RBI proposes enabling framework for banks to finance acquisitions by Indian corporates

Reserve Bank of India

The Reserve Bank of India (RBI) said on October 1 that it has proposed to provide an enabling framework for banks to finance acquisitions by Indian corporates. Governor Sanjay Malhotra said this while announcing the monetary policy.

The central bank also proposed to enhance the limit for lending by banks against shares, units of REITs (Real Estate Investment Trusts) and InvITs (Infrastructure Investment Trusts) while removing the regulatory ceiling altogether on lending against listed debt securities, and put in place a more principle-based framework for lending to capital market intermediaries.

The Governor said that the RBI has proposed to enhance limits for lending by banks against shares from Rs 20 lakh to Rs 1 crore and for IPO financing from Rs 10 lakh to Rs 25 lakh per person.

Further, it proposed to withdraw the framework introduced in 2016 that disincentivised lending by banks to specified borrowers (with credit limit from banking system of Rs 10,000 crore and above), the Governor added.

On August 25, State Bank of India (SBI) chairman CS Setty requested the RBI to allow banks to fund mergers and acquisitions.

His comments come as corporate lending by banks remained tepid in the June quarter, with businesses turning to the bond market to meet their funding needs amid falling interest rates.

To start with, allowance should be given to some listed companies where the acquisitions are more transparent and is approved by the shareholders, Setty said during a panel discussion at the FIBAC  2025.

The RBI’s Monetary Policy Committee (MPC) decided to keep the benchmark repo rate unchanged at 5.5 percent on October 1, second time in a row.

The MPC also kept the stance unchanged to 'Neutral'.

The MPC considered it prudent to wait for impact of policy actions to play our before charting the next policy action.

As a result, the standing deposit facility (SDF) rate remains unchanged at 5.25 percent and the marginal standing facility (MSF) rate and the Bank Rate at 5.75 per cent.

The decision was in line with Moneycontrol’s poll of economists and bankers who predicted the MPC will hold rates due to the comfort from the higher growth in the first quarter while taking time to assess the data on the Goods and Services Tax (GST) reforms.