SBI Urges RBI to Allow Banks to Finance Acquisitions

The State Bank of India (SBI) has urged the Reserve Bank of India (RBI) to permit banks to finance corporate acquisitions, Chairperson Challa Sreenivasulu Setty said at an industry event on Monday.

Currently, Indian banks are barred from lending for mergers and acquisitions (M&A), forcing companies to depend on non-banking financial companies (NBFCs) or raise funds through the bond market. In many cases, Indian firms also turn to international financing, leading to higher borrowing costs and exposure to global market risks.

Setty noted that SBI has requested the RBI to allow acquisition financing, at least for large listed companies.

Why This Matters for the Food Industry

India’s food and beverage sector, including quick-service restaurants (QSRs), packaged foods, and agri-businesses, has been witnessing rapid consolidation and expansion. Allowing banks to fund acquisitions could:

Enable homegrown food chains and FMCG brands to acquire rivals or expand more aggressively.

Reduce dependence on foreign investors and international loans, ensuring Indian ownership in a high-growth industry.

Provide a smoother path for M&A deals in the food sector, which often require substantial capital.

Reducing Reliance on Foreign Financing

Industry experts believe that if the RBI allows acquisition financing, Indian companies will have greater access to domestic capital, lowering their reliance on international lenders. This shift could strengthen India’s financial ecosystem and keep strategic industries—like food, retail, and agriculture—less vulnerable to foreign control.

If approved, this move could be a game-changer for M&A funding in India, especially in consumer-driven sectors such as food, where demand is booming.