RBI grants in-principle approval to Japan's SMBC to set up a wholly-owned subsidiary in India

RBI grants in-principle approval to Japan's SMBC to set up a wholly-owned subsidiary in India

• RBI grants in-principle approval to SMBC for a wholly-owned subsidiary in India
• SMBC to convert its four Indian branches into a wholly-owned subsidiary
• SMBC now holds 24.22 percent stake in Yes Bank, becoming its largest shareholder

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Reserve Bank of India on January 14 said it has decided to grant ‘in-principle’ approval to Japan's Sumitomo Mitsui Banking Corporation (SMBC) for setting up a wholly-owned subsidiary (WOS) in India.

The decision was taken under the Reserve Bank of India (Setting Up of Wholly Owned Subsidiaries by Foreign Banks) Guidelines, 2025, said the central bank.

SMBC is currently carrying on banking business in India in branch mode through its four branches located in New Delhi, Mumbai, Chennai and Bengaluru. "The ‘in-principle’ approval has been granted to the bank for setting up a WOS through conversion of its existing branches in India," said RBI in a statement.

"The RBI would consider granting a licence for commencement of banking business in WOS mode under Section 22 (1) of the Banking Regulation Act, 1949 to SMBC on being satisfied that the bank has complied with the requisite conditions laid down by RBI as part of ‘in-principle’ approval," RBI added.

An Indian subsidiary will give the bank greater flexibility in its operations.

A wholly-owned subsidiary is a separate legal entity in India that allows a bank treatment similar to local peers, including freedom to open branches without restriction.

Such a subsidiary's capital is ring-fenced from the parent bank's.

Last year, SMBC acquired 24.22% stake in Yes Bank.

With this transaction, SMBC had become Yes Bank's largest shareholder, while SBI continues to hold a significant stake of over 10%.

The private sector bank stated its intention to leverage SMBC's global strengths, particularly in facilitating trade and investment flows between Japan and India, to accelerate growth in its corporate banking, treasury services, and cross-border solutions.

SBI and seven investor lenders had invested in the bank as part of the Yes Bank reconstruction scheme in March 2020. The state-owned SBI, which held a 24% stake in Yes Bank, is now left with a little over 10% stake after the dilution.

In March 2020, weeks before the onset of the Covid crisis, the RBI and the government staged a rescue act which saw banks led by SBI taking a 79% stake in Yes Bank and helping it stay afloat.