Japan’s Sumitomo Mitsui Banking Corp (SMBC) is close to finalising a deal to acquire a 51% stake in Yes Bank, according to several sources with direct knowledge of the matter, Reuters reported.
This could make it one of the largest transactions in India’s banking industry.
The transaction, if completed, would be a rare example of foreign ownership in India’s tightly regulated banking sector.
Yes Bank shares climbed nearly 10% on Tuesday following the report. As of 0730 GMT, the stock was up 1.6%, valuing the lender at 565 billion rupees (S$8.6 billion).
Foreign participation in Indian banking has historically been limited due to regulatory restrictions, stringent capital requirements, and a sector largely dominated by state-owned institutions.
The last significant foreign acquisition was Singapore-based DBS Group’s takeover of Lakshmi Vilas Bank in 2020.
Discussions between SMBC and Yes Bank’s top shareholder, the State Bank of India (SBI), have been ongoing since last year but initially stalled over concerns about control and voting rights.
SBI currently holds a 24% stake, a result of the central bank-led rescue of Yes Bank in 2020.
Other institutional shareholders, including ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank, and Life Insurance Corporation of India, collectively own about 11.3%.
The Reserve Bank of India has now given a verbal nod for the deal to proceed, with a formal structure expected to be announced by June, one of the sources said.
Another noted that SBI is still negotiating terms with SMBC and has yet to take the proposal to its board.
Under Indian regulations, any bank’s largest shareholder must reduce its stake to 26% within 15 years.
For this deal, SMBC’s voting rights would reportedly be capped at 26%, despite a potential majority ownership stake.
Yes Bank, in a regulatory filing, said it regularly engages with stakeholders to explore options that enhance shareholder value but emphasised that such discussions are preliminary and speculative at this stage.
The Reserve Bank of India, SMBC, and SBI did not respond to Reuters’ requests for comment.
Featured image credit: Edited from Freepik
