RBI clarifies cross-holding limit for bank equity investments
No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2008-09/209 · issued 08 Oct 2008 · ~2 min read
Quick answerRBI clarifies that a bank's proprietary holdings in another bank are capped at 5% of paid-up capital, but fiduciary holdings by group AMCs are exempt from this limit, though they require RBI acknowledgement and cannot vote or have board representation.
What changed
RBI clarified that the 5% cross-holding limit applies only to proprietary holdings of a bank and its group entities in another bank. Fiduciary holdings by group asset management companies (AMCs) through portfolio management services or mutual funds are excluded from this limit. However, if total group holdings including fiduciary reach 5% or more, the investee bank must seek RBI acknowledgement, and the AMC cannot exercise voting rights or have board representation.
What it means for you
Banks can now invest in other banks through group AMCs without breaching the 5% proprietary cap, but must ensure AMCs do not vote or hold board seats. This provides flexibility for group-level strategic investments while maintaining regulatory oversight. Lenders need to track both proprietary and fiduciary holdings to trigger RBI acknowledgement when total hits 5%.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Monitor aggregate proprietary holdings of your bank and group entities in any investee bank to ensure they stay within 5% of paid-up capital.
Track total group holdings including fiduciary holdings by AMCs; if they reach 5% or more, approach RBI for acknowledgement.
Ensure group AMCs do not exercise voting rights on their holdings in the investee bank and obtain an undertaking from them.
Confirm that group AMCs have no board representation in the investee bank.
Maintain records of AMC undertakings for inspection purposes.
Who it affects
Scheduled commercial banks in the private sector, Bank group entities including asset management companies, Investee banks receiving equity investments
❓ Common questions
Regulatory timeline
Decoded by BankPulse2026-06-19 12:16 IST
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn05 Aug 2026, 04:00 IST
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
What is the 5% limit for cross-holding of capital?
The aggregate proprietary holdings of a bank and its group entities in another bank's paid-up capital must not exceed 5%. Fiduciary holdings by group AMCs are excluded from this limit.
Do we need RBI approval if our group AMC holds shares in another bank?
No prior approval is needed for fiduciary holdings, but if total group holdings including fiduciary reach 5% or more of the investee bank's paid-up capital, the investee bank must approach RBI for acknowledgement.
Can our group AMC vote on its holdings in another bank?
No, the AMC cannot exercise voting rights on its holdings in the investee bank. It must provide an undertaking to this effect, which the investee bank should keep for inspection.
📜 This document’s life story (1 recorded event, each backed by RBI’s own words)
Repealed byRBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
RBI’s words: “Official withdrawal register entry #2088: DBOD.No.PSBD.BC.53/16.13.100/2008-09 — "Investments in the Equity of a Bank by other Banks or their Group Entities" dated October 8, 2008”
📜 Read the original circular — full text as issued by RBI
RBI/2008-09/209
DBOD. No. PSBD.BC. 53/ 16.13.100 / 2008-09
October 8, 2008
To
The CEOs of all scheduled commercial banks
in the private sector
Dear Sir,
Investments in the equity of a bank by other banks or their group entities
With reference to the extant instructions in regard to the limit of 5% for cross-holding of capital contained in paragraph 2.1.4(iii) of our master circular DBOD. No. BP. BC. 2 / 21.01.002 / 2008-09 dated July 1, 2008 and the guidelines on acknowledgement of allotment / transfer of shares issued on February 3, 2004, it is clarified as under:
(i) The aggregate 'proprietary' holdings of a bank and its group entities should be limited to 5% of the investee bank's paid-up capital.
(ii) 'Fiduciary' holdings of an AMC belonging to the group (through PMS and MF) would not be reckoned for the purpose of the 5% limit.
(iii) However, the investee bank should approach RBI for acknowledgement if the total holdings of the group (including fiduciary holdings) are at 5% or more of the bank's paid-up capital.
(iv) The AMC should not exercise voting rights on its holdings in the investee bank. An undertaking to this effect may be furnished by the AMC to the investee bank, which may be kept with the bank for verification during inspections.
(v) The AMC should not have any Board representation in the investee bank.
Yours faithfully
(Murli Radhakrishnan)
General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-09/209 · issued 08 Oct 2008. The plain-English explanation above is BankPulse’s own independent summary.
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4526&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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