India’s banking and financial sector is attracting investors from all over the world these days, but the big banks of Japan are showing the most interest. Japan’s leading financial company Mitsubishi UFJ Financial Group (MUFG) is preparing to invest about Rs 40 thousand crore in India’s Shriram Finance. Through this deal, MUFG can get 20 percent stake in the country’s second largest NBFC.
Japan’s economy has been running at a slow pace for a long time. The population there is ageing, there are fewer new loan takers and banks do not have much scope left to grow in the country. In such a situation, Japanese banks are now looking for countries where there is potential for both earning and expansion. India is giving them this opportunity.
Income is increasing in India, people are buying cars, small businesses are expanding and the demand for loans is continuously increasing. The special thing is that many people and small businesses in the country are still not fully connected to the formal banking system. This means that the market for loans and financial services is going to become bigger in the future.
Why NBFCs are Japan’s first choice?
Instead of opening banks directly in India, Japanese banks are taking stake in strong NBFC companies here. MUFG’s investment in Shriram Finance is part of this strategy. Shriram Finance has a strong network in vehicle loans and retail finance, giving Japanese banks direct access to India’s real loan market. MUFG has already tried to take stake in HDB Financial. Apart from this, it has increased its stake to 20 percent by investing in DMI Finance. It is clear that Japan wants to move ahead in India with a local partner instead of going alone.
There is a race for investment in India
Japan is not alone. Big financial players from all over the world are standing in line to invest in India. Names like America’s Blackstone, Switzerland’s Zurich Insurance, Dubai’s Emirates NBD are investing money in Indian banks and NBFCs. This year alone, deals worth about $15 billion have been made. Recently, Blackstone bought about 10 percent stake in Federal Bank, making it the largest shareholder of the bank. This shows that foreign investors are considering India not just as a short-term opportunity but as a long-term horse.
india vs japan
While the number of loan takers is getting limited in Japan, new customers are being added every year in India. Infrastructure projects, MSME sector, digital payments and financial inclusion are India’s strengths. This is the reason why Japanese banks are bringing bagfuls of money to India.
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