Axis Trustee Services has issued a three-working-day notice to Yes Bank's managing director, chief executive officer and board, seeking the restoration of additional tier-1 (AT-1) bonds worth around Rs 8,415 crore that were written off in March 2020.
The trustee has asked the bank to reinstate the bonds in its books and debenture holder records in favour of the original bondholders or their legal successors. It has also sought the reversal of the write-offs and cancellations carried out under the bank's March 2020 reconstruction scheme. Axis Trustee has asked Yes Bank to reactivate the two AT-1 bond ISINs through the National Securities Depository Ltd (NSDL) and Central Depository Services Ltd (CDSL). It has also sought the restoration of the bonds on the BSE and NSE platforms and the resumption of trading in these securities.
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The notice follows the Supreme Court's October 15, 2026 judgment, which paved the way for the restoration of the AT-1 bonds that had been written off as part of the reconstruction exercise. The Supreme Court had upheld the Bombay High Court's order quashing the write-off of Yes Bank's Additional Tier-1 bonds worth Rs 8,415 crore, carried out during the lender's rescue in March 2020.
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A Bench of Justices Dipankar Datta and Augustine George Masih dismissed appeals challenging the high court's January 20, 2023 judgment. “We see no reason to interfere with the impugned judgment,” the apex court said while pronouncing its verdict.
The appeals had been filed by Yes Bank, the Reserve Bank of India and the Centre. The court had reserved its order on May 20 after hearing all sides.
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During the hearing, the Centre warned that nearly Rs 1 lakh crore of AT1 bonds are outstanding across Indian banks, and that an adverse ruling could weaken investor confidence in these instruments and complicate future bank rescues. Bondholders countered that the case turned only on whether law and due process were followed in this instance.
Which view prevails in the market remains to be seen. The verdict could reassure AT1 investors that write-downs must have clear legal backing, while pushing regulators to make future reconstruction schemes more explicit about how AT1 bonds are to be treated. Investors may also re-examine write-down clauses in existing issues.
In March 2020, Yes Bank faced a severe crisis, with rising bad loans and falling depositor confidence. The RBI superseded its board and imposed a moratorium, and the government approved a reconstruction scheme backed by capital infusion from an SBI-led consortium. As part of the rescue, the bank's administrator wrote down AT1 bonds worth Rs 8,415 crore to zero. Of the three tranches Yes Bank had issued, in 2013, 2016 and 2017, the 2016 and 2017 tranches were written down, wiping out the investments of institutional and retail bondholders. The bonds also drew regulatory action over how they were sold, with SEBI imposing a Rs 25 crore penalty on Yes Bank in April 2021 for alleged mis-selling of AT1 bonds in the secondary market.
Bondholders challenged the write-off, arguing that the final reconstruction scheme deliberately left out any provision for writing down AT1 bonds, even though the draft scheme had contemplated it. They contended this preserved their rights, and that the administrator had no authority to act unilaterally once the scheme came into force.
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