Time right for banks to star in the M&A story as RBI opens doors

Draft guidelines enable banks to fund acquisitions, deepening corporate relationships and reducing reliance on offshore credit

The Reserve Bank of India’s (RBI’s) draft guidelines on financing mergers and acquisitions (M&As) signal that these are no more episodic but have become a strategic lever for growth, enabling companies to acquire technology, enter new markets and strengthen themselves against competition.

Traditionally, acquisition financing has relied on offshore borrowing, private credit funds or internal corporate reserves. While this allowed firms to pursue deals, it also meant domestic banks remained passive observers. The historical reason for barring banks from this business was that deposit-taking institutions should not bear equity-linked risks. This stance sought to prevent excessive leverage