RBI Notification on merger of Private Banks

RBI Notification on merger of Private Banks

In another master direction, a compilation which consolidates instructions on rules and regulations framed by the RBI under various Acts, including banking issues and foreign exchange transactions, the central bank provided direction for issue and pricing of shares by private sector banks.

The scope of master direction on mergers will cover “an amalgamation of two banking companies and amalgamation of an NBFC with a banking company.” In both the cases, the voluntary amalgamation will become effective after RBI’s approval.

As per the direction, the decision of amalgamation should be approved by the respective boards with two-thirds majority and not just by members present and voting. Also, the draft scheme of amalgamation should have approval of shareholders of each banking company through a resolution passed by a majority representing two-thirds of the shareholders.

In case of an NBFC merging with a private sector bank, the master direction says that all accounts should be KYC-compliant as they would eventually become accounts of the banks after amalgamation.

Allotment of shares to investors will be subject to compliance which requires investors to obtain specific prior approval of the RBI if the proposed acquisition results in aggregate holding of 5 per cent or more of the paid-up capital of the bank