Yes Bank Stake Sale: SBI, Other Private Banks Set For Big Tax-Free Gains

State Bank of India (SBI) and a group of private banks are set to reap a major tax bonanza in the September quarter from the sale of their Yes Bank stake to Japan’s Sumitomo Mitsui Banking Corp (SMBC), according to a report by the Economic Times. The Rs 13,483-crore income from the transaction will be exempt from capital gains tax under the Yes Bank Reconstruction Scheme, 2020.

With regulatory approvals secured, SMBC is expected to complete the purchase of a 20% stake in Yes Bank through a secondary market transaction this quarter. The selling banks will book the proceeds as “other income.” The scheme included a clause exempting participating banks from capital gains tax on profits from share sales, designed to encourage their initial support

during Yes Bank’s rescue.

The Rs 13,483-crore ($1.6 billion) deal not only marks the entry of Japan’s largest bank into India but also allows SMBC, a wholly owned subsidiary of Sumitomo Mitsui Financial Group, to appoint two nominee directors to Yes Bank’s board with the Reserve Bank of India’s approval.

SBI and seven private lenders — HDFC Bank, ICICI Bank, Kotak Mahindra Bank, Axis Bank, IDFC First Bank, Federal Bank, and Bandhan Bank — signed a definitive agreement to jointly offload a 20% stake at Rs 21.50 per share. These banks had subscribed to shares at Rs 10 each in 2020. SBI will sell 13.19% of its 24% stake for Rs 8,889 crore, while the remaining seven banks will collectively divest 6.81% for Rs 4,594 crore.

Without the exemption, banks would have been liable to pay 12.5% in long-term capital gains tax. The clause was specifically introduced to incentivize banks that infused capital during Yes Bank’s crisis.

For SBI, which reported a net profit of Rs 19,160 crore in Q1 FY26, the transaction comes as a relief amid expected pressure on net interest margins and moderation in treasury gains due to rising bond yields.

SMBC has also received RBI’s nod to raise its stake in Yes Bank up to 24.99%. It may acquire the additional 4.99% either from private equity investors Advent and Carlyle or via preferential share issuance. In parallel, SMBC is in talks with Yes Bank to infuse Rs 16,000 crore through a mix of debt (Rs 8,500 crore) and equity (Rs 7,500 crore), according to reports. The bank’s board has already secured shareholder approval for this fundraising.

In August, RBI cleared SMBC’s application to increase its stake, and in early September, the Competition Commission of India also approved the proposal.