Mumbai, Oct 25
The Reserve Bank of India (RBI) has proposed to permit banks to extend loans to Indian companies for acquiring full or controlling stakes in domestic or overseas firms as part of strategic investments aimed at creating long-term value.
Only listed companies with a satisfactory net worth and a profitable track record over the last three years will be eligible for such financing under the draft norms.
Up to 70 per cent of the acquisition cost may be financed by banks, with the remaining 30 per cent having to come from the acquiring company's own equity contribution.
According to the proposal, either the acquiring company or a step-down special purpose vehicle (SPV) created specifically for the acquisition can receive the funding.
A thorough policy framework on acquisition finance, including borrower eligibility, security, margins, risk management, and monitoring procedures, has also been required by the central bank.