Acquiring an existing NBFC can be faster than obtaining a new Certificate of Registration, but it is not free of regulation. The RBI requires prior written approval for certain transactions involving NBFCs.
Prior approval is required for
- Any takeover or acquisition of control of an NBFC, whether or not it results in a change of management.
- Any change in shareholding, including progressive increases over time, that results in a person acquiring or transferring 26% or more of the paid-up equity capital.
- Any change in management resulting in a change of more than 30% of the directors, excluding independent directors. Directors re-elected on rotation are not counted.
The process
The application is filed with the RBI with details of the acquirer, the source of funds, fit-and-proper declarations and the business plan. After approval, a public notice must be issued at least 30 days before the change takes effect.
Diligence priorities
Acquirers should review the target’s regulatory correspondence, inspection findings, asset quality, compliance with Scale Based Regulation and the status of its Net Owned Funds against the ₹10 crore glide path ending 31 March 2027.