The Reserve Bank of India (RBI) has postponed the enforcement of its updated capital market exposure framework by three months, shifting the effective date to July 1, 2026, from the previous deadline of April 1. This decision follows feedback from banks, capital market intermediaries (CMIs), and industry bodies, citing challenges in interpreting and executing the new regulations. Initially introduced on February 13, 2026, the RBI’s amendment directions were a result of public consultations.
The revised framework now explicitly includes mergers and amalgamations within the scope of acquisition finance, clarifying their eligibility and emphasizing control-driven transactions over minority investments. Banks dealing with holding companies must ensure synergy requirements are met across all subsidiaries, not just at the parent level. Additionally, companies can now utilize Indian or overseas subsidiaries for acquisition finance.
Under the new guidelines, refinancing rules have been made stricter. Banks are permitted to refinance acquisition loans only post-transaction completion and establishment of control, with the refinancing solely for repaying the original acquisition debt. Moreover, when extending acquisition finance to a subsidiary or special purpose vehicle (SPV), a corporate guarantee from the acquiring company is mandatory to enhance credit protection.
The deferment granted by the RBI offers lenders extra time to align their systems and processes with the updated norms, aiming to reduce legal uncertainties and risks in structuring. While the framework expands access to acquisition finance for acquirers through mergers and subsidiary-led transactions, it restricts funding to control-oriented acquisitions and imposes tighter conditions on refinancing. For capital market intermediaries, the RBI’s measures include allowing bank funding for proprietary trading against 100% cash or cash-equivalent collateral and lifting restrictions on financing market makers using securities for market-making activities.
