Legal experts said the lender has limited legal options left, with the likelihood of success in a review petition appearing remote.
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AINNIE ARIF
The Supreme Court on Thursday upheld the Bombay High Court’s 2023 judgment quashing Yes Bank’s March 14, 2020 decision to write down Basel III-compliant Additional Tier-I (AT-1) bonds worth ₹8,415 crore, dealing a major setback to the private lender and potentially opening the door to significant payouts to bondholders.
A bench of Justices Dipankar Datta and Augustine George Masih dismissed appeals challenging the Bombay High Court verdict in the Axis Trustee Services Ltd. versus Yes Bank case. “We see no reason to interfere with the impugned judgment. The appeals are dismissed. Interim order, if any, stands vacated,” the court said.
The bench also clarified that annual coupon payments on the AT-1 bonds, carrying interest rates of 9.5 per cent on ₹3,000 crore issued in December 2016 and 9 per cent on ₹5,415 crore issued in October 2017, would remain unaffected and must be paid in accordance with the bonds’ Information Memoranda.
Investor Impact
Legal experts said the lender has limited legal options left, with the likelihood of success in a review petition appearing remote.
“The liability could exceed ₹13,000-14,000 crore, including interest. The impact is likely to be absorbed through reserves and shareholders’ funds rather than the profit and loss account, effectively transferring the burden to existing shareholders. While the judgment brings finality to the dispute, it may also reshape investor perception of AT-1 instruments and their risk profile in India,” a banking sector expert said.
Banking expert V Viswanathan highlighted that Yes Bank has strong shareholders’ funds of ₹52,338 crore as of June-end 2026, indicating that the bank could meet the liability from reserves, subject to RBI approval.
“The bank can pay bondholders from its reserves after obtaining RBI approval, as its annual net profit is sufficient. It will also have to pay the contracted interest for the years in which it reported net profits. In that case, the liability will be higher,” he said.
The judgment was particularly critical of what it termed the “triumvirate” of Yes Bank, the Reserve Bank of India and the bank’s then administrator.
The judges observed that under the Information Memorandum and RBI’s Master Circular, there were only two triggers for writing down or writing off the AT-1 bonds. “The first was for Yes Bank to exercise, which it admittedly did not. The second was for the RBI to exercise, which not only expressed its intention not to do so by eliminating the clause providing for a write-down, but also chose not to exercise the power at all. The Administrator could not have assumed the regulatory role of the RBI and exercised a power that it did not possess,” the bench said.
The court further remarked that the RBI, the Administrator and Yes Bank had acted in a manner that was, “to put it mildly, questionable.”
“Putting investors at such uncalled-for risk could have been avoided. The purpose of AT-1 bonds is critical, as they act as a safety buffer preventing a bank from collapsing altogether. That purpose could have been served had the RBI and Yes Bank acted in accordance with the provisions of the Master Circular,” the judges said.
The bench also criticised the RBI for being a “mere bystander” while Yes Bank’s CET-1 ratio fell to 0.6 per cent against the prescribed 7.375 per cent, adding that making investors bear the consequences of administrative lapses would be “highly unfair.”
Investor concerns about the financial impact of the ruling put pressure on the stock. Yes Bank shares plunged 14.43 per cent to close at ₹18.15 on the BSE from ₹21.21 previously and touched an intraday low of ₹16.98 as markets assessed the lender’s potential obligation to compensate bondholders and pay accrued coupons.
Published on October 15, 2026
