Sumitomo Mitsui Banking Corporation to seek RBI Yes for licence to operate wholly owned arm
Sumitomo Mitsui Banking Corporation
(SMBC) is preparing to approach the Reserve Bank of India for a licence to operate a wholly owned subsidiary, said people with knowledge of the matter. The move by Japan's second-largest banking group is seen as part of a plan to acquire a controlling stake in the private sector lender. SMBC on May 9 signed a definitive agreement.
This was for acquiring a 20% stake in
Yes Bank
from
State Bank of India
and a clutch of private banks for ₹13,483 crore through secondary market transactions.
Once the Japanese bank gets approval to set up a wholly-owned subsidiary, SBI and the other banks are likely to sell their remaining stake-of nearly 14%-in accordance with the road map discussed with RBI by Yes Bank and SMBC, the people said.
SMBC operates four branches in India, including one at the International Financial Services Centre in Gift City, Gujarat. Its move to transition from a branch model to a full-fledged subsidiary will facilitate the acquisition of a majority stake in Yes Bank, the people cited above said.
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Previously, DBS had received an RBI licence to set up a wholly owned subsidiary in India in 2020, after the Singapore financial services group agreed to acquire the troubled Lakshmi Vilas Bank under a scheme approved by the government.
Recently, the central bank in-principle permitted Emirates NBD, which is the frontrunner to acquire a majority stake in
IDBI Bank
, to set up a wholly-owned subsidiary.
SMBC has received a verbal assurance from RBI that it would be allowed to retain a majority stake in Yes Bank, ET reported on May 6.
While the plan envisages SMBC getting a nearly 34% stake in Yes Bank, it will not trigger an open offer under the market regulator's Takeover Code. Acquisition of shares beyond 10% or transfer of control in banks requires prior approval from RBI, so such deals are exempted from the open offer requirement.
Yes Bank, SMBC and RBI did not respond to requests for comment.
Keen to Sell
On May 9, Yes Bank announced that SBI would sell 13.2% from the 24% it held in the private lender, to SMBC, while
HDFC Bank
,
ICICI Bank
,
IDFC First Bank
,
Bandhan Bank
,
Federal Bank
and IDBI Bank-which jointly held 9.7%-would sell 6.8%.
After this transaction, SBI will still have a 10.8% stake. The state-run bank, which rescued Yes Bank in 2020 by investing ₹10,000 crore to keep it afloat, is keen to exit, the people mentioned earlier said.
SBI's investment was part of a reconstruction scheme initiated by RBI in March 2020 to rescue the lender that was hit by corporate governance issues, loan defaults and fraud. HDFC Ltd, which has since merged with HDFC Bank, and ICICI Bank each invested ₹1,000 crore in Yes Bank's equity shares while Axis Bank contributed ₹600 crore and Kotak Mahindra Bank put in ₹500 crore. IDFC First Bank, Bandhan Bank, and Federal Bank also participated in the rescue effort with additional investments.
SMBC, which had acquired non-bank finance company Fullerton India Credit in 2021 and renamed it SMFG India Credit, may want to merge Yes Bank with itself, subject to RBI's approval, the people cited above said. To have a wholly owned subsidiary, as well as a majority holding in a listed private bank and a non-banking finance company (NBFC) with 100% stake will imply overlapping of several business activities, they said.
After completion of the deal announced in May, SMBC will have the right to nominate two members to the Yes Bank board, while SBI, with the remaining 10.8% stake, can name one director. SMBC, which has $1.6 trillion in assets under management, will also have preemptive rights to maintain its pro-rata stake in any future capital raise.
The board of Yes Bank will meet on Tuesday to consider plans to raise funds by issuance of equity, bonds or preferential issues, the bank informed exchanges.
At the end of March 2025, Yes Bank had a common equity tier 1 ratio of 13.5% while its capital adequacy ratio was 15.6%.
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