RBI Acquisition Financing Norms: Banks Ask for Easier Limits
Why in the news
Lenders say RBI’s present acquisition-finance rules are too tight for a busy M&A market and want several relaxations.
Key facts
- M&A activity was about $50 billion in H1 2025; banks also want up to 25% lent to one corporate group.
- Financing is limited to listed entities; the JSW Paints $1.5B deal for Akzo Nobel’s Indian unit is excluded.
- Acquirer must bring 30% pure equity; banks ask that CCDs or preference capital count if exposure is ring-fenced.
| Issue | Present rule | Banks want |
|---|---|---|
| Exposure cap | 10% of Tier-1 capital | 25–40% |
| Deal type | Majority or control deals | Minority and phased deals (15–20% first tranche) |
| Targets | Listed entities only | Unlisted and PE-driven deals too |
| Profit record / D:E | 3 years; 70:30 | Banks judge risk; 80:20 |
Exam angle
- Regulator: RBI; terms: Tier-1 capital, CCDs.