New Delhi: The RBI has decided to ease its rules to allow banks to finance more mergers and acquisitions. Banks earlier had strict limits on how much money they could lend for such deals. Companies that buy or merge with others will find it easier to get loans from banks now.
This is a major development in India’s corporate world. A merger or acquisition usually makes companies stronger, less competitive, and faster-expanding. These deals also create new jobs and attract foreign investment.
RBI believes that if banks are allowed to lend more liberally on such business deals, it will be better for the economy at large. Companies can grow faster, and industries like infrastructure, energy, and technology may see more action.
But experts say banks need to be selective about their borrowers. The risk is that if a company borrows beyond its capacity and then goes bust, this could result in bad loans and subsequent losses for the banks themselves. This is why the RBI still expects banks to scrutinize each loan application carefully before disbursing credit.
