Yes Bank Ltd. shares fell 1.38% to Rs 17.87 on Friday, extending their decline after plunging more than 15% in the previous session following the Supreme Court's decision to set aside the write-down of additional tier-1 (AT-1) bonds worth Rs 8,415 crore undertaken in March 2020.
In an exchange filing on Friday, the bank said it was examining the Oct. 15 judgment in detail and evaluating all available legal options and appropriate actions. It said it respected the judgment, which upheld the Bombay High Court's Jan. 20, 2023, order and dismissed appeals filed by Yes Bank, the Reserve Bank of India and the Union government.
The lender added that it had access to capital-management measures and the flexibility to undertake further capital actions, as appropriate, to pursue its growth objectives. It said it remained focused on maintaining its franchise and providing customers with consistent banking services.
What Is The Yes Bank AT-1 Bond Case?
The dispute dates to March 2020, when Yes Bank faced a financial crisis marked by rising bad loans and weakening depositor confidence. The RBI superseded the bank's board and imposed a moratorium before the government approved a reconstruction scheme backed by a capital infusion from an SBI-led consortium.
As part of the rescue, the bank's administrator wrote down AT-1 bonds worth Rs 8,415 crore to zero. These perpetual debt instruments form part of a bank's regulatory capital and can absorb losses under specified contractual and regulatory conditions.
Bondholders challenged the write-down, arguing that the final reconstruction scheme did not authorise the cancellation or conversion of their holdings, despite such provisions having been considered in the draft scheme.
Yes Bank, the RBI and the Centre argued that the action was consistent with the regulatory framework and the bonds' contractual terms. The government also maintained that writing down the bonds before the capital infusion could have jeopardised the rescue.
What Yes Bank Said About Financial Impact
Yes Bank had previously said that any financial liability arising from the court's final verdict would be recognised in the relevant future reporting period, while indicating that it did not anticipate a material financial impact.
The government had told the Supreme Court that nearly Rs 1 lakh crore of AT-1 bonds were outstanding across banks and warned that an adverse ruling could affect investor confidence in these instruments and complicate future bank rescues.
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