In Press Release No. 2025-2026/1218, accompanying the Statement on Developmental and Regulatory Policies dated October 1, 2025, the Reserve Bank of India (RBI) has announced a pivotal shift impacting India’s mergers and acquisitions (M&A) landscape.
Acquisition Financing Framework
Under the proposed review of Capital Market Exposure Guidelines, the RBI aims to create an enabling environment for banks to finance corporate acquisitions, a significant departure from the earlier regime where lending for share purchases was largely prohibited to curb speculative activity.
Key changes:
- RBI now proposes an enabling framework for banks to finance acquisitions by Indian corporates, bringing India closer to global leveraged acquisition practices.
- Lending limits will be enhanced against shares, REITs, and InvITs, while the ceiling on lending against listed debt securities is being removed.
- A principle-based framework will also govern lending to capital market intermediaries, creating more clarity and flexibility.
Implications for M&A
- Private Equity Enablement: Facilitates leveraged buyouts (LBOs) and sponsor-backed acquisitions within India.
- Capital Market Integration: Higher lending flexibility against equity, REITs, InvITs, and debt instruments deepens funding channels for acquisition structures.
- Global Alignment: Creates a level playing field with international deal structures where acquisition financing is bank-led.