New Delhi: State Bank of India (SBI) Chairman Challa Sreenivasulu Setty on Monday said the Indian Banks’ Association (IBA) is preparing a formal recommendation to the Reserve Bank of India (RBI) seeking approval for banks to finance mergers and acquisitions (M&As), particularly in cases of listed companies where shareholders have cleared the deal.
Speaking at the FIBAC 2025 conference, Setty said the industry has long requested the regulator to allow such financing, noting that adequate safeguards on transparency and governance are in place.
The move, if approved, would mark a departure from the RBI’s earlier caution driven by concerns over hostile takeovers, signalling a wider acceptance of bank-backed consolidation as a tool for corporate growth.
Setty added that most legacy challenges, including restrictions under project finance guidelines and capital adequacy norms, had already been addressed, creating scope for more flexible credit flows.
“It’s not a supply issue anymore. It’s about demand visibility. And when that demand returns, banks must be ready,” he said.
Positioning the banking sector as central to India’s economic transformation, the SBI chairman underscored the role of banks in supporting long-term capital financing, startup funding, and MSME credit.
He described these as the new growth drivers, with MSMEs being critical for job creation and entrepreneurship.
“Formalisation and digital trade have made lending to this segment safer and scalable. Banks have a unique opportunity to bridge the MSME credit gap,” Setty said.
Welcoming the RBI’s recent discussion paper on artificial intelligence, Setty highlighted the importance of governance, workplace reskilling, and digital public infrastructure.
He said that careful use of data would help banks enhance customer service and product design, while reaffirming the industry’s commitment to financial inclusion and cybersecurity.
“Our focus remains on improving customer service, enhancing lending practices, and taking all possible steps to check cyber threats—issues that are close to the regulator’s heart,” Setty added.
