With the support of Japan’s largest banking group, MUFG, which is investing Rs 39,618 crore in Shriram Finance, the non-banking finance company (NBFC)’s chances of getting a universal bank licence get a major boost.
In 2013, the Chennai-based Shriram Group, through Shriram Capital, threw its hat in the ring for a bank licence along with 25 other entities. However, the Reserve Bank of India (RBI) granted a universal banking licence to only two applicants — IDFC and Bandhan Financial Services.
After a long hiatus, the central bank, in August 2025, issued an in-principle approval to AU Small Finance Bank to convert into a universal bank.
Banking Push
Experts say SFL’s promoter group, comprising Shriram Capital, Shriram Value Services and Sanlam Life Insurance, among others, with support from strategic investor MUFG Bank — which is part of Mitsubishi UFJ Financial Group, Inc. (MUFG), one of the world’s leading financial groups — may give a bank licence a shot in 3–4 years.
SFL’s case for a bank licence could be bolstered by the fact that the anchor investor, like other large Japanese investors, will be a stickler for rules, which may find favour with the banking regulator.
The NBFC is India’s second-largest non-banking finance company, with assets under management (AUM) of Rs 2.81 lakh crore as of September-end 2025. The fresh capital infusion not only gives the NBFC the firepower to step up lending but could also set it up for a rating upgrade, making future resource raising cheaper.
Strategic Case
Banking expert V Viswanathan said:
“HDFC merged with HDFC Bank as they felt that the cutting-edge NBFC was no longer there, with regulations for NBFCs almost aligned with banks. All rules are more or less the same.
“A bank licence will allow SFL to tap low-cost CASA (current account, savings account) deposits. They can go for subsidy/government-guaranteed MSME loans. SFL has 3,000-plus branches spread across India. So it is attractive to go for a bank licence.”
Capital Boost
Mangesh Kulkarni, Head – Portfolio Management Services, Almondz Financial Services, noted that MUFG Bank has put in good money to pick up a 20 per cent stake in SFL so far.
“This will bolster SFL’s capital adequacy and help further expand its lending operations. The NBFC can leverage the fresh capital five times, effectively being able to lend about Rs 2 lakh crore more. In the short term, its return on equity (RoE) will be slightly negative because equity will increase. But in the long term, there will be value creation,” he added.
Kulkarni opined that since SFL is not part of any industrial house, there is a strong possibility that if it applies for conversion into a universal bank in 3–4 years, the RBI may consider it favourably.