For years, Indian banks followed a strict rule—they could give loans to help a business grow, but not to buy another company. Even if a business was doing well and wanted to expand through an acquisition, banks had to say no. The Reserve Bank of India (RBI) made this rule to keep the financial system safe and protect people’s deposits. But this restriction slowed down many ambitious companies. They had to look abroad or to private investors for funds. Now, as India’s business landscape changes, a big question arises—is it time for banks to finally help Indian companies grow through acquisitions too?

The reasoning was simple. Funding mergers and acquisitions (M&A) carries higher risks than regular business loans. If a company borrowed money to acquire another firm and the deal failed, the loan could quickly turn into a bad asset. For a country that had faced years of bad loans and high non-performing assets (NPAs), the RBI preferred caution over aggression.

As a result, Indian companies that wanted to acquire others—whether in India or overseas—had to depend on foreign banks, offshore funding, or private equity firms. While this helped businesses expand, it also meant that foreign institutions earned most of the profits from financing India’s corporate growth. Indian banks were left out of one of the most profitable segments of modern finance.

Now, the scenario is changing. The Reserve Bank of India is working on a new ‘acquisition finance policy’ that will finally allow Indian banks to fund mergers and acquisitions directly. For the first time, lenders such as ‘State Bank of India (SBI)’, ‘Punjab National Bank (PNB)’ and major private banks could provide loans specifically for corporate acquisitions and restructuring.

This is not just a banking reform—it’s a structural shift in how India will fund its next phase of economic growth. The timing couldn’t be better. India’s economy is expanding rapidly and its companies are scaling up, consolidating, and venturing into new industries. The country’s mergers and acquisitions market has already crossed ₹1.2 lakh crore, but most of the financing still comes from abroad. RBI’s upcoming policy aims to change that by empowering Indian banks to lead the way in funding India’s own growth story.

Allowing banks to finance M&A deals could transform both the banking sector and corporate India. Businesses will no longer need to depend on expensive foreign capital for acquisitions. They will have access to local, reliable, and cost-effective funding, enabling faster deal closures and stronger domestic growth.

For example, imagine a textile manufacturer in Surat wanting to acquire a factory in Tamil Nadu to expand operations. Today, they might have to seek help from an offshore lender. Under the new policy, they could approach SBI or PNB directly for an acquisition loan. Similarly, a growing IT company in Pune that wants to buy a smaller tech firm in Bengaluru can do so with funding from an Indian bank—faster and at better rates.

This new lending capability will also benefit ‘small and medium enterprises (MSMEs),’ which often lack access to strategic financing. With acquisition loans, these businesses can expand their product lines, acquire competitors, and grow faster—boosting India’s manufacturing and employment base.

For Indian banks, this policy is a major opportunity to diversify income and move up the value chain. Traditionally, banks have relied on interest income from retail and business loans. Acquisition finance opens up new revenue streams such as ‘deal advisory, structuring fees, and partnership-driven financing models.’ Public sector banks like SBI and PNB are already preparing internal teams and frameworks for M&A financing so they can act quickly once the policy becomes official.

This marks a turning point for India’s banking sector. For decades, banks were seen as conservative lenders focused on deposits and basic credit. Now, they are evolving into ‘strategic financial partners’ that can fuel large-scale business expansion. If executed carefully, this change could make Indian banks more competitive globally, bringing them closer to the operational models of major international banks.

Of course, the RBI will implement strict controls to ensure safety. There will likely be ‘limits on exposure, higher capital requirements, and detailed risk assessments’ before any bank can offer acquisition funding. The aim is to strike the right balance—encourage growth, but avoid reckless lending.

Once implemented, this reform will not only strengthen Indian banks but also make the entire financial ecosystem more self-reliant. It will ensure that India’s capital powers India’s growth. In the long run, this could help create ‘fewer but stronger banks,’ capable of handling global-level transactions while maintaining financial stability.

The upcoming acquisition finance policy represents confidence—confidence in India’s banks, its corporates, and its economic potential. It shows that Indian banking has matured from merely managing risks to enabling opportunities. This is more than a policy update; it’s a statement that India’s financial system is ready to take charge of its future.

When this policy comes into effect, Indian banks will not just fund factories or projects—they will fund “ideas, acquisitions, and ambitions.” It will be a turning point where India’s financial power begins to shape the next generation of businesses and industries.

India’s banking story is entering a new phase—one that moves beyond safety toward strategic growth. With the RBI’s acquisition finance framework, Indian banks will finally have the power to help build the very companies that will define the nation’s economic future.

In conclusion, RBI’s move to allow acquisition finance marks a bold step toward transforming Indian banking. By giving banks the authority to fund mergers and acquisitions, India is not just unlocking credit—it’s unlocking ambition. This reform will empower banks, strengthen industries, and make India’s financial ecosystem more global, resilient, and future-ready.