Yes Bank flags capital hit as SC upholds AT-1 bond reinstatement

A day after the Supreme Court quashed the March 2020 write-off of Yes Bank’s ₹8,415 crore additional Tier-I (AT-1) bonds, the private lender said the decision is expected to erode its common equity tier-I (CET1) capital ratio by 250 basis points, including profits, as of 30 June 2026.

However, the bank’s overall tier-1 capital ratio is expected to remain unchanged at 14%, Yes Bank said in a release on Friday.

CET1 capital is a bank's highest-quality, core regulatory capital that absorbs financial losses immediately when they happen without forcing the bank to cease operations. Introduced under the Basel III framework, it acts as the primary safety cushion to protect depositors and maintain financial stability.

The Supreme Court’s decision brings a six-year legal battle over the bonds to a head. In 2020, the Reserve Bank of India (RBI) took control of the struggling private lender to facilitate a bailout, appointing an administrator who wrote off the bank's AT-1 bonds worth ₹8,415 crore. The Bombay High Court had quashed the write-off in 2023, and the apex court on Thursday said it found no reason to reverse that.

The bank said that it was reviewing the Supreme Court’s 15 October judgment and its implications, and would make suitable disclosures in due course. The bank did not specify the revised CET-1 ratio following the reinstatement of the AT1 bond principal.

For the quarter ended June, the bank was well capitalised with its capital adequacy ratio at 15.1% and CET-1 ratio of 14.0%. This has come as Japan’s Sumitomo Mitsui Banking Corp. (SMBC) last year bought a 24.22% stake in the Mumbai-based mid-sized bank. During the period, its net profit was ₹1,071 crore, up 34% on the year.

AT1 bonds aggregating ₹8,415 crore, had been written down in March 2020 in connection with the reconstruction of Yes Bank.

AT-1 bonds are perpetual debt instruments that qualify as additional Tier-I capital under Basel III. These trigger points are linked to a bank's capital and earnings. If these triggers are breached, interest payments may be stopped. This situation could even lead to the conversion of the bond into equity.

The Supreme Court’s Thursday order also stated that the annual coupon payments on the AT1 bonds would remain unaffected by the outcome of the appeals and must be made in accordance with the relevant information memoranda.

The bank stated that it had access to appropriate capital-management levers and retained the flexibility to undertake additional capital actions, as considered appropriate, to pursue its growth objectives.

It also reiterated its focus on maintaining the strength of its franchise and providing consistent service and support to customers across their banking requirements.

Subhana Shaikh is a business journalist at Mint, where she covers the Reserve Bank of India, monetary policy, and India’s bond markets. She has seven years of experience in reporting on financial markets, with a focus on banking and the broader financial system.<br><br>She began her career after completing her postgraduate diploma at the Indian Institute of Journalism and New Media, Bengaluru. She then spent five years at Informist Media, a news wire agency, where she closely tracked bond markets and the BFSI sector, developing a strong foundation in market reporting. She later moved to NDTV Profit, where she expanded her coverage across a wide range of business and economic stories.<br><br>At Mint, Subhana focuses on explaining central bank decisions, bond market movements, and banking trends for her readers. Her reporting combines on-ground inputs with careful analysis to help audiences understand complex financial developments.<br><br>Based in Mumbai, she is interested in exploring stories across the business landscape. Outside of work, she enjoys reading and spending time with her three cats.

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