In a major move to capitalize on India’s liberalized banking regulations, State Bank of India (SBI) has initiated high-level discussions with leading Japanese financial institutions to collaborate on acquisition financing. This development follows a landmark policy shift by the Reserve Bank of India (RBI) on February 13, 2026, which opened the doors for domestic lenders to fund mergers and acquisitions (M&A). SBI Chairman CS Setty, speaking at an Indian Banks’ Association (IBA) event in Mumbai, revealed that the bank has a massive “war chest” of approximately ₹94,000 crore (20% of its Tier-1 capital) dedicated to this newly accessible sector.
The partnership with Japanese lenders is seen as a strategic necessity given their deep expertise in complex global M&A structures. Under the new RBI framework, banks can now finance up to 75% of a deal’s value, provided the acquiring company maintains a debt-to-equity ratio of no more than 3:1. Chairman Setty noted that while SBI has collaborated with foreign banks on overseas transactions for years, the ability to now fund domestic acquisitions allows for a “seamless extension” of those relationships within India. He emphasized that the bank will initially focus on “plain vanilla” debt-for-equity structures involving listed companies, ensuring a cautious entry into the market before tackling more intricate mezzanine or bond-integrated financing.
The timing of this tie-up is critical, as India’s M&A landscape is projected to witness deals valued at nearly $40 billion annually. Japanese “megabanks” like Sumitomo Mitsui Banking Corporation (SMBC) and Mitsubishi UFJ Financial Group (MUFG) have already been aggressive in the “India-Japan corridor,” and this collaboration would further bridge the gap between Japanese capital and Indian corporate expansion. For borrowers, this means access to massive pools of liquidity and sophisticated international underwriting standards. SBI is currently finalizing its standard operating procedures (SOPs), which are expected to receive board approval by April 2026, marking a new era of corporate consolidation and globalized financing in the Indian banking sector.
