India central bank allows lenders to fund up to 75% in M&A deals

Published Sun, Feb 15, 2026 · 05:33 PM

INDIA’s central bank will allow lenders to finance up to 75 per cent of the acquisition value in corporate takeovers, in a move that is expected to boost the country’s US$40-billion-plus deals market.

Financing can only take place when a firm “already holds control” over the target company, the Reserve Bank of India (RBI) announced on Friday (Feb 13). Banks can fund companies for buying an extra stake exceeding a threshold of 26 per cent, the regulator said.

The decision comes at a time when corporate appetite for mergers and acquisitions (M&A) deals is rising in India, fuelled by robust balance sheets and resilient domestic demand. 

Beyond bank financing, an acquirer must put up the balance amount on its own through fresh equity or internal accruals, the RBI said. The central bank is also the regulator for the country’s financial sector.

Currently, lenders are barred from directly financing acquisitions due to regulatory and asset-quality concerns. Most corporates typically turn to non-banking financial companies, foreign lenders, or public and private markets.

An acquiring company must have a minimum net worth of five billion rupees (S$70.1 million) and report a net profit for each of the three previous fiscal years. The same rules apply for unlisted companies, along with the additional requirement of an investment-grade rating, the RBI said.

Acquisitions can take place through a single transaction or a series of interconnected deals, but will have to be completed within a year from the date of execution of the agreement.

The buying company cannot be a related party of the target firm, the RBI said, referring to entities where the management or founder’s group are common.

The central bank had first proposed the plan to let local lenders finance M&As in October. BLOOMBERG