SBI asks RBI to allow banks to finance acquisitions

NEW DELHI — State Bank of India (SBI), the country’s largest lender, has requested the Reserve Bank of India (RBI) to allow banks to fund acquisitions, its Chairperson Challa Sreenivasulu Setty said on Monday.

At present, Indian banks are not allowed to lend money for mergers and acquisitions.

Because of this rule, companies usually turn to non-banking financial institutions or raise funds through bonds when they plan to buy other businesses.

Speaking at the FIBAC event organised by FICCI AND IBA, Setty said SBI has asked the RBI to consider allowing acquisition financing, at least for large listed companies to begin with.

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The request comes at a time when public sector banks (PSBs) have reported strong profits and improved balance sheets.

Together, the 12 PSBs earned a record profit of INR 44,218 crore in the April–June quarter (Q1) of FY26, an 11 per cent rise compared to the same period previous year.

SBI alone contributed 43 per cent of this, with a net profit of INR 19,160 crore.

With a net profit of INR 19,160 crore for the April–June quarter, which was 12 per cent higher than Q1 FY25, the SBI was at the top of the pack. In terms of size and profits, the biggest lender in the nation still controls the public banking market.

In the last three financial years (FY23 to FY25), PSBs also raised nearly INR 1.54 lakh crore through equity and bonds to strengthen their capital base and support credit growth.

The Finance Ministry is scheduled to review the performance of these banks this week, focusing on their financial health and growth outlook.

If the RBI accepts SBI’s proposal, it could open a new funding option for Indian companies looking at expansion through acquisitions.