Individual investors in Yes Bank’s AT-1 bonds request RBI to ensure implementation of SC judgment

The Yes Bank AT-1 Bondholders’ Association has requested the Reserve Bank of India to exercise its supervisory responsibilities to secure lawful implementation of the recent Supreme Court judgement relating to the reinstatement of the bonds and provide meaningful protection for individual investors, whose investments were extinguished in March 2020.

The Association, in a letter to RBI, said it is seriously concerned that, notwithstanding the SC judgement, Yes Bank failed to pay the coupon due in October 2026 on the 9 per cent AT-1 bonds.

In this regard, Yes Bank, in an October 24, 2026, regulatory filing, noted that given that the bank has not completed the evaluation and assessment, it will communicate its decision, if any, on whether or not exercise of coupon discretion is required in respect of the AT-1 Bonds after it has completed the evaluation and assessment, which it expects to complete in due course.

Internal assessment

“An internal assessment by the bank is not a stay of the Supreme Court’s judgement. Nor can the Bank’s unilateral statement that it is evaluating its position resolve whether withholding the coupon is permitted under the relevant Information Memorandum (relating to the Bond issuance) and consistent with paragraph 81 (of the SC judgment),” the Association said.

The SC judgement’s Paragraph 81 states that the payment of the annual coupon rate shall remain unaffected by the outcome of these appeals and must be made in terms of the Information Memoranda (IM).

The individual bond holders forum emphasised that it recognises that the coupon terms must be examined separately for each issuance and that the IM contain provisions relevant to coupon discretion.

“That is precisely why the RBI should require a reasoned, instrument-specific examination rather than allow a general assertion of discretion to leave investors without payment, a decision date or an adequate explanation,” it said.

Urge to RBI

The Association urged the RBI to urgently examine the bank’s stated position, the precise contractual provisions relied upon, the applicability of paragraph 81, and the bank’s treatment of coupons outstanding for the relevant periods. Further, the examination should cover both the 9 per cent and 9.50 per cent issuances and should not be confined to the October 2026 payment alone.

The individual bondholders forum has requested the RBI to initiate an urgent supervisory review of the SC judgement, including the steps being taken to give effect to the setting aside of the March 2020 AT-I write-off.

It sought a clear implementation timetable from Yes Bank, with specific milestones and accountability, rather than permitting the matter to remain indefinitely under an open-ended internal assessment.

Regulatory review

The forum wants a review of the regulatory handling of direct and indirect sales of AT-1 bonds to individual investors, including the concerns identified in paragraph 79 of the SC judgement and the distinction the Court drew between exchange-traded transactions and direct offers to individual investors.

The SC judgement's paragraph 79 noted that the RBI’s Master Circular specifies the classes of investors to whom AT-1 instruments may be offered, including, among others, mutual funds and insurance companies. The AT-1 Bonds are high-risk securities and, thus, as per the RBI, must be offered only to institutional investors.