By its circular DNBR (PD) CC. No. 065/03.10.001/2015-16
dated 09 July 2015 ("Circular"), the
Reserve Bank of India ("RBI") has
revised its earlier directions on the requirement for obtaining
prior approval of the RBI in cases of acquisition/ transfer of
control of Non-Banking Financial Companies
The relevant provisions of the Circular are as follows:
(1) In accordance with the Circular, prior approval of the RBI
is required in the following circumstances:
(i) any takeover or acquisition of the NBFC which may or may not
result in change in management;
(ii) any change in the shareholding of an NBFC, which would
result in acquisition/transfer of 26% (twenty six percent) or more
of the paid-up equity capital of the NBFC;
However, prior RBI approval is not required in case of any
shareholding going beyond 26% (twenty six percent) due to buyback
of shares/ reduction in capital of the NBFC where approval of the
competent court has already been obtained. In such an event the
same is required to be reported to the RBI within 1 (one) month
from its occurrence.
(iii) any change in the management of the NBFC which would
result in change in more than 30% (thirty per cent) of the
directors, excluding independent directors.
However, the RBI approval is not required for those directors
who get re-elected on retirement by rotation.
(2) In accordance with the Circular, NBFCs shall continue to
inform the RBI regarding any change in their directors/ management
as required in Non- Banking Financial Companies Acceptance of
Public Deposits (Reserve Bank) Directions, 1998, Non-Systemically
Important Non-Banking Financial (Non-Deposit Accepting or Holding)
Companies Prudential Norms (Reserve Bank) Directions, 2015 and
Systemically Important Non-Banking Financial (Non-Deposit Accepting
or Holding) Companies Prudential Norms (Reserve Bank) Directions,
(3) A public notice of at least 30 days providing details of the
transferees, reasons for such sale/ transfer, shall be given before
effecting the sale of, or transfer of the ownership/ control, by
the NBFC and by the concerned other party (jointly or severally),
after obtaining the prior permission of the Reserve Bank. The
notice shall be published in at least one leading national and in
one leading local (covering the place of registered office)
Pursuant to the Circular, the RBI has issued the Non-Banking
Financial Companies (Approval of Acquisition or Transfer or
Control) Directions, 2015 vide its notification no. DNBS.(PD)
029/CGM(CDS)-2015 dated 9 July 2015, and repealed the Non- Banking
Financial Companies (Approval of Acquisition or Transfer of
Control) Directions, 2014 dated 26 May 2014.
To view the full text of the circular text of the Circular,
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
To print this article, all you need is to be registered on Mondaq.com.
Click to Login as an existing user or Register so you can print this article.
The committee set up to draft a Code on Resolution of Financial Firms, by the Ministry of Finance, Government of India, on September 28, 2016, released a draft bill – The Financial Resolution and Deposit Insurance Bill, 2016...
In a race to adopt technology innovations, Banks have increased their exposure to cyber incidents/ attacks thereby underlining the urgent need to put in place a robust cyber security and resilience framework.
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).