https://en.bharatpedia.org/w/index.php?action=history&feed=atom&title=Yes_Bank_AT1_bond_controversyYes Bank AT1 bond controversy - Revision history2026-10-27T21:07:43ZRevision history for this page on the wikiMediaWiki 1.43.6https://en.bharatpedia.org/w/index.php?title=Yes_Bank_AT1_bond_controversy&diff=546223&oldid=prevJulimye: created new post w/ refs...2026-05-02T04:25:51Z<p>created new post w/ refs...</p>
<p><b>New page</b></p><div>{{Short description|Bank-led misselling case}}<br />
{{Infobox event <br />
| name = Yes Bank AT1 bond controversy <br />
| image = <br />
| caption = <br />
| date = March 2020 – ongoing <br />
| location = India <br />
| participants = [[Yes Bank]], [[Reserve Bank of India]], bondholders (including Axis Trustee Services, mutual funds, retail investors), [[Bombay High Court]], [[Supreme Court of India]], and [[Securities and Exchange Board of India]]<br />
| outcome = Write-down of {{INRConvert|8415|c}} in AT1 bonds; Bombay High Court quashed the decision (2023, stayed by Supreme Court); ongoing litigation <br />
}}<br />
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The '''Yes Bank AT1 bond controversy''' refers to the 2020 write-down of approximately {{INRConvert|8415|c}} worth of Additional Tier 1 (AT1) bonds issued by [[Yes Bank]], as part of a [[Reserve Bank of India]]-led reconstruction scheme following the bank's financial distress. As of 2026, the matter remains under consideration by the [[Supreme Court of India]].<br />
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== Background ==<br />
Yes Bank, a private Indian bank, faced rising non-performing assets and governance issues in the late 2010s, eroding depositor confidence. In March 2020, the RBI superseded its board, appointed an administrator (Prashant Kumar, former CFO of [[State Bank of India]])<ref>{{Cite news |last=Saha |first=Manojit |date=2020-03-08 |title=Explained: Why did Yes Bank have to be bailed out? |url=https://www.thehindu.com/business/Industry/why-did-yes-bank-have-to-be-bailed-out/article61964515.ece |access-date=2026-04-20 |work=The Hindu |language=en-IN |issn=0971-751X}}</ref>, and introduced a reconstruction scheme backed by capital infusion from other banks, including the State Bank of India.<ref>{{Cite web |last=Menon |first=Srijith |date=2 June 2020 |title=Yes Bank Limited Reconstruction Scheme, 2020 |url=https://nsdl.co.in/downloadables/pdf/2020-0089-Policy-NSE%20Circular%20dated%20June%2002,%202020.pdf |access-date=20 April 2026 |website=[[National Stock Exchange of India]]}}</ref><br />
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AT1 bonds, which are perpetual and designed to absorb losses under [[Basel III]], can be written down or converted into equity when capital ratios fall below thresholds. However, critics argued the Yes Bank action inverted the loss hierarchy by impacting AT1 holders before equity.<ref>{{Cite web |last=Bashyam |first=Swati |title=Global Market Research and Advisory Firm {{!}} Investment, Business, Intellectual Property Research and Business Valuation Services |url=https://www.aranca.com/ |access-date=2026-04-20 |website=www.aranca.com |language=en-US}}</ref><br />
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On 14 March 2020, the administrator wrote down the full value of Yes Bank’s AT1 bonds a day after announcing the scheme<ref name=":0">{{Cite web |last=Kumar |first=Kushal |date=2026-01-08 |title=Shadow of doubt: Legal questions arising from the Yes Bank AT-1 write down |url=https://www.barandbench.com/view-point/shadow-of-doubt-legal-questions-arising-from-the-yes-bank-at-1-write-down |access-date=2026-04-20 |website=Bar and Bench - Indian Legal news |language=en}}</ref>. While equity was not immediately written down, equity holdings were locked in for three years.<ref>{{Cite web |last=Borate |first=Neil |date=2020-03-14 |title=Yes Bank shares locked in for 3 years - what it means for you and your funds |url=https://www.livemint.com/money/personal-finance/yes-bank-shares-locked-in-for-3-years-what-it-means-for-you-and-your-funds-11584178946588.html |access-date=2026-04-20 |website=mint |language=en}}</ref> <br />
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In 2021–2022, [[Securities and Exchange Board of India]] penalized Yes Bank and former CEO [[Rana Kapoor]] for mis-selling, citing inadequate risk disclosure and targeting unsuitable clients, including senior citizens.<ref>{{Cite news |last= |date=2022-09-07 |title=Sebi imposes ₹2 crore fine on Rana Kapoor in Yes Bank AT-1 bonds case |url=https://www.thehindu.com/business/sebi-imposes-2-crore-fine-on-rana-kapoor-in-yes-bank-at-1-bonds-case/article65862121.ece |access-date=2026-04-20 |work=The Hindu |language=en-IN |issn=0971-751X}}</ref><br />
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== Legal proceedings ==<br />
Bondholders, represented by entities such as Axis Trustee Services, challenged the write-down in the [[Bombay High Court]]. In January 2023, the court quashed the administrator's decision, ruling that the final reconstruction scheme notified by the government on 13 March 2020 did not explicitly authorize the write-off, and that the administrator had exceeded his powers post-reconstruction.<ref>{{Cite news |last=P Upadhyay |first=Jayshree |date=20 January 2023 |title=India court quashes write-off of Yes Bank's AT1 bonds - order |url=https://www.reuters.com/world/india/india-court-quashes-write-off-yes-banks-at1-bonds-legal-sources-2023-01-20/ |access-date=19 April 2026 |work=[[Reuters]]}}</ref><br />
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Yes Bank, the RBI, and other parties appealed to the Supreme Court, which stayed the High Court order in March 2023 and has since heard arguments on issues including statutory authority, contractual terms of the bonds, and the broader implications for bank resolution frameworks.<ref name=":0" /> Hearings continued into 2025, with the court indicating it would conclude arguments in early 2026. A Swiss court ruling on [[Credit Suisse]] AT1 bonds in 2025 was cited in some commentary but has limited direct precedential value in India.<ref>{{Cite web |last=Arun |first=T.K. |date=2025-12-19 |title=Reconsidering The Impact: Why The Swiss Court's AT1 Ruling Has Limited Relevance For The YES Bank Case |url=https://www.impriindia.com/insights/swiss-courts-at1-ruling-yes-bank-case/ |access-date=2026-04-20 |website=Impact And Policy Research Institute (IMPRI) |language=en-US}}</ref><br />
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== Reception ==<br />
The controversy highlighted tensions between regulatory discretion in crisis resolution and investor rights. Supporters of the write-down argued it was essential to protect depositors and the financial system by enforcing loss-absorbing features without taxpayer burden. Critics pointed to procedural lapses, potential mis-selling, and questions over whether AT1 instruments should absorb losses before equity.<ref>{{Cite web |last=Pandey |first=Radhika |last2=Priyadarshini |first2=D. |title=Yes Bank: The anatomy of a crisis |url=https://www.ideasforindia.in/topics/money-finance/the-anatomy-of-a-crisis |access-date=2026-04-20 |website=Ideas for India |language=en}}</ref><br />
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== See also ==<br />
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* [[HDFC Bank AT1 bond misselling case]]<br />
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== References ==<br />
{{reflist}}<br />
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== Further reading ==<br />
*{{cite journal |last=Agarwal |first=Manas |year=2023 |title=Analysing Additional Tier 1 Bonds through the Yes Bank Fiasco |url=https://www.rfmlr.com/_files/ugd/0fa0b3_384dea11d42b45c3898cf86ccb0d9218.pdf |journal=RGNUL Financial and Mercantile Law Review |volume=10 |pages=215–240 |via=[[HeinOnline]], [[Wikipedia#The_Wikipedia_Library|The Wikipedia Library]]}}<br />
*{{cite journal |last=Gong |first=Addison |date=2020-04-06 |title=Yes Bank AT1 write-off: a wake up call |url=https://www.globalcapital.com/article/28msrwf3i64sdcd3s6jka/asia/yes-bank-at1-write-off-a-wake-up-call |journal=Global Capital |via=[[EBSCO Discovery Service]], [[Wikipedia#The_Wikipedia_Library|The Wikipedia Library]]}}<br />
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[[Category:Supreme Court of India cases]]<br />
[[Category:Financial scandals]]<br />
[[Category:Fraud in India]]</div>Julimye