The Reserve Bank of India has made it mandatory that its prior approval will be required for acquisition of shares or voting rights up to 5 per cent or more of the equity capital in a private bank.
The RBI would undertake a due diligence on the applicant to assess his “fit and proper” status to acquire the stake, it said. “It will be open to the RBI to seek additional information from the applicant or concerned bank, including but not limited to shareholder agreements and make such enquiries with regulators, revenue authorities, investigation agencies and credit rating agencies as considered appropriate,” it said in a notification.
The RBI’s decision to accord or deny permission will be binding on the applicant and the concerned bank. “In the event of the RBI according permission for a lower quantum of acquisition, the concerned bank should register the transfer or purchase of such lower quantum of shares or lower quantum of compulsorily convertible debentures or bonds or lower percentage of voting rights,” the RBI said.
While assessing the “fit and proper” status, the RBI will consider the applicant’s integrity, reputation and track record in financial matters.