RBI raises IPO financing limit to ₹25L per investor
What's the story
The Reserve Bank of India (RBI) has increased the limit for Initial Public Offering (IPO) financing from ₹10 lakh to ₹25 lakh per investor. The move is aimed at improving credit flow in the economy. The decision was announced by RBI Governor Sanjay Malhotra after a three-day-long meeting of the monetary policy committee.
Regulatory changes
Removal of regulatory cap on lending against listed debt securities
Along with raising the IPO financing limit, the RBI has also proposed to remove the regulatory cap on lending against listed debt securities. The central bank has also increased the limit for loans against shares from ₹20 lakh to ₹1 crore per person. These measures are part of a broader strategy by the RBI to enhance credit flow in India's economy.
Banking expansion
Expanded lending scope for Indian banks
In a major structural change, the RBI has also expanded the lending scope for Indian banks. Now, they can finance mergers and acquisitions by domestic companies. This is seen as a major boost for the banking sector, potentially shifting deal financing away from private credit and into formal banking channels.
Policy alignment
RBI's measures to boost credit flow welcomed by experts
Chanchal Agarwal, CIO at Equirus Family Office, welcomed the RBI's move. He said it will allow banks to recapture flows that had been shifting to structured credit players. He also noted that the policy focus is on widening credit intermediation, especially through measures allowing Urban Cooperative Banks' expansion. This aligns with the broader Viksit Bharat agenda of improving credit access and deepening India's financial system.
Economic projections
GDP growth estimate and inflation forecast revised
While keeping the repo rate unchanged as expected, the RBI has revised its GDP growth estimate for the current fiscal year from 6.5% to 6.8%. It has also lowered its CPI inflation forecast from 3.1% to 2.6% for this fiscal year. Murthy Nagarajan, Head-Fixed Income at Tata Asset Management, said these changes could open space for rate cuts in upcoming monetary policy meetings.
Currency internationalization
Measures to enhance global use of Indian rupee proposed
The RBI has also proposed measures to enhance the global use of the Indian rupee (INR). This includes allowing authorized Indian banks to extend rupee-denominated loans to non-residents from Bhutan, Nepal, and Sri Lanka for cross-border trade transactions. Malhotra said they have been making steady progress in this regard, and these changes are part of that effort.