RBI Approval for NBFC Takeover: Rules and Procedure

RBI Approval for NBFC Takeover: Rules and Procedure. A fintech company agrees to buy 24% of an Indian lending NBFC. The buyer expects the deal to close quickly because its stake is below 26%. During a review of the shareholders’ agreement, the team spots a clause that gives the buyer the right to appoint four of the seven directors. That clause can give the buyer control of the NBFC and trigger prior RBI approval, even with a 24% stake.
This is why the approval analysis starts with two questions. How much paid-up equity will the buyer acquire, and what rights will the buyer get? The answers determine whether the NBFC needs to apply to the Reserve Bank of India (RBI), whether a newspaper notice is required and when the parties can complete the transfer.

Which RBI rules govern an NBFC takeover in 2026?
The principal rules are the Reserve Bank of India (Non-Banking Financial Companies – Acquisition of Shareholding or Control) Directions, 2025, issued on 28 November 2025. The RBI issued these Directions under Sections 45JA, 45K, 45L, 45M and 45MA of the Reserve Bank of India Act, 1934. Paragraph 6 sets out the approval triggers. Paragraph 7 covers the application and supporting documents. Paragraphs 8 to 10 deal with public notice, while paragraphs 11 to 13 address investments from or through jurisdictions identified by the Financial Action Task Force (FATF). Paragraphs 14 and 15 address the repeal of earlier instructions and preserve specified actions, liabilities and proceedings. Paragraph 16 preserves the application of other laws.
The general acquisition rules apply across regulatory layers to the NBFC categories listed in the Directions. These include deposit-taking NBFCs, Investment and Credit Companies, Factors, Microfinance Institutions, Infrastructure Finance Companies, Infrastructure Debt Fund NBFCs, Housing Finance Companies (HFCs), Core Investment Companies, Peer-to-Peer Lending Platforms and Account Aggregators. Standalone Primary Dealers (SPDs) are subject to specific provisions. Mortgage Guarantee Companies and Non-Operative Financial Holding Companies fall outside these Acquisition Directions, so their category-specific rules need to be checked separately.
When is prior RBI approval required for an NBFC takeover?

Transaction

Approval or reporting requirement

Takeover or acquisition of control of a covered NBFC

Prior written RBI approval under paragraph 6(1), even if the existing management continues.

Acquisition or transfer of 26% or more of the NBFC’s paid-up equity capital

Prior written RBI approval under paragraph 6(2). Progressive increases over time count toward the threshold.

Acquisition or transfer of 10% or more of paid-up equity by or to a foreign investor in an HFC accepting or holding public deposits

Prior written RBI approval under paragraph 6(3), including for progressive increases.

Change in the shareholding pattern or capital structure of an SPD

Prior RBI approval under paragraph 6(4). Other material changes affecting licensing conditions must be reported immediately.

Shareholding rises above the applicable threshold due to a court-approved buyback or capital reduction

The relevant exception may apply. The change must be reported within one month to the RBI or NHB, as applicable under paragraph 6(2), or to the NHB under paragraph 6(3).

If you are planning to buy shares in an NBFC or take over its management, NBFC acquisition and takeover assistance can help you assess which approvals and filings your transaction requires.

What does acquisition of control mean?
The RBI Directions adopt the definition of control in Regulation 2(1)(e) of the SEBI Takeover Regulations. Control can arise from the right to appoint a majority of directors or to direct management or policy decisions. A person can exercise those rights directly or indirectly, individually or together with persons acting in concert.
In practice, review the shareholders’ agreement, voting arrangements, board nomination rights and rights held through a parent company. The scope of any veto or consent right also matters. A right over how the NBFC conducts its lending business deserves particular attention.

Example: An investor acquires a foreign holding company that controls an Indian NBFC. The name of the NBFC’s direct shareholder stays the same. The transaction still needs a control review because the person who ultimately controls the NBFC may change.

Can a buyer acquire the shares in stages?
Successive purchases count toward the 26% threshold. Suppose an investor first acquires 18% of a covered NBFC’s paid-up equity and later agrees to acquire another 9% on the same capital base. The second purchase takes the aggregate acquisition to 27%, so the NBFC should obtain approval before completing that purchase. If the initial 18% investment gives the buyer control, approval is required before the initial transaction takes effect.

If the buyer plans to acquire shares in stages, read our guide to the 26% shareholding rule for NBFC acquisition.

Does a change in directors also require RBI approval?
Where paragraph 10 of the RBI Governance Directions applies, a management change that results in a change of more than 30% of directors, excluding independent directors, requires prior written RBI permission. Directors re-elected on retirement by rotation are exempt from this approval requirement. The NBFC must continue to inform the RBI, or the National Housing Bank (NHB) in the case of an HFC, about changes in directors or management.
Consider an NBFC with six non-independent directors. Replacing two of them changes one-third of the relevant board seats. The management-change approval requirement can apply even when the shareholding stays the same. Paragraph 11 provides for a separate change-in-management application through PRAVAAH.
Procedure for obtaining RBI approval
Step 1: Review the target NBFC and map the transaction
Start with the target’s Certificate of Registration (CoR), regulatory category, permitted activities, public deposit status and any supervisory restrictions. Prepare ownership tables showing the position before and after the transaction. Compare voting rights, board appointment rights and ultimate beneficial ownership. Include earlier purchases, any planned tranches and any board changes proposed at closing.
The buyer should also review audited financial statements, applicable net owned fund and capital requirements, loan classification and provisioning, lender covenants, litigation, regulatory returns and RBI correspondence. In a share purchase, the NBFC continues to hold its existing loan book and liabilities. An unresolved supervisory issue or weak loan documentation can therefore affect the value of the buyer’s investment after closing.

Understanding the NBFC company registration process can help you check the target’s Certificate of Registration, its RBI category and the activities it is permitted to carry out.

Step 2: Make regulatory approval a condition of closing
The share purchase or subscription agreement can make closing conditional on written RBI approval, completion of any applicable public notice period and receipt of other required clearances. Review when the buyer’s governance rights take effect. If the agreement gives the buyer effective control over the NBFC’s lending policy on signing, the regulatory trigger may arise before the scheduled share transfer.
The agreement can also identify who will prepare the application, respond to RBI queries, arrange publication and handle post-closing filings. The agreed deadline for completing the deal should allow time for both regulatory review and any applicable newspaper notice period.
Step 3: Apply through PRAVAAH
Under paragraph 7, the target NBFC files the application on its company letterhead through the RBI’s PRAVAAH portal. The proposed shareholders provide their details, declarations, evidence of funding and bankers’ reports.

Required document or information

What the NBFC should prepare

Details of the proposed shareholders

Complete the disclosures prescribed in Annex I to the Acquisition Directions.

Sources of acquisition funds

Explain how the proposed shareholders will fund the purchase and keep records that support the funding trail.

Public deposit declaration

Obtain a declaration from the proposed shareholders that they are not associated with any unincorporated body accepting public deposits.

Rejected registration declaration

Obtain a declaration that the proposed shareholders are not associated with a company whose CoR application the RBI rejected.

Criminal case declaration

Obtain the prescribed declaration concerning criminal cases, including offences under Section 138 of the Negotiable Instruments Act, 1881.

Bankers’ report

Arrange the bankers’ report on the proposed shareholders.

The NBFC should also keep its CoR, board authorisation, ownership chart, draft transaction documents, financial statements and a brief transaction note ready. These documents can help the RBI understand the structure and assist the company in answering follow-up questions. The applicable portal process and any RBI requests determine the supporting papers needed for a particular deal.

Before preparing the application, review the documents required for RBI approval of an NBFC takeover.

Step 4: Respond to RBI queries and review the approval terms
Keep the PRAVAAH acknowledgement and track requests for additional information. Check that the names, shareholding percentages and funding figures match across the application, ownership tables and transaction documents. If the buyer changes its acquisition vehicle, funding structure or governance rights during the review, assess whether the NBFC needs to update its submission before proceeding.
The Acquisition Directions do not specify a fixed time for the RBI to decide an application. Once written approval arrives, review any conditions, validity period and transaction-specific reporting obligations. Build the public notice period into the closing schedule separately.
Step 5: Publish the public notice at least 30 days before the transfer
Paragraphs 8 to 10 require public notice where the transaction involves a transfer of ownership by sale of shares or a transfer of control, with or without a share sale. The NBFC and the transferee must publish the notice separately or jointly after obtaining RBI permission.
Publish in at least one leading national newspaper and one leading local vernacular newspaper covering the location of the NBFC’s registered office. The notice should state the intention to transfer ownership or control, identify the transferee and explain the reasons for the transfer.
Allow at least 30 days between publication and the transfer. If the national and local newspapers publish on different dates, schedule closing so both publications meet the minimum period. Keep copies of both notices with the transaction records.
Paragraph 8 contains a specific notice exception for qualifying acquisitions or transfers of at least 10% but below 26% of paid-up equity by or to a foreign investor in an HFC that accepts or holds public deposits. The approval requirement under paragraph 6(3) still applies to the qualifying shareholding change.
Step 6: Complete the transfer and post-closing filings
Once the parties satisfy the approval terms, the applicable notice period and the other closing conditions, complete the share transfer or allotment. Update the register of members and other company records. Depending on the structure, the parties may also need to complete demat instructions, pay applicable stamp duty, file allotment or director-change forms and make any RBI intimation required by the approval letter.
What changes when the buyer is a foreign investor?
A cross-border acquisition requires a separate review under the Foreign Exchange Management Act, 1999 and the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. Check the applicable entry route, beneficial ownership, pricing rules and reporting obligations with the authorised dealer bank. A reportable transfer of existing equity instruments may require Form FC-TRS. A reportable fresh issue to a non-resident may require Form FC-GPR. The applicable foreign investment reporting and prior RBI takeover approval are separate requirements.

For a closer look at which form applies to a share transfer or a fresh issue, see our guide to FEMA reporting for foreign investment.

Where the buyer is a non-resident, FEMA advisory services can help the parties review the proposed ownership structure, identify the applicable entry route and prepare the required filings.
The RBI Acquisition Directions also restrict new investments from or through jurisdictions on the relevant FATF monitoring lists. New investors from or through these jurisdictions cannot acquire significant influence as defined under the applicable accounting standards. Their aggregate voting power must remain below 20% on both an existing-voting-power basis and a basis that includes potential voting rights. Convertible instruments and contractual voting rights can affect this calculation. Paragraph 13 separately addresses investments held before a jurisdiction was listed.

How does an NBFC merger differ from a share takeover?
In a share takeover, the NBFC generally continues as the same legal entity. A voluntary amalgamation combines entities under a scheme and follows a separate RBI approval process. Under paragraph 7 of the RBI Voluntary Amalgamation Directions, 2025, the parties must obtain the applicable RBI clearance before approaching the court or tribunal for orders on the scheme under Sections 230 to 234 of the Companies Act, 2013.

Merger structure

RBI clearance and registration consequences

An NBFC merges into another NBFC

Both entities seek an RBI no-objection certificate (NOC). The surviving NBFC also seeks prior approval if the merger triggers the control, 26% shareholding or more-than-30% director-change test, excluding independent directors. The outgoing NBFC surrenders its CoR after the merger.

An NBFC merges into a non-NBFC

The outgoing NBFC seeks prior RBI approval and surrenders its CoR after the merger. The surviving entity approaches the RBI for registration if it is likely to meet the principal business criteria after the merger.

A non-NBFC merges into an NBFC

The surviving NBFC seeks an RBI NOC and must obtain prior approval if the merger triggers the applicable control, shareholding or director-change test. It must continue to meet the principal business criteria to retain its CoR.

If the parties are considering a merger, they can review eligibility for fast-track mergers under the Companies Act and assess the applicable RBI requirements separately.

What other approvals can affect an NBFC takeover?
A listed NBFC may trigger SEBI open-offer and disclosure requirements. Those rules have their own thresholds and tests. A transaction may also require Competition Commission of India approval if it qualifies as a notifiable combination. The competition review includes a deal-value test for transactions exceeding ?2,000 crore where the target has substantial business operations in India.
Existing financing and investment agreements can also affect the timetable. For example, a lender may require its consent before a change in control, even after the RBI has approved the acquisition. Reviewing those clauses early lets the parties include the required consents in the closing checklist.
Conclusion
Before deciding when to complete an NBFC takeover, the buyer and seller should check the NBFC’s RBI category, the buyer’s total stake after counting earlier purchases, and the rights the buyer will receive. Even a stake below 26% can require prior RBI approval if it gives the buyer control, such as the right to appoint a majority of directors. The parties should also check whether proposed board changes, foreign investment rules or existing lender agreements require separate approvals or consents.
If both prior RBI approval and public notice are required, the parties must first obtain the RBI’s written permission and then publish the required newspaper notices. They can complete the transfer only after at least 30 days have passed from the required publications and all other closing conditions have been met. The closing schedule should therefore allow time for both the RBI’s review and the notice period.
Frequently Asked Questions (FAQ’s)
Q1. Does buying exactly 26% of an NBFC require prior RBI approval?
Ans. Yes. Paragraph 6(2) covers the acquisition or transfer of 26% or more of paid-up equity capital for NBFCs to which the rule applies.
Q2. Can a 15% investment require RBI approval?
Ans. Yes, if the investment confers control. A 15% acquisition by a foreign investor in an HFC accepting or holding public deposits can also trigger the separate 10% threshold under paragraph 6(3).
Q3. Who files the RBI application for an NBFC takeover?
Ans. The target NBFC files the application on its letterhead through PRAVAAH. The proposed shareholders provide the prescribed disclosures, declarations, funding information and bankers’ reports.
Q4. Can the parties publish the newspaper notice while the RBI application is pending?
Ans. The required notice follows RBI permission. Where the notice applies, the parties must allow at least 30 days between publication and the transfer.
Q5. Does the RBI transfer the NBFC registration to the buyer?
Ans. In a share takeover, the registered NBFC continues to hold its Certificate of Registration, subject to applicable requirements and the terms of approval. The buyer acquires shares or control in that company. An amalgamation can require the outgoing NBFC to surrender its CoR.
Q6. How long does RBI approval for an NBFC takeover take?
Ans. The Acquisition Directions do not specify a fixed approval timeline. The 30-day requirement applies to the minimum period between the required newspaper publication and the transfer.
Q7. Can an indirect change in ownership require RBI approval?
Ans. Yes. If a buyer acquires a parent company that controls an Indian NBFC, the deal can trigger prior RBI approval even if the NBFC’s direct shareholding stays the same. The key question is whether the buyer gains indirect control of the NBFC.
Q8. Can a change in directors require RBI approval if no shares are sold?
Ans. Yes. Where the RBI Governance Directions apply, a management change involving more than 30% of the directors, excluding independent directors, requires prior written RBI permission. Directors re-elected on retirement by rotation are exempt from this approval requirement.
Q9. What happens if the two newspapers publish the takeover notice on different dates?
Ans. Count the minimum 30-day period from the later publication date. This ensures that both the national and local vernacular newspaper notices have been published at least 30 days before the transfer takes effect.
Q10. Does a court-approved buyback that raises a shareholder’s stake above 26% require prior RBI approval?
Ans. The shareholding approval exception can apply if the increase results from a court-approved buyback or capital reduction. The NBFC must report the change within one month to the RBI or the National Housing Bank, as applicable. Any separate acquisition of control still needs to be assessed.

A fintech company agrees to buy 24% of an Indian lending NBFC. The buyer expects the deal to close quickly because its stake is below 26%. During a review of the shareholders’ agreement, the team spots a clause that gives the buyer the right to appoint four of the seven directors. That clause can give the buyer control of the NBFC and trigger prior RBI approval, even with a 24% stake.

This is why the approval analysis starts with two questions. How much paid-up equity will the buyer acquire, and what rights will the buyer get? The answers determine whether the NBFC needs to apply to the Reserve Bank of India (RBI), whether a newspaper notice is required and when the parties can complete the transfer.

Which RBI rules govern an NBFC takeover in 2026?

The principal rules are the Reserve Bank of India (Non-Banking Financial Companies – Acquisition of Shareholding or Control) Directions, 2025, issued on 28 November 2025. The RBI issued these Directions under Sections 45JA, 45K, 45L, 45M and 45MA of the Reserve Bank of India Act, 1934. Paragraph 6 sets out the approval triggers. Paragraph 7 covers the application and supporting documents. Paragraphs 8 to 10 deal with public notice, while paragraphs 11 to 13 address investments from or through jurisdictions identified by the Financial Action Task Force (FATF). Paragraphs 14 and 15 address the repeal of earlier instructions and preserve specified actions, liabilities and proceedings. Paragraph 16 preserves the application of other laws.

The general acquisition rules apply across regulatory layers to the NBFC categories listed in the Directions. These include deposit-taking NBFCs, Investment and Credit Companies, Factors, Microfinance Institutions, Infrastructure Finance Companies, Infrastructure Debt Fund NBFCs, Housing Finance Companies (HFCs), Core Investment Companies, Peer-to-Peer Lending Platforms and Account Aggregators. Standalone Primary Dealers (SPDs) are subject to specific provisions. Mortgage Guarantee Companies and Non-Operative Financial Holding Companies fall outside these Acquisition Directions, so their category-specific rules need to be checked separately.

When is prior RBI approval required for an NBFC takeover?

Transaction	Approval or reporting requirement
Takeover or acquisition of control of a covered NBFC	Prior written RBI approval under paragraph 6(1), even if the existing management continues.
Acquisition or transfer of 26% or more of the NBFC’s paid-up equity capital	Prior written RBI approval under paragraph 6(2). Progressive increases over time count toward the threshold.
Acquisition or transfer of 10% or more of paid-up equity by or to a foreign investor in an HFC accepting or holding public deposits	Prior written RBI approval under paragraph 6(3), including for progressive increases.
Change in the shareholding pattern or capital structure of an SPD	Prior RBI approval under paragraph 6(4). Other material changes affecting licensing conditions must be reported immediately.
Shareholding rises above the applicable threshold due to a court-approved buyback or capital reduction	The relevant exception may apply. The change must be reported within one month to the RBI or NHB, as applicable under paragraph 6(2), or to the NHB under paragraph 6(3).

If you are planning to buy shares in an NBFC or take over its management, NBFC acquisition and takeover assistance can help you assess which approvals and filings your transaction requires.

What does acquisition of control mean?

The RBI Directions adopt the definition of control in Regulation 2(1)(e) of the SEBI Takeover Regulations. Control can arise from the right to appoint a majority of directors or to direct management or policy decisions. A person can exercise those rights directly or indirectly, individually or together with persons acting in concert.

In practice, review the shareholders’ agreement, voting arrangements, board nomination rights and rights held through a parent company. The scope of any veto or consent right also matters. A right over how the NBFC conducts its lending business deserves particular attention.

Example: An investor acquires a foreign holding company that controls an Indian NBFC. The name of the NBFC’s direct shareholder stays the same. The transaction still needs a control review because the person who ultimately controls the NBFC may change.

Can a buyer acquire the shares in stages?

Successive purchases count toward the 26% threshold. Suppose an investor first acquires 18% of a covered NBFC’s paid-up equity and later agrees to acquire another 9% on the same capital base. The second purchase takes the aggregate acquisition to 27%, so the NBFC should obtain approval before completing that purchase. If the initial 18% investment gives the buyer control, approval is required before the initial transaction takes effect.

If the buyer plans to acquire shares in stages, read our guide to the 26% shareholding rule for NBFC acquisition.

Does a change in directors also require RBI approval?

Where paragraph 10 of the RBI Governance Directions applies, a management change that results in a change of more than 30% of directors, excluding independent directors, requires prior written RBI permission. Directors re-elected on retirement by rotation are exempt from this approval requirement. The NBFC must continue to inform the RBI, or the National Housing Bank (NHB) in the case of an HFC, about changes in directors or management.

Consider an NBFC with six non-independent directors. Replacing two of them changes one-third of the relevant board seats. The management-change approval requirement can apply even when the shareholding stays the same. Paragraph 11 provides for a separate change-in-management application through PRAVAAH.

Procedure for obtaining RBI approval

Step 1: Review the target NBFC and map the transaction

Start with the target’s Certificate of Registration (CoR), regulatory category, permitted activities, public deposit status and any supervisory restrictions. Prepare ownership tables showing the position before and after the transaction. Compare voting rights, board appointment rights and ultimate beneficial ownership. Include earlier purchases, any planned tranches and any board changes proposed at closing.

The buyer should also review audited financial statements, applicable net owned fund and capital requirements, loan classification and provisioning, lender covenants, litigation, regulatory returns and RBI correspondence. In a share purchase, the NBFC continues to hold its existing loan book and liabilities. An unresolved supervisory issue or weak loan documentation can therefore affect the value of the buyer’s investment after closing.

Understanding the NBFC company registration process can help you check the target’s Certificate of Registration, its RBI category and the activities it is permitted to carry out.

Step 2: Make regulatory approval a condition of closing

The share purchase or subscription agreement can make closing conditional on written RBI approval, completion of any applicable public notice period and receipt of other required clearances. Review when the buyer’s governance rights take effect. If the agreement gives the buyer effective control over the NBFC’s lending policy on signing, the regulatory trigger may arise before the scheduled share transfer.

The agreement can also identify who will prepare the application, respond to RBI queries, arrange publication and handle post-closing filings. The agreed deadline for completing the deal should allow time for both regulatory review and any applicable newspaper notice period.

Step 3: Apply through PRAVAAH

Under paragraph 7, the target NBFC files the application on its company letterhead through the RBI’s PRAVAAH portal. The proposed shareholders provide their details, declarations, evidence of funding and bankers’ reports.

Required document or information	What the NBFC should prepare
Details of the proposed shareholders	Complete the disclosures prescribed in Annex I to the Acquisition Directions.
Sources of acquisition funds	Explain how the proposed shareholders will fund the purchase and keep records that support the funding trail.
Public deposit declaration	Obtain a declaration from the proposed shareholders that they are not associated with any unincorporated body accepting public deposits.
Rejected registration declaration	Obtain a declaration that the proposed shareholders are not associated with a company whose CoR application the RBI rejected.
Criminal case declaration	Obtain the prescribed declaration concerning criminal cases, including offences under Section 138 of the Negotiable Instruments Act, 1881.
Bankers’ report	Arrange the bankers’ report on the proposed shareholders.

Before preparing the application, review the documents required for RBI approval of an NBFC takeover.

Step 4: Respond to RBI queries and review the approval terms

Keep the PRAVAAH acknowledgement and track requests for additional information. Check that the names, shareholding percentages and funding figures match across the application, ownership tables and transaction documents. If the buyer changes its acquisition vehicle, funding structure or governance rights during the review, assess whether the NBFC needs to update its submission before proceeding.

The Acquisition Directions do not specify a fixed time for the RBI to decide an application. Once written approval arrives, review any conditions, validity period and transaction-specific reporting obligations. Build the public notice period into the closing schedule separately.

Step 5: Publish the public notice at least 30 days before the transfer

Paragraphs 8 to 10 require public notice where the transaction involves a transfer of ownership by sale of shares or a transfer of control, with or without a share sale. The NBFC and the transferee must publish the notice separately or jointly after obtaining RBI permission.

Publish in at least one leading national newspaper and one leading local vernacular newspaper covering the location of the NBFC’s registered office. The notice should state the intention to transfer ownership or control, identify the transferee and explain the reasons for the transfer.

Allow at least 30 days between publication and the transfer. If the national and local newspapers publish on different dates, schedule closing so both publications meet the minimum period. Keep copies of both notices with the transaction records.

Paragraph 8 contains a specific notice exception for qualifying acquisitions or transfers of at least 10% but below 26% of paid-up equity by or to a foreign investor in an HFC that accepts or holds public deposits. The approval requirement under paragraph 6(3) still applies to the qualifying shareholding change.

Step 6: Complete the transfer and post-closing filings

Once the parties satisfy the approval terms, the applicable notice period and the other closing conditions, complete the share transfer or allotment. Update the register of members and other company records. Depending on the structure, the parties may also need to complete demat instructions, pay applicable stamp duty, file allotment or director-change forms and make any RBI intimation required by the approval letter.

What changes when the buyer is a foreign investor?

A cross-border acquisition requires a separate review under the Foreign Exchange Management Act, 1999 and the Foreign Exchange Management (Non-debt Instruments) Rules, 2019. Check the applicable entry route, beneficial ownership, pricing rules and reporting obligations with the authorised dealer bank. A reportable transfer of existing equity instruments may require Form FC-TRS. A reportable fresh issue to a non-resident may require Form FC-GPR. The applicable foreign investment reporting and prior RBI takeover approval are separate requirements.

For a closer look at which form applies to a share transfer or a fresh issue, see our guide to FEMA reporting for foreign investment.

Where the buyer is a non-resident, FEMA advisory services can help the parties review the proposed ownership structure, identify the applicable entry route and prepare the required filings.

The RBI Acquisition Directions also restrict new investments from or through jurisdictions on the relevant FATF monitoring lists. New investors from or through these jurisdictions cannot acquire significant influence as defined under the applicable accounting standards. Their aggregate voting power must remain below 20% on both an existing-voting-power basis and a basis that includes potential voting rights. Convertible instruments and contractual voting rights can affect this calculation. Paragraph 13 separately addresses investments held before a jurisdiction was listed.

How does an NBFC merger differ from a share takeover?

In a share takeover, the NBFC generally continues as the same legal entity. A voluntary amalgamation combines entities under a scheme and follows a separate RBI approval process. Under paragraph 7 of the RBI Voluntary Amalgamation Directions, 2025, the parties must obtain the applicable RBI clearance before approaching the court or tribunal for orders on the scheme under Sections 230 to 234 of the Companies Act, 2013.

Merger structure	RBI clearance and registration consequences
An NBFC merges into another NBFC	Both entities seek an RBI no-objection certificate (NOC). The surviving NBFC also seeks prior approval if the merger triggers the control, 26% shareholding or more-than-30% director-change test, excluding independent directors. The outgoing NBFC surrenders its CoR after the merger.
An NBFC merges into a non-NBFC	The outgoing NBFC seeks prior RBI approval and surrenders its CoR after the merger. The surviving entity approaches the RBI for registration if it is likely to meet the principal business criteria after the merger.
A non-NBFC merges into an NBFC	The surviving NBFC seeks an RBI NOC and must obtain prior approval if the merger triggers the applicable control, shareholding or director-change test. It must continue to meet the principal business criteria to retain its CoR.

If the parties are considering a merger, they can review eligibility for fast-track mergers under the Companies Act and assess the applicable RBI requirements separately.

What other approvals can affect an NBFC takeover?

A listed NBFC may trigger SEBI open-offer and disclosure requirements. Those rules have their own thresholds and tests. A transaction may also require Competition Commission of India approval if it qualifies as a notifiable combination. The competition review includes a deal-value test for transactions exceeding ?2,000 crore where the target has substantial business operations in India.

Existing financing and investment agreements can also affect the timetable. For example, a lender may require its consent before a change in control, even after the RBI has approved the acquisition. Reviewing those clauses early lets the parties include the required consents in the closing checklist.

Conclusion

Before deciding when to complete an NBFC takeover, the buyer and seller should check the NBFC’s RBI category, the buyer’s total stake after counting earlier purchases, and the rights the buyer will receive. Even a stake below 26% can require prior RBI approval if it gives the buyer control, such as the right to appoint a majority of directors. The parties should also check whether proposed board changes, foreign investment rules or existing lender agreements require separate approvals or consents.

If both prior RBI approval and public notice are required, the parties must first obtain the RBI’s written permission and then publish the required newspaper notices. They can complete the transfer only after at least 30 days have passed from the required publications and all other closing conditions have been met. The closing schedule should therefore allow time for both the RBI’s review and the notice period.

Frequently Asked Questions (FAQ’s)

Q1. Does buying exactly 26% of an NBFC require prior RBI approval?

Ans. Yes. Paragraph 6(2) covers the acquisition or transfer of 26% or more of paid-up equity capital for NBFCs to which the rule applies.

Q2. Can a 15% investment require RBI approval?

Ans. Yes, if the investment confers control. A 15% acquisition by a foreign investor in an HFC accepting or holding public deposits can also trigger the separate 10% threshold under paragraph 6(3).

Q3. Who files the RBI application for an NBFC takeover?

Ans. The target NBFC files the application on its letterhead through PRAVAAH. The proposed shareholders provide the prescribed disclosures, declarations, funding information and bankers’ reports.

Q4. Can the parties publish the newspaper notice while the RBI application is pending?

Ans. The required notice follows RBI permission. Where the notice applies, the parties must allow at least 30 days between publication and the transfer.

Q5. Does the RBI transfer the NBFC registration to the buyer?

Ans. In a share takeover, the registered NBFC continues to hold its Certificate of Registration, subject to applicable requirements and the terms of approval. The buyer acquires shares or control in that company. An amalgamation can require the outgoing NBFC to surrender its CoR.

Q6. How long does RBI approval for an NBFC takeover take?

Ans. The Acquisition Directions do not specify a fixed approval timeline. The 30-day requirement applies to the minimum period between the required newspaper publication and the transfer.

Q7. Can an indirect change in ownership require RBI approval?

Ans. Yes. If a buyer acquires a parent company that controls an Indian NBFC, the deal can trigger prior RBI approval even if the NBFC’s direct shareholding stays the same. The key question is whether the buyer gains indirect control of the NBFC.

Q8. Can a change in directors require RBI approval if no shares are sold?

Ans. Yes. Where the RBI Governance Directions apply, a management change involving more than 30% of the directors, excluding independent directors, requires prior written RBI permission. Directors re-elected on retirement by rotation are exempt from this approval requirement.

Q9. What happens if the two newspapers publish the takeover notice on different dates?

Ans. Count the minimum 30-day period from the later publication date. This ensures that both the national and local vernacular newspaper notices have been published at least 30 days before the transfer takes effect.

Q10. Does a court-approved buyback that raises a shareholder’s stake above 26% require prior RBI approval?

Ans. The shareholding approval exception can apply if the increase results from a court-approved buyback or capital reduction. The NBFC must report the change within one month to the RBI or the National Housing Bank, as applicable. Any separate acquisition of control still needs to be assessed.

Article last updated on : 11 Nov 2026.