YES Bank shares fell more than 3% on Friday, October 16, after the opening bell, as investors reacted to a Supreme Court order that is expected to reduce the lender’s Common Equity Tier 1 (CET1) ratio by 250 basis points. The stock continued its downtrend following a 20% plunge on Thursday’s market, with NSE data showing a 3.2% drop to ₹17.54 per share, compared with ₹18.12 at the previous close. The decline reflects heightened selling pressure as the market digests the court’s decision to quash the bank’s appeal to write off Additional Tier‑1 (AT1) bonds worth ₹8,415 crore.

In an exchange filing on October 16, YES Bank disclosed that it is reviewing the Supreme Court order and its implications, and will make suitable disclosures in due course. The bank estimates that reinstating the AT1 bonds will impact its CET1 ratio by 250 basis points, while the Tier‑1 ratio is expected to remain unchanged at 14%. The court’s ruling creates a significant negative liability for the lender, as the AT1 bonds were previously written off in 2020 under the bank’s asset reconstruction scheme.

Morgan Stanley analysts described the order as “negative”, noting that the post‑tax liability of ₹6,300 crore represents 12% of YES Bank’s net worth and would shave off 190 basis points from the bank’s current CET1 of 14%. The analysts added that the AT1 bond plea has been an overhang for the company’s stock, which has reacted sharply to the Supreme Court’s decision. They will monitor any review petition or clarification by the bank.

The Supreme Court’s latest order rejected YES Bank’s appeal to write off the AT1 bonds, directing that the annual coupon rate remain unaffected by the outcome of the appeals. On October 15, the court upheld the earlier Bombay High Court ruling, which had found no reason to interfere with the High Court’s decision in favour of the bondholders, such as Axis Trustee Services. The bondholders had challenged the write‑off move, leading to the court proceedings.

YES Bank had written off the AT1 bonds in 2020 as part of its asset reconstruction scheme following the bank’s financial crisis in 2018. The bondholders’ challenge resulted in a January 2023 ruling by the Bombay High Court in their favour, prompting YES Bank, the RBI, and the government to appeal to the Supreme Court. The court’s decision now imposes a material liability on the lender’s capital base.

The market’s reaction underscores the sensitivity of bank stocks to capital adequacy metrics and court rulings. Investors are closely watching the bank’s subsequent disclosures and any potential review of the Supreme Court order. The 250‑basis‑point impact on the CET1 ratio is a significant event for YES Bank, affecting its perceived resilience and capital strength in the eyes of market participants.