**Executive Summary:**
This document, titled the "Reserve Bank of India Issue and Pricing of Shares by Private Sector Banks Directions, 2016," outlines the regulations for private sector banks in India regarding the issuance and pricing of shares. It specifies the types of share issues allowed, general permissions for such issues, and reporting requirements to the RBI. These directions came into effect on the day they were placed on the official website of the Reserve Bank of India (RBI).
**Key Points / Main Content:**
* **Applicability:** These directions apply to all private sector banks licensed by RBI to operate in India, excluding Urban Cooperative Banks, Foreign Banks, and banks licensed under specific statutes.
* **Types of Issues:** Banks can issue shares through:
* Public Issues (Initial Public Offer, Further Public Offer)
* Private Placement (Preferential Issue, Qualified Institutional Placement)
* Rights Issue
* Bonus Issues
* **General Permission for Issue of Shares:** Private sector banks (listed and unlisted) have general permission to issue shares through the above routes, subject to the following conditions:
* Compliance with FEMA and extant Foreign Investment Policy.
* Compliance with SEBI guidelines, Companies Act, and related rules.
* Approval from the bank's Board/AGM.
* Pricing of shares as per SEBI formula (for listed banks) or Companies Act (for unlisted banks).
* Allotment of shares subject to compliance with RBI Master Directions on prior approval for share acquisition exceeding 5% of paid-up capital.
* Adherence to regulatory limits for shareholders/promoters.
* Reporting requirements to RBI after allotment, including details of the issue, pricing, allottees, and shareholding position, along with Board/AGM Resolution and prospectus/offer document.
* **Repeal and Other Provisions:**
* Several previous circulars related to share issuance are repealed.
* Approvals given under the repealed circulars are considered valid under these Directions.
**Impact Analysis:**
**Private Sector Banks Licensed by RBI in India:**
* *Impact:* Must comply with the new directions regarding share issuance and pricing.
* *Action Required:* Ensure all share issuances adhere to the conditions outlined, including compliance with FEMA, SEBI guidelines, and Companies Act, as well as obtaining necessary approvals and submitting required reports to RBI.
**Investors in Private Sector Banks:**
* *Impact:* Subject to existing RBI regulations on prior approval for share acquisition exceeding 5% of paid-up capital.
* *Action Required:* Investors need to ensure they comply with the existing RBI Master Directions on Prior approval for acquisition of shares or voting rights in private sector banks.
**Reserve Bank of India (RBI):**
* *Impact:* Responsible for overseeing and enforcing compliance with these directions.
* *Action Required:* Receive and review reports from private sector banks regarding share issuances and monitor compliance with the regulations.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the banking sector.
Banking Regulation Act, 1949: An act of the Indian Parliament to regulate banking companies in India.
Private Sector Banks: Banks licensed to operate in India under the Banking Regulation Act, 1949, other than Urban Cooperative Banks, Foreign Banks and banks licensed under specific Statutes.
Master Direction Issue and Pricing of shares by Private Sector Banks, Directions, 2016: The title of the policy document being analyzed.
Foreign Exchange Management Act, 1999: An Act of the Parliament of India to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
Companies Act: Legislation that deals with the incorporation of companies, registration of companies, responsibilities of the company, directors, dissolution of the company.
SEBI: The Securities and Exchange Board of India, the regulator of the securities market in India.
Mumbai, Maharashtra: City in India where the central office of Reserve Bank of India is located.
RBI/DBR/2015-16/21
Master Direction DBR.PSBD.No.95/16.13.100/2015-16 April 21, 2016
Master Direction - Issue and Pricing of shares by Private Sector Banks,
Directions, 2016
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In exercise of the powers conferred by 35 A of the Banking Regwulation Act, 1949 the
Reserve Bank of India being satisfied that it is necessary anda expedient in the public
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interest so to do, hereby, issues the Directions hereinafter sdpecified.
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CHAPTER – I
PRELIMINn
ARY
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1. Short Title and Commencement i
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(a) These Directions shall be callede the Reserve Bank of India (Issue and Pricing of
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Shares by Private Sector Bainks) Directions, 2016.
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(b) These directions shallr come into effect on the day they are placed on the official
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website of the Resterve Bank of India (RBI).
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2. Applicability
The provisions of these Directions shall apply to all private sector banks licensed by RBI
to operate in India.
3. Definitions
(i) In these Directions, unless the context otherwise requires, the terms herein shall bear
the meanings assigned to them below –
1“Private Sector Banks” means banks licensed to operate in India under Banking
Regulation Act, 1949, other than Urban Co-operative Banks, Foreign Banks and banks
licensed under specific Statutes.
(ii) All other expressions unless defined herein shall have the same meaning as have
been assigned to them under the Banking Regulation Act, 1949 or the Reserve Bank of
India Act, 1934 or SEBI Guidelines or Companies Act and rules made thereunder or as
used in commercial parlance, as the case may be.
CHAPTER – II
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TYPES OF ISSUES
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4. Banks normally issue shares by way of:
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i) Public Issues
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a) Initial Public Offer t
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b) Further Public Offer
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ii) Private Placement
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a) Preferential Issue i
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b) Qualified Institutional ePlacement
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iii) Rights Issue Di
iv) Bonus Issues
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a CHAPTER III
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ISSUE AND PRICING OF SHARES - GENERAL PERMISSION
5 A private sector bank, both listed and unlisted, has general permission for issue of
shares through all the routes mentioned in Section 4 above subject to the following
conditions:
i. The issue of shares shall be in compliance with the provisions of Foreign
Exchange Management Act, 1999 (FEMA) and extant Foreign Investment Policy
of Government of India for Private Sector Banks.
ii. The issue of shares shall be in compliance with the extant SEBI guidelines,
provisions of Companies Act and rules made thereunder.
2iii. The issue of shares through any of the routes shall have the approval from the
bank’s Board / AGM, as the case may be in compliance with the Companies Act
2013 /SEBI guidelines.
iv. Pricing of shares through any of the routes by listed banks shall be as per SEBI
formula, while for unlisted banks the pricing shall be as per Companies Act and
rules made thereunder.
v. Allotment of shares to the investors under any of the routes shall be subject to
compliance with the extant RBI Master Directions dated November 19, 2015 on
Prior approval for acquisition of shares or voting rights in private sector banks
which requires investors to obtain specific prior approval of RBI if the proposed
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acquisition results in aggregate holding of 5 per cent or wmore of the paid-up
capital of the bank. a
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vi. The specific regulatory limits permitted to the shardeholders or the promoters /
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promoter group shall not be breached on account of fresh subscription, own
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entitlement, renouncement of rights or otherwise.
vii. On completion of allotment process subnject to compliance with the stipulation as
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at para 5 (v) above, if applicable, complete details of the issue shall be reported
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to RBI viz. date of issue, details of the type of issue, issue size, details of pricing,
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number and names of allotteres, post allotment shareholding position, etc, along
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with a copy of Board / AGM Resolution and prospectus / offer document in the
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format given in the scehedule to these Directions.
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REPEAL AND OTHER PROVISIONS
6. With the issue of these Directions, the instructions / guidelines contained in the
following circulars issued by the Reserve Bank stand repealed:
i. DBOD.No.BC.76/16.13.100/94 dated June 17, 1994.
ii. DBOD.No.PSBS.BC.72/16.13.100/98-99 dated July 10, 1998.
iii. DBOD.No.PSBD.BC.99/16.13.100/2004-05 dated June 25, 2005.
iv. DBOD.No.PSBD.BC.92/16.13.100/2009-2010 dated April 20, 2010.
7. All approvals given under the above circulars shall be deemed as given under these
Directions.
3SCHEDULE
Bank……………………
Address: ………………..
The Chief General Manager
Private Sector Banks Division
Department of Banking Regulation
Reserve Bank of India
Central Office, Mumbai
Dear Sir,
Details of issue of shares and aggregate shareholding1
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We give below the necessary information as per RBI Master Direction on Issue and Pricing of
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shares by Private Sector Banks.
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1) Details of issue of shares r
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Sr. Date Type Size of the issue raised No. of Prhe-issue Post-issue
No of the of the allottees t
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issue issue for the PWaid- reserves Paid- reserves *List of
issue up up shareholders
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No. of Face Premium Amoun o al al aggregate
shares value on each t raised i shareholding
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of share c of 5% or
each e above
share r
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* with date of RBI approval for such shareholding
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1 Aggregate shareholding has the same meaning as defined in RBI Master Directions on Prior approval
for acquisition of shares or voting rights in private sector banks. The bank shall ensure compliance with
Section 12B (5) of Banking Regulation Act, 1949 in respect of the above shareholders.
42) Format for Furnishing Details of aggregate shareholding2 of 5% or more post IPO/FPO/
Preferential issue / QIPs/ Rights Issue
Sr. Name of No. of % of total No. of % of Aggregate *% of total
No the Shares paid-up Shares Shares No. of paid-up Shares
Allottees held prior Share approved now Shares (i.e. aggregate
to prior to for allotted (post issue) percentage
Allotment Allotment Allotment to paid shareholding
up post issue)
shares
(A) (B) (C) (D) (A+C) (B+D)
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* If 5% or above, date of RBI approval for such shareholding
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Encl : t
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1) copy of the Board / AGM Resolution
2) Copy of the prospectus / offer document
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Date: ………… Signature (with name and
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i designation):
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…………………
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2 Aggregate shareholding has the same meaning as defined in RBI Master Directions on Prior approval
for acquisition of shares or voting rights in private sector banks. The bank shall ensure compliance with
Section 12B (5) of Banking Regulation Act, 1949 in respect of the above shareholders.
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