Mergers between NBFCs are not simply a corporate finance decision. They are a regulated event that requires prior approval from the Reserve Bank of India, a scheme sanctioned by the National Company Law Tribunal, and in many cases the surrender of one entity's Certificate of Registration before the process is legally complete. Getting any step wrong delays the entire transaction and can expose both entities to regulatory action during the interim period.

NBFC Merger and Amalgamation 2026

In December 2025, the RBI issued the Commercial Banks Voluntary Amalgamation Directions, 2025, which for the first time explicitly incorporated NBFC-with-bank and bank-with-NBFC amalgamations into a single comprehensive framework alongside bank-to-bank mergers. Separately, in February 2026, the National Company Law Tribunal approved the amalgamation between two systemically important NBFCs within a single financial group, with the RBI having directed the surrender of one Certificate of Registration by 31 March 2026. This is one of the first publicly reported NBFC group consolidations driven by a direct RBI regulatory direction in recent years.

This guide covers everything your NBFC needs to know about the merger and amalgamation process in 2026, whether you are consolidating within a group, acquiring a standalone NBFC, or merging an NBFC with a bank.

Why NBFCs Merge: The Strategic and Regulatory Drivers in 2026

NBFC mergers happen for different reasons. Some are purely strategic, combining two complementary businesses to achieve scale, geographic coverage, or product diversification. Others are driven by the RBI's own direction, as in the case of the February 2026 NCLT-approved amalgamation, where the regulator instructed a group to consolidate its two licensed NBFCs into one entity.

The most common strategic reasons for NBFC mergers in 2026 include capital efficiency, where combining two entities allows the merged NBFC to maintain a single capital base with a higher net owned fund rather than splitting regulatory capital across two separate companies. Operational synergies from combining back-office, technology, and compliance functions reduce costs significantly. Access to a larger borrower base and established distribution network without the cost of organic expansion is another major driver. And for fintech companies that have built strong origination platforms but lack an NBFC licence, merging with or acquiring an existing NBFC is often faster than the registration process for a new entity.

From a regulatory perspective, the RBI has been quietly encouraging consolidation within large financial groups that hold multiple NBFC licences for overlapping business activities. Maintaining two separately regulated entities with duplicated compliance infrastructure is inefficient for both the group and the regulator. The February 2026 case demonstrates that where voluntary consolidation does not happen, the RBI will direct it.

The Two Legal Routes for NBFC Merger in India

NBFC mergers in India can take place through two distinct legal routes, and the route chosen determines which regulatory authority has primary jurisdiction over the approval process.

Route 1: NBFC Merging with Another NBFC

When two NBFCs merge with each other, the process is governed by Sections 230 to 233 of the Companies Act, 2013, with the National Company Law Tribunal as the approving authority. However, prior RBI approval is mandatory before the scheme is filed with the NCLT. An NBFC cannot approach the tribunal with a merger scheme without first obtaining the RBI's written consent. The RBI reviews the proposed merger for fit and proper compliance of incoming directors and shareholders, capital adequacy of the surviving entity, KYC compliance status of both merging entities, and whether any RBI or SEBI norms have been violated by either entity that must be resolved before the scheme proceeds.

Route 2: NBFC Merging with a Bank or Vice Versa

When an NBFC merges with a scheduled commercial bank, or a bank merges with an NBFC, the December 2025 Voluntary Amalgamation Directions apply. Under this route, a No Objection Certificate from the RBI must be obtained before either entity approaches the NCLT or any court for approval. The scheme then requires the sanction of the tribunal under Sections 230 to 234 of the Companies Act, 2013. Both the amalgamating and amalgamated entities must obtain the approval of at least two-thirds of their Board members and two-thirds of their shareholders before submitting the application to the RBI through the PRAVAAH portal.

Merger Type	Governing Law	RBI Requirement	NCLT Role
NBFC with NBFC	Companies Act 2013, Sec 230-233	Prior approval before NCLT filing	Sanctions the scheme
NBFC with Bank	Companies Act 2013, Sec 230-234 + RBI Directions Dec 2025	No Objection Certificate before NCLT	Sanctions the scheme
Bank with NBFC	Companies Act 2013, Sec 230-234 + RBI Directions Dec 2025	No Objection Certificate before NCLT	Sanctions the scheme
Group NBFC Consolidation	Companies Act 2013 + RBI direction if applicable	Prior approval; CoR surrender on completion	Sanctions the scheme

Step-by-Step RBI Approval Process for NBFC Merger in 2026

The following sequence applies to NBFC-to-NBFC mergers where both entities are licensed by the RBI. The process for bank-related mergers follows a broadly similar path but with the December 2025 Directions governing the specific submission requirements.

• Step 1 - Board Approval: Both the transferor and transferee NBFCs must hold a board meeting and pass a resolution approving the proposed merger. The resolution must be supported by at least two-thirds of the total board strength. If the merger involves a shareholding change exceeding 26 percent of paid-up equity capital, or a change in more than 30 percent of directors, prior RBI approval for that specific change is separately required under the Governance Directions, 2025.
• Step 2 - Lender Consent: If either NBFC has availed credit facilities from banks or financial institutions, the loan agreements must be reviewed to determine whether the lenders' consent is required for the proposed merger. This consent must be obtained before the RBI application is filed.
• Step 3 - KYC and Regulatory Compliance Review: Both entities must confirm that KYC norms are complied with for all their accounts and that there are no outstanding violations of RBI or SEBI regulations. Any compliance gaps identified at this stage must be resolved before the scheme can be approved.
• Step 4 - Valuation and Swap Ratio Determination: An independent valuation of both entities must be conducted in accordance with RBI and Companies Act guidelines. The swap ratio for equity shareholders must be fair and defensible. The valuation methodology must be disclosed in the scheme documents.
• Step 5 - RBI Application via PRAVAAH: The application for prior approval is submitted to the RBI through the PRAVAAH portal (Platform for Regulatory Application, Validation and Authorisation). The application must include board resolutions, audited financial statements, proposed swap ratio, KYC documents of incoming directors and shareholders, source of funds declarations, fit and proper declarations, and detailed business plan for the merged entity.
• Step 6 - Public Notice: After RBI clearance, a public notice must be published in at least two newspapers, one of which must be in English, inviting objections to the proposed merger. A second notice must be published at least 30 days after the first.
• Step 7 - NCLT Filing and Sanction: The scheme, along with the RBI's approval, is filed with the NCLT. The tribunal holds meetings with shareholders and creditors and issues its order sanctioning the scheme. Dissenting shareholders are entitled to fair compensation.
• Step 8 - CoR Surrender: Following the NCLT order and the effective date of the merger, the transferor NBFC must surrender its Certificate of Registration to the RBI. Operations of the transferor entity cannot continue after the effective date.

Documents Required for RBI Prior Approval

The RBI's application package for NBFC merger approval must be complete at the time of submission. Incomplete applications are returned without processing, which delays the entire transaction timeline. Key documents include:

• Certified true copies of the latest three years of audited financial statements for both entities, including balance sheets, profit and loss accounts, and the statutory auditor's report.
• Detailed information about all proposed directors and shareholders of the surviving entity, including PAN, KYC documents, credit reports, fit and proper declarations, and banker's reports.
• Source of funds declarations from all proposed shareholders confirming that the funds being used for the merger are from legitimate, disclosed sources.
• Affidavit and declaration of non-criminal history from all proposed directors and shareholders, specifically confirming no cases under Section 138 of the Negotiable Instruments Act.
• A forward-looking business plan for the merged entity covering at least three years, with projections for capital adequacy, asset quality, and growth.
• The independent valuation report and proposed swap ratio with the methodology explained.
• Board resolutions from both entities approving the merger, and shareholder approval where applicable.
• Declaration confirming that neither entity has applied for an NBFC licence that was subsequently rejected by the RBI.

Post-Merger Compliance: What the Surviving NBFC Must Do

The obligations of the surviving NBFC do not end when the NCLT sanctions the scheme. The post-merger period carries its own set of regulatory requirements that must be completed promptly.

The merged entity must ensure that the combined balance sheet is prepared and filed with the RBI promptly after the effective date. The pro-forma balance sheet, which combines both entities' financial positions, must demonstrate that the surviving NBFC meets all prescribed capital adequacy, net owned fund, and provisioning requirements from day one of the combined operations. If the merged entity's CRAR falls below the prescribed floor after combining the two balance sheets, a capital restoration plan must be submitted to the RBI immediately.

All borrower accounts transferred from the transferor entity must be re-KYC'd within the timeline prescribed by the RBI. Accounts that cannot be verified must be flagged and handled in accordance with the PMLA directions. The surviving entity must notify all borrowers, depositors, and lenders about the merger and the new entity's details. Credit information reports must be updated across all four Credit Information Companies to reflect the account migration from the transferor to the surviving entity. And if the surviving NBFC's SBR layer classification changes due to the combined asset size crossing a threshold, the governance, capital, and compliance obligations of the new layer apply immediately.

Bank-Group NBFCs: A New Dimension from December 2025

The RBI's December 5, 2025 Amendment Directions introduced a significant new obligation for NBFCs that are part of a scheduled commercial bank's group. Through a new paragraph 60A in the NBFC Master Directions, such NBFCs must comply with the Commercial Banks Undertaking of Financial Services Directions, 2025 for activities they undertake that are also undertaken by the parent bank. These entities must also comply with the Upper Layer NBFC framework (excluding listing requirements) regardless of their actual SBR classification. For groups planning mergers involving both a bank and its subsidiary NBFC, the December 2025 framework adds an additional compliance dimension to the merger planning process.

Conclusion

NBFC mergers in 2026 are more structured, more regulated, and more closely watched by the RBI than at any point in the past decade. The December 2025 Voluntary Amalgamation Directions have brought NBFC-with-bank mergers into a single unified framework. The February 2026 NCLT approval of an RBI-directed group consolidation demonstrates that where voluntary action does not happen, the regulator will direct it and set hard deadlines for completion.

For NBFC promoters considering a merger or acquisition, the starting point is not the NCLT. It is the RBI. A thorough pre-application assessment covering capital adequacy, KYC compliance, fit and proper status of incoming management, and lender consent requirements will determine how quickly the RBI processes the application and whether the transaction can close on the intended timeline. An NBFC that approaches the merger process without this groundwork typically faces delays, queries, and in some cases, a restructured transaction that looks very different from what the promoters originally intended.

Recommended Action Before Starting Any NBFC Merger Process

Conduct a pre-merger regulatory health check covering both entities' capital adequacy, CRAR, NPA levels, KYC compliance status, pending RBI or SEBI actions, and lender consent requirements. Confirm that all directors of the surviving entity meet the fit and proper criteria. Prepare a three-year business plan for the merged entity before approaching the RBI. Given the complexity of the PRAVAAH application, the public notice requirements, and the NCLT process, engaging a qualified NBFC legal and compliance specialist at the outset of the transaction is strongly recommended.

Frequently Asked Questions

Q1. Can an NBFC merge with another NBFC without approaching the RBI first?

No. Prior approval from the Reserve Bank of India is mandatory before an NBFC can file a merger scheme with the National Company Law Tribunal. This requirement is absolute and applies to all NBFC-to-NBFC mergers regardless of the size of the entities involved. The RBI reviews the proposed scheme for regulatory compliance on multiple dimensions before granting approval. These include whether all directors and significant shareholders of the surviving entity meet the fit and proper criteria, whether both entities have complied with KYC norms across all their accounts, whether there are any outstanding violations of RBI or SEBI regulations that must be resolved before the scheme can proceed, and whether any lender consent requirements under existing credit agreements need to be addressed. Filing a merger scheme directly with the NCLT without first obtaining the RBI's written approval would be a procedural violation that the tribunal would not entertain, since the RBI's regulatory oversight of NBFCs gives it precedence in the approval chain.

Q2. What happens to the Certificate of Registration of the transferor NBFC after the merger is completed?

Once the NCLT sanctions the merger scheme and the effective date of the amalgamation arrives, the transferor NBFC ceases to exist as a separate legal entity. Its Certificate of Registration, which is the operating licence issued by the RBI under Section 45-IA of the RBI Act, must be surrendered to the RBI. The February 2026 NCLT approval of an RBI-directed group merger illustrates this directly: the RBI had specified March 31, 2026 as the deadline by which the Certificate of Registration of the merging entity must be surrendered following the NCLT order. The surviving entity continues to operate under its own CoR, which now covers the combined business. If the merger results in the combined entity crossing an SBR layer threshold due to increased asset size, the surviving entity automatically becomes subject to the governance, capital adequacy, and compliance obligations of the new layer from the effective date of the merger.

Q3. What additional obligations apply to NBFCs in a bank's group under the December 2025 Amendment Directions?

The RBI's Non-Banking Financial Companies Undertaking of Financial Services Amendment Directions, 2025, effective from December 5, 2025, introduced a new paragraph 60A in the NBFC Master Directions. This paragraph requires all NBFCs and housing finance companies that are part of a scheduled commercial bank's group to comply with the Commercial Banks Undertaking of Financial Services Directions, 2025 for any activities they undertake that are also being undertaken by the parent bank. Additionally, these bank-group NBFCs must comply with the Upper Layer NBFC governance framework even if their own asset size would otherwise place them in the Base or Middle Layer. This means enhanced board composition requirements, mandatory risk management and audit committees, CRO and CCO appointments, and KMP compensation governance obligations apply to these entities regardless of their standalone SBR classification. For groups planning to merge their bank-subsidiary NBFC with another entity, this framework creates an additional compliance dimension that must be factored into the pre-merger due diligence and post-merger integration planning.