RBI’s 2026 amendments on major shareholding in commercial banks: One-time approval route for regulated funds

The Reserve Bank of India has notified the “Reserve Bank of India (Commercial Banks – Acquisition and Holding of Shares or Voting Rights) Amendment Directions, 2026”, effective October 1, 2026. These Amendment Directions refine the earlier Reserve Bank of India (Commercial Banks – Acquisition and Holding of Shares or Voting Rights) Directions, 2025 (the “Master Direction”), particularly in relation to:

  • how mutual funds,
  • pension funds, and
  • insurance companies

may acquire and hold major shareholding in commercial banks, and how such holdings are monitored on a continuing basis.

The overarching framework remains that prior approval of the Reserve Bank is compulsory for initial acquisition of major shareholding in a banking company. However, the 2026 amendments introduce a one-time approval mechanism for specified “qualifying persons” for their subsequent major share acquisitions up to 10% of paid-up share capital or voting rights in a bank, subject to stringent conditions.

Background: Existing framework under the 2025 Master Direction

Under the Master Direction issued on November 28, 2025, the key principles included:

  • Any person intending to make an initial acquisition of major shareholding in a banking company must secure prior approval of the Reserve Bank.
  • Once such an acquisition has been made, if the person’s aggregate shareholding in the banking company subsequently falls below 5% at any time, fresh prior approval is required before that person can again acquire major shareholding.

The 2026 amendments do not change the basic requirement of obtaining prior RBI approval for first-time major shareholding. Instead, they selectively relax the requirements for particular classes of regulated institutional investors, subject to carefully defined safeguards.

Statutory basis and commencement

The Reserve Bank has exercised its powers under:

  • Section 12 of the Banking Regulation Act, 1949
  • Section 12B of the Banking Regulation Act, 1949
  • Section 35A of the Banking Regulation Act, 1949

The Reserve Bank has recorded that issuance of these Amendment Directions is necessary and expedient in the public interest.

Effective date

  • The Reserve Bank of India (Commercial Banks – Acquisition and Holding of Shares or Voting Rights) Amendment Directions, 2026:
    • Take effect immediately,
    • From October 1, 2026.

Key definitional changes and clarifications

Clarification on portfolio manager–client acquisitions

A significant clarification has been introduced in Chapter I, Section C (Definitions), para 4, via an Explanation to item (viii). It addresses how acquisitions by a client should be treated in the context of portfolio managers.

Under this Explanation, an acquisition by a client will not be treated as an indirect acquisition by its portfolio manager if all the following conditions are satisfied:

  1. Registered ownership and voting rights

    • The client is the registered owner of the shares; and
    • The client is entitled to exercise the voting rights in those shares.

  2. Non-discretionary advisory role

    • The portfolio manager is acting strictly as an advisor; and
    • Provides only non-binding investment or divestment advice.

  3. Voting based on explicit mandate

    • Any voting rights exercised by the portfolio manager in the banking company on behalf of the client, if such voting occurs, must be pursuant to a specific mandate from the client.

Note: This clarification is particularly important for identifying the true holder of voting rights and whether the portfolio manager should be treated as an indirect acquirer under the Master Direction.

Introduction of “qualifying person” and “qualifying person with one-time approval”

Two new definitions are inserted in Chapter I, Section C (Definitions), para 4, as sub-paras (6A) and (6B):

Definition of “qualifying person” – sub-para (6A)

A “qualifying person” in respect of an investee banking company is a person who meets both of the following conditions:

  1. Regulated institutional category
    • The person is:
      • A mutual fund registered with the Securities and Exchange Board of India, or
      • A pension fund registered with the Pension Fund Regulatory and Development Authority, or
      • An insurance company registered with the Insurance Regulatory and Development Authority of India.