YES Bank moved the Supreme Court to review the ₹8,415 crore AT1 bond ruling. The dispute started after the bank wrote down these bonds during its March 2020 reconstruction. While bondholders want their money back, the bank said it is evaluating the legal implications of the court’s October 15 decision.
The dispute relates to AT1 bonds written down during YES Bank's reconstruction in March 2020, when the lender faced mounting bad loans, governance concerns and severe financial stress.
What is the ₹8,415 crore dispute?
The disputed instruments comprise two bond issuances: ₹3,000 crore carrying a 9.5% coupon issued in December 2016 and ₹5,415 crore offering 9% interest issued in October 2017.
Following the Reserve Bank of India's reconstruction exercise, YES Bank wrote down the entire outstanding value of these instruments.
Axis Trustee Services, representing bondholders, challenged the decision before the Bombay High Court in May 2020.
In January 2023, the High Court ruled against the write-down. The Supreme Court subsequently upheld that judgment on October 15, 2026, dismissing appeals filed by YES Bank, RBI and the Union government.
What happens to YES Bank's capital?
The judgment carries significant implications for the lender's capital position.
In its October 16 disclosure, YES Bank estimated that reinstating the AT1 bond principal could reduce its Common Equity Tier-1 (CET1) capital ratio by approximately 250 basis points, based on its June 30, 2026, financial position.
However, its Tier-1 capital ratio was expected to remain unchanged at 14% on a pro forma basis.
The bank maintained that it had sufficient capital-management flexibility to undertake additional measures if required.
Bondholders demand reinstatement
Following the judgment, Axis Trustee Services sought restoration of the bonds and associated rights.
On October 28, the trustee asked YES Bank to reinstate the instruments within three days, warning of possible contempt proceedings over alleged non-compliance.
YES Bank responded on October 30, stating that it acknowledged the Supreme Court ruling and was evaluating its legal implications.
The lender also maintained that coupon payments would be governed by the respective bond information memorandums, including applicable discretion.
The latest review petition adds another legal dimension to the dispute, leaving bondholders awaiting clarity on reinstatement, interest payments and the eventual financial implications for YES Bank.