India plans restrictions on private equity ownership of non-bank lenders
India's central bank is preparing proposals that would prevent private equity firms from holding controlling stakes in more than one non-bank lender, amid concerns over the potential spread of financial stress across the sector, according to a report by Reuters . The Reserve Bank of India (RBI) is reportedly considering restrictions designed to limit contagion risks arising from financial…
The Reserve Bank of India is reportedly drafting regulations that would restrict private equity firms from owning more than a 15% stake in any single non-bank lender, according to a Reuters report. The RBI is concerned that widespread financial stress at global private equity firms or their affiliates could spread to India's non-bank lenders, potentially causing a contagion effect. If enacted, the proposed rules would come into effect in early 2027 after a public consultation period.
Investments of 15% or less would face less regulatory oversight compared to larger holdings involving management control, which would be subject to stricter regulations. The RBI has previously imposed similar restrictions, such as when Bain Capital attempted to acquire a 41.7% stake in Manappuram Finance. In that case, Bain was required to divest its 93% holding in Tyger Capital.
The proposals come as foreign investment in India's financial services sector continues to grow. Private equity investments reached $5.4 billion in 2025, representing a 6% increase year-on-year. In the first nine months of 2026 alone, another $3.6 billion was invested in the sector. Notable recent transactions include Blackstone's acquisition of a 16% stake in IIFL Finance for $535 million and Temasek's planned $265 million investment in Godrej Capital.
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