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Key Points

State Bank of India has formally requested the Reserve Bank to allow banks to finance acquisition deals. Currently, Indian companies cannot borrow from banks for mergers and acquisitions and must use alternative funding sources. This proposal comes as public sector banks report strong financial performance with record quarterly profits. If approved, this change would create new expansion opportunities for businesses through bank-funded acquisitions.

Key Points: SBI Chairperson Setty Requests RBI Allow Bank Acquisition Financing

  • SBI seeks RBI approval for banks to finance mergers and acquisitions
  • Currently companies rely on NBFCs or bonds for acquisition funding
  • Public sector banks reported record Rs 44,218 crore Q1 FY26 profits
  • PSBs raised Rs 1.54 lakh crore in equity and bonds over three years
2 min read

SBI asks RBI to allow banks to finance acquisitions

SBI asks RBI to permit banks to fund M&A deals, potentially opening new financing options for companies seeking expansion through acquisitions.

"SBI has asked the RBI to consider allowing acquisition financing, at least for large listed companies to begin with. - Challa Sreenivasulu Setty"

New Delhi, Aug 25

State Bank of India (SBI), the country’s largest lender, has requested the Reserve Bank of India (RBI) to allow banks to fund acquisitions, its Chairperson Challa Sreenivasulu Setty said on Monday.

At present, Indian banks are not allowed to lend money for mergers and acquisitions.

Because of this rule, companies usually turn to non-banking financial institutions or raise funds through bonds when they plan to buy other businesses.

Speaking at an industry event, Setty said SBI has asked the RBI to consider allowing acquisition financing, at least for large listed companies to begin with.

The request comes at a time when public sector banks (PSBs) have reported strong profits and improved balance sheets.

Together, the 12 PSBs earned a record profit of Rs 44,218 crore in the April–June quarter (Q1) of FY26, an 11 per cent rise compared to the same period previous year.

SBI alone contributed 43 per cent of this, with a net profit of Rs 19,160 crore.

With a net profit of Rs 19,160 crore for the April–June quarter, which was 12 per cent higher than Q1 FY25, the SBI was at the top of the pack. In terms of size and profits, the biggest lender in the nation still controls the public banking market.

In the last three financial years (FY23 to FY25), PSBs also raised nearly Rs 1.54 lakh crore through equity and bonds to strengthen their capital base and support credit growth.

The Finance Ministry is scheduled to review the performance of these banks this week, focusing on their financial health and growth outlook.

If the RBI accepts SBI’s proposal, it could open a new funding option for Indian companies looking at expansion through acquisitions.

- IANS

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Reader Comments

P
Priya S
While this could boost M&A activity, RBI needs to be cautious. Banks should have strict risk assessment frameworks before lending for acquisitions. We don't want another NPA crisis!
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Aman W
Great move! This will level the playing field for Indian companies competing with global players who have easier access to acquisition financing. Our banks are strong enough to handle this now 💪
Sneha F
SBI's timing is perfect with PSBs showing record profits. Banks have the capital and need new growth avenues. Hope RBI approves this with proper safeguards 🙏
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Michael C
As someone working in corporate finance, this change is long overdue. The current restrictions force Indian companies to pay higher interest rates to NBFCs. Banking sector reform is essential for economic growth.
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Nisha Z
RBI should consider this proposal carefully. While it could boost business growth, they must ensure banks don't become overexposed to acquisition risks. Maybe start with a pilot for top-rated corporates only?

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