RBI issued draft amendment directions on July 14, 2026, proposing a one-time approval mechanism for mutual funds, insurance companies, and pension funds to acquire major shareholding in banks. Currently, any acquisition of 5% or more requires prior RBI approval repeatedly. The new framework allows qualifying institutional investors to hold up to 10% of a bank's paid-up share capital without fresh approvals each time. Comments are invited by August 4, 2026. Draft covers commercial banks, SFBs, payments banks, and LABs.

India's banking sector has long required any acquirer of 5% or more stake — classified as 'major shareholding' — to seek prior RBI approval under the Master Directions on Acquisition of Major Shareholding. For passive institutional investors like mutual funds, this triggered a bureaucratic loop: every time their aggregate holding fluctuated across the 5% threshold due to market movements or fresh purchases, they needed fresh regulatory clearance. AMCs flagged this as an operational burden, particularly for large-cap index funds and passive schemes that mechanically replicate indices containing bank stocks.

RBI's proposed one-time approval framework addresses this elegantly. Once a qualifying person — defined narrowly as SEBI-registered mutual funds, IRDAI-registered insurers, or PFRDA-registered pension funds not belonging to the bank's promoter group — obtains initial approval, they can subsequently hold up to 10% without repeat approvals. This reduces compliance friction without diluting the regulatory intent of monitoring concentrated ownership.

The disclosure tightening is equally important: any crossing of the 5% threshold (up or down) must be reported to RBI and the bank within one business day. This preserves supervisory visibility. The portfolio manager carve-out — clarifying that a client's acquisition isn't the portfolio manager's indirect acquisition — removes a significant grey area that complicated discretionary mandates. Together, these reforms signal RBI's shift toward principles-based oversight over rule-based proceduralism in ownership monitoring.