New Delhi, Oct. 25 -- The Reserve Bank of India (RBI) has proposed a new framework to regulate how banks fund mergers and acquisitions (M&As), bringing acquisition financing under stricter prudential norms. The draft circular, released on 24 October, aims to prevent excessive risk-taking in large corporate buyouts and ensure that banks maintain adequate capital buffers while lending for such deals.

The move comes as India sees a surge in corporate dealmaking funded largely by private credit. By defining a framework for bank participation, the RBI seeks to balance growth in buyout financing with systemic stability.

On 1 October, the central bank had first proposed allowing banks to fund corporate buyouts as part of its Statement on Devel...