MUMBAI: Moody’s Ratings has termed the proposed 20 per cent stake acquisition in Yes Bank by Japan’s Sumitomo Mitsui Banking Corporation (SMBC) as credit-positive, citing the entry of a long-term strategic partner with deep pockets and global lending expertise.
The move, part of a broader transformation journey for Yes Bank, may also pave the way for a merger of SMBC’s Indian non-banking arm with the private lender, according to banking industry sources.
On May 9, Yes Bank announced that SMBC would acquire the stake from existing shareholders, including State Bank of India (SBI) and other banks that had participated in its 2020 rescue.
The transaction, which is awaiting regulatory and shareholder approvals, is expected to conclude by the second quarter of FY26.
Two SMBC board members
Moody’s noted that the deal will provide governance and strategic support through board-level representation – SMBC can nominate two non-executive directors – but stopped short of factoring in affiliate-level backing from the Japanese group, saying SMFG’s influence at 20 per cent would still be limited.
However, a larger shareholding could prompt the rating agency to reassess that view.
Banking circles believe this acquisition is more than a passive investment. Industry executives say SMBC’s parent Sumitomo Mitsui Financial Group (SMFG) may be planning to merge its wholly owned Indian NBFC, SMFG India Credit, with Yes Bank, aligning with the Reserve Bank of India’s guideline that banks should not have separate lending entities within the same group.
“Technically, if SMFG wants to increase its stake in Yes Bank, merging its NBFC arm makes strategic sense,” said a banking expert familiar with regulatory norms.
“It streamlines the structure and complies with the RBI’s requirement for a single point of presence for lending businesses.”
SMFG India Credit
SMFG India Credit operates in segments such as home loans, business loans and personal finance – areas where Yes Bank also has exposure.
The merger, if it materialises, could create synergies and deepen SMFG’s footprint in one of Asia’s fastest-growing banking markets.
The transaction has limited financial implications for SMFG, given the scale of its global balance sheet. Still, it is expected to significantly enhance its India play, building on similar investments across Indonesia, Vietnam, and the Philippines.
Yes Bank, which was rescued in 2020 through an RBI-led reconstruction scheme and capital infusion of Rs10,000 crore by SBI and other domestic institutions, exited the restructuring framework in July 2022.
Following SMBC’s investment, SBI is expected to retain over 10 per cent stake.
While the RBI generally caps foreign bank ownership in private Indian lenders at 15 per cent, exceptions have been made in distressed situations, such as DBS Bank’s 100 per cent takeover of Lakshmi Vilas Bank (LVB) and Fairfax’s 51 per cent stake in Catholic Syrian Bank (Now CSB Bank) via its Indian arm.
Yes Bank’s deal signals a continuing openness towards strategic foreign capital, particularly when aligned with domestic recovery and growth ambitions.
