The bank estimates that reinstatement of the bond principal could reduce its common equity tier 1 (CET1) capital ratio by around 240 basis points to 11.4% on a pro forma basis as of September 30, 2026. Its overall Tier 1 capital ratio is expected to remain around 13.7%.
“We do believe that we will continue to evaluate areas of capital actions to make sure that the bank remains well capitalized in order to fulfil its growth objectives,” managing director and chief executive Vinay Tonse said during the post earnings analyst call. “Capital planning is an ongoing board-level process. Any capital decision will be based on a careful assessment of regulatory requirements, the cost and availability of capital, shareholder interests and the long-term objectives,”
The Supreme Court on October 15 upheld the Bombay High Court’s decision setting aside the write-down of Yes Bank’s AT1 bonds, reversing a key measure undertaken during the lender’s reconstruction in March 2020.
While the bank has quantified the potential capital impact arising from reinstatement of the principal, the treatment of accumulated unpaid coupons remains unresolved, raising the possibility of an additional financial obligation.
“The manner and the timing of reinstatement of the bonds as well as payment of the coupon is also under assessment,” Niranjan Banodkar, CFO, Yes Bank said, adding that the treatment would depend on the terms of the bonds’ information memoranda and the Supreme Court judgment.
The lender clarified that reinstatement of the Rs 8,415 crore principal would initially involve an accounting adjustment rather than an immediate cash outflow. The amount would effectively move from the bank’s reserves to borrowings or liabilities on its balance sheet.
“There is no repayment, no cash outflow on the borrowing. It is just an accounting that we will have to restate,” Banodkar said.
However, the eventual payment obligations and timelines will depend on the bank’s assessment of the judgment and the applicable contractual terms.
Tonse said the lender was studying the ruling before deciding its next course of action, including possible legal remedies.
“We are examining the judgment in detail, including the available legal options and appropriate steps going forward,” he said.
The bank stressed that its assessment of the 240-basis-point CET1 impact was indicative and that the final accounting and regulatory treatment would be determined after its review.
Despite the potential capital implications, Yes Bank said its business growth priorities remain unchanged. The lender reported a 23.7% year-on-year increase in advances during the September quarter, while normalised loan growth, excluding foreign currency term loans linked to FCNR(B) mobilisation, stood at 17.6%.
Management said cross-referrals from SMBC had started gaining traction and would help the bank deepen customer relationships and expand business opportunities.
The lender also expects some improvement in profitability during the second half of the fiscal year. Net interest margins, which declined to 2.6% during the September quarter, are expected to remain broadly stable in the December quarter before improving towards March 2027.
Management said the deployment of liquidity raised through FCNR(B) deposits, higher interest rates and a reduction in low-yielding Rural Infrastructure Development Fund (RIDF) balances should support margins, although competitive pressures on loan pricing could partially offset these gains.
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