With RBI easing norms, SBI aims to tap India’s growing Mergers and Acquisitions market through global collaborations

The State Bank of India (SBI) is exploring collaborations with foreign banks to provide acquisition financing, signalling its intention to expand into the mergers and acquisitions (M&A) lending space, which global lenders have traditionally dominated.

At an industry event, SBI Chairman C.S. Setty said the bank is exploring partnerships with foreign lenders to co-lend and structure acquisition finance deals, in line with the RBI’s draft guidelines permitting Indian banks to fund corporate takeovers.

“We are open to collaborating with foreign banks in the acquisition finance space. We already have some experience in outbound financing and will explore opportunities as the regulatory framework evolves,” Setty said.

The move comes as the RBI recently released draft norms allowing domestic banks to extend credit for takeovers and acquisitions, a practice earlier restricted in India. Under the draft proposal, banks will be allowed to finance acquisitions up to 10% of their Tier-1 capital, subject to strict due diligence and board-approved policies.

SBI, which has a strong corporate banking portfolio, is expected to channel its M&A lending through its existing corporate finance division and its investment banking subsidiary, SBI Capital Markets, rather than setting up a new vertical. The bank is also likely to take up the issue of the proposed 10% cap through the Indian Banks’ Association (IBA), seeking a higher limit to better serve large-scale transactions.

Analysts say SBI’s entry into acquisition finance could reshape the domestic lending landscape by reducing corporates’ dependence on foreign lenders for M&A deals. The collaboration model is expected to bring in international expertise while leveraging SBI’s strong local network and balance sheet.

However, experts caution that M&A financing carries higher risks compared to conventional corporate lending, given uncertainties around integration and business performance post-acquisition. SBI is expected to adopt a cautious approach with rigorous credit assessment mechanisms.

As India witnesses an uptick in corporate consolidation across sectors such as steel, energy, renewables, and infrastructure, SBI’s move could play a pivotal role in deepening the domestic market for acquisition finance.