With the Reserve Bank of India (RBI) announcing an enhanced limit on loan against shares to Rs 1 crore from Rs 20 lakh, banks are expected to become more aggressive in this segment, said both bankers and analysts. Currently, non-banking financial companies and brokerages are more open to lending to retail customers against their equity holdings.
The year-on-year growth in bank credit to individuals against shares and bonds was at a 19-month low in August, according to the RBI data. Loans to shares and bonds grew merely 0.9% on year to Rs 9,807 crore in August compared to 26.8% in the year-ago period. However, experts believe that growth will pick up going ahead followed by the RBI’s announcements.
“This opens up new business opportunities, especially among high networth individuals (HNIs). We are keen to expand our activity in this space. The segment is well-secured and allows us to better serve and retain our HNI clients,” said a senior official at a bank.
Borrowers in this segment are majorly high net-worth individuals (HNIs) who invest in equity. They use the funds borrowed through this route to buy more shares or trade in derivatives. Besides, it offers a fast way to convert investments into liquidity whether for personal use, business expansion, or emergency. The enhanced limit allows investors to access more capital from their portfolios without selling their securities.
Jinay Gala, director-India Ratings & Research, is also of the view that enhanced limit will encourage more banks to enter the segment, which has been dominated by brokers due to their faster turnaround and client focus. Having said that, he added that proper processes and credit assessment policies should be put in place to support sustainable growth, considering the volatile equity market and the risks associated with it.
Equity market has grown significantly over the past years. Nifty has gained 118% at a 16.84% compounded annual growth rate (CAGR) in the last five years. In 2025 itself, it gained 8.32%. The RBI’s move would increase liquidity in the market and encourage more participation from HNIs and retail investors.
The RBI guidelines mandates lenders to follow a maximum loan-to-value ratio of 50%. can lend only against group 1 shares on the NSE. NSE defines group 1 shares which traded at least 80% of the days for the previous six months.
Apart from reform on loan against shares, the central bank also removed the regulatory ceiling on lending against listed debt securities and enhanced limits for initial public offering (IPO) financing to Rs 25 lakh from Rs 10 lakh per person, further helping to deepen the market.