Reserve Bank of India (Local Area Banks – Voluntary Amalgamation) Directions, 2025
RBI master-direction RBI/DOR/2025-26/223 · 28 Nov 2025
RBI master-direction RBI/DOR/2025-26/223 · 28 Nov 2025
Summary
Check the official recordThese Directions establish the regulatory framework for the voluntary amalgamation of Local Area Banks. The scope includes mergers between two banks, a bank and a banking company, or a bank and a Non-Banking Financial Company. Boards of directors must approve the scheme by a two-third majority. Shareholders must approve the scheme by a majority in number representing two-thirds in value. Banks must submit applications and supporting documents to the Reserve Bank of India via the PRAVAAH portal. For bank-NBFC mergers, banks must obtain a No-Objection Certificate from the Reserve Bank of India before approaching the National Company Law Tribunal. Dissenting shareholders may claim the value of their shares as determined by the Reserve Bank of India within three months of sanction.
What you must do
Key dates
Who is affected
If you do not comply
RBI/DOR/2025-26/223 DoR.HOL.REC.No.142/16-13-100/2025-26
November 28, 2025
Reserve Bank of India (Local Area Banks - Voluntary Amalgamation) Directions, 2025
Table of Contents
Chapter I - Preliminary A. Short Title and Commencement B. Applicability C. Definitions D. Scope
Chapter II – Approval by Board of Directors and Shareholders A. Approval by Board of Directors B. Approval by Shareholders
Chapter III – Approval or sanction by RBI
Chapter IV – Entitlement of dissenting shareholders
Chapter V – Norms for buying / selling of shares by promoters
Chapter VI – Repeal and Other Provisions A. Repeal and saving B. Application of other laws not barred C. Interpretations
Annex
In exercise of the powers conferred by Section 44A and Section 35A of the Banking Regulation Act, 1949 and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Directions hereinafter specified.
Chapter I - Preliminary
A. Short Title and Commencement
1.These Directions shall be called the Reserve Bank of India (Local Area Banks: Voluntary Amalgamation) Directions, 2025.
B. Applicability
C. Definitions
(1) ‘Amalgamated Entity’ means the entity which is proposed to transfer its business to another entity under the scheme of amalgamation.
(2) ‘Amalgamating Entity’ means the entity which is to acquire the business of the amalgamated entity under the scheme of amalgamation.
(3) ‘Amalgamation’ refers to one or more entities merging with another entity under the relevant statutes / regulations through a scheme of amalgamation (or whatever name called), which sets out the terms and modalities of the process.
(4) ‘Tribunal’ means the National Company Law Tribunal constituted under Section 408 of the Companies Act, 2013 (as defined in sub-section (90) of Section 2 of the said Act), as amended from time to time.
D. Scope
(1) Two banks
(2) A bank with a banking company (as defined under clause (c) of Section 5 of Banking Regulation Act, 1949) excluding foreign banks or vice- versa.
(3) A Non-Banking Financial Company (NBFC) with a bank or vice versa.
Chapter II – Approval by Board of Directors and Shareholders
A. Approval by Board of Directors
Provided that, it shall be ensured that ‘Deeds of Covenants’, as indicated in Reserve Bank of India (Local Area Banks – Governance) Directions, 2025, have been obtained from all independent and non-executive directors participating in the said meetings.
Whether due diligence exercise has been undertaken in respect of the amalgamated entity.
The changes which are proposed to be made in the composition of the Board of Directors of the amalgamating entity, consequent upon amalgamation, and the resultant composition of the Board are in conformity with the Reserve Bank guidelines / directives in this regard.
The nature of the consideration that the amalgamating entity will pay to the shareholders of the amalgamated entity.
Whether the swap ratio has been determined by independent valuers having required competence and experience and whether, in the opinion of the Board, such swap ratio is fair and proper.
The shareholding pattern in the concerned entities and whether, as a result of the amalgamation and the swap ratio, the shareholding of any person, entity or group in the amalgamating entity will be in contravention of RBI guidelines or any other applicable statute, or regulatory instruction, requiring prior approval from RBI or any other regulatory or administrative authority.
The values at which the assets, liabilities and reserves of the amalgamated entity are proposed to be incorporated into the books of the amalgamating entity and whether such incorporation will result in a revaluation of assets upwards, or credit being taken for unrealised gains.
The impact of amalgamation on the profitability and capital adequacy ratio of the amalgamating entity.
The NBFC has violated or is likely to violate any of the RBI / SEBI norms and if so, the Board shall ensure that these norms are complied with before the scheme of amalgamation is approved.
The NBFC has complied with the ‘Know Your Customer’ norms for all the accounts.
If the NBFC has availed of credit facilities from a bank / Financial Institution (FI), whether the loan agreements mandate the NBFC to seek consent of the bank / FI concerned for the proposed merger / amalgamation.
B. Approval by Shareholders
Provided that the ceiling on voting rights under Section 12(2) of the Banking Regulation Act, 1949, shall apply when there is a poll to determine whether the resolution has been passed by required majority.
Chapter III – Approval or sanction by RBI
Provided that for voluntary amalgamation of an NBFC with a bank or vice versa, scheme of amalgamation shall require approval by the Tribunal in terms of Sections 230 to 234 of the Companies Act, 2013. However, No-Objection Certificate’ from RBI shall be obtained before approaching any Court or Tribunal for approval of amalgamation of a bank and an NBFC.