RBI proposes 10% cap on acquisition financing for banks
pre-market1 source ↓written by the desknot a recommendation
- on acquisition financing
- 10% cap
- of acquisition costs
- 70%
- contribution from acquiring
- 30% equity
The Reserve Bank of India (RBI) has proposed a 10% cap on acquisition financing based on banks' Tier-I capital. Banks can fund up to 70% of acquisition costs, requiring a 30% equity contribution from acquiring firms. This policy aims to facilitate mergers but raises concerns about limiting bold corporate strategies.
• Acquiring firms must be listed and profitable for three years.
• The proposal has sparked debate among bankers regarding its potential impact on M&A activity.
Not investment advice. For informational purposes only.