BENGALURU (Reuters) - Japan's Mitsubishi UFJ Financial Group (MUFG) is considering sweetening its $1.7 billion offer for a minority stake in Indian lender HDFC Bank's non-banking unit, Bloomberg News reported on Monday.

Both sides are looking to reach an agreement for a 20% stake in HDB Financial Services in about a month, the report said, citing people familiar with the matter.

HDFC Bank, which had a 94.84% stake in HDB Financial as of March 2023, and MUFG both did not respond to a Reuters request for comment.

HDB Financial, incorporated in 2007, provides secured and unsecured loans and has more than 1,680 branches across India.

It must be listed on or before September 2025 to adhere to a central bank regulation, amended in 2021, that requires large non-banking financial companies (NBFCs) to go public within three years.

However, HDFC Bank has said it will list HDB Financial even sooner, which will likely make it among the first of a few large NBFCs that will be listed in the next year.

HDFC Bank is looking at all possible options to list HDB Financial, Chief Financial Officer Srinivasan Vaidyanathan said in an earnings call over the weekend.

Vaidyanathan said he could not comment on the MUFG deal.

MUFG's influence on HDB Financial's strategy is among the final details under discussion, the Bloomberg report added.

(Reporting by Nandan Mandayam in Bengaluru and Siddhi Nayak in Mumbai; Editing by Savio D'Souza)