Banks can now fund mergers and acquisitions: RBI
Starting FY27, Indian banks can help finance mergers and acquisitions (M&A) thanks to a new RBI framework.
Banks are now allowed to cover up to 75% of an acquisition's cost, but the company making the purchase has to chip in at least 25% from its own funds.
The RBI says this move is all about making India's M&A scene more active, while still keeping things financially safe.
Who can get this funding?
To get this bank funding, companies need a net worth of ₹500 crore. Publicly listed firms must show profits for the last three years; private ones need at least a BBB-minus credit rating.
The deal should give them control within a year, and their debt-to-equity ratio can't go over 3:1.
The RBI also tweaked loan rules: loans against listed shares are capped at 60%, equity mutual funds at 75%, retail loans max out at ₹1 crore per person, and IPO funding is limited to ₹25 lakh with a 25% margin—the RBI carved out exemptions from the total capital market exposure (CME) limits for investments in systemically important financial institutions (listing LIC, NPCI, National Stock Exchange of India and BSE).