State Bank of India, the country’s largest lender by assets, has requested the banking sector regulator to allow banks to finance acquisitions, its chairperson said on Monday.
“We’ve been formally requesting the regulator, we’ll make a formal request from the IBA (Indian Banks’ Association) also, that at least start with some listed companies where the acquisitions are more transparent and are approved by the shareholders,” SBI Chairperson Challa Sreenivasulu Setty said at an industry event.
Indian banks are barred from lending for mergers and acquisitions, pushing companies to rely on non-banking financial firms or bonds to finance such deals.
“Some of these things are restricted because in the past, they have been misused,” Ruchin Goyal, managing director and senior partner at consulting firm BCG said at the same event.
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“But now with so many enabling environments coming in, with NPAs (non-performing assets) at all-time low, the regulator can start relaxing these norms. It’s for the regulators to put the right guard rails,” Goyal said, adding that one could start with the “safest” segments such as large listed companies and land financing.
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