RBI has formally opened the door for Indian banks to finance corporate takeovers, reversing a two-decade constraint that pushed acquirers to NBFCs, private credit, bonds, or offshore lenders; limits on lending against shares and listed debt securities have been eased alongside this shift, materially improving deal liquidity and pricing for domestic corporates. Early estimates suggest this could unlock ₹5 lakh crore-plus in incremental credit demand as debt components of takeovers migrate back to bank balance sheets under a risk-managed framework, with SBI research implying at least ₹1.2 lakh crore near-term if banks fund 30% of the debt slice in FY24-style activity.

Critically, this comes as India’s M&A engine runs hot: YTD 2025 dealmaking is outpacing 2024, and a dedicated banking framework narrows the cost spread versus private credit, where mid-teens pricing has been typical for mezzanine and structured tranches in prior marquee deals. The regulator is pairing opportunity with guardrails - withdrawal of the 2016 disincentives for large borrower exposures shifts risk control to macro-prudential tools while banks build specialized M&A underwriting capabilities, covenant playbooks, and ALM-matched funding for multi-year acquisition debt.

Bottom line: competition between banks and private credit intensifies, and the immediate winner is the CFO who locks in cheaper senior debt and uses private credit tactically for speed, holdco structures, earn-outs, or bridge-to-refi flexibility.

What changes for deal financing this quarter?

• Banks can now participate in acquisition finance for Indian corporates under an enabling framework, expanding capital market lending and lowering reliance on NBFCs/AIFs/foreign loans for takeovers.

• Limits on lending against shares have been raised from ₹20 lakh to ₹1 crore per person, IPO financing limits increased to ₹25 lakh, and the ceiling on lending against listed debt securities is being removed, improving collateral flexibility and market depth around event financing.

• System-level concentration risks will be managed with targeted macro prudential tools, replacing earlier broad disincentives for large borrowers, enabling banks to compete head-on in acquisition-led growth while maintaining prudence.

Pricing and timeline implications for CXOs

• Expect 300–400 bps lower all-in cost on senior acquisition tranches versus offshore loans or structured private credit, with syndication from leading Indian banks tightening spreads as competition scales through Q4 CY2025.

• Execution velocity improves as bank appetite grows for transparent listed-company transactions and sector leaders; however, deals will carry tighter covenants and enhanced diligence on synergy realization and post-merger cash flows, lengthening credit approval by a few weeks versus pure private credit.

Three actionable moves for CFOs right now

• Dual-track term sheets: Run parallel bank and private credit processes; anchor senior debt with banks to compress cost of capital, and reserve private credit for holdco debt, earn-outs, and back-ended tranches that require bespoke flexibility.

• Documentation edge: Pre-package a diligence kit aligned to bank expectations - clear synergy models, integration milestones, ring-fenced security packages, DSCR/interest cover sensitivities, and ALM-compatible amortization to speed approvals and protect pricing.

• Treasury strategy: Hedge rate-risk and refi windows proactively; as banks scale M&A books, spreads may tighten, enabling opportunistic refinancings - build 12–24 month refi triggers into board-approved treasury policies.

Credit Curators’ lens and support

• Acquisition financing design: Structure blended stacks where domestic banks lead senior secured debt while private credit fills timing, covenant, or holdco gaps; negotiate inter creditor terms that preserve financial flexibility through integration.

• Readiness sprints: Prepare bank-grade models, covenants, and security waterfalls tailored to sector; align NCLT/IBC-linked acquisitions with emerging creditor-friendly timelines to capture speed advantages in distressed takeovers.

• Market calibration: Benchmark pricing and covenant intensity across relationship banks versus global private credit desks to lock in 6–8 quarter visibility on cost of capital for M&A pipelines.

Compliance note

• This analysis reflects announcements and reporting as of Oct 1–9, 2025 from national business media and policy briefings; treat as information, not legal or investment advice.