Supreme Court Quashes Yes Bank's Rs 8,415 Crore AT1 Bond Write-Off

The Supreme Court of India has ruled in favour of bondholders challenging Yes Bank's write-off of Rs 8,415 crore in AT1 (Additional Tier-1) bonds, overturning a decision that had wiped out investor holdings during the bank's 2020 crisis management.

The judgment, delivered nearly five months after the court reserved its order on May 20, comes after extensive hearings involving arguments from the Centre, the Reserve Bank of India, Yes Bank, and representatives of the bondholders. The case had drawn significant attention from the investment community, as it touched upon the regulatory framework governing hybrid securities and investor protections.

AT1 bonds are a class of perpetual securities that banks use to bolster capital reserves. Yes Bank had proceeded with the write-off following RBI directives as part of a reconstruction scheme initiated in 2020 when the bank faced severe financial stress. The decision had sparked considerable controversy, with bondholders contending that the process lacked adequate transparency and investor consultation.

The Supreme Court's decision is expected to have implications for how financial regulators handle crisis management in the banking sector and the rights of AT1 bondholders. The ruling may also prompt a review of similar instruments issued by other financial institutions and the regulatory safeguards surrounding them.

Yes Bank had received a capital infusion and restructuring support from the RBI and other stakeholders during its bailout period. The court's judgment now raises questions about the implementation of the earlier reconstruction scheme and potential remedies for affected bondholders.