Why This Topic Matters Right Now
NBFC deals are booming in India. In 2025, banking and financial services deals touched USD 15.7 billion across 84 transactions — about 26% of all Indian M&A value that year. Big names made headlines. MUFG bought a 20% stake in Shriram Finance for Rs 39,618 crore. International Holding Company put USD 1 billion into Samman Capital for a 43% stake. BFSI deal count tripled in 2025, jumping from 10 deals in 2024 to 30 deals.
This wave means one thing for lawyers, founders, and investors: more Share Purchase Agreements (SPAs) are being drafted for NBFC takeovers than ever before. But NBFC deals are not like normal company buyouts. They come with extra rules, extra regulators, and extra risk. Get the SPA wrong, and the whole deal can fall apart — even after money changes hands.
To put the scale in context: as of December 2025, India had just over 9,000 registered NBFCs, down from 9,443 in March 2023, as the RBI keeps cancelling licenses for weak compliance. The ones that remain are getting bigger. Total NBFC Assets Under Management (AUM) touched roughly Rs. 32 trillion as of March 2025. Between 2023 and 2025, the RBI penalised 62 NBFCs for regulatory lapses, and it cancelled 22 NBFC licenses in a single action reported in early 2026. This mix — a shrinking but consolidating sector, heavy regulatory scrutiny, and record deal flow — is exactly why SPA structure matters so much right now.
This guide breaks down how to structure an SPA for an NBFC takeover, in plain language, with the real numbers and rules you need to know.
What Makes an NBFC Takeover Different
A Non-Banking Financial Company (NBFC) is not a normal target company. It lends money, holds public deposits (in some cases), and answers to the Reserve Bank of India (RBI). Because of this, an NBFC takeover SPA must deal with three things a normal SPA does not:
- A regulator sits between the buyer and the deal. The RBI must approve most ownership changes before they happen.
- The target holds other people’s money. Borrowers, depositors, and lenders all have a stake in how the NBFC is run after the sale.
- “Control” means more than shares. You can trigger regulatory approval even without buying a majority stake.
Every clause in the SPA should be built around these three facts.
Step One: Know the RBI Approval Triggers
Before you draft a single clause, figure out if the deal needs RBI approval. Under the RBI’s Master Direction – Scale Based Regulation, 2023, and the newer 2025 Directions on acquisition and transfer of control, prior RBI approval is required in three situations:
- Change in shareholding of 26% or more of the paid-up equity capital, even if it happens gradually over several transactions. If a buyer picks up 10% in January, 8% in April, and 9% in September, the RBI treats this as crossing 26% in total — approval was needed before that last purchase.
- Change in control, whether or not shares change hands. Control is judged by who can appoint a majority of directors or steer management decisions — not just by the percentage of shares owned. A buyer with only 25% of shares but the right to name 3 of 5 board seats still triggers this rule.
- Change in management of 30% or more of directors, excluding independent directors.
There’s also an indirect trigger. If a holding company that owns 51% of an NBFC is itself sold, the RBI treats this as an indirect change of control of the NBFC — even though no NBFC shares moved at all.
Practical takeaway for the SPA: build the entire transaction timeline around RBI approval as a condition precedent, not an afterthought.
Step Two: The Core Building Blocks of the SPA
An NBFC takeover SPA needs everything a normal SPA has, plus extra layers for the regulatory and financial risks unique to lending businesses. Here are the parts that matter most.
Conditions Precedent (CPs)
This section lists everything that must happen before the deal can close. For an NBFC, the CP list should include:
- Prior written RBI approval for change in control and/or shareholding
- Fit-and-proper clearance for new directors and shareholders from RBI
- 30-day public notice before the transfer, as required by RBI rules
- CCI (Competition Commission of India) approval, if deal size crosses merger control thresholds
- Any sector-specific consents (for example, if the NBFC holds gold loan or housing finance licenses)
- No material adverse change in the loan book between signing and closing
Buyers should insist that RBI approval is a hard condition, not something that can be waived. Skipping this step to close faster risks the RBI cancelling the NBFC’s registration later.
Representations and Warranties (Reps and Warranties)
This is where NBFC deals differ most from a typical business sale. Standard reps cover title to shares, no litigation, and proper corporate authority. NBFC-specific reps should also cover:
- Loan book quality — accuracy of the classification of standard, sub-standard, and non-performing assets (NPAs), and compliance with RBI’s asset classification norms
- Provisioning — that provisions for bad loans match RBI’s Expected Credit Loss or provisioning norms
- Capital adequacy — that the NBFC meets the minimum Capital to Risk-weighted Assets Ratio (CRAR) required for its category
- No breach of RBI directions — on fair practices, KYC, interest rate disclosure, and grievance redressal
- No related-party lending violations — a common problem area in NBFC audits
- Deposit-taking compliance, if the NBFC accepts public deposits
- IT and cybersecurity compliance, since RBI has tightened data and outsourcing norms for regulated entities
Sellers will want to cap or limit these reps. Buyers should resist broad caps on financial reps like loan book quality — this is usually where the real risk hides.
Indemnities
Indemnity clauses in NBFC SPAs typically carve out special, uncapped, or higher-cap indemnities for:
- Regulatory penalties from RBI for pre-closing violations
- Loan losses beyond what was disclosed or provisioned for
- Fraud or misrepresentation in the loan book
- Tax liabilities, including any GST or TDS shortfalls tied to loan recoveries
A common structure is a general indemnity cap of 15–25% of deal value, alongside an uncapped, ring-fenced indemnity for regulatory and fraud-related losses.
Conditions Subsequent
Even after closing, some obligations continue. The SPA should require the seller (and sometimes the buyer) to:
- Notify RBI of the completed transfer within the prescribed window
- Publish the required post-completion notices
- Cooperate with any RBI inspection relating to the pre-closing period
- Hand over statutory registers, RBI correspondence, and inspection reports
Pricing Mechanism
NBFC valuations are sensitive to loan book quality, so most SPAs use one of two structures:
- Locked-box mechanism: Price is fixed as of a reference balance sheet date, with protections against leakage of value before closing.
- Completion accounts mechanism: Price is adjusted at closing based on final book value, net worth, and NPA levels — common when there’s a long gap between signing and RBI approval.
Given that RBI approval can take several months, many NBFC SPAs prefer completion accounts, since the loan book can shift meaningfully in that time.
Escrow and Holdback
Because indemnity claims for regulatory or credit issues often surface only after an RBI inspection, it’s common to hold back 10–20% of the purchase price in escrow for 12–24 months post-closing.
Step Three: Structuring Around Regulatory Timelines
RBI approval is not instant. Applications go to the Regional Office of the Department of Non-Banking Supervision, and processing can take weeks to several months, depending on the complexity of the deal and the “fit and proper” review of new shareholders and directors.
Because of this, most SPAs build in:
- A long-stop date (commonly 6–12 months from signing) after which either party can walk away if RBI approval isn’t received
- No public announcement clauses until conditions are closer to being met, to avoid triggering the 30-day public notice prematurely
- Interim covenants restricting the seller from taking major lending, dividend, or capital decisions between signing and closing without buyer consent
Step Four: Special Clauses for NBFC Deals
Beyond the standard SPA skeleton, a few clauses are worth calling out separately because they come up again and again in NBFC transactions.
- Change of control clauses in existing loan agreements. NBFCs usually borrow from banks and bond markets. Many of these facility agreements have their own change-of-control triggers that can accelerate repayment. The SPA should require the seller to identify and, where needed, get waivers from these lenders before closing.
- Co-lending and partnership agreements. Many NBFCs run co-lending arrangements with banks. These contracts often need partner consent for a change in ownership.
- Employee and key managerial personnel (KMP) continuity. RBI’s fit-and-proper norms apply to KMPs too. The SPA should address retention or replacement of the CEO, CFO, and compliance officer, since RBI will scrutinise this closely.
- Data and borrower confidentiality. Handing over loan books involves transferring sensitive personal and financial data of thousands of borrowers. The SPA needs data protection covenants aligned with India’s DPDP Act framework.
A Quick-Reference Checklist
- Confirm whether the deal crosses the 26% shareholding or 30% management thresholds
- Build RBI approval into conditions precedent, with a realistic timeline
- Draft NBFC-specific reps on loan book quality, provisioning, and CRAR
- Set special indemnities for regulatory and credit risk, separate from the general cap
- Choose locked-box or completion accounts pricing based on expected approval timeline
- Add escrow or holdback for post-closing regulatory and credit claims
- Check change-of-control clauses in the NBFC’s own borrowing and co-lending agreements
- Plan the 30-day public notice and post-completion RBI intimation
- Address KMP continuity and fit-and-proper approvals for new directors
Final Word
NBFC takeovers reward patience and precision. The commercial terms — price, indemnity caps, escrow — matter, but they only work if the regulatory architecture around them is sound. A well-structured SPA treats RBI approval as the backbone of the deal timeline, not a side condition, and builds reps, indemnities, and covenants specifically around loan book quality and regulatory compliance. With deal activity in this space having tripled in 2025 and fresh capital chasing Indian NBFCs, getting this structure right is no longer a niche legal skill — it’s becoming a core part of doing financial services M&A in India.
This article is for general information only and is not legal or financial advice. Every NBFC transaction is fact-specific, and RBI approval requirements can vary based on the target’s category, layer classification, and deposit-taking status.
For structuring support on your next NBFC transaction, connect with NBFC Advisory.
