Source: BS Context: The Reserve Bank of India (RBI) released a draft circular on October 24, 2025, proposing guidelines to allow banks to finance corporate acquisitions. This is a major policy shift, since Indian banks were earlier barred from lending for mergers and acquisitions due to risks of over-leverage and promoter-level funding. Under the new proposal, banks may fund corporate acquisitions—domestic or overseas—only if they create long-term strategic value and not merely support financial restructuring. Key Provisions of RBI’s Draft Norms Why Banks Find the 10% Cap Restrictive Bankers argue that: Some executives believe the exposure cap could be raised to around 30% of Tier-I capital for well-governed banks. Why RBI Is Being Cautious Experts say the central bank’s conservative limits reflect genuine risks: 1. Uncertain outcomes of acquisitions Not all M&A deals succeed. If a bank funds a deal based on optimistic projections and the acquisition fails, it can turn into a bad loan. 2. Asset–Liability Mismatch (ALM) Banks will therefore need stronger credit underwriting and dedicated long-term funding structures. Need for Strong Internal Frameworks Experts advise banks to: Analysts add that banks must first build a high-quality acquisition finance book, especially through mid-market deals, before asking RBI for softer rules. Inclusion of Mid-Market & Family-Owned Firms EY notes that restricting eligibility only to listed companies excludes: A calibrated expansion of eligibility may be required later. Why Banks Want the Norms Liberalised Bank credit growth to corporates has slowed as companies rely increasingly on: Bankers believe acquisition financing could develop similarly to infrastructure financing, where: Key Risks Identified

Source: BS Context: India has developed a robust last-mile credit ecosystem, yet repeated shocks over the past 15 years—Andhra Pradesh crisis (2010), demonetisation (2016), Covid-19 (2020), and the slowdown since early 2024—have caused abrupt lending cuts and household distress. The solution lies in moving from stop-start lending cycles to continuous, reliable access to formal credit for low-income households. Key Recommendations Harmonise Bank-NBFC Partnership and Strengthen PSL Reduce Funding Fragility Replace Crude Lender Caps with Credible Income Assessment Rationale

Source: Mint Context: The National Urban Co-operative Financial and Development Corporation Ltd (NUCFDC)—the apex body representing India’s urban cooperative banks (UCBs)—is preparing to request the RBI to allow small UCBs with net worth below ₹50 crore to offer digital services such as internet banking, mobile banking, and UPI. Current RBI Rules Under existing RBI regulations: This restriction means a majority of UCBs cannot provide modern digital banking facilities to their customers. What NUCFDC Is Proposing NUCFDC wants RBI to consider an alternative compliance model: NUCFDC’s Role and Infrastructure Plan NUCFDC received its licence in February 2024 as a mid-layer NBFC.Its current focus is non-fund-based support for UCBs, especially digital modernization. Key components of the central stack NUCFDC is building: This infrastructure is being built for 440 UCBs that have partnered with NUCFDC so far. Why This Matters Pending Regulatory Response Queries sent to RBI and the finance ministry remain unanswered.RBI will need to evaluate whether the proposal aligns with: India’s Urban Cooperative Banks (UCBs) Urban Cooperative Banks (UCBs) are financial institutions operating on a cooperative model, primarily serving urban and semi-urban areas. They cater to lower- and middle-income groups, small businesses, and local communities. Key Features of UCBs: