RBI nod mandatory to takeover, acquire control of NBFCs

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To ensure 'fit and proper' character of the management of NBFCs, the Reserve Bank today said any takeover or acquisition control of such an entity (NBFC) would now require its prior approval in writing.

"The prior written permission of the Reserve Bank of India shall be required for any takeover or acquisition of control of an NBFC, whether by acquisition of shares or otherwise," the central bank said in a notification today.

Also, any merger or amalgamation of an NBFC with another entity or any merger or amalgamation of an entity with an NBFC that would give the acquirer/another entity control of the NBFC would require permission from the RBI.

The RBI further said any merger or amalgamation of an NBFC with another entity or any merger or amalgamation of an entity with an NBFC which would result in acquisition/transfer of shareholding in excess of 10 per cent of the paid up capital of the NBFC, would also need its approval.

The regulator said its prior written approval would also be required before approaching the court or tribunal seeking order for mergers or amalgamations with other companies or NBFCs.

The said directions of the RBI to be known as ‘Non-Banking Financial Companies (Approval of Acquisition or Transfer of Control) Directions, 2014, would be applicable to every non-banking financial company (NBFC).

The RBI said these directions shall come into force with immediate effect.

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