RBI has released a draft framework allowing Indian banks to play a bigger role in acquisition finance — a space previously dominated by private credit funds. This marks a major shift in how M&A deals can be funded.

 

📌Key Points

• RBI has outlined clear rules for banks to provide acquisition finance, bringing formal structure to an area long driven by private credit.

• The framework clarifies risk eligibility, capital norms and regulatory oversight for banks entering buyout financing.

• Banks can now tap their balance sheets and lower cost of funds to support leveraged buyouts and acquisition-led deals.

• This move is expected to create a more competitive and transparent market for M&A debt financing.

✅Strategic Impact

• Greater bank involvement can lower borrowing costs and expand access to acquisition finance, potentially boosting deal activity.

• Private credit funds will still play a major role due to their flexibility, speed and higher risk appetite — leading to coexistence, not replacement.

• Strong risk management and governance standards will be essential as the market evolves.

🔅Bottom Line

RBI’s proposed rules open the door for bank-funded buyouts at scale, reshaping India’s M&A financing ecosystem — while private credit continues to remain an important pillar for innovative and customised deal structures.