Yes Bank Bonds Write-Off Cancelled By Court

The best news I have heard in 2023. So many retired employees were sold this bond in the guise of better earning deposit by the RM.


Big negative for the stock though. Fresh liability of 8500 crore

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Lesson to be learnt from the episode
Don’t deal with private banks. They’re only interested in sales by fooling innocent people. Stick to PSU banks. Service may be little bit poor but their staff won’t call you every other day for a sales pitch.


One of the most dumb explanation I have read

It said while Yes Bank draft reconstruction scheme contained the clause for AT1 bonds write down, the final scheme sanctioned by the government did not.

“It appears that upon consideration of the objections, the Reserve Bank made modification in the draft scheme, as permissible under section 45(6)(b) of the Act of 1949. It deleted the clause of writing down of AT-1 bonds,” the court said.

The final scheme did not authorise the Yes Bank administrator to write off the AT-1 bonds and in doing so, he exceeded his authority the court said.

“It appears that the administrator exceeded his powers and authority in writing off AT-1 bonds after the bank was reconstructed on March 13, 2020,” the court said.

If RBI did not want the AT1 bonds to be written off, they could have advised the administrator about their intention. How come RBI was silent all these years if their intention was never to write off the bonds. Crazy…

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Finshots says that YB can still walk away. Court has only ordered to bring those bonds back to life. YB can still show them on books and say we won’t pay anything as these are perpetual binds.

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After watching the interview of Yes Bank CEO.

These are perpetual bonds. Even if SC do agree to reinstate it, it will remain in the books of Yes Bank as perpetual bonds and the right to call it or close it lies with Yes Bank. It is not like a deposit which is maturing in 5 or 10 years and needs to be paid back.

With regard to Interest payment on these bonds. The bank has the right not to pay interest on these bonds. It is their exclusive rights. They are mandated to pay only if Yes bank pays dividends. As long as Yes bank does not pay dividends, they are not supposed to pay interest on these Bonds. There is no obligation to pay accumulated interest over the years.

What would happen in a worst case scenario. The capital of yes bank will fall by 3% whilst the Bond will be listed back and increase by 3%. Do remember these are perpetual bonds and there is no obligation to pay.

I feel sorry for the retail depositors who parked their money in these bonds. I always thought there was an obligation of the bank to pay interest on these bonds. What I worry now is even if this is reinstated, I dont think there will be liquidity for the retail investors to sell and take the money back. Yes Bank will not call up this bond at least in the near future. I did not know this aspect and came to know only now about the interest. Retired people might have invested only for the interest.

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