India is poised to launch a $40 billion M&A market accessible to local bank financing.

The Reserve Bank of India intends to allow domestic financial institutions to fund mergers and acquisitions, a decision anticipated to enhance the country’s deals market, which exceeds $40 billion. On Wednesday, after the central bank maintained interest rates, Governor Sanjay Malhotra announced in Mumbai that the Reserve Bank of India would soon suggest a framework allowing banks to directly finance corporate takeovers.The RBI announced a series of measures, one of which included the proposed easing of regulations. Additionally, it intends to abolish regulatory limits on lending against listed debt securities and to increase the limits for lending against shares. The moves drove the Nifty Bank index up 1.4%, reaching the day’s peak.

The announcement comes as corporate appetite for M&A in India grows, driven by healthier balance sheets, years of debt reduction, and robust domestic demand. According to data compiled by Bloomberg News, the volume of domestic M&A in 2025 has reached nearly $41 billion, reflecting a slight improvement from the previous year.When asked about the easing of bank regulations, Malhotra stated at a news conference, “The goal will be to foster stability while also boosting competitiveness and promoting and enhancing economic growth.” At present, lenders are prohibited from providing direct funding for acquisitions because of regulatory and asset-quality issues. Most corporates usually seek assistance from non-banking financial institutions, foreign lenders, or both public and private markets. In recent years, bad loans in India’s banking sector have been significantly addressed, leading to gross non-performing asset ratios reaching their lowest levels in several years.It is anticipated by analysts that foreign banks will be affected by the new proposal. Bharat Gupta, founder of research services firm Au-RRange Ventures, stated, “If the RBI permits state-run banks to finance highly rated M&A transactions, public sector banks will capture market share from foreign banks that have been benefiting more from this regulatory arbitrage.”