The Reserve Bank of India (RBI) on Friday released draft regulations allowing banks to finance corporate acquisitions, while capping their total exposure to such deals at 10% of their Tier 1 capital.

The move forms part of a broader effort to deepen India’s capital markets and encourage credit flow into mergers and acquisitions.

According to the draft circular, the RBI has proposed that banks’ aggregate exposure to the capital markets should not exceed 40% of their Tier 1 capital, while their total direct capital market and acquisition finance exposure combined must remain within 20% of the same.

Under the proposed framework, banks will be permitted to fund up to 70% of an acquisition’s total deal value, with the remaining 30% to be contributed by the acquiring company. Only listed comp

See Full Page