Buying an Existing NBFC in India: RBI Approval and Due Diligence

Why buyers look at existing NBFCs

An existing non-banking financial company already holds a Certificate of Registration (CoR) from the Reserve Bank of India. For a buyer, acquiring such a company can be an alternative to applying for a fresh registration. It is not a shortcut around regulation: the Reserve Bank treats a change in the ownership, control or management of an NBFC as a matter requiring its prior approval, and it assesses the incoming shareholders and directors much as it would assess a new applicant.

Since 28 November 2025, the relevant rules sit in two consolidated directions: the Reserve Bank of India (Non-Banking Financial Companies – Acquisition of Shareholding or Control) Directions, 2025 and the Reserve Bank of India (Non-Banking Financial Companies – Governance) Directions, 2025. This guide summarises what they require and what a buyer should check before signing.

When RBI prior approval is required

Under the Acquisition of Shareholding or Control Directions, an NBFC must obtain the Reserve Bank’s prior written permission for:

• Any takeover or acquisition of control of the NBFC, whether or not it results in a change of management. “Control” follows the definition in the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
• Any change in shareholding, including progressive increases over time, that results in acquisition or transfer of 26 per cent or more of the paid-up equity capital.

Separately, the Governance Directions require prior written permission for any change in management that would result in a change in more than 30 per cent of the directors, excluding independent directors. Directors re-elected on retirement by rotation are not counted.

The directions contain an exception for a buyback or capital reduction approved by a court, which is reported to the Reserve Bank after the event instead. Specific categories such as housing finance companies and standalone primary dealers have additional rules, so the exact category of the target matters.

In practice, most outright purchases of an NBFC cross more than one threshold at once, because the buyer takes control, acquires well over 26 per cent and reconstitutes the board.

How the application works

The application is made by the NBFC itself, not by the buyer, through the Reserve Bank’s PRAVAAH portal. The directions list what must accompany it, including:

• information on the proposed shareholders in the prescribed format;
• the sources of funds for the acquisition;
• declarations that the proposed shareholders are not associated with unincorporated bodies accepting deposits, have not had a CoR application rejected, and have no criminal cases against them;
• bankers’ reports on the proposed shareholders.

After approval, the directions require a public notice at least 30 days before the transfer of ownership or control takes effect, in one national newspaper and one local vernacular newspaper. The notice states the intention to transfer, the particulars of the transferee and the reasons.

The directions also restrict fresh investment from jurisdictions that the FATF identifies as non-compliant: in aggregate, such investors must hold less than 20 per cent of voting power, including potential voting power.

Due diligence checklist

RBI approval assesses the buyer; it does not certify the quality of the company being bought. That is the buyer’s job. A structured NBFC due diligence exercise usually covers the following areas.

Registration and regulatory standing

• Original CoR, its category and any conditions attached to it.
• Whether the company is deposit-taking or non-deposit-taking, and its layer under scale-based regulation.
• Correspondence with the Reserve Bank, inspection reports, show-cause notices, penalties and compounding history.
• Status of periodic returns on the RBI portal and any pending or delayed filings.
• Past changes in control or management and whether each was approved.

Corporate and secretarial records

• MCA master data, annual returns, financial statements and event-based filings.
• Statutory registers, share transfer records and share certificates or demat records.
• Board and shareholder minutes, and any charges registered against the company.

Financial and tax position

• Audited accounts, net owned fund position and how it has been computed.
• Loan book or investment portfolio, asset classification and provisioning, if the company has operated.
• Bank accounts, borrowings, guarantees and off-balance-sheet commitments.
• Income-tax assessments, pending demands, TDS and GST compliance.

Compliance frameworks

• KYC/AML policies, FIU-IND registration and reporting history, and CKYC compliance.
• Fair practices code, grievance redressal and other board-approved policies.
• Where applicable, CERSAI filings and credit information company memberships.

Litigation and contingent liabilities

• Suits, recovery proceedings, consumer complaints and regulatory proceedings.
• Undisclosed liabilities that the seller should indemnify.

Audit and certification work within this exercise, such as a statutory auditor’s certificate of net owned fund or a valuation report, is carried out by independent licensed professionals.

Structuring the transaction

Most deals are documented through a share purchase agreement that is conditional on RBI approval. Key points to address include:

• Conditions precedent: RBI approval, completion of the 30-day public notice period and any other regulatory approvals.
• Seller’s conduct until closing: no new business, borrowings or board changes without the buyer’s consent.
• Representations, warranties and indemnities tied to the due diligence findings.
• Escrow of consideration until completion, where the parties agree to it.
• Foreign buyers: compliance with FEMA and the non-debt instruments framework, including pricing and reporting of the share transfer.

After completion, the company updates its share register, files the required forms with the Registrar of Companies, reconstitutes the board and informs the Reserve Bank as required. Expertvuw’s NBFC takeover page outlines this sequence in more detail.

Timelines

The directions do not prescribe a fixed period within which the Reserve Bank must decide. The overall process typically runs over several months, covering due diligence, preparation of the application, RBI review and queries, the 30-day public notice and closing. The actual time depends on the completeness of the application, the profile of the proposed shareholders and the target’s compliance history.

Common pitfalls

• Completing the transfer before approval. Paying consideration, transferring shares or changing the board before RBI permission and the public notice period is a breach by the NBFC.
• Relying on a “clean shell” description. An inactive company can still have unfiled returns, unresolved RBI correspondence or old liabilities.
• Incomplete source-of-funds documentation. Gaps in the fund trail are a frequent cause of queries.
• Ignoring progressive increases. Several smaller transfers that together reach 26 per cent still need approval.
• Overlooking the director threshold. A board change of more than 30 per cent (excluding independent directors) needs permission even without a share transfer.
• Weak seller protections. Without specific indemnities, a buyer inherits historic non-compliance.

Buyers comparing available companies can see how Expertvuw lists them on its NBFC for sale page. Expertvuw’s team can help you assess a target NBFC and prepare the change-in-control application, with licensed work handled by independent professionals.

Sources

• RBI – Reserve Bank of India (Non-Banking Financial Companies – Acquisition of Shareholding or Control) Directions, 2025 (RBI/DOR/2025-26/340, 28 November 2025)
• RBI – Reserve Bank of India (Non-Banking Financial Companies – Governance) Directions, 2025 (RBI/DOR/2025-26/344, 28 November 2025, as updated)
• RBI – Master Directions index