The Reserve Bank of India has finalised its July proposal to simplify bank shareholding rules, allowing eligible mutual funds, insurance companies and pension funds to seek one-time approval for subsequent acquisitions of major shareholding of up to 10% in the same bank. According to reports from Mint and The Times of India, under the earlier framework, an investor whose holding fell below 5% after initially acquiring a major shareholding had to seek fresh RBI approval before crossing the threshold again. The amended rules replace this repeated approval requirement for eligible institutional investors with a one-time approval mechanism, while prior approval will continue to be mandatory for the initial acquisition of a major stake. As per The Times of India, the new rules allow eligible mutual funds, pension funds and insurance firms to obtain one-time approval to raise their aggregate holding to 10% without seeking fresh clearance every time their stake crosses the 5% threshold.
The amendments have come into effect immediately and apply to commercial banks, small finance banks, payments banks and local area banks. As reported by Mint, eligible entities include mutual funds registered with the Securities and Exchange Board of India, pension funds registered with the Pension Fund Regulatory and Development Authority and insurance companies registered with the Insurance Regulatory and Development Authority of India. Under the new framework, RBI may grant one-time approval, either individually or collectively, for subsequent acquisitions of major shareholding up to 10% of the paid-up share capital or voting rights of a banking company, with the 10 per cent shareholding limit calculated on an aggregate basis. According to The Times of India, the earlier regime demanded prior clearance from RBI for acquiring a "major shareholding"—defined as 5% or more of a bank's paid-up share capital, making the current changes a significant simplification of the regulatory framework. However, as per Zee News, to qualify for the one-time approval, such investors must not belong to the promoter group or the group of the bank in which they are acquiring shares.
Applications for the one-time approval will have to be made through RBI's PRAVAAH portal, while the concerned bank will also be required to furnish its comments to the central bank. According to Mint, such qualifying persons can seek one-time approval, individually or collectively, and the RBI can revoke it if its conditions are not met, or if the qualifying person—or anyone associated with it—is later found not to be fit and proper. Investors covered by the one-time approval will also have to report to RBI and the concerned bank within three working days whenever their aggregate holding falls below or rises above the 5% threshold. As per The Times of India, the three-working-day reporting period follows feedback received on the draft directions, with the RBI accepting a request to increase the reporting period from one day to three working days. According to Zee News, the approval will remain subject to conditions specified by the central bank and other applicable provisions of the directions.
RBI had released the draft amendments on July 14 and sought stakeholder comments until August 4. As reported by Mint, the central bank said the feedback received had been examined and suitable modifications incorporated in the final directions. The final rules also clarify that a client's acquisition need not be treated as an indirect acquisition by its portfolio manager if the client remains the registered owner of the shares and voting rights, the manager provides only non-binding advice and any voting is based on a specific mandate from the client. According to The Times of India, the amendment incorporates the 10% limit calculation into the RBI's guidelines on acquisition and holding of shares or voting rights in banking companies, representing a significant simplification of the regulatory framework for institutional investors seeking to acquire stakes in banking companies. The revised framework was notified through the Reserve Bank of India (Commercial Banks – Acquisition and Holding of Shares or Voting Rights) Amendment Directions, 2026, issued on October 1.
The changes are aimed at reducing repeated regulatory approvals for eligible institutional investors while retaining RBI oversight over major bank shareholdings. According to Mint and The Times of India, the amendments represent a significant simplification of the regulatory framework for institutional investors seeking to acquire stakes in banking companies, streamlining the approval process while maintaining adequate regulatory oversight. Additionally, RBI has also revised the FEMA framework for imports and exports, which came into effect from October 1, 2026, bringing changes to payment timelines, trade transaction handling and reporting requirements. As per Mint, the amended directions also require investors holding one-time approval to report any increase or decrease in their aggregate shareholding across the 5 per cent threshold to the RBI and the concerned bank within three working days. The RBI has also retained safeguards under the revised framework, stating that a one-time approval could be revoked if the investor fails to comply with the terms and conditions of the approval or if the qualifying person, or anyone associated with it, is subsequently found not to meet the "fit and proper" criteria.
