In a significant development for India's banking sector, State Bank of India (SBI) is gearing up to offload its 24% stake in Yes Bank, valued at $2.2 billion (184.2 billion Indian rupees), by the end of March. This move is aimed at marking a full turnaround from Yes Bank's troubled past, with serious interest from international financial giants, Sumitomo Mitsui Banking Corp from Japan and Dubai's Emirates NBD.

The deal is being closely watched as Sumitomo Mitsui Banking Corp and Emirates NBD are in advanced talks to acquire a majority 51% stake in Yes Bank, giving them significant control over the bank's operations. Sumitomo Mitsui is a subsidiary of Sumitomo Mitsui Financial Group, Japan's second-largest bank by assets.

According to multiple sources familiar with the matter, the Reserve Bank of India (RBI) has verbally given its approval for the transaction, and due diligence is currently in progress. The transaction is seen as an exit strategy for SBI, which took a major stake in Yes Bank during its financial troubles in 2020. At that time, a consortium of local banks, including SBI, ICICI Bank, and HDFC Bank, came together for a bailout. Currently, SBI holds about 24% of Yes Bank, while 11 other banks joined in the rescue holding a collective 9.74%. Private equity funds CA Basque Investments and Verventa Holdings collectively hold another 16.05%, with the remaining shares owned by other investors and the public.

There are some regulatory hurdles to overcome, particularly concerning the requirement that the promoter shareholding be reduced to 26% within 15 years of the investment. Talks are ongoing to seek relaxation on this front. While there has been no official confirmation from SBI, sources indicate that preparations for the sale are well underway. SBI has already aimed to make a profit of approximately 100 billion rupees from this divestment.

Another layer of complexity comes from ongoing market conditions. Market volatility in Japan and a parallel government stake sale in IDBI Bank could potentially delay the deal. Emirates NBD, for example, has also expressed interest in acquiring a stake in private lender IDBI Bank and is waiting for that process to be concluded before making a final decision on Yes Bank.

Yes Bank's road to recovery began in March 2020 when the RBI orchestrated its restructuring following severe liquidity issues. Since then, the bank has shown signs of stabilization, making this potential sale a notable shift. With RBI's anticipated approval of the bidders, the acquisition process could proceed swiftly, with SBI looking to negotiate valuation terms, among other details, to ensure a profitable exit.

This stake sale is resonating not just for SBI and Yes Bank, but also has wider implications for global banking. It exemplifies the increasingly global nature of financial institutions seeking footholds in lucrative emerging markets. If Sumitomo Mitsui and Emirates NBD secure the majority stake, it would mark a significant entry of Japanese and Middle Eastern banking giants into India's financial sector.

The deal is also significant for investors who are closely watching the prospects of operational changes and improved governance at Yes Bank. Such changes could positively influence Yes Bank's stock performance. Moreover, for SBI, the expected profit from this sale could bolster its financial position, thus potentially uplifting its own market performance.

This anticipated transaction underscores the complex yet collaborative dynamics of modern global banking. The evolving landscape presents both challenges and opportunities for strategic investments and alliances, impacting geopolitical and economic scenarios alike.