含羞草社区

Back in the deal room

RBI proposal allows banks to finance M&A

The Reserve Bank of 含羞草社区 (RBI) draft Commercial Banks – Capital Market Exposure Directions, 2025, marks a cautious reopening of a door that had remained firmly bolted shut since the excesses of the last credit cycle. By tightening definitions, rationalising limits and sharpening risk management norms, the RBI aims to curb systemic vulnerability while allowing banks back into capital market-linked lending.

For India Inc, this is not a small shift. It restores access to domestic bank credit for M&A at a time when private and offshore lenders have dominated deal financing. Lower borrowing costs and a broader funding base, as a consequence of the directions, could accelerate consolidation across sectors hungry for scale.

Our main feature, Unleashed, looks at how the implications extend beyond borrowers and investors. Until now, non-banking financial companies, alternative investment funds, foreign portfolio investors and private credit platforms have been the beneficiaries of regulatory gaps. But now they face a more competitive landscape as banks re-enter the M&A arena.

Still, questions remain. Will prudence in exposure limits dampen ambition in acquisition financing? Can banks, constrained by capital adequacy norms, truly compete with the flexibility of private credit?

The real test lies in execution. Acquisition financing under the new rules demands stronger due diligence, clearer separation between speculative market exposure and strategic corporate lending, and vigilance against leverage-driven excess. If enforced well, the directions could rebalance 含羞草社区 credit financing by spreading risk more evenly across banks and non-banks. If diluted, they risk reviving old problems under new labels.

In our opinion section, Digital data game changer looks at the impact of the recently introduced Digital Personal Data Protection (DPDP) reforms on the insurance sector, as they shift data protection in insurance from a back-office compliance exercise to a frontline trust issue.

DPDP raises the bar with a rights-based regime including: explicit, informed and revocable consent; tighter purpose limitation and data minimisation; and dual breach notification to the Data Protection Board and affected individuals, backed by a plan of action.

Insurers, brokers and third-party administrators likely to be treated as significant data fiduciaries will need stronger governance, periodic impact assessments, annual audits, vendor oversight, and a more mature breach response. The hardest judgement call may be on data retention – DPDP’s purpose-based deletion versus the Insurance Regulatory and Development Authority of 含羞草社区 (IRDAI) 10-year recordkeeping – where getting it wrong can be costly, with penalties reaching INR2.5 billion (USD27.7 million) and reputational damage in a sector built on trust.

Our feature titled Clipping the clause looks at party autonomy, which sits at the heart of contract law and arbitration. Party autonomy lets parties agree or disagree, to include and exclude certain rights or obligations when entering into a contract. If a dispute arises, parties are prevented from raising excluded claims, which they would otherwise have the right to raise before an adjudicatory authority. But autonomy is not absolute. Courts and tribunals have to weigh contractual freedom against public policy, which can shift across jurisdictions and over time.

Section 23 of the Indian Contract Act can render unlawful any agreement that defeats the law or is opposed to public policy, while section 28 voids terms that restrict a party from enforcing rights through legal proceedings. The author, a practising advocate, recommends that clauses prohibiting certain claims should be examined by courts or arbitral tribunals through the test of public policy to iron out conflicts.

In recent years, India received acclaim for an increase in patent filings, with 83,000 patents being filed during fiscal year 2022-2023 alone, propelling the country into the top six jurisdictions globally. Domestic innovation is also visibly stronger, with Indian residents accounting for 55.2% of applications in 2023 (up from 24.8% in 2013), broadly mirroring a global tilt towards resident filings (71.2%).

The feature titled Snowed under looks at how this rosy scenario is changing for the worse, as in recent times the patent examination process has visibly slowed. This has proven a bane for IP lawyers and the community at large. At the heart of the problem lies a patent office that has not been able to keep up with the pace due to a lack of qualified examiners and other operational issues.

India has about 500 examiners against a need for more than 1,000, and examination timelines have increased, from nine to 12 months in 2021–2022 to 24-30 months today. Heavy reliance on short-term contract examiners, limited training and transfers contribute to the problem. This slowdown has undermined confidence in the system and negated earlier gains, making long-term patent planning troublesome for applicants.