India attracts foreign bank investment as China expansion costs rise

Foreign banks are increasingly turning to India for expansion through acquisitions and partnerships, finding the market more accessible than China. According to analysts from Roland Berger, establishing a locally incorporated unit in China requires at least $149 million in capital, whereas the requirement for wholly owned units in India is significantly lower at $53 million.

India's $3.65 trillion banking market has seen several major foreign investments in 2025. Notable deals include Sumitomo Mitsui Banking Corp.’s $1.6 billion purchase of a 20 percent stake in Yes Bank, Mitsubishi UFJ Financial Group’s $4.3 billion agreement for a 20 percent stake in Shriram Finance Ltd., and Emirates NBD’s $2.75 billion acquisition of a 60 percent stake in RBL Bank.

In contrast, China’s banking market has seen a decline in foreign participation. The share of foreign banks in China’s $70.93 trillion market fell from 1.5 percent in 2020 to 1.2 percent in 2024. Despite regulatory liberalization, the number of foreign branches and subsidiaries in China has plateaued since 2018, with some institutions exiting the retail sector due to intense competition and high capital requirements.