RBI defers capital market exposure norms to July 1

MUMBAI : The RBI said that the implementation of its new directions on capital market exposures for banks, which, among others, included acquisition finance, has been deferred by three months to July 1.

These new directions were aimed primarily at:

1. Provide an enabling framework for banks to finance acquisitions by Indian corporates
2. Rationalise the limits for lending by banks to individuals against shares, units of REITs, InvITs, etc.
3. Put in place a more principle-based framework for lending to capital market intermediaries (CMIs), a release from the central bank said.

One of the most important parts of the guidelines was for allowing domestic lenders to fund acquisitions — a practice prevalent in several developed markets.

On Monday, RBI said that under the new definition of acquisition finance, the rules have been modified to include mergers and amalgamations. It also said that the acquisition finance may be extended only for acquiring control over a non-financial target company.