Reserve Bank of India (Small Finance Banks - Voluntary Amalgamation) Directions, 2025
UR
- Applies toSmall finance banks
- StatusIn force
- IssuedNov 28, 2025
- Amendmentsnone tracked
- Length26 points in 5 sections · 3 min read
The four dates on this rule
- PublishedNov 28, 2025The day RBI put this document out. This is the same day as the Issued date on this rule.
- Starts to applyNov 28, 2025The day this rule starts to apply, as RBI's own text states it.
- Time to get readyNoneIt starts to apply on the day it was published.
- Last date to actNot statedNo date to act by was found in this document. Other dates may sit inside single paragraphs.
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Chapter I. Preliminary
1. In force at once
These Directions came into force with immediate effect.
2. Who is covered
These Directions apply to every small finance bank.
3. Two sides of a merger
The amalgamated entity transfers its business; the amalgamating entity acquires it.
4. Three kinds of merger
The rules cover a merger of two banks, a bank with a banking company, or a finance company with a bank.
5. Foreign banks excluded
A merger with a foreign bank is outside these Directions.
Chapter II. Approval by Board of Directors and Shareholders
Do it
1. Two thirds of every board
Both boards must approve by a two-third majority of ALL board members, not merely those present and voting.
BankPulse example. A board has 12 members. Approval needs 2 of every 3 of them, counting all 12 and not just those present. That is 8 members. If only 9 attend, two-thirds of those 9 would be 6, and 6 is not enough.
2. Covenants first
Deeds of covenants must be in hand from every independent and non-executive director at those meetings.
3. Due diligence weighed
The boards must weigh whether due diligence was done on the entity being absorbed.
BankPulse example. The board of the acquiring bank asks one question before it votes. Was due diligence undertaken in respect of the entity being absorbed? If nobody can answer, the board is not ready to vote.
4. A fair swap ratio
The swap ratio must come from independent valuers and the board must judge it fair and proper.
BankPulse example. The two banks agree a swap ratio. It must come from independent valuers with the required competence and experience. The board must then form its own opinion that the ratio is fair and proper. A ratio the board has not examined does not meet the rule.
5. Ownership caps watched
The boards must check no holder crosses an RBI shareholding limit through the swap.
6. No hidden revaluation
The boards must check the merger books do not revalue assets upwards or book unrealised gains.
7. Capital impact examined
The boards must weigh the merger's effect on profitability and the capital adequacy ratio.
8. Extra finance company checks
Merging with a finance company adds checks: its rule breaches must be cured before the scheme is approved.
9. Shareholders decide by value
Shareholders must approve by a majority in number holding two-thirds in value, present in person or by proxy.
10. One in the local language
One of the two newspapers must be in a language the locality commonly understands.
Background
11. The voting ceiling holds
The Banking Regulation Act's ceiling on voting rights applies in any poll on the resolution.
12. Three weeks of notices
Meeting notices run weekly for three consecutive weeks in at least two local newspapers.
Chapter III. Approval or sanction by RBI
1. RBI's no-objection first
RBI's no-objection certificate must be in hand before approaching any court or tribunal.
2. Then RBI decides
After the shareholders approve, the scheme goes to RBI for approval or sanction.
3. Tribunal for mixed mergers
A merger between a bank and a finance company needs the Tribunal's approval under the Companies Act.
4. One portal for papers
All information and documents go to RBI through the PRAVAAH portal, as the annex lists.
Chapter IV. Entitlement of dissenting shareholders
1. A dissenter can exit
A dissenting shareholder may claim the RBI-determined value of the shares within three months of sanction.
2. RBI's price is final
RBI's determination of that share value is final for all purposes.
Chapter V. Norms for buying / selling of shares by promoters
1. Unlisted follow in spirit
Even unlisted companies must follow the SEBI rules in spirit and to the extent applicable.
2. Insider rules bind listed
For listed companies, the SEBI insider trading rules apply: merger information is price sensitive.
Chapter VI. Repeal and Other Provisions
1. What it replaces
Earlier voluntary amalgamation instructions for this class of bank stand repealed by these Directions.
The same subject for other kinds of institution
The same subject for other kinds of institution.
Other RBI rules for small finance banks
RBI compliance officer and compliance function rules for small finance banks 2026
RBI credit bureau reporting rules for small finance banks 2025
RBI credit card and debit card rules for small finance banks 2025
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