In short: The Reserve Bank of India has issued final Amendment Directions that simplify how mutual funds, insurance companies and pension funds get approval to hold a major shareholding in a bank. They can now obtain a one-time approval covering holdings of up to 10%, instead of seeking fresh approval again and again. The directions took effect immediately.
What has happened?
On 14 July 2026, the RBI released draft amendments and invited comments until 4 August 2026. After examining the feedback and making changes, it has now issued the final Amendment Directions. They apply with immediate effect and cover four categories of banks:
- commercial banks;
- small finance banks;
- payments banks; and
- local area banks.
Each category has its own set of directions, titled "Acquisition and Holding of Shares or Voting Rights" Amendment Directions, 2026. The RBI has also published a statement on the feedback it received, as an annex to its press release.
What was the earlier position?
Under the existing rule, an investor whose holding fell below 5% had to take fresh approval to raise its stake again. According to press reports, the amendment raises the threshold for approval and removes the need for repeated approvals.
What does the one-time approval involve?
- Who: mutual funds, insurance companies and pension funds.
- How much: up to 10% of the bank's paid-up share capital or voting rights.
- How it is counted: the 10% limit is computed on an "aggregate basis".
- Who can apply: a bank may apply on behalf of a qualifying person belonging to the bank's promoter group or group.
- Reporting duty: after the first acquisition, a holder with this approval must tell the RBI and the bank within three working days if its aggregate holding moves below or above 5% of paid-up share capital or voting rights.
Can the approval be taken back?
Yes. The RBI can revoke the one-time approval in two situations:
- the holder does not comply with the terms and conditions of the approval; or
- the qualifying person, or anyone associated with them, is later found not to be "fit and proper".
So the approval is easier to obtain and keep, but it is not permanent or unconditional.
Legal context
The Amendment Directions are issued by the RBI as regulator.
Who is affected, and what should they do?
- Mutual funds, insurers and pension funds: they should read the final directions that apply to the relevant type of bank, and plan their approval applications and reporting processes accordingly.
- Banks: they may apply on behalf of qualifying promoter-group persons, and receive the three-working-day reports of holding changes.
- Ordinary bank customers and small investors: no action is required.
Frequently asked questions
Is the change already in force?
Yes. The RBI said the Amendment Directions come into immediate effect.
Does the 10% limit apply to each fund separately?
The RBI says the limit is calculated on an aggregate basis. The sources do not explain further how aggregation works, so check the final directions.
Can the RBI cancel the approval?
Yes, if the terms and conditions are not followed, or if the qualifying person or an associated person is later found not to be fit and proper.
Sources
- RBI: RBI issues Amendment Directions on 'Simplified approval process for subsequent acquisitions of major shareholding in a banking company by mutual funds, insurance companies and pension funds'
- ET Markets: RBI eases bank stake rules, allows one-time approval for MFs, insurers for holdings up to 10%