Supreme Court Rules Yes Bank’s $884 Mn AT1 Bond Write-Off Illegal, Shares Fall 15%

The Supreme Court has ruled that Yes Bank’s write-off of Additional Tier-1 (AT1) bonds worth ₹8,400 crore ($884 million) during its 2020 restructuring was illegal, dealing a setback to the private lender and raising the prospect of fresh financial liabilities.

Srijan Sinha, a partner at Edictum Law & Co. representing the bondholders, said that the court found the write-off illegal and arbitrary because it was inconsistent with the final reconstruction scheme notified by the Union government, Reuters reported on Thursday.

The ruling upholds a January 2023 Bombay High Court decision that quashed the write-off on procedural grounds. Yes Bank had challenged that order in the Supreme Court in March 2023.

Yes Bank shares fell sharply following the judgment, with the stock declining around 15% during Thursday’s session, as per a report by CNBC-TV18. This is reportedly the stock’s steepest single-day decline since July 2020.

Japan’s Sumitomo Mitsui Banking Corporation, which acquired a 20% stake in Yes Bank in May 2025 and increased it by another 4.99% in August 2025, holds a 24.99% stake, per Reuters.

Why AT1 Bond Write-Off Was Challenged

Yes Bank’s administrator wrote off the bonds in March 2020 as part of the bank’s government-backed rescue and restructuring, arguing that the move was necessary for the lender’s survival. The decision wiped out approximately ₹8,400 crore held by investors.

Yes Bank had raised ₹8,415 crore through AT1 bond issuances in 2016 and 2017. The bondholders, represented by Axis Trustee Services, challenged the write-off, questioning the administrator’s authority to extinguish the securities, per CNBC-TV18.

AT1 bonds are hybrid capital instruments that help banks meet regulatory capital requirements. They typically offer higher returns but can absorb losses through conversion into equity or a write-off when specified triggers are breached, including when a bank reaches a point of non-viability.

The dispute also drew attention to allegations of mis-selling. The Securities and Exchange Board of India (SEBI) had penalised former Yes Bank managing director and chief executive Rana Kapoor in 2021-22 over mis-selling and inadequate risk disclosures involving AT1 bonds.

Financial And Regulatory Implications

The judgment could expose Yes Bank to additional financial obligations if it is required to compensate bondholders.

The ruling could also raise questions about how losses are imposed on bondholders during future bank rescues, as per a report by Bloomberg (BBG).

Yes Bank had not made provisions for potential liabilities arising from the dispute, former chief executive Prashant Kumar said in 2023, citing legal advice supporting the bank’s position, the report said.

According to Vivek Ramji Iyer, partner and national leader for financial services risk advisory at Grant Thornton, the apex court's decision "seems to be on a technicality rather than the underlying terms of the product."

“This decision creates regulatory uncertainty that can have a potential to impact investor sentiment,” Iyer said, as per Reuters.