Reserve Bank of India (Commercial Banks - Voluntary Amalgamation) Directions, 2025

1. Start date

This rule takes effect immediately.

2. Who is covered

This rule applies to commercial banks, called 'banks' here.

3. Meaning of Commercial Banks

This means all banks except small finance, payment, local area and foreign banks.

4. Which mergers are covered

These Directions cover mergers between two banks and between a bank and an SFB, LAB or payments bank.

5. NBFC mergers included

This rule also covers a merger between an NBFC and a bank.

1. Two-thirds board approval

Two-thirds of all board members, not just those present, must approve the merger.

2. Board must weigh these

The boards of both banks must consider the listed matters before giving approval.

3. Due diligence first

The board must consider whether due diligence was done on the amalgamated entity.

4. Independent valuers fix swap

The board must check that independent and competent valuers set a fair swap ratio.

5. Effect on capital ratio

The board must weigh the effect of the merger on profitability and capital adequacy.

6. Violations fixed first

The bank's board must fix any NBFC rule violations before approving the merger.

7. KYC done at NBFC

For an NBFC merger the board must check that KYC norms were met on all accounts.

8. Shareholder approval test

Shareholders must approve with a majority in number holding two-thirds of the share value.

9. Voting rights ceiling applies

The voting rights ceiling under Section 12(2) applies when a poll decides the resolution.

BankPulse example. A bank puts a voluntary merger resolution to its shareholders. The chair takes a poll to decide whether it has been passed. A limit on how many votes one shareholder may cast then applies. It comes from Section 12(2) of the Banking Regulation Act, 1949.

1. RBI scheme approval

After shareholder approval, banks must submit the scheme to RBI for approval.

2. PRAVAAH portal filing

Banks must file amalgamation documents with RBI through the PRAVAAH portal.

3. Send papers to RBI

Both banks must submit the information and documents specified in the Annex.

4. Tribunal approval

NBFC-bank mergers need approval from the National Company Law Tribunal.

5. No-objection certificate first

Banks need an RBI no-objection certificate before approaching a Tribunal for NBFC mergers.

6. NBFC merger papers differ

For an NBFC merger the bank submits the Annex documents, leaving out item 4.

1. Dissenting shareholder valuation

RBI's valuation of a dissenting shareholder's shares is final.

1. SEBI insider rules

Listed banks must follow SEBI insider trading rules during amalgamation.

2. SEBI rules still apply

Even for unlisted companies, SEBI regulations should be followed in spirit where applicable.

1. Older rules cancelled

This document cancels the earlier conduct rules for these institutions.

2. Earlier repeals stand

Rules already cancelled before this notification remain cancelled.

3. Old rules stay repealed

Rules repealed before this document was issued remain repealed.

4. Old actions preserved

Anything already done under the old rules stays governed by those old rules.

5. Approvals carried over

Approvals given under the cancelled rules are now treated as given under these rules.

6. Other laws still apply

These Directions add to other laws. They do not replace any of them.

7. RBI's reading final

RBI's interpretation of any part of these Directions is final and binding.