The Reserve Bank of India (RBI) has updated its payments bank shareholding rules, offering significant relief to mutual funds, insurance companies, and pension funds. The amendment, issued on October 1, 2026, takes effect immediately. It introduces a one-time approval mechanism for certain institutional investors seeking repeated major shareholding in payments banks.
Key Details of the Payments Bank Shareholding Amendment
Earlier rules required every investor to seek fresh RBI approval before each subsequent acquisition of major shareholding — whenever their stake fell below five percent. However, the RBI has now reviewed this requirement. As a result, qualifying institutional investors can apply once and receive standing approval for future acquisitions. This change reduces regulatory friction for long-term institutional investors.
The new category of “qualifying persons” covers SEBI-registered mutual funds, PFRDA-registered pension funds, and IRDAI-registered insurance companies. Additionally, these entities must not belong to the promoter group of the concerned payments bank. Together, these conditions define who can benefit from the one-time approval route.
Applications must be submitted through the RBI’s PRAVAAH portal. Qualifying persons can apply individually or collectively. Meanwhile, a bank may also apply on behalf of a qualifying person linked to its own group. The one-time approval covers acquisitions up to 10 percent of paid-up share capital or voting rights, calculated on an aggregate basis.
What This Means for Investors and Payments Banks
For institutional investors, this amendment simplifies repeated investment in payments banks. Therefore, funds no longer need to restart the full approval process each time their stake dips and then rises again. This streamlining could encourage more consistent long-term institutional participation in the sector.
The RBI, however, retains full oversight. It can revoke the one-time approval if an investor violates terms or fails the fit-and-proper criteria. For example, non-compliance with reporting requirements could trigger a revocation. Qualifying persons must also report any change in aggregate holding — above or below five percent — within three working days.
Furthermore, the amendment clarifies that portfolio managers acting only in an advisory capacity will not be treated as indirect acquirers. This distinction protects genuine advisory relationships from triggering unnecessary approval requirements.
Overall, this update reflects the RBI’s balanced approach — easing compliance burdens while maintaining strong regulatory safeguards for India’s payments banking sector.
Source: RBI Notifications
