What RBI rules say about margin money

RBI fixes a minimum margin only for home loans, gold and silver loans, and loans against securities.

Written 07 September 2026. For bankers in India.

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In one line

Margin money is the borrower's share of the cost. RBI never writes a margin as such. It writes an LTV (Loan to Value) cap, and the margin is what is left. Everywhere else the bank's policy decides.

Why it matters to you

• Some margins are RBI rules for every bank. Home loans, gold loans and loans against securities have RBI caps.
• Most margins are your bank's choice. Loan against property, working capital, vehicles and personal loans have none from RBI.
• The two get mixed up. A note that calls a policy margin an RBI rule is wrong.
• RBI also fixes the cost base. For home loans, stamp duty and registration stay out of the LTV figure.
• RBI fixes when the bank may pay. Home loan releases must follow construction stages, not a builder's scheme.

How it works

1. Find the RBI LTV cap for the product, if one exists.
2. Minimum margin = 100 per cent minus the cap. RBI fixes the margin only this way.
3. If RBI has no cap, open your bank's credit policy. The margin there is bank practice.
4. Your bank may set a higher margin than RBI's minimum. It may never set a lower one.

In words: minimum margin = 100 per cent minus the RBI LTV cap.

In symbols: M = 1 minus LTV cap, where M is the margin as a share of the cost.

Margins that RBI fixes (RBI RULE; the securities rows are for loans to individuals at banks):

Margins that RBI does not fix (NO RBI NUMBER; ranges are BANK PRACTICE):

Two more RBI rules sit beside the margin rules for home loans.

• The cost base. Stamp duty, registration and documentation charges stay out, unless the house costs up to Rs 10 lakh.
• The release. Each release must follow the construction stage. No upfront payment to a builder in an unfinished project.

Worked examples

Example 1: the home loan margin by tier

A borrower wants a Rs 50,00,000 home loan.

1. A Rs 50 lakh loan is in the Rs 30 to 75 lakh tier: cap 80, margin 20 per cent.
2. Smallest cost that allows the loan: 50,00,000 / 0.80 = Rs 62,50,000.
3. Minimum margin: Rs 62,50,000 minus Rs 50,00,000 = Rs 12,50,000.
4. Stamp duty and registration come on top, unless the house costs up to Rs 10 lakh.

For a Rs 25,00,000 loan: cap 90 per cent, smallest cost Rs 27,77,778, margin Rs 2,77,778. For Rs 1,00,00,000: cap 75 per cent, smallest cost Rs 1,33,33,333, margin Rs 33,33,333.

Example 2: a loan against listed shares after 1 July 2026

A customer pledges listed shares worth Rs 10,00,000.

1. RBI cap for listed shares: 60 per cent. Margin: 40 per cent.
2. Maximum loan: Rs 6,00,000. Margin held: Rs 4,00,000.
3. Prices fall 20 per cent. The shares are now worth Rs 8,00,000. LTV is 6,00,000 / 8,00,000 = 75 per cent.
4. RBI RULE: the bank must fix the breach within seven working days (paragraph 219H).
5. It makes a margin call (a demand to repay or add security) to restore 60 per cent.
6. Repay Rs 1,20,000 (loan Rs 4,80,000), or add shares worth Rs 2,00,000.

With equity mutual fund units instead, the cap would be 75 per cent and the loan Rs 7,50,000. Debt fund units: 85 per cent and Rs 8,50,000. For shares and equity funds, the borrower's total across all banks must stay within Rs 1 crore. Debt funds sit outside that cap.

Example 3: money to apply in an IPO

A customer wants to apply for Rs 20,00,000 of shares in an IPO.

1. RBI allows a loan of up to 75 per cent of the amount applied for. Cash margin: 25 per cent.
2. Loan: Rs 15,00,000. Cash margin: Rs 5,00,000.
3. The per-person cap is Rs 25,00,000. On a Rs 40,00,000 application the loan stops at Rs 25,00,000.

On that Rs 40 lakh application, 75 per cent would be Rs 30 lakh. The cap cuts it to Rs 25 lakh.

Example 4: a gold loan margin

Gold worth Rs 2,00,000 is pledged for a Rs 1,70,000 loan repaid in monthly instalments.

1. The loan is up to Rs 2.5 lakh. Cap: 85 per cent. Margin: 15 per cent.
2. Maximum loan: Rs 1,70,000. The request fits exactly.
3. Had the loan been a lump-sum loan, the interest to maturity would count too.

What the rule says

RBI RULE (home loans): see paragraph 111 of the Credit Facilities Directions, 2025. It caps LTV at 90, 80 and 75 per cent by loan size. The full name is the Reserve Bank of India (Commercial Banks – Credit Facilities) Directions, 2025. Paragraph 113 keeps stamp duty, registration and documentation charges out of the cost. The exception is a house costing up to Rs 10 lakh (from the circular of 5 March 2015, paragraph 2). See Housing loan rules.

RBI RULE (home loan releases): paragraphs 114 to 116 of the same Directions describe the 80:20 and 75:25 schemes. In those schemes the bank paid the builder upfront, and the builder paid the buyer's interest or EMIs during construction. RBI lists the risks and tells banks to link each release to the construction stage. No upfront release in an unfinished project.

Paragraph 117 allows an exception for projects of government or statutory authorities. This began with the circular of 3 September 2013, paragraphs 1 to 3.

RBI RULE (home loans by an HFC (Housing Finance Company)): see paragraph 58 of the Housing Finance Companies Directions, 2025. It sets the same tiers. See Housing Finance Companies Directions 2025.

RBI RULE (gold and silver): see paragraph 19 of the Gold and Silver Collateral Directions, 2025. It caps LTV at 85, 80 and 75 per cent. A lump-sum loan counts at its total payable at maturity. Paragraph 20 keeps the cap alive through the loan. Lenders had until 1 April 2026. The same text now sits in paragraphs 44 and 45 of the Credit Facilities Directions. See Gold loan rules.

RBI RULE (loans against securities, banks): see the Credit Facilities Amendment Directions, 2026 (Revised) of 30 March 2026. They apply from 1 July 2026, or earlier where a bank adopted the whole amendment early. Paragraph 219G caps LTV at 60 per cent for listed shares. Equity fund units get 75 and debt fund units 85.

Paragraph 219H wants LTV watched all the time, with any breach fixed within seven working days. Paragraph 219J lets each bank fix its own limits for government securities, listed debt and debt fund units. Paragraph 219K caps loans against the other securities at Rs 1 crore per person across the banking system.

Paragraph 219L caps loans for buying shares in the market at Rs 25 lakh. Paragraph 219M caps IPO, FPO and ESOP loans at Rs 25 lakh with a 25 per cent cash margin.

Before 1 July 2026 the older rule applied. See paragraph 2.3.1.1 of the Master Circular on Loans and Advances of 1 July 2015. It allowed Rs 10 lakh against paper share certificates and Rs 20 lakh against demat (electronic) shares. The margin was 50 per cent for paper and 25 per cent for demat holdings. Some lender pages still show these numbers.

RBI RULE (loans against shares, NBFCs): see paragraph 106 of the Non-Banking Financial Companies – Credit Facilities Directions, 2025. It keeps LTV at 50 per cent for NBFCs with assets of Rs 100 crore or more. Margin: 50 per cent.

NO RBI NUMBER (loan against property, working capital, vehicles, personal loans): RBI does not fix this number. Each bank sets it in its own credit policy. Paragraph 88 of the Credit Facilities Directions asks each bank's board to set margins for real estate lending. We found no RBI margin for stocks, book debts, vehicles or personal loans on rbi.org.in.

BANK PRACTICE: loan against property at 50 to 75 per cent of market value. State Bank of India shows 65 and 60 per cent; HDFC Bank up to 65 per cent. Working capital: about 25 per cent on stocks and 40 per cent on book debts, varying by bank and trade. Car loans: up to 100 per cent of the on-road price at State Bank of India. Your bank's policy decides.

BANKPULSE VIEW: RBI's MSME (Micro, Small and Medium Enterprises) FAQ (Frequently Asked Questions), question 7, covers small units. It says banks compute working capital at a minimum of 20 per cent of turnover, up to Rs 5 crore. Textbooks add a 5 per cent margin from the borrower. We could not confirm that 5 per cent from an RBI document we opened. See MSME lending direction.

Common mistakes

• Calling a loan against property margin an RBI margin. RBI has none. Write policy margin and cite the policy.
• Quoting 50 per cent for shares. From 1 July 2026 the bank LTV cap is 60, so margin 40.
• Forgetting the Rs 1 crore cap. For shares and equity funds it applies across all banks together, not per bank.
• Counting stamp duty in the home cost. RBI keeps it out unless the house costs up to Rs 10 lakh.
• Paying a builder upfront. An 80:20 scheme breaks paragraph 116. Release by construction stage only.
• Reading a lump-sum gold loan at principal. RBI counts principal plus interest to maturity.

How to use it at your desk

1. Name the product. Check the first table: does RBI cap LTV for it?
2. If yes, write the RBI minimum margin and the paragraph in the note. Your policy may ask for more.
3. If no, write: no RBI margin, policy margin X per cent. Cite the policy page.
4. For home loans, strip stamp duty and registration from the cost unless the house costs up to Rs 10 lakh.
5. For shares and funds, check the Rs 1 crore and Rs 25 lakh caps. Fix a margin call trigger.
6. For a builder deal, tie every release to an architect's stage certificate.
7. Check the date on any lender page you use. Many still show numbers replaced in 2026.

Related terms

• What is LTV? (Loan to Value ratio) — every RBI margin rule is an LTV cap read the other way.
• What is Own Contribution? (OCR (Own Contribution), margin money) — how the margin is computed and proved on one deal.
• How to verify own contribution — the checks that show the margin was really paid.
• Parallel funding — a second loan that fills the margin defeats the rule.
• What is FOIR? (Fixed Obligation to Income Ratio) — where RBI fixes no margin, income limits often bind first.
• Product rule pages: Housing loan rules, Gold loan rules, HFC Directions 2025, MSME lending direction.

Quick check

Does RBI fix a margin for a loan against property?

Answer: No. Paragraph 88 of the Credit Facilities Directions leaves margins on real estate lending to the bank's board.

What is the minimum margin on a Rs 40 lakh home loan?

Answer: 20 per cent. A Rs 40 lakh loan is in the 80 per cent tier (paragraph 111).

A bank lends against listed shares on 1 August 2026. What is the RBI margin?

Answer: 40 per cent. Paragraph 219G caps LTV at 60 per cent from 1 July 2026.

Sources

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