SBI looks to focus on deal financing within its own territory, as a draft regulation from the RBI proposes an even playing field for Indian banks

The State Bank of India (SBI), which has long funded the overseas acquisitions of Indian companies, believes it is prepared to support domestic mergers and acquisitions (M&As) as the Reserve Bank of India (RBI) looks into the possibility of allowing domestic lenders to do so.“Our outbound M&A financing involves Indian corporations acquiring foreign entities. Banks such as SBI possess extensive knowledge of acquisition financing,” C.S. Setty, chairman of the largest lender in the country, informed reporters during the Global Fintech Fest in Mumbai on Wednesday.Amitabh Chaudhry, the managing director and CEO of Axis Bank, stated on Tuesday that his bank aims not only to take part but also to challenge foreign banks that have been funding these acquisitions for several years, offering them “a run for their money.”On 1 October, in the course of detailing its review of monetary policy, the RBI unveiled a draft framework aimed at allowing domestic banks to underwrite acquisition financing for Indian corporates—something that has been desired by the banking sector for a long time.

Regulatory constraints had effectively prohibited Indian banks from providing loans for share purchases in acquisition deals up to this point. Foreign banks, non-bank financial institutions, bond markets, and private equity largely took on those tasks.As the RBI aims to revise the regulations, domestic banks might soon benefit from a level playing field that is conditioned on safeguards, credit limits, and oversight standards. Market participants think this action could reveal value in the corporate funding life cycle. “Im Zuge des Geschäftsjahres 2024 beliefen sich die Werte von M&A-Transaktionen auf mehr als 120 Milliarden US-Dollar (ungefähr ₹10 lakh crore bzw. trillion). As per a note from SBI Research Ecowrap following the RBI's announcement regarding draft rules, if we consider that the debt component accounts for 40% of M&A and that banks could finance 30% of this, it results in a possible credit growth of ₹1.2 lakh crore.