India's SBI may look to cut Yes Bank stake once lock-in ends -sources

By Siddhi Nayak

MUMBAI (Reuters) - State Bank of India may look to lower its stake in Yes Bank after a lock-in period ends on March 13, which was put in place by the central bank as a part of the lender's restructuring, two sources told Reuters.

SBI, India's largest bank, does not want to permanently retain a stake in Yes Bank and would want to trim its holdings, albeit in phases, one of the sources told Reuters on condition of anonymity.

"The percentage of equity dilution that the bank intends to do will have to be placed before the RBI (Reserve Bank of India) in due course."

SBI, which initially acquired 49% of Yes Bank, now holds a 26.14% stake as of Dec. 31, stock exchange data showed. SBI is still the largest single shareholder in the rescued lender.

SBI cannot reduce its holding below 26% before completion of three years from the date of infusion of the capital, as per the reconstruction plan.

SBI, along with other lenders such as ICICI Bank, Axis Bank, IDFC FIRST Bank, Kotak Mahindra Bank, Housing Development Finance Corp had stepped in to rescue Yes Bank in March 2020, after the Reserve Bank of India superseded the bank's board.

At the time, the reconstructuring scheme put in place by central bank required these lenders to hold on to at least 75% of the shares acquired for three years. A similar restriction was placed on other existing shareholders.

ICICI Bank, Axis Bank, IDFC FIRST Bank held 2.61%, 1.57% and 1% stakes respectively, as of end-December. State-owned Life Insurance Corporation holds 4.34%, while HDFC holds 3.48%.

The board of SBI is likely to meet soon to decide on the future of its stake in Yes Bank, following which a proposal will be sent to the RBI, the second source said, also requesting anonymity.

SBI and Yes Bank did not reply to a query seeking comment on Reuters’ story.

Yes Bank's shares fell as much as 7% from the day's high and 5.5% from Wednesday's close and were trading at 17.57 rupees. SBI had acquired Yes Bank's shares at 10 rupees apiece as a part of the reconstruction scheme.

In September last year, Yes Bank had said that the RBI would allow it to exit a reconstruction scheme only after the share lock-in period ends.

(This story has been corrected to rectify the date of when the lock-in period ends in paragraph 1)

(Reporting by Siddhi Nayak; editing by Jason Neely and Kim Coghill)