SBI chairman Setty requests RBI to allow banks to fund M&As

SBI chairman CS Setty

State Bank of India’s (SBI) chairman CS Setty on August 25 requested the Reserve Bank of India (RBI) to allow banks to fund mergers and acquisitions.

The 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.

“We have been requesting the regulator and will make a formal request to the RBI that at least start with some listed companies where the acquisitions are more,” Setty said.

The corporate world should start looking at capacity expansion right away, which would be supported by capital markets as well as debt markets through the banking system, he said.

When the demand comes back in a big way, the corporate should not be found wanting for the capital expenditure or the capacity availability, he added.

The shift to the bond market comes as the Reserve Bank of India (RBI) has reduced the repo rate by 100 basis points (bps) this year. In response, yields on corporate bonds and commercial papers (CPs) fell by more than 70 bps, making market borrowing significantly cheaper than traditional bank loans.

The central bank has held the key repo rate steady at 5.5 percent in the past two monetary policy reviews.