RBI bets big on rupee power, opens banks to takeover financing

In a move that signals both confidence and ambition, the Reserve Bank of India (RBI) recently unveiled a sweeping set of reforms aimed at deepening domestic financial markets and extending India’s economic influence abroad.

The measures include permitting banks to finance corporate takeovers for the first time, allowing rupee-denominated loans to residents of neighbouring countries, and significantly raising financing limits for investors in primary markets.

The most striking element is the RBI’s fresh push to internationalise the rupee. Indian banks and their overseas branches can now extend rupee loans to residents of Nepal, Bhutan, Sri Lanka and other neighbours. Analysts see this as the first step in positioning the rupee as a regional trade and settlement currency, reducing reliance on the US dollar and boosting confidence in its stability.

The reforms come against a tense global backdrop. US President Donald Trump recently threatened BRICS nations with 100% import tariffs if they attempted to back an alternative to the dollar.

While Russia dismissed talk of a BRICS currency, the debate has unsettled markets. The RBI’s strategy, insiders say, is pragmatic: if India cannot yet shape global currency dynamics, it can build regional dominance for the rupee.

Equally groundbreaking is the central bank’s decision to let banks directly finance mergers and acquisitions (M&As). Until now, takeover financing was off-limits for lenders, leaving NBFCs and bond markets to dominate the space.

By opening the door, the RBI is empowering banks to support corporate consolidation with deeper balance sheets and lower-cost funds—potentially accelerating India Inc.’s growth story.

The package also includes investor-friendly measures: the limit on loans against shares has been raised from ₹25 lakh to ₹1 crore, while IPO financing ceilings have been lifted from ₹10 lakh to ₹25 lakh.

The central bank has further eased restrictions on lending against listed debt securities and allowed surplus funds in Special Rupee Vostro Accounts (SRVAs) to be invested in corporate bonds and commercial paper—steps expected to inject fresh liquidity into bond markets.

RBI Governor Sanjay Malhotra framed the reforms as a balance between ambition and caution: “The aim is to promote stability while improving competitiveness and enhancing growth.” Safeguards, he noted, will ensure takeover financing does not fuel reckless borrowing.

Still, the direction of travel is unmistakable. For decades, the RBI has been conservative, wary of exposure and systemic risks. Recent announcements mark a break from that posture. They show a central bank willing to take calculated risks to expand India’s financial clout.

The message is clear: India will no longer remain a passive participant in global finance. The RBI wants its banks in the middle of India Inc.’s deal-making and its currency circulating across borders. For the rupee, and for corporate India, the stage has just widened.