RBI Draft Norms on Bank Funding of Corporate Acquisitions
Why in the news
RBI issued a draft circular allowing banks to lend for corporate takeovers, with prudential limits to safeguard stability.
Key facts
| Parameter | Proposal |
|---|---|
| Eligible borrower | Listed Indian company with satisfactory net worth and three years of profits |
| Bank funding | Up to 70% of deal value |
| Acquirer’s equity | At least 30% |
| Exposure cap | 10% of bank’s Tier-I capital |
| Route | Acquirer directly or a step-down SPV formed for the deal |
| Effective | 1 April 2026 |
Conditions
- Buyer and target cannot be related parties.
- Buyer and SPV must be body corporates, not NBFCs or AIFs.
- Pricing needs two independent valuations under SEBI rules; appraisal uses the combined balance sheet.
- Banks may also finance PSU share purchases under disinvestment.
Related move
RBI also floated lower risk weights for NBFC infrastructure loans.
Exam angle
- Remember 70:30, 10% of Tier-I and 1 April 2026.