YES Bank files SC review plea over AT-1 bonds: What does it mean for investors after stock's 15% rebound?

aimeShares of YES Bank are likely to remain in focus on Monday after the private sector lender approached the Supreme Court seeking a review of its October 15 judgment concerning the write-down of Additional Tier-1 (AT-1) bonds worth ₹8,415 crore, reopening a legal battle over the controversial financial instruments.In a regulatory filing on Friday, the lender said it had filed a review petition under Article 137 of the Constitution of India, seeking a review of the Supreme Court's judgment and order dated October 15, 2026.The review petition comes days after Axis Trustee Services, acting on behalf of bondholders, filed a contempt petition in the Supreme Court, alleging that the lender had failed to provide a "concrete roadmap" for restoring the bonds and implementing the court's judgment.In a notice dated October 28, Axis Trustee Services Ltd, which represents investors holding the bonds, asked YES Bank's managing director and board to restore the bonds in its register of holders to their status before the March 2020 write-down. The development was reported in a letter the trustee sent to the bondholders' association on Thursday, accessed by Mint.Earlier, Reuters reported, citing sources, that YES Bank was preparing to seek a review of the ruling after it refused to pay coupons due this year on its AT-1 bonds, despite the Supreme Court's judgment.The latest development follows a series of disclosures made by the bank between October 15 and October 30 regarding the Supreme Court's ruling on the AT-1 bonds issued by the lender.YES Bank said it would make further disclosures about material developments in the matter as required under the listing regulations.What are AT-1 bonds, and what is the dispute? Yes Bank plunged into a liquidity crisis in March 2020 as bad loans mounted, prompting the Reserve Bank of India (RBI) to take control of the lender and impose restrictions on withdrawals.

To stabilise the bank, a consortium of lenders led by the State Bank of India (SBI) was assembled to inject fresh equity capital. As part of the reconstruction, the bank’s administrator wrote down around ₹8,415 crore worth of Additional Tier-1 (AT-1) bonds, prompting Axis Trustee Services and other bondholders to challenge the move in court. AT-1 bonds are perpetual instruments issued by banks to strengthen their capital base.

They are riskier than traditional bonds and typically offer higher interest rates. Under specified circumstances, these bonds can be written down or cancelled to absorb losses when a bank faces financial distress. On October 15, the Supreme Court upheld the Bombay High Court judgment against the write-down of AT-1 bonds undertaken in March 2020 as part of YES Bank's reconstruction..

Shares recover 15% in November Following the Supreme Court's order, the shares came under intense selling pressure, falling 28% in October. This marked their biggest monthly decline since July 2020, with the sell-off dragging the stock to its lowest level in more than three years. Nevertheless, the stock attempted a recovery in November, rebounding 15% so far.

However, it still remains down 19.35%. The potential impact on YES Bank’s capital position remains a key concern for investors. The lender had earlier indicated that reinstating the AT-1 bonds would reduce its common equity tier-1 (CET1) capital ratio by around 240 basis points.

Any move to restore the written-down bonds or meet related obligations could therefore put pressure on the bank’s capital ratios and weigh on investor sentiment. However, the actual impact will depend on the outcome of the review petition and the subsequent course of action.Disclaimer: We advise investors to check with certified experts before making any investment decisions.