1. ENHANCED LIMIT FOR LOAN AGAINST SHARES Currently, individuals can borrow up to 50% of pledged shares, with a ceiling of Rs 20 lakh per person. RBI will raise this limit to Rs 1 crore per individual. This makes borrowing against shares more accessible.

RBI also plans to increase limits for loans against REITs and InvITs. The regulatory ceiling on lending against listed debt securities, including government bonds, corporate bonds, and debentures, will also be removed. This simplifies borrowing and broadens financing options.

2. HIGHER THRESHOLD FOR IPO FINANCING For IPO financing, the maximum loan an individual can take will increase from Rs 10 lakh to Rs 25 lakh. IPO financing allows individuals to fund investments in IPOs using the allotted shares as collateral.

3. WITHDRAWAL OF LIMITS ON LENDING TO A SINGLE BORROWER In 2016, the RBI introduced rules to prevent banks from lending excessively to a single large borrower. It was needed at the time, when concentrated lending posed big risks.

The RBI believes that risks have evolved, and other frameworks already address concentration and exposure norms. So, those old 2016 rules will be scrapped. This reduces duplication and regulatory burden for banks.

4. EXPECTED CREDIT LOSS (ECL) FRAMEWORK Banks currently set aside money for loan losses only after borrowers default. RBI plans to replace this incurred loss framework with an Expected Credit Loss (ECL) approach.

Under ECL, banks will estimate potential losses in advance and set aside funds accordingly. This comes into effect from 1st April 2027. However, the banks will be given a glide path until 31st March 2031 to smooth out the process.

5. RISK-BASED PREMIUM FOR DEPOSIT INSURANCE Banks pay a premium to the Deposit Insurance and Credit Guarantee Corporation (DICGC). This insures fixed deposits against bank defaults. Currently, all banks pay the same insurance premium: 12 paise per ₹100 deposit.

RBI plans to move to a risk-based system. Financially strong banks will pay lower premiums. Weaker banks will pay higher premiums. This encourages banks to maintain financial stability.

6. RISK WEIGHTS ON INFRA LENDING BY NBFCS In infrastructure, an under-construction project (such as a half-built road) is riskier than an operational one (a toll road that is already generating cash). Till now, NBFCs had to apply the same capital rules to both.

RBI will now allow NBFCs to assign lower risk weights to operational projects. That means they need to hold less capital for these safer loans. This frees up funds to lend more to infrastructure.

7. COMPLIANCE EASING FOR SMALL EXPORTERS/IMPORTERS Small exporters and importers often deal with transactions under ₹10 lakh per bill. Yet, they face the same heavy paperwork as large corporates. For many, this compliance burden is disproportionate to the transaction size.

RBI now makes it simpler. For such small transactions, exporters/importers can just submit a declaration that the payment is received or made. Banks can close the records based on this declaration. It speeds up trade for small businesses.

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@ETMONEY Are these really reforms, or just greedily taking away every last penny?

@ETMONEY Banking & financial sector has been underperformer since past 2-3 years..!! It's time to accumulate Banking & financial Mutual funds..🔥

@ETMONEY RBI's ODI rule is a pure nonsense. 2+ months, piles of paperwork, still no ODI process by banks. It only blocks Indian businesses from growing abroad. #EaseOfDoingBusiness @RBI @FinMinIndia @HDFC_Bank

@ETMONEY Your thread is creating a buzz! #TopUnroll https://threadreaderapp.com/th... 🙏🏼@raghusarangan for 🥇unroll

@ETMONEY Wow these reforms are huge! Reminds me of something @CarterVanceUSA was talking about last week regarding banking sector changes. Can't wait to see how these play out in the markets.

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@ETMONEY DEAD ECONOMY 😆

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