RBI Update - Reserve Bank of India (Small Finance Banks – Credit Facilities) Amendment Directions, 2026

The Reserve Bank of India has issued the Reserve Bank of India (Small Finance Banks – Credit Facilities) Amendment Directions, 2026 to align Small Finance Banks’ (SFBs) lending against securities and capital market exposures with a strengthened and harmonised prudential framework. Under the Reserve Bank of India (Small Finance Banks – Credit Facilities) Directions, 2025, provisions relating to loans against financial assets were dispersed and relatively less granular, and there was no comprehensive framework governing credit facilities to Capital Market Intermediaries (CMIs). Definitions such as “Eligible Securities,” “LTV,” “Margin,” and detailed exposure controls were either absent or not standardised in line with evolving capital market practices. The amendment introduces Revised and expanded definitions including “Collateral,” “Capital Market Intermediaries (CMIs),” “Eligible Securities,” “LTV,” and “Primary Security”; A new, structured Chapter on “Loans Against Securities” prescribing eligible instruments, LTV ceilings (e.g., 60% for listed shares, 75% for equity-oriented mutual funds/ETFs/REITs/InvITs, 85% for certain debt instruments), valuation norms, monitoring timelines, and prudential caps (₹1 crore overall cap and ₹25 lakh for secondary market acquisition in specified cases); and A new Chapter on “Credit Facilities to CMIs” mandating full collateralisation (generally 100%), minimum haircuts (40% for equity shares), restrictions on proprietary trading finance, and inclusion of such exposures under CME norms. The Directions take effect from April 1, 2026, or earlier if adopted. Link - View Circular