Global private equity firm Blackstone has received approval from the Reserve Bank of India (RBI) to acquire up to a 9.99 % stake in Federal Bank, marking a significant foreign investment in India’s private banking sector. The RBI’s go-ahead allows Blackstone to proceed with the transaction through its affiliate, Asia II Topco XIII Pte Ltd, via a preferential issue of warrants.

Key Highlights

• RBI approval allows Blackstone to invest up to 9.99% in Federal Bank
• Deal signals rising foreign investor confidence in India’s private banking space

Under the agreement, Federal Bank will issue up to 272.97 million warrants, each convertible into one fully paid-up equity share at a price of ₹227 per share (including a ₹225 premium). Upon full conversion of these warrants, Blackstone’s holding could reach 9.99 % of the bank’s paid-up share capital, potentially making it the largest institutional shareholder in the Kochi-based lender.

The deal comes amid a broader surge in foreign investments into Indian banks, with recent major moves including Emirates NBD’s acquisition of a 60 % stake in RBL Bank and Japan’s Sumitomo Mitsui Banking Corporation increasing its holding in Yes Bank. Market experts say such deals reflect growing confidence among global investors in India’s long-term banking growth prospects and the RBI’s more welcoming stance on overseas capital inflows.

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Blackstone’s agreement also provides the firm with the right to nominate a non-executive director to Federal Bank’s board once its stake exceeds 5 %, subject to regulatory and shareholder approvals. The investment is expected to bolster the bank’s capital base and support its expansion plans as it seeks to deepen its footprint in India’s competitive private banking landscape.