Banks to drive domestic M&A as RBI eases financing norms

BANKS, ESPECIALLY LARGE public sector lenders such as the State Bank of India and Bank of India, have begun seeking legal advice on reviving acquisition financing in the domestic market after RBI issued its final prudential guidelines on the segment.

- MAHESH NAYAK

“Large PSU banks have shown a lot of interest... they have a large appetite. The interest is already visible,’ said a senior partner at a law firm, adding that lenders have begun internal evaluations on how to operationalise the new framework. Banks are preparing board-approved policies, subject to risk-department vetting and upgrades in staffing and capabilities.

A senior private sector banker said the initial draft guidelines were “widely dismissed as toothless,” offering little flexibility and failing to address longstanding industry concerns. “But the RBI’s revised guidelines have dramatically altered that perception. Banks are eager to enter this business. The final guidelines are far more favourable and provide ample operational headroom,” added a senior official at a state-run bank.