What Triggered the Move
Over the past year, India has seen massive foreign portfolio outflows as investors pulled more than ₹1.6 lakh crore from equities, surpassing the record withdrawals of 2022. Rising US tariffs, a weaker rupee, and global uncertainty have tightened liquidity at home, leaving markets looking for relief.
The RBI, which has been closely watching this liquidity crunch, kept the repo rate steady at 5.5% while raising the GDP growth outlook to 6.8% and trimming inflation projections. But behind these numbers, the central bank made a subtler move — loosening the rules around lending against securities.
What Has Changed
Investors can now borrow up to ₹1 crore against their shares, a fivefold increase from previous limits. The cap on loans against listed debt instruments, such as sovereign gold bonds, has been completely removed. Additionally, the IPO financing limit has been raised from ₹10 lakh to ₹25 lakh per person.
This means investors can now tap into their portfolios for more liquidity without having to sell assets. For the first time, the RBI has also allowed Indian banks to finance mergers and acquisitions — a step that could unlock billions in corporate dealmaking potential.
Why It Matters
Until now, large Indian companies relied mostly on NBFCs, global banks, or private funds to finance takeovers. By letting domestic banks step into this space, the RBI is encouraging Indian institutions to play a bigger role in shaping corporate growth. This is expected to boost both credit demand and market activity, particularly in the capital-intensive sectors.
But the RBI’s move isn’t just about corporate finance. It’s about addressing a broader liquidity problem. With foreign capital retreating, domestic sources of funding need to pick up the slack. By relaxing lending norms, the RBI is effectively increasing the flow of credit without cutting policy rates.
Balancing Growth and Risk
The central bank’s decision comes with a clear understanding of the risks. Easing lending norms can lead to higher leverage, which increases the potential for defaults or market shocks. To counter that, the RBI has planned a phased implementation and given banks time until April 2026 to adapt their risk systems.
This approach ensures that the banking system remains stable while allowing liquidity to circulate through safe, supervised channels. The RBI’s focus is not only on making credit cheaper but also on making it more efficient and better distributed.
The Bigger Picture
The liquidity easing is also a strategic response to global headwinds. With new tariffs and trade pressures affecting exports, domestic growth will increasingly rely on internal demand and strong capital markets. Combined with the recent GST 2.0 reforms aimed at simplifying compliance and boosting spending, the RBI’s actions form the supply-side complement to India’s demand push.
Together, these measures aim to keep India’s economy resilient — not immune — to global shocks. By encouraging banks, corporates, and investors to circulate capital more freely, the RBI hopes to sustain the current growth momentum well into FY2026.
If successful, this recalibration could mark a turning point in India’s financial evolution, empowering domestic institutions and reducing dependence on foreign inflows. It’s a quiet but significant move that signals confidence in India’s ability to fuel its own growth story.
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