Indian Companies Get a Boost for Overseas Acquisitions With New RBI Rules

Indian businesses will now have more authority to purchase full or majority equity in local and overseas companies. The Reserve Bank of India has released a circular to enhance the loan ceilings provided to banks for buying such stakes. This regulation would be effective from April 1, 2026. Such loans would be included in strategic investments that generate long-term value and not short-term financial reorganization.

But the RBI has also made it clear that acquirer companies should be listed on the stock market and should be of good net worth. Banks will also take into account these companies' three-year profit track record to sanction higher loans.

According to the RBI draft, banks can provide a maximum of 70 percent of the acquisition price. At least 30 percent of the acquiring company's stake must be funded as equity using its own funds. The RBI has proposed limiting a bank's total investment in such acquisitions to 10 percent of its Tier-1 capital. The circular states that banks can only lend directly to the acquiring company.

Such a policy should include details regarding borrower eligibility, limits and conditions on security, risk management, margin, and monitoring regulations. Banks will need to ensure that the acquiring company and the SPV formed are not financial intermediaries, such as non-banking financial companies or alternative investment funds. Banks will also need to verify that the acquiring company and the one being acquired are not related to each other. The value of the company to be acquired will be determined under the regulations of the market regulator SEBI.