The Reserve Bank of India has amended its commercial bank shareholding rules with immediate effect to allow eligible mutual funds, insurance companies and pension funds to obtain one-time approval for subsequent major shareholding acquisitions in the same bank, individually or collectively, up to 10% of paid-up share capital or voting rights. The change follows its July consultation and removes the need for a fresh approval when an eligible investor’s holding falls below 5% and later returns to major shareholding status. Prior approval remains mandatory for the initial acquisition of a major shareholding. Eligibility is limited to regulated institutional investors that do not belong to the promoter group or group of the investee bank. The 10% ceiling is calculated on an aggregate basis, and approved investors remain subject to continuous monitoring, approval conditions and fit-and-proper requirements. They must report movements below or above the 5% threshold to the RBI and the bank within three working days. The amendments also clarify 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, receives only nonbinding advice and gives a specific mandate for any voting by the manager.
Reserve Bank of India allows one-time approval for institutional investors’ subsequent acquisitions of up to 10% in commercial banks
The Reserve Bank of India now permits eligible mutual funds, insurers and pension funds to seek one-time approval for subsequent major shareholding acquisitions of up to 10% in a commercial bank. Initial major acquisitions still require prior approval, while approved investors face aggregate limits, continuing monitoring and three-working-day reporting when holdings cross the 5% threshold. The changes take effect immediately.