EL7.AI
StocksMedium•29 October 2026•
4 min read

YES Bank shares fall 14.43% after AT1 bond write-off annulment upheld

Key Facts

1YES Bank shares fell 14.43% to 18.15 rupees after the ruling on October 15, 2026.
2Anand Rathi analysis estimated that the bank’s net worth could decline by between 16% and 26% from 52,338 crore rupees.
3The bank said restoring the bonds’ principal could reduce the CET-1 ratio by about 250 basis points, while the Tier 1 ratio would remain at 14%.
4Shares fell 3.42% on October 16 and closed at 17.50 rupees.

On October 15, 2026, India’s Supreme Court rejected appeals by YES Bank, the Reserve Bank of India and the central government, upholding the Bombay High Court’s January 20, 2023 ruling on the write-off of AT1 bonds. The bank’s shares fell 14.43% to 18.15 rupees after the ruling, in a direct market response to the bond case returning to the fore. The decision’s impact centers on how the bonds are restored and accounted for, since overturning their write-off does not mean the bank must immediately repay their full value in cash. The bank said it was studying the ruling and its legal options, while the ultimate implications depend on the next steps and the mechanism for restoring the bonds. That puts capital and future earnings at the center of investors’ attention.

The case dates back to the decision to write off AT1 bonds as part of the bank’s restructuring, a decision challenged by bondholders. The Bombay High Court had found that the final restructuring scheme approved by the central government contained no provision allowing the bonds to be written off. It also ruled that the bank’s administrator was not authorized to make the decision after the bank was reconstituted. The Supreme Court upheld that ruling by rejecting appeals filed by the bank and the authorities. The annulment of the write-off therefore remains in place, while the way its effect on the financial instruments will be implemented still needs to be determined.

Anand Rathi analysis said the ruling’s impact depends on how bondholders’ rights are treated, whether through restoration of principal, payment of coupon arrears or conversion of the instruments into shares under the non-viability clause. The analysis estimated that the bank’s net worth, at 52,338 crore rupees on the comparison basis used, could decline by between 16% and 26% under compensation scenarios. The CET-1 ratio could also fall from 14% to a range of 10% to 11.5%, depending on the mechanism adopted. These are estimates of possible scenarios, not an announcement of a realized loss or an immediate cash liability. The wide range reflects differing outcomes depending on whether a settlement covers only principal, includes coupons or ends with the bonds being converted into shares.

In its own estimate, the bank said restoring the principal of AT1 bonds would reduce the CET-1 ratio by about 250 basis points, based on its capital position on June 30, 2026. It added that the total Tier 1 capital ratio would remain at 14% in this scenario. This estimate differs from Anand Rathi’s ranges, as each is based on different assumptions about compensation and how the instruments are restored. The bank also said annual coupon payments would remain unaffected by the outcome of the appeals and would be paid in accordance with the bonds’ information memoranda. This means the coupon payment schedule remains in place under the instruments’ terms, alongside consideration of the capital impact of restoring their principal.

S&P said it did not expect the ruling to change the bank’s rating, but noted that restoring the bonds would weigh on earnings because of their higher coupons. The annual coupons on the re-listed bonds range from 9.0% to 9.5%, according to the agency’s estimate. S&P estimated that the risk-adjusted capital ratio would remain between 8.0% and 8.5% in the fiscal years ending in March 2027 and March 2028, compared with 9.0% in March 2026. This estimate places the bonds’ impact in a capital context spanning more than one fiscal period, despite the agency’s expectation that the rating will not change. The bank said its legal options and the treatment related to the ruling were still under review.

Market pressure extended into the session after the ruling: the shares fell a further 3.42% on Friday, October 16, and closed at 17.50 rupees, after dropping more than 14% in the previous session. The move followed the upholding of the annulment of the write-off, while the mechanism for restoring the bonds and its financial implications remain to be determined. The bank said coupon payments would continue in accordance with the information memoranda, while the capital effects depend on the final course of action. The available facts do not show that the bank announced an immediate cash liability for the bonds’ full value. Its next legal step and the treatment of the restored instruments remain the two factors determining the case’s path after the ruling.