The Government of India has imposed a strict ban on cross-promoter loans among public limited companies, marking a decisive move to curb opaque financial arrangements and enhance corporate governance. Notified by the Ministry of Corporate Affairs (MCA) through amendments to the Companies (Meetings of Board and its Powers) Rules, 2014, the ban prohibits public companies from extending direct or indirect loans, guarantees, or security to entities owned or controlled by the promoters of other listed companies. The ban takes effect from July 1, 2026, and applies to all transactions regardless of board approval or group affiliations.

Under the new rules, any such financial arrangement that creates interlocking promoter interests, or potentially influences management control or voting rights in another listed entity, will be considered a prohibited related party transaction. The restriction covers structured deals routed through subsidiaries or special purpose vehicles (SPVs), and public companies must now conduct a promoter exposure audit as part of their annual compliance filings. Non-compliance will attract stringent penalties under Section 186 and Section 188 of the Companies Act, 2013, including a monetary fine of up to ₹25 lakh for the company and ₹5 lakh for each officer in default.

To enforce the ban, the MCA and SEBI will jointly monitor financial disclosures, related party transactions, and lending activities using the MCA21 and SEBI LODR data integration system. Additionally, companies must update their Board-approved lending and investment policies, explicitly barring cross-promotional exposure. Analysts and governance experts have praised the reform, stating it will deter circular financing, reduce promoter-driven risk, and strengthen minority shareholder confidence. The move is expected to usher in a more transparent and arms-length capital structure across India’s public corporate sector.