Axis Bank
has put on hold plans to sell a stake in its consumer lending
arm, Axis Finance. after the central bank eased proposed
restrictions on overlapping business activities between banks
and their subsidiaries, three sources familiar with the matter.
India’s third-largest lender initiated the stake sale
process in Axis Finance last year and appointed merchant
bankers, after the Reserve Bank of India in 2024 proposed draft
rules that barred banks from having overlapping businesses with
subsidiaries.
Morgan Stanley had been appointed as a banker to the deal.
However, following a pushback from the industry, the RBI
diluted its proposal in December 2025, permitting banks to
continue with potentially overlapping non-bank businesses while
ring-fencing them from banks’ main operations.
The rules in their original form could have forced large
banks, including HDFC Bank, ICICI Bank and
Axis Bank to either merge or divest non-bank lending
businesses held as subsidiaries.
The change in rules has prompted a rethink at Axis Bank, the
sources, directly familiar with the deal, said.
“Axis Finance is well-capitalised and does not need to rush
into raising capital,” said one of the sources, who declined to
be named.
An email sent to Axis Bank and to Morgan Stanley was not
answered.
Axis Finance, registered as a non-bank finance company, is
set to submit a revised growth plan to the bank’s board in April
and will reevaluate its capital-raising needs thereafter, the
person said.
A separate source, while not confirming that the deal is on
hold, said the bank will approach the regulator with options for
Axis Finance – including infusing fresh capital itself.
The deal to sell an initial 20% stake in the lender was
estimated to be worth $350 million to $400 million, according to
local media reports. Reuters could not independently confirm the
value of the deal.
Homegrown private equity fund Kedaara Capital was most
actively in discussions, the second of the three sources said.
A third source said the bids received were not lucrative
enough, which prompted the bank to pull back on the sale after
the recent change in regulations.
Axis Bank has invested 23.75 billion Indian rupees ($262.49
million) in Axis Finance over the past decade, according to the
company’s website. As of March 31, 2025, Axis Finance had assets
under management of 415.83 billion rupees.
Published on January 23, 2026
