Mistry does not see any challenge in India’s banking sector over foreign capital because the Indian financial system is very strong and very well regulated. “Its domestic investment itself is so large, so I wouldn’t worry about foreigners coming in and putting more capital into India,” he said.

Giving an example, Mistry explained that the MSCI index is based on the amt of money foreigners can invest into a company. “For banks, the foreign ownership is capped at 74%. Theoretically, if we were to increase that from 74% to 100%, one can get a lot of foreign money flowing into India without any impact whatsoever on control or shareholding,” he said.

“This is because the Reserve Bank of India controls the shareholding very closely in terms of ownership in banks. So these small little changes can bring about a huge passive capital into India, if not active capital,” he said.

The landmark transaction will be the largest foreign direct investment in a financial services company in India and reflects foreign banks bet on Indian growth story. According to the deal, the investment in Shriram Finance will be MUFG Bank’s parent entity’s largest investment in India so far. The investment will be made through a preferential issuance of equity shares.