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Reserve Bank of India

Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies

The contents of these Guidelines shall be read along with Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023, and applicable provisions of the Banking Regulation Act, 1949.

Prior approval for acquisition of shares or voting rights in a banking company

2. In terms of sub-section (1) of Section 12B of Banking Regulation Act, 1949, every person, who intends to acquire shares or voting rights and intends to be a major shareholder1of a banking company, is required to obtain previous approval of the Reserve Bank.

3. The person, who intends to be a major shareholder of a banking company, is required to make an application to the Reserve Bank along with the declaration in Form A. The Reserve Bank would undertake a due diligence to assess the ‘fit and proper’ status of the applicant. It will be open to the Reserve Bank to seek additional information / documents from the applicant / concerned banking company and make such enquiries with regulators, revenue authorities, investigation agencies, credit rating agencies or any other persons as considered appropriate.

4. While granting approvals, the Reserve Bank may specify conditions under sub-section (4) of Section 12B of B R Act,1949, including a validity period for completing such acquisition. Subsequent to such acquisition, if at any point in time the aggregate holding2 of the person falls below five per cent, as per sub-section (1) of Section 12B of B R Act, 1949, the person will be required to again obtain prior approval from the Reserve Bank to raise the aggregate holding to five per cent or more of total paid-up share capital or voting rights of the banking company.

5. Any person who intends to acquire shares or voting rights in a banking company beyond the limit for which approval was obtained from the Reserve Bank, is required to apply to the Reserve Bank for prior approval to increase their aggregate holding in the banking company.

6. The persons from3 Financial Action Task Force (FATF) non-compliant jurisdictions4 shall not be permitted to acquire major shareholding in the banking company. However, the existing major shareholders from such FATF non-compliant jurisdictions would be allowed to continue with their investment, provided that there shall not be any further acquisition without prior approval of the Reserve Bank. The Reserve Bank may, however, review the ‘fit and proper’ status of such holders of shares or voting rights at any point of time and may take steps to limit their voting rights in accordance with law.

Information to be provided for continuous monitoring

7. In addition to furnishing the information sought by the banking company, major shareholders who have completed the approved5 acquisition or applicants who have obtained the approval to have major shareholding or applicants who have submitted the application for obtaining the prior approval shall inform the banking company of any change in the information provided in Form A or any other development which may have a bearing on the ‘fit and proper’ status.

Limits on shareholding

8. Permission of the Reserve Bank to acquire shares or voting rights in a banking company shall be subject to the following limits:

(a) Non-promoter:

i. 10 per cent of the paid-up share capital or voting rights of the banking company in case of natural persons, non-financial institutions, financial institutions directly or indirectly connected with Large Industrial Houses6 and financial institutions that are owned to the extent of 50 per cent or more or controlled by individuals (including the relatives and persons acting in concert)7, or

ii. 15 per cent of the paid-up share capital or voting rights of the banking company in case of financial institutions (excluding those mentioned in paragraph 8(a)(i) above), supranational institutions, public sector undertaking and central/state government.

(b) Promoter: 26 per cent of the paid-up share capital or voting rights of the banking company after the completion of 15 years8 from commencement of business of the banking company.

9. During the period prior to the completion of the 15 years, the promoters of banking companies may be allowed to hold a higher percentage of shareholding as part of the licensing conditions or as part of the shareholding dilution plan9 submitted by the banking company and approved by the Reserve Bank with such conditions as deemed fit.

10. Reserve Bank may also permit higher shareholding [than the limits prescribed in paragraph 8 above] on a case-to-case basis under circumstances such as relinquishment by existing promoters, supervisory intervention including under Prompt Corrective Action, reconstruction/restructuring of banks, entrenchment of existing promoters or any other action in the interest of the banking company and its depositors or in the interest of consolidation in the banking sector, etc. While allowing such higher shareholding, Reserve Bank may impose conditions as deemed fit (including dilution of such higher shareholding within a timeline).

11. In specific cases where State Government / Central Government / Union Territory / Public Sector Undertaking / Public Financial Institution / specifically permitted investors are promoters of banking companies or have been specifically permitted by Reserve Bank to hold a higher shareholding as promoter/non-promoter in certain special circumstances10, Reserve Bank may prescribe a differentiated shareholding dilution plan for such holdings.

Lock-in requirement

12. In case of a person permitted by the Reserve Bank to have a shareholding of 10 per cent or more of the paid-up equity share capital11 of the banking company but less than 40 per cent of the paid-up equity share capital, the shares acquired shall remain under lock-in for first five years from the date of completion of acquisition. In case of any person permitted to have a shareholding of 40 per cent or more of the paid-up equity share capital of the banking company, only 40 per cent of paid-up equity share capital shall remain under lock-in for first five years from the date of completion of acquisition.

13. The shares which are under lock-in, shall not be encumbered under any circumstances. Promoter(s) and promoter group are required to report details of creation/invocation/release of encumbrance on shares which are not under lock-in to the banking company within two working days of such an event in the format specified in Form Bas given in these Guidelines.

14. After the end of the lock-in period, there is no requirement for any minimum shareholding.

Ceiling on voting rights

15. As per the provisions of sub-section (2) of Section 12 of B R Act, 1949, read with gazette notification DBR.PSBD.No.1084/16.13.100/2016-17 dated July 21, 2016, no shareholder in a banking company can exercise voting rights on poll in excess of 26 per cent of total voting rights12 of all the shareholders of the banking company.

16. A Depository can exercise voting rights on behalf of the Depository Receipts (DR) holder only in cases where it can be demonstrated that their holdings on behalf of DR holder is in conformity with Section 12B of B R Act, 1949, and the Depository exercises voting rights pursuant to voting instructions from the DR holder. The changes in the depository agreements shall require the prior approval of the Reserve Bank.

17. In case of person(s) holding beneficial interest13 attached to shares, the voting rights can be exercised only in cases where it can be demonstrated that the aggregate holding is in conformity with Section 12B of B R Act, 1949.

18. A person can exercise voting rights on behalf of registered shareholders only in cases where it can be demonstrated that their aggregate voting rights is in conformity with Section 12B of B R Act, 1949.

19. Any major shareholder14 who is covered by sub-section (3) of section 12B of the B R Act, 1949, and has not obtained prior approval of the Reserve Bank, can exercise voting rights only after obtaining the approval of Reserve Bank for major shareholding.

Related Links

January 16, 2023 Master Direction – Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023
November 26, 2021 Recommendations of the Internal Working Group to Review Extant Ownership Guidelines and Corporate Structure for Indian Private Sector Banks

Notes: 

1 ‘Major shareholder’ shall have the same meaning as under the Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023

2 ‘Aggregate holding’ shall have the same meaning as under the Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023

3 This shall also be applicable to various jurisdictions through which the funds for investments are routed.

4 i) High-Risk Jurisdictions subject to a Call for Action, and ii) Jurisdictions under Increased Monitoring.

5 The usage of the word ‘approved’ shall mean approved by the Reserve bank.

6 The Guidelines for ‘on tap’ Licensing of Universal Banks and Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector issued by the Reserve Bank may be referred to.

7 The shareholding in banks by such financial institutions would be deemed to be by a natural person for the purpose of these Guidelines

8 In case of SFBs which already transited from UCBs the period of 15 years will begin from reaching the net-worth of ₹200 crores.

9 to ensure diversified shareholding and is not just limited to promoters but also include non-promoter with shareholding higher than the limits prescribed in paragraph 8(a) of these Guidelines

10 Including a scheduled commercial bank which has been specifically permitted to hold equity stake as per the “Guidelines for Licensing of Payments Banks, 2014”

11 Paid-up voting equity share capital is nothing but ‘paid up equity share capital’ as preference share capital in banking companies cannot have voting rights as per the BR Act.

12 This shall include voting rights against all shares issued by the banking company and is not restricted to ‘exercisable’ voting rights arrived at after cutting off the rights beyond the maximum limit that can be exercised by a single holder. Thus, the percentage of voting rights exercisable has to be worked out in relation to the total number of shares carrying voting rights assuming that there are no restrictions.

13 Beneficial interest has the same meaning as stated in Section 89 of the Companies Act, 2013 and rules framed thereunder.

14 Includes acquisition of shares or entitlement to exercise voting rights in cases involving invocation of encumbrance of shares.

 *****

Reserve Bank of India

RBI/DOR/2022-23/95
DOR.HOL.No.95/16.13.100/2022-23

January 16, 2023

Master Direction – Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023

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 may 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 (the Guidelines).

Objective: 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.

CHAPTER – I
PRELIMINARY

1. Short Title and Commencement.

1.1 These directions shall be called the Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023.

1.2 These directions shall become effective from the date of issue.

2. Applicability

2.1 The provisions of these directions shall apply to all banking companies (as defined in clause (c) of Section 5 of the Banking Regulation Act, 1949), including Local Area Banks (LABs), Small Finance Banks (SFBs) and Payments Banks (PBs) operating in India1.

3. Definitions

3.1 In these directions, unless the context otherwise requires, the terms used shall bear the meanings assigned to them below, and their cognate expressions and variations shall be construed accordingly:-

a.  “acquisition” means, acquiring, or agreeing to acquire, shares2 or voting rights in a banking company, directly or indirectly3;

b. “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 arriving at indirect holding, the acquisition of shares or voting rights mentioned in Annex I shall also be considered and that indirect acquisition is not limited to the acquisition(s) mentioned therein];

c.  “applicant” means the person making an application under Section 12B of the Banking Regulation Act, 1949 (10 of 1949);

d. “encumbrance” has the same meaning as assigned to it in the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011;

e. “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;

f.   “person” means a natural person or a legal person;

g.  “relative” has the same meaning as defined in Section 2(77) of the Companies Act, 2013 and rules made thereunder; and

h.  “significant beneficial owner” has the same meaning as stated in Companies (Significant Beneficial Owners) Rules, 2018.

3.2 All other expressions, unless defined herein, shall have the same meaning as have been assigned to them under the Banking Regulation Act, 1949.

CHAPTER – II
PRIOR APPROVAL FOR ACQUISITION

4. Procedure for prior approval

4.1 Any person who intends to make an acquisition which is likely to result in major shareholding in a banking company4, is required to seek previous approval of the Reserve Bank by submitting an application to the Reserve Bank.

4.2 On receipt of the application and declaration from the applicant, the Reserve Bank may seek comments from the banking company on the proposed acquisition.

4.3 On receipt of the reference from the Reserve Bank, without prejudice to the generality of the aspects to be considered, the board of directors (the board) of the banking company shall, based on the information provided as well as due diligence undertaken by the banking company, deliberate on the proposed acquisition, and assess the ‘fit and proper’ status of the person. The concerned banking company shall furnish its comments after considering all relevant aspects along with a copy of the relevant board resolution and information in Form A1 specified in these directions to the Reserve Bank within 30 days. For this purpose, banking companies shall put in place a board-approved ‘fit and proper’ criteria for major shareholders, which shall consider, at a minimum, the illustrative ‘fit and proper’ criteria mentioned in the Annex II.

4.4 The Reserve Bank would undertake due diligence to assess the ‘fit and proper’ status of the applicant. The decision of the Reserve Bank to (a) accord or deny permission or (b) accord permission for acquisition of a lower quantum of aggregate holding than that has been applied for, shall be binding on the applicant and the concerned banking company. The Reserve Bank may impose such conditions on the applicant and the concerned banking company as deemed fit while according the permission.

4.5 Subsequent to such acquisition, if at any point in time the aggregate holding falls below five per cent, the person will be required to seek fresh approval from the Reserve bank if the person intends to again raise the aggregate holding to five percent or more of the paid-up share capital or total voting rights of the banking company (as per sub-section (1) of Section 12B of B R Act, 1949).

4.6 The persons from5 Financial Action Task Force (FATF) non-compliant jurisdictions6 shall not be permitted to acquire major shareholding in a banking company. The existing major shareholders from such FATF non-compliant jurisdictions will, however, be allowed to continue with their investment, provided that there shall not be any further acquisition without prior approval of the Reserve Bank. Reserve Bank may, however, at any point of time, consider the fitness of such persons holding shares and pass appropriate orders on their permissible voting rights in accordance with law and applicable rules.

CHAPTER – III
CONTINUOUS MONITORING ARRANGEMENTS

5. Due diligence

5.1 A banking company shall continuously monitor that the following persons are ‘fit and proper’ on an ongoing basis:

a.  its major shareholders7 who have completed the approved acquisition;

b. those applicants for whom comments have been provided by the concerned banking company to the Reserve Bank for approval to have major shareholding; and

c. those applicants who have been approved by the Reserve Bank to have major shareholding but are yet to complete the approved acquisition8.

5.2 Further, a banking company shall:

a. put in place a mechanism to obtain information on a continuous basis on any changes in the information provided in Form A appended to the Guidelines or any other development which may have a bearing on the ‘fit and proper’ status of major shareholder / applicant;

b. examine any concern / information regarding the major shareholders / applicants that could render such persons not ‘fit and proper’ to continue as / become major shareholder and immediately furnish the report on the same to the Reserve Bank;

c. obtain, within one month of the close of financial year, a report on any changes in the information provided in Form A appended to the Guidelines from the major shareholder / applicant; and

d. make an assessment about the ‘fit and proper’ status of such person(s) in the light of information provided and its own investigations and forward the comments of its Board regarding the ‘fit and proper’ status of its major shareholders / applicants, to the Department of Regulation, Reserve Bank of India, not later than September 30 every year.

5.3 The banking companies shall put in place a mechanism to obtain information on any change in Significant Beneficial Owner or acquisition by a person to the extent of 10 per cent or more of paid-up equity share capital of the major shareholder. In seeking the information, banking companies shall also be guided by the information sought in Form A appended to the Guidelines. Based on the information so received, the concerned banking company shall conduct requisite due diligence to ascertain whether the major shareholder continues to be ‘fit and proper’. The banking company shall, within 30 days from receipt of information on such changes, submit a brief report, along with the board note and resolution to Department of Regulation, Reserve Bank of India.

6. Detecting violation of Section 12B (1) of the B R Act, 1949

6.1 A banking company shall establish a continuous monitoring mechanism to ascertain that a major shareholder has obtained prior approval of the Reserve Bank for the shareholding/voting rights. Any violation of sub-section (1) of section 12B of B R Act, 1949 shall be immediately brought to the notice of the Reserve Bank. Any major shareholder9 who is covered by sub-section (3) of section 12B of the B R Act, 1949, and has not obtained prior approval of the Reserve Bank, can exercise voting rights only after obtaining the approval of Reserve Bank for major shareholding.

6.2 Even when the acquisition / aggregate holding is less than five per cent of paid-up share capital or voting rights of a banking company, a reference shall be made to the Reserve Bank by the banking company along with a copy of board resolution and necessary documents, if it has reason to believe that the methods adopted are meant to circumvent the statutory requirements.

6.3 The banking company shall submit periodical reports on the continuous monitoring arrangements to its board, which inter alia, shall include assessment of compliance to sub-section (5) of Section 12B of the B R Act, 1949.

7. Diversified shareholding in the banking company

7.1 The banking companies (excluding Payments Banks) which are operational as on the date of issue of these directions and where the aggregate holding of a person is not in conformance with the Guidelines shall within six months from the date of issue of these directions submit a shareholding dilution plan.

8. Reporting requirements

8.1 After issue10 and allotment of shares, a banking company shall report the details in the Form A2 within 14 days of completion of the allotment process. The banking company shall also ensure that the limits approved by the Reserve Bank for a person shall not be breached.

8.2 The banking company shall forward the details on encumbrance of shares reported by promoter(s)11 and promoter group in Form B appended to the Guidelines to the Department of Supervision within one working day. Further, the banking company shall place the report before its board and within 30 days from the date of event submit a report to Department of Regulation, Reserve Bank of India.

CHAPTER IV
REPEAL AND OTHER PROVISIONS

9. Following three Master Directions have been consolidated into these directions with suitable modifications, and thus they are repealed from the date of issue of these directions:

S. No. Date of Master Directions Master Directions number Subject
(i) November 19, 2015 Master Direction No. DBR. PSBD.No.56/16.13.100/2015-16 Prior approval for acquisition of shares or voting rights in private sector banks
(ii) April 21, 2016 Master Direction DBR.PSBD.No.95/16.13.100/2015-16 Issue and Pricing of Shares by Private Sector Banks
(iii) May 12, 2016 Master Direction DBR.PSBD.No.97/16.13.100/2015-16 Ownership in Private Sector Banks

10. The instructions / guidelines contained in the following circulars issued by the Reserve Bank, had already been repealed through earlier Master Directions (as mentioned below), and thus they continue to remain repealed:

(A) Master Direction No.DBR.PSBD.No.56/16.13.100/2015-16 dated November 19, 2015 –Reserve Bank of India (Prior approval for acquisition of shares or voting rights in private sector banks) –Directions, 2015

S. No. Date of circular Circular number Subject
(i) May 23, 1991 DBOD.No.Fol.BC.129/C.249-91 Transfer of Shares of Banks addressed to all Indian Private Sector Commercial Banks
(ii) April 16, 1994 DBOD.No.44/16.13.100/94 Acquisition of Shares of Banks for Gaining Controlling Interest addressed to all Indian Private Sector Commercial Banks
(iii) September 21, 1999 DBOD.No.PSBS.BC.349/16.13.100/99-2000 Transfer of Shares addressed to all Indian Private Sector Commercial Banks
(iv) May 31, 2000 DBOD.No.PSBS.BC.182/16.13.100/99-2000 Transfer of Shares addressed to all Indian Private Sector Commercial Banks
(v) July 18, 2000 DBOD.No.PSBS.BC.05/16.13.100/2000-2001 Transfer of Shares addressed to all Indian Private Sector Commercial Banks
(vi) November 7, 2002 DBOD.No.PSBS.BC.41/16.13.100/2002-2003 Transfer of Shares – Prior Acknowledgment of Reserve Bank addressed to all Indian Banks in the Private Sector
(vii) February 3, 2004 DBOD.No.PSBS.BC.64/16.13.100/2003-04 Guidelines for Acknowledgement of Transfer / Allotment of Shares in Private Sector Banks addressed to all Scheduled Commercial Banks
(viii) August 13, 2005 DBOD.No.PSBD.155/16.13.100/2004-05 Transfer of shares of banks addressed to all Private Sector Banks.
(ix) October 26, 2005 DBOD.No.PSBD435/16.13. 100/2005-06 dated October 26, 2005 Transfer of shares of banks addressed to all Private Sector Banks.

(B) Master Direction DBR.PSBD.No.95/16.13.100/2015-16 dated April 21, 2016- Reserve Bank of India (Issue and Pricing of Shares by Private Sector Banks) Directions, 2016.

S. No. Date of circular Circular number Subject
(i) June 17, 1994 DBOD.No.BC.76/16. 13.100/94 Issue of Shares by Private Sector Banks
(ii) July 10, 1998 DBOD.No.PSBS.BC.72/16.13.100/98-99 Issue of Shares by Private Sector Banks
(iii) June 25, 2005 DBOD.No.PSBD.BC.99/16.13.100/2004-05 Rights Issue by Private Sector Banks – Acknowledgement of Transfer/Allotment of Shares
(iv) April 20, 2010 DBOD.No.PSBD.BC.92/16.13.100/2009-2010 Issue and Pricing of Shares by Private Sector Banks

(C) Master Direction DBR.PSBD.No. 97/16.13.100/2015-16 May 12, 2016 – Reserve Bank of India (Ownership in Private Sector Banks) Directions, 2016.

S. No. Date of circular Circular number Subject
(i) February 28, 2005 DBOD.No.PSBD.BC.99/ 16.13.100/2004-05 Ownership and Governance in Private Sector Banks – The following paragraphs are repealed: 1(iii), (iv), 2, 3 (i), (ii), (iv) & (v), 4, 5, 7, 7.1, 7.2, 7.3, 9 (i) to (iv), 10 (i), 11
(ii) February 5, 2007 DBOD.No.PSBD.7269/ 16.13.100/2006-07 Issue of American Depository Receipts (ADRs) / Global Depository Receipts (GDRs) – Depository Agreement.

11. All approvals / acknowledgements given under the above circulars/ directions shall be deemed as given under these directions.

Annex I
Indirect acquisition of shares or voting rights

The 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 owner13 to which the person belongs to and its directors;

ii.  the directors of the person and any other person entrusted with the management of the person;

iii.  promoter and promoter group14 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 person15 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;

x. Any other person having control16 over the person;

xi. Proxy voters17 (other than Corporate representative and relatives of the registered members) without any specific mandate on manner of voting.

Annex II
Illustrative criteria for determining “fit and proper” status of applicants/major shareholders

(i) For acquisition of five per cent or more but less than 10 per cent in the banking company:

a. Integrity, reputation and track record in financial/non-financial matters and compliance with tax laws,

b. 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,

c. 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,

d. Outcome of due diligence conducted with the relevant regulator, revenue authorities, investigation agencies and credit rating agencies etc., as considered appropriate,

e.  Serious financial misconduct, including defaulting on financial obligations or whether the applicant was adjudged to be insolvent,

f.  The credibility of source of funds for the acquisition,

g. 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.

h. Adherence to the Guidelines on acquisition and holding of shares or voting rights in banking companies

(ii) For acquisition of 10 per cent or more in the banking company:

a.  All aspects as laid down in (i) above.

b. Details of group entities, in case the applicant belongs to a group.

c. 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.

d. The business record and experience of the applicant including any experience in acquisition of business.

e. The extent to which the corporate structure of the applicant will be in consonance with effective supervision and regulation of the banking company.

f. The soundness and feasibility of the plans of the applicant for the future conduct and development of the business of the banking company.

g. Shareholder agreements and their impact on control and management of the banking company.

Related Links
January 16, 2023 Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies
November 26, 2021 Recommendations of the Internal Working Group to Review Extant Ownership Guidelines and Corporate Structure for Indian Private Sector Banks

1 These directions are not applicable to foreign banks [operating either through branch mode or Wholly Owned Subsidiary (WOS) mode].

2 Shares include equity shares and preference shares as mentioned in Section 12(1)(ii) of the BR Act, 1949.

3 In these directions usage of the word “indirectly” will include the meaning as provided in Explanation III to Rule 2(h) of Companies (Significant Beneficial Owners) Rules, 2018.

4 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.

5 This shall also be applicable to various jurisdictions through which the funds for investments are routed.

6 i) High-Risk Jurisdictions subject to a Call for Action, and ii) Jurisdictions under Increased Monitoring.

7 Major shareholders include promoter(s) with major shareholding.

8 Subject to any validity period for the approval granted by the Reserve Bank under sub-section (4) of Section 12B of B R Act, 1949.

9 Includes acquisition of shares or entitlement to exercise voting rights involving invocation of encumbrance of shares.

10 A banking company has general permission for issue of shares subject to various conditions such as FEMA, 1999, SEBI regulations, provisions of Companies Act and rules made thereunder, etc.

11 “promoter and promoter group” has the same meaning as stated in Annex I of Guidelines for ‘on tap’ Licensing of Small Finance Banks in the Private Sector dated December 5, 2019, amended from time to time.

13 Illustratively, 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.

14 For the purpose of these directions, the recognition norms for recognizing the promoter group of a banking company shall be applied to recognize the promoter and promoter group of the person.

15 This 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.

16 Control 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.

17 This shall include Proxy Adviser for one or more persons with authorisation to exercise voting rights.

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