RBI Mandates Prior Approval for NBFC Control Changes
No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2009-10/162 · issued 17 Sep 2009 · ~2 min read
Quick answerDeposit-taking NBFCs must now get RBI's prior written approval for any takeover, acquisition of control, merger, or amalgamation that shifts control. This ensures management remains 'fit and proper' and protects depositor interests.
The rule, in the simplest words
If a deposit-taking NBFC (a company that takes money from people and gives loans) wants to change who is in charge, it must first get a written 'yes' from RBI (the central bank of India).
This rule applies to any takeover (buying the company), merger (joining with another company), or any way of getting control (being the boss) of the NBFC.
The RBI checks that the new management is 'fit and proper' (honest and capable) to protect the money of depositors (people who gave their savings to the NBFC).
To ask for permission, the NBFC must send an application to the RBI's Regional Office (local office) where the company's main office is located.
How it plays out — a real example
Priya, a compliance officer at a deposit-taking NBFC in Chennai, is reviewing a proposed merger with a smaller finance company. She knows that before any papers are signed, she must submit a detailed application to the RBI's Regional Office in Chennai, explaining how the new management will remain 'fit and proper' to safeguard depositor funds. She updates her checklist to ensure this prior approval step is never missed, protecting her NBFC from regulatory trouble.
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.
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
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
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
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.
📜 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 #149: DNBS.(PD).CC.No.160/03.10.001/2009-10 — "RBI approval required for acquisition/transfer of control of NBFCs accepting deposits" dated September 17, 2009”
📜 Read the original circular — full text as issued by RBI
RBI/2009-10/162
DNBS (PD) CC.No. 160/03.10.001/2009-10
September 17, 2009
All deposit taking NBFCs (excluding RNBCs)
Dear Sirs,
Requirement for obtaining prior approval of RBI in cases of acquisition/
transfer of control of NBFCs accepting deposits
Under Section 45 IA (4)(c) of the RBI Act, 1934, a certificate of Registration can only be given to a company if the Bank is satisfied, inter alia, that the general character of the management or the proposed management of the non-banking financial company shall not be prejudicial to the public interest or the interests of its depositors.
2. To enable RBI to verify that the 'fit and proper' character of the management of NBFCs is continuously maintained, it has been decided that any take over / acquisition of shares of a deposit taking NBFC or merger/amalgamation of a deposit taking NBFC with another entity or any merger/amalgamation of an entity with a deposit taking NBFC that would give the acquirer / another entity control of the deposit taking NBFC, would require prior permission of RBI.
3. Applications in this regard may be submitted to the Regional Office of the Department of Non-Banking Supervision in whose jurisdiction the Registered Office of the Company is located.
4. Notification No.DNBS(PD) 208 /CGM(ANR)/2009 dated September 17, 2009 issued in this regard by Reserve Bank in exercise of powers under Sections 45K and 45L of the RBI Act, 1934 is enclosed for meticulous compliance.
Yours sincerely,
(A Narayana Rao)
Chief General Manager-in-Charge
RESERVE BANK OF INDIA
DEPARTMENT OF NON-BANKING SUPERVISION
CENTRAL OFFICE
CENTRE I, WORLD TRADE CENTRE,
CUFFE PARADE, COLABA,
MUMBAI 400 005.
Notification No. DNBS.(PD) 208/ CGM(ANR)-2009 dated September 17, 2009
In exercise of the powers conferred by sections 45K and 45L of the Reserve Bank of India Act, 1934 (2 of 1934) and of all the powers enabling it in this behalf, Reserve Bank of India having considered it necessary in the public interest and being satisfied that for the purpose of enabling the Bank to regulate the credit system to the advantage of the country, it is necessary so to do, gives to every deposit taking NBFC the Directions hereinafter specified.
Short title and commencement of the Directions
1. (1) These Directions shall be known as the Non-Banking Financial Companies (Deposit Accepting) (Approval of Acquisition or Transfer of Control) Directions, 2009.
(2) These Directions shall come into force with immediate effect.
Definitions
2. For the purpose of these Directions, unless the context otherwise requires,-
(a) "control" shall have the same meaning as is assigned to it under clause (c) of sub-regulation (1) of regulation 2 of Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 1997.
(b) "NBFC" means non-banking financial company as defined in clause (xi) of sub-paragraph (1) of Paragraph 2 of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998.
Prior approval of RBI in cases of acquisition or transfer of control of deposit taking NBFCs
3. Any takeover or acquisition of control of a deposit taking NBFC, whether by acquisition of shares or otherwise, or any merger/amalgamation of a deposit taking NBFC with another entity, or any merger/amalgamation of an entity with a deposit taking NBFC, shall require prior written approval of Reserve Bank of India.
Application of other laws not barred
4. The provisions of these Directions shall be in addition to, and not in derogation of the provisions of any other law, rules, regulations or directions, for the time being in force.
Exemptions
5. The Reserve Bank of India may, if it considers necessary for avoiding any hardship or for any other just and sufficient reason, exempt any NBFC or class of NBFCs, from all or any of the provisions of these Directions either generally or for any specified period, subject to such conditions as the Reserve Bank of India may impose.
(A. Narayana Rao)
Chief General Manager In-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/162 · issued 17 Sep 2009. The plain-English explanation above is BankPulse’s own independent summary.
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BankPulse Compliance Evidence Pack — generated 03 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=5278&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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