 "SMBC nears YES Bank stake deal; India may see biggest private bank M&A")
This story has been updated. Japanese banking giant Sumitomo Mitsui Banking Corp (SMBC) is in advanced talks to acquire a significant stake in YES Bank, according to a report by The Economic Times. The deal is being coordinated with the State Bank of India (SBI), which holds 24 per cent in YES Bank and has been seeking a long-term buyer following the bank’s turnaround since its 2020 rescue.
The discussions, which have been underway for months, are now in the final stages. SMBC’s senior leadership reportedly met with SBI officials and other key stakeholders in Mumbai last week to finalise terms. If completed, the transaction would be SMBC’s largest investment in India, surpassing its $2 billion purchase of Fullerton India Credit (74.9 per cent) in 2021. According to a report by CNBC-TV18, Sumitomo currently has no pending application with the Reserve Bank of India (RBI) to acquire a stake in YES Bank.
Stake sale may trigger open offer under Indian rules
SMBC is expected to acquire a controlling stake, potentially 51 per cent, which would trigger a mandatory open offer for up to 26 per cent of the bank’s equity under Indian regulatory norms.
A 51 per cent stake sale in YES Bank would give SMBC effective control, pending regulatory approvals. “They (SMBC and SBI) are fine-tuning the deal structure. But with the RBI giving comfort, an announcement is imminent,” the report quoted a person familiar with the matter.
RBI likely to allow SMBC majority stake in YES Bank
The Reserve Bank of India (RBI) is said to have "verbally assured" SMBC that it would be allowed to retain a majority stake in YES Bank. Voting rights, however, will remain capped at 26 per cent under the RBI’s existing regulations. However, a CNBC-TV18 report stated that Sumitomo currently has no pending application with the RBI to acquire a stake in Yes Bank.
Similar exceptions have been made before, including for Fairfax’s takeover of Catholic Syrian Bank and DBS’s acquisition of Lakshmi Vilas Bank.
If completed, the deal will see SMBC emerge as the bank’s largest shareholder. However, it remains unclear whether other institutional holders—such as HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, LIC, Carlyle and Advent International—will exit.
YES Bank CEO Prashant Kumar to step down by October
The bank’s CEO, Prashant Kumar, is set to complete his term in October. If the deal goes through, SMBC will recommend candidates for the role to the central bank. India has already been carved out as a separate operating region by SMBC in preparation for the acquisition. Rajeev Kannan, SMBC’s co-head for Asia Pacific, will now report directly to Tokyo.
“Eventually, the plan is to merge the two (SMBC India and YES Bank), but that is still far out,” an official told The Economic Times.
YES Bank deposit growth and SME focus continue
YES Bank’s deposits have grown to ₹2.85 trillion in FY25, up 2.7 times since March 2020, while retail and SME loans are expected to drive future growth. “We would like to keep the proportion of retail and SME at around 60 per cent,” Kumar said during the recent earnings call.