The Reserve Bank of India (RBI) has proposed a streamlined, one-time approval mechanism allowing eligible institutional investors to increase their stakes in commercial banks without seeking fresh regulatory clearance for every transaction. Under current rules, mutual funds, insurance companies, and pension funds must get prior RBI approval whenever acquiring a major shareholding of 5% or more, and must reapply if their holding dips below that threshold before buying again. Under the draft guidelines, while initial approval for acquiring a 5% or greater stake remains mandatory, qualifying investors can be granted a single, standing authorization to acquire up to 10% of a bank’s paid-up share capital or voting rights. This approval will remain valid even if their holding temporarily drops below 5%, unless explicitly revoked by the central bank. To ensure oversight, entities benefiting from the rule must notify the RBI and the respective bank within one day whenever their aggregate stake crosses above or below the 5% mark. The proposed facility applies strictly to SEBI-registered mutual funds, IRDAI-registered insurers, and PFRDA-registered pension funds that are independent of the bank’s promoter group.
