https://www.spglobal.com/market-intelligence/en/news-insights/articles/2025/6/japanese-megabanks-focus-on-india-in-hunt-for-higher-returns-89644979

08 JUN, 2025

Japanese megabanks focus on India in hunt for higher returns

By Yuzo Yamaguchi, Beenish Bashir, and Yuvraj Singh

Major Japanese lenders will likely make further investments in India's financial sector after expanding aggressively in Southeast Asia and the US, seeking high-return investment opportunities beyond their mature home market.

Sumitomo Mitsui Financial Group Inc.'s (SMFG's) acquisition of a 20% stake in India's Yes Bank Ltd. is the first major foray by a Japanese lender into India's private commercial banking sector. The proposed deal, announced in May, may encourage SMFG's peers, especially megabanks Mitsubishi UFJ Financial Group Inc. (MUFG) and Mizuho Financial Group Inc., to consider further investments in the South Asian country's financial sector.

"India is the next market for us to push in," MUFG CEO Hironori Kamezawa told S&P Global Market Intelligence on the sidelines of an earnings press conference on May 15. "India is a tough market to enter, but its economy is growing rapidly."

India's economy, forecast to grow 6.2% in 2025 and 6.3% in 2026 as per the International Monetary Fund, has attracted investments from the Japanese megabanks into its nonbanking industry in recent years as the commercial banking sector remains strictly regulated. SMFG, for instance, acquired Fullerton India Credit Co. Ltd., now called SMFG India Credit Co. Ltd., for $2 billion in 2021, while MUFG invested over $700 million in DMI Finance Pvt. Ltd. in 2023 and 2024, Market Intelligence data showed. Mizuho acquired a 15% stake in digital nonbanking finance company Kisetsu Saison Finance (India) Pvt. Ltd. in 2024.

"It could be possible to consider this kind of investment," Mizuho CEO Masahiro Kihara said at a press conference on May 20, without elaborating further.

Shift to India

Japanese megabanks may be turning their attention to India as the country offers strong loan demand amid a growing economy.

The megabanks may benefit from strong cash demand, especially for retail loans, and robust economic growth in India compared to their home market. India's scheduled commercial banks extended total loans of 160 trillion Indian rupees in 2024, versus 67.4 trillion rupees in 2014, while nonbanks' lending nearly quadrupled to 40.3 trillion rupees, according to a report from Osaka Metropolitan University based on data from the Reserve Bank of India.

Yusuke Morishima, a Tokyo-based partner at Bain & Co., said the biggest reason behind the megabanks' aggressive expansion in the Association of Southeast Asian Nations and India "is the expectation of high economic growth in these geographies compared with the mature Japanese economy."

Further, it is driven by the high level of cash the megabanks have at hand, Morishima said.

The megabanks have announced plans to sell cross-holding stocks of Japanese corporations due to local requirements to increase their price-to-book ratios. Together with "historic high profit level in the last few years, they are proactively looking for high-return investment opportunities," Morishima added.

In India, the megabanks have completed nine transactions — acquisitions, share purchases and funding rounds — since Jan. 1, 2021, according to Market Intelligence data. These were limited to deals in target companies that amounted to at least a $100 million combined transaction value. The aggregate value of all those deals amounted to about $5.12 billion.