India Weighs Limiting Private Equity Firms to One Controlled Non-Bank Lender
Key Facts
The Reserve Bank of India is working on a proposal to prevent private equity firms from holding a controlling stake in more than one non-bank lender, according to people familiar with the matter cited by Reuters in a report published via MarketScreener on November 12, 2026. If adopted, the proposal would limit private equity firms’ multiple investments in India’s non-bank lending sector. The sources cited concerns that financial stress at a global private equity firm or its affiliates could spread to several lenders in which it holds stakes. One source said the stress "could have a contagion effect across multiple non-bank lenders." The rules remain at the proposal stage, with a draft to be finalized after public consultation before formal issuance.
The scope of the proposed restrictions depends on the meaning of control, which is not limited to ownership percentage alone, Reuters reported. Indian law defines control as a significant stake of up to 25% in listed companies. But control may also be established through a smaller stake if it allows the investor to appoint a majority of the board or influence the company’s management and policies. This makes assessing the investor’s actual influence part of determining whether its ownership would be subject to the restrictions. Reuters said the rules under consideration concern holding a controlling stake in more than one lender, while available information did not detail how the test would be applied in each case.
By contrast, a source told Reuters that stakes of 15% or less would be treated as financial investments and attract less scrutiny. This threshold would draw a proposed distinction between financial investment and ownership that confers controlling influence, while the definition of control would also remain linked to management rights and influence. Reuters quoted the source as saying: "Stakes of 15% or less will be considered financial investments and will attract less scrutiny." According to the proposal’s description, this classification would give investors room to retain smaller stakes without subjecting them to the same level of scrutiny applied to control. The report gave no further details on the procedures these investments would face or the scope of the reduced scrutiny.
The discussion comes alongside existing Reserve Bank of India directions on changes in ownership of non-bank finance companies. Directions issued on November 28, 2025 require a company to obtain prior written approval when acquiring control. Approval is also required when transferring or acquiring a stake of 26% or more of paid-up capital, including through gradual increases over time. This means the existing framework already provides for prior review of some changes in control and ownership, while the new proposal addresses a private equity firm holding controlling stakes across more than one lender. Available information does not explain how the proposed rules would interact with the existing approval threshold or whether they would change it.
Bain Capital’s deal involving Manappuram Finance provides an earlier example of regulatory approval being linked to overlapping ownership among lending companies. The Reserve Bank of India approved Bain’s purchase of a 41.7% stake in Manappuram Finance last year, on condition that it divest its 93% ownership in Tiger Capital, Reuters reported. The condition places the investment in a finance company in the context of reviewing an investor’s ties to other lending companies, the issue the proposal aims to regulate more broadly. The report did not specify whether the deal would serve as a direct precedent for applying the proposed rules or how the rules would treat similar investments. The draft rules are to be finalized after public consultation and could be formally issued early next year, according to a source cited by Reuters.