Buying or selling an NBFC is not a private transaction between two parties. It is a regulated event that requires the Reserve Bank of India's written approval before a single share changes hands, before a board seat is transferred, and before control of the entity shifts in any meaningful way. Acting without this approval does not just create a compliance gap. It can result in cancellation of the NBFC's Certificate of Registration, making the entire transaction worthless from the moment it closes.

NBFC Transfer of Ownership 2026

On 28 November 2025, the RBI issued the Non-Banking Financial Companies Acquisition of Shareholding or Control Directions, 2025. These new directions replaced all earlier rules on ownership and control changes in NBFCs including the 2015 directions that had governed the sector for a decade. They introduced a consolidated, cleaner framework with clearer thresholds, tighter disclosure requirements, and a new set of restrictions specifically targeting investments from FATF non-compliant jurisdictions that did not exist in any earlier directive.

Whether you are a promoter planning to exit, a private equity fund acquiring a stake, a fintech company buying an existing NBFC to avoid a fresh registration, or a bank subsidiary consolidating its group structure, this guide explains exactly what the 2025 Directions require and what happens if you get it wrong.

The Three Triggers That Require RBI Prior Approval

The first question any buyer or seller must answer before proceeding with an NBFC ownership transaction is whether the proposed change triggers the mandatory prior approval requirement. The Directions 2025 identify three distinct situations where RBI approval is non-negotiable.

Trigger 1: Takeover or Acquisition of Control

Any takeover or acquisition of control of an NBFC requires prior RBI approval, regardless of whether it results in a change of management. Control is not defined purely by share percentage. A person or entity exercises control if they have the right to appoint a majority of directors, if they can determine the composition of the board, or if they can otherwise direct the management and policy decisions of the NBFC. This means a transaction that gives an acquirer 25 percent of the shares but also grants them the right to appoint three out of five directors still constitutes a change in control and requires RBI approval, even though the 26 percent shareholding threshold is not crossed.

Indirect changes in control are equally subject to this rule. If a holding company that already owns 51 percent of an NBFC itself undergoes a change in ownership, the RBI treats this as an indirect change in control of the NBFC. The NBFC must apply for and obtain prior approval for the indirect change, even if no NBFC shares themselves are being transferred.

Trigger 2: Acquisition or Transfer of 26 Percent or More Shareholding

Any change in shareholding that results in a person or group acquiring or transferring 26 percent or more of the paid-up equity capital of an NBFC requires prior RBI approval. The Directions make clear that this includes progressive increases over time. An acquirer who buys 10 percent in January, 8 percent in April, and 9 percent in September has crossed the 26 percent threshold in aggregate and should have sought approval before the cumulative holding reached that level.

There is one exception. If the shareholding of an existing holder exceeds 26 percent due to a share buyback or a court-approved reduction in the NBFC's capital, prior RBI approval is not required. However, the NBFC must inform the RBI within one month of the event. This exception is narrow and applies only to passive dilution caused by the company's own capital actions, not to active acquisition.

Trigger 3: Change in Management Resulting in More Than 30 Percent Director Change

Any change in the management of an NBFC that results in more than 30 percent of its directors being replaced requires prior RBI approval. Independent directors are excluded from this count, and directors who are re-elected on retirement by rotation are also excluded. This threshold applies cumulatively over a year, meaning an NBFC that replaces two directors in March and two more in September on a ten-member board has already crossed 30 percent of non-independent directors and should have sought approval before the second round of changes.

Trigger	Threshold	Exception	RBI Notification Required
Acquisition of Control	Any transfer of control, with or without shareholding change	None	Prior approval mandatory
Shareholding Change	26% or more of paid-up equity, including progressive increases	Court-approved buyback or capital reduction	Within 1 month if exception applies
Director Change	More than 30% of non-independent directors in a year	Re-election on retirement by rotation	Prior approval mandatory
Indirect Control Change	Change in holding company that owns the NBFC	None	Prior approval mandatory

FATF Non-Compliant Jurisdictions: A New and Critical 2025 Restriction

One of the most significant new provisions in the Acquisition Directions 2025 is the explicit treatment of investments from FATF non-compliant jurisdictions. The Financial Action Task Force periodically publishes two lists: High-Risk Jurisdictions Subject to a Call for Action, and Jurisdictions Under Increased Monitoring. Any country appearing on either of these lists is treated as FATF non-compliant for the purpose of these directions.

Investments into an NBFC from an investor whose source country is FATF non-compliant are not treated on the same terms as investments from FATF compliant jurisdictions. Under the 2025 Directions, such investors cannot acquire a level of shareholding that would grant them significant influence beyond 20 percent of voting power in the NBFC. This is a hard cap on the influence that FATF non-compliant country investors can exercise, regardless of how their shareholding is structured.

There is a grandfathering provision for existing investors. If an investor was already holding shares in an NBFC before the source or intermediate jurisdiction was classified as FATF non-compliant, that investor may continue to hold those shares and may even bring in additional investments as permitted under other applicable regulations, specifically to support continuity of business in India. This protection does not extend to new investments made after the jurisdiction was classified as non-compliant.

The RBI Approval Process: Step by Step in 2026

The approval process under the Acquisition Directions 2025 is structured, sequential, and must be completed before any transaction is executed. There is no provision for retroactive approval.

• Step 1: Board and Shareholder Preparation. Before filing the RBI application, both the existing and incoming shareholders must confirm that all proposed changes comply with the fit and proper criteria. The incoming shareholders must prepare the complete set of disclosure documents required under Annex I of the directions. Any existing compliance gaps in the NBFC must be resolved before the application is submitted, since the RBI reviews the NBFC's regulatory history as part of its assessment.
• Step 2: Application through PRAVAAH Portal. The application is submitted through the RBI's PRAVAAH portal on the company's official letterhead. The application must include all documents specified in the directions. Incomplete submissions are returned without processing, and the clock does not run on an incomplete application.
• Step 3: RBI Review. The RBI examines the fit and proper status of incoming shareholders and directors, the source of funds for the acquisition, the regulatory compliance record of both the NBFC and the acquiring parties, and whether any of the proposed changes would create a governance or concentration risk concern. During this review, the RBI may request additional information or clarifications. Failure to respond to these queries promptly is a common cause of delay and, in at least one documented case, has resulted in rejection.
• Step 4: RBI Issues No Objection Certificate. If the RBI is satisfied with the application and supporting documentation, it issues a No Objection Certificate or prior approval letter. This document must be in hand before any share transfer is executed or any director change is effected.
• Step 5: Public Notice. After receiving the RBI's prior approval, a public notice must be issued at least 30 days before the ownership or control transfer is effected. The notice must be given jointly by the NBFC and the transferee party, or separately by each. It must be published in at least one leading national English-language newspaper and one leading vernacular newspaper covering the location of the NBFC's registered office. The notice must state the intention to transfer ownership or control, the particulars of the incoming parties, and the reasons for the transfer.
• Step 6: Execution and ROC Filing. After the 30-day notice period, the actual share transfer, board changes, or control restructuring can be executed. The necessary forms must be filed with the Registrar of Companies reflecting the updated ownership and management details.
• Step 7: Post-Approval Intimation to RBI. Following the actual execution of the transfer, the NBFC must intimate the RBI about the completion of the transaction. Any deviation from what was approved must be brought to the RBI's attention immediately.

Documents Required for the RBI Approval Application

The completeness of the application package determines how quickly the RBI processes the request. Every document listed below must be provided for each proposed incoming shareholder and director. Missing even one item is grounds for the application to be returned.

• Complete information about each proposed shareholder as specified in Annex I of the Acquisition Directions 2025, covering identity, nationality, existing shareholdings in other regulated entities, and business background.
• Source of funds declaration: A detailed, documented explanation of where the acquisition funds are coming from, including the chain of entities through which the funds flow. For foreign investments, the source country must be confirmed as FATF compliant.
• Declaration that none of the proposed shareholders or directors is associated with any unincorporated body that accepts deposits from the public.
• Declaration that none of the proposed shareholders or directors is associated with any company whose application for a Certificate of Registration was rejected by the RBI.
• Declaration that there is no criminal case pending against any proposed shareholder or director, including any case under Section 138 of the Negotiable Instruments Act, 1881.
• Banker's report on each proposed shareholder and director from their principal bank, confirming account conduct and financial standing.
• Fit and proper declaration from each incoming director confirming compliance with the criteria prescribed in the Governance Directions 2025.
• If the transaction involves a change of more than 30 percent of directors, details of all proposed incoming directors and their experience in financial services must be provided, along with confirmation that at least one director has prior banking or NBFC sector experience.

Transactions That Do Not Require Prior RBI Approval

Not every ownership change in an NBFC requires prior RBI approval. Understanding the boundaries of the approval requirement prevents unnecessary delays in legitimate transactions.

The transmission of shares through inheritance or succession does not require prior RBI approval, because no active acquisition is involved. However, if the transmission results in the inheriting party gaining control over the NBFC or results in a change in management, the RBI must be notified and approval obtained for the consequential changes.

A shareholder who already holds 26 percent or more of an NBFC with prior RBI approval does not need fresh approval for further incremental increases unless those increases would cross 50 percent, which could constitute acquisition of control. Instruments such as convertible preference shares must be evaluated on a post-conversion basis to determine whether the 26 percent or control threshold would be crossed.

Shares acquired by persons acting in concert are evaluated at the group level. Two investors who jointly cross 26 percent, even if each holds less than 26 percent individually, trigger the approval requirement. Structuring a transaction to keep individual holdings just below the threshold while achieving collective control is treated as a circumvention and does not avoid the approval requirement.

Consequences of Proceeding Without RBI Approval

Transferring ownership or control of an NBFC without the RBI's prior written approval is not a technical irregularity that can be regularised after the fact. The consequences under the RBI Act and the Acquisition Directions 2025 are severe and immediate.

The RBI can direct the NBFC to unwind the transaction and restore the previous ownership structure at the cost of the parties who executed the transfer. It can impose monetary penalties under the RBI Act. And in cases where the unapproved transfer is part of a pattern of regulatory non-compliance, the RBI can initiate proceedings for cancellation of the Certificate of Registration. A cancelled CoR means the NBFC can no longer legally carry on the business of a non-banking financial institution.

For acquirers, an unapproved ownership change also creates legal uncertainty about whether their investment is valid and enforceable. Courts have consistently held that transactions executed in violation of mandatory regulatory approvals are voidable, meaning the acquirer may not be able to enforce their rights as a shareholder until the approval is obtained or the transaction is set aside.

Conclusion

The NBFC Acquisition of Shareholding or Control Directions, 2025 have modernised and tightened the framework that governs every ownership and management change in the NBFC sector. The new FATF jurisdiction restriction adds a dimension that did not exist in the 2015 framework and has direct implications for foreign-funded NBFCs and PE-backed structures with offshore holding entities. The move to the PRAVAAH portal standardises the application process but also removes the informal communication channels that some practitioners had relied upon. And the three-trigger framework remains unchanged in its core logic: any meaningful change in who owns, controls, or manages an NBFC goes through the RBI first.

For buyers, sellers, and investors in the NBFC space, the practical message is straightforward. Start the RBI application process early. Prepare the documentation before the transaction term sheet is signed. Account for the RBI approval timeline, which can range from six weeks to several months depending on application completeness and the complexity of the proposed structure, in every deal timeline and long-stop date calculation.

Before You Start Any NBFC Ownership Transaction in 2026

Map the proposed transaction against all three triggers in the Acquisition Directions 2025 to confirm whether prior RBI approval is required. Identify whether any foreign investor or intermediate holding entity is routed through a FATF non-compliant jurisdiction and assess the 20 percent voting power cap. Prepare Annex I disclosures and source of funds documentation for all incoming shareholders before approaching the RBI. Plan for a minimum of eight to twelve weeks for the RBI review process when setting your transaction long-stop date. Engaging a qualified NBFC legal and compliance specialist before the application is filed significantly reduces the risk of queries, delays, and rejection.

Frequently Asked Questions

Q1. If an investor already holds 20 percent of an NBFC and wants to increase their stake to 30 percent, do they need RBI approval?

Yes, prior RBI approval is mandatory. The change in shareholding from 20 percent to 30 percent results in a cumulative holding of 30 percent, which crosses the 26 percent threshold prescribed in the Acquisition of Shareholding or Control Directions, 2025. The fact that the investor already holds a stake in the NBFC does not exempt the incremental acquisition from the approval requirement. The directions apply to any acquisition or transfer that results in a holding of 26 percent or more, including through progressive increases over time. The investor must apply through the PRAVAAH portal with complete disclosure documentation before executing the additional share purchase. Any agreement entered before RBI approval is obtained should contain a condition precedent making the transaction subject to and conditional upon the RBI's prior written approval, with a long-stop date that accounts for the approval timeline.

Q2. What is the 30-day public notice requirement and exactly when must it be published?

Under the Acquisition Directions 2025, after the RBI grants its prior approval for a change in ownership or control, a public notice must be given at least 30 days before the actual transfer of ownership or control is effected. The notice must be published by the NBFC and by the transferee party, either jointly or separately. It must appear in at least one leading national English-language newspaper and one leading vernacular newspaper covering the area where the NBFC's registered office is located. The content of the notice must state the intention to transfer ownership or control, the particulars of the incoming party including their identity and background, and the reasons for the transfer. The 30-day period counts from the date of publication of the notice, not from the date of RBI approval. The actual share transfer or control change can only be executed after this 30-day window has passed. Skipping or shortening the public notice period after receiving RBI approval is itself a violation of the directions.

Q3. How does the FATF non-compliant jurisdiction restriction work for a PE fund with an intermediate holding entity in a grey-listed country?

The FATF non-compliant jurisdiction restriction introduced in the Acquisition Directions 2025 applies to investments where the source or any intermediate jurisdiction in the ownership chain is identified as FATF non-compliant at the time of the investment. If a private equity fund routes its investment into an NBFC through an intermediate holding company or special purpose vehicle incorporated in a country that appears on either the FATF High-Risk Jurisdictions Subject to a Call for Action list or the Jurisdictions Under Increased Monitoring list, the entire investment is treated as coming from a FATF non-compliant jurisdiction. The practical consequence is that the fund cannot acquire shareholding that would give it more than 20 percent voting power in the NBFC, regardless of how the shares are structured or whether preference shares or convertible instruments are used. Voting power is assessed on a post-conversion, effective-influence basis, not just at the level of ordinary equity shareholding. A fund that was invested before the intermediate jurisdiction was classified as non-compliant is protected by the grandfathering clause and may continue to hold its existing stake and even bring in additional funds to support business continuity under applicable regulations.