RBI's new rules on bank funding for acquisitions
The Reserve Bank of India (RBI) is letting banks fund company takeovers with up to 20% of their core capital—double the earlier draft limit.
Banks can cover up to 75% of an acquisition's price for both listed and unlisted targets, and the draft had tied profitability and listed-company requirements to the acquiring company, while buyers must put in at least 25% from their own pocket.
There's also a cap: overall market bets can't go over 40% of a bank's main capital.
Implications of the new rules
This move could shake up India's mergers and acquisitions scene by giving local banks more firepower—helping them compete with foreign lenders and NBFCs.
The RBI hopes channeling these deals through regulated banks will keep risks in check and boost homegrown credit for strategic buys.
For anyone interested in business, finance, or how money moves in India, this is a pretty big shift.