In a verdict that closes a bruising chapter of India’s 2020 banking crisis, the Supreme Court has upheld the Bombay High Court’s January 20, 2023 judgment that quashed Yes Bank’s Rs 8,415-crore write-down of its Additional Tier-1 (AT1) bonds. A two-judge bench of Justices Dipankar Datta and Augustine George Masih dismissed the appeals filed by Yes Bank, the Reserve Bank of India and the Union government, observing that it saw no reason to interfere with the impugned judgment.
The write-down — one of the largest such cancellations in Indian banking history — was executed on March 14, 2020, barely days after the RBI imposed a moratorium on the private lender on March 5 that year. The apex court held the move “illegal and arbitrary” when measured against the Final Reconstruction Scheme that the Union government had gazetted to nurse the bank back to health.
The bench’s reasoning turned on a crucial legal distinction. The draft reconstruction scheme had indeed contained a provision permitting an AT1 write-down — but that provision was deleted before the final scheme was notified. Since Yes Bank stood reconstituted on March 13, 2020, the administrator who extinguished the bonds the very next day simply had no authority left to do so. In the court’s reading, the administrator acted on a power that the final scheme no longer conferred.
The write-off had been challenged by Axis Trustee Services, acting for debenture holders, after thousands of retail investors found their holdings wiped out overnight. The bondholders argued that the instruments had been mis-sold to unsophisticated investors as safe, high-yield deposits — and that once the reconstruction plan took effect, the bonds could not be cancelled at the administrator’s stroke.
Markets reacted sharply. Yes Bank shares fell 13 per cent on Thursday as investors weighed the implications of the ruling. (One weaker aggregator claimed a 20 per cent plunge, but that figure was not corroborated by mainstream market reporting.) The sell-off reflected fears that the lender may now face claims from bondholders seeking restoration of the extinguished securities.
Legal and market experts flagged the broader fallout. Vivek Ramji Iyer of Grant Thornton said the decision “creates regulatory uncertainty that can have a potential to impact investor sentiment” — a warning that the regulator’s crisis-management toolkit may face fresh judicial scrutiny in future bank rescues.
The verdict also lands at a delicate moment for Yes Bank. Japan’s SMBC agreed to acquire a 20 per cent stake in the lender in May last year and added a further 4.99 per cent in August 2025, signalling foreign confidence in its turnaround. The court’s ruling does not disturb that investment, but it does reopen questions about who ultimately bears the cost of a bank’s resolution — the bondholder, the depositor, or the state.
For India’s banking regulators, the message is unambiguous: extraordinary crisis powers must flow from the scheme that Parliament and the executive actually finalise — not from drafts that were quietly dropped along the way.
