MUMBAI - Japan's MUFG will acquire a 20% stake in ‍Shriram Finance Ltd (SFL) ‍for $4.4 billion, the Indian non-bank lender said on Friday, marking the largest cross-border ​investment in India's financial sector.

The sector has struck deals worth nearly $15 billion so far this year, ⁠according to Dealogic data, more than double the $6.5 billion done in 2024.

The deal comes close on ⁠the heels ‌of Emirates NBD Bank's $3 billion investment for a 60% stake in Indian private lender RBL Bank in November, which was then the largest investment ⁠in the sector by a foreign bank.

For years, Japan's biggest banks have sought out overseas targets in the face of a shrinking domestic market and rock-bottom interest rates, with India becoming a popular destination due to its fast-growing economy.

Rival Sumitomo Mitsui Banking ⁠Corporation, a unit of Sumitomo Mitsui ​Financial Group, bought a 24.2% stake in Indian lender Yes Bank, starting with a 20% stake for $1.6 billion in May.

Shriram ‍Finance, owned 24.9% by the Shriram Group, stated that the transaction is subject to regulatory approval.

The SFL board ​has also approved granting MUFG certain minority protection rights, including the right to nominate up to two non-independent directors on its board and pre-emptive rights to maintain proportional shareholding. These rights will lapse if MUFG's stake falls below 10% on a fully diluted basis, the company added.

MUFG will also have to pay a one-time non-compete and non-solicit fee of $200 million to SFL's major shareholder Shriram Ownership Trust, subject to the non-bank lender's shareholders' approval.

Shriram Finance said the deal would improve its capital adequacy, bolster its balance sheet, and offer long-term growth capital. It will ⁠also aid in accessing low-cost liabilities and strengthening credit ‌ratings, the non-bank lender noted.

Shares of Shriram Finance rose as much as 3.4% to a record 898.85 rupees following the news. Since talks of the MUFG deal were first ‌reported in early ⁠October, the non-bank lender's shares have jumped about 46%.

(Reporting by Gopika Gopakumar in Mumbai, Nandan Mandayam ⁠and Urvi Dugar in Bengaluru; Editing by Sonia Cheema and Muralikumar Anantharaman)