Japan’s Sumitomo Mitsui Banking Corporation  (SMBC) is taking a cautious approach to further increasing its stake in private Indian lender Yes Bank.

SMBC, Japan’s second-largest bank, has secured 24.2% stake in Yes Bank and has the Reserve Bank of India’s (RBI) approval to take it up to 24.99%. But there are no plans yet to go beyond that, according to a senior executive of SMBC.

Analysts had expected the bank to seek approval for a further increase, which would have triggered the launch of an open offer of 26% to Yes Bank’s retail shareholders.

Rajeev Kannan, group executive officer and head of SMBC Group’s India division, has ruled out immediate plans of a stake upheaval. He has said in an interview to Reuters that SMBC will focus on contributing to Yes Bank's growth as its largest shareholder and board member. It does not intend to take on an executive role in Yes Bank. 

"We are not actively looking at increasing our stake in Yes Bank beyond the regulatory permissible limit of 24.99%," Kannan told the news agency. " There are many areas which Yes Bank still needs to work on, and we need to ensure that those areas, which they have a plan to address, are being executed."

Japanese financial institutions, hit by rock bottom interest rates at home, have been indulging in major overseas investments as they look to secure new sources of growth. SMBC is, however, moving cautiously with its biggest investment in India.

Yes Bank needs to improve on its cost of funds, return on assets and return on equities as compared to its peers, Reuters quoted Kannan as saying.

Under India's takeover regulations, acquiring 25% or more in a listed company triggers a mandatory open offer to purchase at least an additional 26% from public shareholders, potentially resulting in a majority stake of 51%.

The RBI in August gave SMBC approval to buy up to a 24.99% stake in Yes bank. The Japanese bank had in May inked a deal to purchase a 20% stake for $1.6 billion from State Bank of India (SBI) and seven other shareholders.

SBI has agreed to stay on as a significant shareholder, with the current holding at 10.8% in Yes Bank.

The group, which has investments worth $7 billion in India, intends to keep its existing non-bank lending business SMFG Credit separate from its investment in Yes Bank, Reuters reported. 

The group has made a significant investment in the NBFC platform and the intention is to scale it up.

"In future, there is a possibility that things could be more integrated maybe. But we haven't basically focused on that. Our intention is to look at each entity on its own strength at this point in time," Reuters quoted Kannan as saying.

SMFG Credit had assets under management totaling $6.5 billion as of 31 March 2025.

The group has not applied to set up a wholly owned subsidiary in India but continues to evaluate the plan.

SMBC Group also sees opportunities in the wealth management and investment bank businesses in India, through Yes Bank and its securities platform. 

Kannan also told the news agency that the group may consider asset management business as an area of growth in future, given their holding in Sumitomo Mitsui DS Asset Management.