Yes Bank's ₹8,415 Cr AT1 Bond Case
Yesterday, the Supreme Court cancelled Yes Bank's 2020 write-off of ₹8,415 crore of AT1 bonds. What these bonds are, why they were wiped out, and what the court ruled.
What Is an AT1 Bond?
| BANK INSTRUMENT | END DATE | TYPICAL RETURN | IF THE BANK GETS INTO TROUBLE | LOSS ORDER |
|---|---|---|---|---|
| Fixed Deposit (FD) | 1 to 5 years | 6.5% – 7.5% | Protected first (insured up to ₹5 lakh) | Last to lose |
| Regular Bond (Tier-2) | 5 to 10 years | 7.5% – 8.0% | Loses money only if the bank shuts down | 3rd to lose |
| AT1 Bond (Perpetual) | No end date | 8.5% – 9.5% | Bank can skip interest or write down to zero | 2nd to lose |
| Bank Shares (Equity) | No end date | No fixed return | Supposed to take the first full loss | 1st to lose |
What Happened at Yes Bank in March 2020
Mutual funds (Nippon, Kotak, Franklin) and companies (like 63 Moons) held most of the bonds. But Yes Bank staff also sold ~₹679 Cr directly to over 1,300 individuals and retirees as safe "Super FDs" paying 9.5%.
Normally, shareholders lose everything before any bondholder loses a rupee. At Yes Bank, AT1 bondholders lost 100% (₹8,415 Cr), while existing shareholders kept their shares (with a 3-year lock-in on 75% of stock).
RBI's draft rescue plan on March 6 included writing off the AT1 bonds. When the Government notified the final law on March 13, that write-off clause was left out. Yet on March 14, the Administrator wrote them off anyway.
What the Supreme Court Ruled Yesterday
What Changed After 2020
SEBI raised the minimum investment size for AT1 bonds from ₹10 lakh to ₹1 crore and restricted trading to institutional platforms. Regular retail savers can no longer buy them directly.
Several debt mutual funds lost money in 2020 because they held Yes Bank AT1 bonds. SEBI capped AT1 bond holdings at 10% of any mutual fund scheme and tightened how funds value them.
Three years after Yes Bank, Switzerland did the exact same thing when UBS rescued Credit Suisse in 2023: $17 billion of AT1 bonds were written down to zero while shareholders still got $3.2 billion.