RBI Boosts Credit Growth, Lending Against Shares Declines
The Reserve Bank of India (RBI) is actively promoting credit growth, currently lagging at below 10% this fiscal. In July 2025, lending against shares, though a small part of overall bank credit, saw a decline of 3% on the stock market today. RBI has taken steps to boost this sector, but risks remain for borrowers and the market.
Non-Banking Financial Companies (NBFCs) and stock market intermediaries, not scheduled commercial banks, primarily facilitate financing against shares. The exact loan volumes and institutions involved in July 2025 are unclear, as specific data is not available. RBI, however, has increased the retail limit on borrowing against shares and debt securities to ₹1 crore per person, up from ₹20 lakh earlier.
RBI's efforts to stimulate credit growth include raising the limit for Initial Public Offering (IPO) financing to ₹25 lakh per person. This move may encourage speculative activity in the primary market, where individual investors already hold significant shares. Despite these initiatives, borrowing against shares has decreased by 3% between April and July 2025, reflecting a corrective phase in markets. RBI acknowledges the potential risks, including margin calls during stock price corrections, and is mindful of financial stability while pushing for credit growth.
RBI's focus on boosting credit growth, including lending against shares, is evident. While these measures may activate the 'wealth effect' and encourage investment, borrowers and the market must navigate potential risks. RBI's role in ensuring productive use of funds and maintaining financial stability will be crucial in this evolving landscape.
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