The Japanese lender announced in May that it will acquire a 20% stake in Yes Bank for ₹13,482 crore, in the largest cross-border investment in the Indian banking sector. SMBC is a wholly-owned subsidiary of Sumitomo Mitsui Financial Group, the second largest banking group in Japan with assets of $2 trillion at the end of December. Then in July, Reuters reported that SMBC sought approval for an additional 4.9% stake in Yes Bank.
It is not immediately clear as to when and from which shareholders SMBC will purchase the additional shares to take its stake in Yes Bank to just under 25%. Per the 20% stake sale plan, India’s largest lender State Bank of India (SBI) will sell a 13.19% stake, and seven other shareholders — Axis Bank, Bandhan Bank, Federal Bank, HDFC Bank, ICICI Bank, IDFC First Bank and Kotak Mahindra Bank — will sell a total of 6.81%.
“…we are pleased to inform that SMBC has received the approval of the Reserve Bank of India (RBI) to acquire up to 24.99% of the paid-up share capital/ voting rights of the bank vide letter dated August 22, 2025. This approval is valid for one year from the date of this letter,” Yes Bank said in a regulatory filing on Saturday.
Following a deterioration in Yes Bank’s financial position, the RBI superseded the board in March 2020. Soon after, a clutch of banks led by SBI rescued Yes Bank.
RBI, the statement said, has further clarified that following the acquisition, SMBC would not be treated as a promoter of the bank. At present, Yes Bank has no promoter and is fully owned by public shareholders. Yes Bank said that the proposed transaction “is subject to approval from Competition Commission of India (CCI) and customary conditions precedents as mentioned in the agreements referred in our intimation dated 9 May”.
This deal is expected to pave the way for similar transactions in future where foreign capital will be able to seamlessly flow into the Indian banking sector. As per Fitch Rating, India’s foreign investment norms cap voting rights for investors in banks at 26% and investments by financial institutions in Indian banks at 15%, which have deterred such stake sales.
However, there have been exceptions. The RBI has previously allowed the local unit of a foreign bank to take over a struggling domestic lender. In November 2020, the central bank seized control of Lakshmi Vilas Bank (LVB) and forced a merger with the Indian arm of Singapore’s DBS Bank. That was the first instance of the central bank deploying a foreign-owned bank to stabilize a domestic peer.
Board seats and dissent
Meanwhile, as part of the deal, SMBC will get two seats on the board of Yes Bank. However, Yes Bank’s decision to give the Japanese lender the right to place its nominee directors on the lender’s key board committees did not go down well with proxy advisory firms.
Mint reported on 15 August that two proxy advisory firms — Institutional Investor Advisory Services India Ltd (IiAS) and Stakeholder Empowerment Services (SES) — have recommended investors to vote against the proposal.
Yes Bank chief executive Prashant Kumar, whose term ends in April 2025, had told Mint three months ago that the proposal to sell 20% in Yes Bank has allowed the private sector lender to achieve three key objectives. One of the bank’s overhangs was the fate of State Bank of India’s (SBI) stake in the bank, and that has been taken care of, Kumar had said.
The search for a new chief executive should gather steam now. The board of Yes Bank Ltd had paused the search till the banking regulator cleared its ongoing stake sale, Mint reported on 7 July citing two people aware of the development. This was after some directors voiced concerns about shortlisting a new CEO at a time of ownership change.
Shares of Yes Bank on NSE closed at ₹19.28 a piece on Friday, up 5.8% from the closing of 8 May, a day before the deal was first announced.
