The central bank aims to prevent financial stress from spreading across several lenders through new ownership rules.
The Reserve Bank of India (RBI) is planning to prohibit private equity firms from maintaining controlling interests in more than one non-banking financial company (NBFC), according to reports by Times of India and Business Standard.
The central bank is concerned that financial difficulties at a global private equity firm or its affiliates could create a contagion effect across various NBFCs where the firm holds significant stakes.
Under current Indian law, a 25 per cent stake in a listed company is viewed as a controlling interest. However, an investor may still be deemed to have control with a smaller shareholding if they can influence management, policy decisions, or appoint most directors.
The proposed regulations would distinguish between controlling stakes and smaller financial investments. Holdings of 15 per cent or less would be classified as financial investments and would face fewer regulatory checks.
The RBI intends to finalise a draft of these rules after seeking public feedback, with formal issuance expected early next year. This follows recent large deals, including Blackstone's $535 million agreement to buy a 16 per cent stake in IIFL Finance.
The Indian Venture and Alternate Capital Association has approached the RBI to request that different entities within a single group be allowed to hold stakes exceeding 20 per cent in multiple NBFCs.
