Yes Bank Shares Fall After Supreme Court Upholds AT-1 Bond Ruling

Capital Impact

Yes Bank stated that its Common Equity Tier 1 capital ratio could drop by around 250 basis points after the Supreme Court dismissed appeals and upheld a judgment against the write-down of Additional Tier-1 bonds worth ₹8,415 crore. The disputed write-down took place in March 2020 as part of the bank's financial rescue and reconstruction.

Market Reaction

Despite the expected drop in core capital, the bank's overall Tier 1 ratio is projected to stay at 14% on a pro forma basis. However, investor worry over the ruling triggered a 14% stock crash in Thursday's trade, followed by another 3.42% fall on Friday, pushing the stock down 19% for the year 2026.

Next Steps

Yes Bank announced it is studying the judgment in detail and looking at its legal choices while maintaining that it has access to capital-management tools to support its growth. Meanwhile, S&P Global Ratings stated it does not expect the ruling to change its bank ratings, noting that the lender's capital remains safely above minimum regulatory requirements.

Context

Additional Tier-1 bonds are special perpetual instruments that banks issue to build up their capital base, offering higher interest rates because they carry more risk than regular bonds. Courts review such major financial write-downs to ensure that all procedural rules and rescue schemes are followed correctly by regulators and lending institutions.