The New Era of Acquisition Finance in India: Opportunities and Legal Challenges Under RBI’s Revised Framework

Abstract

In February 2026, the Reserve Bank of India issued the RBI (Commercial Banks – Credit Facilities) Amendment Directions, 2026, formally notifying a landmark regulatory shift that permits scheduled commercial banks to extend credit for corporate acquisitions for the first time in decades. The framework, which took effect from April 1, 2026 (with an operational rollout deferred to July 1, 2026), enables eligible banks to finance up to 75% of the independently assessed acquisition value for transactions involving equity shares and compulsorily convertible debentures, subject to stringent borrower eligibility criteria, leverage caps, and collateral requirements. This reform dismantles a long-standing statutory prohibition that had forced Indian acquirers to rely on costly offshore borrowings, private credit funds, and mezzanine instruments, introducing domestic liquidity while embedding robust prudential safeguards to protect depositor funds and maintain systemic stability. The Reserve Bank of India's decision to permit commercial banks to finance corporate acquisitions marks a watershed moment for India's M&A landscape, dismantling decades-old prohibitions and introducing a calibrated, risk-managed regime that aligns domestic banking norms with international leveraged buyout standards. For in-house corporate counsels advising Indian conglomerates, growing operating companies, and private equity platforms, mastering these rules is essential to orchestrating compliant and commercially viable transactions in an increasingly competitive deal environment.

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