The Reserve Bank of India has amended its local area bank ownership directions with immediate effect, allowing eligible mutual funds, insurance companies and pension funds to seek one-time approval for subsequent acquisitions of major shareholdings up to 10% of a bank’s paid-up share capital or voting rights. The measure implements for local area banks the approval simplification previously proposed for regulated institutional investors, while retaining prior approval for an initial acquisition of a major shareholding. Eligible investors must be registered with the relevant sector regulator and must not belong to the investee bank’s promoter group. The 10% limit will be calculated on an aggregate basis, and approvals may be granted individually or collectively, made subject to specific conditions and revoked for noncompliance or failure to remain fit and proper. Approved investors must report movements below or above the 5% threshold to the Reserve Bank and the bank within three working days. The amendment also clarifies that a client’s acquisition need not be treated as an indirect acquisition by its portfolio manager where the client owns the shares and voting rights, the manager provides only nonbinding advice, and any voting by the manager follows a specific client mandate.
Reserve Bank of India allows one-time approval for institutional investors’ subsequent acquisitions of up to 10% in local area banks
The Reserve Bank of India now allows eligible mutual funds, insurers and pension funds to seek one-time approval for subsequent major shareholding acquisitions of up to 10% in local area banks. Prior approval remains mandatory for an initial major acquisition. Approved investors are subject to aggregate limits, continuing monitoring and three-working-day reporting when holdings cross the 5% threshold.