In a landmark deal underscoring global confidence in India's economic trajectory, Shriram Finance has announced that Japan's MUFG Bank will acquire a 20% stake in the company for a staggering ₹39,618 crore (approximately $4.4 billion). This transaction, approved by the Shriram Finance board on Monday, represents the single largest overseas investment into India's financial sector.
A Strategic Endorsement of India's Financial Health
Umesh Revankar, Executive Vice Chairman of Shriram Finance, hailed the deal as a "huge endorsement" of India's progress. He pointed to a systemic reduction in credit costs across lenders as evidence of a structurally healthier economy and the maturation of "financial discipline" among borrowers and institutions. "That's why I think more international institutions want to come to India and tie up with NBFCs," Revankar stated while addressing reporters in New Delhi.
The sentiment was echoed by MUFG's leadership. Yasushi Itagaki, the Japanese bank's Senior Managing Corporate Executive, identified India as its "most strategically important key market" in Asia, citing the nation's strong potential for enduring economic growth. The investment, he noted, is aimed at building a "solid business foundation" to serve India's Small and Medium Enterprises (SMEs) and retail sectors, thereby capturing the country's booming domestic demand.
Deal Details and the Broader FDI Context
The stake sale to MUFG Bank, a subsidiary of the Mitsubishi UFJ Financial Group, is pending shareholder and regulatory approvals. Officials indicated the process could be completed by April-May 2026. This mega-deal arrives amidst a notable wave of Japanese capital flowing into Indian financial services. Recent months have seen Sumitomo Mitsui Banking Corporation pick up a stake in Yes Bank and Mizuho Securities agree to a majority acquisition in Avendus Capital. Further, in October, UAE's Emirates NBD Bank agreed to purchase a majority stake in RBL Bank.
This rush of foreign investment into lending institutions presents a contrasting picture to the broader Foreign Direct Investment (FDI) trends. Net FDI inflows into India have seen pressure, with 2024-25 recording less than $1 billion in net inflow due to rising repatriation by foreign investors and increased overseas investments by Indian companies. However, the first seven months of 2025-26 have shown a recovery, with net FDI standing at $6.20 billion. Revankar expressed optimism that the MUFG deal "should change (the FDI trend)" and is a massive sign of belief in the Indian economy, predicting that more capital will follow.
Shriram Finance's Focus: No Banking Ambitions, Only Core Growth
Despite the massive capital infusion, which is expected to boost Shriram Finance's capital adequacy ratio to around 31% from 20.68%, the company has no plans to deviate from its core business. Revankar categorically dismissed any interest in applying for a banking licence, stating the subject was "not a discussion at all." He emphasized that even MUFG supports their focus on serving their existing constituency—the underbanked and unbanked segments.
"We would like to remain there. We feel that there is enough opportunity for growth…in the constituency that we have built, which is vehicle (loans) and SMEs," Revankar explained. He saw no distinct advantage in a banking licence for serving their current customer base, a focus that MUFG reportedly appreciates.
As of the end of September, Shriram Finance, India's second-largest non-bank (excluding housing finance companies), served nearly 97 lakh customers with assets under management worth ₹2.81 lakh crore. Its loan portfolio is dominated by commercial vehicle loans (46%), followed by passenger vehicle loans (21%) and loans to MSMEs (14%). The company reported a net profit of ₹2,307 crore for the July-September quarter, an 11% year-on-year increase.
Clarifying the partnership's nature, Revankar addressed speculation about MUFG potentially increasing its stake beyond 50% in the future. He stated that the Japanese bank desires to remain a minority shareholder and that no discussions have been held about going beyond the agreed 20%. Itagaki confirmed this stance, saying MUFG's immediate priority is to "digest" this investment and ensure the partnership delivers value, with no current appetite for further expansion in India's financial services segment beyond Shriram Finance.
