Mumbai: The Reserve Bank of India (RBI) has proposed amendments to its shareholding regulations that would make it easier for eligible institutional investors, including mutual funds, insurance companies and pension funds, to increase their stakes in banks without seeking repeated regulatory approvals. The proposal is part of the draft Reserve Bank of India (Commercial Banks — Acquisition and Holding of Shares or Voting Rights) Amendment Directions, 2026, released for public consultation.
Under the proposed framework, the RBI would grant a one-time approval to eligible institutional investors for future acquisitions of major shareholding in a bank. Once approved, these entities would not be required to obtain fresh permission each time they increase their holding to as much as 10%, even if their stake had previously fallen below the 5% threshold. However, they must continue to comply with all applicable regulatory conditions, and the approval must remain valid without being revoked.
At present, the 2025 Master Direction requires institutional investors to seek fresh RBI approval whenever their shareholding drops below 5% and they later wish to raise it again to a level classified as major shareholding. While this provision ensures continuous regulatory oversight over ownership in the banking sector, it also results in repeated approval requirements for large institutional investors.
The central bank said the proposed amendment aims to simplify the approval process while maintaining effective supervision of bank ownership structures. The move is expected to reduce regulatory burden and improve operational efficiency for long-term institutional investors without compromising transparency or governance standards.
To qualify for the one-time approval, investors must be registered with the relevant financial regulator. Mutual funds must be regulated by the Securities and Exchange Board of India (SEBI), insurance companies by the Insurance Regulatory and Development Authority of India (IRDAI), and pension funds by the Pension Fund Regulatory and Development Authority (PFRDA). Additionally, eligible institutions must not belong to the promoter group or any group entities of the concerned banking company.
