RBI Approves Japan’s SMBC to Acquire 25% Stake in Yes Bank: What Indian Investors Need to Know

The Reserve Bank of India (RBI) has approved Sumitomo Mitsui Banking Corporation (SMBC) to acquire up to 24.99% in Yes Bank’s paid-up share capital and voting rights, a move that would make the Japanese lender the largest shareholder, ahead of State Bank of India (SBI).

Background of the Deal

The approval, issued on August 22 and valid for one year, also clarified that SMBC will not be classified as a promoter. The transaction remains subject to clearance from the Competition Commission of India (CCI) and other customary conditions. The deal involves SMBC purchasing a 20% stake, including 13.19% from State Bank of India and 6.81% from a group of private banks.

Impact on Yes Bank and Indian Banking Sector

The investment, estimated at about $1.6 billion, would be the largest foreign investment in an Indian bank. SBI will retain around 10.8% after the transaction, which is expected to conclude by September 2025. SMBC will also gain the right to nominate two directors to Yes Bank’s board. This move is expected to bring in fresh capital and expertise to Yes Bank, which has been working to recover from its past troubles.

Yes Bank’s Current Financial Position

As of June 2025, Yes Bank reported a capital adequacy ratio of 16.2% and Tier I capital of 14%. Net NPAs, net security receipts and restructured assets together accounted for just 0.5% of advances, while gross NPAs fell to 1.6% from 16.8% in FY20. The provision coverage ratio stood at 80%. The bank’s loan book is increasingly tilted toward retail and SME lending, which rose to about 60% of advances in FY25 from 36% in FY20.

SMBC’s India Strategy

SMBC, part of Sumitomo Mitsui Financial Group, has expanded its India presence steadily since opening its first branch in New Delhi in 2012, followed by Mumbai, Chennai and Gift City, and recently secured RBI approval for a Bengaluru branch. Its India strategy is centred on corporate and trade finance, catering to Japanese and multinational clients. Before SMBC, Singapore-based DBS had acquired Lakshmi Vilas Bank, which it later merged with its India operations.

What This Means for Indian Investors

This deal is a significant development for the Indian banking sector, and it has implications for investors. The influx of foreign capital can help strengthen the bank’s balance sheet and support its growth plans. Additionally, the nomination of two directors to Yes Bank’s board by SMBC can bring in fresh perspectives and expertise, which can benefit the bank in the long run.

Conclusion

In conclusion, the RBI’s approval of SMBC’s acquisition of a 25% stake in Yes Bank is a positive development for the Indian banking sector. It reflects the growing interest of foreign investors in the Indian market and can help bring in fresh capital and expertise to the sector. Indian investors should keep a close eye on this development and its implications for the banking sector and the overall economy.

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