Yes Bank bonds worth ₹8,415 crore are set to be reinstated after India’s Supreme Court upheld a January 2023 Bombay High Court decision reversing their 2020 write-down. The bank is examining the legal and accounting consequences, including the potential effect on its capital.

Key Takeaways

  • Yes Bank estimates that reinstating the principal would reduce its common equity tier-1 ratio by about 240 basis points on a pro forma basis.
  • The perpetual bonds have no fixed maturity, so reinstatement does not mean immediate repayment.
  • The court directed annual coupons to be paid under the bonds’ information memoranda, though cancellation provisions remain an issue.

Yes Bank bonds and the capital impact

Chief executive Vinay M Tonse told analysts that the bank’s indicative assessment, as of September 30, 2026, put its common equity tier-1 ratio at 11.3% on a pro forma basis after reinstatement of the principal, compared with 13.7% before the adjustment. The assessment includes profits.

The bank expects its overall tier-1 capital ratio to remain around 13.7% on a pro forma basis. Tonse said capital planning was an ongoing board-level process and that the bank was examining the judgment and available legal options.

Why the write-down was challenged

The bonds were written down by Yes Bank’s administrator in March 2020, during a reconstruction that included a ₹10,000 crore capital infusion led by State Bank of India.

The Reserve Bank of India’s March 6 draft reconstruction scheme included a clause requiring AT-1 instruments to be permanently written down. That clause was absent from the scheme notified by the Finance Ministry on March 13.

The Supreme Court judges said the administrator had acted under a mistaken belief that he retained authority to write down the bonds despite the reconstruction scheme. They found the action impermissible under the applicable rules and scheme.

What reinstatement means for holders

The two AT-1 issues carry coupons of 9.5% and 9%, with a face value of ₹10 lakh each. They are perpetual, unsecured instruments.

Venkatakrishnan Srinivasan, founder and managing partner of Rockfort Fincap, said the judgment strengthens holders’ claim to principal but does not require immediate repayment because the bonds have no fixed maturity. He said the interaction between the court’s coupon direction and the instruments’ coupon-cancellation provisions remains an important issue.

Read More News

More FinanceVelix news

Disclaimer

This FinanceVelix article provides general information, not personalized financial, investment, legal, or tax advice. Market prices, interest rates and economic conditions can change; investments carry a risk of loss. Facts reflect the material available when published and may change. Check important information independently and consult a qualified professional when needed. Mentioning an asset, company, or service is not an endorsement.