YES Bank has escalated its protracted legal battle over Additional Tier-1 (AT-1) bonds by filing a review petition before the Supreme Court, seeking a reconsideration of the apex court’s October 15, 2026, judgment that invalidated the lender’s write-down of instruments worth ₹8,415 crore. According to a regulatory exchange filing submitted on Friday, the private sector lender approached the Supreme Court under Article 137 of the Constitution of India to challenge the order that upheld an earlier January 2023 Bombay High Court verdict quashing the write-down. The controversy dates back to March 2020, when YES Bank wrote down the entire outstanding value of two specific AT-1 bond issuances—one worth ₹3,000 crore carrying a 9.5 per cent coupon rate from December 2016, and another worth ₹5,415 crore carrying a 9 per cent coupon from October 2017—as part of a Reserve Bank of India-led reconstruction scheme triggered by mounting non-performing assets, severe governance lapses, and a rapidly deteriorating financial position. Aggrieved by the complete wipeout of their investments, bondholders represented by Axis Trustee Services initially challenged the decision in the Bombay High Court in May 2020, securing a favourable ruling in January 2023 that was subsequently affirmed by the Supreme Court last month. Notably, the October 15 apex court verdict not only invalidated the principal write-down but also clarified that the payment of annual coupons on these bonds remains entirely unaffected by the appellate proceedings and must be honoured strictly in accordance with the terms laid out in their respective information memorandums. Following the Supreme Court’s affirmation, Axis Trustee Services moved swiftly to demand the full restoration of the bonds, their associated investor rights, and their formal reinstatement across relevant depository and stock exchange records, while explicitly warning that it could initiate contempt of court proceedings against the bank over alleged non-compliance with the judicial directive. For YES Bank, the legal tussle carries substantial financial and regulatory consequences, particularly regarding its capital adequacy buffers. The lender has previously disclosed that reinstating the ₹8,415 crore principal amount on its books would exert a downward impact of approximately 250 basis points on its Common Equity Tier-1 (CET1) capital ratio, calculated against its financial position as of June 2026, though it noted that its overall Tier-1 capital ratio would not experience an identical reduction due to the structural classification of AT-1 instruments. By invoking Article 137, YES Bank is attempting to utilise a narrow constitutional remedy to persuade the Supreme Court to revisit its own binding precedent and shield its core equity capital from significant dilution. As the matter returns to the top court’s docket, both institutional investors and banking sector regulators will closely monitor whether the lender can secure relief from the impending capital hit or if it will be compelled to execute the costly restoration of the disputed bonds and settle accrued coupon obligations.
