Bandhan Bank Reduces YES Bank Stake from 0.70% to 0.21% in Strategic Divestment
Bandhan Bank Limited has completed a significant divestment of its YES Bank holdings, selling 15.39 crore equity shares at ₹21.50 per share to Sumitomo Mitsui Banking Corporation (SMBC). This transaction, valued at approximately ₹331 crore, reduces Bandhan Bank's shareholding in YES Bank from 0.70% to 0.21%, marking another step in the ongoing restructuring of YES Bank's ownership structure.
Transaction Details and Strategic Rationale
The sale was executed on September 17, 2025, with Bandhan Bank disposing of 15,39,34,975 equity shares to the Japanese banking giant. The transaction price of ₹21.50 per share represents the current market valuation of YES Bank shares, indicating a market-driven pricing approach for the divestment.
This strategic sale aligns with broader portfolio optimization efforts by Indian banks, allowing institutions to reduce concentrated exposures while maintaining minimal strategic holdings in sector peers.
SMBC's Aggressive Acquisition Strategy
The purchase from Bandhan Bank follows SMBC's recent acquisition of a substantial 13.18% stake from State Bank of India (SBI) for ₹8,888.97 crore. Despite this major sale, SBI retains a significant 10.8% shareholding in YES Bank, maintaining its position as a key stakeholder in the private lender.
These acquisitions are part of SMBC's comprehensive strategy to build a 25% stake in YES Bank, which received regulatory approval from the Reserve Bank of India (RBI) in August and clearance from the Competition Commission of India (CCI) in September.
Comprehensive Acquisition Framework
SMBC's acquisition plan involves purchasing stakes from multiple Indian banking institutions, creating a systematic approach to building its YES Bank position. The original plan included acquiring a 20% stake from SBI and seven other lenders, including Axis Bank, HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Federal Bank, Bandhan Bank, and IDFC First Bank.
Additionally, SMBC plans to acquire an additional 4.2% stake from a Carlyle Group affiliate for ₹3,066 million ($349 million), demonstrating the comprehensive nature of its investment strategy in the Indian banking sector.
Historical Context of YES Bank's Recovery
YES Bank's current ownership restructuring stems from its financial crisis in March 2020, when the RBI superseded the bank's board due to severe financial distress. The intervention led to a comprehensive rescue operation involving a consortium of Indian banks led by SBI.
The rescue package involved a ₹10,000 crore investment by the SBI-led consortium, which stabilized the bank's operations and enabled its gradual recovery. The RBI appointed former SBI Chief Financial Officer Prashant Kumar as administrator and subsequently as CEO, ensuring experienced leadership during the turnaround period.
Financial Performance and Recovery Indicators
YES Bank's recent financial performance demonstrates significant improvement from its crisis period. The bank reported net profit of ₹808.70 crore in Q1 FY2025-26, representing a substantial 56.7% year-on-year increase from ₹516 crore in the corresponding quarter of the previous year.
This improved profitability reflects successful implementation of recovery strategies, including asset quality improvement, operational efficiency enhancements, and strategic focus on core banking activities.
Cross-Border Investment Significance
SMBC's investment in YES Bank represents one of the largest cross-border investments in India's banking sector, highlighting international confidence in the Indian financial services market. The transaction demonstrates foreign institutional interest in India's banking sector recovery and growth prospects.
The Japanese banking giant's commitment to a 25% stake indicates long-term strategic interest rather than purely financial investment, suggesting potential for technology transfer and operational expertise sharing.
Regulatory Approval and Compliance
The successful completion of regulatory approvals from both RBI and CCI demonstrates thorough due diligence and compliance with Indian banking regulations. These approvals consider factors including financial stability, strategic fit, and competitive implications for the banking sector.
The regulatory clearance process ensures that foreign investments align with India's banking sector development objectives while maintaining adequate oversight of systemic institutions.
Market Implications and Sector Dynamics
The ongoing stake sales by Indian banks to SMBC reflect broader trends in the banking sector, including capital optimization and strategic portfolio management. Banks are balancing their investment portfolios while maintaining necessary strategic relationships within the financial ecosystem.
For YES Bank, the entry of a major international banking partner provides access to global expertise, potential technology partnerships, and enhanced credibility in international markets.
Future Ownership Structure
Upon completion of all planned acquisitions, SMBC will hold a 25% stake in YES Bank, making it one of the largest shareholders alongside SBI's continued significant holding. This ownership structure creates a balanced mix of Indian banking expertise and international strategic partnership.
The diversified ownership base positions YES Bank for continued growth while maintaining strong connections to both domestic and international banking networks.
Strategic Benefits for Stakeholders
For Bandhan Bank, the divestment provides capital that can be redeployed toward core business activities and growth initiatives. The retention of a 0.21% stake maintains minimal strategic connection while significantly reducing concentration risk.
YES Bank benefits from SMBC's expertise in areas such as digital banking, risk management, and international operations, potentially accelerating its transformation into a more competitive private sector bank.
This transaction represents successful evolution of YES Bank's ownership structure from crisis-driven rescue to strategic international partnership, indicating confidence in the bank's recovery and future prospects in India's dynamic banking market.
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