Indian banks are expected to significantly boost domestic mergers and acquisitions (M&A) activity following the Reserve Bank of India’s (RBI) decision to ease acquisition financing norms. Under the revised guidelines, banks can now provide funding to companies seeking to acquire additional stakes in businesses they already control, allowing ownership levels to rise from 26% up to 90%. This regulatory shift is aimed at facilitating structured financing for acquisitions while maintaining adequate safeguards to protect financial stability.

Key Highlights

• RBI relaxes acquisition financing norms, enabling banks to actively support domestic mergers and acquisitions.
• Revised rules expected to boost corporate consolidation, credit flow, and strategic investments across key industries.

The move is anticipated to unlock fresh credit flows into the corporate sector and accelerate consolidation across key industries such as manufacturing, infrastructure, financial services, pharmaceuticals, and technology. By enabling banks to actively support acquisition financing, the RBI is encouraging companies to pursue strategic growth initiatives, operational synergies, and scale-driven efficiencies. This is expected to reduce reliance on high-cost alternative funding sources, lower overall borrowing costs, and provide firms with more flexible capital structures.

Industry experts believe the relaxed norms will not only strengthen the domestic M&A ecosystem but also enhance banks’ role in supporting long-term economic expansion. With improved access to structured financing, corporates will be better positioned to undertake capacity expansion, business restructuring, and market consolidation. At the same time, banks stand to benefit from increased lending opportunities and improved asset quality through carefully evaluated transactions.

Also Read: Ezeepay Banking Mitra Network Boosts Rural Jobs & Financial Inclusion

The RBI has emphasized the importance of prudent risk management, robust due diligence, and strict adherence to regulatory safeguards to ensure that the expansion of acquisition financing does not lead to excessive leverage or financial instability. Overall, the revised framework is expected to create a more dynamic, resilient, and growth-oriented corporate and banking environment in India, fostering sustained investment and development.