India’s banking sector is witnessing a seismic shift as Sumitomo Mitsui Banking Corporation (SMBC), the Japanese financial giant, enters advanced talks to acquire a controlling stake in Yes Bank. If successful, this deal could become the largest-ever banking M&A in Indian history, marking a dramatic turnaround for Yes Bank just five years after its near-collapse and government-led rescue. The development has sparked optimism among investors, with Yes Bank shares surging nearly 10% on the news, and is poised to reshape the competitive landscape of Indian private banking.
The potential entry of Sumitomo Mitsui Banking Corporation into Yes Bank’s shareholding marks a significant milestone in the evolution of India’s private banking landscape. SMBC, with its global assets exceeding $2 trillion and a presence in over 40 countries, brings deep expertise in corporate banking, risk management, and digital transformation. Analysts believe that SMBC’s involvement could accelerate Yes Bank’s adoption of global best practices, strengthen its risk controls, and enhance its digital offerings to both retail and corporate customers. This strategic partnership could also open new avenues for Yes Bank to access international markets and diversify its funding sources.
SMBC’s Strategic Interest in Yes Bank: A Game-Changer for Indian Banking
Sumitomo Mitsui Banking Corporation, a subsidiary of the Sumitomo Mitsui Financial Group and one of the world’s largest financial institutions, has been in talks for months with Yes Bank’s key stakeholders, including the State Bank of India (SBI), to secure a significant stake. Sources indicate that SMBC is considering acquiring just over 20% initially, which would trigger an open offer for an additional 26%-a regulatory requirement under Indian takeover norms. This could ultimately give SMBC a controlling 51% interest, making it the largest shareholder in Yes Bank and the first major Japanese bank to control a top Indian lender.
Senior SMBC executives were recently in Mumbai, meeting with SBI and other major shareholders to finalize terms. The move is viewed as a strategic play to expand SMBC’s footprint in India’s fast-growing banking market, leveraging Yes Bank’s extensive retail and corporate customer base.
For Yes Bank, the timing of SMBC’s interest is fortuitous. After years of struggle with mounting bad loans, governance issues, and a dramatic loss of depositor confidence, the bank has managed to restore stability and return to profitability. The recent improvement in asset quality and capital adequacy ratios has made Yes Bank a more attractive proposition for foreign investors. SMBC’s potential investment is seen as a strong vote of confidence in the bank’s turnaround strategy and future growth prospects.
Yes Bank’s Road to Recovery: From Crisis to Opportunity
Yes Bank’s journey to this pivotal moment has been tumultuous. In March 2020, the Reserve Bank of India (RBI) orchestrated a rescue after Yes Bank’s financial health deteriorated sharply. SBI led a consortium of domestic banks and financial institutions-including ICICI Bank, HDFC Bank, Axis Bank, Kotak Mahindra Bank, and LIC-that collectively infused ₹10,000 crore to stabilize the bank. SBI emerged as the largest shareholder with a 24% stake, while other banks and LIC together hold 11.34%.
Since the rescue, Yes Bank has staged a remarkable recovery. For the financial year ending March 2025, it reported a net profit of ₹2,406 crore, up 92.3% year-on-year, and a 63.3% jump in Q4 net profit to ₹738 crore. Asset quality has improved, with gross NPA at 1.6% and net NPA at 0.3% as of March 2025. The bank’s cost-to-income ratio has dropped to 67.3%, and its CASA ratio rose to 34.3%, reflecting a healthier deposit mix.
The deal, if finalized, would also have broader implications for India’s banking sector. It would signal to global investors that Indian banks are open to substantial foreign investment and strategic partnerships, especially in the wake of regulatory reforms and increased transparency. Such a move could encourage other international financial institutions to consider similar investments, thereby increasing competition, improving service quality, and fostering innovation within the sector.
Deal Structure and Regulatory Hurdles: What’s on the Table?
Reports suggest two possible routes for the SMBC-Yes Bank deal: either SMBC acquires less than 26% via a share swap and merger, or it buys up to 26% and launches an open offer for a majority stake. However, Yes Bank has clarified that discussions are still preliminary and speculative, and that no binding agreement has been reached. The bank stated, “Such discussions are preliminary and do not warrant a disclosure under Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, at this stage”.
Crucially, any stake above 10% in an Indian bank requires Reserve Bank of India approval. While some reports claim SMBC has secured the green light for a 51% stake, the RBI has not confirmed receiving any formal proposal. If the deal materializes, it could also facilitate a partial or full exit for SBI, which has been actively seeking to reduce its holding post-turnaround. The Economic Times has noted uncertainty about whether other institutional shareholders like HDFC Bank, ICICI Bank, Axis Bank, Kotak Mahindra Bank, and LIC plan to exit their investments.
From a regulatory perspective, the Reserve Bank of India’s approval will be critical. The RBI has traditionally been cautious about allowing foreign entities to acquire controlling stakes in Indian banks, prioritizing financial stability and safeguarding the interests of depositors. However, the central bank has also shown a willingness to support foreign investment when it aligns with the broader goals of strengthening the banking system and promoting financial inclusion. The outcome of the RBI’s review will set an important precedent for future deals of this scale.
Market Response and Broader Implications
The market has responded enthusiastically to the news. Yes Bank’s share price jumped as much as 9.64% to ₹19.44 on May 6, 2025, before closing 1.18% higher at ₹17.94. The surge reflects investor optimism about the bank’s future under SMBC’s stewardship, with expectations of fresh capital infusion, global best practices, and enhanced governance.
If completed, the transaction would surpass SMBC’s previous $2 billion India investment and set a new benchmark for foreign investment in Indian banking. Analysts believe SMBC’s entry could accelerate Yes Bank’s growth, improve its risk management, and boost confidence among depositors and corporate clients.
Shareholder dynamics will play a key role in shaping the final contours of the transaction. While SBI, as the largest shareholder, may look to reduce its stake and book profits, other institutional investors will weigh their options based on the offer price and long-term strategic considerations. Retail investors, who have endured years of volatility, are watching developments closely, hoping for a sustained recovery in share value and improved governance standards.
Additional Analysis and Data-Driven Insights
The scale of the potential acquisition is unprecedented. If SMBC secures a 51% stake, it would mark the largest foreign takeover of an Indian private bank, highlighting the growing global interest in India’s banking sector. Yes Bank’s improved financial metrics bolster its appeal: Q4 FY25 net profit rose 63.3% to ₹738 crore, while annual profit nearly doubled to ₹2,406 crore. The bank’s net advances grew 8.1% year-on-year to ₹2,46,188 crore, and the CASA ratio improved to 34.3%.
Operationally, Yes Bank’s cost-to-income ratio fell to 67.3% in Q4 FY25, down from 75.8% a year ago, reflecting better efficiency. Non-interest income for FY25 was ₹5,857 crore, up 14.5% year-on-year. The bank’s gross NPA remained stable at 1.6%, and net NPA dropped to 0.3%, indicating improved asset quality and risk management.
Despite the positive momentum, some analysts remain cautious, with a majority still maintaining a ‘sell’ rating on Yes Bank shares, citing the need for sustained performance and clarity on the deal’s structure. The bank also faces a ₹244 crore tax demand, though it has stated plans to file a rectification application.
Sumitomo Mitsui’s bold move to acquire a controlling stake in Yes Bank could be a defining moment for India’s financial sector. As negotiations continue, all eyes are on regulatory approvals, shareholder decisions, and the potential for a transformative partnership that could set new standards for foreign investment and corporate governance in Indian banking.
As the talks progress, industry observers are keenly monitoring the potential synergies between SMBC and Yes Bank. Both organizations have complementary strengths-SMBC’s global reach and expertise in wholesale banking, and Yes Bank’s established presence in India’s retail and SME segments. If the partnership materializes, it could redefine Yes Bank’s growth trajectory, positioning it as a formidable player in the Indian banking sector and setting a benchmark for future cross-border financial collaborations.
The successful completion of the Sumitomo Mitsui Banking Corporation’s stake acquisition in Yes Bank could also serve as a catalyst for renewed investor confidence across India’s financial markets. It would demonstrate that even banks that have faced severe crises can recover and attract world-class investors through robust reforms and strategic partnerships. Moreover, this deal could encourage other distressed or mid-sized banks to explore similar alliances, fostering greater consolidation and stability within the sector. Ultimately, the SMBC-Yes Bank partnership has the potential not only to transform the fortunes of a single bank but also to contribute significantly to the resilience and modernization of India’s entire banking ecosystem.
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