Indian Supreme Court Quashes Write-Off of 8,415 Crore of Yes Bank Bonds
India's Supreme Court has upheld a ruling quashing Yes Bank's write-off of bonds worth 8,415 crore rupees in 2020, with the stock closing sharply lower following the decision.
India's Supreme Court has upheld the 2023 Bombay High Court ruling that quashed Yes Bank's write-off of Additional Tier 1 (AT-1) bonds worth 8,415 crore rupees, a write-off executed during the bank's restructuring in March 2020.
A two-judge bench comprising Justices Dipankar Datta and Augustine George Masih dismissed the appeals filed by the bank, the Reserve Bank of India, and the Union Government, concluding that the restructuring scheme contained no provision authorizing such a write-off.
The court also found that the bank sold these high-risk instruments to retail investors in violation of the Reserve Bank of India's master circular guidelines. The decision restores bondholders' claims against Yes Bank, with the exact liability to be determined in light of the court order's text.
The bank's stock plummeted following the ruling, dropping around 10% after hitting its lower circuit limit. The decision comes at a time when Japan's Sumitomo Mitsui holds nearly 25% of the bank, having invested around 17,000 crore rupees.
What do these terms mean?
Additional Tier 1 (AT-1) Bonds: High-risk bank bonds counted as part of a bank's capital, which can be written off or converted if the bank faces financial distress.
Restructuring: A procedure to rescue a distressed bank by altering the structure of its capital and liabilities, often with regulatory involvement.
Crore: A numerical unit in India equivalent to ten million rupees.
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