Source: IE
Context:
The Reserve Bank of India (RBI) has proposed a draft amendment to simplify the approval process for mutual funds, insurance companies and pension funds acquiring significant shareholding in banks by introducing a one-time approval mechanism.
Key Highlights
Current Rule
- Investors such as mutual funds, insurance companies and pension funds must obtain prior RBI approval before acquiring 5% or more shareholding (major shareholding) in a bank.
- If their holding later falls below 5%, they must again seek RBI approval before crossing the threshold in future.
Proposed Change
- RBI approval will continue to be mandatory for the first acquisition of a major shareholding.
- After receiving the initial approval, eligible institutional investors will not need fresh approval every time they again acquire a major stake in the same bank.
- RBI may grant a one-time approval covering future acquisitions.
One-Time Approval Limit
- Valid for acquisitions of up to 10% of the paid-up share capital or voting rights in the same bank.
- Subject to conditions specified by the RBI.
Eligible Investors
- Mutual Funds
- Insurance Companies
- Pension Funds
