The Japanese lender eyes one of the biggest foreign direct investments in India’s NBFC space, while the Indian firm seeks fresh capital for growth.

What happens when one of the largest banks in Japan sets its eyes on an Indian lender? The answer may soon be known. On October 1st, 2025, the Economic Times reported that Mitsubishi UFJ Financial Group (MUFG) was in advanced talks for a $2.6 billion deal.

This would be for a 20 percent stake in Shriram Finance, India’s largest retail-focused non-bank finance company (NBFC).

Latest Twist: MUFG Investment In Shriram Finance

The Economic Times report on the MUFG Shriram deal came on October 1, 2025. It said the Japanese bank is in discussions to buy a stake in Shriram Finance through a preferential allotment route. This means fresh equity would be issued, giving Shriram Finance new capital rather than a change in ownership among existing shareholders.

This MUFG investment in Shriram Finance is being seen as one of the largest foreign direct investments in India’s NBFC industry. According to Reuters, the deal has reached the stage of exclusivity. Negotiations are still under way and no official filing has yet been made by either side.

The talk of this deal lifted Shriram Finance shares on the exchanges. On October 1, 2025, the stock climbed more than 3.5 percent intraday. Some market trackers even recorded a rise closer to 4 percent.

The numbers behind the company add to the story.

Metric	Value	Period
Assets Under Management (AUM)	₹2.63 trillion (about $31 billion)	March 2025
External Commercial Borrowing (ECB) Share	15% of total borrowings	March 2025
Overseas Bond Share	6.8% of total borrowings	March 2025

Shriram Finance is a major player in vehicle loans, small business lending and personal credit. The firm has a strong reach across semi-urban and rural areas, which is exactly where foreign banks usually find it hard to expand.

Why MUFG Sees Shriram Finance as Its Gateway to Indian Lending?

In Japan, banks like MUFG face low growth and low interest rates. Lending opportunities are limited at home. Overseas expansion becomes the natural choice.

Shriram Finance $2.6 billion stake talks fit perfectly with this global story. India is one of the fastest growing credit markets in Asia. Shriram is well established in lending to drivers, small traders and households who are outside the mainstream banking system.

MUFG stake purchase in an Indian finance firm is not only about money. It is also about strategy. The Indian NBFC already has foreign loans in its books. In April 2025, its CEO even said the firm was studying yen-denominated fundraising to lower costs and spread risk.

This gives a direct link between the Japanese bank MUFG investment India finance and the ground reality in India. MUFG brings both equity and access to Japanese debt markets.

To see this link clearly, the borrowing mix of Shriram Finance tells the story.

Borrowing Source	Share of Total	Comment
ECBs	15%	Overseas commercial loans
Overseas Bonds	6.80%	Foreign market bonds
Excess Liquidity	₹300 billion	Held as buffer

This shows that Shriram already has a footprint in global borrowings. A Japanese partner could expand that exposure and reduce funding costs.

Past Lessons: Similar Deals In Indian Finance

The Economic Times report on the MUFG-Shriram deal isn’t the first time a Japanese lender has made a sizable move in India. In 2025, Sumitomo Mitsui Banking Corporation (SMBC) secured RBI approval to acquire 24.99 % stake in Yes Bank, marking a major foreign investment in India’s banking sector. LoansJagat covered this development in “Big Update: RBI Clears SMBC’s 24.99% Stake Buy in Yes Bank, CCI Nod Awaited”.

At first glance, the two deals appear similar, foreign capital entering an Indian financial firm. But there is a key difference: Yes Bank is a commercial bank, while Shriram is an NBFC. This distinction makes MUFG’s move even more intriguing, as it signals confidence in non-bank financial intermediation and the regulatory space around NBFCs.

Deal	Stake	Value	Sector
Sumitomo Mitsui – Yes Bank	20%	$1.58 billion	Banking
MUFG – Shriram Finance (proposed)	20.00%	$2.6 billion	NBFC

The larger cheque size for Shriram tells a clear story. Foreign banks see more promise in India’s NBFC model where retail and small-ticket loans are growing at double-digit pace.

Reaction Of Banks And Government In The Past

Whenever such big foreign deals are in discussion, regulators like the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) take notice. Shriram Finance issued a statement after the October 2025 report. It said no shareholder had informed the company of any stake sale plan. The firm asked the public not to believe in speculation. MUFG also declined to make any public confirmation.

But the market reaction was swift. Investors pushed the stock up within hours. This has been the usual pattern. When Yes Bank’s deal with Sumitomo Mitsui was announced in 2024, its stock also jumped more than 2 percent.

Another earlier case was in May 2024. Shriram Finance sold its housing finance subsidiary to Warburg Pincus for about ₹4,630 crore. The stock then rose by more than 3 percent.

Company	News	Stock Movement	Year
Shriram Finance	MUFG stake talks	+3.5% to +4%!	2025
Yes Bank	Sumitomo Mitsui deal	0.028	2024
Shriram Housing Finance	Sale to Warburg Pincus	0.032	2,024

This pattern shows how investors welcome foreign money into Indian lenders. The government’s stance is usually measured. It calls for compliance with foreign direct investment rules and ensures the regulator vets the deal.

Conclusion

MUFG stake purchase in an Indian finance firm is still at the discussion stage. But the Economic Times report on the MUFG Shriram deal has already moved the market. If this $2.6 billion deal goes through, it would mark one of the largest Japanese bank MUFG investment India finance cases in history.

Shriram Finance $2.6 billion stake talks reflect a shift in India’s NBFC region. It is a story of capital, confidence and foreign faith in India’s lending market. The next few months will show if MUFG is ready to sign the papers and rewrite the playbook for global banks in India.

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