Japanese Bank SMBC gets RBI in-principle approval to expand operations as wholly owned subsidiary

The Reserve Bank of India (RBI) on Wednesday announced that it has granted in-principle approval to Japan’s Sumitomo Mitsui Banking Corporation (SMBC) to set up a wholly owned subsidiary (WOS) in India, marking a key milestone in the Japanese lender’s expansion plans in the country.

In a statement, the RBI said the approval allows SMBC to move from its current branch-based operations to a locally incorporated subsidiary. Until now, the bank has been operating in India through branch mode. “RBI has decided to grant 'in-principle' approval to SMBC, Japan for setting up a Wholly Owned Subsidiary (WOS) in India,” the central bank said in the statement.

Setting up a wholly owned subsidiary will give SMBC greater operational flexibility in India. As a locally incorporated entity, the bank will be treated on par with domestic banks, including the ability to open branches more freely without the restrictions that apply to foreign bank branches. “SMBC is currently carrying on banking business in India in branch mode through its four branches located in New Delhi, Mumbai, Chennai and Bengaluru,” the RBI added.

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The WOS structure also ensures that the subsidiary’s capital remains ring-fenced from the parent bank, helping protect the Indian financial system from external shocks.

Conversion of existing branches

“The 'in-principle' approval has been granted to the bank for setting up a WOS through conversion of its existing branches in India,” RBI stated. The approval has been granted under the RBI (Setting Up of Wholly Owned Subsidiaries by Foreign Banks) Guidelines, 2025, which govern how overseas lenders can operate in India. Under the framework, foreign banks are allowed to operate either through branches or as wholly owned subsidiaries, subject to regulatory norms and supervisory requirements.

Licence subject to conditions

“The RBI would consider granting a licence for commencement of banking business in WOS mode under Section 22 (1) of the Banking Regulation Act, 1949 to SMBC on being satisfied that the bank has complied with the requisite conditions laid down by RBI as part of 'in-principle' approval,” the central bank mentioned. This means SMBC will have to meet all regulatory and operational requirements before it can formally begin banking operations as a wholly owned subsidiary.

SMBC already has a growing presence in India. In 2024, the Japanese lender acquired a 24.22 per cent stake in Yes Bank, making it the private sector lender’s largest shareholder. With this transaction, SMBC became Yes Bank’s largest shareholder, while State Bank of India (SBI) continues to hold a significant stake of a little over 10 per cent after dilution.

FAQs

1. What has RBI given approval to SMBC for?

The RBI has granted SMBC approval to establish a fully owned subsidiary in India as a preliminary decision.

2. What is present operating mode of SMBC in India?

The present mode of operation of SMBC in India is through four branches in New Delhi, Mumbai, Chennai, and Bengaluru.

3. Has SMBC invested in Indian banks before?

Yes, in 2024, SMBC bought about 24 per cent of Yes Bank, becoming its largest shareholder.

4. Is RBI approval final?

No, this is just a first-step approval. SMBC can start banking fully only after it meets all RBI rules and gets the final licence.

5. Which law governs the final licence?

The licence will be considered under Section 22(1) of the Banking Regulation Act, 1949.