Sumitomo Mitsui Revives Bid for Yes Bank as SBI Reopens Stake Sale Talks

Japanese financial conglomerate Sumitomo Mitsui Banking Corporation (SMBC) has reignited discussions to acquire a controlling stake in Yes Bank.

The State Bank of India (SBI), which holds 23.97 percent of the Mumbai-based lender, has reopened negotiations with SMBC, sources confirmed.

Changes in Deal Structure Since 2024

Though the discussions originally began in 2024, insiders said the terms of the deal have since been revised. SBI may offload up to 20 percent of its stake to SMBC, which is also expected to inject fresh capital amounting to 6–7 percent.

Following the infusion, SMBC is likely to make an open offer to raise its total stake to 51 percent.

The remaining shares held by SBI could be tendered through this open offer. Other key investors—Axis Bank, Kotak Mahindra Bank, ICICI Bank, and HDFC Bank—collectively own 7.36 percent and are expected to exit.

Private equity firms Advent International and Carlyle, with 9.2 percent and 6.84 percent respectively, along with Life Insurance Corporation of India (3.98 percent), may also sell their shares.

“This is the structure that has been presented to SMBC,” a banker familiar with the discussions said, adding that a response from the Japanese group was still awaited.

Regulatory and Governance Assurances

Sources indicated that to ensure smooth execution of the deal, certain assurances have been extended to SMBC, particularly concerning voting rights and controlling interest.

Previous discussions in 2024 involving SMBC and Mitsubishi UFJ Financial Group (MUFG) had stalled due to voting rights issues.

Indian regulations cap promoter voting rights in private sector banks at 26 percent, even if shareholding exceeds that.

“SMBC is reconciled to the fact that this cannot be changed and has yet shown interest in Yes Bank,” the banker said.

If SMBC secures a 51 percent shareholding, Yes Bank may be consolidated into its parent company’s financials, although certain jurisdictional dispensations might be required. “These factors are under consideration,” the source added.

SMBC May Take Board-Level Control

To maintain operational and managerial oversight, SMBC is expected to nominate directors to critical board committees, including the nomination and remuneration committee (NRC), which plays a key role in executive appointments such as the CEO.

“Once SMBC reverts on the proposed terms, the deal will be taken to the regulator for further consideration,” a senior official stated. A final agreement may be reached within this fiscal year, contingent on SMBC’s acceptance of existing voting rights laws.

SBI’s Recent Fundraising Plan

On May 3, SBI announced plans to raise Rs 25,000 crore through equity. During a post-earnings conference, chairman CS Setty remarked that the bank would explore all options but did not provide a timeline. “That (fund raise) will depend on our business needs and market conditions,” he said.

According to The Economic Times, SMBC is in advanced stages of discussions with SBI. Senior SMBC executives reportedly visited Mumbai recently to finalize terms.

If completed, the transaction would surpass SMBC’s 2021 acquisition of Fullerton India Credit, which was valued at $2 billion.

Regulatory and Strategic Outlook

Though reports suggest the Reserve Bank of India (RBI) has not yet received a formal application from SMBC, it has reportedly provided a verbal assurance that a majority stake in Yes Bank would be permitted.

Voting rights, however, will remain capped at 26 percent under existing RBI norms. Past precedents include Fairfax’s acquisition of Catholic Syrian Bank and DBS’s takeover of Lakshmi Vilas Bank.

If successful, SMBC will become the largest shareholder in Yes Bank. It is still unclear whether other institutional investors—such as HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, LIC, Carlyle, and Advent International—will fully exit the bank.

Leadership Changes Ahead

Yes Bank’s CEO, Prashant Kumar, is set to complete his term in October. If the acquisition proceeds, SMBC will likely propose CEO candidates to the RBI.

In anticipation of this move, SMBC has already established India as a separate operating region, with Rajeev Kannan, the co-head for Asia Pacific, now reporting directly to the Tokyo headquarters.

“Eventually, the plan is to merge the two (SMBC India and Yes Bank), but that is still far out,” an official told The Economic Times.

Yes Bank’s Operational Focus Remains Stable

Despite ownership changes, Yes Bank’s core operations remain steady. Deposits have climbed to ₹2.85 trillion in FY25, marking a 2.7-fold increase since March 2020.

The bank continues to emphasize retail and SME lending. “We would like to keep the proportion of retail and SME at around 60 per cent,” Kumar stated during a recent earnings call.