TL;DR: The Core Insight
Starting April 2026, the Reserve Bank of India (RBI) is set to implement a draft framework that will allow Indian banks to finance up to 70% of an acquisition’s value. Historically, banks were barred from funding share acquisitions, forcing companies to rely on private equity or internal accruals. This shift is part of a broader "Foresight 2026" regulatory pivot, where the focus moves from "permissive growth" to "structured scale."
Vichaarak Perspective: The Maturity of the Indian Financial System
For decades, the Indian banking system's restriction on acquisition financing was a bottleneck for domestic M&A (Mergers and Acquisitions). The logic was rooted in risk aversion, preventing "hostile takeovers" or "leverage-induced bubbles." By allowing 70% financing, the RBI is signaling that Indian Inc. has matured enough to handle leverage.
This is a game-changer for the 'Reverse Flip' movement. As Indian startups return to their home base, they need the financial infrastructure to acquire smaller competitors or global technology assets. The "Structured Scale" era will be defined by compliance-first, resilience-anchored deals. However, with this power comes the responsibility of risk-based scrutiny. Banks will now need to build internal expertise in valuing intangibles (like software and IP) which they have traditionally been wary of.
FAQ: What You Need to Know
1. What is the main change in the RBI's new framework? Indian banks will be allowed to finance up to 70% of an acquisition's value. The acquirers must bring in at least 30% as equity from their own funds.
2. Why was this barred earlier? The restriction was in place to prevent banks from being exposed to the high risks and volatility of share-market-linked acquisitions, ensuring banking stability over aggressive corporate expansion.
3. When does this come into effect? The draft framework is slated to take effect in April 2026, making 2026 a "learning year" for both India Inc. and the banking sector.
Citations: Source: Economic Times (ET Bureau/Khaitan & Co. Foresight 2026 Report). Source: YourStory (Daily Roundup), February 26, 2026.