"The conversations are still at a very initial stage. The finalisation of the deal may take some time as a lot of regulatory approvals will be required," a source in the know of developments told on Tuesday.
When contacted by , Paytm's spokesperson refused to comment.
Paytm and mobile content company One97 founder founder Vijay Shekhar Sharma also owns the Paytm Payments Bank Ltd (PPBL) and the deal with Yes Bank would require approval from the Reserve Bank of India (RBI).
As per the latest data released by the Ministry of Electronics and Information Technology (MeitY), PPBL has acquired more than 7 lakh merchants in Q1 against the target of 6.5 lakh.
As per the initial conversations, Paytm is likely to buy stake from Yes Bank co-founder Rana Kapoor, who, together with his associates, owns 9.64 per cent stake in the bank.
Yes Bank Chief Executive Officer (CEO) and Managing Director (MD) Ravneet Gill said that the talks to sell stakes to a "global technology company" are at a "fairly advanced level" and "it is close to being a done deal."
While the stake sale could start with less than 10 per cent, it could eventually go up. As per RBI rules, the maximum share an individual can hold should not exceed 15 per cent.
The Yes Bank board has already approved the move to raise $1.3 billion growth capital. But via a preferential allotment, the bank wants to bring in an extra $1-$1.2 billion.
To boost its capital adequacy ratio, Yes Bank in August raised nearly $275 million via qualified institutional placement (QIP).
The stake of Kapoor and his family members in Yes Bank is worth Rs 1,550 crore at current valuations.
After losing a court battle to co-promoter Madhu Kapur in 2015 over a board appointment, Kapoor was eventually removed as MD and CEO of Yes Bank.
Vijay Shekhar Sharma has raised $2.3 billion from a number of investors, including Alibaba, Softbank and Warren Buffett's Berkshire Hathaway.
Paytm has reportedly incurred losses of Rs 4,217 crore for the financial year ending March 2019.
Yes Bank's shares had closed at Rs 63.10 apiece, up 4.47 per cent, on the BSE on Monday. The markets remained closed on Tuesday for Muharram.
( With inputs from IANS )