Acquisition Finance: Banks Move Slowly After RBI Final Norms
Why in the news
Once RBI released final guidelines, lenders signalled a slow, careful entry. Acquisition financing means bank loans for buying another company or asset.
RBI guardrails
| Area | Rule |
|---|---|
| Exposure | Up to 20% of eligible capital (draft: 10% of Tier-I), within capital market exposure limits |
| Borrower | ₹500 crore net worth, 3 years of profit, investment-grade rating if unlisted |
| Leverage | Debt-to-equity capped at 3:1 |
| Structure | Banks fund at most 75%; the other 25% via bridge finance repayable in 1 year |
Purpose
- Only sound borrowers, less leverage, lower systemic risk.
Exam angle
- Final exposure limit: 20% of eligible capital.