Mumbai, Dec. 19 -- Japan's MUFG Bank has decided to acquire a 20% stake in Shriram Finance Ltd (SFL) for Rs 39,618 crore (US$4.4 billion), marking the largest foreign direct investment (FDI) in a financial service company in India.

In a press release on Friday, Shriram Finance said that its board of directors has approved the definitive agreement with MUFG Bank for the proposed investment by the Japanese lender.

Shriram Finance said that the deal has reinforced confidence in India's lending and financial services sector fundamentals and future growth potential. Also, it strengthens Shriram Finance's capital base.

Terming the deal as a landmark transaction, Shriram Finance said it underscores the company's status as India's second large...