MUMBAI: Within a month of the central bank issuing the final guidelines for acquisition financing, State Bank of India has roped in the Japanese banking giant MUFG Bank for this, along with collaboration in other financial deals, by inking a strategic partnership agreement, which also seeks to strengthen the India-Japan economic corridor.
SBI chairman CS Setty had last month said they were in talks with a few Japanese banks for M&A finance. The move came after the Reserve Bank allowed banks to enter into acquisition finance allowing funding up to 75% of the deal value.
Setty had said the bank has a war chest of about Rs 94,000 crore for this, and the bank will be going to the board soon.
“Given Japanese banks' experience in funding acquisitions, we are keen to collaborate with them,’” Setty said without offering more details. Setty had earlier said when the draft direction on acquisition financing was released that it would be based under a special wing of the bank’s I-banking arm-SBI Capital Markets.
On February 13, the RBI issued the final guidelines allowing up to 75% bank funding of M&As, up from 70% in the draft norms and also allowed such funding to both listed and unlisted companies, which was a change from the draft which allowed only listed companies. The central bank also stated that banks will be allowed to fund the promoters' stake while they set up new companies.
"Total bank financing shall not exceed 75% of the acquisition value, as independently assessed by the bank," the central bank said, adding the new facility will be available for banks and companies from April 1.
The move opens up a large funding avenue for banks as the annual M&A funding is valued at around $40 billion.
Setty said, “The bank to begin with will have a maximum book size of Rs 94000 crore depending on capital adequacy as it wants to go slow initially. Also, SBI will initially keep the structure simple, going for listed companies and offering debt for equity."
When asked about the pricing, he said, "Obviously it will be priced higher than other loans and the rate will depend on the risk perception of the deal from both angles.”
In a joint statement Wednesday, the lenders said the agreement aims to enhance mutual collaboration by further leveraging the complementary strengths of both institutions to facilitate cross-border capital flows, create new synergistic financing opportunities and support sustainable economic growth across the second and third largest economies in Asia.
The alliance combines SBI’s domestic market leadership with MUFG’s extensive global network and cross-border structuring expertise, to support Japanese corporates expanding in India as well as Indian enterprises pursuing international growth, including entry into Japan and other global markets.
Last week, SBI launched a $500-million syndicated gender loan facility to advance women’s economic empowerment, which is the largest gender-themed loan by a financial institution globally and is arranged by MUFG.
This came on the back of MUFG’s role in 2023 as the lead social loan coordinator and arranger for SBI’s inaugural $1 billion social loan, which was the largest social loan by a bank in Apac.
MUFG has also engaged with SBI Chakra Centre of Excellence under its project finance & structuring function, supporting the development of financing frameworks for priority sunrise sectors.
The new partnership will explore collaboration in structuring and financing projects with a specific focus on sectors such as M&As, aviation and real estate finance to support Indian and global clients.
The banks will also cooperate on M&A advisory, trade finance and retail banking solutions, facilitating Japanese corporate linked potential inbound and outbound transactions by leveraging SBI’s deep expertise in the Indian market and MUFG’s extensive global network.
Both banks will also help facilitate the introduction of Indian mid-corporates and MSMEs to Japanese corporate clients, identifying financing opportunities that deepen transaction-level collaboration.
Rising Japanese investment into India across infrastructure, manufacturing and emerging sectors, alongside the growing global ambitions of Indian corporates, underscores the need for coordinated financial platforms capable of supporting long-term capital formation.
Takuya Senoo, regional executive at MUFG Bank, said India represents one of the most compelling growth markets globally, and the India–Japan corridor continues to deepen.
“We are witnessing strong momentum from Japanese companies expanding their presence in India, alongside increasing global ambition from Indian enterprises. Through our partnership with SBI, we aim to provide integrated cross-border solutions that support both inbound investment into India and outbound expansion by Indian corporates. This collaboration reflects our long-term commitment to strengthening economic ties between Japan and India,” he said.
Kishore Kumar Poludasu, deputy managing director, international banking group at SBI, said, "As trade and investment flows between India and Japan continue to expand, our collaboration with MUFG enhances our ability to provide comprehensive financing and advisory solutions to clients operating across both jurisdictions."