What changed
RBI issued Directions under Sections 45K and 45L of the RBI Act, 1934, effective September 17, 2009, requiring prior written approval for any takeover, acquisition of control (by shares or otherwise), merger, or amalgamation involving a deposit-taking NBFC. The definition of 'control' aligns with SEBI's Substantial Acquisition of Shares and Takeovers Regulations, 1997. Exemptions may be granted by RBI to avoid hardship.
What it means for you
Banks and lenders dealing with deposit-taking NBFCs must ensure any change in control or restructuring gets RBI's nod upfront, adding a regulatory checkpoint. This tightens oversight to prevent unfit management from taking over, safeguarding depositor funds. Non-compliance could lead to regulatory action, so due diligence on counterparties is critical.
What you must do
- Review any planned acquisitions, mergers, or control changes involving deposit-taking NBFCs for RBI approval requirements.
- Submit applications to the relevant Regional Office of the Department of Non-Banking Supervision before executing any such transaction.
- Update internal compliance checklists to include this prior approval step for all NBFC-related control events.
- Advise clients or counterparties who are deposit-taking NBFCs about this mandatory approval process.
Who it affects
All deposit-taking NBFCs (excluding RNBCs), Acquirers or entities seeking control of deposit-taking NBFCs, Banks and lenders financing or facilitating such transactions, Regulatory compliance teams at NBFCs and banks
Does this apply to non-deposit taking NBFCs?
No, the Directions specifically apply only to deposit-taking NBFCs (excluding RNBCs). Non-deposit taking NBFCs are not covered.
What is the definition of 'control' used here?
The Directions adopt the same definition as under SEBI's Substantial Acquisition of Shares and Takeovers Regulations, 1997, which generally means the ability to appoint majority directors or control management or policy decisions.
Can RBI exempt any NBFC from these rules?
Yes, RBI may grant exemptions for any NBFC or class of NBFCs if it considers necessary to avoid hardship or for any other just and sufficient reason, subject to conditions.