2025’s headline for Indian banking sector is undoubtedly about two large foreign banks entering India through the acquisition mode. Sumitomo Mitsui Banking Corporation’s (SMBC) deal with Yes Bank, which was announced in May this year, and the RBL – Emirates NBD deal that concluded ahead of Diwali, have aspects in common, and are also unique as far as the Indian banking ecosystem is concerned. More importantly, they may have set the template for more to come.
What’s common between the two, interestingly, traces back to the thought process that went into planning the divestment of IDBI Bank, another mega deal in the making expected to conclude in a few months.
Sources say around mid-2022 there was collective will among policymakers to explore the idea of inviting large foreign banks to participate in the divestment of IDBI. “That opened the doors for some foreign banks to test the waters in India,” said an official who wasn’t authorized to talk to media.
Through the process of inviting letter of intent (LOI), it became clear to those in the corridors of power that “Global banks see their Indian counterparts as viable green pastures,” said an official who didn’t want to be named.
Large foreign banks such as MUFG, SMBC, Mizuho, Emirates and First Abu Dhabi Bank are said to be among the prominent names which had showed interest in IDBI Bank. Of the lot, Emirates was keen to close in on IDBI Bank. “But it was around early 2025 that Emirates started exploring conversations with other likely investment opportunities. Was it the prolonged nature of the divestment process or apprehensions raised by analysts covering the bank isn’t clear, but Emirates wanted to have a Plan B,” said a banker.
How the RBL deal transpired
People aware of the conversations between Emirates and RBL say talks began around March this year. But progress was very slow, and Emirates was keeping all its options open. Sometime around May - June this year, the shares of Emirates NBD listed in Dubai were witnessing a slew of downgrades by analysts tracking it. That signalled to Emirates to consider capital allocation plans outside Dubai, said a source who works with the Middle East lender.
“For Emirates the question that surfaced repeatedly was whether RBL Bank fits its bill, especially after getting a good sense of IDBI Bank,” said a person with knowledge of the negotiations. Emirates started exploring banks in India with the plan of cutting a ‘big’ USD 5 - 6 billon cheque. In relative terms RBL was a smaller opportunity. “It was a rather unusual situation for bankers and advisors – convincing Emirates to settle for something smaller; normally it’s the other way around,” said a consultant. When the Yes Bank – SMBC deal started taking shape in May, Emirates got the comfort to explore a serious alternative to IDBI.
Plan A, Plan B
Around July, whispers about deal talks between RBL and Emirates started gaining steam. Yet, on July 2, when The Economic Times reported the possibility of Emirates picking a significant stake in RBL Bank, the bank issued a stock exchange communication denying deal talks.
“There was nothing concrete at that time to predict the direction of talks,” said an investment banker. By September, it became apparent that RBL Bank had to raise capital for growth. It was working with two options. First was a straightforward equity raise through a qualified institutional placement (QIP) which had approval from shareholders and the other was to address RBL’s long-term pain point– lack of a promoter face.
QIP was an easier option and a large section of the market believed that RBL was headed in that direction. “RBL had appointed bankers for its QIP,” said an analyst. But little did one know that internally QIP was just Plan B.
Plan A – finding a promoter for the bank – was something a close-knit team of four were piecing together.
Closed door deal
By early October, as clarity started emerging, the chatter about something ‘big’ brewing in RBL became louder. “It was still a tale of ‘the four blind men and the elephant’. Finer deal contours, its quantum, and structure were closely guarded by a handful of top executives.
“No one knew what the deal would ultimately be,” said a person involved in the process. For almost three weeks to the run up of to its announcement, the team barely slept, as is the case with any large M&A.
For Emirates, the ask was simple: a large stake, preferably 51 percent. Everything else was open to negotiations. RBL’s top deck were clear that the deal should happen within the regulatory contours laid down by RBI.
“We were clear that no exceptions can be sought from RBI. That motived us in a way, and we knew this would be the first of its kind deal in many ways,” said senior banker at RBL.
It turned out to be just that – whether it was reinforcing India’s strategic importance within the India-Middle East-Europe Economic Corridor, the structuring the deal in a way that an open offer would precede the preferential issue of shares or more importantly, a promoter confined to 26 percent voting rights despite the likelihood of a 60 percent plus economic interest in the bank, it is indeed a first of its kind deal.
How the Yes Bank – SMBC deal evolved
It would be tough to talk about the closure of the Yes Bank – SMBC deal without referencing Emirates NBD – the strong common thread between Yes Bank and RBL.
In March, when Emirates was scouting for investment options, bankers involved in the process say Yes Bank topped its list. “They were very keen. But Yes Bank was also quick to be struck from the list because Emirates wasn’t getting a clear 51 percent stake,” said one of the bankers cited above.
At that juncture, advisors for SMBC once again plunged into action and ensured that by end of April, the three critical parties involved – SBI, SMBC and Yes Bank - had complete clarity on how the deal would unfold.
“Unlike the RBL – Emirates deal which concluded in jet speed and within seven months from initial discussion, Yes Bank – SMBC deal is an outcome of several rounds of negotiations, multiple draft agreements and extreme patience,” said an investment banker associated with SBI on the deal. “Last September, talks were almost put into cold storage, and we went our different ways. But that is also how the Japanese work. They don’t rush into a deal, and nothing is certain till the last hurdle is crossed”. It took 18 months for the deal to conclude.
How it started
By mid-2023 when SMBC was certain that IDBI Bank would be too big to absorb, representatives of SBI reached out to SMBC for to discuss a deal.
For India’s largest bank, its holding in the country’s sixth largest private bank was starting to be more of a liability than an asset; Yes Bank was a drag on SBI’s capital. Therefore, it was logical that with the mandatory three-year lock-in for its 24% stake in Yes Bank ending on March 31, 2023, a new home had to be found for Yes Bank.
Around end of 2023, top leaders at SMBC, primarily those from Japan, started engaging in seruous exploratory talks with SBI to acquire its stake in Yes Bank. By then, Yes Bank had appointed Citi to run the process.
Source say that sometimes in May 2024 three strong possible acquirers emerged – SMBC, MUFG and Emirates. The period between May – September 2024, as an advisor to the deals termed it – were months of serious ‘night and day’ endeavors. “We had daily engagements, and it seemed like a deal was weeks away,” he said. At that time though, MUFG was in the lead and SMBC was the second choice.
Voting rights constraint
What hurt the deal was the ceiling on voting right for a foreign investor at 26 percent, a restriction unique to Indian private banks. The pricing sought by SBI and other exiting banks such as Axis and ICICI and Carlyle, the key private equity investor involved in the sale, was another dampener.
“Why do a deal without having a control in decision making, was the view which MUFG and SMBC took, especially at the price demanded by the sellers,” said a banker who worked with Yes Bank during the negotiations.
By September 2024, MUFG and SMBC had backed out of deal talks.
Sources say for the next three months, the deal was in cold storage. Until just before Christmas when for a change, MUFG knocked on SBI’s door. “For the Japanese lenders, India is an underpenetrated market unlike the US, UK and Australia. They want to make India an important part of their global growth,” said a CEO of a Japanese bank which has branch operations in India. This explains why despite the hurdle on voting rights; global banks were keen to again try to reach a deal with SBI.
Getting it right the second time
SMBC was also quick to jump into action and unlike the earlier attempt which involved representatives from Japan and US to negotiate with SBI, Rajeev Kannan entered the frame. Kannan is SMBC’s trusted old hand and the one who spearheaded the acquisition of Fullerton India Credit in 2021.
He is the managing executive officer and head of the India division of SMBC and Sumitomo Mitsui Financial Group (SMFG).
Sources say Kannan made weekly trip to RBI’s Mumbai headquarter. “From January 2025, he visited RBI twice a week,” said a source. In SMBC’s second attempt for Yes Bank, Kannan become the Indian face putting the deal together.
Kannan is now one of the SMBC’s two nominee directors on Yes Bank’s board.
“It was a team of 30 senior executives who ran the deal strategy,” said a person who was part of it, but not authorized to speak to media.
By February 2025, SMBC had the edge over MUFG and it became likelier that Yes Bank was going the Sumitomo way.
In March 2025, SMBC’s board in Japan gave a go-ahead to advance the acquisition. This was despite RBI’s reluctance to budge on the voting rights restriction. According to a person cited earlier, ‘bring the money first’ was the message for SMBC from the regulator’s corridors.
“There was clarity that SMBC can exercise good oversight over Yes Bank’s operations including enjoying economic control,” he added. With such assurances given, the deal quickly took shape.
Moving parts
The next big hurdle for RBL Bank is securing regulatory clearances. Despite the grand joint announcement of the deal, certain sections of investors are raising doubts on whether the Emirates – RBL deal will go through in the manner announced. Any adverse development could be a huge setback.
For Yes Bank, there are multiple moving parts.
Kannan recently made it public that SMBC will keep its stake at 24.99 percent in Yes Bank for a while. Does this mean that SMBC won’t make fresh investments into Yes Bank or is it a momentary pause? Will SMBC wait to strike till it gets in-principal approval from RBI to convert its India branches into a wholly-owned subsidiary?
What happens to SMFG India Credit - will it fold into Yes Bank as speculated earlier despite RBI’s relaxation of investment norms applicable for banks?
While RBL is confident that from April 1, 2026 Emirates NBD would have concluded its 62 percent plus stake acquisition, what happens next at Yes Bank seems to be anyone’s guess for now.
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