Prior RBI nod required for M&As related to NBFCs

The central bank has said merger & acquisitions (M&As) involving non-banking finance companies (NBFCs) would need its prior written permission, as per a notification issued on Monday.

It also said any merger/amalgamation of an NBFC with another entity or any merger/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 require its prior approval.

In addition its nod would be mandatory before approaching the court or tribunal under Section 391-394 of the Companies Act, 1956 or Section 230-233 of Companies Act, 2013 seeking order for mergers or amalgamations with other companies or NBFCs.

It added, “Any transfer of shares in violation of the notification would result in adverse regulatory action including cancellation of Certificate of Registration (CoR).”

The directions, which shall be applicable to all NBFCs whether they accept deposits or not, come into force with immediate effect.

(Edited by Joby Puthuparampil Johnson)

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