Japanese financial giant Sumitomo Mitsui Banking Corp (SMBC) is in the final stages of discussions to acquire a major stake in Yes Bank. The acquisition, if finalized, could lead to an open offer for up to 26% more of the bank’s shares.
The State Bank of India (SBI), currently the largest shareholder of Yes Bank with a 24% holding, but now that the bank is doing better, SBI is looking to exit by selling its stake. Other big Indian financial institutions (like HDFC, ICICI, LIC, etc.) hold 11.34% combined. Foreign investors Advent International and Carlyle hold 9.20% and 6.84%, respectively.
Senior executives from the Japanese conglomerate visited Mumbai last week. They met with SBI officials and other key shareholders. The purpose was to finalize the terms of the proposed acquisition. The deal might be the biggest M&A (merger & acquisition) in India’s banking sector, especially if SMBC ends up buying a 51% stake. This move could make SMBC the largest shareholder in Yes Bank.
The Reserve Bank of India (RBI) has informally told SMBC that it can buy most of the shares in Yes Bank, even though foreign banks usually aren’t allowed to take control of Indian banks under FDI rules.
However, even if SMBC owns more than half of Yes Bank, RBI will only let it use up to 26% of the voting power, even if it owns more shares. It means SMBC can invest money and own more shares, but it won’t be allowed to make major decisions or have full control over the bank. With only 26% voting rights, SMBC can influence decisions but can’t pass or block key resolutions alone (like board changes, mergers, or altering rules), which usually require more than 50% votes.
This is a way for RBI to protect Indian banking interests, even while allowing foreign investment.
RBI has made similar exceptions in the past—for example, when DBS took over Lakshmi Vilas Bank and when Fairfax invested in Catholic Syrian Bank.SMBC may recommend a new CEO if the deal is done as Yes Bank CEO Prashant Kumar term ends in October.
SMBC already runs its own banking business in India with offices in cities like Delhi, Mumbai, Chennai, and GIFT City. SMBC treats India as its own separate region, instead of grouping it with other countries. This shows that India is very important to SMBC and that they are serious about expanding here, especially with this Yes Bank deal.