The Reserve Bank of India (RBI) has issued a set of Draft Directions, in line with its Statement on Developmental and Regulatory Policies released earlier this month. A key directive is “Capital Market Exposure Directions, 2025” to overhaul rules on banks’ exposure to capital markets. Capital market exposures (CME) by regulated entities (REs) carry higher risk and are therefore subject to sectoral exposure limits, purpose-specific lending caps, and loan-to-value (LTV) ratios. CME includes both direct exposures (investments) and indirect exposures (credit). These Directions shall come into force from April 1, 2026, or an earlier date when adopted by a bank in entirety.
Aggregate CME of a bank shall be subject to the following prudential ceilings (‘CME ceilings’), subject to the exclusion, to be maintained on an ongoing basis:
a.The aggregate CME of a bank, on solo basis, shall not exceed 40 per cent of its Tier 1 Capital as on March 31 of the previous financial year.
b.The aggregate CME exposure of a bank, on a consolidated basis, shall not exceed 40 per cent of its consolidated Tier 1 Capital as on March 31 of the previous financial year.
c. A bank’s direct capital market exposure, consisting of investment and acquisition finance exposures, shall not exceed 20 per cent of solo and consolidated Tier 1 Capital, as applicable.
d. Within the above limits, banks should have separate sub-limits for intra-day exposures to individual counterparties, as well as on an aggregate basis to all intra-day exposures.