SBI and Consortium Banks to Sell 20% Stake in Yes Bank to Sumitomo Mitsui Banking Corp
In a significant development for India's banking sector, State Bank of India (SBI) has announced plans to divest its 13.19% stake in Yes Bank to Japanese financial giant Sumitomo Mitsui Banking Corporation (SMBC). The transaction, valued at approximately Rs 8,890 crore, marks a major step in the evolution of Yes Bank's ownership structure following its 2020 rescue.
Details of the Stake Sale
SBI's board approved the divestment plan on Friday, which involves selling 413 crore shares at Rs 21.5 apiece, according to an exchange filing. The sale is subject to receipt of all regulatory and statutory approvals by the acquirer.
In addition to SBI's stake, SMBC will acquire an additional 6.81% stake from other Indian lenders, bringing its total ownership in Yes Bank to 20%. The lenders participating in this consortium sale include:
- HDFC Bank
- ICICI Bank
- Kotak Mahindra Bank
- Axis Bank
- IDFC First Bank
- Federal Bank
- Bandhan Bank
These lenders will sell approximately 213.68 crore shares to SMBC, valued at around Rs 4,594 crore. This brings SMBC's total investment in Yes Bank to an impressive Rs 13,484 crore.
Regulatory Considerations and Timeline
SBI indicated that the sale would be concluded within 12 months of executing the deal. However, the transaction requires approval from the Reserve Bank of India (RBI), as regulatory norms limit investors from acquiring more than 4.99% stake in a private bank without explicit regulatory clearance.
According to RBI guidelines:
- For stakes up to 10% in a private bank, specific approval is mandatory
- For higher stake purchases, investors must undergo a fit and proper assessment by the regulator
Historical Context: Yes Bank's Rescue
Yes Bank's ownership has been a matter of significant interest since March 2020, when the lender experienced severe financial distress. At that critical juncture, SBI led a consortium of 10 lenders who collectively infused Rs 10,000 crore worth of equity to stabilize the bank's operations.
SBI originally held a 40% stake in Yes Bank following the rescue, but its holding has since decreased to approximately 24%. This latest divestment will reduce SBI's stake further to around 10.8%.
Strategic Implications and Future Outlook
Industry analysts suggest this transaction could be the first phase of a larger strategic plan by SMBC to establish a stronger foothold in India's banking sector. According to sources familiar with the matter, SMBC may explore avenues to increase its stake in Yes Bank through multiple mechanisms.
One potential scenario could involve the merger of SMFG India Credit (formerly known as Fullerton India) into Yes Bank. SMFG India Credit is an India-based non-banking finance company where the Japanese investor holds a majority stake. As of December 31, 2024, SMFG India Credit reported:
- Assets under management worth Rs 53,100 crore
- Capital adequacy ratio of 23.9%
- Net non-performing asset ratio of 1.4%
Yes Bank's Financial Position
Yes Bank's financial indicators have shown improvement, making it an attractive investment opportunity. As of March 2025, the bank reported:
- Total advances worth Rs 2.46 lakh crore
- Deposits worth Rs 2.84 lakh crore
- Capital adequacy ratio of 15.6%
- Common equity Tier-1 capital ratio of 12.2%
- Gross NPA ratio of 1.6%
- Net NPA ratio of just 0.3%
Market Impact and Sector Dynamics
This significant foreign investment in Yes Bank reflects growing international interest in India's banking sector. For Yes Bank, SMBC's strategic investment could provide access to global expertise, additional capital for growth, and potentially enhance its competitive position in the market.
The transaction also represents a successful milestone in the rehabilitation of Yes Bank, which has been working to restore investor confidence and strengthen its financial foundation since the 2020 crisis. The participation of a global financial institution like SMBC signals positive sentiment regarding the bank's turnaround and future prospects.
For India's banking sector, this deal highlights the attractiveness of well-positioned private banks to international investors seeking exposure to India's growing financial services market. It may also pave the way for similar strategic investments in other mid-sized private banks looking to strengthen their capital base and competitive positioning.
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