1. Commercial Banks – Amendment Directions
Applicable Entities: All Scheduled Commercial Banks (excluding RRBs).
Specific Changes Required:
- Acquisition Finance: New framework allowing banks to fund Indian non-financial companies for strategic equity acquisitions (up to 75% of value).
- Bridge Finance: Permitted for an interim period (max 1 year) with a firm repayment plan via equity or debt issuance.
- CME Ceilings: Aggregate Capital Market Exposure (CME) capped at 40% of eligible capital base; direct investment capped at 20%.
- LTV Limits: Standardized Loan-to-Value (LTV) ratios: 60% for listed shares, 75% for Units of REITs/InvITs, and 85% for debt mutual funds.
Management Action Plan:
- Formulate and obtain Board approval for a standalone “Acquisition Finance Policy”.
- Update internal monitoring systems to track the 3:1 consolidated Debt-to-Equity ratio for acquiring entities.
- Reconfigure LTV breach alerts to ensure rectification within 7 working days.
2. Small Finance Banks (SFBs) – Amendment Directions
Applicable Entities: All Small Finance Banks.
Specific Changes Required:
- CME Inclusion: Broadened definition of CME to include fund-based and non-fund-based exposures, including IPO/ESOP financing.
- LTV for Individuals: Cap of ₹1 crore per individual for loans against securities (excluding Govt securities/Debt MFs).
- Market Intermediaries: Lending to Capital Market Intermediaries (CMIs) must be fully secured (100% collateral).
Management Action Plan:
- Implement a “Board-approved policy” for fixing intra-day exposure limits to capital markets.
- Audit existing individual loan portfolios to ensure no single borrower exceeds the ₹1 crore cap for non-debt securities.
- Ensure all guarantees for brokers are backed by 50% collateral, with at least 25% in cash.
3. Financial Disclosures & Capital Adequacy
Applicable Entities: All Commercial Banks and SFBs.
Specific Changes Required:
- Notes to Accounts: Substitution of existing CME disclosure tables with a new comprehensive “Exposure to Capital Markets” format.
- Risk Weighting: Irrevocable Payment Commitments (IPCs) assigned a Credit Conversion Factor (CCF) of 100% and a risk weight of 125%.
Management Action Plan:
- Update the “General Ledger and Reporting templates” to capture the 11-point data requirements for capital market disclosures.
- Recalculate RWAs (Risk Weighted Assets) for IPCs starting April 1, 2026, or earlier if adopted.