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IIE DIGITAL DESK : Mumbai, May 6, 2025 — Shares of Yes Bank experienced a significant surge, climbing over 10% in early trading on Tuesday, following reports that Japan's Sumitomo Mitsui Banking Corporation (SMBC) is in advanced discussions to acquire a substantial stake in the private sector lender. The potential deal, which could see SMBC acquiring up to a 51% stake in Yes Bank, has garnered attention as it may mark one of the largest foreign investments in India's banking sector. 

According to sources cited by the Economic Times, SMBC is negotiating to purchase a significant shareholding in Yes Bank, potentially triggering an open offer for an additional 26% stake. This move could position SMBC as the largest shareholder in Yes Bank, surpassing the State Bank of India (SBI), which currently holds a 24% stake. The discussions are reportedly being coordinated with SBI, which has been seeking a long-term buyer following Yes Bank's turnaround since its 2020 rescue. 

The Reserve Bank of India (RBI) has reportedly given SMBC the go-ahead to acquire a majority stake in Yes Bank. However, in line with existing regulations, SMBC's voting rights would remain capped at 26%, even if its economic interest exceeds this threshold. This regulatory framework aims to maintain a diversified ownership structure and prevent excessive concentration of control in the banking sector. 

Yes Bank's stock responded positively to the news, with shares opening higher at ₹19.24 apiece, compared to the previous close of ₹17.73 on the BSE. The stock reached an intraday high of ₹19.44, reflecting investor optimism about the potential infusion of foreign capital and strategic expertise. However, the bank later issued a clarification stating that discussions with SMBC are preliminary and speculative, leading to a partial pullback in the stock's gains. 

The potential acquisition by SMBC is seen as a significant development in India's banking landscape. If finalized, it would represent SMBC's largest investment in India to date, exceeding its $2 billion acquisition of a 74.9% stake in Fullerton India Credit in 2021. The deal would also provide an exit route for SBI and other banks that participated in Yes Bank's 2020 bailout, including ICICI Bank, HDFC Bank, Kotak Mahindra Bank, Axis Bank, and Life Insurance Corporation of India, which collectively hold an 11.34% stake. 

Yes Bank underwent a significant restructuring in March 2020, led by the RBI and supported by a consortium of local lenders, after its financial health deteriorated. Since then, the bank has been on a recovery path, focusing on strengthening its balance sheet and improving asset quality. The potential entry of a strategic foreign investor like SMBC is expected to bolster Yes Bank's capital base and enhance its competitiveness in the Indian banking sector. 

While the reports have generated considerable market interest, it's important to note that the discussions are still in the preliminary stages. Yes Bank has emphasized that it routinely explores opportunities aimed at enhancing shareholder value, but the current talks with SMBC do not warrant a formal disclosure under regulatory norms at this stage. Investors and stakeholders are advised to await official announcements before making investment decisions based on the ongoing negotiations. 

The potential acquisition of a majority stake in Yes Bank by SMBC represents a significant development in India's banking sector, reflecting the growing interest of foreign investors in the country's financial institutions. While the deal is still under discussion, its successful execution could have far-reaching implications for Yes Bank's future trajectory and the broader banking industry in India.