The Reserve Bank of India (RBI) on Thursday eased norms governing share acquisitions in banks, allowing mutual funds, insurance companies and pension funds to obtain one-time approval for subsequent acquisitions of major shareholding of up to 10 per cent in a bank.
Under the amended directions, the one-time approval will be available to eligible investors that are not part of the promoter group or the investee bank’s group. The approval will be subject to conditions specified by the RBI and other applicable regulatory provisions.
Under the existing framework, any person seeking to make an initial acquisition of major shareholding in a bank must obtain prior approval from the central bank. Further, if the aggregate shareholding falls below 5 per cent after the initial acquisition, prior approval is required again before any subsequent acquisition of major shareholding.
The RBI said the requirement for prior approval for the initial acquisition would continue. However, following a review, it has decided to provide one-time approval for subsequent acquisitions by qualifying investors.
Applications for the one-time approval must be submitted through the RBI’s PRAVAAH portal. The concerned bank will also be required to furnish its comments to the central bank.
The approval may be granted to qualifying investors individually or collectively, with the 10 per cent shareholding limit calculated on an aggregate basis. The RBI may revoke the approval in case of non-compliance with its conditions or if the investor or any person associated with it is subsequently found not to be fit and proper.
The amended directions also require investors holding one-time approval to report any increase or decrease in their aggregate shareholding across the 5 per cent threshold to the RBI and the concerned bank within three working days.