India to ban private equity firms from controlling multiple non-bank lenders: Sources

Résumé détaillé

Holdings of 15 per cent or less will be considered a financial investment and attract less scrutiny, according to one of the people ...

India's central bank is working on proposals that would prevent private equity firms from holding a controlling stake in more than one non-bank lender, two people with knowledge of the plans said.

It is concerned that financial stress at a global private equity firm or its affiliates could have a contagion effect across several non-bank lenders in which it has significant investments, they said.

Authorities, however, hope to encourage smaller financial investments that will be subject to lesser scrutiny, the people added, declining to be identified as the discussions are private.

Under Indian law, control is defined as a large stake — 25 per cent in the case of listed firms — though ownership can be smaller and still be considered a controlling stake if the investor has the right to appoint a majority of the directors or can control a firm's management or policy decisions.

Holdings of 15 per cent or less will be considered a financial investment and attract less scrutiny, according to one of the people. A draft of the rules will be finalised after public consultation and they could be formally issued early next year, the person said.

The Reserve Bank of India did not respond to Reuters requests for comment.

Indian banks and non-bank lenders have seen a rush of foreign investor interest as demand for credit in the economy remains strong and loan delinquencies remain low.

About $5.4 billion in private equity investments flowed into India's financial sector last year, up 6 per cent from 2024 and 17 per cent higher than levels for 2023, according to data from Grant Thornton. Another $3.6 billion has come in this year through to end-September.

The RBI has at times moved to prevent controlling investments in multiple non-bank lenders.

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