Sumitomo Mitsui Banking Corporation (SMBC) is reportedly considering raising its shareholding in Yes Bank and establishing a wholly owned subsidiary in India, reinforcing its long-term commitment to the Indian financial services market. Rajeev Kannan, SMBC’s India head, made these remarks in a recent interview.
Key Developments & Strategy
- Yes Bank Positioning: SMBC believes Yes Bank has the potential to return to the top five private sector banks in India.
- Current Stake: SMBC already holds approximately 24.2%, close to the regulatory cap of 24.99%.
- Future Capital: Kannan said SMBC may invest more if credible opportunities arise — though any increase beyond the 24.99% threshold would involve regulatory discussions.
- Local Unit Plan: SMBC is actively evaluating the creation of a wholly owned bank subsidiary in India, though no formal application has been filed yet.
- Long-Term Commitment: According to Kannan, SMBC took a “permanent capital” approach — not investing with a short-term exit in mind.
Implications & Risks
- Positive for Yes Bank: Increased backing from SMBC could bolster Yes Bank’s turnaround play, especially in terms of capital strength, governance, and strategic direction.
- Strategic Reach: A local subsidiary would give SMBC more control and flexibility in its India operations, aligning with its broader Asia-market ambition.
- Regulatory Sensitivity: SMBC’s potential increase in stake is constrained by the 24.99% cap — going beyond this would likely trigger an open offer.
- Cautious Signals: Despite the talk of raising its stake, SMBC has publicly stated it does not have immediate plans to go beyond the current shareholding.
In sum, SMBC’s statements suggest a deepening of its India commitment — not just as an investor in Yes Bank, but potentially as a full-scale banking player. However, the actual execution will depend heavily on regulatory clearance, capital allocation, and Yes Bank’s turnaround prospects.
