The Reserve Bank of India (RBI) has proposed a major change that could make it easier for asset management companies (AMCs), insurance companies, and pension funds to increase their shareholding in banks.
Under the proposal, these entities would need RBI approval only for their first major investment in a bank.
After that, they could buy additional shares with a one-time approval, reducing the need for repeated permissions.
What Is Changing?
At present, AMCs, insurance companies, and pension funds must obtain RBI approval when they acquire a 5% or higher stake in a bank.
They also need fresh approval for any later stake purchase if their total holding falls below 5% at any point.
Under the new proposal, once the RBI grants a one-time approval, it will remain valid unless the central bank decides to withdraw it.
This means eligible entities will not have to seek RBI permission every time they increase their stake in a bank.
The proposal will apply to investments in:
Commercial banks
Small Finance Banks
Payment Banks
Local Area Banks
Reporting Requirements Will Continue
Even with the one-time approval, these entities will still have certain responsibilities.
They must inform both the RBI and the concerned bank within one day if their shareholding rises above or falls below the 5% threshold.
In addition, if an entity plans to acquire more than 10% of a bank’s paid-up share capital or voting rights, it will have to provide any additional information requested by the RBI before proceeding.
Why Is RBI Making This Change?
According to the RBI, the proposal is aimed at simplifying the approval process for institutional investors such as mutual funds, insurance companies, and pension funds.
By reducing repeated approval requirements, the central bank hopes to make the investment process more efficient while continuing to monitor significant changes in ownership.
Public Feedback Invited
The RBI has invited comments and suggestions on the proposal from regulated entities, industry stakeholders, and members of the public.
Feedback can be submitted until August 4, 2026. After reviewing the responses, the RBI is expected to take a final decision on the proposed changes.
