An insurance company subscribes to shares in a listed company using funds set aside to meet policyholder liabilities. It takes no board seat, has no observer rights, and no access to Commercially Sensitive Information (‘CSI’). Before it can conclude that no filing is required with the Competition Commission of India (‘CCI’), it must still map the activities of every group entity, and every portfolio company that crosses a low materiality threshold, against the target’s business. In a financial conglomerate, an overlap usually turns up somewhere. When it does, the exemption shrinks to a holding below 10%.

A mutual fund making an identical investment is not subject to this. This difference comes from the Competition (Criteria for Exemption of Combinations) Rules, 2024 (‘Exemption Rules’). Rule 1 of the Exemption Rules exempts three categories of Securities and Exchange Board of India (‘SEBI’)-registered acquirers from notification under Section 6(2) of the Competition Act, 2002, which include: (i) underwriters up to 25%; (ii) stockbrokers up to 25%; and (iii) mutual funds up to 10%. Insurance companies and pension funds are not on the list, and the Exemption Rules do not explain why.

This is not an argument that minority stakes should escape the CCI’s scrutiny. They should not, and generally do not, because a minority holding can carry strategic intent, or control and information rights that shape how a company competes, irrespective of its size. Nor is it an argument that insurers and pension funds belong outside merger control. They do not. The question is narrower, i.e., why should an acquisition that confers no control, no board seat and no access to CSI, made with policyholders’ or subscribers’ money and no strategic intent, need CCI’s prior clearance simply because the acquirer answers to Insurance Regulatory and Development Authority of India (‘IRDAI’) or the Pension Fund Regulatory and Development Authority (‘PFRDA’) rather than SEBI?

Underwriters, stockbrokers and mutual funds have little in common commercially. The ceilings alone make this clear: a stockbroker is permitted two and a half times what a mutual fund is permitted. What connects them is the capacity in which each holds shares. An underwriter takes them on devolvement. A stockbroker holds them as trading inventory. A mutual fund holds them for its unitholders. None is building a position for itself, so Rule 1 of the Exemption Rules looks only at what the acquirer holds, and not at its group level.

Insurers and pension funds invest in exactly that capacity, and their own regulators insist on it. SEBI and IRDAI each require investment decisions to sit with a dedicated in-house function, walled off from the sponsor or promoter group, with no personnel overlap with a group mutual fund or a bank. A pension fund run by an HDFC group entity must set its investment strategy independent of HDFC Bank Limited and independent of the HDFC mutual fund. These are conditions of registration, and not internal policy. A framework that aggregates these holdings to those of a banking or lending affiliate attributes to them a degree of coordination that their own regulators forbid.

Policyholder funds are segregated under the Insurance Act, 1938, and cannot be commingled with shareholder capital. Under the National Pension System (‘NPS’), subscriber money vests in the NPS Trust, a PFRDA-registered custodian holds the assets, and the pension fund manager directs investment without ever holding what it invests.

One objection follows naturally, i.e.,  – extend the applicability of Rule 1 of the Exemption Rules to insurers and pension funds, and a group could route a strategic stake through its insurance arm to avoid scrutiny. However, it could not, as  Rule 1’s exemption is conditional throughout. It holds only where the acquisition carries no control, no board or observer right and no access to CSI. The moment any of those appear, the exemption falls away and the transaction is notifiable like any other, exactly as it would be for a mutual fund today. Extending Rule 1 changes who qualifies for the carve-out. It does not touch the conditions that keep the carve-out narrow.

The other exemptions in the Exemption Rules were intended to cover what Rule 1 does not, but they do not work for a fiduciary investor either. Rule 2 of the Exemption Rules exempts a first-time, purely financial acquisition up to 25%, unless the acquirer’s group has an overlap with the target, in which case the ceiling drops to 10%. Rule 3 of the Exemption Rules, in the context of further acquisitions, measures its thresholds against the acquirer’s group and caps overlap cases at a 5% increase, or below 10% altogether.

Both turn on the same overlap exercise, and that exercise is where the real burden sits. An affiliate, for this purpose, includes any company in which a group entity holds 10%, a board or observer seat, or access to CSI. A large insurer or pension fund manager typically sits within a group that includes a bank, a lending business and an asset manager. This is an identifiable pattern across groups such as SBI, ICICI, HDFC, and Kotak, each holding small stakes across different sectors. The insurer itself will usually hold shares in those same sectors, simply because a diversified portfolio is what fiduciary investing looks like. Overlaps turn up as a matter of course, and one is enough to cut the exemption to 10%. An exercise that is meant to clear passive investment ends up disproportionate to it, and usually concludes that no exemption is available at all.

The result is a group-wide mapping exercise for an investment that carries no control and no strategic value, followed in most cases by a 10% ceiling regardless. Where the institution wants to hold more, the acquisition becomes notifiable, with the standstill obligations that follow, even though nothing about it (no board seat, no observer right and no CSI access) looks any different from a mutual fund’s investment, except that the mutual fund files nothing.

Rule 1 of the Exemption Rules should be extended to acquisitions by IRDAI-registered insurers out of segregated policyholder funds, and by PFRDA-registered pension funds, made in the ordinary course of business. This is not a call for lighter scrutiny; the same conditions that confine the exemption today would confine it here too. It is a call to stop spending review capacity on filings that answer no substantive question, so that the capacity remains available for the transactions that do.