RBI Chief Sanjay Malhotra Says Easing Bank Acquisition Rules Will Boost Real Economy

Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday said that the removal of restrictions on banks for acquisition financing will strengthen the real economy by enhancing credit flow and enabling greater business opportunities. Speaking at the State Bank of India’s Banking and Economics Conclave, Malhotra emphasized that the recent policy changes are designed to support economic growth while maintaining financial stability.

Last month, the RBI allowed banks to finance acquisitions and increased the cap on loans for purchasing shares during initial public offerings (IPOs). These measures, according to the governor, come with “guardrails” such as limiting bank funding to 70% of a deal’s value and setting debt-to-equity ratio limits to ensure safety and prudence in lending. Malhotra highlighted that these steps would allow banks and stakeholders to benefit from additional business without compromising on stability.

Underscoring the importance of institutional autonomy, the RBI chief said that regulators should not replace boardroom judgment, particularly in a diverse and dynamic economy like India. He added that the central bank’s supervisory tools — including risk weights, provisioning norms, and counter-cyclical buffers — remain sufficient to manage emerging risks and sustain a “robust, resilient and beautiful banking system.”

Pic Courtesy: google/ images are subject to copyright