Archive · 2 Oct 2026
RBI Eases Approval Rules for Subsequent Bank Share Purchases
The Reserve Bank of India changed how some large investment funds can buy bank shares.
Mutual funds, insurance companies and pension funds may seek one approval for later purchases in the same bank.
That approval can cover an aggregate holding of up to 10% of the bank’s shares or voting rights.
They still need separate RBI permission for their first major purchase.
The investors must not be part of the bank’s promoter group.
They must tell the RBI and the bank within three working days if their total holding moves above or below 5%.
The RBI can cancel the approval if its conditions are broken or the investor is no longer considered fit and proper.
The rules also clarify that some client purchases are not treated as indirect purchases by a portfolio manager.
Eligible mutual funds, insurers and pension funds can obtain one-time approval for subsequent major acquisitions in a bank.
The approval can cover aggregate holdings of up to 10% of a bank’s paid-up share capital or voting rights.
Prior RBI approval remains mandatory for an investor’s initial major shareholding acquisition.
Eligible investors must be registered with SEBI, PFRDA or IRDAI and must not belong to the bank’s promoter group.
Approved investors must report holdings moving above or below 5% to the RBI and the bank within three working days.
- Who
- The Reserve Bank of India and qualifying mutual funds, insurance companies and pension funds.
- What
- The RBI introduced a one-time approval mechanism for subsequent major acquisitions of bank shares by eligible institutional investors.
- When
- The amended directions were issued on October 1, 2026, and took effect immediately.
- Where
- The framework applies to acquisitions in Indian banking companies, including commercial banks, small finance banks, payments banks and local area banks.
- Why
- The RBI reviewed the earlier framework, under which investors could need fresh approval after their aggregate holding fell below 5% and later rose again.
- Approval scope
- One-time approval may cover subsequent acquisitions resulting in aggregate holdings of up to 10% of a bank’s paid-up share capital or voting rights.
- Initial acquisition
- Prior RBI approval remains mandatory for an initial acquisition of major shareholding.
- Eligible investors
- Qualifying investors include SEBI-registered mutual funds, PFRDA-registered pension funds and IRDAI-registered insurance companies.
- Ownership restriction
- Eligible investors must not belong to the promoter group of the bank in which they are acquiring shares.
- Application process
- Applications for one-time approval are submitted through the RBI’s PRAVAAH portal, and the concerned bank must provide comments.
- Reporting deadline
- Investors must report aggregate holdings moving above or below 5% to the RBI and the concerned bank within three working days.
- Approval safeguards
- The RBI may revoke approval for non-compliance or if the investor or an associated person is later found not fit and proper.
