Previously, a blanket cap restricted loans against the collateral of any listed company to a maximum of 70% of its valuation. Under the new directive, the central bank has granted commercial banks and financial institutions the autonomy to design their own "product papers" to independently assess a company's financial health and stability.
Key Evaluation Criteria for Higher Loan Limits:
Banks will now determine the eligibility of listed companies for the enhanced loan limit based on several financial and regulatory benchmarks, including:
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Capital & Listing: Size of paid-up capital and minimum duration of listing on the stock exchange.
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Financial Track Record: Profitability history and a consistent track record of dividend distribution.
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Risk & Compliance: Credit rating, regulatory compliance, and a history of holding regular Annual General Meetings (AGMs).
For companies that meet these strict criteria and are classified in the highest tier of financial strength, banks are permitted to increase the loan-to-value limit by an additional 10 percentage points. This effectively raises the maximum borrowing capacity to up to 80% of the share value for top-tier companies, providing a major boost to investors in fundamentally strong equities.
