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 told Reuters.
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.
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.
