State Bank of India (SBI) and seven private banks are poised to sell their collective 20% stake in Yes Bank to Japan's Sumitomo Mitsui Banking Corporation (SMBC) for a substantial ₹13,483 crore. The deal, priced at ₹21.50 per share, represents a significant return on investment for the selling banks, who originally acquired these shares at ₹10 each in 2020 under the Yes Bank Reconstruction Scheme.

Tax-Free Windfall for Selling Banks

In a notable financial advantage, the entire proceeds from this sale will be exempt from capital gains tax. This exemption, granted under the Yes Bank Reconstruction Scheme 2020, will save the selling banks from paying the standard 12.5% long-term capital gains tax, further boosting their returns from the transaction.

Breakdown of the Stake Sale

The stake sale involves a consortium of Indian banks, with SBI taking the lead:

*Private banks include HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IDFC First Bank, Federal Bank, and Bandhan Bank.

SMBC's Strategic Move

SMBC has already secured approval from the Reserve Bank of India (RBI) to acquire up to a 24.99% stake in Yes Bank. This leaves room for the Japanese banking giant to potentially purchase an additional 4.99% stake, either from private equity firms or through preferential shares.

Future Capital Infusion

In addition to the stake purchase, SMBC is reportedly in discussions to inject a substantial ₹16,000 crore into Yes Bank. This capital infusion is expected to be structured as a combination of debt and equity funding, potentially strengthening Yes Bank's financial position and capital adequacy.

Implications for Yes Bank

This significant investment by SMBC could mark a turning point for Yes Bank, which has been working to stabilize its operations since its near-collapse in 2020. The influx of foreign capital and the strategic partnership with a major global banking player may help bolster Yes Bank's financial health and market position in the Indian banking sector.

The stake sale represents a successful exit strategy for the consortium of Indian banks that stepped in to rescue Yes Bank during its financial crisis. It also demonstrates the attractiveness of the Indian banking sector to international investors, particularly as the sector continues to evolve and strengthen its regulatory framework.

Yes Bank , a prominent Indian private sector bank, has achieved a significant milestone in its corporate governance structure. The bank has received approval from the Reserve Bank of India (RBI) for amendments to its Articles of Association, paving the way for strategic board nominations by two major financial institutions.

Key Highlights

• RBI approval received on September 09
• Sumitomo Mitsui Banking Corporation (SMBC) to nominate two directors
• State Bank of India (SBI) to nominate one director
• Approval linked to share purchase agreement dated May 09

RBI Approval Details

Yes Bank disclosed that the RBI's approval, dated September 09, pertains to proposed amendments in the bank's Articles of Association. These amendments are in connection with the nomination rights for board directors, as agreed upon in a share purchase agreement executed on May 09, between Yes Bank, SMBC, and SBI.

Nomination Rights

Under the approved amendments:

• Sumitomo Mitsui Banking Corporation will have the right to nominate two directors
• State Bank of India will be able to nominate one director

These nomination rights will become effective upon the completion of transactions outlined in the share purchase agreement.

Regulatory Compliance

The bank has promptly informed the stock exchanges about this development, in compliance with Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Yes Bank's Company Secretary, Sanjay Abhyankar, confirmed the receipt of RBI approval in a formal communication to the National Stock Exchange of India Limited and BSE Limited.

Next Steps

While this RBI approval marks a crucial step forward, Yes Bank noted that the consummation of the transactions contemplated under the share purchase agreement remains subject to customary conditions precedent. The bank has not disclosed specific details about these conditions or the expected timeline for their fulfillment.

Implications

This development signifies a potential shift in Yes Bank's governance structure, with two major financial institutions set to gain board representation. The involvement of Sumitomo Mitsui Banking Corporation, a prominent Japanese bank, and the State Bank of India, India's largest public sector bank, could bring valuable expertise and strategic insights to Yes Bank's board.

Investors and stakeholders will likely be watching closely to see how these changes might influence Yes Bank's strategic direction and operational decisions in the coming months.

Yes Bank has stated that further information regarding this development is available on the bank's official website, www.yesbank.in , in accordance with listing regulations.