(Adds Deutsche Bank's response)
MUMBAI, Jan 22 (Reuters) - Indian lender Yes Bank is the main suitor in a race for Deutsche Asset Management (India) Pvt. Ltd's mutual fund business in India, two sources who are directly involved in the process said, although talks are still at an early stage.
The deal, which the sources estimated at nearly 2 billion rupees ($32.5 million), is coming at a time of optimism in Indian markets after a surprise interest rate cut and hopes of reform ahead of the government's maiden budget next month.
Deutsche Asset Management (India) Private Ltd. is a Mumbai-based investment management division of Deutsche Bank A.G., with average mutual fund assets of 226.70 billion rupees ($3.68 billion) in the October-December period, data from the Association of Mutual Funds in India shows.
Earlier this month, Yes Bank's board of directors agreed to seek approval from Indian regulators to set up asset management and primary dealership businesses.
Local media reported last week that Yes Bank was considering a move for Deutsche's Indian mutual fund business.
"The process of the Deutsche mutual fund acquisition is the key focus for the bank in short term," one of the sources said.
Both sources declined to be identified because the information has not been made public.
A Deutsche Bank spokesman said the company did not comment on market rumours. A spokesman for Yes Bank did not respond to email and telephone requests for comment. ($1 = 61.5500 Indian rupees) (Reporting by Abhishek Vishnoi; Editing by Alan Raybould and Jane Merriman)