SBI in talks with Japanese lenders to fund acquisitions

State Bank of India, the country's largest lender is in talks with Japanese lenders for funding mergers and acquisition, it's chairman CS Setty said on Friday. The statement comes a week after the Reserve Bank of India issued financial guidelines on acquisition financing by banks.

Setty said that typically it was not possible to finance large acquisitions independently and had to be done together by several banks.

"We also have been talking to many banks to work together and we have been working together overseas, except that Indian transactions were not allowed. Now we will be collaborating. We have been talking to Japanese banks because they have been active in that," pointed Setty.

But he clarified that there is no preference and that each transaction will bring a set of bankers together.

It could either be a consortium of lenders or ideally couple of banks, which will work on the transaction, and other banks will join the funding, he noted.

Last week, the Reserve Bank issued guidelines formally allowing banks to fund mergers and acquisitions. Under the new rules that come into effect in the next financial year (2026-27), banks can finance up to 75 per cent of acquisition value, while the acquiring entity would have to contribute at least 25 per cent of the cost through its own funds.

Setty said the lender will have to look at transactions based on risk appetite and initially they may not go into complex structures. Also, these policies would need to have approval by the board and they would also need a standard operating procedure.

He expects a couple of months for banks to have their board approved policies in place.

Separately, Setty said that the lender hopes to file papers for the initial public offering of its asset management subsidiary by March this year. SBI Mutual Fund is the country's largest asset manager.

He also informed that banks were trying to develop a common lending platform under the Indian Banks Association.

"Co-lending is a complex orchestration. If you try to do manually, then it is very cumbersome and you can't deliver as many loans as possible," said Setty.