Daijiworld Media Network - Mumbai

Mumbai, Oct 2: The Reserve Bank of India (RBI) on Thursday eased the approval process for mutual funds, insurance companies and pension funds seeking to make subsequent acquisitions of major shareholding in banks, allowing eligible investors to obtain one-time approval for purchases of up to 10 per cent of a bank’s paid-up share capital or voting rights.

The revised framework came into effect immediately and was notified through the Reserve Bank of India (Commercial Banks – Acquisition and Holding of Shares or Voting Rights) Amendment Directions, 2026, issued on October 1.

Under the earlier framework, investors were required to obtain prior RBI approval for an initial acquisition of major shareholding in a bank. If their aggregate shareholding subsequently fell below 5 per cent, another approval was required before making a further acquisition that qualified as major shareholding.

Following a review of the framework, the RBI has introduced a one-time approval mechanism for subsequent acquisitions by specified institutional investors.

The central bank said prior approval would continue to be mandatory for the initial acquisition of major shareholding in a banking company.

The new provision applies to “qualifying persons”, including mutual funds registered with the Securities and Exchange Board of India (SEBI), pension funds registered with the Pension Fund Regulatory and Development Authority (PFRDA), and insurance companies registered with the Insurance Regulatory and Development Authority of India (IRDAI).

To qualify, such investors must not belong to the promoter group or the group of the bank in which they are acquiring shares.

The RBI may grant one-time approval, either individually or collectively, for subsequent acquisitions of major shareholding of up to 10 per cent of a bank’s paid-up share capital or voting rights.

The approval will remain subject to conditions specified by the central bank and other applicable provisions of the directions.

The RBI has retained safeguards under the revised framework. It said a one-time approval could be revoked if the investor fails to comply with the terms and conditions of the approval or if the qualifying person, or anyone associated with it, is subsequently found not to meet the “fit and proper” criteria.

Reporting requirements will also continue under the new regime.

Investors holding a one-time approval will have to inform the RBI and the concerned bank within three working days if their aggregate shareholding moves below or above the 5 per cent threshold of the bank’s paid-up share capital or voting rights.