India Supreme Court Rules Yes Bank AT1 Bond Write-Off of Rs 8415 Crore Illegal, Shares Plunge Up to 20%

India's Supreme Court has ruled the write-off of Yes Bank's additional tier-1 bonds illegal, upholding a 2023 Bombay High Court order that had already set aside the decision. The bonds in question total Rs 8,415 crore, equivalent to roughly 84 billion rupees or $884 million, and were written down during Yes Bank's 2020 rescue. The court dismissed Yes Bank's appeals against the Bombay High Court ruling, handing a decisive win to AT1 bondholders and a loss to Yes Bank, the Reserve Bank of India and the Union government.

Yes Bank shares fell as much as 20% to Rs 16.96 in the immediate aftermath of the ruling, with selling described as sharp and sudden. The bank is 24.9% owned by Japan's Sumitomo Mitsui Banking Corp, amplifying the international stakes of the decision.

The ruling carries broader implications for India's AT1 bond market, which is worth nearly Rs 1 lakh crore. The Centre had argued before the court that an adverse ruling could shake investor confidence and complicate future bank rescues, while bondholders countered that the case turned solely on whether proper law and due process were followed. The Supreme Court's decision now leaves open questions about how regulators and administrators may handle AT1 instruments in any future banking crisis.