Yes Bank petitions Supreme Court to review quashing of Rs 8,415 crore bond write-off

Why in news

Yes Bank petitioned the Supreme Court to review an order upholding the quashing of its Rs 8,415 crore AT-1 bond write-off, alleging administrative lapses during its financial reconstruction.

Background

The Supreme Court upheld a Bombay High Court ruling that quashed Yes Bank's March 14, 2020 decision to write off Additional Tier 1 (AT-1) bonds worth Rs 8,415 crore. The court ruled the administrator lacked authority as the reconstruction scheme lacked a specific provision for such a write-off.

Facts for Prelims

• FactYes Bank AT-1 bonds write-off amount: Rs 8,415 crore
• S&TAdditional Tier 1 (AT-1) bonds are perpetual bonds issued by banks to increase capital base and are riskier than traditional bonds
• FactYes Bank's CET1 ratio dropped to 0.6 per cent during the period of scrutiny
• BodyThe RBI has the authority to ask a bank to cancel AT-1 bonds if the bank is in trouble

For Mains

Q. Discuss the importance of Additional Tier 1 (AT-1) bonds in maintaining banking stability and the implications of administrative lapses in bank reconstruction schemes.

Dimensions to cover in your answer

• Regulatory oversight: RBI's role as a 'bystander' vs active supervisor during bank distress
• Legal authority: Limits of administrator powers in the absence of explicit reconstruction scheme provisions
• Investor protection: Balancing the 'safety barrier' function of AT-1 bonds against risks of clandestine administrative actions

Keywords: AT-1 Bonds · Capital Adequacy · Bank Reconstruction · Regulatory Oversight · Judicial Review · Financial Stability

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