In a development that will encourage banks to participate more aggressively in funding acquisitions by India Inc, the Reserve Bank of India ( RBI ) on Friday issued the draft circular on acquisition financing that proposes to allow banks to banks to finance as much as 70% of the acquisition value, provided the rest 30% comes from acquirer.

“Acquisition financing mat be extended by banks to Indian corporates for acquitting equity stakes in domestic or foreign companies as strategic investment… by the core objective of creating long-term value… rather than restructuring for short-term gains,” the draft circular said.

The regulator asked banks to put in place a policy on acquisition finance, which defines the overall limit under the ‘direct capital market exposures’, eligibility of borrow

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