Summary of this article
One-time RBI approval proposed for repeat bank stake acquisitions
Mutual funds, insurers and pension funds may benefit from easier rules
Initial approval and continuous reporting requirements will continue
The Reserve Bank of India (RBI) on July 14 proposed a one-time approval mechanism that would allow eligible mutual funds, insurance companies and pension funds to acquire higher stakes in banks without seeking fresh regulatory approval for every subsequent acquisition.
The proposal is part of the RBI's draft Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights) Amendment Directions, 2026. Once finalised, the amendments will apply to commercial banks, small finance banks, payments banks and local area banks.
According to the existing rules, investors are required to obtain prior RBI approval before acquiring a major shareholding in a bank. If their holding later falls below 5 per cent, they are required to seek the regulator's approval again before increasing it beyond that threshold. The RBI now proposes to retain the approval requirement for the first acquisition but remove the need for repeated approvals for eligible institutional investors.
The central bank said that, following a review, it has 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."
What The Draft Proposes
The draft introduces a new category of investors called "qualifying persons", which includes Securities and Exchange Board of India (Sebi)-registered mutual funds, Insurance Regulatory and Development Authority of India (IRDAI)-registered insurance companies and Pension Fund Regulatory and Development Authority (PFRDA)-registered pension funds that are not part of a bank's promoter group.
Under the proposal, these entities may seek a one-time approval from the RBI for subsequent acquisitions of major shareholding of up to 10 per cent in the same banking company, instead of obtaining fresh approval each time their holding falls below the 5 per cent threshold. The approval, once granted, will remain valid unless revoked by the RBI.
The RBI said the proposal follows representations from asset management companies seeking a simpler approval process for subsequent acquisitions by mutual funds, insurance companies and pension funds.
Oversight To Continue
Initial acquisition of a major shareholding will continue to require prior approval, and banks will have to submit their comments before the regulator grants a one-time approval.
The draft also keeps qualifying investors within the RBI's continuous monitoring framework. Entities that receive one-time approval will have to inform both the RBI and the concerned bank whenever their aggregate shareholding moves above or below the 5 per cent threshold within one day of such an event.
The proposed changes are expected to reduce the compliance burden for institutional investors whose holdings may fluctuate because of portfolio rebalancing, investor inflows and redemptions, while ensuring that the RBI continues to monitor significant ownership in banks.
The RBI has invited public comments on the draft amendments until August 4, 2026.
