For decades, Indian banks were largely prohibited from lending for the acquisition of shares. Indian acquirers had to rely on internal accruals, offshore borrowing or private credit, which typically came at a higher cost. On 13 February 2026, the Reserve Bank of India issued the RBI (Commercial Banks – Credit Facilities) Amendment Directions, 2026, effective 1 April 2026, which create a structured framework for acquisition finance.
The key features
- Banks may finance up to 75% of the acquisition value. The acquirer must contribute at least 25% from its own resources.
- Finance is available only to Indian non-financial companies that meet prescribed net worth and profitability criteria.
- The acquisition must be strategic, aimed at acquiring control, in India or overseas.
- Acquisitions between related parties are largely excluded.
- The acquisition value must be supported by independent valuation, and lenders will typically take a pledge of the acquired shares as security.
- Post-acquisition leverage and bank-level exposure limits apply.
What it means for acquirers
Lower-cost domestic debt makes more transactions viable, particularly promoter-led consolidation, management buyouts and mid-market acquisitions. It also increases competition for quality targets.
Acquirers who approach lenders with a complete package, including an independent valuation, a combined financial model, a synergy case and a clear security structure, will secure better terms and move faster.
Points for acquirers
- Confirm eligibility on net worth and profitability before approaching lenders.
- Commission the independent valuation early; it anchors the debt quantum.
- For listed targets, plan financing for the open offer as well as the primary acquisition.
Sources: RBI (Commercial Banks – Credit Facilities) Amendment Directions, 2026; analysis by Argus Partners and Shardul Amarchand Mangaldas.