Indian banks boost M&A financing to 75% after RBI rule shift

The Reserve Bank of India's recent amendment permitting lenders to finance up to 75% of an independently assessed acquisition value has opened a sizable new market for domestic banks. State Bank of India has emerged as a leading participant, with roughly a dozen deals either completed or in progress, while HDFC Bank, Kotak Mahindra Bank, ICICI Bank, Axis Bank and RBL Bank have also provided acquisition financing. Foreign banks such as HSBC, Citibank, MUFG and Barclays, once the primary providers due to earlier caps on Indian banks, are now competing alongside domestic lenders.

Since July, more than twelve M&A transactions have been closed, featuring notable deals like Crystal Crop Protection’s ₹2,268-crore purchase of FMC Corporation’s India business and Waaree Renewable Technologies’ ₹1,225-crore acquisition of a majority stake in Associated Power Structures. The financing activity is generating additional fee-based income, with banks cross-selling escrow accounts, demat services and foreign-exchange solutions, especially for private-equity and overseas strategic participants. Industry insiders say every advisory mandate creates a financing opportunity, expanding banks’ revenue streams beyond traditional loans.