Highlights
- The RBI's amended directions enabling banks to finance acquisitions by Indian corporates came into force from April 1, 2026.
- The framework follows draft directions first issued in October 2025 and amended in February 2026.
- Separately, the RBI's Non-Banking Financial Companies Acquisition of Shareholding or Control Directions, 2025 replaced the earlier 2015 rules governing NBFC ownership changes.
- Acquisition of 26% or more equity in an NBFC now requires prior RBI approval under the revised framework.
A significant shift in India's corporate finance regulatory architecture took effect this year as the Reserve Bank of India's amended directions enabling banks to finance acquisitions by domestic corporates came into force from April 1, 2026. The framework marks a departure from India's historically conservative approach to bank-funded acquisition finance.
The RBI had first flagged its intent to create an enabling framework for acquisition finance in October 2025, before issuing draft directions later that month and subsequently amending them in February 2026 ahead of implementation.
Why Investors Are Watching
The new framework is being closely watched because it could materially expand the pool of domestic capital available for Indian corporates pursuing acquisitions, both at home and abroad. Historically, Indian companies pursuing large acquisitions have often relied on a combination of internal accruals, overseas bank financing, or non-bank lenders, given restrictions on domestic bank funding for such purposes.
With banks now permitted to participate more directly in acquisition financing, market participants are assessing which sectors and companies are best positioned to benefit, particularly as India's M&A deal value has already surged in 2026, led by outbound transactions in pharmaceuticals and telecom.
Market Context
The acquisition finance framework arrives at a time when India's M&A market has shown considerable momentum, with deal value reaching $86.9 billion in H1 2026, a 31% year-on-year increase. Large outbound transactions, including Sun Pharmaceutical Industries' acquisition of Organon & Co. and Bharti Airtel's African stake consolidation, have highlighted the scale of capital Indian corporates are deploying overseas.
In a related but distinct development, the RBI also issued the Non-Banking Financial Companies Acquisition of Shareholding or Control Directions, 2025 on November 28, 2025, replacing the 2015 rules governing changes in NBFC ownership and control. Under the revised framework, acquisition of 26% or more equity shares in an NBFC requires prior RBI approval, as does any change affecting more than 30% of a company's directors.
What Market Participants Will Monitor
Bankers, corporates, and analysts will track how quickly banks operationalise acquisition financing facilities under the new framework, and which sectors see the earliest uptake. The interplay between this framework and existing corporate leverage levels will also be relevant, since regulators are likely to remain watchful of systemic risk from rising acquisition-related debt.
Separately, market participants will monitor how the revised NBFC ownership and control directions influence consolidation within India's non-bank lending sector, given the tighter approval thresholds now in place for shareholding changes.
Industry or Peer Perspective
Indian banks with strong corporate banking franchises are likely to be the most direct beneficiaries of the new acquisition finance framework, as they compete for a larger share of deal financing that may previously have gone to offshore lenders or private credit funds. Companies with active acquisition strategies, such as Sun Pharmaceutical Industries (NSE:SUNPHARMA), represent examples of the kind of corporate activity this framework is designed to support.
The NBFC sector, which has already seen high-profile transactions such as the merger that made Shriram Finance India's largest retail NBFC, is also likely to see continued consolidation activity shaped by the revised RBI ownership directions.
Conclusion
The RBI's acquisition finance framework, alongside its revised NBFC ownership and control directions, represents a structural evolution in how Indian banks and corporates approach acquisition funding. As these rules take root, they are likely to influence the pace and financing structure of India's already active M&A market through the remainder of 2026.
FAQs
Q: Why is the company in focus today?
A: This article covers the RBI's acquisition finance framework for banks and revised NBFC ownership directions, both of which took effect in 2026 and are reshaping how Indian corporates fund acquisitions.
Q: What factors are investors monitoring?
A: Market participants are watching how quickly banks roll out acquisition financing facilities, which sectors benefit first, and how the revised NBFC ownership rules affect consolidation in the non-bank lending space.
Q: Which peer companies are relevant?
A: Sun Pharmaceutical Industries (NSE:SUNPHARMA) is relevant as an example of a company actively pursuing large acquisitions that could utilise such financing frameworks.
Q: Is this article investment advice?
A: No. This article is intended solely for informational purposes and should not be considered investment, financial or trading advice.