RBI eases approval process for bank share acquisitions by MFs, insurers, pension funds

Mumbai: The Reserve Bank of India (RBI) has eased the approval process for mutual funds, insurance companies and pension funds looking to build up major shareholdings in banks. These investors can now obtain a one-time approval for subsequent acquisitions, rather than seeking the central bank's permission every time.

Under the earlier framework, anyone making an initial acquisition of a major shareholding in a bank needed prior RBI approval. If their aggregate shareholding, after the initial acquisition, fell below 5% at any point of time, prior RBI approval was again required before any subsequent acquisition of major shareholding.

The RBI has kept the prior-approval requirement for an initial acquisition, but mutual funds, insurance companies and pension funds can now obtain one-time approval covering subsequent acquisitions of up to 10% of a bank's paid-up share capital or voting rights, subject to specified conditions.

"While obtaining prior approval shall continue to be mandatory for initial acquisition of major shareholding in a banking company, based on a review, it has now been decided to grant one-time approval for subsequent acquisitions of major shareholding in the same banking company by mutual funds, insurance companies and pension funds, subject to certain requirements," the central bank said in a press release on Thursday.

The amended directions took effect immediately. A qualifying person, as defined by the RBI, is a mutual fund registered with the Securities and Exchange Board of India, a pension fund registered with the Pension Fund Regulatory and Development Authority, or an insurance company registered with the Insurance Regulatory and Development Authority of India—provided it does not belong to the promoter group of the bank it is investing in.

Such qualifying persons can seek one-time approval, individually or collectively, and the RBI can revoke it if its conditions are not met, or if the qualifying person—or anyone associated with it—is later found not to be fit and proper.

The 10% limit is calculated on an aggregate basis, and the same requirement has also been incorporated into the RBI's guidelines on the acquisition and holding of shares or voting rights in banking companies.

The RBI has also introduced a reporting requirement for major shareholders that have obtained one-time approval. They will have to report any increase or decrease in their aggregate holding that takes it above or below 5% of the total paid-up share capital or voting rights of the bank to the RBI and the concerned bank within three working days of the event.

The three-working-day reporting period follows feedback received on the draft directions. The RBI said a request to increase the reporting period from one day was “accepted”, with the period extended to three working days.

The amendment also clarifies when an acquisition by a client will not be treated as an indirect acquisition by its portfolio manager.

The RBI said an acquisition by a client may not be treated as an indirect acquisition by its portfolio manager if the client is the registered owner of the shares and is entitled to exercise the voting rights; the portfolio manager is acting only as an adviser providing non-binding investment or divestment advice; and any voting rights exercised by the portfolio manager on behalf of the client are based on a specific mandate from the client.

The RBI’s final directions also set out how it dealt with feedback on the draft amendment directions issued on 14 July 2026. The draft had proposed simplifying the approval process for subsequent acquisitions of major shareholdings by mutual funds, insurance companies and pension funds.