Sumitomo Mitsui Banking Corporation (SMBC) is currently in advanced discussions with State Bank of India (SBI) to acquire up to a 24% stake in Yes Bank, marking a significant step for the Japanese lender to enter the Indian banking market.
SMBC Set to Lead Yes Bank’s Growth
This potential deal, which has been in the works since last year, faced earlier hurdles due to concerns over voting rights. The Reserve Bank of India (RBI) caps foreign investors’ voting rights at 26%, which was initially a sticking point for SMBC. However, recent progress suggests that SMBC may control around 20-24% of Yes Bank, enabling them to make an open offer to eventually control 51% of the bank, despite the voting rights cap.
This move is crucial for Yes Bank’s ongoing recovery. The bank faced severe financial troubles in 2020, prompting RBI intervention and a rescue plan led by SBI and other banks. The success of this transaction would demonstrate the effectiveness of RBI’s resolution mechanism and help stabilize Yes Bank with a strong foreign investor backing.
The Indian government, RBI, and SBI are keen to ensure that Yes Bank finds a reliable investor who can add value and strengthen the bank’s position in the market. This deal is expected to be closely watched by investors and industry experts alike, as it represents a key development in India’s banking sector and foreign investment landscape.
