The Reserve Bank of India (RBI) on November 28, 2025, issued the Reserve Bank of India (Small Finance Banks – Voluntary Amalgamation) Directions, 2025 for public comments. Framed under Sections 44A and 35A of the Banking Regulation Act, 1949, these directions outline the regulatory framework for voluntary amalgamation between two Small Finance Banks (SFBs) or between an SFB and a Non-Banking Financial Company (NBFC). The objective is to ensure a transparent, fair, and well-governed amalgamation process that safeguards stakeholders’ interests and upholds financial stability.
The prescribes a detailed multi-level approval mechanism—requiring consent by a two-thirds majority of the Board of Directors of each entity, followed by shareholder approval representing two-thirds in value of shares. Boards must ensure due diligence, fair valuation by independent experts, conformity with regulatory shareholding norms, and assessment of the impact on profitability and capital adequacy. In cases involving NBFCs, compliance with KYC norms, regulatory guidelines, and credit agreement clauses must be verified before approval.
Further, the directions stipulate that post shareholder approval; the scheme must be submitted to the RBI through its PRAVAAH portal for sanction. Dissenting shareholders are entitled to claim the value of their shares within three months of sanction, as determined by RBI. Provisions on promoter share dealings mandate adherence to SEBI’s insider trading norms. The also repeals earlier instructions on voluntary amalgamation while allowing continuity of prior approvals, ensuring harmonisation with existing laws and clarity in interpretation.
These Directions shall come into force with immediate effect.
[Notification No. RBI/DOR/2025-26/177 DoR.HOL.REC.96/ 16-13-100/2025-26]
