In a move to enhance capital market participation and improve liquidity, the Reserve Bank of India (RBI) has increased the financing limit for Initial Public Offers (IPOs) from Rs 10 lakh to Rs 25 lakh per individual.
The central bank has also raised the cap on loans against shares (LAS) from Rs 20 lakh to Rs 1 crore.
According to RBI, these measures are expected to attract more high-net-worth individuals (HNIs) to the equity markets and strengthen activity in the primary market.
RBI Raises IPO Financing Limit
Higher limits will also apply on units of Real Estate Investment Trusts (Reits) and Infrastructure Investment Trusts (InvITs).
“Loans against shares and IPO financing existed earlier, but were not revised for many years. It is only natural that these limits be updated,” RBI Governor Sanjay Malhotra said
The last revision of loan against shares limit was done in 1998, RBI said considering inflation this increase is not significant.
The RBI measures come at a time when primary market activity is buzzing. Big IPOs likely this year includes that of Reliance Jio, Tata Capital and LG Electronics are likely to benefit with higher HNIs category subscriptions.
RBI Proposals On Debt Securities
The central bank has also proposed to remove the ceiling on lending against listed debt securities, giving banks greater flexibility to support investors. External commercial borrowings norms have been relaxed to broaden borrowers and lenders base.
Risks base for NBFCs infrastructure lending and housing finance have been lowered for ongoing operational projects and licencing for new urban cooperative banks will resume after a pause of over two decades.
RBI has also announced to consolidate over 250 regulatory instructions into master directions to reduce compliance costs, eased restrictions on transaction accounts and announced giving extended timelines to exporters for repatriation from IFSC accounts.
The central bank has also allowed a six-month forex outlay for merchanting trade transactions, which involves shipment of goods from one foreign country to another country involving an Indian intermediary, and special rupee Vostro accounts to invest in corporate bonds and commercial papers.