Yes Bank’s Recovery: A Quick Recap
Yes Bank’s troubles began to surface sharply in early 2020. With rising NPAs and governance failures, the Reserve Bank of India (RBI) stepped in on March 5, 2020, and superseded the board. The bank’s near-collapse was averted by a SBI-led rescue mission, supported by seven other private Indian banks.
Over the past four years, the bank has stabilized—but concerns over growth and leadership have remained. SMBC’s entry could mark the beginning of a new phase of revival and growth.
Dissecting the Deal: Who Sold What to SMBC?
SMBC is acquiring:
- 13.19% stake from SBI at a cost of Rs 8,889 crore
- 6.81% stake from other major banks like ICICI Bank, Axis Bank, HDFC Bank, Bandhan Bank, Federal Bank, Kotak Mahindra Bank, and IDFC First Bank
The share purchase has been made at Rs 21.50 per share, highlighting SMBC’s long-term interest rather than a short-term profit motive.
Sumitomo’s Strategic Intentions
Industry sources say that management control is very much on the table. While foreign banks in India have typically operated through wholly-owned subsidiaries, this would be among the first cases of foreign control in an existing private bank—a bold step that would require regulatory greenlight from the RBI.
Sumitomo Mitsui’s likely goals include:
- Replacing top leadership over time
- Driving technology-led banking transformation
- Integrating Yes Bank into SMBC’s global strategy
- Increasing stake potentially up to 51%, subject to approval
However, RBI may cap voting rights at 26%, even if SMBC’s equity share crosses that mark—a common practice to ensure regulatory control.
Foreign Control in Indian Banks: Is RBI Softening Its Stance?
This move could be seen as a continuation of RBI’s cautious shift in attitude, started in 2020 with DBS Bank’s acquisition of Lakshmi Vilas Bank (LVB). That deal, which occurred under the RBI’s supervision, marked the first instance of a foreign bank absorbing an Indian lender.
The SMBC-Yes Bank case differs:
- Yes Bank is now stable—not a distressed bank
- The foreign investor is entering via a commercial transaction, not a bailout
- Regulatory scrutiny will likely be stricter
Still, the deal indicates the RBI’s increasing openness to foreign participation, especially when it promises capital strength and operational turnaround.
Investor Implications and Market Response
The stock market has responded cautiously optimistic to the announcement. While some investors fear loss of Indian control, others see improved management, capital infusion, and a potential re-rating of Yes Bank’s valuation.
This is what investors should watch for:
- Will RBI allow SMBC to increase stake beyond 26%?
- Will SMBC be given voting rights and board control?
- What new strategy will SMBC deploy for Yes Bank?
The Japan-India Financial Axis
The deal also strengthens Japan’s presence in Indian financial services. SMBC already operates in India through corporate banking and has expressed long-term interest in the Indian market. Gaining control of Yes Bank would give it:
- Retail and SME banking exposure
- A strong domestic platform
- Entry into a rapidly digitizing financial economy
For India, it signifies deeper economic cooperation with Japan, especially in the wake of supply chain diversification and geopolitical realignment.
What’s Next? Waiting for the Regulator’s Nod
The next big step will come from the RBI. If the central bank approves a higher stake and greater operational control, it could trigger a wave of similar interest from other global banks eyeing Indian assets.
But the regulator’s cautious nature suggests a phased approach—with strict guidelines, compliance requirements, and oversight.
Final Thoughts: A New Chapter in Indian Private Banking
The Yes Bank-SMBC deal is a potential game-changer. It reflects:
- Renewed investor interest in Indian banking
- RBI’s evolving regulatory stance on foreign ownership
- Yes Bank’s transformation from crisis to confidence
Saathee Global
