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SBI, PNB Prepare Joint Playbook To Capture Rs 1.2 Lakh-Crore M&A
- SBI and PNB, along with other government lenders, are preparing a common strategy to enter India’s Rs 1.2 lakh crore M&A financing market.
- The move follows RBI’s draft guidelines allowing banks to extend acquisition finance from April 2026, a segment previously off-limits for them.
- Discussions aim to address exposure limits, listed company restrictions, and vigilance norms, with banks exploring a unified approach through the IBA to jointly fund M&A deals.
State Bank of India and Punjab National Bank are among government lenders preparing a common strategy to tap the country's lucrative Rs 1.2 lakh crore mergers and acquisitions market, executives said.
The lenders, through the IBA, will also seek relaxations in the framework proposed by the RBI that opens the door for banks to participate in deal financing, hitherto a forbidden segment for them, with effect from April 1, 2026. To be sure, the discussions are at a preliminary stage, and any final decision will also factor in the vigilance norms that PSU banks are required to follow.
These are preliminary deliberations on how to approach this as public sector lenders if there can be a unified approach on sectors and a common framework, also taking into consideration the scrutiny around vigilance issues in state-run banks, says a senior bank executive, adding that 3-4 top banks may hold separate discussions on these issues.
The Reserve Bank of India had floated the draft guidelines Reserve Bank of India (Commercial Banks Capital Market Exposure) Directions, 2025 for consultations in October. These will permit banks to extend acquisition finance to Indian corporates for acquiring equity stakes in domestic or foreign companies as strategic investments. A second bank executive said IBA members are currently holding deliberations to further seek tweaks in the RBI's draft policy.
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“SBI has flagged concerns over the limit on exposure towards acquisition not exceeding 10% of tier 1 capital. Other issues are being examined, including the restrictions on acquiring firms being listed entities”, he said. M&A deals accounted for 518 transactions worth $28 billion in the September quarter, a 26% increase in volume and 80% by value on a sequential basis, per a recent PwC report. Average M&A deal size expanded to $74 million from $59 million in the previous quarter.
Banks estimate that they can provide as much as Rs 1.2 lakh crore of funding, assuming companies availed 30 per cent debt of the total Rs 10 lakh crore M&A deals in FY24. On an analyst call after the September quarter results, SBI chairman CS Setty had said that the lender is continuing to evaluate its suggestions on the issue and the requirement of restricting it to 10 percent of capital is something the bank will definitely take up with the RBI through the IBA.
PNB, too, is firming up its strategy, with chief executive Ashok Chandra saying on a recent analyst call that banks would collectively arrive at a strategy. "We will go for a proper policy. And in that space, definitely, PNB will play some bigger role in that. Yes, I think we will have to explore through the IBA also", he then said and added that banks would be proposing to jointly provide finance for this particular area in view of the prevailing good opportunities and scales.
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