YES Bank fallout: RBI move casts shadow on Rs 1-trillion AT-1 bond market

Forcing bondholders to take 100 per cent haircut on the bank's AT-1 bonds would lead to losses to the tune of Rs 10,800 crore, estimates Acuite Ratings

The Rs 1-trillion additional tier-1 (AT-1) bond market — also called perpetual bonds — is likely to see a heavy loss of investor appetite after Reserve Bank of India proposed writing-down the AT-1 bonds of YES Bank. Forcing bondholders to take a 100 per cent haircut on the bank’s AT-1 bonds would lead to losses to the tune of Rs 10,800 crore, estimates Acuité Ratings. It says such a move can drive away investors from such bond issues in the future.

According to the rating agency, the bulk of the exposure to YES Bank’s AT-1 bonds is to mutual funds