YES Bank fallout: Additional tier-1 bondholders plan legal action

The RBI's draft reconstruction plan for YES Bank states that AT-1 bondholders shall not be entitled to get any compensation from the reconstructed bank

Holders of YES Bank’s additional tier-1 (AT-1) bonds, amounting to Rs 10,800 crore, are contemplating legal action, with the Reserve Bank of India’s (RBI’s) draft reconstruction scheme for the troubled lender suggesting a permanent write-down of these bonds outstanding as of March 5. According to the draft scheme, the write-down is “in conformity with the extant regulations issued by the RBI based on the Basel framework”.

According to the Basel norms, if minimum tier-1 capital falls below 6 per cent, it allows for a write-off of these bonds. Classified as a quasi-equity instrument, AT-1 bonds are intended to provide