Sensitive Sector Limits: RBI Eyes Easing for M&A Loans
Why in the news
Reports in November 2025 said RBI might loosen sensitive-sector limits so banks can lend for mergers and acquisitions, which they cannot do directly today.
Key facts
- Sensitive sectors: capital markets, real estate, commodities.
- FY24 exposure: ₹46.62 trillion (27.2% of loans, up 34.1%); capital market part ₹2.43 trillion (1.4%), up 31.3%.
- Draft CME framework: aggregate exposure within 40% of Tier-1 capital, solo and consolidated; it is silent on sensitive sectors.
| Lender | M&A funding position |
|---|---|
| Domestic banks | Not allowed directly |
| NBFCs | Allowed; often borrow from banks, so indirect exposure |
| Foreign banks | Via offshore offices |
| Banks under IBC, 2016 | CIRP acquisitions only to repay lenders |
Concerns and significance
- Bankers feel the 5% ceiling blocks the large credit M&A needs.
- A review could aid restructuring and level the field with NBFCs and foreign banks.
Exam angle
- Cap: 5% of previous year’s deposits.
- Draft CME limit: 40% of Tier-1.