RBI tweaks norms related to acquisition for Banks

The Reserve Bank of India on Monday tweaked norms related to acquisition and holding of shares in banks to ensure that their ultimate ownership and control remain well-diversified and the major shareholders are ‘fit and proper’ on a continuing basis.

The central bank has issued Master Direction–Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023.

“These directions are issued with the intent of ensuring that the ultimate ownership and control of banking companies are well-diversified and the major shareholders of banking companies are ‘fit and proper’ on a continuing basis,” it said.

Subsequent to such acquisition, if at any point in time the aggregate holding falls below 5%, the person will be required to seek fresh approval from the RBI if the person intends to again raise the aggregate holding to 5% or more of the paid-up share capital or total voting rights, it said.

The RBI further said the banking companies have been asked to put in place a mechanism to obtain information on any change in significant beneficial owner or acquisition by a person to the extent of 10% or more of paid-up equity share capital of the major shareholder.

Also, a banking company will have to establish a continuous monitoring mechanism to ascertain that a major shareholder has obtained prior approval of the Reserve Bank for the shareholding/voting rights.