High foreign ownership positive for Indian financial institutions: Fitch

Fitch Ratings on Tuesday said significant ownership by foreign shareholders can be positive for Indian financial institutions’ credit profiles through long-term capital, as well as lifting of governance standards in some cases.

However, foreign interest is not in itself a reliable signal of stronger credit fundamentals.

Transactions that strengthen internal controls, risk management and leadership accountability can be more credit-relevant than those purely for financial gains, it noted.

Fitch said recent greater interest from foreign investors indicates their rising confidence in India’s long-term growth prospects, the financial sector’s regulations and oversight, and improved risk governance.

Fitch believes investors will seek platforms with scalable distribution and local expertise.

“Acquirors with experience in developed markets may introduce enhancements in risk controls and board oversight,” it said, adding that the presence of reputable strategic shareholders can potentially ease its cost of capital.

These factors can contribute towards strengthening the financial institutions’ standalone credit profile.

“Significant ownership by foreign shareholders can be positive for Indian financial institutions’ credit profiles through long-term capital and funding flexibility, business franchise enhancement, as well as lifting of governance standards in some cases,” Fitch said in a statement.

Bain Capital’s partial acquisition of Manappuram Finance in 2026 gives it joint control and the right to nominate two board directors and key management personnel, which could support Manappuram’s management, governance and business profile.

However, any impact on the credit profile will take time to materialise and be subject to execution risk, Fitch said.

Fitch believes there is more scope for foreign shareholders to gain control of non-bank financial institutions (NBFIs) than banks, as regulations allow up to full foreign ownership of NBFIs.

For instance, Sumitomo Mitsui Financial Group bought 100 per cent of Fullerton India Credit Company (now SMFG India Credit), resulting in increased board and management representation, along with sales and funding synergies.