Yes Bank examines legal options after SC upholds ₹8,415 crore AT-1 bond write-off ruling

Yes Bank on Friday said it is examining the judgment in detail, including suitable actions going forward, after the Supreme Court upheld the Bombay High Court judgment against the write-down of Additional Tier-1 (AT-1) bonds worth Rs 8,415 crore undertaken in March 2020 as part of the bank's reconstruction.

Additional Tier 1 (AT-1) bond is a perpetual instrument issued by banks to increase their capital base and is riskier than traditional bonds, with higher interest rates. The RBI can ask a bank to cancel them if the bank is in trouble.

The Supreme Court on Thursday dismissed appeals filed by Yes Bank, the Reserve Bank of India (RBI) and the Union government, upholding the Bombay High Court's January 20, 2023, judgment on the matter.

"The bank is examining the judgment in detail, including evaluating all available legal options and suitable actions/steps going forward," Yes Bank said in a regulatory filing.

The bank also said it has access to various capital-management levers and retains the flexibility to undertake additional capital actions, as considered appropriate, to pursue its growth objectives.

The bank remains focused on strengthening its franchise and providing consistent service and support to customers across their banking requirements, it added.

"Putting the investors to such uncalled-for risk could have well been avoided. The purpose of the AT-1 bonds is imperative: it acts as a safety barrier to the Bank from collapsing altogether. That purpose could have been served had the RBI and Yes Bank acted in accordance with the terms of the Master Circular.

"The RBI was a mere bystander, allowing the CET1 ratio of Yes Bank to drop to an astonishing low of 0.6 per cent while the business of Yes Bank was being carried out in a clandestine manner. It cannot be denied that material irregularities in the functioning of Yes Bank were noticed much prior; criminal prosecution has also been initiated against the personnel of Yes Bank. However, to have the investors at the receiving end of the administrative lapses would be highly unfair," the bench said.

The top court said the administrator had no authority to write off the bonds in the absence of a specific provision in the reconstruction scheme.

The High Court had on January 20, 2023, quashed the decision of the Yes Bank taken on March 14, 2020 to write off the bonds, noting that the administrator did not have the authority to take such a decision.

The High Court, while quashing the decision of the Yes Bank administrator, had, however, said its decision would be in abeyance so the central bank and the lender may appeal against it in the apex court.

The court had, in its judgment, said the final reconstruction scheme of Yes Bank issued by the Reserve Bank of India did not engulf within its fold, writing down the AT-1 bonds.

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