Axis Bank sets its sights on acquisition financing, awaits RBI guidelines

Following the Reserve Bank of India’s (RBI) indication that it will allow domestic banks to fund acquisitions by Indian corporates, Axis Bank, the country’s third-largest private sector lender, said it plans to enter the segment in a big way, as it aims to bank with all major corporates in the country.

 

“We want to bank with all the major corporates of India. We are the biggest players in bond syndication and loan syndication,” Amitabh Chaudhry, MD&CEO, Axis Bank, said on the sidelines of Global Fintech Fest 2025.

 

Chaudhry, however, did not specify which are the sectors the bank would focus on when it comes to funding acquisition of Indian corporates. “It depends on what is the acquisition, who is acquiring, and what are the cash flows”.

 

 

However, he stressed that Axis Bank will give the foreign banks a run for their money when it comes to acquisition financing. In India, it’s the foreign banks who dominate the acquisition financing space, along with private credit funds.

 

However, Chaudhry said the private credit segment, although growing, is still not a challenge for the domestic banks.

 

“Private credit is not a competition,” Chaudhry said.

 

Last week, the RBI said it will allow banks to finance acquisitions by Indian corporates, which has been a long standing demand of Indian banks. Bankers are hopeful that this will not only boost credit demand from the corporate sector, but will also enable them to capture a sizeable share of the acquisition fina­ncing market, which so far has been dominated by non-banks, pr­i­vate credit funds, and foreign ba­n­ks, as banks have a lower cost of funds.

 

According to a Bank of Baroda report, the RBI’s decision has the potential to open the doors to an industry which market sources value at around $40 billion or ₹3.5 trillion.

 

Indian banks have been historically restricted from lending for mergers and acquisitions, as such financing can lead to over-leverage, promoter-level funding at the holding company level, and may not directly contribute to asset creation or growth.

 

Separately, Chaudhry, referring to the “Forms of Business” circular, said that the RBI may give the banks more time to sell stake in their subsidiaries who are in the same line of business as their parent banks.

 

He added that Axis Bank is awaiting the final guidelines from the RBI to take a final call on its stake sale in Axis Finance – its wholly owned NBFC subsidiary. Axis Bank was looking to raise ₹2,000-₹4,000 crore by offloading a portion of its stake in Axis Finance. The RBI was not comfortable with the bank infusing additional equity into the NBFC, and, hence the bank is looking to induct other shareholders.

 

“Let the circular come. We have to raise money now for it (Axis Finance). The impression I get is they (RBI) will give more time to banks to manage this whole process rather than pushing us to sell in a shorter period of time. But, directionally, nothing might change,” Chaudhry said, adding that Axis Bank is in no hurry to sell stake in Axis Finance, and they would first check contours of the final guidelines to be issued by the RBI on “Forms of Business”.

 

Last week, RBI Governor Sanjay Malhotra said that they have dropped the proposed restriction on overlaps in business activities between banks and their group entities from the final guidelines on “Forms of Business and Prudential Regulation for Investments”. The draft guidelines issued last year had suggested barring such overlaps.

 

The draft circular had proposed that only a single entity within a bank group can undertake a particular form of permissible business. Further, it had specified that multiple entities within a bank group cannot undertake the same business or hold/acquire the same category of licence/authorisation or registration from any financial sector regulator. Additionally, it had stated there can be no overlap in the lending activities undertaken by the bank and its group entities.

 

According to analysts, removal of regulations that restricted banks and NBFCs from doing overlapping business is positive for all banks like HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank, which have such NBFCs.