Yes Bank is actively evaluating various capital measures to ensure it remains well-positioned for future growth following a landmark Supreme Court ruling. The apex court recently upheld a Bombay High Court decision that set aside the write-down of the bank’s Additional Tier 1 (AT1) bonds—a critical restructuring measure implemented in March 2020. This legal development has introduced new variables into the lender’s financial planning, particularly regarding its capital buffers.
During an earnings call with analysts, Yes Bank’s Chief Financial Officer, Niranjan Banodkar, noted that the lender expects its Common Equity Tier 1 (CET1) ratio—a key metric for core loss-absorbing capital—to shrink by more than two percentage points to approximately 11.4% as of September. Despite this anticipated decline, the bank's overall Tier 1 capital ratio is expected to remain steady at around 13.7%, which satisfies the minimum thresholds mandated by Indian regulatory authorities.
Market reaction to the judgment has been significant, with the bank's stock experiencing a 17% decline since last Thursday. The downward trend continued on Monday, with shares losing another 3.5% to settle at Rs 16.88 on the National Stock Exchange. In response to the market volatility and the shifting regulatory landscape, management emphasized that they are still analyzing the precise impact of the ruling.
Regarding the Rs 8,415 crore principal outstanding on the bonds, the bank clarified that there is no requirement for immediate cash outflow. Instead, the amount is expected to shift from the bank’s reserves to its liabilities on the balance sheet. Banodkar stated, "There is no repayment, no cash outflow on the borrowing. It is just an accounting that we will have to restate." The lender is currently examining the information memoranda of the bonds and the specific details of the Supreme Court judgment to determine if further obligations, such as accumulated unpaid coupons, must be addressed.
Yes Bank’s Managing Director and Chief Executive Officer, Vinay Tonse, confirmed that the bank is studying the judgment in detail to explore potential legal remedies and the next course of action. "We believe that we will continue to evaluate areas of capital actions to make sure that the bank remains well-capitalised in order to fulfil its growth objectives," Tonse said. He added that any future decisions regarding capital will be balanced against regulatory requirements, cost, market availability, and shareholder interests.
Despite these internal adjustments, the lender’s core business operations appear to be moving forward. Yes Bank reported a 23.7% year-on-year increase in advances for the September quarter. When excluding foreign currency term loans, the normalized loan growth stood at 17.6%. Executives reiterated that their primary growth priorities remain unchanged despite the potential capital implications of the bond reinstatement.
As the lender continues to review the final accounting and regulatory treatment of the ruling, stakeholders are watching closely to see how the bank navigates the potential 240 basis point shrinkage in its CET1 ratio. For now, the bank maintains that its assessment is indicative and subject to final review, keeping its strategic path open as it manages the transition following the court-mandated reversal.
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