Currently, banks can only support overseas acquisitions of Indian companies Photocredit:
Banks could see a healthy demand for business credit, because the RBI intends to enable them to finance domestic acquisitions and to withdraw a framework introduced in 2016 that they do not provide lending to specified large borrowers.
Domestic acquisitions by India Inc can get a leg-up, because RBI intends to set a possible framework for Indian banks to finance them.
overseas acquisitions
Currently, banks can only support overseas acquisitions of Indian companies. To improve the credit flow and to expand the scope of the capital market loans by banks, RBI Governor Sanjay Malhotra said that the Central Bank is planning to offer a possible framework for Indian banks to finance acquisitions by Indian companies.
CS Sety, chairman, State Bank of India, and chairman of the Indian Banks’ Association, said that the withdrawal of the framework with regard to specified borrowers and the proposed engaging framework is possible that financing of merger and acquisition and acquisition) allows by Indian banks and the incremental stream of the banks.
SBI’s Economic Research Department (ERD) said in a report, the regulatory green lighting of acquisition financing promises to unlock value in the life cycle of company financing.
“M&A Deals in FY24 were valued at more than $ 120 billion (£ 10 Lakh Crore). Based on a debt component of 40 percent of mergers and acquisitions and 30 percent of this could be financed by banks, this translates into a potential credit growth of £ 1,2” per 1.2 lakh crore “per £ 1,2” per 1.2 lakh crore. “
Referring to the proposal of the regulator to withdraw the framework in 2016 that the lending by banks to specified large borrowers (with credit limit of the banking system of £ 10,000 crore and higher), the ERD said that this could stimulate the credit of the commercial bank.
“This could stimulate the credit of the business sofa. Incremental loans of companies, including bonds, commercial papers and external commercial loans, was around £ 30 Lakh Crore in FY25. If we assume that 10-15 percent return to the banking system, it will have the potential for banks to have a 3-4.5-4.5-4.5the?
BK Divakara, executive director of CSB Bank, noted that previously Indian companies normally only adopted other domestic companies through the stock route or with NBFC support.
“Promoters cannot bring everything in through equity. They need a number of bank financing. Normally, bank financing is cheaper than other sources of financing
“But now banks are officially allowed to support the domestic acquisitions of Indian companies,” he said.
Divakara said it is still too considering whether the risk weight for exposure to the capital market in the case of the financing of domestic acquisitions will be revised by Indian companies.
Published on October 2, 2025
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