State Bank of India: SBI chief advocates for regulatory changes to boost corporate M&A

Mumbai: State Bank of India (SBI) chairman CS Setty on Monday batted for regulatory latitude that would allow local lenders to fund corporate mergers and acquisitions, underscoring the allure of a vibrant deal market that topped $50 billion in value in the first half of 2025.

“We have been requesting the regulator and will make a formal request to the Reserve Bank of India (RBI) that at least start with some listed companies where the acquisitions are more transparent and approved by shareholders,” Setty said, speaking in a panel discussion at the FICCI-IBA banking conference.

Setty’s comments came even as a Boston Consulting Group (BCG) report unveiled during the conference showed that bank advances to companies have drastically changed texture over the past 15 years. Corporate credit has been a relative straggler among other banking asset classes, expanding slower than overall advances after companies moved away from banks toward capital markets and alternative funding avenues that include private credit and mutual funds.

“Within bank funding, the mix is shifting toward short-term working capital compared with long term capex,” said the BCG report. “Banks need to play a more active role in funding the new capex for Viksit Bharat to become a reality.”

A study by EY showed that India’s mergers and acquisitions market remained stable from a value standpoint at $50 billion through the first half of 2025, climbing about 2% from the immediately preceding six months, although the number of deals contracted 12%. A significant trend is the rise in large-value transactions, showed the study. The first half of 2025 recorded 10 deals valued at over a billion dollars, it said.

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CREDIT DEMAND REVIVAL
Setty expressed confidence that the demand for corporate loans from banks would come back. “I think it’s not about supply issues. In my view, it’s more in terms of the demand issue, and, hopefully, demand for corporate credit will come back,” Setty said. The BCG report said that India’s banking assets have grown slower than its nominal GDP for several years; while overall financial and non-banking financial assets have outpaced the rate of expansion in the GDP. “Several other economies operate at much higher growth multiples. India faces a significant ‘Banking growth gap’ of 3 to 3.5 percentage points, the difference between the current GDP growth and the required growth rate of banking assets,” said the BCG report. India’s banking sector bad loans, which had ballooned on significant project financing exposure to corporates, are now at decadal lows, reflecting circumspect bank exposure to execution risks. Several of these accounts are still at various stages of resolution under revamped bankruptcy laws. However, the lack of privatesector participation in building fresh capacities is also attributed as one of the reasons for relatively thin banking exposure to companies. Setty, therefore, said that corporate India should be ready when demand revives. “The corporate world should start looking at capacity expansion right away, which would be supported by capital markets and debt markets through the banking system,” Setty said. “When the demand comes back in a big way, corporates should not be found wanting on either capital expenditure or capacity availability.”



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