RBI Update: Master Direction – Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023 dated 16th January, 2023

Reserve Bank of India vide its notification dated 16th January, 2023, has come up with this Master Direction with the purpose to ensure that the ultimate ownership and control of banking companies are well diversified and the major shareholders of banking companies are ‘fit and proper’ on a continuing basis. The given directions may be read along with the ‘Guidelines on Acquisition and Holding of Shares or Voting Rights in Banking Companies’ issued by the Reserve Bank of India.

CHAPTER-I (Preliminary)

Short Title and Commencement. These directions shall be called the Reserve Bank of India (Acquisition and Holding of Shares or Voting Rights in Banking Companies) Directions, 2023 and shall come into force with immediate effect.

Applicability This notification is applicable to all banking companies (as defined in clause (c) of Section 5 of the Banking Regulation Act, 1949), including Local Area Banks (LABs), Small Finance Banks (SFBs) and Payments Banks (PBs) operating in India.

Definitions The terms used shall bear the meanings assigned to them below, and their cognate expressions and variations shall be construed accordingly:

• “acquisition” means, acquiring, or agreeing to acquire, shares or voting rights in a banking company, directly or indirectly; • “aggregate holding” means the total holding, directly or indirectly, beneficial or otherwise, of shares or voting rights by a person along with his relatives, associate enterprises and persons acting in concert with him in a banking company [For the purpose of arriving at indirect holding, the acquisition of shares or voting rights mentioned in Annex I of the given notification shall also be considered and that indirect acquisition is not limited to the acquisition(s) mentioned therein]; • “applicant\" means the person making an application under Section 12B of the Banking Regulation Act, 1949 (10 of 1949); • “encumbrance” has the same meaning as assigned to it in the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) Regulations, 2011; • “major shareholding” means “aggregate holding” of five per cent or more of the paid-up share capital or voting rights in a banking company by a person; • “person” means a natural person or a legal person; • \"relative\" has the same meaning as defined in Section 2(77) of the Companies Act, 2013 and rules made thereunder; and • “significant beneficial owner” has the same meaning as st