Bond jolt: Yes Bank moves SC to review ruling that restored Rs 8,415 crore AT-1 bonds

Reinstatement could cut Yes Bank's CET1 ratio by 240 basis points and turn its September-quarter Rs 1,080-crore profit into a Rs 5,217-crore loss, the bank says

Yes Bank has moved the Supreme Court seeking a review of its October 15 judgment setting aside the write-down of ₹8,415 crore worth of Additional Tier-1 (AT-1) bonds issued as part of the lender's government-backed rescue in 2020. The reinstatement of the bonds could have a significant bearing on the bank's capital position, potentially reducing its Common Equity Tier-1 (CET1) ratio by around 240 basis points.

The bank has filed a review petition under Article 137 of the Constitution seeking reconsideration of the apex court's judgment, it said in a stock exchange filing late on Friday.

In its October 15 ruling, the Supreme Court upheld a Bombay High Court decision that had struck down the permanent write-down of the bonds. The court had questioned whether the administrator appointed during the bank's restructuring had the authority to extinguish the securities.

The potential capital impact was outlined by Yes Bank managing director and chief executive Vinay M. Tonse during the bank's earnings call.

"Based on our current assessment, which is indicative, and as of September 30, 2026, the reinstatement of the AT-1 principal amount is expected to have a pro forma impact of approximately 240 basis points on our Common Equity Tier 1 ratio, including profits," Tonse had told analysts.

The implications extend beyond the capital ratio. Reinstatement would bring back a substantial liability on the bank's books, along with the associated interest payment obligations, potentially weighing on profitability and future capital requirements.

The lender has illustrated the impact through a pro forma assessment of its September-quarter financial performance. Had the reinstatement been reflected in its accounts, Yes Bank would have reported a loss of ₹5,217 crore for the quarter ended September, against the reported net profit of ₹1,080 crore.

AT-1 bonds are a form of hybrid capital issued by banks to strengthen their capital buffers. They are designed to absorb losses when a lender comes under financial stress and form part of the regulatory capital framework. Yes Bank's bonds were written down as part of the restructuring overseen by the Reserve Bank of India in 2020.

Yes Bank, however, has maintained that it has options to manage its capital position and that its growth plans remain unaffected by the court ruling.

Rating agency Moody's has also retained a stable outlook on the bank, saying its overall credit profile would remain intact despite the expected decline in the CET1 ratio following the invalidation of the AT-1 write-down.