mumbai, May 6 -- Japan's Sumitomo Mitsui Banking Corp. (SMBC) has secured Reserve Bank of India (RBI) go-ahead to acquire 51% in private lender Yes Bank, two people aware of the development said, in a deal that may value the private lender at $1.7 billion. SMBC will either buy less than 26% in Yes Bank and do a merger through a share swap, or may buy up to 26% and launch an open offer, the people said. Currently, State Bank of India (SBI) and other lenders hold 33% in Yes Bank. SMBC's voting rights in Yes Bank will be capped at 26%. "RBI has given SMBC the go-ahead for acquiring a majority stake and running Yes Bank," one of the two people cited above said on the condition of anonymity. "This happened a few weeks after SBI and other bank shareholders agreed to sell their stakes in Yes Bank to Sumitomo Mitsui. SMBC will buy up to a 51% stake in Yes Bank at the market price. RBI has to keep every existing stakeholder's interest in mind," the person said, adding SMBC may pay in cash for the initial stake purchased. The transaction paves an exit path for SBI and other banks brought in to save Yes Bank five years ago, and ushers in a new owner who can help India's sixth-largest private lender compete better with nimble rivals. SMBC may increase its stake to 51% in phases after acquiring an initial stake, the people cited above said. Apart from SBI, other Yes Bank shareholders include Axis Bank, Kotak Mahindra Bank and HDFC Bank. All of them will sell some of their shares partly to SMBC in the first round, and the remaining shares in the next rounds, the two people said. SMBC has appointed JPMorgan and J Sagar Associates as financial and legal advisers for the transaction, a third person said. The Japanese bank declined to comment. Emails to spokespersons of RBI, as well as SBI, Axis Bank, Kotak Mahindra Bank and HDFC Bank who own stakes in Yes Bank went unanswered. "Yes Bank requires a strategic promoter with robust management control to ensure long-term stability and sustainable growth," said Asutosh Mishra, head of research, Ashika Stock Broking Ltd. "An exit for SBI and other major shareholders can only be effectively achieved by bringing in a committed strategic shareholder, which is crucial for the bank's enduring strategic stability. In today's competitive and rapidly evolving banking sector, strong promoter leadership is essential to restore market confidence, enhance governance standards, and guide Yes Bank through its next phase of transformation," Mishra added. Besides SMBC, Japan's Mizuho Bank and Emirates NBD were also reported to be in the race to buy Yes Bank. RBI is also pushing SMBC to set up a wholly owned subsidiary in India, a model which would shield its Indian operations from any crisis the foreign bank may encounter. This also ensures better regulation. While some of the foreign banks in India operate as local branches of their foreign owners, others banks set up wholly owned subsidiaries for Indian operations, a model preferred by the regulator. Since 2013, foreign banks setting up such subsidiaries are treated on par with local banks, and allowed to acquire Indian banks. Such banks can also open branches more freely....