RBI unveils measures to ease credit; banks may soon back M&A deals
RBI Governor said Indian banks will soon be allowed to finance acquisitions by domestic corporates under an enabling framework. The central bank proposed to remove the regulatory ceiling on lending against listed debt securities. In addition, the lending limit against shares will be raised from Rs 20 lakh to Rs 1 crore per person, while IPO financing will see its ceiling enhanced from Rs 10 lakh to Rs 25 lakh.
The RBI will also withdraw the 2016 framework that discouraged bank lending to borrowers with system-wide credit exposure of Rs 10,000 crore or more. While the Large Exposure Framework addresses concentration risk at the individual bank level, the regulator said system-level risks will be managed through macroprudential tools when necessary.
To reduce the cost of infrastructure financing by non-banking financial companies, the central bank has proposed lowering the risk weights on lending to operational, high-quality infrastructure projects. In another move, the RBI will publish a discussion paper on licensing new urban co-operative banks, marking the first such initiative since licensing was paused in 2004.
On ease of doing business, Das highlighted that around 9,000 circulars and directions across 11 regulated entities have been consolidated and will soon be released in draft form for public consultation. Banks will be given greater flexibility in opening and maintaining transaction accounts of borrowers, with restrictions on collection accounts set to be withdrawn.
For the export sector, the RBI extended the repatriation period from foreign currency accounts of Indian exporters in IFSC to three months from the existing one month. The forex outlay period for merchanting trade transactions has been lengthened from four months to six months. The central bank will also simplify reconciliation of outstanding export and import entries in reporting portals.
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