More loans against shares to raise market liquidity but analysts sound a note of caution
Currently, an amount an individual can raise from keeping his shares as collateral is up to 50% of the total value of the pledged shares, with a ceiling of Rs 20 lakh.
- Oct 1, 2025,
- Updated Oct 1, 2025 3:18 PM IST
The Reserve Bank of India (RBI) announced an increase in the maximum ceiling an individual can borrow by keeping shares as collateral from Rs 20 lakh to Rs 1 crore. “It is proposed to enhance limits for lending by banks against shares from Rs. 20 lakh to Rs. 1 crore per person”, read the governor’s statement post the RBI said while keeping the repo rate unchanged at 5.5% today.
Currently, an amount an individual can raise from keeping his shares as collateral is up to 50% of the total value of the pledged shares, with a ceiling of Rs 20 lakh.
For IPO financing, the banking regulator raised the limit from Rs 10 lakh to Rs 25 lakh per person. This change will be can especially help high net worth individuals (HNIs) to apply for larger amounts in public offerings.
Analysts welcomed RBI's latest moves, which they said would increase liquidity in the market. However, the apex bank also sounded caution mentioning the flip side of this move.
Abhinav Tiwari, Research Analyst at Bonanza said, "With the ability to borrow more against their shares, investors won’t need to sell as much from their portfolios, which helps ease selling pressure in the secondary market. This move is likely to be especially supportive for mid and small cap stocks, since investors can now unlock higher funding from their holdings to channel into new investments or meet other financial needs.
Tiwari added that banks are set to gain the most from this change. The higher loan potential opens up new lending opportunities, driving both fee income and interest earnings. Since these loans are backed by liquid securities, banks also benefit from relatively safer, asset backed credit growth. However, Tiwari is of the view that market volatility could rise during downturns. "Larger pledged amounts mean bigger risks of margin calls and forced selling if prices drop sharply," he added.
However, Nikunj Saraf, CEO, Choice Wealth sounded a note of caution.
"More leverage also raises the spectre of sharper sell-offs if volatility returns — margin calls could cascade through concentrated positions," said Saraf.
On the positive side, short-term, banks, brokers and blue-chips may benefit; medium-term, prudence in haircuts, eligible-stock lists and concentration limits will decide whether this deepens markets or inflates risk. Investors should stress-test portfolios accordingly now, Saraf added.
Raj Gaikar, Research Analyst, SAMCO Securities said, "The RBI’s move is a positive step for market liquidity and investor sentiment. This enhancement will improve retail and HNI participation by enabling additional access to capital without liquidating equity holdings. Broking firms, NBFCs, and banks could see higher demand for margin funding and loan-against-securities products. In turn, this may provide near-term support to trading volumes in equities and boost ancillary revenue streams for lenders."
AR Ramachandran, SEBI registered Independent analyst said, "The announcement is beneficial for the banking sector stocks from a short term perspective as it allows banks to improve their NIMs by a few percentage points. But from a longer term perspective, it is a risky proposal as if and when broader markets correct sharply and unexpectedly, bank's could face problems as the collateral value will decline leading to potentially heavy losses."
Kirang Gandhi, Pune-based financial mentor is of the view that these measures will increase credit growth, ease liquidity and provide support to corporate activity – signalling positive views on financials and overall market momentum.
The Reserve Bank of India (RBI) announced an increase in the maximum ceiling an individual can borrow by keeping shares as collateral from Rs 20 lakh to Rs 1 crore. “It is proposed to enhance limits for lending by banks against shares from Rs. 20 lakh to Rs. 1 crore per person”, read the governor’s statement post the RBI said while keeping the repo rate unchanged at 5.5% today.
Currently, an amount an individual can raise from keeping his shares as collateral is up to 50% of the total value of the pledged shares, with a ceiling of Rs 20 lakh.
For IPO financing, the banking regulator raised the limit from Rs 10 lakh to Rs 25 lakh per person. This change will be can especially help high net worth individuals (HNIs) to apply for larger amounts in public offerings.
Analysts welcomed RBI's latest moves, which they said would increase liquidity in the market. However, the apex bank also sounded caution mentioning the flip side of this move.
Abhinav Tiwari, Research Analyst at Bonanza said, "With the ability to borrow more against their shares, investors won’t need to sell as much from their portfolios, which helps ease selling pressure in the secondary market. This move is likely to be especially supportive for mid and small cap stocks, since investors can now unlock higher funding from their holdings to channel into new investments or meet other financial needs.
Tiwari added that banks are set to gain the most from this change. The higher loan potential opens up new lending opportunities, driving both fee income and interest earnings. Since these loans are backed by liquid securities, banks also benefit from relatively safer, asset backed credit growth. However, Tiwari is of the view that market volatility could rise during downturns. "Larger pledged amounts mean bigger risks of margin calls and forced selling if prices drop sharply," he added.
However, Nikunj Saraf, CEO, Choice Wealth sounded a note of caution.
"More leverage also raises the spectre of sharper sell-offs if volatility returns — margin calls could cascade through concentrated positions," said Saraf.
On the positive side, short-term, banks, brokers and blue-chips may benefit; medium-term, prudence in haircuts, eligible-stock lists and concentration limits will decide whether this deepens markets or inflates risk. Investors should stress-test portfolios accordingly now, Saraf added.
Raj Gaikar, Research Analyst, SAMCO Securities said, "The RBI’s move is a positive step for market liquidity and investor sentiment. This enhancement will improve retail and HNI participation by enabling additional access to capital without liquidating equity holdings. Broking firms, NBFCs, and banks could see higher demand for margin funding and loan-against-securities products. In turn, this may provide near-term support to trading volumes in equities and boost ancillary revenue streams for lenders."
AR Ramachandran, SEBI registered Independent analyst said, "The announcement is beneficial for the banking sector stocks from a short term perspective as it allows banks to improve their NIMs by a few percentage points. But from a longer term perspective, it is a risky proposal as if and when broader markets correct sharply and unexpectedly, bank's could face problems as the collateral value will decline leading to potentially heavy losses."
Kirang Gandhi, Pune-based financial mentor is of the view that these measures will increase credit growth, ease liquidity and provide support to corporate activity – signalling positive views on financials and overall market momentum.