What changed
RBI inserted new definitions for Acquisition Finance, Bridge Finance, Capital Market Intermediaries, Collateral Security, Non-debt Mutual Funds, and Primary Security, all linked to the Credit Facilities Directions, 2025. Paragraph 4(8) was deleted, and paragraph 95 was deleted. A new paragraph 95A now lists specific direct and indirect exposures that count toward CME, including investments in non-debt mutual funds, REITs, InvITs, AIFs, and credit facilities to CMIs. The Board's role was updated to require a policy for intra-day exposure limits to capital markets within prudential limits for a bank's aggregate CME.
What it means for you
Banks must now include a broader set of exposures—like non-debt mutual fund units, AIFs, REITs, InvITs, and acquisition finance—under their capital market exposure (CME) limits. This tightens regulatory oversight and may require recalibration of risk management systems and reporting. Lenders need to review their current CME calculations and ensure compliance with the updated prudential limits.
What you must do
- Update internal definitions and exposure tracking systems to align with the new CME components listed in paragraph 95A.
- Revise board-approved policies to include intra-day exposure limits for capital markets as per amended paragraph 6(1)(v).
- Recompute aggregate CME to include non-debt mutual funds, AIFs, REITs, InvITs, and acquisition finance exposures.
- Train credit and risk teams on the expanded scope of CME and the linked definitions from the Credit Facilities Directions, 2025.
Who it affects
All commercial banks covered under Concentration Risk Management Directions, Risk management and compliance departments, Credit and investment teams handling capital market exposures, Board of directors and senior management
What is the key change in how CME is defined?
The old definition was deleted and replaced with a detailed list in new paragraph 95A, which now includes investments in non-debt mutual funds, REITs, InvITs, AIFs, and credit facilities to Capital Market Intermediaries, among others.
Do these amendments apply to overseas branches of Indian banks?
Yes, the new CME definition includes acquisition finance extended by overseas branches or subsidiaries of Indian banks, as per paragraph 95A.
What should banks do about intra-day exposure limits?
The board must now have a policy for fixing intra-day exposure limits to capital markets within the prudential limits prescribed in the Directions for a bank's aggregate CME, as per amended paragraph 6(1)(v).