The country’s largest lender State Bank of India (SBI) has requested the Reserve Bank of India (RBI) to allow banks to fund acquisitions, the bank’s chairman Challa Srinivasulu Shetty said on Monday. Currently, Indian banks are not allowed to lend for mergers and acquisitions.
Because of this rule, when companies plan to buy other businesses, they usually turn to non-banking financial institutions or raise funds through bonds.
Speaking at an industry event, Shetty said SBI has requested the RBI to consider allowing acquisition financing at least for large listed companies.
The request comes at a time when public sector banks (PSBs) have reported strong profits and improved balance sheets.
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Overall, the 12 public sector banks posted a record profit of Rs 44,218 crore in the April-June quarter (Q1) of FY26, up 11 per cent over the same period last year.
SBI was on top with a net profit of Rs 19,160 crore in the April-June quarter, up 12 per cent from Q1 FY25. In terms of size and profits, the country’s largest lender still controls the public banking market.
In the last three financial years (FY23 to FY25), public sector banks raised about Rs 1.54 lakh crore through equity and bonds to strengthen their capital base and support loan growth.
The finance ministry will review the performance of these banks this week, focusing on their financial health and growth outlook.
If RBI accepts SBI’s proposal, it could open up a new funding option for Indian companies looking to expand through acquisitions.
