The Reserve Bank of India’s (RBI) decision to remove certain restrictions on bank lending for corporate acquisitions is set to provide a significant lift to the nation’s real economy, according to RBI Governor Sanjay Malhotra.

Speaking on November 7, 2025, at the State Bank of India’s Banking and Economics Conclave, the Governor explained that the recent policy shift, which now allows banks to finance takeovers and raises the maximum loan amount for subscribing to shares in IPOs, is part of a broader strategy to stimulate lending and growth in India’s financial sector.

Guardrails for Safety

Mr. Malhotra emphasized that the new regulations are implemented with essential “guardrails” to ensure stability and safety. These protective measures include placing a cap on bank financing at 70% of the total deal value and mandating specific limits on the debt-to-equity ratio. These mechanisms, he noted, allow stakeholders to benefit from expanded business opportunities without compromising the financial system’s integrity.

Regulatory Philosophy

The Governor also used the platform to articulate the central bank’s regulatory stance, stressing that no supervisory body should try to replace the judgment exercised by a bank’s boardroom. He argued that prescribing a “one size fits all rule” is impractical, especially in a diverse economy like India where every loan and transaction has unique merits. Instead, he advocates for empowering regulated entities to make informed, case-by-case decisions.

In conclusion, Mr. Malhotra asserted that the RBI’s proactive supervisory role acts as a crucial “backstop” to mitigate unsustainable growth and foster a “robust, resilient” banking system. He confirmed that the central bank maintains ample tools, such as risk weights, provisioning norms, and counter-cyclical buffers, to effectively contain any emerging financial risks.