RBI barred banks from financing M&As after the 1992 scam, when funds were diverted to risky market bets. The rule aimed to protect stability in a fragile banking system
India’s banks are stronger and better regulated today. With improved oversight and maturity, they are ready to handle complex financing like mergers and acquisitions
Global rivals use bank loans in their markets to outbid Indian companies. Without the same access, domestic firms are left at a disadvantage in acquisition races
Indian corporations have reduced debt and are turning to capital markets. As funding sources diversify, old restrictions on banks need a fresh review
The risks of financing acquisitions are not unlike those of new projects. Both require assessing balance sheets, stability, and future revenue streams
Excluding banks only empowers private credit and shadow funds. Allowing banks brings transparency and regulatory oversight to India’s growing M&A market