Prior RBI nod may be mandatory for NBFC acquisitions

To tighten rules for the takeover of non-banking financial companies (NBFCs) the Reserve Bank of India (RBI) might make it mandatory for acquirers to take the regulator’s prior approval for such deals.

RBI’s consent might be required for any takeover or acquisition of control of an NBFC, which might or might not result in change of management, said the central bank in draft norms on NBFCs, which have been placed on the central bank’s website.

According to the proposal, an approval shall be required even for any change in the shareholding of an NBFC which would result in acquisition/transfer of shareholding of 26 per cent or more of the paid-up equity capital of the NBFC. Besides, approval would also be required for any change in the management of the NBFC which would result in change in more than 30 per cent of the directors.

NBFCs will have to furnish information about proposed directors and shareholders. They will also have to give details about sources of funds that shareholders will use for acquiring the NBFC.

NBFCs might also have to give public notice of at least 30 days before effecting the sale of, or transfer of the ownership by sale of shares, or transfer of control, whether with or without sale of shares. Such a public notice shall be given by the NBFCs and the other party or jointly by the parties concerned, after obtaining the prior permission of RBI.

According to the draft rules, the public notice shall indicate the intention to sell or transfer ownership or control, the particulars of transferee and the reasons for such sale or transfer of ownership or control.

The notice shall be published in a leading national and another in a leading local (covering the place of registered office) vernacular newspaper.