RBI master-direction · 28 Nov 2025
RBI/DOR/2025-26/176 DOR.HOL.REC.95/16.13.100/2025-26 November 28, 2025 Reserve Bank of India (Small Finance Banks – Acquisition and Holding of Shares or Voting Rights) Directions, 2025 Table of Contents Chapter I- Preliminary A. Short Title and Commencement B. Applicability C. Definitions Chapter II- Prior Approval for…
RBI/DOR/2025-26/176 DOR.HOL.REC.95/16.13.100/2025-26
November 28, 2025
Reserve Bank of India (Small Finance Banks – Acquisition and Holding of Shares or Voting Rights) Directions, 2025
Table of Contents
Chapter I- Preliminary A. Short Title and Commencement B. Applicability C. Definitions
Chapter II- Prior Approval for Acquisition A. Fit and Proper Criteria B. Procedure for prior approval
Chapter III- Continuous Monitoring Arrangements A. Due diligence B. Detecting violation of Section 12B (1) of the B R Act, 1949 C. Reporting requirements
Chapter IV- Repeal and Other Provisions A. Repeal and saving B. Application of other laws not barred C. Interpretations
Form A1 Form A2
Annex I A. Prior approval for acquisition of shares or voting rights in a banking company B. Information to be provided for continuous monitoring C. Limits on shareholding D. Lock-in requirement E. Ceiling on voting rights
Form A Form B
Introduction
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.
In exercise of the powers conferred by Sections 12, 12B, and 35A of the Banking Regulation Act, 1949, the Reserve Bank of India being satisfied that it is necessary and expedient in the public interest so to do, hereby, issues the Directions hereinafter specified.
These Directions shall be read along with the ‘Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies’ issued by the Reserve Bank of India (hereinafter referred to as ‘Guidelines’).
Chapter I- Preliminary
A. Short Title and Commencement
These directions shall be called the Reserve Bank of India (Small Finance Banks – Acquisition and Holding of Shares or Voting Rights) Directions, 2025.
These directions shall become effective on the day these are placed on the official website of the Reserve Bank.
B. Applicability
C. Definitions
(1) ‘acquisition’ means acquiring, or agreeing to acquire, shares or voting rights in a banking company, directly or indirectly; Explanation (i) ‘Shares’ shall include equity shares and preference shares, as mentioned in Section 12(1) (ii) of the Banking Regulation Act, 1949. Explanation (ii) The term ‘indirectly’ shall have the same meaning as provided in Explanation III to Rule 2(h) of Companies (Significant Beneficial Owners) Rules, 2018.
(2) ‘aggregate holding’ means the total holding, directly or indirectly, beneficial or otherwise, of shares or voting rights by a person along with his relatives, associate enterprises and persons acting in concert with him in a banking company; For the purpose of this definition, indirect acquisition of shares or voting rights by a person (natural or legal) may include, amongst others, such acquisition by:
(i) any body-corporate under the same management or control or owner to which the person belongs to and its directors; Explanation: The term ‘under the same management or control or owner’ shall illustratively include entities related to one or more other entities because they all have the same shareholder structure without a single controlling shareholder or because they are managed on a unified basis.
(ii) the directors of the person and any other person entrusted with the management of the person;
(iii) promoter and promoter group of the person; Explanation: For the purpose of these Directions, the norms for recognizing the promoter group of a banking company shall be applied to recognize the promoter and promoter group of the person.
(iv) mutual funds, its sponsor, trustees, trustee company and asset management company;
(v) a collective investment scheme and its collective investment management company, trustees and trustee company of the person;
(vi) venture capital fund, its sponsor, trustees, trustee company and asset management company;
(vii) alternative investment fund, acquisition through its sponsor, trustees, trustee company and manager;
(viii) a portfolio manager and its client;
(ix) Any person who manages the funds of one or more investors and exercise voting rights on their behalf or direct the manner of exercise of voting rights in the banking company; Explanation: ‘person’ shall also include Private Equity funds, its General Partners and Limited Partners, investment manager or any other person doing similar activity of managing funds of one or more persons.
(x) Any other person having control over the person; Explanation: ‘Control’ shall have the same meaning as defined in Section 2(27) of Companies Act, 2013- Control shall include the right to appoint majority of the directors or to control the management or to control policy decisions exercisable by a person or persons acting individually or in concert, directly or indirectly, including by virtue of their shareholding or management rights or shareholders agreements or voting agreements or in any other manner.
(xi) Proxy voters (other than Corporate representative and relatives of the registered members) without any specific mandate on manner of voting. Explanation: Proxy voters shall include Proxy Adviser for one or more persons with authorisation to exercise voting rights.
(3) ‘applicant’ means the person making an application under Section 12B of the Banking Regulation Act, 1949;
(4) ‘encumbrance’ shall have the same meaning as assigned to it in the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;
(5) ‘major shareholding’ means ‘aggregate holding’ of five per cent or more of the paid-up share capital or voting rights in a banking company by a person; Explanation: The shareholding shall be computed assuming that all the instruments (including convertible instruments) issued/ to be issued to the person have been converted into shares (with applicable voting rights) and deemed to be included in the paid-up share capital or total voting rights of the banking company.
(6) ‘person’ means a natural person or a legal person;
(7) ‘relative’ shall have the same meaning as defined in Section 2(77) of the Companies Act, 2013 and rules made thereunder; and
(8) ‘significant beneficial owner’ shall have the same meaning as stated in Companies (Significant Beneficial Owners) Rules, 2018.
Chapter II- Prior Approval for Acquisition
A. Fit and Proper Criteria
Explanation: The illustrative criteria for determining ‘fit and proper’ status of applicants/major shareholders shall include, at a minimum:
(1) For acquisition of five per cent or more but less than 10 per cent in the banking company: Integrity, reputation and track record in financial/non-financial matters and compliance with tax laws, Any proceedings of a serious nature, or has been notified of any such impending proceedings or of any investigation which may lead to such proceedings, Record or evidence of previous business conduct and activities resulting in conviction for an offence under any legislation designed to protect members of the public from financial loss due to dishonesty, incompetence, or malpractice, Outcome of due diligence conducted with the relevant regulator, revenue authorities, investigation agencies and credit rating agencies etc., as considered appropriate, Serious financial misconduct, including defaulting on financial obligations or whether the applicant was adjudged to be insolvent, The credibility of source of funds for the acquisition, Where the applicant is a body corporate, track record or reputation for operating in a manner that is consistent with the standards of good corporate governance, financial strength and integrity in addition to the assessment of individuals and other entities associated with the body corporate as enumerated above. Adherence to the ‘Guidelines’ on acquisition and holding of shares or voting rights in banking companies.
(2) For acquisition of 10 per cent or more in the banking company: All aspects as laid down in (1) above. Details of group entities, in case the applicant belongs to a group. Source and stability of funds for acquisition and the ability to access financial markets as a source of continuing financial support for the banking company. The business record and experience of the applicant including any experience in acquisition of business. The extent to which the corporate structure of the applicant will be in consonance with effective supervision and regulation of the banking company. The soundness and feasibility of the plans of the applicant for the future conduct and development of the business of the banking company. Shareholder agreements and their impact on control and management of the banking company.
