Why Japan’s MUFG Is Investing $4B in India’s Shriram Finance Amid Low Growth at Home

Key Highlights

• Japan’s MUFG is set to invest over $4 billion for a roughly 20% stake in India’s Shriram Finance.
• The deal reflects Japanese banks’ push overseas amid low growth, ageing demographics and weak credit demand at home.
• India’s fast-expanding retail credit market is emerging as a key destination for Japanese capital.

Japan’s Mitsubishi UFJ Financial Group (MUFG) is poised to invest more than $4 billion for an approximately 20% stake in India’s Shriram Finance, in what would be one of the largest cross-border financial investments into India’s non-bank lending sector, according to people familiar with the matter.

The deal, expected to be finalised on Friday, highlights how Japan’s largest banks are increasingly turning to overseas markets, particularly India, to offset structural weaknesses in their domestic economy.

MUFG Bets Big on India With $4B-Plus Shriram Finance Deal

While Bloomberg previously reported that MUFG could invest more than $3.2 billion, sources stated that the final figure would be significantly higher, with one estimating the investment at around $4.3 billion, or roughly 390 billion rupees.

Shriram Finance informed Indian stock exchanges that its board would meet on Friday to consider a fundraising proposal, without providing further details, signalling that the transaction is nearing completion.

Why Japanese Megabanks Are Looking Beyond Home Markets

The deal reflects a deeper structural shift in Japan’s banking strategy. Japan’s economy has long been marked by low growth, an ageing and shrinking population, and subdued credit demand, limiting opportunities for domestic loan expansion.

Even as Japan has seen tentative signs of wage growth and inflation, demand for credit remains weak, and margins are thin. As a result, megabanks such as MUFG are increasingly seeking growth, scale and yield abroad, particularly in emerging markets where credit penetration is still low.

India, with its expanding middle class and infrastructure push, has become one of the most attractive destinations for Japanese financial capital.

India’s Credit Growth Offers What Japan’s Economy Lacks

India’s financial sector offers what Japan currently lacks: rising incomes, strong loan demand, infrastructure-led growth and a rapidly formalising economy.

Retail and small-business lending in India continues to expand at a pace far exceeding that of developed economies, driven by vehicle purchases, personal loans and MSME financing. For Japanese banks, this provides long-term exposure to consumption-led growth without the demographic drag facing their home market.

Shriram Finance: Gateway to India’s Retail Lending Boom

Shriram Finance is one of India’s largest retail-focused non-bank financial companies, with a strong presence in commercial vehicle financing, two-wheelers, passenger cars and personal loans, segments closely tied to economic activity and income growth.

As of the end of September, the company reported assets under management of 2.8 trillion rupees ($31 billion), making it a significant platform for accessing India’s underpenetrated credit markets.

For MUFG, the investment offers a ready-made distribution network and deep local expertise, allowing it to participate in India’s lending boom without building operations from scratch.

Part of a Broader Japan-to-India Capital Shift

MUFG’s move follows a series of high-profile Japanese financial investments in India. Earlier this year, Sumitomo Mitsui Financial Group acquired a 24.2% stake in Yes Bank, beginning with a $1.6 billion investment for a 20% holding.

Separately, Mizuho Securities announced it would acquire a majority stake in Indian investment bank Avendus from KKR for up to 81 billion yen ($523 million). Together, these deals highlight a clear trend: Japanese capital is increasingly flowing into India as megabanks seek growth abroad to compensate for stagnation at home.

In that context, MUFG’s multi-billion-dollar bet on Shriram Finance is less an isolated transaction and more a strategic signal. Indicating how the global capital is repositioning around India’s expanding credit economy.