Yes Bank shares plunge 20% following Supreme Court ruling on AT-1 bonds

Yes Bank Ltd witnessed a sharp decline in its share price following a Supreme Court judgment on the contentious write-off of AT-1 bonds undertaken during the bank's financial reconstruction.

The dispute centres on the RBI-supervised reconstruction programme initiated in March 2020, when the central bank stepped in to stabilize the troubled lender. As part of this intervention, AT-1 bonds valued at more than ₹8,300 crore were written down to zero, resulting in significant losses for investors who held these hybrid securities.

AT-1 bonds, which occupy a subordinated position in a bank's capital structure, carry higher risk compared to conventional debt instruments. They are designed to absorb losses during financial stress, but the scale of the write-off in Yes Bank's case had sparked investor disputes and litigation.

The Supreme Court's ruling on the matter has reignited concerns among market participants regarding the treatment of AT-1 bond holders during banking sector crises. Yes Bank has since stabilized operationally, but the legal proceedings concerning investor compensation have continued to cast a shadow over market confidence.

Investors holding AT-1 bonds face potential permanent loss of capital under the terms of such instruments, though the Supreme Court's decision on the adequacy of the RBI's resolution approach has now become a key reference point for similar situations in the financial sector.