The Reserve Bank of India (RBI) has postponed the implementation of its acquisition finance guidelines by another three months. The new deadline has now been set for July 1, 2026, following feedback from stakeholders.
Why the Deadline Was Extended
The RBI explained that the decision was taken after further consultations with industry participants and a detailed review of the framework. The guidelines were initially introduced on February 13, as part of the revised Amendment Directions on Capital Market Exposures.
Key Changes in the Guidelines
The RBI has also made several important modifications to the framework:
- Expanded Definition of Acquisition Finance
The scope now includes not only acquisitions but also mergers and amalgamations. - Broader Lending Scope
Banks can provide funding for acquiring companies, even when the target entity is non-financial. - Support for Subsidiaries
Acquiring companies are now allowed to use acquisition finance for on-lending to subsidiaries (both in India and overseas) to complete acquisitions. Refinancing Rules Clarified
Refinancing of acquisition finance is permitted only after:- The acquisition process is fully completed
- The acquiring company gains control of the target company
Additionally, such refinancing must be used strictly to repay the original acquisition loan.
- Corporate Guarantee Requirement
If acquisition finance is extended to a subsidiary or a special purpose vehicle (SPV), the parent (acquiring) company must provide a corporate guarantee.
Broader Objective of the Framework
The RBI’s updated guidelines aim to:
- Rationalize lending limits against shares, REITs, and InvIT units
- Create a principle-based lending framework for capital market intermediaries (CMIs)
- Improve transparency and risk management in acquisition financing
Conclusion
With these changes, the RBI is trying to strike a balance between facilitating corporate acquisitions and ensuring financial stability. The extension until July 2026 is expected to help banks and financial institutions smoothly transition to the revised framework.