With SBI Preparing Its Exit And Japan’s Banking Giant SMBC Gearing Up For Control, Is Yes Bank Heading For A Transformative Shift In Ownership And Operations?

In a strategic move that could redefine India’s private banking space, Sumitomo Mitsui Banking Corporation, SMBC, Japan’s second-largest lender, is preparing to approach the Reserve Bank of India for a licence to operate a wholly owned subsidiary in the country.

According to people familiar with the matter, this step is seen as a precursor to acquiring a controlling stake in Yes Bank, the private sector lender that was rescued by a clutch of Indian banks under a government-approved plan in 2020.

The move follows SMBC’s definitive agreement on May 9 to acquire a 20% stake in Yes Bank from State Bank of India (SBI) and several other private lenders for ₹13,483 crore via secondary market transactions. But this appears to be just the first phase of a more comprehensive plan.

RBI Licence
SMBC currently operates four branches in India, including one at GIFT City, Gujarat but a branch model limits operational flexibility and investment scope; by converting into a wholly owned subsidiary, SMBC will be eligible to significantly expand operations, hold a majority stake in an Indian bank, and pursue local M&A opportunities more aggressively. This structure is in line with RBI’s policy to allow foreign banks to operate more freely while remaining under closer regulatory scrutiny.

Interestingly, precedents exist – In 2020, Singapore-based DBS received RBI’s nod for a wholly owned subsidiary structure while absorbing the ailing Lakshmi Vilas Bank. More recently, Emirates NBD, a frontrunner in the race for IDBI Bank, also secured in-principle approval for a similar subsidiary.

Sources indicate that SMBC has already received verbal assurance from RBI that it will be permitted to retain a majority stake in Yes Bank once the WOS licence is secured.

Why This Won’t Trigger an Open Offer
While SMBC may eventually hold up to 34% in Yes Bank post all rounds of acquisition, it won’t trigger a mandatory open offer under SEBI’s Takeover Code. Banking sector acquisitions are treated as a special case, requiring RBI’s prior approval for stakes above 10%, which exempts such deals from the usual open offer obligations. This regulatory clause enables smooth transitions in bank ownership without complicating public shareholding patterns.

SBI’s Exit Strategy
SBI had stepped in as Yes Bank’s white knight during its near-collapse in early 2020, investing ₹10,000 crore under the RBI-led reconstruction scheme. On May 9, SBI announced the sale of 13.2% of its 24% stake in Yes Bank to SMBC. After the transaction, it will retain just 10.8%, though sources suggest this residual stake will also be offloaded once SMBC’s plans formalize.

Apart from SBI, HDFC Bank, ICICI Bank, IDFC First Bank, Bandhan Bank, Federal Bank, and IDBI Bank, who together held 9.7%, are selling 6.8% to SMBC in this round.

This gradual exit aligns with the roadmap mutually agreed upon between SMBC, Yes Bank, and the RBI, as per people involved in the discussions.

SMBC’s Broader India Playbook Is From Credit to Control
This is not SMBC’s first foray into Indian financial services. In 2021, the bank acquired Fullerton India Credit, a prominent NBFC, later rebranded as SMFG India Credit. Hence, with a bank, an NBFC, and potentially a wholly owned subsidiary in the same geography, SMBC may face regulatory complexity, though it may also enjoy synergy across verticals subject to RBI approval and compliance checks.

There is also speculation that SMBC may look to merge Yes Bank with SMFG India Credit in the longer term to consolidate lending operations across secured and unsecured segments. But such a move would be precedent-setting and highly sensitive from a regulatory standpoint.

Board Control and Future Capital Raises
Under the current terms, SMBC will get to nominate two board members to Yes Bank, reinforcing its influence in key decisions. SBI, even with a reduced 10.8% stake, will retain the right to appoint one director. SMBC will also enjoy preemptive rights allowing it to maintain its proportional holding in any future capital raises.

With $1.6 trillion in assets under management, SMBC brings global financial heft, technology, and governance capabilities that could accelerate Yes Bank’s long-term recovery.

Yes Bank, for its part, is preparing to shore up capital even further. The bank’s board is scheduled to meet on Tuesday to discuss capital-raising plans via equity, bonds, or preferential issue. As of March 2025, the bank reported a Common Equity Tier 1 ratio of 13.5% and a Capital Adequacy Ratio of 15.6% healthy by current regulatory standards, but still requiring bolstering to support future growth and lending ambitions.

Under The Lens 

SMBC’s Majority Stake in Yes Bank Is a Welcome Step Signaling Fresh Capital, Global Expertise, and a Chance at Reinvention

The Reserve Bank of India’s likely nod to Sumitomo Mitsui Banking Corporation (SMBC) for a majority stake in Yes Bank marks a decisive and progressive step for the Indian banking sector. In a time when global capital flows are uncertain and financial systems across economies are undergoing stress tests, India opening the doors wider for a seasoned international player like SMBC is both prudent and future-facing.

Yes Bank, once known for aggressive lending and then an example of misgovernance, is at a crucial inflection point. Despite multiple attempts to steady the ship, including a high-profile rescue by domestic giants like SBI, ICICI Bank, and HDFC, the lender has struggled to fully regain investor confidence. What it now needs is not just capital, but credibility, governance, and deep banking know-how.

That’s exactly what SMBC brings to the table.

With over $1.6 trillion in assets under management and a track record of disciplined, risk-calibrated banking, SMBC is not only a foreign investor, it is an institution with the muscle and maturity to revamp a bank’s culture, systems, and long-term strategy. The Japanese banking philosophy emphasizes sustainability, customer trust, and technological integration, qualities Indian private banks must aspire to if they want to compete globally.

Moreover, the infusion of ₹13,483 crore in secondary market purchases and potential future capital injections will strengthen Yes Bank’s balance sheet, improve its capital adequacy ratios, and give it the cushion to lend more actively in key segments like MSMEs, retail, and green finance. SMBC’s involvement also opens doors for cross-border business especially with Japanese corporates in India who will now have a natural banking partner with global scale and local presence.

In approving such a structure, the RBI is also signaling a calibrated openness to foreign strategic investment in Indian banks without losing regulatory control. By mandating a wholly owned subsidiary structure, it ensures that foreign banks remain accountable under Indian laws, maintain minimum capital thresholds, and abide by domestic lending norms. It’s a clever balancing act between sovereignty and globalization.

For SBI and the consortium of rescuing banks, this offers a dignified and structured exit route. Having performed their role as stabilizers during Yes Bank’s crisis, they can now allow an experienced foreign partner to take over the steering wheel, while they focus on their own growth mandates.

That said, the transition will need careful regulatory oversight; with SMBC already holding an NBFC in India (SMFG India Credit), questions around potential overlap, business segmentation, and customer data governance must be addressed upfront. The last thing the banking sector needs is a turf war between allied entities or confusion over product offerings.

Still overall, this is a timely, well-considered, and progressive move. In an era where capital is global but trust is local, India needs strategic partnerships that combine both.

Thus, SMBC’s increased presence, if managed wisely, could just be the model for how foreign capital can revive, reshape, and reimagine Indian banks for the decade ahead.