Shriram Capital’s bank license aspirations get a boost with MUFG backing

The fresh capital infusion not only gives the NBFC the firepower to step up lending but could set it up for a rating upgrade, making future resource raising cheaper
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Reuters

Backed by Japan’s largest banking group MUFG, which is investing ₹39,618 crore in Shriram Finance, the non-banking finance company (NBFC) now stands a stronger chance of securing a universal banking license.

In 2013, Chennai-based Shriram Group applied for a banking license through Shriram Capital, competing against 25 other contenders. At the time, the Reserve Bank of India (RBI) approved only two applicants—IDFC and Bandhan Financial Services. After years without new licenses, the central bank granted AU Small Finance Bank in-principle approval to transition into a universal bank in August 2025.

Financial analysts suggest that with strategic backing from MUFG Bank, Shriram Finance’s core promoters—including Shriram Capital, Shriram Value Services, and Sanlam Life Insurance—could pursue a banking license within the next three to four years.

SFL’s application may also gain traction due to MUFG’s reputation as a disciplined long-term investor, potentially aligning with the RBI’s preference for governance-focused financial partners.

As of September 2025, Shriram Finance holds the position of India’s second-largest NBFC, managing assets worth ₹2.81 lakh crore.

Beyond lending expansion opportunities, the new capital could lead to credit rating improvements, reducing future borrowing costs.

Banking industry specialist V Viswanathan stated: “HDFC merged with HDFC Bank as NBFC regulations increasingly mirror banking requirements. Full conversion would enable SFL to access low-cost deposits through CASA accounts and government-backed MSME loan programs. With over 3,000 branches nationwide, the infrastructure supports this transition.”

Mangesh Kulkarni, Head of Portfolio Management Services at Almondz Financial Services, observed that MUFG’s investment establishes a 20% ownership stake while strengthening SFL’s capital buffers for growth. “The equity infusion could support up to ₹2 lakh crore in additional lending. While near-term returns on equity might dip with expanded share capital, long-term value creation appears promising,” he explained.

Kulkarni added that since SFL operates independently of corporate conglomerates, its eventual application for banking status could receive favorable RBI consideration.

Published on December 21, 2025