Daijiworld Media Network - New Delhi

New Delhi, Aug 25: In a push to expand financing options for Indian corporates, State Bank of India (SBI) has formally requested the Reserve Bank of India (RBI) to permit banks to fund mergers and acquisitions, SBI chairperson Challa Sreenivasulu Setty revealed on Monday.

Currently, Indian banks are barred from lending for acquisition purposes, forcing companies to rely on non-banking financial institutions or issue bonds to fund takeovers. Setty, speaking at an industry event, urged that the RBI consider easing this restriction—at least initially for large, listed companies—arguing it would boost strategic growth opportunities.

The request comes at a time of record profitability and strengthened balance sheets for public sector banks (PSBs). Collectively, the 12 PSBs posted a combined profit of Rs 44,218 crore in Q1 FY26, up 11% year-on-year. SBI alone accounted for 43% of that figure, reporting a net profit of Rs 19,160 crore—12% higher than Q1 FY25—cementing its dominance in both size and profitability among Indian lenders.

Over the last three financial years (FY23 to FY25), PSBs have also mobilized around Rs 1.54 lakh crore via equity and bonds, bolstering their capital buffers to support credit expansion.

The Finance Ministry is expected to conduct a performance review of these banks this week, focusing on financial stability, profitability, and growth outlook.

If the RBI greenlights SBI’s proposal, it would mark a significant shift in India's banking regulations, opening up new avenues of acquisition financing and potentially transforming the landscape for corporate expansion in the country.