Rbi Amendments For Bank Shareholding: Raising bank stakes gets easier for DIIs
MUMBAI: Reserve Bank of India has proposed changes to bank shareholding norms to ease investment by domestic institutional investors, while tightening disclosure and monitoring to maintain regulatory oversight. The amendments will make it easier for fund managers that are part of a financial conglomerate to acquire shares in private banks without triggering acquisition norms.RBI has also sought to amend directions on governance so that bank boards can focus on strategy and risk governance and not on extant routine administrative matters or detailed review of minor policy adjustments.According to draft amendments issued this year to the Nov 2025 Master Direction, the central bank has revised the treatment of acquisitions by portfolio managers and their clients. Under the earlier framework, investments by a portfolio manager and its clients were aggregated as indirect holdings, which could push them past regulatory thresholds regardless of who exercised control.
Bk Boards To Focus On Risk And Strategy
The revised proposal introduces a carve-out under which client holdings will not be treated as indirect acquisitions by the manager if the client retains ownership and voting rights, the manager provides only non-binding advice, and any voting exercised by the manager is backed by a specific mandate. The change ensures that portfolio management services are not constrained by client-level investment decisions where no discretionary control exists.The draft also introduces the concept of qualifying persons, which includes mutual funds, insurance companies and pension funds regulated by domestic regulators, provided they are not part of the promoter group of the bank. These entities may be applicants, or current or past major shareholders, and are treated separately from promoters and other investors.The amendments propose a shift to a one-time approval mechanism for such qualifying persons. Under the revised framework, RBI may grant a one-time approval through the PRAVAAH portal, allowing these investors to increase their holding up to 10% even if their stake temporarily falls below 5%.Meanwhile, the amended governance norms require bank boards to sharpen their focus on core oversight by shifting time towards business strategy, financial soundness, key personnel decisions, internal organisation and compliance, while scrapping the earlier rigid requirement to review exhaustive items across seven themes such as individual business competitiveness and routine staff perks.
