Skip to content
Free updates Login
BankingNABARD / RBI

RBI Draft: Cap on Bank Capital Market, Acquisition Exposure

27 October 20251 min read
BANKING & FINANCERBI Draft: Cap onBank Capital Market,Acquisition Exposure27 October 2025safalsetu.com

Why in the news

RBI circulated draft prudential norms to restrain risk-taking and keep capital buffers sound while credit expands.

Key facts

  • Eligible acquirers: listed firms with positive net worth and three profitable years.
  • Security: loans fully backed by target company shares.
  • NBFCs: lower risk weights proposed on infrastructure loans, freeing capital for banks.

Significance

  • Capital discipline and diversified risk.
  • Responsible financing during an M&A surge.
  • Credit growth together with financial stability.

Exam angle

  • Reference base: Tier-1 capital.
  • Funding split: 70:30.

Test yourself

1. What aggregate cap did RBI's draft propose on banks' direct capital market and acquisition financing exposure?

The draft caps total direct exposure at 20% of Tier-1 capital.

2. Under RBI's draft acquisition finance rules, what is the minimum contribution by the acquirer from own funds?

Banks may fund up to 70%, so the acquirer must put in at least 30%.

3. Acquisition loans under the RBI draft must be fully secured by what?

The loans must be fully secured by shares of the target company.

This topic is part of Daily Current Affairs 25 October 2025 (15 topics).

All topics of the dayDay quizOctober 2025

Read more