The Reserve Bank of India (RBI) has granted in-principle approval to Sumitomo Mitsui Banking Corporation (SMBC), Japan, for setting up a wholly owned subsidiary in India.

In India, SMBC has a branch-based presence, spread over New Delhi, Mumbai, Chennai and Bengaluru.

The move to float a wholly owned subsidiary in India has come in the wake of SMBC acquiring last year close to a 25% stake in Yes Bank. The plan could be to increase its holding in Yes Bank to a majority.

"The in-principle approval has been granted to the bank for setting up a wholly owned subsidiary (WOS) through conversion of its existing branches in India," the RBI said in a statement.

The central bank further said it will consider granting a licence for commencement of banking business in the wholly owned subsidiary to SMBC on being satisfied that the bank has complied with the requisite conditions laid down by the RBI as part of 'in-principle' approval.

While SMBC is currently the largest shareholder in Yes Bank with a 24.22% stake, State Bank of India (SBI) continues to hold over 10%.

SMBC could be wanting to buy out the remaining stakes of SBI and other banks in Yes Bank, which amount to nearly 14%.