Banks are going slow in extending loans against shares and bonds as markets remain volatile amid heightened trade tensions between India and the US, experts say.

According to data compiled by businessline, banks’ loans against shares and bonds rose by 2-6 per cent year-on-year (y-o-y) between May-July 2025. Between January-April, banks’ loans against shares increased by 17-33 per cent y-o-y, Reserve Bank of India (RBI) data showed. In July, banks’ loan against shares were up 3 per cent to ₹9,730 crore, sharply lower than 25 per cent growth seen in same period last year.

“There has been a lot of global uncertainty over the past three months period and thus markets have been range bound and volatile. Normally, investors also tend to reduce their leverage during such periods and institutions also become cautious in lending to investors during volatile phase. Adverse volatility that leads to downside momentum can increase the lending risk for institutions,” said Kranthi Bhathini, director of equity research at WealthMills Securities.

According to NSE data, Nifty 50 has moved up slightly from 24346.70 to 24768.35 points in May-July period. In January-April period, the Nifty 50 index moved up from 23742.90 points to 24334.20 points.

Anil Gupta, senior VP and co-group head at ICRA, says since banks can lend only up to ₹20 lakh against shares, their lending is not meaningful in overall loan against securities, which is expected to be over ₹50,000 crore as NBFCs dominate in this segment as there is no lending cap for them and is based on regulatory limit for single borrower based on 15 per cent of tier-1 capital.

“It is difficult to explain the slower growth or de-growth in this segment for banks as it is not a meaningful segment or a focus segment for them, but weak market returns or lower tendency of borrowers to leverage in weak markets may be some factors,” he said.

A private sector banker said global trade uncertainties have led to banks being hesitant in lending against shares and the sentiment may revive once trade tensions cool off and more IPOs hit the market.

Published on September 7, 2025