Mumbai, Feb. 16 -- The Reserve Bank of India's (RBI) new rules on banks' capital market exposure will allow lenders to actively participate in corporate takeovers, mergers and acquisitions (M&A), and leveraged buyouts, according to a report by JM Financial.

The report said the new framework will allow banks to fund acquisition deals while keeping risks under control. It added that by setting limits on the debt-to-equity (D/E) ratio after acquisition and capping capital market exposure (CME), only financially stable companies will be able to access bank funding.

This will help reduce systemic risk, which means lowering the chances of financial instability in the banking system.

It stated, "We believe the new rules will allow banks to ac...