In a move aimed at simplifying succession planning for business families, the Reserve Bank of India (RBI) has eased the process of transferring ownership of finance and investment companies to private family trusts. The regulator has signalled a more pragmatic stance, allowing such transitions on a case-by-case basis while ensuring that trustees remain family members to preserve control and continuity.

For years, business families preferred to hold shares of their finance holding companies and NBFCs through private trusts as part of long-term succession structures. However, the shift of ownership to trusts required RBI approval, particularly when the level of control changed hands. With the rising complexity of corporate structures and the growing involvement of the next generation, applications for such transfers have increased significantly.

Experts say RBI’s latest approach marks a shift in regulatory thinking. According to Vishal Gada, founder & CEO of AURISS, the regulator is now clearer about distinguishing between trustees and the ultimate beneficiaries. From a regulatory perspective, family trusts run by immediate family members ensure continuity and reduce governance concerns. Over the last decade and especially post-COVID Indian business families have increasingly relied on trusts to consolidate assets, minimise inheritance tax exposure in foreign jurisdictions, and streamline succession. As a result, applications for transferring ownership of NBFCs, CICs and holding companies into trusts have risen sharply.

RBI now assesses these proposals with enhanced flexibility. At least three applications have reportedly been cleared recently, signalling a shift to approvals where trustees are part of the promoter family. For NBFCs with notable public shareholding, RBI can still seek guidance from SEBI to ensure no unintended transfer of control takes place. Industry insiders note that the regulator wants to ensure that family trusts do not become a route for outsider influence or foreign control. In cases where conditions raise concerns about shifts in control, RBI may request additional information or undertakings from applicants.

Alongside domestic structuring, RBI is also reviewing requests for overseas investments by such family trusts, provided they meet prescribed guidelines. Financial sector entities may face tighter scrutiny due to their systemic importance, but the central bank is open to evaluating proposals individually. However, approvals for offshore investment vehicles may be limited to smaller stakes, especially in regulated foreign financial firms. Experts highlight that clear rules for family trusts will support long-term governance, reduce disputes among heirs and offer a stable ownership framework for companies operating in sensitive financial sectors. With more Indian families formalising succession plans, regulatory clarity is becoming increasingly essential.

The central bank’s calibrated stance shows it is willing to adapt to modern wealth and business management needs while maintaining strict oversight over entities that form part of India’s financial system.