Economy & Banking★ Must Know

RBI's New Acquisition-Financing Norms Let Banks Fund Up to 75% of a Deal, Effective July 1

By TestNeeti Editorial TeamPublished Wednesday, 1 July 2026 2 min readSource: The Financial ExpressArticle 5 of 7

From 1 July 2026, the Reserve Bank of India (RBI)'s revised acquisition-financing framework came into effect, for the first time allowing Indian banks to finance up to 75% of the value of an acquisition of a controlling stake in a non-financial company (domestic or overseas), including through special purpose vehicles (SPVs) and subsidiaries. The norms, notified via an amendment to the Commercial Banks – Credit Facilities Directions on 30 March 2026 and effective July 1, cap bank funding at 75% of the deal value, require a meaningful equity contribution from the acquirer (a 3:1 debt-equity ceiling) and set eligibility conditions such as a minimum net worth of Rs 500 crore for the acquirer. The move creates a regulated domestic pathway for mergers and acquisitions (M&A) financing, reducing reliance on offshore/structured funding and opening a large new lending opportunity for banks.

Key Facts & Details

9 points

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The RBI's revised acquisition-financing framework took effect on 1 July 2026.
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Banks can now fund up to 75% of the value of an acquisition of a controlling stake in a non-financial company.
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Funding is subject to a 3:1 debt-equity ceiling (a meaningful equity contribution by the acquirer).
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Eligibility conditions include a minimum net worth of Rs 500 crore for the acquirer.
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The norms were notified on 30 March 2026 (amending the Commercial Banks – Credit Facilities Directions) and became effective July 1.
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It creates a regulated domestic route for M&A financing, cutting reliance on offshore structures.

Deep Dive

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Earlier, Indian banks were largely barred from directly financing acquisitions of controlling stakes, pushing such deals to NBFCs, private credit or overseas lenders.
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Banks may adopt the framework earlier than July 1 at their option; some deals have already been structured under it.
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The framework also folds mergers and amalgamations into the definition of acquisition finance.

Exam Focus

Under the RBI's new framework effective July 1, 2026, up to what share of an acquisition's value can banks finance?

Exam Relevance & Angle

Changes to RBI lending norms are core Banking & Financial Awareness material, especially for PO/RBI-grade exams. Examiners test the regulator (RBI), the 75% limit, the effective date (July 1, 2026) and the M&A-financing purpose — all clean hooks, and the reform links to broader banking-credit and corporate-finance themes.

Target Exams

SBI POIBPS POIBPS RRB OfficerRBI Grade BNABARD Grade ASSC CGLRRB NTPCLIC AAOUPSC CSEState PCS

Background & Context

The Reserve Bank of India (RBI) regulates what commercial banks may lend against and for what purpose through its Credit Facilities / exposure directions. Historically, Indian banks were restricted from directly financing the acquisition of controlling stakes in companies (unlike in many Western markets), so acquirers relied on internal cash, equity issuance, NBFCs, private credit or offshore borrowing. Acquisition finance is lending used to fund the purchase of another company; a debt-equity ratio limits how much of the deal is funded by borrowing versus the acquirer's own equity. By allowing regulated bank-led acquisition financing up to a capped share, the RBI aims to deepen India's M&A funding market while containing systemic risk through net-worth, leverage and control-related safeguards.