NBFCs need RBI nod for acquisition & transfer of control

The Reserve Bank of India today directed non-banking financial institutions (NBFCs) to seek prior permission in cases of acquisition and transfer of control. This decision was taken after a thorough scrutiny of the credit system in the country.Earlier too NBFCs had to take permission of the RBI but now certain amendments have been made after the representations made by the industry

Any takeover or acquisition of control of NBFCs irrespective of the change or no change in the management will require the Central Bank’s prior approval. Apart from that, permission will also be required in case of any change in the shareholding pattern and transfer of shareholding of 26 percent or more of the paid up equity capital. Earlier it was at 10 percent now it has been upped to 26 percent.There has been a major change in the format of the directors and the company composition. RBI approval is needed in change of management resulting in more than 30 percent directors, excluding independent directors.Other two important highlights in terms of directors, one is directors should not be associated with any unincorporated entity that is accepting deposits. Two, they should also not be associated with any company whose application for certificate of registration has been cancelled earlier by RBI. Therefore, any violation of these amendments will lead to the cancellation of certificates of the NBFC.