SMBC to Seek RBI Nod for Full-Owned Subsidiary Before Yes Bank Stake Deal

According to a media source, Sumitomo Mitsui Banking Corporation (SMBC) plans to apply for a licence from the Reserve Bank of India (RBI) to run a fully owned subsidiary in India. The action is a component of the Japanese conglomerate's strategy to take over Yes Bank.

Before State Bank of India (SBI) and other lenders sell their remaining approximately 14% interest to the Japanese conglomerate, SMBC requires the banking regulator's approval to establish a wholly owned subsidiary in India, according to sources mentioned in the paper.

As per the report, SMBC, which has four branches in India, intends to switch from the branch format to a full-fledged subsidiary model in order to make it easier to acquire the majority of Yes Bank.

According to the article, the conglomerate has already received "verbal assurance" from the RBI that it will be permitted to keep a controlling interest in the private lender with its headquarters in Mumbai.

RBI Granting Approvals to Foreign Players

The RBI recently gave Emirates NBD Bank PJSC, the most probable leading candidate to purchase a share in IDBI Bank, in-principle approval to establish a wholly owned subsidiary in India.

 The RBI granted the Indian division of the Singapore-based DBS Group a permission to operate as a wholly owned subsidiary in 2019.

 On May 9, Yes Bank declared that, for around INR 13,480 crore, SMBC would purchase a 20% interest from its stakeholders, which included SBI and a number of other Indian banks that had taken part in its 2020 rehabilitation plan.

 It is also anticipated that the Japanese banking behemoth will contribute new funds to the private lender, amounting to an extra 6-7% of the company.

SMBC and Yes Bank Deal

A significant change in the ownership and control of the bank would occur if the money injection were to occur since SMBC could have to make an open offer to Yes Bank shareholders, increasing its overall interest to as much as 51%.

Furthermore, on May 28, Yes Bank declared that its Board of Directors would convene on June 3, 2025, to examine a proposal for capital raising by the sale of debt securities, equity shares, or other suitable financial instruments.

SMBC, which in 2021 purchased the non-bank finance company Fullerton India Credit and rebranded it as SMFG India Credit, may wish to combine Yes Bank with itself, pending RBI approval.

 As per the reports, having a wholly owned subsidiary, a majority position in a publicly traded private bank, and a 100% stake in a non-banking financing company (NBFC) would require overlapping a number of business operations.