Sumitomo Mitsui’s historic investment move could redefine the future of private banking in India.
In a deal that promises to dramatically reshape the banking industry in India, Sumitomo Mitsui Banking Corporation (SMBC) is on the cusp of buying out a majority interest in YES Bank. Not only is this the largest investment that SMBC has made in India to date, but it represents a huge step in the long-term plan for the bank to increase its Asia presence.
SMBC to buy 51% stake in YES Bank: The deal is nearly finalized
The Japanese banking giant is in final stages of talks to buy a 51% majority stake in YES Bank. The transaction is being planned in close coordination with the State Bank of India (SBI), which holds 24% of YES Bank’s stake. Since YES Bank’s spectacular turnaround from its 2020 debacle, SBI has been keenly looking for a long-term strategic partner to drive stability and growth.
As per reports in The Economic Times, SMBC top brass had senior-level meetings in Mumbai last week with SBI management and other stakeholders. The final contours of the deal will be finalized soon subject to regulatory clearances.
Regulatory Hurdles and Open Offer Requirements
Indian securities legislation requires that upon a company gaining control, it make an open offer to the public shareholders. Here, SMBC would be obligated to make an offer to buy up to another 26% of the shares of YES Bank, thus potentially increasing its holding to 77%, subject to public uptake.
If fully executed, SMBC would become the largest shareholder in a major private sector bank in India—a groundbreaking development in Indo-Japanese financial relations.
RBI’s Conditional Green Light to SMBC
The Reserve Bank of India (RBI) has reportedly offered informal support for the acquisition. While the RBI may allow majority economic ownership, voting rights would be capped at 26%, in accordance with current regulatory guidelines.
This framework is in line with previous cases, including Fairfax’s investment in Catholic Syrian Bank and DBS’s takeover of Lakshmi Vilas Bank, where foreign investors acquired substantial economic interests but limited governance rights.
YES Bank’s Leadership and Strategic Realignment
The deal is timely, as YES Bank CEO Prashant Kumar is set to retire in October 2025. After the transaction, SMBC will likely put forward new leadership candidates, pending RBI approval.
Ahead of this transformation, SMBC has already upgraded India as an independent operational hub in its worldwide organization. The co-head of Asia Pacific, Rajeev Kannan, will henceforth report directly to Tokyo headquarters, reflecting India’s strategic role SMBC intends in the coming days.
Financial Performance Signals Resilience and Growth
YES Bank has demonstrated remarkable financial turnaround in the past few years. As of FY25, the deposits of the bank have risen to Rs 2.85 trillion, reflecting robust customer confidence. Further, the bank has also transitioned its focus towards retail and SME lending, which now account for approximately 60% of its loan book.
CEO Kumar has noted that this customer-first philosophy, coupled with risk discipline, will be critical to sustainable growth—and a huge draw for investors such as SMBC.
Wider Implications for India’s Banking Industry
If cleared, this transaction would be one of the largest foreign direct investments in India’s private banking industry. It also reflects the increased confidence in the Indian economy, especially in these uncertain global economic times.
Following SMBC’s entry into India in a dominant manner, other foreign players might enter too, possibly leading to a new era of foreign involvement in Indian finance.
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