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Post rate cut and liquidity infusion, RBI turns focus on measures for boosting growth

ICICIdirect Research 03 Oct 2025 DISCLAIMER

A major regulatory shift is the transition from the incurred-loss approach to Expected Credit Loss (ECL) framework, retaining existing asset classification. Implementation of proposed norms (awaiting draft guidelines) will be from April 2027, with a glide path until March 2031 to manage the transition. Draft norms on the standardised approach to credit risk will also be released, with lower risk weights for MSMEs & residential real estate expected to reduce capital requirements. Large private banks, with strong buffers, appear well positioned.
The RBI has also announced removal of restrictions on overlap of business between banks and their group entities, leaving business allocation to the wisdom of board, benefitting banks with established lending arms such as HDFC Bank, Axis Bank, Kotak Mahindra Bank and Federal Bank.
Further, central bank has decided to withdraw large borrower market mechanism guidelines from April 2026. Introduced in 2016, the framework disincentivized banks from lending to large borrowers with system-wide exposures above ₹10,000 crore system. However, given reduction in bank credit to such large borrowers, stronger bank balance sheets and lower concentration risks, central bank have decided to withdraw the guidelines. Given substantial opportunity, partial shift of market share towards banks is seen to aid credit demand in corporate segment and thus overall credit momentum.  
RBI has proposed to permit banks to finance corporate acquisitions — a demand long voiced by lenders.
Limits on lending against shares will be raised (from ₹20 lakh to ₹1 crore), financing extended to REITs and InvITs, and caps on loans against listed debt securities to be removed. These changes open fresh lending avenues and deepen the bank–corporate financing ecosystem.
Currently, banks are charged standardised premium of ~12 paise per ₹100 of accessable deposit across banks. However, RBI has proposed for a risk based premium framework for deposit insurance, which is expected to result in reduction of premium for banks which are fundamentally stable, thus leading to reduction in opex. While insurance premium charges remain in single digit for major banks, any reduction in premium charges is seen to aid earnings and thus RoA. On implementation, these guidelines seems to benefit large private and PSU banks amid relative stable franchise and fundamental strength.
Overall, the policy framework balances prudential strengthening with growth support. Large private banks and SBI stand out as major beneficiaries, given their stronger buffers for ECL transition, greater flexibility in business structuring, and scope to benefit from capital-market related lending.

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