Japan’s banking heavyweight Sumitomo Mitsui gets major RBI approval to take majority control of Yes Bank.
Potential $1.7 billion deal for Yes Bank marks a new chapter in Japanese investment in India’s financial markets.
RBI Clears the Way: SMBC to Take Majority Holding in Yes Bank
In a major development, the Reserve Bank of India (RBI) has given its nod to Sumitomo Mitsui Banking Corp. (SMBC) to buy up to 51% in Yes Bank, one of India’s leading private lenders. Sources close to the development indicated that this takeover would put the bank’s overall valuation at approximately $1.7 billion.
This is a big move by SMBC, one of the largest financial institutions in Japan, to extend its reach in India — a fast-expanding and strategically significant market for Asia’s financial industry.
Two Strategic Options: Share Swap or Open Offer
SMBC is considering two options to finalize the purchase, according to sources. It could buy less than 26% of Yes Bank and then merge through share swap, with the Japanese bank taking control slowly.
Otherwise, SMBC may opt to acquire up to 26% directly and follow it up with an open offer to public shareholders to take its holding to 51%. Yet under Indian banking rules, SMBC’s voting rights in Yes Bank will be limited to 26%, even if it has a higher shareholding.
Current Holding: SBI and Consortium Have a Strong Grip
Yes Bank is now supported by State Bank of India (SBI) and a group of other Indian banks, which have a collective ownership of 33% of the bank. They were instrumental in saving Yes Bank during its 2020 crisis, when the bank suffered intense liquidity and governance issues.
Despite the incoming foreign investment, SBI is expected to retain a significant influence in the bank’s operations, ensuring a level of stability and continuity as ownership structure evolves.
Strategic Implications for India-Japan Financial Ties
This development could prove to be a turning point in India-Japan financial collaboration, opening doors for future cross-border banking partnerships and foreign capital inflows into Indian institutions.
Sumitomo’s investment injects state-of-the-art banking operations, technology, and international standards of risk management, which might help reinforce substantially the performance and reliability of Yes Bank. It is also in keeping with Japan’s larger move to counter China’s increasing clout in financial markets across Asia through strategic tie-ups with such rising economies as India.
Stay updated with all the insights.
Navigate news, 1 email day.
Subscribe to Qrius
