SBI, PNB & PSU Banks Plan Unified Strategy to Tap Rs 1.2 Lakh Crore M&A Market via IBA, Seek RBI Relaxations

State Bank of India (SBI) and Punjab National Bank (PNB), along with several other public sector lenders are actively working on a coordinated approach to tap into India's burgeoning mergers and acquisitions (M&A) market, valued at an estimated Rs 1.2 lakh crore. The initiative is being steered through the Indian Banks' Association (IBA), which is facilitating discussions on crafting a unified framework for government-owned banks.

Mega Bank Mergers: SBI, PNB and PSU Banks Collaborate via IBA

The banks' primary objective is to seek relaxations in the Reserve Bank of India's (RBI) proposed guidelines on acquisition finance, which are expected to take effect from April 1, 2026 as per ET report.

These guidelines are currently under review, and discussions are at an early stage. A senior banking executive noted that any final decisions would carefully consider the vigilance norms applicable to public sector banks while ensuring a common strategy across lenders for financing acquisitions.

RBI Draft Guidelines 2025: PSU Banks Seek Relaxations to Boost Acquisition Finance

The RBI's draft framework, titled "Reserve Bank of India (Commercial Banks-Capital Market Exposure) Directions, 2025", was issued for consultation in October 2025. The draft proposes allowing banks to finance Indian companies in acquiring equity stakes in domestic and foreign firms as strategic investments.

Key issues being discussed by banks through the IBA include the cap on exposure, which is currently suggested at 10% of tier-1 capital for individual acquisitions, and restrictions on financing acquisitions of listed companies.

SBI has raised concerns over the exposure limit, emphasising the need for flexibility to effectively support large-scale M&A deals. As per reports, a second senior bank executive highlighted that these matters are central to ongoing deliberations and will shape the banks' collective strategy.

PSU Banks Eye Rs 1.2 Lakh Crore Funding for M&A Deals

Public sector banks estimate that they could provide up to Rs 1.2 lakh crore in acquisition finance, based on projections that companies may avail around 30% debt of the total Rs 10 lakh crore M&A deals expected in FY24. SBI Chairman CS Setty recently mentioned during an analyst call that the bank is actively evaluating its recommendations on the proposed 10% capital restriction and plans to address the matter through discussions at the IBA.

Punjab National Bank is also positioning itself to play a key role in this emerging segment. PNB Chief Executive Ashok Chandra stated during a recent analyst call that banks would collectively formulate a robust policy to leverage the M&A opportunities. "We will go for a proper policy. And in that space, definitely, PNB will play some bigger role," he said.

Chandra added that the IBA would serve as a platform for banks to propose joint financing solutions, capitalising on the scale of opportunities available in the market.