Yes Bank , one of India's prominent private sector banks, is navigating a crucial phase in its leadership succession plan, closely tied to the anticipated stake acquisition by Sumitomo Mitsubishi Banking Corp (SMBC). The bank's future direction is set to be shaped by this strategic move, which has implications for both its governance and market position. However, the bank now faces additional challenges as allegations of serious misconduct have emerged.

Allegations of Misconduct

Yes Bank is currently facing allegations of serious misconduct related to its loan approval process for Anil Ambani's Reliance Group companies. The specific nature and source of these allegations have not been disclosed in the available information. This development adds a layer of complexity to the bank's ongoing transitions.

Leadership Transition

Yes Bank's succession planning is currently on hold, awaiting the completion of SMBC's acquisition of at least a 20% equity stake. This development has led to an extension of the current MD and CEO Prashant Kumar's tenure by six months from October. This extension is strategically timed to allow the incoming Japanese investor, SMBC, to participate in board discussions regarding the bank's future leadership.

SMBC's Stake Acquisition

The Japanese banking giant, SMBC, has taken significant steps towards acquiring a substantial stake in Yes Bank:

• Applied to the Reserve Bank of India (RBI) for acquiring a 20% stake from the State Bank of India (SBI) and other banks
• Submitted an application to the Competition Commission of India for regulatory approval
• Initially applied for a 25% ownership, indicating potential for future stake increases post-approval

Market Challenges

Prashant Kumar, the current MD and CEO, has highlighted some challenges facing the banking sector:

• The September quarter is expected to be challenging due to sluggish credit growth
• Impact of repo rate cuts on margins is a concern
• Yes Bank's performance in the June quarter showed:
  • 5.00% growth in advances
  • 4.00% increase in deposits

Kumar noted weak credit demand, attributing it to corporates increasingly accessing debt and overseas markets rather than traditional bank loans.

Recent Corporate Governance Update

Yes Bank has made changes to its agreement with Verventa Holdings Limited (VHL), an affiliate of funds advised/managed by Advent. Key points from the amendment agreement include:

This amendment, approved by the board on July 23, 2025, reflects Yes Bank's ongoing efforts to refine its corporate governance structure amidst changing stakeholder dynamics.

As Yes Bank navigates these transitions in ownership and leadership, along with addressing the recent allegations, the banking sector watches closely. The completion of SMBC's stake acquisition, the subsequent leadership decisions, and the resolution of the misconduct allegations will be crucial in shaping the bank's strategy and performance in the competitive Indian banking landscape.

Yes Bank , a prominent Indian private sector bank, has announced significant changes to its investment agreement with Verventa Holdings Limited (VHL), an affiliate of funds advised by Advent. The amendment, approved by YES Bank's board on July 23, 2025, primarily focuses on revising the terms related to VHL's right to nominate a non-executive director to the bank's board.

Key Amendments

The revised agreement introduces several important changes:

1. Director Rotation: The VHL-nominated non-executive director will now be subject to retirement by rotation, replacing the previous provision for a non-retiring director.

2. Alternate Directorship: VHL's rights to appoint an alternate director have been removed.

3. Fall-away Threshold: The threshold for VHL's board nomination rights has been significantly adjusted. Previously, VHL needed to maintain at least 50% of its originally issued securities to retain this right. Under the new terms, VHL must hold at least 5% of YES Bank's total paid-up share capital (on a fully diluted basis) to maintain its nomination rights.

Shareholding and Impact

VHL currently holds a 9.19% stake in YES Bank's paid-up share capital. This amendment aims to align the nomination rights more closely with VHL's ongoing shareholding in the bank.

Regulatory Compliance

YES Bank has made this disclosure in compliance with Regulation 30 of the Securities and Exchange Board of India (SEBI) Listing Obligations and Disclosure Requirements Regulations, 2015. The bank has also confirmed that this transaction does not fall under the category of related party transactions.

Conclusion

This amendment represents a significant shift in the governance structure between YES Bank and one of its major investors. By introducing director rotation and revising the fall-away threshold, the bank appears to be strengthening its corporate governance practices while maintaining strategic investor relationships.

Shareholders and market observers will likely watch closely to see how these changes impact YES Bank's board dynamics and overall corporate governance in the coming months.