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.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

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Japan's SMBC Revives Talks with SBI for Controlling Stake in Yes Bank

In a significant development for India's banking sector, Japanese financial powerhouse Sumitomo Mitsui Banking Corporation (SMBC) has reentered negotiations with State Bank of India (SBI) to acquire a controlling stake in Yes Bank. This renewed interest could reshape the ownership structure of one of India's prominent private sector lenders.

Deal Structure Takes Shape

According to market sources, the potential transaction has been restructured compared to previous discussions that began in 2024. The current framework involves SBI divesting up to 20 percent of its 23.97 percent stake in Yes Bank to SMBC. Additionally, the Japanese financial giant is expected to infuse fresh capital equivalent to approximately 6-7 percent stake.

Following this initial transaction, SMBC plans to launch an open offer with the aim of increasing its total stake to 51 percent, effectively taking control of the Mumbai-headquartered bank. Industry experts suggest this multi-stage approach could help navigate regulatory requirements while ensuring a smooth transition of control.

Exit Strategy for Current Investors

The proposed deal structure creates a pathway for several existing stakeholders to potentially exit their investments:

• SBI is likely to tender its remaining shareholding through the open offer
• Other banking investors including Axis Bank, Kotak Mahindra Bank, ICICI Bank, and HDFC Bank (collectively holding 7.36 percent) may also exit
• Private equity firms Advent International (9.2 percent stake) and Carlyle (6.84 percent stake) are expected to participate in the open offer
• Life Insurance Corporation of India currently holds a 3.98 percent stake in Yes Bank

"This is the structure that has been presented to SMBC," revealed a banker familiar with the negotiations, noting that the Japanese company's response is still pending.

Regulatory Considerations and Control Mechanics

The current talks appear to have addressed some of the regulatory hurdles that prevented earlier deals from materializing. Previous negotiations with both SMBC and Mitsubishi UFJ Financial Group (MUFG) reportedly stalled over voting rights limitations.

Under Indian banking regulations, voting rights for promoters in private sector banks are capped at 26 percent, regardless of actual ownership percentage. This regulatory constraint had been a sticking point in earlier discussions.

"SMBC is reconciled to the fact that this cannot be changed and has yet shown interest in Yes Bank," explained a banking industry source. While SMBC may consolidate Yes Bank at its Japanese parent level with a 51 percent shareholding, certain dispensations might be required in its home jurisdiction.

Operational Control Framework

To establish effective operational and management control despite the voting rights limitations, SMBC may seek to nominate directors to key committees of Yes Bank's board. Particular emphasis is likely to be placed on representation in the nomination and remuneration committee (NRC), which plays a crucial role in appointing senior management, including the CEO.

Industry observers note that once SMBC responds to the proposed terms, the deal will be presented to regulators for further consideration. If the Japanese financial institution accepts the shareholding and voting rights framework, an agreement could potentially be finalized within the current fiscal year.

SBI's Strategic Positioning

The timing of these renewed talks comes shortly after SBI's announcement of a substantial Rs 25,000-crore equity fundraising plan on May 3. While SBI Chairman CS Setty indicated the bank would consider all options for its fundraising, he refrained from providing specific timelines, stating, "That will depend on our business needs and market conditions."

This potential divestment by SBI could represent a strategic realignment of its investment portfolio while potentially realizing value from its Yes Bank stake, which it acquired as part of the bank's reconstruction scheme several years ago.

Disclaimer: The views and investment tips expressed in this article are for informational purposes only and do not represent financial advice. The views expressed are those of the sources cited and not necessarily those of this website or its management. Investing in equities or other financial instruments carries the risk of financial loss. Readers must exercise due caution and conduct their own research before making any investment decisions. We are not liable for any losses incurred as a result of decisions made based on this article. Please consult a qualified financial advisor before making any investment.

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