Government Clears IDFC First Bank's Extended Stake in Construction Firm

By siliconindia  |  Tuesday, July 8, 2025

Government Clears IDFC First Bank's Extended Stake in Construction Firm
  • The Finance Ministry, on RBI’s recommendation, has allowed IDFC First Bank to hold over 30% stake in Niraj Kakad Constructions for five years.
  • This bypasses Section 19(2) of the Banking Regulation Act, which limits such holdings in non-subsidiary firms.
  • The exemption is effective from July 7, 2025, to July 7, 2030, unless withdrawn earlier.
In a significant regulatory development, the Ministry of Finance has granted IDFC First Bank Limited a five-year exemption from the provisions of Section 19(2) of the Banking Regulation Act, 1949. This allows the bank to continue holding more than 30% of the paid-up capital in Niraj Kakad Constructions Private Limited exceeding the statutory cap normally applicable to banking entities.
The exemption, issued via Notification S.O. 3018(E) dated July 7, 2025, is effective immediately and will remain valid until July 7, 2030, unless withdrawn earlier. The decision was made on the recommendation of the Reserve Bank of India (RBI) and is intended to support continuity in the bank's investment strategy, which may involve legacy or strategic holdings.
Section 19(2) of the Banking Regulation Act restricts banks from holding more than 30% in non-subsidiary companies. However, Section 53 permits the Central Government to issue exemptions in the public interest, based on RBI's advice.
The notification also clarifies that the exemption will not affect any liabilities or obligations incurred by the bank before its expiry. This move provides regulatory flexibility and underscores the government's support for targeted financial decisions in alignment with broader public and economic interests.

ON THE DECK