Banks seek more leeway in acquisition financing

BANKS HAVE FLAGGED several restrictions in the Reserve Bank of India’s acquisition financing guidelines that they believe will limit their participation in the merger and acquisition (M&A) space.

- KSHIPRA PETKAR & MAHESH NAYAK

These include capital caps, equity restructuring as well as inability to fund smaller deals.

According to banking sources, a detailed representation has already been made to the banking regulator.

One of main feedback that bankers have given is on the majority and controlling stake acquisitions. “This rules out funding for minority acquisitions or staggered deals done in tranches as sometimes companies acquire 15-20% initially and scale up later,” said Anu Aggarwal, president & head, corporate banking, Kotak Mahindra Bank, adding that the current framework should allow that flexibility