FINANCING THE FUTURE

Author- Smruti Mayee Dora

Introduction

Diplomacy isn’t always about the embassies, national interests and politics;it sometimes is about the boardrooms and balance sheets. What does this mean? On 4th November 2025, the country’s largest lender, SBI,said that “it is open to collaborating with foreign banks once the Reserve Bank of India makes it possible for the local banks to do acquisition finance”. Chairman CS Shetty,in the Bank’s FY26 Earnings Calls of the Second Quarter, stated, “I think some of the MNC banks are very well into this activity. We don't mind collaborating with them," he said. “SBI can also use its in-house investment banking unit, SBI Capital Markets' expertise for such deals. The country's largest lender knows domestic corporates very well, which, coupled with the ability to fund outbound finance, places it very well”.India’s one of the largest banks is set to open doors for collaborations with foreign lenders, and it’s not just sharing deals, it’s sharing trust,and SBI is playing the role of a financial diplomat and helping in building a bridge that carries not just capital but credibility across the border.Assuming, an local Indian bank is on one side of a river, and a foreign bank on the other side, but both want to help theirbusiness grow, but the river is full of regulations, risks and currencies which keeps them apart, and now, the state bank of India decides to build a bridge which is made up of trust and a shared vision,capital market starts to flow and connecting India’s rising enterprises with the world’s deeper pockets. This is called financial diplomacy as just like other nations build diplomacy through embassies, and SBI is planning to build relationships through finance.“In the world of finance, build an empire, not walls”.This quote is going to be true soon as SBI announced its collaboration with global banks in a strategic manner in India’s acquisition finance landscape. SBI will work as a bridge between the local expertise and global liquidity. This blog is related to the recent declaration made by the SBI chairman in a press conference related to the bank’s earnings for the second quarter, and the author is analysing the acquisition finance in relation to the current economic and diplomatic relations for global reach for financing.

Understanding Acquisition Finance

Acquisition financing is specialised for buying another business, and it allows companies to expand operations or enter new markets.In today’s economic world, growth often depends on how fast a company expands, both organically and strategically, which helps it acquire other domestic or foreign businesses. In these situations, it results in economic growth.

Recently, SBI emphasisedthat if RBI allows, then they are open to collaborating with foreign banks with acquisition finance, which will help the Indian or global companies to buy or merge with others, and this shift is not just a business decision, but rather a strategic transformation, and it reflects India’s banking sector is growing to become more flexible and opportunity driven.Indian corporates are hungry for bigger opportunities and for global expansion,and foreign banks and investors have deep pools of capital but are limited to local markets. Nowadays, SBI is not only lending money but it is also becoming a connector between the Indian business and global finance, which will result in a healthy economy for us.Acquisition financing is one of the principal funding routes available for financing abroad and also in domestic mergers and acquisitions.

The role of foreign banks in India’s M&A ecosystem.

Foreign banks are full of flowing capital, and they have always played an important role in mergers and acquisitions of businesses. India, having the fifth-largest economy and trying very hard to upgrade, is setting their sights on global markets and in foreign banks as well. The offshore transaction is outside the purview of the Indian jurisdiction and regulations. But one applicable regulation is that Indian companies are not permitted to grant any security or provide any kind of guarantees for loans availed by their overseas parent companies.SBI’s partnering with foreign banks creates a positive relationship and a blended banking model, where the Indian insight meets with the international financial engineering in acquisition finance. The step of SBI will help India’s largest corporations, startups, and even mid-sized firms can dream big without any restrictions and financial constraints. India’s mergers and acquisitions have evolved and transformed domestic affairs into a globally integrated market.

Why Did SBI Choose Global Banks to do Acquisition Finance?

A local Indian company that comes to borrow or to purchase a business in a foreign country can be subjected to complex choices such as the extent to which the purchase can be made by debt or equity, how to mitigate risks due to changes in foreign upheavals and how to deal with different tax and legal frameworks across borders. It is through partnership with such overseas agencies that SBI can access this superior financial engineering set of tools. The partnership allows SBI to study the best practices of the world, use the technical and analytical advantage of the foreign banks, and implement the experience in favour of Indian corporates without losing the domestic control over the association with clients and performance.In this model of collaboration, a sizeable M&A deal would be funded in a joint manner: SBI would evaluate the domestic credit worthiness of the borrower, facilitate Indian compliance, and handle rupee transactions, whereas a foreign partner organises the international part, secures foreign currency borrowings and bears foreign currency risk. Collectively, they can cut deals that one of them could not have made individually, leaving Indian companies in a position to venture into the international market with resources to do so.

This competition into co-operation is indicative of the bigger picture that is the economic ascendancy of India, and its globalisation is no more a choice but a necessity. Indian companies are becoming global, and therefore, the banking ecosystem, which sustains them, has to change as well. Through the collaboration with other banks abroad, SBI is also making sure that the Indian financial industry is not only a player but a player in international transactions.

Regulatory Finance and Risk Management

Every transaction is done, which is transacted over trust, and the trust is based on good regulations, open governance and risk management. The accumulation of a partnership between the SBI and the foreign banks, compliance is not a blue tick in the box, the compilation of deals, structure, monitoring and execution.The financial structure of India, led by the Reserve Bank of India (RBI) and international regulations such as Basel III, is at the forefront of enabling this to be made possible.

The Basel III model is the foundation of the contemporary stability of the banking system in the world. Brought into effect following the global financial crisis of 2008, Basel III asks banks to have a better capital buffer and handle their risk-weighted assets (RWAs) in a more prudent manner. Basel III is not that complicated; the idea is to make sure that the banks possess sufficient shock absorbers to endure the financial turbulence without collapsing.

In the case of SBI, collaborating with international banks, which are already operating under the Basel III regulation, becomes a natural protection. In case of co-financing of large M&As deals, the exposure is divided, and SBI can share the risk per deal but remain involved in high-value opportunities. In the case when SBI works with such foreign banks as HSBC or Citi, the same reporting and capital adequacy standards are followed by both parties. This will guarantee a shared responsibility, reduce systemic risks and build confidence of international investors.Basel III, in effect, does not just regulate the manner in which the banks handle their balance sheets; it also creates a common language of financial discipline and trustworthiness that enables SBI and its entire global partners of SBI to conduct their business smoothly regardless of the jurisdiction.

Credit risk, which is the potential default of the borrower him is at the core of any lending transaction. When it comes to dealing with big mergers and acquisitions, where loans can readily be in the hundreds of millions of dollars, it may be overwhelming to any bank, regardless of its size, to bear the total exposure. That is why credit risk sharing is the centre of the collaborative strategy of SBI with foreign banks. In the case of SBI, it is the sustainability of appropriate levels of risks, but remaining involved in landmark deals that will enhance its global image.

Conclusion

In this entire process, SBI announced that it will become the bridge for India’s emerging corporate, no matter how big or how small it is, and create a financial relationship with the global capital flows, where it will play a role in connecting domestic ambition with international finance. SBI chairman CS Shetty also mentioned that “It will be a combination of our own expertise, our merchant banking unit, and foreign banks that have been active in this space”. It will play a role in financial diplomacy by building trust and cooperation between the global investors and India’s business community, which will result in the growth of the Indian economy.

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