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 difficulties at global private equity firms or their affiliates. Under the proposals, investments of 15% or less would face reduced regulatory scrutiny, while larger holdings involving management control would be subject to tighter oversight.

The proposed rules could be issued in early 2027 following public consultation. The RBI has previously imposed similar conditions on individual transactions, including Bain Capital's acquisition of a 41.7% stake in Manappuram Finance, which required the firm to divest its 93% holding in Tyger Capital.

The proposals come amid continued foreign investment in India's financial services sector. Private equity investment reached $5.4bn in 2025, up 6% year-on-year, according to Grant Thornton, with a further $3.6bn invested in the first nine months of 2026. Recent transactions include Blackstone's agreement to acquire a 16% stake in IIFL Finance for $535m and Temasek's planned $265m investment in Godrej Capital.