RBI Allows One-Time Approval for Subsequent Bank Stake Acquisitions

On October 1, 2026, the Reserve Bank of India (RBI) issued four corresponding Amendment Directions amending the regulatory frameworks governing acquisition and holding of shares or voting rights in Commercial Banks, Small Finance Banks, Payments Banks and Local Area Banks, providing for one-time approval of subsequent acquisitions of major shareholding in the same banking company by mutual funds, insurance companies and pension funds.

The Amendment Directions amend the four Master Directions issued on November 28, 2025, namely the RBI (Commercial Banks – Acquisition and Holding of Shares or Voting Rights) , RBI (Small Finance Banks – Acquisition and Holding of Shares or Voting Rights) , RBI (Payments Banks – Acquisition and Holding of Shares or Voting Rights), RBI (Local Area Banks-Acquisition and Holding of Shares or Voting Rights) [Directions, 2025]. 

Under the 2025 directions, “major shareholding” means an aggregate holding of 5% or more of the paid-up share capital or voting rights. Where an investor’s aggregate shareholding, after an initial approved acquisition, fell below 5%, prior RBI approval was again required before a subsequent acquisition of major shareholding.

On July 14, 2026, RBI issued four draft Amendment Directions, one for each category of bank, proposing the one-time approval mechanism. Stakeholders were invited to submit comments until August 4, 2026.

Key Amendments Under the 2026 Amendment Directions:

• One-Time Approval for Subsequent Acquisitions

The amendments introduce the concept of a “qualifying person”. This includes a mutual fund registered with SEBI, a pension fund registered with PFRDA or an insurance company registered with IRDAI, provided it does not belong to the promoter group of the investee bank. For commercial banks only, the exclusion also extends to the group of the investee bank, determined as per the definition of “group entity” in the Reserve Bank of India (Commercial Banks – Undertaking of Financial Services) Directions, 2025. 

A qualifying person may apply through RBI’s PRAVAAH portal, along with the declaration in Form A, for one-time approval for subsequent acquisitions of major shareholding. RBI may, at its discretion, grant such approval individually or collectively, for acquisitions up to 10% of the bank’s paid-up share capital or voting rights. The concerned bank is required to furnish its comments in Form A1, and the approval remains subject to the conditions specified in it and all other applicable provisions of the Master Directions. An application for one-time approval may also be made by a bank on behalf of a qualifying person belonging to the promoter group or group of the bank. 

Prior RBI approval remains mandatory for the initial acquisition of major shareholding.

• Aggregate Holding and Continuing Oversight

The 10% ceiling is computed on an ‘aggregate basis’ as per paragraph 4(2) of the Master Directions, which defines ‘aggregate holding’ as the total holding, direct or indirect, beneficial or otherwise, of a person along with his relatives, associate enterprises and persons acting in concert with him.

RBI may revoke the approval for non-compliance with its conditions or where the qualifying person or an associated person is subsequently found not to be “fit and proper”. 

The continuous monitoring arrangements in Chapter III of the Master Directions (paragraphs 17 to 20) have also been extended to “qualifying persons with one-time approval”, defined as qualifying persons that hold one-time approval but do not have a major shareholding in the bank at the relevant time. Under the newly inserted paragraph 9A of Annex I to the Master Directions, any decrease or increase in aggregate holding to below or above 5% must be reported to RBI and the concerned bank within three working days.

• Additional Criteria for Qualifying Persons

The additional criteria under paragraph 6(2), which apply to acquisitions of 10% or more, have been extended to qualifying persons seeking one-time approval.

Correspondingly, the additional-information section of Form A (from S.No. 32) now also applies to qualifying persons seeking, or holding, one-time approval.

• Portfolio Manager Clarification

The Amendment Directions also insert an explanation to item (viii) under paragraph 4(2) in Section C (Definitions) of Chapter I of the Master Directions, clarifying that a client’s acquisition may not be treated as an indirect acquisition by its portfolio manager where the client is the registered owner and entitled to exercise voting rights, the portfolio manager acts only as an adviser providing non-binding investment or divestment advice, and any voting by the portfolio manager is based on a specific mandate from the client.

The Amendment Directions came into force with immediate effect, i.e., on October 1, 2026.