Prior Written Permission Of RBI Mandatory In Cases Of Acquisition/ Merger/ Amalgamation/ Transfer Of Control Of All NBFC’s

Reserve Bank of India (“RBI”) vide its notification dated May 26th 2014, has provided that, all NBFC’s has to obtain prior approval of RBI in case of acquisition / merger/ amalgamation/ transfer of control of NBFC’s.

In this connection, RBI vide notification DNBS (PD) C.C. No. 160/03.10.001./2009 – 10 dated September 17th, 2009, mandated the requirement of prior approval only in such cases, wherein the acquisition / transfer of control of deposit taking NBFC’s were involved.



Further, in suppression of this notification and in order to enable RBI to ensure ‘fit and proper’ character of the management of NBFCs, both deposit accepting and non-deposit accepting, is continuously maintained, RBI, through this notification, has been decided that, prior written permission shall be required for- 
  • any takeover or acquisition of control of an NBFC, whether by acquisition of shares or otherwise; 
  • any merger/amalgamation of an NBFC with another entity or any merger/amalgamation of an entity with an NBFC that would give the acquirer / another entity control of the NBFC;
  • any merger/amalgamation of an NBFC with another entity or any merger/amalgamation of an entity with an NBFC which would result in acquisition/transfer of shareholding in excess of 10 percent of the paid up capital of the NBFC.
  • prior written approval of the Reserve Bank would also be required before approaching the Court or Tribunal under Section 391-394 of the Companies Act, 1956 or Section 230-233 of Companies Act, 2013 seeking order for mergers or amalgamations with other companies or NBFCs.
RBI has further clarified that applications in this regard may be submitted to the Regional Office of the Department of Non-Banking Supervision in whose jurisdiction the Registered Office of the Company is located.

PENALTY FOR NON COMPLIANCE: Any transfer of shares in violation of the notification would result in adverse regulatory action including cancellation of Certificate of Registration.

CP VIEW: In last one year, the provisions for amalgamation/ acquisitions has seen so many changes, including approvals of SEBI (in case of listed companies), Income Tax authorities, specific industry regulators, etc. These changes has ensured, that different regulators, ensure that none such scheme shall sail through, which are detrimental to the interest of shareholders, however, such changes has escalated the time lines for scheme of arrangements/ acquisitions.
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