To understand why this deal is such a milestone, we need to rewind to when Yes Bank was flying high. In 2015, it was a symbol of rapid growth and aggressive expansion, with its loan book swelling dramatically year after year.

But that unchecked growth brought risks. In July 2015, UBS sounded an alarm about Yes Bank's lending practices, claiming it was "most vulnerable to a large corporate default." The bank had begun extending loans to troubled businesses that couldn't secure funding from more

Yes Bank had built significant exposure to future high-profile failures: DHFL, Reliance ADA group, Essel/Zee Group, Vodafone Idea, Jet Airways, and more. Each was a ticking time-bomb, and soon these loans started turning bad.

The bank tried sweeping problems under the carpet by underreporting NPAs. In FY2019, Yes Bank officially reported NPAs of around ₹3,277 crore, but RBI inspectors found a major divergence. An Asset Quality Review revealed the true gross NPAs were exponentially higher, around

By September 2019, bad loans had reportedly ballooned to a staggering ₹50,396 crore. At the heart of the issue was CEO Rana Kapoor, whose aggressive approach led to the bank's financial strain. Kapoor allegedly received ₹600 crore in kickbacks for extending loans to distressed

Kapoor stepped down amid regulatory scrutiny in 2019, selling nearly all his stake. The bank faced severe capital erosion as NPA losses piled up. Efforts to raise new capital from external sources kept failing, and Yes Bank approached the brink of collapse.

In March 2020, RBI intervened decisively. It imposed a moratorium limiting withdrawals to ₹50,000 per account, which prevented a potential bank run. The RBI then drafted a resolution plan anchored by SBI, which along with seven other major banks (including ICICI and HDFC)

The bailout carried steep consequences: existing shareholders were massively diluted, the ownership structure changed overnight, and Yes Bank's Additional Tier 1 bonds were controversially written off completely, sparking a legal battle that remains unresolved today.

Under new CEO Prashant Kumar (an SBI veteran), Yes Bank undertook significant strategic changes. It offloaded a massive ₹48,000 crore of bad loans to JC Flowers Asset Reconstruction Company, effectively cleaning its balance sheet, and recovered over ₹5,000 crore in previously

The bank also diversified its loan book, pivoting away from large corporate lending to retail and SME segments. By March 2025, ~60% of its loan book belonged to Retail & MSME, compared to just 36% in March 2020. Fresh capital from PE giants Carlyle and Advent further solidified

Fast forward to 2023: the lock-in period for Yes Bank's rescuers expired. Though they could sell their stakes, they waited for a better offer. Their patience paid off with SMBC's deal valuing the 20% stake at ₹13,483 crore, offering these initial investors a relatively

For SMBC, this acquisition represents a significant leap into India's banking landscape. While not a stranger to India, SMBC has been executing a multi-franchise strategy across Asia, selectively buying stakes in key markets.

In 2021, SMBC's parent company acquired a 74.9% stake in Fullerton India (later increased to 100% and rebranded as SMFG India Credit). But Yes Bank fills the missing piece—giving SMBC a stake in a scheduled commercial bank with an existing customer base and branch network.

The timing is strategic: SMBC is buying in after Yes Bank has largely de-risked and stabilised, but still has room for growth. RBI's willingness to allow a 20% foreign stake (exceeding the typical 15% limit) suggests the central bank is comfortable with Yes Bank having a strong

For Yes Bank, the SMBC partnership is transformative. It provides a strong foreign anchor investor that boosts confidence, offers better governance through SMBC's global best practices, and doesn't require another dilutive capital raise.

For the initial rescue investors like SBI, this deal offers a graceful and profitable exit. They've guided the bank through its crisis and now hand over stewardship to SMBC. This marks the end of Yes Bank's exhausting recovery phase and potentially the beginning of a promising

We cover this and one more interesting story in today's Daily Brief in detail. You can watch the episode on YouTube, read on Substack, or listen on Spotify, Apple Podcasts, or wherever you get your podcasts. All links here: https://thedailybrief.zerodha....