RBI

NBFCs- Lending against Shares 50% LTV to be maintained at all times

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RBI/2014–15/551 DNBR (PD).CC.No.028/03.10.001/2014–15

April 10, 2015

Please refer to our cir­cu­lar DNBS (PD).CC.No.408/03.10.001/2014–15 dat­ed August 21, 2014. We have since received a num­ber of queries from the indus­try par­tic­i­pants seek­ing clar­i­fi­ca­tion on the applic­a­bil­i­ty of the cir­cu­lar. In this con­nec­tion, the fol­low­ing is clarified 

  1. The above men­tioned cir­cu­lar is not applic­a­ble to unlist­ed shares.
  2. LTV ratio of 50% is required to be main­tained at all times. Any short­fall in the main­te­nance of the 50% LTV occur­ring on account of move­ment in the share prices shall be made good with­in 7 work­ing days.
  3. The con­di­tion of accep­tance of only Group 1 secu­ri­ties (spec­i­fied in SMD/ Policy/ Cir — 9/ 2003 dat­ed March 11, 2003 as amend­ed from time to time, issued by SEBI) as col­lat­er­al for loans of val­ue more than Rs. 5 lakh, is applic­a­ble only where the lend­ing is done for invest­ment in the cap­i­tal market.
  4. The report­ing to the Stock Exchanges shall be quarterly.

Yours faith­ful­ly

(C.D.Srinivasan)
Chief Gen­er­al Manager

RESERVE BANK OF INDIA
DEPARTMENT OF NON-BANKING REGULATION
CENTRAL OFFICE
CENTRE I, WORLD TRADE CENTRE,
CUFFE PARADE, COLABA,
MUMBAI 400 005

DNBR(PD) 016/CGM(CDS)-2015 dat­ed April 10, 2015

The Reserve Bank of India, hav­ing con­sid­ered it nec­es­sary in pub­lic inter­est and being sat­is­fied that, for the pur­pose of enabling the Bank to reg­u­late the cred­it sys­tem to the advan­tage of the coun­try, it is nec­es­sary to amend the Non-Bank­ing Finan­cial (Deposit Accept­ing or Hold­ing) Com­pa­nies Pru­den­tial Norms (Reserve Bank) Direc­tions, 2007 (here­inafter referred to as ‘the Direc­tions’), (Noti­fi­ca­tion No.DNBS.192/DG(VL)-2007 dat­ed Feb­ru­ary 22, 2007), in exer­cise of the pow­ers con­ferred by Sec­tion 45JA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the pow­ers enabling it in this behalf, here­by makes the fol­low­ing amend­ments in the Direc­tions with imme­di­ate effect namely : –

1. Para­graph 17 F shall be read as

17 F. Loans against secu­ri­ty of shares

All NBFCs with asset size of </span>.100 crore and above, lending against the collateral of listed shares shall,
<ol type="i">
<li>maintain a Loan to Value (LTV) ratio of 50% for loans granted against the collateral of shares. LTV ratio of 50% is required to be maintained at all times. Any shortfall in the maintenance of the 50% LTV occurring on account of movement in the share prices shall be made good within 7 working days.</li>
<li>in case where lending is being done for investment in capital markets, accept only Group 1 securities (specified in SMD/ Policy/ Cir - 9/ 2003 dated March 11, 2003 as amended from time to time, issued by SEBI) as collateral for loans of value more than <span class="Rupee">. 5 lakh, sub­ject to review by the Bank.

  • report on-line to stock exchanges on a quar­ter­ly basis, infor­ma­tion on the shares pledged in their favour, by bor­row­ers for avail­ing loans in for­mat as giv­en in Annex VI.

    • (C.D.Srinivasan)
    Chief Gen­er­al Manager

    RESERVE BANK OF INDIA
    DEPARTMENT OF NON-BANKING REGULATION
    CENTRAL OFFICE
    CENTRE I, WORLD TRADE CENTRE,
    CUFFE PARADE, COLABA,
    MUMBAI 400 005

    DNBS(PD) 017/CGM(CDS)-2015 dat­ed April 10, 2015

    The Reserve Bank of India, hav­ing con­sid­ered it nec­es­sary in pub­lic inter­est and being sat­is­fied that, for the pur­pose of enabling the Bank to reg­u­late the cred­it sys­tem to the advan­tage of the coun­try, it is nec­es­sary to amend the Non-Sys­tem­i­cal­ly Impor­tant Non-Bank­ing Finan­cial (Non-Deposit Accept­ing or Hold­ing) Com­pa­nies Pru­den­tial Norms (Reserve Bank) Direc­tions, 2015 (here­inafter referred to as ‘the Direc­tions’), (Noti­fi­ca­tion No.DNBR.008/CGM(CDS) dat­ed March 27, 2015), in exer­cise of the pow­ers con­ferred by Sec­tion 45JA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the pow­ers enabling it in this behalf, here­by makes the fol­low­ing amend­ments in the Direc­tions with imme­di­ate effect namely : –

    1. Para­graph 23 shall be read as

    23. Loans against secu­ri­ty of shares

    All NBFCs with asset size of </span>.100 crore and above, lending against the collateral of listed shares shall,
    <ol type="i">
    <li>maintain a Loan to Value (LTV) ratio of 50% for loans granted against the collateral of shares. LTV ratio of 50% is required to be maintained at all times. Any shortfall in the maintenance of the 50% LTV occurring on account of movement in the share prices shall be made good within 7 working days.</li>
    <li>in case where lending is being done for investment in capital markets, accept only Group 1 securities (specified in SMD/ Policy/ Cir - 9/ 2003 dated March 11, 2003 as amended from time to time, issued by SEBI) as collateral for loans of value more than <span class="Rupee">    . 5 lakh, sub­ject to review by the Bank.

  • report on-line to stock exchanges on a quar­ter­ly basis, infor­ma­tion on the shares pledged in their favour, by bor­row­ers for avail­ing loans in for­mat as giv­en in Annex VI.

    • (C.D.Srinivasan)
    Chief Gen­er­al Manager

    RESERVE BANK OF INDIA
    DEPARTMENT OF NON-BANKING REGULATION
    CENTRAL OFFICE
    CENTRE I, WORLD TRADE CENTRE,
    CUFFE PARADE, COLABA,
    MUMBAI 400 005

    DNBS(PD) 018/CGM(CDS)-2015 dat­ed April 10, 2015

    The Reserve Bank of India, hav­ing con­sid­ered it nec­es­sary in pub­lic inter­est and being sat­is­fied that, for the pur­pose of enabling the Bank to reg­u­late the cred­it sys­tem to the advan­tage of the coun­try, it is nec­es­sary to amend the Sys­tem­i­cal­ly Impor­tant Non-Bank­ing Finan­cial (Non-Deposit Accept­ing or Hold­ing) Com­pa­nies Pru­den­tial Norms (Reserve Bank) Direc­tions, 2015 (here­inafter referred to as ‘the Direc­tions’), (Noti­fi­ca­tion No.DNBR.009/CGM(CDS) dat­ed March 27, 2015), in exer­cise of the pow­ers con­ferred by Sec­tion 45JA of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the pow­ers enabling it in this behalf, here­by makes the fol­low­ing amend­ments in the Direc­tions with imme­di­ate effect namely : –

    1. Para­graph 23 shall be read as

    23. Loans against secu­ri­ty of shares

    NBFCs lend­ing against the col­lat­er­al of list­ed shares shall,

    1. main­tain a Loan to Val­ue (LTV) ratio of 50% for loans grant­ed against the col­lat­er­al of shares. LTV ratio of 50% is required to be main­tained at all times. Any short­fall in the main­te­nance of the 50% LTV occur­ring on account of move­ment in the share prices shall be made good with­in 7 work­ing days.
    2. in case where lend­ing is being done for invest­ment in cap­i­tal mar­kets, accept only Group 1 secu­ri­ties (spec­i­fied in SMD/ Policy/ Cir — 9/ 2003 dat­ed March 11, 2003 as amend­ed from time to time, issued by SEBI) as col­lat­er­al for loans of val­ue more than ‘. 5 lakh, sub­ject to review by the Bank.
    3. report on-line to stock exchanges on a quar­ter­ly basis, infor­ma­tion on the shares pledged in their favour, by bor­row­ers for avail­ing loans in for­mat as giv­en in Annex VI.

    (C.D.Srinivasan)
    Chief Gen­er­al Manager

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