RBI Notification on NBFC’s M&A

RBI has recently issued a circular with regard to M&A activities related to NBFC, whether deposit-taking or not.

Summary: any acquisition of NBFC will now require prior approval of the RBI.

1. Both deposit-taking and non-deposit taking NBFC’s are covered.
2. Further all types of transactions are covered, i.e. purchase of shares, control through shareholders’ agreement and merger with another company (even if it is an NBFC).

The application needs to be made to the Regional Office of the DNBS (Dept of Non-Banking Supervision).

The key objective is to ensure that the new management are ‘fit and proper’ persons.

Hence, while pursing any transaction ensure this prior approval is taken.

Relevant Extract of RBI Notification on NBFC M&A transactions:

The prior written permission of the Reserve Bank of India shall be required for –

1. any takeover or acquisition of control of an NBFC, whether by acquisition of shares or otherwise;
2. 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;
3. 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.
4. 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.

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.

Link to RBI notification – pdf file