On 16 October 2026, the Supreme Court of India overturned a 2020 decision by Yes Bank to write off riskier bonds. The ruling reinstated the bank’s AT‑1 bonds—valued at ₹8,415 crore—into its capital structure, a move that reverberated through every tier of the institution’s financial health.
The immediate consequence was a projected erosion of the bank’s Common Equity Tier‑I (CET1) capital ratio by 250 basis points. While the overall Tier‑1 ratio would remain steady at 14 %, the dip in CET1 signals a tighter buffer against future shocks, raising questions about the bank’s resilience.
The backdrop to this legal reversal is the Reserve Bank of India’s intervention earlier in the year. The RBI placed Yes Bank under its control to facilitate a bailout, appointing an administrator who had written off the AT‑1 bonds worth ₹8,415 crore. The Supreme Court’s decision effectively undoes that write‑off, reintroducing the bonds into the bank’s books.
Despite the upheaval, the bank reported a net profit of ₹1,071 crore for the quarter ended June, a 34 % increase year‑on‑year.
The news sent Yes Bank shares tumbling by 15 %. The market’s reaction underscores how intertwined regulatory decisions and capital adequacy are: a single court ruling can shift investor sentiment overnight.
Despite the upheaval, the bank reported a net profit of ₹1,071 crore for the quarter ended June, a 34 % increase year‑on‑year. Yet, the profit figure sits beside a capital ratio that is now under pressure, painting a complex picture for stakeholders.
The Supreme Court’s stance on the 2020 decision raises the possibility of a new legal precedent. If the court can mandate losses on bondholders during bank rescues, future bailouts may face tighter scrutiny and stricter capital requirements.
Yes Bank’s overall Tier‑1 capital ratio remains at 14 %, while its CET1 ratio has decreased due to the court’s ruling. The bank’s shares have already reflected the market’s uncertainty, and the institution now faces a recalibrated regulatory landscape.
