State Bank of India is set to execute five to six merger and acquisition financing deals, signalling a strategic move to capitalise on the Reserve Bank of India’s new acquisition finance framework, which now allows up to 75% bank funding for deals.
State Bank of India has five to six merger and acquisition financing transactions in the pipeline, a senior official said, signalling that India’s biggest lender is beginning to make use of the Reserve Bank of India’s new acquisition finance framework. The bank has already completed three deals under the scheme and is not trying to chase market share, the official said, according to PTI and The Hindu BusinessLine.
The RBI only finalised its acquisition finance rules in February, allowing banks to fund up to 75% of a deal value, up from the 70% proposed in the draft version. The framework also permits banks to finance promoters’ stakes when they are setting up new companies. The central bank said total bank funding must stay within 75% of the acquisition value as independently assessed by the lender, and the rules are due to take effect from April 1, 2026, according to reports by the New Indian Express, Business Standard and Outlook Business.
SBI chairman C.S. Setty said many of the transactions the bank has already taken on are still in progress, which makes it hard to predict how many will be completed in any given period. He said such deals often begin with a bridge loan before being refinanced into longer-term funding, and that clients sometimes draw less than the full amount because they also tap other financing sources, according to The Hindu BusinessLine.
The RBI’s move marks a significant shift for Indian banking, which had previously kept lenders out of acquisition finance. Industry reports said the central bank has also widened the scope of eligible borrowers, including both listed and unlisted non-financial companies, while tightening borrower criteria and exposure limits. Analysts say the change could help lenders win business from sectors such as software, where companies do not always rely on banks for routine funding, while also giving acquirers more room to structure deals with meaningful equity of their own.
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