RBI Draft: Higher LTV for Loans Against Shares and Debt MFs
Why in the news
RBI’s draft circular aims to improve credit flow and tidy capital market exposures by easing LTV and loan limits for individuals.
| Collateral | LTV now | Proposed |
|---|---|---|
| Shares | 50% | 60% |
| Debt mutual funds | 50% | 75% |
| Debt securities, commercial papers | – | Ceiling to rise |
| G-Secs, SGBs | – | Bank policy or gold loan norms |
Key facts
- Loans for buying securities in secondary markets: capped at ₹25 lakh.
- If a pledged debt security drops below BBB-, replace it within 30 working days or repay proportionately.
- No bank loans to own employees or trusts for buying the bank’s shares; none against locked-in securities.
Rationale
- Liberalise credit, improve liquidity, harmonise LTV norms and limit concentration risk.
Exam angle
- Limit ₹20 lakh to ₹1 crore; BBB- investment-grade cut-off.