Investors will need approval to buy 5% in banks: RBI

The central bank seeks to tighten the criteria for ownership of lenders

Reserve Bank of India (RBI) said on Thursday investors seeking to buy at least 5% in shares or convertible debt of a private sector bank in the country will first need to obtain its approval, as it seeks to tighten the criteria for ownership of lenders.

The buyer would also have to give an annual declaration to the lender that it remains a "fit and proper" investor, the RBI said in a statement.

In turn, the lender would need to alert the RBI should it have doubts about whether the investor meets that "fit and proper" criteria.

Existing shareholders who already have been approved by the RBI as a major shareholder would not need to seek permission again to increase their holdings if the total investment remains below 10% of the lender, the RBI added.