Shriram Finance Rate Cuts Ahead
Shriram Finance plans to reduce lending rates by up to 100 basis points in 18 months, driven by lower funding costs from MUFG Bank's major investment, enabling cheaper loans and stronger growth in vehicle and small business financing.
MARKET NEWS
12/23/20251 min read
Following a historic $4.4 billion equity investment for a 20% stake from Japan's MUFG Bank, Shriram Finance, India's second-largest retail non-banking financial company (NBFC), expects to significantly lower its lending rates by up to 100 basis points (bps) over the next 18 months due to lower borrowing costs.
Deal Catalyzes Cost Savings
The MUFG cooperation will reduce incremental borrowing costs from the current 8.8%, allowing for the repricing of obligations and a possible credit rating improvement, according to Umesh Revankar, Executive Vice Chairman of Shriram Finance. The company will be able to pass on benefits to customers thanks to this cost advantage, which is projected to be between 40 and 100 basis points. This will make loans more competitive versus banks and peers, especially in commercial vehicles, passenger cars, MSMEs, and underserved regions like North, Central, and East India.
Strategic Growth Implications
Targeting areas including new commercial vehicles (CVs), passenger vehicles (PVs), and SMEs amid a ₹40–50 trillion credit deficit, the injection provides sufficient resources for 17–18% asset under management (AUM) growth in FY26. After three to four years of delays, Revankar observed pent-up demand for vehicle upgrades, increasing lending opportunities while preserving solid margins of 8.25 to 8.5%.
Broder Market Context
By the end of March 2026, regulatory approvals for the transaction are anticipated, putting Shriram Finance in a position to grow globally and keep clients without obtaining a banking license because its NBFC model allows greater flexibility. With a 5-year ROE recovery goal and steady 15-20% growth, analysts see this as a game-changer for profitability.