India to ban private equity firms from controlling multiple non-bank lenders, sources say
INDA•India’s central bank is working on proposals to prevent private equity firms from controlling more than one non-bank lender, citing possible contagion if an investor faces financial stress. Stakes of 15% or less may receive less scrutiny, and rules could be issued early next year after public consultation.
1. Proposed ownership limits
The Reserve Bank of India is working on proposals that would prevent private equity firms from holding a controlling stake in more than one non-bank lender, two people familiar with the plans said. The central bank is concerned that financial stress at a global private equity firm or its affiliates could spread across multiple lenders in which it has significant investments.
2. Smaller stakes may face less scrutiny
Holdings of 15% or less would be considered financial investments and attract less scrutiny, one person said. A draft is expected to be finalised after public consultation, and the rules could be formally issued early next year. Indian law defines control as a 25% stake in listed firms, though a smaller holding can qualify if it confers board appointment or management and policy control.
3. Recent deals and prior approvals
The RBI previously approved Bain Capital’s purchase of 41.7% of Manappuram Finance on condition that it divest its 93% ownership in Tyger Capital. This week, Blackstone agreed to buy 16% of IIFL Finance for $535 million, while Temasek will invest roughly $265 million in Godrej Capital. About $5.4 billion in private equity investments flowed into India’s financial sector last year, and another $3.6 billion came in through the end of September this year.
