Yes Bank must face claims after court rejects bond write-off
Investors regain legal claims erased during the bank’s 2020 rescue.
Overview
Yes Bank’s rescue in March 2020 wiped out ₹8,415 crore held in , causing major losses for institutional and retail investors. These bonds can take losses during a bank rescue. However, the draft rescue plan included the write-off, while the final plan issued on March 13 did not. The ordered it the next day, after the bank had been reconstituted.
Bondholders challenged the decision. The ruled in January 2023 that the had acted beyond his powers. The Supreme Court has upheld that ruling and rejected appeals by Yes Bank, the RBI and the government. Investors can now pursue their claims, but repayment timing, interest and other terms may need further court orders. The ruling could leave Yes Bank with new debts and require future rescue plans to state clearly when investors can lose money. It may also make AT1 investors examine legal protections more closely.
Timeline
Judgment tightens scrutiny of authority for bond write-offs
The judgment held that the administrator lacked authority to write off Yes Bank’s AT1 bonds because the final reconstruction scheme did not specifically permit it and the decision did not comply with . Its broader effect on future and remains uncertain.
Recovery claims return to Yes Bank
The ruling restores connected with the ₹8,415 crore investment that had been written off. The exact , including possible interest, timing and other terms, may require further directions, and the outcome can create for Yes Bank.
Supreme Court upholds bondholders’ victory
The Supreme Court dismissed the appeals and upheld the Bombay High Court’s of the AT1 write-off. It left undisturbed the finding that the administrator lacked authority to after the final scheme omitted that power.
Bombay High Court quashes write-off
The Bombay High Court set aside the March 14, 2020 write-off of the . It held that Yes Bank had already been on March 13 and that neither the nor the RBI had authorised the ’s action.
Yes Bank, RBI and government appeal
Yes Bank, the RBI and the Union government appealed against the Bombay High Court’s ruling. The appeals raised questions about the available during bank reconstruction, the of the final scheme and whether the independently permitted the write-off.
Bondholders challenge the decision
Bondholders, including investors that held substantial AT1 exposure, challenged the write-off before the . They argued that the final scheme did not authorise the extinguishment and that the administrator could not make a new after reconstruction had taken effect.
Administrator writes off ₹8,415 crore
Yes Bank’s administrator communicated the decision to write off AT1 bonds worth , affecting institutional and retail investors. The decision came one day after the final reconstruction scheme took effect, a timing that later became central to the courts’ authority analysis.
Final scheme omits write-off power
The Central government notified the on March 13, 2020. Unlike the draft, the final scheme did not contain a provision authorising the or write-off of Yes Bank’s AT1 bonds, and the bank was treated as from that date.
Draft scheme proposes AT1 write-off
The draft reconstruction scheme included a provision to write down Yes Bank’s . AT1 instruments are designed to absorb losses when a bank reaches a specified trigger or requires resolution support, making them different from ordinary .
RBI begins Yes Bank rescue
After severe deterioration in Yes Bank’s financial position and depositor confidence, the RBI initiated of the Banking Regulation Act, 1949. The emergency process placed the bank under an and created the legal setting for the later AT1 bond dispute.