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10%

of a payments bank that institutions can hold under one RBI approval

RBI made it easier for institutions to build stakes in payments banks

Markets No. 42 2 October 2026 · 1 min read

The RBI changed the rules on October 1 for institutions buying shares in payments banks.

Earlier, an institution needed RBI approval to build a major stake, and fresh approval every time that stake fell below 5% and it wanted to rebuild it. Now, one approval lets it rebuild a stake of up to 10% without applying again each time.

The rule applies to 3 types of investors: SEBI-registered mutual funds, IRDAI-registered insurance companies and PFRDA-registered pension funds. They can buy individually or together, as long as their total stake stays within 10%.

There is one important condition though: the investor cannot be part of the payments bank's promoter group.

Once approved, the investor must tell the RBI within 3 working days whenever its stake moves above or below 5%. Applications are made through the PRAVAAH portal, and the RBI can cancel the approval if the investor later fails its fit and proper test.

Why does this matter?

Payments banks can accept deposits but cannot lend. That makes it harder for them to make money and grow, so access to institutional capital matters.

The new rule makes it easier for funds and insurers to sell and rebuild stakes. For example, a fund that holds 7% and sells down to 4% can now buy back to 7% under the same approval instead of applying to the RBI again.

It is a small regulatory change, but it makes payments banks easier for institutional investors to hold and trade.

One RBI approval lets funds and insurers hold 10% of a payments bank

How much of a payments bank a fund or insurer can hold under one RBI approval. It covers up to 10%, and every move across 5% is reported to the RBI.

% OF A PAYMENTS BANK'S PAID-UP CAPITAL

  • Below 5%: no approval needed
  • 5% to 10%: covered by the one approval
  • Above 10%: not covered
Bar showing how much of a payments bank a mutual fund, insurer or pension fund can hold under one RBI approval: below 5% needs no approval, 5% to 10% is covered by the one approval, and above 10% is not covered.

Mutual funds, insurers and pension funds outside the promoter group count together. A first purchase of 5% or more still needs RBI approval.

RBI Notification RBI/2026-27/277, October 1, 2026 · From October 1, 2026

Sources