Yes Bank drops on reports of Supreme Court ruling on AT-1 bonds
The reported ruling is a setback for the bank. It has also raised concerns about the potential financial implications of the bond dispute.
The Supreme Court reportedly declined to interfere with the Bombay High Court?s January 2023 order. The order had set aside the bank administrator?s decision to write down the bonds. The write-off took place in March 2020 as part of Yes Bank?s restructuring, backed by the Reserve Bank of India (RBI) and a consortium of lenders.
Yes Bank had written down two tranches of AT-1 bonds issued in 2016 and 2017. The bonds were written down to zero, wiping out the bondholders? principal. Axis Trustee Services, representing bondholders, challenged the decision. It argued that the write-off was not authorised under the applicable reconstruction framework. Yes Bank, the RBI and the Central government challenged the Bombay High Court?s order in the Supreme Court.
AT-1 bonds are hybrid capital instruments used by banks to strengthen regulatory capital. They carry higher risk than conventional bonds. They are designed to absorb losses when a bank reaches a point of non-viability, subject to regulatory rules and contractual terms.
The Rs 8,415 crore bond amount is significant compared with Yes Bank?s FY26 net profit of Rs 3,476 crore. The bank?s net profit grew 44.5% year-on-year in FY26.
The ruling?s accounting impact and any repayment obligations remain subject to the judgment?s implementation and the bank?s disclosures. Yes Bank had previously said that any financial impact arising from the final verdict would be recognised in a future reporting period.
The stock exchanges have sought clarification from Yes Bank on the sharp share-price decline following the reports. The bank?s response was awaited at the time of writing.
Yes Bank is one of the leading new generation private sector banks in India. The bank offers a wide range of banking services such as corporate & institutional banking, retail banking, msme, transaction banking and treasury. The bank has over 1300 branches, 200+ business correspondent banking outlets (BCBOs) and more than 1350 ATMs (including CRMs and BNAs) spanning across 300 districts of India.
The bank reported 33.7% rise in net profit to Rs 1,071 crore on a 11.2% increase in total net income to Rs 4,584 crore in Q1 FY27 over Q1 FY26.
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