The Reserve Bank of India (RBI) has halted the sale of majority stake in Yes Bank to potential foreign bidders, according to MoneyControl.com. The regulator’s move is line with the current bank licensing norm and is likely to delay sale process.
One of the bidders, Japan’s Sumitomo Mitsui Banking Corp (SMBC) has shown interest in buying stakes and is persistent in its demand to acquire 51 per cent stakes.
“SMBC is directly negotiating with RBI on this, but the central bank is not willing to relent on ownership control,” MoneyControl reported, citing a source. Consequently, it has asked the potential bidders to reconsider their position on important terms of the deal.
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RBI’s nudge stems from the bank licensing norms under the Banking Regulations Act, 1949. The norms require promoters to reduce their stake to 26 per cent within 15 years of starting operations.
As a solution, RBI has proposed the investors decrease their stake in the bank over time.
The Timeline of Yes Bank’s Trouble and the Role of RBI as the Troubleshooter
Yes Bank was founded in 2004 by Rana Kapoor and Ashok Kapoor and became the country’s fifth-largest private lender in terms of market capitalisation. However, due to issues with its asset quality in 2017 and 2018, the bank came under the scrutiny of the RBI. Additionally, governance issues with the bank also popped up. Consequently, in March 2020, RBI intervened and imposed a 30-day moratorium on the bank.
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Following the moratorium in 2020, RBI launched a revival plan for the bank and offered a maximum of 49 per cent stake to SBI. Nearly 48 per cent of the stake was bought by SBI.
Currently, according to media reports, SBI has blocked 24 per cent of its stake in Yes Bank. While Axis Bank, Kotak Mahindra Bank, ICICI Bank, and HDFC b\Bank collectively hold 7.4 per cent stakes in the bank. Around 14 per cent is held by PE investors Carlyle and Advent collectively.
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