State Bank of India (SBI) is signaling a major shift in its corporate lending strategy by aggressively targeting the domestic merger and acquisition (M&A) landscape. The country’s largest lender has identified a massive "war chest" of 94,000 crore INR to fund upcoming deals, marking a turning point for Indian banking. This move follows final guidelines issued by the Reserve Bank of India on February 13, 2026. The new regulations permit banks to fund up to 75% of an acquisition’s cost, a significant jump from previous restrictions. To manage risk, the regulator has capped a bank’s total exposure to M&A financing at 20% of its Tier-1 capital. SBI Chairman CS Setty has confirmed that the bank is in advanced discussions with Japanese lenders to form strategic partnerships. These collaborations are aimed at leveraging the deep experience Japanese banks have in global deal structuring. While SBI is open to various partners, Japanese institutions are currently lead candidates due to their active presence in the sector. The lender intends to adopt a "plain vanilla" approach for its initial domestic deals. This means focusing on straightforward debt-for-equity structures rather than complex instruments like mezzanine financing. The primary focus will be on listed companies with a minimum net worth of 500 crore INR and a consistent profit record over the last three years. Market data shows that India’s M&A activity reached 50 billion USD in the first half of 2025, with a growing trend toward billion-dollar "mega-deals." SBI’s entry into this space, which was historically dominated by private credit funds and offshore lenders, is expected to provide much-needed liquidity for domestic consolidation. The bank is currently awaiting final board approval for its internal M&A financing policy, which will outline specific pricing and risk appetite benchmarks. These new credit facilities are scheduled to be available to corporate borrowers starting April 1, 2026, coinciding with the new financial year. Under the new norms, the post-acquisition debt-to-equity ratio must remain within a 3:1 limit. This safeguard ensures that while banks take on larger roles in corporate buyouts, the financial health of the acquiring entities remains stable on a continuous basis.