Reserve Bank of India (RBI) on Friday stated that banks would be allowed to provide acquisition financing only in cases where the acquiring company already holds control in the target and seeks finance to raise its stake to cross material thresholds from 26% onward to 90%
The regulator said banks are allowed refinance a target company’s existing debt where such refinancing is “integral to the acquisition finance.” Borrowers must meet stringent financial criteria, including minimum net worth of Rs 500 crore, three consecutive years of net profit, and—where the acquirer is unlisted—an investment grade credit rating prior to disbursement.
The banking regulator also eased the portfolio limit for such lending, raising the bank level cap on acquisition finance to 20% of eligible capital, compared with a proposed 10% of Tier 1 capital in the draft rules. The limit will apply within the overall capital market exposure (CME) ceiling, it said.
The final guidelines are relaxed post consultation with banks and will be effective from April 1, 2026.
The RBI aligned rules for infrastructure trusts, saying that InvIT related acquisition funding must comply with the new acquisition finance framework, linking it to the conditions around control, leverage and security requirements.
On retail borrowers, RBI increased the amount individuals can borrow against shares by raising the cap to Rs 1 crore per person from Rs 20 lakh earlier. Within this higher ceiling, banks can lend up to Rs 25 lakh to individuals specifically for purchasing securities in the secondary market.
Banks can now extend up to Rs 25 lakh per individual for subscriptions to initial public offers (IPO), follow on public offers (FPO) and employee stock option plans (ESOPs), subject to borrowers contributing a minimum 25% cash margin, meaning loans cannot exceed 75% of the subscription value.
For other market instruments, the RBI set specific ceilings: loans against listed debt securities rated BBB or above, mutual fund units, exchange traded funds, and units of REITs or InvITs will follow LTV caps applicable under the new framework, ranging from 60% for listed shares to 85% for high rated debt instruments and 75% for equity oriented funds, ETFs and trust units.
