Reserve Bank of India tightens merger rules for non-banking finance firms

KOLKATA: Reserve Bank of India has directed non-banking financial companies (NBFCs) to take its prior clearance before purchasing shares of other NBFCs or for merger and acquisition with another entity.

This rule will be applicable to both deposit taking and non-deposit accepting companies and any violation of it may cost the company its registration, the central bank told NBFCs Monday in a note.

Prior written approval of RBI would also be required before approaching the Court or Tribunal seeking order for mergers or amalgamations with other companies or NBFCs.

"It is brought to the notice of the prospective acquirers of NBFCs that acquisition of shares/ takeover of an NBFC without the prior approval of the Reserve Bank shall result in adverse regulatory action by the Reserve Bank, including, cancellation of Certificate of Registration of the concerned NBFC" RBI said in the note.