Mitsubishi UFJ Financial Group (MUFG) is in advanced talks to acquire a 20 per cent stake in Shriram Finance Ltd. for about $2.6 billion, according to a report by the Economic Times citing people familiar with the matter.

Both parties have signed an exclusivity agreement to move forward with negotiations. The proposed investment would be made through a primary issuance via preferential allotment and will not involve a secondary share sale, the report said.

Any deal by Japan’s largest lender would follow similar moves by its peers to expand in India, a market seen as critical for growth. In May, Sumitomo Mitsui Financial Group’s banking arm agreed to acquire a 20 per cent stake in Yes Bank Ltd. for $1.58 billion, the biggest foreign investment in India’s banking sector to date.