Japanese banking major MUFG Bank Ltd, a subsidiary of Mitsubishi UFJ Financial Group Inc (MUFG), has agreed to invest Rs39,618 crore to acquire a 20% stake in Shriram Finance Ltd, marking the largest foreign direct investment (FDI) in India’s financial services sector and a landmark transaction in the non-banking financial company (NBFC) space.
In separate statements issued on Friday, MUFG Bank and Shriram Finance announced that the investment will be made through a preferential allotment of equity shares, subject to shareholder approval, regulatory clearances, and customary closing conditions. Upon completion, Shriram Finance will become an equity-method affiliate of both MUFG Bank and its parent, MUFG.
The transaction values the investment at about Rs39,618 crore or about US$4.4bn (billion) and will result in MUFG Bank holding a 20% stake in Shriram Finance on a fully diluted basis. MUFG also plans to nominate two directors to the board of Shriram Finance following completion of the deal.
MUFG Bank says the investment is a strategic step to establish a strong foothold in India’s rapidly expanding micro, small and medium enterprises (MSME) and retail lending markets. Asia is MUFG’s second home market and India is viewed as one of its most critical growth geographies, with the country expected to become the world’s third-largest economy by 2030.
Alongside the equity investment, MUFG Bank has entered into a memorandum of understanding (MoU) with Shriram Finance for a strategic partnership aimed at accelerating growth through collaboration. The proposed alliance will combine MUFG’s global banking expertise and client network with Shriram Finance’s extensive domestic reach, particularly in rural and semi-urban markets.
Shriram Finance is India’s second-largest retail NBFC in terms of loan assets, with assets under management exceeding Rs2.81trn (trillion). The company operates a network of about 3,200 branches across the country and has a strong presence in commercial and passenger vehicle financing, especially in the used vehicle segment.
Shriram Finance says the investment will significantly strengthen its capital base, enhance capital adequacy and provide long-term growth capital to support expansion in segments such as new commercial vehicles and MSME lending. The company also expects the partnership to enhance access to low-cost funding, potentially strengthen its credit ratings, and align its governance and operational practices with global standards.
“This transaction marks a defining moment in our growth journey,” says Umesh Revankar, executive vice chairman of Shriram Finance. He added that the entry of MUFG as a key investor reinforces global confidence in India’s financial services sector and Shriram Finance’s leadership position within it.
MUFG Group chief executive officer (CEO) Hironori Kamezawa says the group was proud to become a strategic partner of Shriram Finance. “Leveraging our global capabilities, MUFG is committed to supporting Shriram Finance’s growth and contributing to economic development, communities, and society in India,” he says.
MUFG has a long history in India that began in 1894 with the setup of the Mumbai branch of Yokohama Specie Bank, a predecessor of The Bank of Tokyo. It currently operates across six locations, including a branch at GIFT City. The group launched the US$300mn (million) Ganesha Fund in 2022 to support Indian startups and invested in DMI Finance in 2023 to expand its presence in digital lending.
According to Shriram Finance, the proposed investment underscores strong investor confidence in India’s lending sector and reflects the growing attractiveness of the country’s retail and MSME credit markets. The deal is expected to close after receipt of all regulatory approvals, with the next major parliamentary session for financial legislation likely during the Budget session in early-2026.
