This article mainly covers various aspects for the prior permission of RBI for acquisition/transfer of control of NBFC which may or may not result in change in management or takeover of NBFC Company.

1. Events leading to Change of Management or Control

It could be complete sale by existing shareholders to new set of promoters, dilution of equity for fund infusion, induction of Directors, Mergers etc.


2. Legal Language

‘In terms of Para 2 of the NBFC-DNBR (PD) CC. No. 065/03.10.001/2015-16, dated July 09, 2015, Requirement of prior approval of Reserve Bank

(i) Henceforth, prior written permission of the Reserve Bank shall be required for any takeover or acquisition of control of an NBFC, which may or may not result in change of management;

a) any change in the shareholding of an NBFC, including progressive increases over time, which would result in acquisition/ transfer of shareholding of 26 per cent or more of the paid-up equity capital of the NBFC. Prior approval would, however, not be required in case of any shareholding going beyond 26% due to buyback of shares/ reduction in capital where it has approval of a competent Court. The same is however required to be reported to the Reserve Bank not later than one month from its occurrence;

b) any change in the management of the NBFC which would result in change in more than 30 per cent of the directors, excluding independent directors. Prior approval would not be required for those directors who get re-elected on retirement by rotation.

(ii) Notwithstanding clause (i), NBFCs shall continue to inform the Reserve Bank regarding any change in their directors/ management as required in Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998, Non-Systemically Important Non-Banking Financial (Non-Deposit Accepting or Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015 and Systemically Important Non-Banking Financial (Non-Deposit Accepting Holding) Companies Prudential Norms (Reserve Bank) Directions, 2015.

3. Illustrations

1. There are 3 Directors in Company A, B, and C. Now, Mr. D & Mr. E are willing to join the company as Director. Should company take prior permission from RBI?

Yes, as there is change in more than 30% of Directors.

2. There are 5 Directors in company. Say example A, B, C and 2 Independent Director Mr. D and E. Now, Company is willing to appoint Mr. F as Director. Should company go for prior permission?

No, as there is no change in more than 30% of the Director.

3. There are 5 shareholders in company let us say A, B, C, D, E, each one of them has number of equity share 1,00,00. If A, B, C would like to sell their entire holding. What would be scenario?

Yes, Prior permission is needed as there is change in more than 26% of shares (3L/5L) i.e60% change.

4. In the captioned case, if only A would like to sale its 70,000 shares?

No, Prior permission is needed as less than 26%(0.70L/5L) i.e 14%.

5. After selling 70,000 shares by Mr. A. if Mr. B would like to sell his1,00,000 shares in company. What would be scenario?

Yes, Prior permission is required as there is progressive transfer of more than 26% (1.70L/5L) i.e 34%.

4. Procedural Part

i. Application for prior approval

(i) NBFCs have to submit an application, on the company letter head, for obtaining prior approval of the Bank under paragraph 2, along with the following documents along with specific reasons for the same:

a) Information about the proposed directors/ shareholders as per the Annex;

b) Sources of funds of the proposed shareholders acquiring the shares in the NBFC;

c) Declaration by the proposed directors/ shareholders that they are not associated with any unincorporated body that is accepting deposits;

d) Declaration by the proposed directors/ shareholders that they are not associated with any company, the application for Certificate of Registration (CoR) of which has been rejected by the Reserve Bank;

e) Declaration by the proposed directors/ shareholders that there is no criminal case, including for offence under section 138 of the Negotiable Instruments Act, against them; and

f) Bankers’ Report on the proposed directors/ shareholders.

Captioned requirements are indicatory, they may further ask for net worth certificate of proposed director/ shareholder, group company financials, directorship in other companies etc…

(ii) Applications in this regard needs to be submitted to the Regional Office of the Department of Non-Banking Supervision in whose jurisdiction the Registered Office of the NBFC is located. This needs to be submitted through physical submission only. You are advised to keep acknowledgement and one set of copy submitted documents for future reference.

ii. Comply with Additional requirements

On receipt of application, RBI will review the application, check the track record of company If any pending non-compliance by company,it needs to be complied, RBI may callfor a meeting of proposed director to check whether fit and proper criteria has been fulfilled or not as laid down in Master Circular – “Non-Banking Financial Companies – Corporate Governance (Reserve Bank) Directions, 2015”dated July 01, 2015 amended time to time.

iii. Requirement of Prior Public Notice

On Receipt of Prior permission of the Reserve Bank, a public notice of at least 30 days is required to be given before effecting the sale of, or transfer of the ownership by sale of shares, or transfer of control, whether with or without sale of shares. Such public notice can be given by the NBFCs and also by the other party or jointly by the parties concerned, after obtaining the prior permission of the Reserve Bank.

The public notice should indicate the intention to sell or transfer ownership/ control, the particulars of transferee and the reasons for such sale or transfer of ownership/ control. The notice needs to be published in at least one leading national and in one leading local (covering the place of registered office) vernacular newspaper.

iv. ROC procedure

On Expiry of Public notice period, company has to repass Board Resolution for change/appointment/resignation of directors in case of change in management or adoption of share transfer if there is change in shareholding.

Company has to file form DIR-12 with ROC within 30 days of passing Board Resolution and comply with share transfer procedures. Likewise, valuation for issue/transfer of shares, share transfer/members/Directors register to be updated, changes in share certificates, payment of stamp duty etc.

v. Intimation to RBI

Company has to intimate to RBI along with supportive documents like ROC forms DIR-12, Board Resolution in case of change in Director and Board Resolution for change in shareholding to enable RBI to update its records.

5. Formats and Resolutions

i. Application letter

The Assistant General Manager,
Reserve Bank of India,
Department of Non-Banking Supervision,
Address :

Subject: Application for Prior Approval for change in shareholding of XXXX

Reference: Certificate of Registration No. XXXXX

Dear Sir,

We are submitting this application in terms of circular No. RBI/2015-16/122 dated July 9, 2015 issued in continuance of DNBS (PD) CC.No.376/03.10.001/2013-14 and Notification No. DNBS (PD) 275/GM (AM)-2014 dated May 26, 2014 wherein ‘Non-Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2014 has been notified. The required documents/information as suggested are furnished below.

1. Information about the proposed shareholders (Annexure I)

2. The proposed share holder will acquire the entire shareholding from the existing shareholders out of their XXXXXX

3. Required Declaration by the proposed shareholders (Annexure II)

4. Bankers’ Report on the proposed shareholders (Annexure III)

5. Required Board Resolutions (Annexure IV)

6. Statement of existing and proposed shareholding pattern of company in percentage and absolute terms along with relevant notes. (Annexure V)

7. Annual accounts of the company for the F.Y. XXXX along with the Statutory Auditor’s Certificate about the asset income pattern of the company. (Annexure VI)

We hope you will find the above in order. We shall be glad to provide further information, you may ask for.

Please acknowledge the receipt of the documents and do the needful.

Thanking you.

Yours Faithfully,

Encl: as above

ii. Information about Proposed Director/Shareholder/Promoter

Sr. No. Particulars Required Response
1 Name
2 Designation
3 Nationality
4 Age (to be substantiated with date of birth)
5 Business Address
6 Residential Address
7 E-mail address/ Telephone number  
8 PAN Number under Income Tax Act
9 Director Identification Number (DIN)
10 Passport No.*
11 Educational/professional qualifications
12 Professional Achievement relevant to the job
13 Line of business or vocation
14 Any other information relevant to Directorship of the Company
15   Name/s of other companies in which the person has     held the post of Chairman/ Managing Director/Director/Chief Executive Officer
16 Name/s of the regulators (RBI,SEBI,IRDA,PFRDA,NHB or any other foreign regulator) of the entities mentioned in which the Directors hold directorships
17 Name/s of the company/ies ,if any, with which the Director is  associated as Promoter, Managing Director, Chairman or Director with any NBFC including a Residuary Non-Banking Financial Company which has been prohibited from accepting deposits/prosecuted by RBI ?
18 Detail of prosecution, if any, pending or commenced or resulting in conviction in the past against the Director and/or against any of the entities he is associated with for violation of economic laws and regulations
19 Cases, if any, where the Director or relatives of the Director or the companies in which the Director is associated with, are in default or have been in default in the last 5 years in respect of credit facilities obtained from any entity or bank
20 If the Person is a member of a professional association/body, details of disciplinary action, if any, pending or commenced or resulting in conviction in the past against him/her or whether he/she has been banned from entry of any professional occupation at any time.
21 Whether the Director attracts any of the disqualification envisaged under Section 164 of the Companies Act,2013
22 Has the Director or any of the companies, he is associated with, been subject to any investigation at the instance of the Government Department of Agencies
23 Has the Director at any time been found guilty of violations of rules/ regulations/ legislative requirements by Customs/ Excise/ Income Tax// Foreign Exchange/ Other Revenue Authorities , if yes, so give particulars
24 Experience in the business of NBFC (number of years)
25 Equity shareholding in the company
(i) No. of shares
(ii) Face value
(iii) Percentage to total equity share capital of the       company
26  Name/s of the companies, firms and proprietary concerns in which the person holds substantial interest
27 Names of the principal bankers to the concerns at 26 above
28 Names of the overseas bankers *
29 Whether number of directorships held by the Director exceeds the limits prescribed under Section 165 of the Companies Act,2013.
Signature :
Date : Name :
Place: Designation :
Company Seal :

Note: There is separate Annex for corporate Promoter as laid down in captioned Master Direction. Company has to submit separate form for each person

iii. Declaration Format


The Assistant General Manager,
Reserve Bank of India,
Department of Non-Banking Supervision,


I XXXX aged XX years residing at XXXX hereby confirm and undertake as under:

1. That I am not associated with any unincorporated body, which accepted deposit in violation of 45S of chapter IIIC of the RBI Act, 1938.

2. That I am not involved in any criminal offence including offence u/s 138 of the Negotiable Instrument Act, 1881.

3. That at anytime I have not received any adverse notice from any regulator such as SEBI, MCA, IRDA etc.

4. That I am not associated with any company, the application for Certificate of Registration (CoR) of which has been rejected by the Reserve Bank

5. I hereby solemnly affirm and declare as under I am not having any association with any NBFC.

6. I am not being associated with any vanishing, cancelled or rejected company in the past or present.

7. I am not associated with any of NBFC Company or any company in which any prohibitor order were in issued in past or in present.

I confirm that the above information is to the best of my knowledge and belief true and complete.

Place: XXXSignature

Date: XXX

iv. Bankers Report

Bankers Report

We hereby certify that Mr/Ms./Mrs/M/s. XXX is having below mentioned Current account with Bank of Baroda/SBI /etc.., XXXX branch address XXXX.

Sr No Name of Account Holder Account No:

The conducts of the above accounts are satisfactory.

For Bank of Baroda/SBI/XXX
Authorised Signatory
Date: XXXX

v. Proposed Resolutions

Resolution for proposal to Transfer of Shareholding subject to prior approval of RBI 


The Chairman informed the Board about proposal regarding transfer of XXX Equity Shares. The matter was discussed at length and after various deliberations the following resolution was passed:

“RESOLVED THAT XXX Equity Shares be and is hereby Proposed to Transfer subject to prior approval from RBI and that the shares be transferred as per details mentioned below:

Sr. No. Name of Transferor Name of Transferee No. of Shares Transferred

“RESOLVED FURTHER THAT Mr. XX, the Director of the Company be and is hereby authorised to  take prior permission from RBI and comply with relevant master Direction and notification of RBI issued by time to time for the said transfer and to make necessary endorsement on the reverse of the Share Certificates and send it to the transferees whose name is entered in the Register of members on receipt of prior permission from RBI.”

vi. Intimation Letter

The Assistant General Manager,
Reserve Bank of India,
Department of Non-Banking Supervision,
Address :

Sub: Public notice

Ref: Certificate of Registration No. XXX

Dear Sir,

We take this opportunity to express our sincere thanks for your co-operation and subsequent approval for transfer of control and management. We acknowledge the receipt of No Objection Certificate (NOC) vide your letter no. XXXX dated XXX.

Pursuant to the said letter we have published public notice in following newspapers and one edition of each of the same is enclosed herewith for your reference.

1. Business Standard (English) issue dated XX.

2. Local News Paper reference to be given issue dated XX.

Kindly acknowledge the receipt of the same and do the needful.

Thanking you,


Director, DIN

vii. Format of Public Notice


We, the undersigned: –

a) xxx, one of the key Shareholder & Director of the Company known as xxxx, a Company registered under the Companies Act, 1956, vide certificate of Incorporation No. xxxx dated xxx, issued by Registrar of Companies, xxxx, and having its Registered Office at xxxxxxx and having certificate of Registration No. xxx dated xxx issued by the Reserve Bank of India and authorized by Board of Directors of the Company, hereby give notice about the intention to sell / transfer of ownership / control on behalf of the Company and all the Shareholders (hereinafter referred to as “the transferors”).

b) M/s.xxxxx having its registered office at xxxx one of the key purchaser and Mr. xxxx having its address at xxxxx another purchaser duly authorized by the other persons of the group hereby give notice about the intention to acquire the above mentioned Company by purchasing all the shares of the Company (hereinafter referred to as “the transferee”).

The reason for such sale / transfer of ownership / control by the transferor is to exit from the non-core activity of NBFC and to concentrate of core activity.

The purpose of acquiring the above Company by the transferee is to carry out activity of NBFC.

If anybody has any objection in respect of the above-mentioned sale / transfer of ownership / control, the same may be communicated in writing, within 30 days from the date of publication of this notice to Department of Non-Banking Supervision, Reserve Bank of India, xxxx address of particular Regional office of RBI.

This notice is being given pursuant to RBI Circular DNBS (PD) CC No. 11/02.01/99-2000 dated November 15, 1999 as amended by Circular No. DNBS (PD) CC No. 12/02.01/99-2000 dated January 13, 2000 and further amended by Circular No. DNBS (PD) CC No. 63/02.002/2005-06 dated January 24, 2006 and DNBS (PD) CC No. 82/03.02.02/2006-07 dated October 27, 2006 and DNBR (PD) CC. No. 065/03.10.001/2015-16 dated July 09, 2015 and other relevant regulations.

For & on behalf of the transferors, Sd/-

For & on behalf of the transferee




viii. Intimation for change of Ownership/Director

The Assistant General Manager,
Reserve Bank of India,
Department of Non-Banking Supervision,
Address :

Sub: Intimation for Change of Management and Ownership

Ref: Yourletter No. XXX dated XXX

With reference to your above referred letter, wherein you have approved our application for change of management and control, we published a public notice on XXX as per the terms of Circular No. DNBS (AH) No. 2343/01.11.604/2015-16 dated 9th July, 2015. The mandatory period of 30 days from the date of publishing has expired on XXX. The company has not received any objection from public, till date, for effecting transfer.

Subsequently, the meeting of Board of directors convened on XXX and approved the followings considering all applicable laws and regulation for the time being in force in this regards;

Appointment of Directors:

Board had approved appointment of following Directors w.e.f.XXX.

  1. Mr. XX
  2. Mr. XX

Transfer of Shares:

Board has approved transfer of XXX shares as per the details attached.We request you to kindly take the above on your records and do needful.

Thanking you.

Yours Faithfully,




1. Copy of Board Resolution for Transfer of Shares

2. Details of shares transferred

3. E-form Dir-12 with Challan for appointment of new directors

4. List of Directors as per MCA website

Disclaimer: This is to inform to readers that the views, thoughts, and opinions expressed in the article belongs solely to the author.It needs to be reviewed on case to case basis.

Author can be reached on +918879051225 or [email protected]


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She was enrolled as Member of the ICAI in 2012, she has cleared CA at First attempt and become CA at the age of 21 years only. She has secured rank in Gujarat University in M.Com Examination. She has passed Diploma Information System Audit (DISA) examination, a course conducted by ICAI. She has done View Full Profile

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One Comment

  1. akshay aggarwal says:

    really nice and helpful article….
    I have 2 questions:

    1) What is the expected time in which RBI Approve/ reject the application after the filing of the same.

    2) Assuming all the required documents are satisfactorily submitted by the applicant…does the RBI has discretionary power to reject the application (what is the probability of granting acceptance)??

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