What changed
Previously, all NBFCs (deposit-taking and non-deposit-taking) had to give prior public notice for any change in control/management. Now, for mergers and amalgamations approved by a High Court under Sections 391 and 394 of the Companies Act 1956, the NBFC only needs to inform RBI within one month of the court order, and no separate public notice is required. For all other cases (sale/transfer of ownership), the 30-day prior public notice rule continues.
What it means for you
This relaxation reduces compliance burden for NBFCs undergoing court-approved mergers, as they no longer need to issue an additional public notice solely for RBI's requirement. However, RBI will still conduct due diligence on directors of any new NBFC formed through such changes. Lenders should note that the core requirement for prior notice in non-court-approved changes remains unchanged.
What you must do
- For court-approved mergers/amalgamations, inform RBI within one month of the High Court order, attaching the order; no separate public notice needed.
- For other changes in control/management (sale/transfer), continue to give a 30-day prior public notice as per earlier circulars.
- Ensure all other terms and conditions from earlier circulars (DNBS (PD) CC.No.11/02.01/99-2000 and No.12/02.01./99-2000) are still complied with.
- If a new NBFC is formed, be prepared for RBI's due diligence on directors under Section 45 IA(4)(c) of the RBI Act, 1934.
Who it affects
All Non-Banking Financial Companies (NBFCs) including Residuary Non-Banking Companies (RNBCs), Deposit-taking and non-deposit-taking NBFCs, NBFCs undergoing merger, amalgamation, or change in management/control
Do we need to issue a public notice for a merger approved by the High Court?
No, if the merger is under Sections 391 and 394 of the Companies Act 1956 and approved by the High Court, you only need to inform RBI within one month of the court order. No separate public notice is required.
What if the change in control is through a sale or transfer, not a court-approved merger?
In such cases, you must still give a prior public notice of 30 days as per the earlier circulars. The relaxation only applies to court-approved mergers and amalgamations.
Will RBI still check the directors of the new NBFC after a change in control?
Yes, RBI will continue to conduct due diligence on the directors of any new NBFC formed through change of management, merger, or acquisition, to ensure compliance with Section 45 IA(4)(c) of the RBI Act.