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State Bank of India (SBI) and seven private banks are set to earn tax-free gains this quarter from selling a 20% stake in Yes Bank to Japan’s Sumitomo Mitsui Banking Corporation (SMBC). The Rs 13,483 crore ($1.6 billion) deal is exempt from capital gains tax under the 2020 Yes Bank Reconstruction Scheme, introduced to encourage the lender’s rescue.
SMBC, Japan’s largest banking group and a completely owned subsidiary of Sumitomo Mitsui Financial Group, has secured regulatory clearances from the Reserve Bank of India (RBI) and the Competition Commission of India (CCI) to acquire the stake.
The deal will be executed through a secondary market transaction, making it one of the largest cross-border M&A moves in India’s financial sector.
Under the agreement, SBI will divest 13.19% of its holding, reducing its stake from 24% to below 11%. This sale is expected to generate proceeds of around Rs 8,889 crore.
The remaining seven banks: HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IDFC First Bank, Federal Bank, and Bandhan Bank have together agreed to sell 6.81% of Yes Bank for approximately Rs 4,594 crore.
Originally, the banks had subscribed to Yes Bank shares at Rs 10 a share in 2020 and are now selling at Rs 21.50, therefore more than doubling their investment. After the latest development, Monday’s stock market witnessed a surge in Yes Bank share price boosting the banking sector.
Normally, this sale would have attracted a 12.5% long-term capital gains tax, but due to the exemption clause in the 2020 reconstruction plan, the banks got the entire profit. The exemption was added to reward the institutions that helped Yes Bank during its crisis.
For SBI, which reported a net profit of Rs 19,160 crore in Q1 FY26, the stake sale provides an additional boost at a time when rising bond yields are expected to pressure treasury income and net interest margins.
The deal not only cements SMBC’s entry into India’s banking sector but also allows the Japanese lender to appoint two directors to Yes Bank’s board, alongside one director nominated by SBI.
SMBC has also received the RBI’s approval to increase its shareholding up to 24.99%. Yes Bank is reportedly exploring an additional investment of Rs 16,000 crore, with Rs 7,500 crore in equity and Rs 8,500 crore in debt to bolster Yes Bank's capital base and to support growth.
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The transaction is a significant milestone for Yes Bank by bringing a deep-pocketed, global investor, while also giving early rescuers such as SBI and private banks a sizable tax-free gain. With SMBC set to be a strategic partner, Yes Bank is expected to gain financial stability and renewed credibility in the banking landscape.
