State Bank of India chairman Challa Sreenivasulu Setty on Monday said the Indian Bank’s Association (IBA) is preparing a formal recommendation to the Reserve Bank of India (RBI) to allow bank financing for mergers and acquisitions, particularly for listed companies with shareholder-approved deals.
“We have been requesting the regulator, and will make a formal request from the IBA as well, to allow bank financing for acquisitions where transparency and governance are ensured,” Setty said at the FIBAC 2025 conference. This marks a strategic shift from earlier regulatory caution rooted in concerns over hostile takeovers, and reflects the industry’s readiness to support corporate consolidation and strategic expansion.
SBI chairman noted that legacy overhangs, such as constraints under project financing guidelines and net capital ratio norms, have been mainly addressed, setting the stage for a more flexible credit environment. “It’s not a supply issue anymore. It’s about demand visibility. And when that demand returns, banks must be ready.”
Start-up funding is new driver of business growth
It’s time to position the banking system as the cornerstone of India’s economic transformation, Setty said. “India stands at an inflexion point and this is the moment to accelerate an inclusive growth, enhance global competitiveness and shape a prosperous and sustainable future.”
Emerging opportunities in long-term capital financing, startup funding and MSME credit are the new drivers for growth, he said. “Banks must step up to finance the next wave of long-term capital essential for India’s growth ambition. “IBA is playing a key role, but banks need to do more. Start-up funding is the new driver of business growth.”
Setty believes the MSMEs are central to jobs and growth, highlighting how formalisation and digital trade have made lending to this segment safer and scalable. “Banks have a unique opportunity to bridge the MSME credit gap, powering entrepreneurship and employment,” he said.
Banking sector’s resilience and future outlook
Citing the vision under Viksit Bharat and Prime Minister Narendra Modi’s Independence Day address, Setty emphasised India’s emergence as a resilient global leader amid geopolitical tensions and shifting capital flows. “The India of tomorrow will be fundamentally different from the India of today.”
He described the past decade as a golden chapter for Indian banking marked by macroeconomic stability, regulatory discipline, and formalisation. “Credit growth has remained strong, asset quality has improved significantly, and profitability has rebounded with double-digit ROEs,” he noted. With Q1 results showing good performance with some of the banks recording exceptional performance, he affirmed that the sector is well-positioned to support India’s growth ambitions.
Welcoming the regulator’s AI discussion paper, Setty stressed the importance of governance, workplace reskilling, and digital public infrastructure. “Judicious use of data and digital public infrastructure will help banks improve customer service and design suitable products.” He reaffirmed the industry’s commitment to financial inclusion, customer service, and cybersecurity. “We are focusing on improving customer service, lending and taking all possible steps to check cyber threats, themes that are close to the regulator’s heart,” the SBI chairman said.
