Emirates NBD-RBL deal signals floodgate of foreign investment in India

On Saturday, Emirates NBD said it has entered into an agreement to acquire a 60% stake in RBL Bank for ₹26,850 crore. The transaction, which is subject to shareholder and regulatory approvals, will see Emirates NBD acquiring more stake through a mandatory open offer to the rest of the shareholders, a joint statement said.

This is the largest foreign direct investment in India’s banking sector till date. In the last 30 days alone, the country has seen two global groups investing in local lenders. On 2 October, Abu Dhabi-based investor Avenir Investment RSC, an affiliate of International Holding Co. (IHC), agreed to pick a 43.46% stake in Sammaan Capital (formerly Indiabulls Capital) for $1 billion.

Before that, following Reserve Bank of India’s (RBI’s) approval, Japanese lender Sumitomo Mitsui Banking Corp. (SMBC) completed the acquisition of a 20% stake in Yes Bank in September. That apart, SMBC has also signed an agreement with CA Basque Investments, a company affiliated with The Carlyle Group Inc., to acquire an additional 4.2% equity stake in Yes Bank, taking the total stake to 24.2%. In August, RBI approved SMBC’s proposal to buy up to 24.99% in Yes Bank.

Japan’s MUFG is also reportedly in talks to acquire a controlling stake in Avendus Capital, a homegrown financial services firm, valuing it at around $800-900 million.

Policy change

“After nearly two decades, the policy framework for Indian banking is pivoting towards globalisation. Policymakers and the regulator have signalled greater flexibility to enable both financial and strategic capital to play a larger role. While I would not wish to fuel speculation, both the Yes Bank-SMBC and NBD-RBL developments augur well for the future,” said Gopal Jain, managing director and chief executive officer, Gaja Capital, an India-focused private equity firm. Gaja Capital was the first institutional backer of RBL Bank in 2010.

According to Jain, there is new thinking in the room—more progressive, more ambitious for Indian banking. “With the private sector overtaking the public sector in market share, the need for fresh capital has become structural, and this will naturally attract more strategic and financial investors,” he added.

This also illustrates the shifting sands of India’s banking landscape, with global brands entering the Indian market after many had exited over the past 15-20 years. Firms such as Credit Suisse, Deutsche Bank, RBS, Standard Chartered and Citi, among others, have either scaled down their India presence or have exited completely.

Renewed global investor interest in Indian banks is a strong vote of confidence in the long-term growth and resilience of the economy. Banking is highly correlated with the overall health of an economy, and therefore, more institutional capital in this sector will have a multiplier effect, supporting credit penetration and financial inclusion in one of the world’s fastest-growing large markets.

“India’s banking sector is increasingly drawing the attention of global financial institutions seeking both growth and stability. The combination of a large underbanked population, a resilient economy, and a well-regulated financial system creates a compelling opportunity for international players to participate in India’s long-term growth story,” said Raghav Gupta, joint CEO, IIFL Capital.

Growth potential

More deals are likely to be stitched either through minority stakes, co-branded propositions, or fintech-linked collaborations, as global players look to leverage India’s scale and digital depth, Gupta added.

As per a recent UBS report, India’s financial services industry profits are projected to grow from ₹6.1 trillion in FY25 to ₹11.3 trillion by FY30, at a 13% compound annual growth rate (CAGR). Non-banking financial companies (NBFCs) are expected to outperform banks with 16% growth versus 11%.

“Low credit penetration offers growth opportunities in housing loans and business lending. Market-linked businesses show strong potential, with wealth and asset managers projected to grow significantly. Digital payments boom expected, with fee income to exceed ₹1 trillion by 2030,” it said.

“Global institutions are taking a keen interest in Indian banks and NBFCs. It sets the stage for the next level of growth in the FIG (Financial Institutions Group) sector, which is now ripe for further consolidation,” said Rahul Saraf, Citi India’s head of investment banking. Citigroup was an advisor on the Yes Bank-SMBC and Samman-IHC deals.