Finshots Daily Why RBI is rewriting the liquidity rules
Oct 13, 2025
Discover how the Reserve Bank of India is streamlining lending against securities to enhance market liquidity. Dive into the implications for retail investors who can now borrow more against their assets. Learn how this shift could revolutionize financing for mergers and acquisitions. However, caution is advised as increased liquidity brings potential risks like market vulnerabilities. The discussion also touches on the broader economic landscape and the phased rollout of these significant changes.
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RBI Eases Lending Against Securities
- The RBI raised lending limits against securities to inject liquidity without cutting policy rates.
- This expands loans against shares to ₹1 crore and removes limits on listed debt securities, plus raises IPO financing limits.
Banks Can Now Finance M&A
- For the first time, RBI allowed banks to finance mergers and acquisitions domestically.
- This could open over $40 billion of M&A activity to Indian banks and reshape deal-making.
Liquidity Comes With Concentration Risk
- Increased lending capacity raises systemic risk if leverage and concentration build up.
- RBI's past large-borrower guidelines exist to prevent banks from overexposing themselves to a few big names.