Brief Overview:
Mutual funds, insurers and pension funds may now obtain a one-time approval for subsequent acquisitions of up to 10% in a bank. This avoids the need for repeated RBI approvals when their holdings fall below and later cross the 5% major shareholding threshold.
Technical Details:
1) Qualifying Investors: Regulated insurance companies, mutual funds, pension funds that do not belong to the promoter group / group of the investee bank.
2) Initial Approval: Prior RBI approval remains mandatory for the initial acquisition of a major shareholding.
3) One-Time Route: RBI may, at its discretion, grant a one-time approval, individually or collectively through PRAVAAH, for subsequent acquisitions of a major shareholding in the same bank, subject to an aggregate ceiling of 10% of the bank’s paid-up share capital or voting rights.
4) Reporting: Following the initial acquisition of a major shareholding, any subsequent movement below or above the threshold must be reported to RBI and the investee bank within 3 working days.
5) Revocation: RBI may revoke the one-time approval for non-compliance with its terms and conditions or where the Qualifying Investor, or a person associated with it, is subsequently found not to be “fit and proper”.
6) Separate portfolio manager clarification: A client’s acquisition may be excluded from its portfolio manager’s indirect acquisition where ownership and voting control remain with the client and the manager acts only on non-binding advice or a specific voting mandate.
The amendments came into force with immediate effect on 1st October 2026.
Takeaways:
The new framework gives qualifying investors more room to move their bank holdings above and below 5% without returning to RBI for approval each time. It offers greater investment flexibility without relaxing RBI’s oversight of significant bank ownership.
For further details, please see:
RBI (Commercial Banks – Acquisition and Holding of Shares or Voting Rights) Amendment Directions, 2026 and Press Release for Corresponding Amendments
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