Banking: After the sale of Yes Bank, 8 banks including SBI, will benefit, can get huge benefit in tax..

Japanese bank Sumitomo Mitsui Banking Corp (SMBC) is going to buy India's largest private lender, Yes Bank. In this deal, 8 banks, including State Bank of India (SBI), are also selling their stake. These 8 banks are likely to get big tax benefits from this deal in the September quarter. The income of Rs 13,483 crore from the stake sale will be free from capital gains tax. With all regulatory approvals, SMBC will complete the deal to buy a 20 percent stake through secondary market transactions in this quarter.

The selling banks will record the income as "other income". The Yes Bank Reconstruction Scheme, 2020, has a specific section that exempts banks investing in reconstruction from capital gains tax on the profit from the sale of shares. However, SMBC, a wholly-owned subsidiary of Sumitomo Mitsui Financial Group (SMFG), has also received the approval of the Reserve Bank of India for the appointment of two nominee directors on the board of Yes Bank.

8 banks will get tax relief

SBI and seven private banks – HDFC Bank, ICICI Bank, Kotak Mahindra, Axis Bank, IDFC First Bank, Federal Bank, and Bandhan Bank – have jointly signed a definitive agreement to sell 20 per cent stake at Rs 21.50 per share. These banks had bought shares in 2020 at a rate of Rs 10 per share. Under the agreement, SBI will sell 13.19 per cent of its 24 per cent stake for Rs 8,889 crore, while the remaining seven banks will sell 6.81 per cent stake for Rs 4,594 crore.

This is how you will get relief from tax.
If there were no tax exemption, these 8 banks would have to pay 12.5 percent long-term capital gains tax. This section was added to the Yes Bank Reconstruction Scheme to make the deal easier for those banks that were hesitant to participate in the much-needed capital investment to save the bank. The scheme states that the investor bank and the investors investing in the shares of the restructured bank under this scheme will not be liable to pay capital gains tax under the Income Tax Act, 1961 (43 of 1961), on any alleged profit or receipt from such investments.

Banks will get relief.
The transaction sale of Yes Bank is like a relief for banks, as most of them are likely to see some reduction in net interest margins as they are passing on the benefit of policy rate cuts to borrowers. Fiscal benefits are also expected to come down due to the increase in bonds sold. There are also concerns that the reduction in GST slabs could increase the fiscal deficit, and there is no hope of immediate rate cuts. SBI, which reported a net profit of Rs 19,160 crore in the first quarter of FY26, will benefit the most.

Now it can increase its stake like this.

SMBC has received approval from the RBI to increase its stake in Yes Bank to 24.99 per cent. According to sources close to the matter, it can either buy the remaining 4.99 per cent stake from private equity firms Advent and Carlyle or invest in preferential shares to be issued by the private bank. Apart from this, SMBC is in talks with Yes Bank to invest Rs 16,000 crore in Yes Bank through a combination of loans (Rs 8,500 crore) and equity (Rs 7,500 crore). The bank's board has obtained shareholders' approval for fundraising. In August, the RBI approved SMBC’s application to increase its stake in the bank, while in early September, the Competition Commission of India approved the proposal.

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