MUMBAI, Aug 28 Reuters Talks to sell majority stakes in two Indian banks have attracted interest from foreign peers in Japan and the Middle East betting on a fastgrowing economy, but tighter regulations and valuation concerns could curb their appetite, analysts and sources say.

The rare opportunity for foreign banks to take controlling stakes in a market dominated by stateowned banks comes as existing investors in Yes Bank and IDBI Bank look to divest their holdings.

Banking sector deals in India, especially those involving foreign entities, are rare. A full takeover of troubled Indian lender Lakshmi Vilas Bank by Singaporebased DBS Group in a regulatorydriven transaction in 2020 was the last major deal.

The top shareholders are looking to exit from the two banks about four years after they were roped in by the regulator and the government to help them recover from sharply worsening asset quality due to rampant lending that threatened their stability.

Private sector lender Yes Bank, in which shareholders are looking to sell a 51 stake, has drawn interest from Japan39;s Sumitomo Mitsui Banking Corp SMBC and Emirates NBD, Reuters has reported.

IDBI Bank, in which the Indian government and the Life Insurance Corporation are collectively selling a 60.72 stake, has seen Emirates, Canada39;s Fairfax Group, as well as local rival Kotak Mahindra Bank express interest.

The foreign interest in the two banks comes as the Indian economy is forecast to grow at 7.2 this year,…