RBI allows one-time approval for mutual funds, insurers and pension funds to re-acquire major shareholding in a bank, up to 10 per cent
RBI has amended its directions on acquisition and holding of shares or voting rights in banks. SEBI-registered mutual funds, IRDAI-registered insurers and PFRDA-registered pension funds outside the bank’s promoter group can get a one-time approval, through PRAVAAH, for subsequent acquisitions of major shareholding up to 10 per cent. Prior approval for the initial acquisition stays mandatory.
Key facts
- In force
- In force from 1 October 2026
- Who it affects
- Mutual funds, insurance companies, pension funds, portfolio managers, commercial banks, small finance banks, payments banks, local area banks
- What it is
- Relief
- Section
- FEMA & RBI
- Published
- 1 October 2026
In 30 seconds
- Four Amendment Directions were issued on 1 October 2026 — for commercial banks, small finance banks, payments banks and local area banks — and came into force immediately (RBI Press Release 2026-2027/1233).
- A “qualifying person” is a SEBI-registered mutual fund, a PFRDA-registered pension fund or an IRDAI-registered insurance company that does not belong to the promoter group or group of the investee bank.
- RBI may, at its discretion, grant such persons a one-time approval for subsequent acquisitions of major shareholding up to 10 per cent of paid-up share capital or voting rights, computed on an aggregate basis.
- The application is made through PRAVAAH with the declaration in Form A; the bank furnishes its comments in Form A1.
- Holders of a one-time approval must report their aggregate holding moving below or above five per cent to RBI and the bank within three working days.
- The approval can be revoked for non-compliance with its terms, or if the person or anyone associated with it is found not ‘fit and proper’.
हिंदी में सार
RBI ने 1 अक्टूबर 2026 को बैंकों में शेयर/वोटिंग अधिकार के अधिग्रहण से जुड़े Amendment Directions जारी किए, जो तुरंत लागू हैं। SEBI-पंजीकृत म्यूचुअल फ़ंड, IRDAI-पंजीकृत बीमा कंपनियाँ और PFRDA-पंजीकृत पेंशन फ़ंड (जो बैंक के प्रमोटर समूह में न हों) अब PRAVAAH से आवेदन कर उसी बैंक में 10 प्रतिशत तक दोबारा major shareholding लेने के लिए एक-बार की मंज़ूरी ले सकते हैं। पहली बार के अधिग्रहण के लिए पूर्व-मंज़ूरी पहले की तरह ज़रूरी है; होल्डिंग 5 प्रतिशत से ऊपर या नीचे जाने पर तीन कार्य-दिवस में सूचना देनी होगी।
Before and now
If the holder’s aggregate shareholding fell below five per cent at any time after the initial acquisition, RBI’s prior approval was required again before any subsequent acquisition of major shareholding.
Mutual funds, insurance companies and pension funds that are qualifying persons can obtain a one-time approval covering subsequent acquisitions up to 10 per cent. Prior approval for the initial acquisition continues.
What RBI has done
On 1 October 2026 the Reserve Bank of India issued four sets of Amendment Directions on acquisition and holding of shares or voting rights in banks — one each for commercial banks, small finance banks, payments banks and local area banks. Its press release of the same day (2026-2027/1233) says they come into immediate effect. This story is drawn from the press release and from the Reserve Bank of India (Commercial Banks – Acquisition and Holding of Shares or Voting Rights) Amendment Directions, 2026 (RBI/2026-27/275).
The draft was put out on 14 July 2026, with feedback invited until 4 August 2026. RBI says the consequent modifications have been incorporated.
The problem being solved
The Master Direction of 28 November 2025 requires any person making an initial acquisition of major shareholding in a banking company to obtain RBI’s prior approval. Where that person’s aggregate shareholding later falls below five per cent, prior approval is required again before any subsequent acquisition of major shareholding.
Prior approval for the initial acquisition stays mandatory. What changes is the second step: RBI has decided to grant a one-time approval for subsequent acquisitions in the same banking company by mutual funds, insurance companies and pension funds, subject to certain requirements.
Who qualifies
A new definition, “qualifying person”, covers a person that meets both conditions:
- it is a mutual fund registered with SEBI, a pension fund registered with PFRDA, or an insurance company registered with IRDAI; and
- it does not belong to the promoter group or group of the investee banking company (“group” as per the definition of ‘group entity’ in the Commercial Banks – Undertaking of Financial Services Directions, 2025).
The Directions also provide that an application for the one-time approval can be made by a bank on behalf of a qualifying person belonging to the promoter group or group of the bank.
How the one-time approval works
| Point | What the Amendment Directions provide |
|---|---|
| Ceiling | Subsequent acquisitions of major shareholding up to 10 per cent of the paid-up share capital or voting rights of the banking company |
| How the 10 per cent is counted | On an ‘aggregate basis’, as per paragraph 4(2) of the Directions |
| Application | Through PRAVAAH, with the declaration in Form A; qualifying persons may apply individually or collectively |
| Bank’s role | The banking company furnishes its comments to RBI in Form A1 |
| Grant | At RBI’s discretion, subject to the conditions in the approval and all other applicable provisions |
| Revocation | For non-compliance with the terms and conditions, or if the qualifying person or any person associated with it is subsequently found not ‘fit and proper’ |
| Reporting | A decrease or increase of aggregate holding to below or above five per cent to be reported to RBI and the bank within three working days |
The continuous monitoring provisions in Chapter III are extended to “qualifying persons with one-time approval”.
Portfolio managers
A new Explanation says acquisition by a client may not be treated as indirect acquisition by its portfolio manager if all three conditions are met: the client is the registered owner of the shares and entitled to exercise the voting rights; the portfolio manager only gives non-binding investment or divestment advice; and any voting by the portfolio manager on the client’s behalf is based on a specific mandate from the client.
What funds and banks should do
- Mutual funds, insurers and pension funds that trade in and out of major shareholding in a bank can apply through PRAVAAH for the one-time approval, and must set up reporting of the five per cent crossing within three working days.
- Banks should be ready to furnish comments in Form A1 and to bring holders of a one-time approval within their continuous monitoring arrangements.
Questions and answers
Who can get the one-time approval?
A “qualifying person”: a mutual fund registered with SEBI, a pension fund registered with PFRDA or an insurance company registered with IRDAI, which does not belong to the promoter group or group of the investee bank. A bank can also apply on behalf of a qualifying person belonging to its promoter group or group.
Is prior approval still needed for the first acquisition of major shareholding?
Yes. The Amendment Directions state that obtaining prior approval continues to be mandatory for the initial acquisition of major shareholding in a banking company.
What is the limit under the one-time approval?
Subsequent acquisitions of major shareholding up to 10 per cent of the paid-up share capital or voting rights of the banking company, computed on an aggregate basis.
How is the application made?
Through RBI’s PRAVAAH portal, along with the declaration in Form A. The concerned bank furnishes its comments to RBI in Form A1.
What must be reported after the approval?
A decrease or increase of the aggregate holding to below or above five per cent of the bank’s paid-up share capital or voting rights must be reported to RBI and the bank within three working days.
Published 1 October 2026. Updated 6 October 2026. This report is for general information and is not professional advice. Read the source document before acting on it.