RBI's new acquisition finance framework, which kicks in from today, marks a significant shift in India's corporate lending landscape. RBI (Commercial Banks-Credit Facilities) Amendment Directions 2026 (Revised) represents a structural change in India's credit architecture by bringing acquisition finance - long confined to specialised and alternative capital providers - into the regulated banking system.Unlike mature markets, where leveraged lending is a core component of M&A activity, Indian acquirers have had limited access to domestic bank financing for acquisitions. Consequently, many transactions have relied on promoter capital, offshore borrowing structures, structured credit products or alternative lenders, increasing both the complexity and cost of acquisitions.RBI's move comes at a time when India's dealmaking market is witnessing unprecedented momentum. According to Grant Thornton's Annual Dealtracker 2025, India recorded more than 2,100 transactions worth about $116 bn in 2024, marking a sharp increase in deal value from the previous year. M&A transactions accounted for $44.1 bn across 683 deals, while outbound acquisitions reached their highest level in more than a decade.The framework creates a regulated pathway for banks to finance acquisitions of controlling stakes in domestic and overseas non-financial companies, including through SPVs and subsidiaries. This could improve execution certainty, expand financing options and reduce reliance on offshore structures.However, unlike in some Western markets, the framework caps bank financing at 75% of the acquisition value, requires a meaningful equity contribution from acquirers, and restricts post-acquisition leverage through a debt-equity ceiling.These safeguards are reinforced by profitability requirements, valuation standards, restrictions on related-party transactions and collateral requirements. The result is a calibrated framework that balances two competing objectives: enabling corporate growth while preserving financial stability.RBI's move could reshape competition in India's acquisition financing market. Over the past decade, private credit funds and offshore lenders have become key providers of acquisition capital, largely because domestic banks could not participate directly. In many transactions, private credit was not merely an alternative but the only viable source of funding. The new framework is likely to change that. Well-capitalised corporates pursuing strategic acquisitions may increasingly turn to banks, attracted by lower borrowing costs and deeper balance-sheet capacity.Yet, predictions of private credit's immediate decline would be premature. The framework's eligibility conditions and prudential safeguards mean bank-led acquisition financing will primarily be available to stronger borrowers and lower-risk transactions.The role of private credit providers may change. Sponsor-backed acquisitions, higher-leverage transactions, distressed opportunities and bespoke financing structures will continue to require the flexibility that private credit funds often provide. Reform may, instead, create a more segmented and sophisticated market in which banks and private credit providers coexist, serving different parts of the transaction spectrum.Implications of the new norms extend beyond deal financing. By formally recognising acquisition finance as a legitimate banking product, RBI nudges the sector towards greater sophistication.But acquisition finance requires capabilities that differ from traditional corporate lending. Banks must assess not only a borrower's creditworthiness but also transaction rationale, integration risks, expected synergies, governance considerations and future cash-flow generation.In global markets, acquisition finance evolved alongside specialised leveraged finance teams and sophisticated underwriting frameworks. Indian banks will need to develop similar capabilities if they are to compete with international lenders and private credit funds.Some may view the reform as a broader liberalisation of acquisition financing through foreign debt. It isn't. The framework expressly remains subject to India's forex regulations. Consequently, qualifying for acquisition finance under the framework doesn't automatically permit funding through external commercial borrowings (ECBs). Transactions involving foreign debt will continue to be governed by separate forex and ECB norms, including end-use restrictions and borrower eligibility requirements.The impact on listed company acquisitions could be equally significant. Committed acquisition financing can enhance funding certainty for bidders pursuing control transactions and mandatory open offers. But it will also require careful navigation of securities laws, particularly on lender rights, pledge structures, and issues of control and persons acting in concert.Shah is senior partner, and Singh is senior associate, RegFin Legal, Mumbai(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)