RBI Issues Directions on Acquisition and Holding of Shares or Voting Rights in Commercial Banks, 2025
The Reserve Bank of India (RBI) has issued the Reserve Bank of India (Commercial Banks – Acquisition and Holding of Shares or Voting Rights) Directions, 2025, aimed at ensuring diversified ownership, transparent control, and continuous monitoring of major shareholders in commercial banks. Issued under Sections 12, 12B, and 35A of the Banking Regulation Act, 1949, these Directions seek to strengthen governance, prevent undue concentration of ownership, and ensure that influential shareholders remain “fit and proper” at all times.
The Directions apply to all commercial banks except Small Finance Banks, Payment Banks, Local Area Banks, and foreign banks operating in India. They work alongside the RBI’s Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies.
A major shareholder is defined as any person—natural or legal—holding 5% or more of a bank’s paid-up equity capital or voting rights. The Directions set out a comprehensive definition of “aggregate holding,” covering direct, indirect, beneficial, or concerted ownership. Indirect holdings through group entities, funds, trustees, proxy voters, asset managers, private equity structures, and persons acting in concert are fully captured to prevent circumvention of regulatory limits.
Any person seeking to acquire 5% or more must obtain prior approval from the RBI by applying through the PRAVAAH portal. Banks must evaluate the “fit and proper” status of applicants based on integrity, financial soundness, governance track record, legal proceedings, source of funds, and corporate structure. For acquisitions of 10% or more, additional scrutiny includes group structure, long-term plans for the bank, and ability to provide financial support.
RBI may approve, reject, or permit a lower level of acquisition and may impose conditions. Investors from FATF non-compliant jurisdictions are barred from acquiring major stakes, though existing shareholders from such jurisdictions may continue without further acquisitions.
Banks are required to maintain continuous monitoring mechanisms, including annual fit and proper reviews, reporting of changes in beneficial ownership, detection of unapproved acquisitions, and immediate reporting of violations. Periodic filings such as Form A2 for share allotments and Form B for encumbrances are mandatory.
The Directions also define shareholding limits: non-promoters may hold up to 10% or 15% depending on category, while promoters may hold up to 26% after 15 years. Higher holdings may be permitted only in exceptional circumstances. Lock-in requirements apply to significant shareholdings, and voting rights remain capped at 26%.
These Directions repeal earlier instructions but preserve all actions and approvals previously granted.
