"We are the largest bank in the country and we have a role to play," SBI Chairman Rajnish Kumar said, adding that India's largest state-run lender had been asked by the government to stand behind Yes Bank.
"Any restructuring plan will now become more credible both with the depositors as well as the potential investors," he told media, saying the survival of India's fifth-largest private bank as "a must".
Capital-starved Yes Bank has an increasing pile of bad debt, struggled for months to raise the capital it needs to stay above regulatory requirements, without any success.
Also Read: What now for account holders after Yes Bank crash
However, the Reserve Bank of India (RBI) on Thursday, took control of Yes Bank, capped withdrawal amount to protect investors and said it would work on a revival plan. The move led to a 56% fall in Yes Bank's share price on Friday, and instigated depositors, who rushed to bank to withdraw their funds.
According to analysts, SBI's move to lend help at the first step was good but more funds would be needed to bailout the lender.
In a client note, Macquarie Capital analyst Suresh Ganapathy estimated that Yes Bank could need as much as $3 billion of new funding in the next 12 to 18 months. "So the question arises, would SBI bring in more capital in the future if required?" said Ganapathy.
Speed is also necessary at this crucial stage highlighted analysts. Acuité Ratings & Research, in a note said, "An immediate equity infusion will be critical to prevent any significant damage to the business."
SBI said it would try to implement a reconstruction of Yes Bank much before the end of a 30-day moratorium imposed by the central bank. It also said it was in talks with others who will likley be investing in the troubled bank.
Kumar also acknowledged SBI's investment in Yes Bank could increase to as much as 100 billion rupees ($1.35 billion) over time, depending on the lender's capital requirements. The rescue plan states SBI will not be allowed to reduce its stake to below 26% for at least three years.
"Now that SBI's there for at least for three years, there's a possibility that now you might get some serious players coming to invest," said Siddharth Purohit, a research analyst at SMC Institutional Equities.