Private equity firm Advent International is weighing a $1bn (INR75bn) investment in Indian private lender Yes Bank, Economic Times has reported.

The US-based private equity firm is currently conducting a due diligence process and may form a consortium for co-investing, the publication added quoting sources familiar with the development.

As per the Reserve Bank of India’s norms, non-promoters can take up a 9.9% stake in banks.

A 10% stake in Yes Bank would be worth INR33.64bn and Advent might need the banking regulator’s clearance for the investment, which could be through a preferential allotment.

A Hong Kong-based special situations fund may have been tapped for the deal, the sources added adding that the deliberations are on and may fall apart if the share price rise or any regulatory hurdle comes up.

In March 2020, RBI seized Yes Bank’s control after the bank failed to raise sufficient new capital to boost its capital ratio and was crushed under bad loans.

Subsequently, public sector bank State Bank of India (SBI) and a group of private lenders infused capital into the lender.

Currently, the State Bank of India owns a 30% stake in Yes Bank and cannot dilute its holdings below 26% till March 2023.

An official close to the discussions was quoted by the Economic Times as saying: “An investor like Advent will give a signal to the market. It is a confidence booster. They will also seek board representation like in the Bain-Axis Bank deal. Advent has been keen on the asset for a while.

“Plus, it is inexpensive with significant upshot baked in. With SBI in the driver’s seat, the earlier risks associated with the bank has also vanished. Over the years, with successful trades in cards, insurance, SBI too has got comfortable with PE players.”