SBI Discusses Japanese Lenders for Acquisition Financing

State Bank of India Chairman C S Setty said SBI is discussing acquisition financing with Japanese lenders, after the RBI issued final guidelines that allow banks to fund large acquisitions under defined limits. Setty said SBI will first assess deal-by-deal fit with its risk appetite and start with plain-vanilla structures where the acquirer brings equity and SBI provides debt.

Setty also said SBI is working on standard operating procedures for acquisition finance and expects board approval before rolling out more complex structures such as mezzanine or bond programmes. The RBI framework permits acquisition finance up to 20% of the eligible capital base, allows funding of acquisitions of listed and unlisted non-financial companies, and caps acquisition financing at 75% of total acquisition value with a bridge for the remaining 25% repaid within one year.