MUMBAI: Yes Bank’s proposed sale to a private buyer has hit a hurdle as potential buyers seek a 51% shareholding, which is not allowed under existing rules. The development is likely to push the exit of major Indian banks that hold a majority stake in the private lender beyond the current financial year.
Reports have indicated that Japan’s SMBC and Emirates NBD were the only bidders for the private bank and both are eager to hold over 51%.In the past, RBI had allowed white-knight investors to hold more than 50% in private banks, but those transactions were aimed at preventing distressed lenders from collapsing.
Development Bank of Singapore, for instance, was permitted to acquire the distressed Lakshmi Vilas Bank during the pandemic in Nov 2020. Likewise, in 2018, RBI approved Canada’s Fairfax Group to obtain a 51% stake in CSB Bank.
Reports have indicated that Japan’s SMBC and Emirates NBD were the only bidders for the private bank and both are eager to hold over 51%.In the past, RBI had allowed white-knight investors to hold more than 50% in private banks, but those transactions were aimed at preventing distressed lenders from collapsing.
Development Bank of Singapore, for instance, was permitted to acquire the distressed Lakshmi Vilas Bank during the pandemic in Nov 2020. Likewise, in 2018, RBI approved Canada’s Fairfax Group to obtain a 51% stake in CSB Bank.
Unlike these two cases, however, Yes Bank is currently financially stable. The proposed sale aims to provide an exit to existing shareholders including SBI, HDFC Bank, and ICICI Bank. Issuing fresh capital would further increase the bank’s equity base. Additionally, in all cases where RBI has allowed a higher stake, it was with the understanding that the investor would eventually decrease their stake to 26%. Contrary to some reports, sources mentioned that there has not been any ‘fit and proper’ assessment of bidders, which is a prerequisite for a formal bid.
In March 20200, Yes Bank underwent a govt-notified reconstruction scheme where an SBI-led consortium invested over Rs 10,000 crore to rescue the bank.