Cloud 9fin RBI to unleash Indian banks to finance M&A next month
Mar 13, 2026
Rajhkumar Shaw, Mumbai-based reporter on Indian banking and credit markets, guides listeners through the RBI’s April rule change allowing domestic banks to fund M&A. He explains why banks were previously barred. He outlines key revisions, safeguards and banks’ reactions. He also covers how deals were financed before and what this means for private credit funds.
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RBI Opens Banks To M&A Financing
- RBI will allow domestic banks to finance mergers and acquisitions from 1 April, ending a long-standing ban on acquisition financing.
- Rajhkumar Shaw notes M&A volumes hit $113bn in 2025, making timing favourable for banks to enter the market.
Why Banks Were Barred From Acquisition Loans
- The original ban aimed to protect depositor funds by keeping risky, leveraged acquisition lending out of the banking system.
- Rajhkumar Shaw explains RBI feared banks funding highly leveraged acquisitions would harm asset quality and stability.
Final Rules Broaden Bank Participation Limits
- Final guidelines expanded scope versus the October draft: unlisted targets allowed, exposure cap doubled to 20% of Tier 1 capital, and LTV raised to 75%.
- That means acquirers must now bring 25% equity and banks can take larger roles in deals.