SBI and PNB Plan Unified Strategy to Tap Rs 1.2 Lakh Crore M&A Market

State Bank of India (SBI) and Punjab National Bank (PNB), two leading public sector banks, are working on a joint approach to enter India’s growing mergers and acquisitions (M&A) market, which is estimated to be worth Rs 1.2 lakh crore.

The banks, through the Indian Banks’ Association (IBA), are also seeking relaxations in the Reserve Bank of India (RBI) framework that would allow them to participate in deal financing. This segment, previously off-limits to banks, is expected to open from April 1, 2026.

However, officials emphasised that these discussions are at a preliminary stage. Any final plan will also consider vigilance norms that public sector banks are required to follow.

“These are initial talks on how public sector banks can approach this market together. We are exploring whether a unified approach and common framework for sectors is possible, while keeping vigilance and compliance in mind,” said a senior bank executive. He added that three to four top public sector banks may hold separate discussions on these issues.

The RBI had floated draft guidelines in October 2025 — titled Commercial Banks — Capital Market Exposure Directions, 2025 — for consultation. If implemented, these rules will allow banks to provide acquisition finance to Indian companies for buying equity stakes in domestic or foreign firms as strategic investments.

A second bank executive said that IBA members are currently discussing possible tweaks to the RBI draft policy.

Key concerns include:

• SBI has raised the issue of exposure limits, which currently restrict banks from providing acquisition finance exceeding 10% of their Tier 1 capital.
• Restrictions on acquiring companies that are listed entities are also under review.

M&A activity in India has been strong. In the September quarter, 518 deals worth $28 billion were reported, a 26% increase in volume and 80% increase by value compared to the previous quarter, according to PwC. The average deal size also rose from $59 million to $74 million.

Banks estimate that they can provide up to Rs 1.2 lakh crore in funding, assuming companies take debt for about 30% of total M&A deals, which amounted to Rs 10 lakh crore in FY24.

In an analyst call after the September quarter results, SBI Chairman CS Setty said the bank is reviewing its suggestions and will raise concerns about the 10% capital restriction with the RBI through the IBA.

Similarly, PNB Chief Executive Ashok Chandra said the bank is developing its strategy and that banks would collectively arrive at a plan through the IBA. “We will have a proper policy. PNB will play a bigger role here, and we will explore opportunities jointly with other banks through the IBA,” he said, adding that banks aim to provide finance together given the attractive opportunities in the sector.