Yes Bank shares plunged after India’s Supreme Court upheld the cancellation of its 2020 write-off of ₹8,415 crore in AT1 bonds, reviving potential liabilities and setting a precedent for future bank rescues.
Yes Bank shares fell sharply on Thursday after India’s Supreme Court upheld a lower court ruling that quashed the lender’s 2020 write-off of roughly ₹8,415 crore of Additional Tier-1, or AT1, bonds. The decision revived uncertainty around one of the most contested episodes of India’s banking rescue playbook and raised the prospect that the private lender could face renewed financial claims from bondholders.
AT1 securities sit in a high-risk corner of bank capital structures. They are designed to absorb losses when a lender is under severe stress, which is why Yes Bank’s bonds were fully written off during its 2020 restructuring. But the Bombay High Court had already struck down that move in 2023, and the Supreme Court has now left that judgment intact after dismissing the appeals brought by Yes Bank, the Reserve Bank of India and the government, according to Business Standard and LiveMint.
The market reaction was swift. Business Today reported that the stock dropped more than 14%, while other market reports said the fall was briefly as steep as 20% before the shares recovered some ground. Moneycontrol reported that Yes Bank said on October 15 it was examining the Supreme Court’s order after the exchange sought a response following the stock’s slump. Bloomberg had earlier noted that the bank’s former chief executive, Prashant Kumar, said in 2023 that the lender had not set aside any provision for the dispute, relying on legal advice.
The ruling may reach beyond Yes Bank itself. Legal specialists quoted in the Business Today report said the judgment could become an important precedent for future bank rescue cases, particularly where regulators seek to impose losses on investors in hybrid capital instruments. Ashish Pyasi of Andrey Legal said it could shape later restructuring matters, while Venkatkrishnan Srinivasan of Rockfort Fincap argued that stronger protection for bondholders may improve confidence in the market, even if it also raises the cost of capital for banks.
For investors, the immediate question is how the lender will respond and whether it will seek review of the ruling. For the wider banking system, the case is likely to sharpen debate over how far authorities can go in using AT1 bonds to stabilise a troubled lender without exposing banks and regulators to years of litigation.
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