The Daily Brief Indian banks want a shot at funding business takeovers
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Sep 15, 2025 Discover how Indian banks are navigating the tricky waters of financing mergers and acquisitions amidst restrictive policies. Learn about the challenges posed by a fragile global trading system and the shifting landscape of world trade. The discussion also highlights the decline in energy costs for sustainable factories and the push for a regulatory framework that supports responsible lending. Finally, delve into the second unbundling of globalization and its effects on global income inequality and economic integration.
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Banks Locked Out Of M&A Finance
- Indian banks have been banned from directly financing share acquisitions for three decades, excluding them from lucrative M&A finance.
- This policy channels acquisition financing to foreign banks and non-bank lenders, costing domestic banks growth opportunities.
Choose Financing Path Deliberately
- Use multiple legal routes when banks can't finance takeovers: raise funds overseas, use FOCC structures, or tap NBFCs and AIFs.
- Each route trades off cost, collateral strength, and regulatory complexity, so choose based on deal size and urgency.
Domestic Credit Is Available But Costly
- Domestic NBFCs and AIFs can fund acquisitions but charge higher prices due to provisioning and risk profiles.
- Listed NCDs open access to mutual funds and insurers but add SEBI compliance and disclosure burdens.