Tax Bonanza for SBI and Private Banks in Yes Bank Stake Sale

Strategic Insights -

State Bank of India (SBI) and a group of private banks are set to reap a tax bonanza in the September quarter from the sale of their stake in Yes Bank to Japanese bank Sumitomo Mitsui Banking Corp (SMBC). The é 13,483-crore income from the stake sale will be exempt from capital gains tax, thanks to a specific clause in the Yes Bank Reconstruction Scheme, 2020. This clause exempts banks that invested in the reconstruction from paying capital gains tax on profits from the sale of shares. The deal, valued at é 13,483 crore ($1.6 billion), will mark the entry of Japan's largest bank in India.

Key Takeaways:

  • SBI and a group of private banks, including HDFC Bank, ICICI Bank, Kotak Mahindra, Axis Bank, IDFC First Bank, Federal Bank, and Bandhan Bank, will sell a 20% stake in Yes Bank to SMBC at é 21.50 per share.
  • The selling banks had subscribed to the shares at é 10 each in 2020, making this sale a profitable transaction for them.
  • The Yes Bank Reconstruction Scheme, 2020, has a specific clause that exempts banks from paying capital gains tax on profits from the sale of shares.
  • Without this exemption, the selling banks would have been liable to pay 12.5% as long-term capital gains tax.
  • The deal is expected to be completed in the September quarter, with SMBC receiving the regulatory approvals needed to conclude the transaction.
  • SBI will sell 13.19% of its 24% stake for é 8,889 crore, while the remaining seven banks will sell 6.81% stake for é 4,594 crore.
  • The deal marks the entry of Japan's largest bank in India and provides a tax bonanza for the selling banks in the September quarter.

Statistics:

  • é 13,483 crore: The income from the sale of Yes Bank stake to SMBC that will be exempt from capital gains tax.
  • 20%: The stake in Yes Bank being sold by SBI and the private banks to SMBC.
  • é 21.50: The price per share at which the stake is being sold.
  • é 10: The price per share at which the selling banks subscribed to the shares in 2020.
  • 12.5%: The long-term capital gains tax rate that the selling banks would have been liable to pay without the exemption.
  • é 8,889 crore: The amount SBI will sell 13.19% of its 24% stake for.
  • é 4,594 crore: The amount the remaining seven banks will sell 6.81% stake for.
  • é 19,160 crore: The net profit SBI reported for the first quarter of FY26.

Sources:

  • Times of India
  • Business Standard
  • Economic Times