Yes Bank Shares Jump 10% on Tuesday After RBI Approves Sumitomo Mitsui’s 51% Stake Deal

In a major development for India’s banking sector, Japan’s Sumitomo Mitsui Banking Corporation (SMBC) has received approval from the Reserve Bank of India (RBI) to acquire a 51% stake in private sector lender Yes Bank. 

This marks a turning point for Yes Bank, which has struggled since its near-collapse in 2020. The proposed deal, which may value Yes Bank at around $1.7 billion, sets the stage for a new strategic owner with strong financial backing and global experience. It also offers an exit opportunity for the consortium of Indian banks, led by the State Bank of India (SBI), that had stepped in to rescue the lender five years ago. Source: LiveMint

Yes Bank Shares Surge on the News

Yes Bank’s stock reacted positively to the news. On 6 May 2025, its share price jumped over 10%, opening at ₹19.24 on the National Stock Exchange (NSE) compared to the previous close of ₹17.70. During intraday trade, it soared to a high of ₹19.44, a gain of 9.83%.

The Deal Structure: 51% Stake in Phases

Sources familiar with the transaction explained that SMBC will initially buy up to 26% of Yes Bank and then increase its holding to 51% in phases. Two possible methods are being discussed:

1. A direct purchase of less than 26% followed by a merger using a share swap.
2. A purchase of up to 26% followed by an open offer to the public shareholders.

Whichever method is chosen, SMBC’s voting rights will be capped at 26%, in line with RBI’s regulations that prevent any single entity from gaining complete control. This model is similar to the case of Catholic Syrian Bank, where the RBI allowed a majority stake acquisition but limited voting rights to maintain balance in decision-making.

SBI and Other Banks to Exit

Yes Bank has been without a promoter since Rana Kapoor, its founder and former CEO, left in 2019. Since then, the bank has been owned by a consortium of Indian banks, led by SBI, which acquired stakes as part of an RBI-supervised rescue plan in 2020.

Currently, the combined ownership of SBI and other banks is 33.74%, broken down as follows:

• SBI: 23.99%
• HDFC Bank: 2.75%
• ICICI Bank: 2.39%
• Kotak Mahindra Bank: 1.21%
• Axis Bank: 1.01%

Source: LiveMint

These shareholders are now preparing to gradually sell their holdings to SMBC, which will become the strategic promoter of Yes Bank. SBI’s lock-in period for its shares ended in 2023, and the bank has been actively exploring an exit strategy since then.

Why SMBC is a Good Fit for Yes Bank

SMBC brings significant strength to the table. It is part of the Sumitomo Mitsui Financial Group (SMFG), which offers commercial banking, leasing, securities, and consumer finance services. As of 31 March, SMFG had total assets worth ₹162 trillion and posted a net profit of ₹44,900 crore. Source: LiveMint

SMBC began operations in India in 2013 and currently operates three branches: Mumbai, New Delhi, and Chennai. It has also received approval to open a branch in GIFT City (Gujarat International Finance Tec-City). An offshore team based in Singapore supports its Indian operations, especially for funding Indian businesses.

Its financial strength, global experience, and long-term vision make SMBC a credible and capable promoter for Yes Bank.

RBI’s Strategic Push and Guidelines

According to people familiar with the matter, the RBI has actively ensured a smooth transition. The central bank reportedly approved after SMBC followed Indian regulatory guidelines.

One such guideline involves establishing a wholly owned subsidiary (WOS) in India. This model is favored by the RBI because:

• It allows better regulatory control.
• It protects Indian operations from global crises faced by the foreign parent bank.
• It ensures a local bank-like structure, giving equal treatment to Indian banks.

Since 2013, the RBI has encouraged foreign banks to follow this model by offering incentives like easier branch expansion and permission to acquire Indian banks. SMBC may adopt this approach to further integrate into India’s financial ecosystem.

Advisers and Deal Coordination

SMBC has appointed JPMorgan as its financial advisor and J Sagar Associates, a prominent Indian law firm, as its legal advisor for this high-profile acquisition. These firms will help SMBC structure the transaction, navigate legal complexities, and ensure regulatory compliance.

SMBC, RBI, SBI, or other banks involved made no official comments. However, people in the know confirmed that discussions had been underway for some time, and SBI, in particular, had shown readiness to sell its stake to a serious long-term investor like SMBC.

Yes Bank Needs a Strong Promoter

Experts believe bringing in a global player like SMBC as a strategic promoter is crucial for Yes Bank’s long-term success. They also emphasize that Yes Bank needs a strategic promoter with strong management skills to ensure long-term growth. The exit of SBI and other temporary shareholders can be successful only if a reliable and committed new owner takes charge. 

Others in the Race

Before SMBC emerged as the frontrunner, other global financial institutions were reportedly interested in acquiring Yes Bank. These included:

• Mizuho Bank (Japan)
• Emirates NBD (UAE)

Ultimately, SMBC’s robust presence in India and strategic alignment with RBI’s vision helped it secure the necessary approvals.

Background: Yes Bank’s Rescue in 2020

Yes Bank was once a fast-growing private sector bank in India. However, its fortunes took a sharp turn due to:

• Excessive exposure to risky corporate loans.
• Governance issues under the former CEO Rana Kapoor.
• Inability to raise fresh capital.

In 2020, as Yes Bank teetered on the edge of collapse, the RBI stepped in with a carefully crafted rescue plan. SBI and a group of Indian banks were asked to inject capital and stabilize the bank. This move protected depositors, restored confidence, and allowed Yes Bank to continue operating.

Five years later, this strategic ownership transition from Indian banks to SMBC signals the completion of that rescue mission. Source: LiveMint/ Moneycontrol

What This Means for the Banking Sector

The SMBC-Yes Bank deal is a significant moment for India’s banking sector. Here’s why:

1. Foreign Investment Boost: Global banks are confident in India’s banking space and regulatory framework.
2. Exit for Indian Banks: SBI and others can exit their temporary investments and focus on their core operations.
3. Strategic Revival for Yes Bank: With a strong promoter, the bank is expected to strengthen its retail and corporate banking offerings.
4. Better Governance: Global risk management and corporate governance standards are expected to be introduced.
5. Regulatory Maturity: RBI’s handling of the situation demonstrates its ability to balance stability with reform.

Conclusion

The Reserve Bank of India’s approval for Sumitomo Mitsui Banking Corporation (SMBC) to acquire a 51% stake in Yes Bank marks a historic moment in the bank’s journey. After being rescued in 2020, Yes Bank is now poised to take a fresh step forward under the leadership of a globally reputed financial institution. The phased acquisition, capped voting rights, and regulatory safeguards protect all stakeholders’ interests.

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