Sumitomo Mitsui Eyes Bigger Stake in Yes Bank with $1.1 Billion Boost

A Growing Japanese Bet on India’s Banking Revival

Sumitomo Mitsui Financial Group (SMFG) is reportedly considering a fresh $1.1 billion investment in India’s Yes Bank, marking a significant escalation in its commitment to one of India's most closely watched banking turnaround stories. According to sources cited by Bloomberg, the proposed investment would be in addition to the $1.6 billion stake SMFG acquired just two months ago.

If finalized, the new investment would raise SMFG’s total holding in Yes Bank to around 25%, positioning it as one of the largest foreign stakeholders in the Indian lender. The deal reportedly involves acquiring approximately 5% of Yes Bank’s shares from existing shareholders, including the Carlyle Group, along with a possible purchase of $680 million worth of convertible bonds issued by Yes Bank.

Yes Bank’s Road from Crisis to Confidence

Yes Bank has seen a dramatic turnaround since its near-collapse in 2020. Once inundated with bad loans and teetering on the edge of insolvency, the bank was bailed out by the Reserve Bank of India (RBI), with the State Bank of India and several private players stepping in to inject capital.

Since then, Yes Bank has steadily restructured its operations, cleaned up its balance sheet, and sought to regain investor and depositor confidence. Its shares have gained modestly—about 2.1% this year—pushing its market valuation to approximately $7.3 billion. While the growth has been gradual, the bank’s improving fundamentals and India’s strong economic trajectory have caught the attention of foreign investors like SMFG.

Strategic Expansion by SMFG in India

This potential move is part of a broader Indian strategy by SMFG and other Japanese financial institutions. SMFG previously spent $700 million to acquire full control of Fullerton India Credit Company, a local consumer lender, after purchasing a $2 billion stake in 2021. That acquisition deepened its exposure to India’s fast-growing retail lending sector, particularly in housing and automobile finance.

Now, with Yes Bank, SMFG appears to be expanding its footprint in the mainstream Indian banking sector—betting not only on the revival of a troubled lender but also on the long-term structural growth of India's banking industry.

The $680 million proposed investment in convertible bonds is especially noteworthy, as it would both provide fresh capital for Yes Bank’s lending operations and potentially increase SMFG’s equity exposure in the future, depending on how the instruments are structured.

Caution Behind the Curtains

Despite the potential scale of the deal, no final decisions have been made, and all discussions are still in progress. Neither SMFG nor Yes Bank has commented officially. The Carlyle Group, one of the parties from whom shares might be acquired, also declined to respond.

For SMFG, which faces limited growth at home due to Japan’s aging population and low interest rates, India offers scale, youth, and economic dynamism. For Yes Bank, the partnership offers stability, capital, and global expertise—three pillars it needs as it continues its recovery.

A Calculated Gamble with Mutual Upside

If this investment materializes, it would mark a significant deepening of Japan’s financial engagement with India. For Yes Bank, SMFG’s capital infusion would be a validation of its revival strategy and a critical resource to fuel future expansion. For SMFG, it would represent a calculated but strategic move to cement its presence in a booming economy with massive unmet banking demand.

As India’s banking landscape grows increasingly competitive, such cross-border partnerships may well define the next phase of global capital deployment in South Asia’s financial sector.