¨     RBI permitted banks higher acquisition financing limit.

¨     Higher acquisition financing limits for banks have been permitted by the Reserve Bank of India.
¨     Indian lenders will now be allowed to finance acquisitions up to 20% of their eligible capital base.
¨     The revised limit has been issued under the final rules following a review of bank exposure to capital markets.
¨     The earlier draft proposal had suggested a lower cap of 10% of Tier-1 capital.
¨     The recommendation made by lenders for a higher cap has been accepted by the central bank.
¨     Earlier, Indian banks were not permitted to finance acquisitions, putting them at a disadvantage against foreign lenders.
¨     The new framework opens an additional avenue of credit growth for domestic banks.
¨     Banks will be allowed to lend up to 75% of the acquisition value.
¨     Acquisition finance will be permitted for purchases of both listed and unlisted companies.
Stake acquisition can be undertaken through equity shares or compulsorily convertible debentures as per the rules.