Supreme Court of India Quashes Yes Bank Bond Write-Off

The Supreme Court of India upheld a 2023 Bombay High Court ruling that quashed Yes Bank's March 2020 decision to write off ₹8,415 crore in Additional Tier-1 (AT-1) bonds. A bench led by Justice Dipankar Datta dismissed appeals from Yes Bank, the Reserve Bank of India (RBI), and the Government of India, ruling that the bank's administrator lacked the authority to extinguish the bonds because the final reconstruction scheme lacked a write-off provision.

Justices Dipankar Datta and Augustine George Masih criticized the RBI for acting as a "mere bystander" while the bank's business was conducted in a "clandestine manner," allowing the Common Equity Tier 1 ratio to drop to 0.6%. The court also condemned Yes Bank for violating guidelines by selling high-risk bonds to retail investors, stating that investors should not suffer from administrative lapses.

Following the verdict, Yes Bank shares plunged between 10% and 14.5%, closing at Rs 18.15. The ruling restores bondholders' claims and requires the bank to resume annual coupon payments. While the government had argued the write-off was necessary to protect depositors, the court found the execution of the write-off was legally flawed. Yes Bank is currently examining the judgment as analysts consider whether the lender will raise new capital or receive support from its investor, Sumitomo Mitsui Banking Corporation.