Former Citigroup Inc. Chief Executive Officer Vikram Pandit is buying a stake in India’s JM Financial Ltd. and will take a leadership role as it sets up a bank, according to the Mumbai-based company.

In an agreement approved by JM Financial’s board, Pandit promised to help raise $100 million to expand the firm’s lending and financing businesses, the company said in a statement to stock exchanges today. The deal also calls for the creation of a distressed-asset fund to be set up with a firm run by Pandit. The fund initially will seek to raise $100 million.

Pandit and Hari Aiyar will jointly take a 3 percent equity stake in JM Financial through an issuance of warrants, according to the statement. Aiyar previously helped Pandit found hedge-fund firm Old Lane Partners LP, according to a 2007 statement from that company. JM Financial is applying for a banking license and will nominate Pandit as its non-executive chairman, the Indian company said.