RBI's prior approval not needed for Japan's MUFG to acquire 20% stake in Shriram Finance

The Reserve Bank of India (RBI) has confirmed that Japan's Mitsubishi UFJ Financial Group (MUFG) doesn't require prior regulatory permission to participate in the Shriram Finance preferential issue, the company informed in an exchange filing on Friday, 13 February.

In December last year, Shriram Finance announced a stake sale of 20% to MUFG , which will involve a preferential issuance of equity shares valued at ₹39,618 crore, subject to shareholder and regulatory approvals. The proposed transaction will mark the largest foreign direct investment (FDI) in India's financial sector to date, the company then stated.

“We have been informed by the Investor that the Reserve Bank of India (RBI) has confirmed that the Investor is not required to obtain prior approval from the RBI for the Proposed Transaction,” the filing posted by Shriram Finance read.

About Shriram-MUFG deal

MUFG Bank’s investment in Shriram Finance is a strategic equity stake rather than a passive financial interest. Through the proposed transaction, Shriram Finance aims to enhance balance sheet resilience when scale, liquidity, and risk management have become increasingly important in the Non-Banking Financial Company (NBFC) sector, it said.

Meanwhile, in the case of MUFG, the transaction will provide exposure to one of India’s most extensive retail and MSME lending franchises, built over decades across semi-urban and rural markets, Shriram Finance said.

The $4.4 billion transaction has received approval from credit rating agencies such as Care Ratings, ICRA, and Moody's Ratings, positioning the NBFC favourably to obtain low-cost borrowing.

Concerns raised by proxy advisers

Despite all the benefits highlighted by Shriram Finance, two prominent proxy advisers have flagged concerns, Mint reported on 13 January 2026.

The NBFC is requesting shareholder approval for three resolutions, which include the issuance of 47.1 crore shares valued at ₹39,618 crore to MUFG through a preferential private placement; granting specific controlling rights to MUFG Bank; and a one-time, non-recurring payout of $200 million from MUFG to promoter Shriram Ownership Trust for non-compete and non-solicit commitments.

The resolutions received shareholders approval at an extraordinary general meeting on 14 January.

Governance research firm Stakeholders Empowerment Services (SES) has opposed all three proposals, while Institutional Investor Advisory Services has opposed only the third one. InGovern Research Services, on the other hand, has supported all resolutions to approve the deal.

What's next?

Following RBI's nod, other approvals related to the proposed transaction are pending, and the company will provide further updates as and when such approvals are obtained, the filing said.