{"id":21175,"date":"2025-10-27T06:09:17","date_gmt":"2025-10-27T06:09:17","guid":{"rendered":"http:\/\/tezgyan.com\/index.php\/2025\/10\/27\/banks-may-soon-finance-domestic-and-overseas-acquisitions-under-rbis-new-draft-banking-and-finance-news\/"},"modified":"2025-10-27T06:09:17","modified_gmt":"2025-10-27T06:09:17","slug":"banks-may-soon-finance-domestic-and-overseas-acquisitions-under-rbis-new-draft-banking-and-finance-news","status":"publish","type":"post","link":"https:\/\/tezgyan.com\/index.php\/2025\/10\/27\/banks-may-soon-finance-domestic-and-overseas-acquisitions-under-rbis-new-draft-banking-and-finance-news\/","title":{"rendered":"Banks May Soon Finance Domestic And Overseas Acquisitions Under RBI\u2019s\u00a0New\u00a0Draft | Banking and Finance News"},"content":{"rendered":"


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RBI proposes new rules capping banks\u2019 capital market exposure at 40 percent of Tier 1 capital, with stricter limits for loans and investments.<\/h2>\n
\"RBI<\/p>\n

RBI May Allow Banks to Lend for Mergers and Acquisitions, Both in India and Overseas<\/p>\n<\/figure>\n

The Reserve Bank of India (RBI) has proposed to allow banks to offer capital\/loans to Indian companies for a strategic acquisition purpose, both home and abroad.<\/p>\n

With the new proposal, RBI aims to tighten and update rules for banks\u2019 exposure to the capital market (both direct investments and loans against securities).<\/p>\n

The goal is to reduce risks and bring all older circulars under one framework, according the RBI\u2019s Draft Directions on Commercial Banks\u2019 Capital Market Exposure (CME), 2025.<\/p>\n

The proposed guidelines is expected to be effective from April 1, 2026.<\/p>\n

Loans to Companies (Non-individuals)<\/h3>\n

Banks may give working capital or bridge loans against eligible securities, according to RBI\u2019s draft. However acquisition finance is allowed up to 10 per cent of Tier 1 capital, only for strategic (Not speculative acquisitions).<\/p>\n

To limit risk, the central bank has proposed capping a bank\u2019s total exposure to acquisition finance at 10% of its Tier 1 capital. The acquiring company will also need to contribute at least 30% of the deal value from its own equity, while banks can finance up to 70%. The loan must be fully secured by the shares of the target company, with additional collateral allowed as per the bank\u2019s internal policy.<\/p>\n

What Are Other Key Points Of Draft?<\/h3>\n

According to RBI\u2019s draft, the total capital market exposure (CME) of a bank cannot exceed 40 per cent of its Tier 1\u00a0 capital. Moreover, direct CME (like investments and acquisition finance) cannot exceed 20 per cent ceiling.<\/p>\n

Banks may keep lower limits as per their own risk policies.<\/p>\n

Certain investments (e.g., in government-backed institutions, debt MFs, NCDs) are excluded from this limit. Banks can give loans against approved securities only (like listed shares, bonds or mutual funds).<\/p>\n

Banks can\u2019t give loans for:<\/strong><\/p>\n