US private equity firms Blackstone is set to make a big entry into Kerala-based Federal Bank, underscoring the rising global appetite for Indian private lenders even as the sector braces for tighter regulation and higher competition.
Federal Bank said on Thursday that the Reserve Bank of India has approved Blackstone’s proposal to acquire up to a 9.99 percent stake in the bank. The investment will be made through Blackstone affiliate Asia II Topco XIII Pte Ltd via a preferential issue on a private placement basis.
Blackstone is one of the world’s largest alternative asset managers, with investments spanning private equity, real estate, infrastructure, credit and hedge funds across more than 30 countries. Founded in 1985 and headquartered in New York, the firm manages over $1 trillion in assets and has steadily expanded its presence in India across real estate, technology, logistics and financial services.
Under the plan, Blackstone will invest ₹6,196.51 crore to become the single largest shareholder in Federal Bank. The bank does not have a promoter, and all its shares are publicly held, allowing large institutional investors to emerge as anchor shareholders.
Details of the deal were outlined in a notification issued in October 2025. Federal Bank will issue up to 27.3 crore warrants, each convertible into one fully paid-up equity share with a face value of ₹2. The issue price has been fixed at ₹227 per share, including a premium of ₹225. Once fully converted, the warrants will translate into an equity holding of just under 10 percent.
For Federal Bank, the investment is expected to strengthen its capital base and provide greater flexibility to pursue growth, especially in retail lending, MSME finance and digital banking. The presence of a global investor such as Blackstone could also improve market confidence and governance perception, analysts said.
The approval adds to a broader trend of rising foreign interest in India’s banking sector. In 2025, Emirates NBD announced a $3 billion investment (about ₹24,900 crore) to acquire a 60 percent stake in RBL Bank, marking the largest foreign investment so far in India’s private banking space. Earlier, Japan’s Sumitomo Mitsui Banking Corporation picked up a 24 percent stake in Yes Bank, while Warburg Pincus and Abu Dhabi Investment Authority together invested $877 million (around ₹7,280 crore) in IDFC First Bank.
Blackstone’s move also comes amid policy signals that could further open up the sector. Reports suggest the Centre is examining a proposal to allow foreign investors to hold up to 49 percent in state-run banks. Currently, foreign ownership in public sector banks is capped at 20 percent, while private banks can have foreign shareholding of up to 74 percent. In comparison, the insurance sector permits 100 percent foreign direct investment.
If policy easing materialises, analysts expect global capital flows into Indian banking stocks to accelerate, with well-capitalised private lenders such as Federal Bank likely to be among the key beneficiaries.