RBI may ban PE ownership of more than one NBFC

The Reserve Bank of India (RBI) is drafting proposals to prohibit private equity firms from holding a controlling stake in more than one non-banking financial company (NBFC). This initiative stems from concerns that financial instability at a global private equity firm or its affiliates could trigger a contagion effect across multiple NBFCs under their control.Under the proposed norms, a controlling stake is generally considered to be 25% for listed firms, though lower thresholds may apply if an investor maintains the right to appoint a majority of directors or influence management and policy decisions. Investments of 15% or less would be classified as financial investments and subject to reduced regulatory scrutiny.The RBI has previously enforced similar principles, such as requiring Bain Capital to divest its stake in one NBFC to receive approval for its acquisition in another. Furthermore, Mizuho Financial Group has been requested to provide a consolidation plan for its multiple Indian non-bank holdings.