SMBC Nears Deal For Majority Stake In YES Bank; Major Reshaping Of Indian Banking Landscape

Japanese financial giant Sumitomo Mitsui Banking Corporation (SMBC) is in the final stages of negotiations to acquire a significant controlling interest in YES Bank, marking what could become its largest investment in India to date. The deal is being structured in consultation with the State Bank of India (SBI), which currently holds a 24 per cent stake in YES Bank and has been actively seeking a long-term strategic partner following the bank’s recovery from its 2020 crisis.

According to sources cited by The Economic Times, senior SMBC executives held high-level meetings in Mumbai last week with SBI officials and other stakeholders to iron out the terms of the acquisition. The proposed transaction is expected to involve the purchase of a 51 per cent stake in YES Bank, which would give SMBC effective control, subject to regulatory approvals.

Under Indian securities law, a controlling stake acquisition will trigger an open offer, requiring SMBC to offer to buy up to an additional 26 per cent of YES Bank’s equity from public shareholders. If approved, this would position SMBC as the largest shareholder in the private sector bank.

RBI's Take

The Reserve Bank of India (RBI) has reportedly given informal assurances that it would permit SMBC to retain a majority economic interest in YES Bank, though voting rights will remain capped at 26 per cent, as per existing regulatory limits. This aligns with precedent cases such as Fairfax’s investment in Catholic Syrian Bank and DBS’s acquisition of Lakshmi Vilas Bank.

As part of the transition, YES Bank CEO Prashant Kumar is set to complete his tenure in October. Following the acquisition, SMBC is expected to propose new leadership candidates for RBI's consideration. In anticipation of the deal, SMBC has already designated India as a standalone operational region within its global structure, with Rajeev Kannan, Asia Pacific co-head, now reporting directly to headquarters in Tokyo.

YES Bank’s financial performance has also shown steady improvement. Deposits have risen to Rs 2.85 trillion as of FY25, with retail and SME lending forming the cornerstone of its growth strategy. Kumar recently stated the bank aims to maintain around 60 per cent of its portfolio in the retail and SME segments.

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