Months after picking up 24.21 per cent stake in private sector lender Yes Bank, Japan’s Sumitomo Mitsui Banking Corporation (SMBC) has received the Reserve Bank of India’s (RBI’s) in-principle approval for setting up a wholly owned subsidiary (WOS) in India.
Photograph: Yuya Shino/Reuters
In May last year, Emirates NBD Bank PJSC, which will be picking up a controlling stake (up to 60 per cent) in another private sector lender RBL Bank for $3 billion, had also received regulatory nod to set up WoS.
RBL will be a subsidiary of NBD.
SMBC will be the fourth foreign lender to set up a WoS in India.
SMBC currently carries 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.
SMBC is a WoS of the Sumitomo Mitsui Financial Group (SMFG).
SMFG has a WoS, SMFG India Credit, which is among the largest diversified non-banking financial companies (NBFCs) in India.
“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 the central bank as part of ‘in-principle’ approval,” the RBI press release said.
After the transaction with Yes, SMBC became the largest shareholder while State Bank of India’s (SBI’s) stake fell to 10.78 per cent.
SBI and other banks had invested in Yes Bank as part of the latter’s reconstruction scheme.
In March 2020, several banks led by SBI took 79 per cent stake in Yes Bank and helped the lender to stay afloat.
Initially, SBI and seven other private banks, which had invested in Yes during its reconstruction phase in March 2020, collectively sold their 20 per cent stake to SMBC for Rs 13,482 crore.
Current regulations allow foreign banks to operate as a branch or a WoS of the parent entity.
Currently, DBS Bank India and SBM Bank India work as wholly owned subsidiaries.
A local presence gives these banks more flexibility than operating as a foreign branch.
Earlier, Moody’s Ratings had said the deal with Yes will enhance SMFG’s presence in India, which it considers has both medium- and long-term strong growth potential.
At end-March 2025, the number of foreign banks operating in branch/WoS mode in India declined to 44, following the exit of one bank during the year.
“The change in the number of branches of foreign banks reflects their continuous realignment of global business,” the RBI said in its recent Trends & Progress report. As on March 31, 2025, there were 775 branches of foreign banks in India and 31 representative offices.
