Reserve Bank of India (Commercial Banks - Acquisition and Holding of Shares or Voting Rights) Directions, 2025

1. Start date

These Directions took effect the day RBI placed them on its official website.

2. Who is covered

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

3. Meaning of Commercial Banks

This means banking companies under the Banking Regulation Act, other than small finance, payment and local area banks.

BankPulse example. The word banks on this page has a narrow meaning: banking companies as the Banking Regulation Act defines them. It leaves out small finance banks, payment banks and local area banks. RBI also says these Directions do not apply to foreign banks, whether they work through branches or wholly owned subsidiaries.

4. Foreign banks excluded

This rule does not apply to foreign banks, whether branches or subsidiaries.

5. Major shareholding meaning

Owning 5% or more of a bank's shares counts as major shareholding.

1. FATF country bar

People from FATF non-compliant countries cannot become major shareholders in a bank.

2. Fit-and-proper rules

Banks must set board-approved fit-and-proper rules for major shareholders.

3. Prior approval rule

Anyone planning major shareholding must get RBI's prior approval via the PRAVAAH portal.

4. Board assesses the buyer

On a Reserve Bank reference the board must assess whether the proposed acquirer is fit and proper.

1. Report within thirty days

Such changes must be reported to the Reserve Bank within 30 days with the board resolution.

2. 14-day allotment reporting

Banks must report new share allotments to RBI within 14 days.

3. One-day encumbrance reporting

Banks must report share encumbrance by promoters to RBI within one working day.

4. Yearly shareholder review

Banks must send RBI the board's yearly shareholder review by September 30.

5. Track beneficial ownership

The bank must have a mechanism to learn of changes in significant beneficial ownership.

6. Monitor prior approvals

The bank must monitor continuously that a major shareholder holds prior Reserve Bank approval.

7. Board monitoring reports

Banks must send the board regular reports on shareholder monitoring.

8. Do not breach limits

The bank must ensure that approved shareholding limits for a person are not breached.

1. 26 percent promoter ceiling

A promoter can hold up to 26% after 15 years of the bank's operation.

2. Five-year lock-in

Shares bought under this rule stay locked in for five years.

3. Locked shares stay free

Shares under lock-in cannot be encumbered under any circumstances.

4. 26 percent voting cap

No shareholder can use voting rights above 26% of the bank's total votes.

5. Older rules repealed

This document repeals RBI's earlier instructions on acquisition and holding of shares or voting rights for commercial banks.

6. Earlier repeals stand

Guidelines already repealed before these Directions stay repealed.

7. Old rules stay repealed

Rules repealed before this document was issued remain repealed.

8. Old actions preserved

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

9. Approvals carried over

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

10. Other laws still apply

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

11. RBI's reading final

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

12. Depository changes need approval

Changes in the depository agreements need prior approval of the Reserve Bank.