Banking: As per the guidelines, any person who intends to make an acquisition and which is likely to result in a major shareholding in an affiliated bank, shall obtain the prior approval of the Reserve Bank by submitting an application.
Reserve Bank of India: The Reserve Bank of India (RBI) made changes in the rules related to acquisition and shareholding of banks. The purpose of these changes is to ensure that ownership and control of banks remain in different hands and that large shareholders continue to be ‘suitable’. The Reserve Bank has issued the Master Guidelines (Acquisition of Shares and Holding or Voting Rights in Banking Companies) Directions, 2023. It added that these directions have been issued to ensure that the ultimate ownership and control of banking companies is well diversified and that the major shareholders of the bank units remain suitable on an ongoing basis.
Requirement to obtain fresh approval from RBI
As per the master guidelines, any person who intends to make an acquisition and which is likely to result in a major shareholding in the associated bank, shall obtain the prior approval of the Reserve Bank by submitting an application. It has been said that whatever decision of RBI will be taken in this context will be binding on the applicant and the concerned bank unit. If at any time after such acquisition the total holding falls below 5 per cent, the person, if he wishes to further increase the total holding to 5 per cent or more of the paid-up share capital, shall, as per the instructions, apply to the RBI. Fresh approval will be required.
RBI said that bank units have been asked to make arrangements for receiving information about the ownership or acquisition of 10 percent or more of the paid-up share capital of a large shareholder on behalf of any person. Also, the bank entity shall put in place a continuous monitoring system to ensure that a major shareholder has obtained prior approval of the Reserve Bank regarding shareholding/voting rights.
