RBI Greenlights Japan's SMBC Buying Nearly 25% Stake in Yes Bank

Yes Bank announced on Saturday that the Reserve Bank of India (RBI) has approved a proposal by Japan’s Sumitomo Mitsui Banking Corporation (SMBC) to acquire up to 24.99% of the lender. The approval, conveyed through a letter dated August 22, will remain valid for one year. Importantly, the central bank clarified that SMBC will not be categorised as a promoter after the investment.

"This approval is valid for one year from the date of this letter. RBI has further clarified that pursuant to the said acquisition, SMBC would not be treated as a promoter of the Bank," the exchange filing said.

The RBI’s clearance comes with conditions, including adherence to the Banking Regulation Act, 1949, the Foreign Exchange Management Act, 1999, and its guidelines on ownership in banks. It also imposes restrictions such as a lock-in period, with any further share transactions requiring prior approval.

The transaction, first disclosed on May 9, involves SMBC acquiring a 20% stake in Yes Bank through a secondary share sale. This includes 13.19% divested by State Bank of India and another 6.81% sold collectively by Axis Bank, Bandhan Bank, Federal Bank, HDFC Bank, ICICI Bank, IDFC First Bank, and Kotak Mahindra Bank.

The deal still requires clearance from the Competition Commission of India (CCI) and remains subject to standard conditions under the share purchase agreements. Yes Bank shares closed at Rs 19.28 on Friday, down 0.77%, but have gained 7.95% over the past six months.

Bloomberg reported last month that Sumitomo Mitsui Financial Group (SMFG) is considering acquiring an additional 5% stake in Yes Bank from existing investors, including Carlyle Group and other minority shareholders.

The plan underscores SMFG’s confidence in Yes Bank’s turnaround. Since its 2020 rescue by the RBI, when mounting bad loans pushed it to the brink, the lender has been gradually recovering with support from SBI and a consortium of domestic institutions.

Alongside the proposed stake, SMFG is also said to be weighing the purchase of around $680 million in convertible bonds issued by Yes Bank, reinforcing its long-term commitment.

This potential investment is part of SMFG’s broader India expansion strategy. In March last year, the Japanese group acquired Fullerton India Credit Co. outright for $700 million, following an initial $2 billion investment in 2021, building a strong presence in housing and vehicle finance, two high-growth segments in the Indian market.