YES Bank's stake sale stalled due to RBI's concerns over majority foreign bank ownership

According to the Moneycontrol report, Sumitomo Mitsui Banking Corp (SMBC) is negotiating directly with the RBI, but the central bank remains firm on not permitting a majority stake controlled by a foreign entity.

SMBC, which is keenly interested in acquiring YES Bank, is facing obstacles as it insists on obtaining a 51 percent stake, as per reports.

This impasse is expected to delay the completion of the stake sale, which was initially anticipated to wrap up by the fourth quarter of the current financial year.

Moneycontrol, on August 1, reported that the RBI had advised investors seeking a controlling interest in YES Bank to reconsider their demands, particularly the request to hold a majority stake, which could extend the deal timeline.

"Following initial discussions with the regulator, potential bidders have been asked to reassess their position on several crucial deal terms," a source told Moneycontrol, adding that the investors have made two key requests.

According to reports, investors want to hold a 51 percent stake in the private lender perpetually.

However, banking regulations stipulate that promoters must reduce their stake to 26 percent within 15 years of starting operations.

To address this, the RBI has suggested a gradual reduction in the investors' stake over time, indicating that a perpetual 51 percent holding may not be feasible.

Additionally, media reports indicate that SBI has put its 24 percent stake in YES Bank up for sale, while other private sector banks, including Axis Bank, Kotak Mahindra Bank, ICICI Bank, and HDFC Bank, hold a combined 7.4 percent.

Private equity investors Carlyle and Advent collectively own about 14 percent of YES Bank, as reported by Moneycontrol.