The Reserve Bank of India (RBI) issued new draft norms on Friday that enable banks to fund acquisitions by Indian companies and raise the required loan amount to individuals who seek to purchase shares through IPOs and FPOs.
The latest rationalised norms have been proposed to be implemented from April 1, 2026.
The draft, ‘Reserve Bank of India (Commercial Banks – Capital Market Exposure) Directions, 2025’, seeks to rationalise and consolidate the applicable regulations governing such exposures, said the bank.
“Acquisition finance may be extended by banks to Indian corporates for acquiring equity stakes in domestic or foreign companies as strategic investments, i.e. those investments which are driven by the core objective of creating long-term value for the acquirer through potential synergies, rather than mere financial restructuring for short-term gains,” it said.
The central bank also said Capital Market Exposures (CME) by regulated entities (Res) carry higher risk and are therefore subject to sectoral exposure limits, purpose-specific lending caps, and loan-to-value (LTV) ratios.
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It has also invited comments on the draft from stakeholders by November 21, 2025.
The existing guidelines have been comprehensively reviewed to align with evolving market practices and provide a more enabling framework for bank financing of CME, the draft further said.
Recently, the Chairman of the State Bank of India, CS Setty, also called for permitting banks to provide funding for mergers and acquisitions, as done by global lenders.
The RBI’s draft says acquisition finance can be extended directly to the acquiring company, or its step-down special vehicle (SPV) that is set up specifically for acquiring the target firm.
“A bank may finance at most 70 per cent of the acquisition value, with at least 30 per cent of the acquisition value to be funded by the acquiring company in the form of equity using its own funds,” it said.
The draft also says banks may grant loans to individuals for subscribing to shares under an initial public offer (IPO), follow-on public offer (FPO), or under an employee stock option plan (ESOP) up to ₹25 lakh per individual, subject to certain conditions. The current limit is ₹10 lakh.
The amount of loan that can be granted to individuals against eligible securities should be capped at ₹1 crore per individual, it added.
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