(MENAFN- KNN India) New Delhi, Nov 7 (KNN) Reserve Bank of India (RBI) Governor Sanjay Malhotra on Friday said the removal of restrictions on bank financing for acquisitions will strengthen the real economy, noting that recent regulatory changes are designed to boost lending while preserving financial stability.

Speaking at the State Bank of India's Banking and Economics Conclave, Malhotra said the RBI's decision last month to permit banks to fund corporate acquisitions and raise lending limits for IPO share purchases was accompanied by safeguards to manage risk.

“These come as you are aware... with guardrails, like limiting bank funding to 70 percent of the deal value, limits on debt to equity ratio... which will ensure safety while allowing banks and their stakeholders to reach the benefits of additional business,” he said, Reuters reported.

The Governor emphasised that regulators should not substitute for corporate decision-making, stressing the need for bank boards and management to exercise sound judgment.

“We need to allow the regulated entities to take decisions based on the merits of each case, rather than prescribing a one size fit all rule,” he added.

Malhotra added that supervisory interventions have helped moderate excesses and support a resilient banking system.

He highlighted the central bank's tools - including risk-weight adjustments, provisioning norms and counter-cyclical buffers - that can be deployed to address emerging risks and maintain stability.

(KNN Bureau)

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