RBI eases bank stake rules, allows one-time approval for MFs, insurers for holdings up to 10%

Reserve Bank of India (RBI) has allowed mutual funds, insurance companies and pension funds to take a one-time approval that would allow these entities to acquire up to 10% equity in banks, finalising the draft norms the banking regulator had proposed in July.

In the final guidelines published Thursday, the RBI said the one time approval could be revoked by the Reserve Bank in the event of non-compliance with the terms and conditions of the approval, or if the qualifying person or any person associated with them is subsequently found to be not ‘fit and proper’.

"The computation of a major shareholding limit of up to 10% of the paid-up share capital or voting rights under the one-time approval shall be on an ‘aggregate basis’. Application for such one-time approval can also be made by a bank on behalf of a qualifying person belonging to the promoter group or group of the bank,” the RBI said.


After the initial acquisition of the shareholding, shareholders with one-time approval must report the decrease or increase of the aggregate holding to below or above 5% of total paid-up share capital or voting rights of the banking company to the regulator and the concerned banking company within three working days of such an event.

The latest RBI amendment is a change from the existing rule that said investors were required to take a fresh approval to increase their stake if their holding falls below 5%. The amendment has increased the threshold for approval and also removed the need for repeated approvals.