RBI Unveils Framework to Boost Bank Financing for Corporate Acquisitions

Mumbai, October 1 – In a major policy shift aimed at improving credit flow in the market, the RBI announced strategies to enable Indian banks to finance acquisitions by domestic corporates. This move comes on the backdrop of a long-standing demand from the Indian banking sector. The SBI Chairman, CS Shetty, had urged the central bank to permit such financing, a practice that is globally carried out. Mr Shetty also suggested that approvals could be initially restricted to listed companies to ensure the highest level of compliance and to safeguard against hostile takeovers.

Key Policy Measures Announced

The key policy measures announced by the RBI governor include a new framework for corporate acquisition financing, removal of caps on lending against listed debt securities, and enhanced lending limits, with share-backed loans rising to ₹1 crore and IPO financing per person raised to ₹25 lakh. Additionally, the 2016 restrictions on large borrower lending will be withdrawn, while systemic risks will continue to be managed through macroprudential tools.

Other Announcements

Other announcements include infrastructure financing aimed at reducing costs for NBFCs, where the RBI plans to lower risk weights. It will help increase lending to high-quality operational infrastructure projects by NBFCs. In addition, the licensing of new Urban Cooperative Banks, which has been paused since 2004, could be reinstated soon, as the RBI plans to publish a discussion paper on the topic in response to private sector developments and rising stakeholder demand.

The measures are expected to ease credit access for corporates, deepen the capital market, and provide fresh momentum to infrastructure financing.

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