YES Bank's AT1 bonds writeoff: What SC's decision means for foreign investors
In May last year, Sumitomo Mitsui Banking Corporation inked a deal to buy a 20% stake in YES Bank for $1.6 billion, making it the largest cross-border merger and acquisition deal in India's financial sector.
- Oct 16, 2026,
- Updated Oct 16, 2026 1:53 PM IST
The Supreme Court's decision on striking down YES Bank Ltd's Rs 8,415-crore Additional Tier-1 (AT1) bonds write-off is likely to make foreign investors cautious before entering the country. YES Bank's shareholding data show there were two investors of foreign origin in the private sector lender at the end of September 2026 quarter.
Japan's Sumitomo Mitsui Banking Corporation owned the largest stake of 24.90% or 78.14 crore shares in the bank in Q2. In May last year, Sumitomo Mitsui Banking Corporation inked a deal to buy a 20% stake in Yes Bank for $1.6 billion, making it the largest cross-border merger and acquisition deal in India's financial sector.
In August 2025, the banking and financial services company received the Reserve Bank of India's approval to buy up to a 24.99% stake in YES Bank.
Another investor, which features as a foreign shareholder is Verventa Holdings with a stake of 8.49% or 26.64 crore shares.
In October 2022, Competition Commission of India (CCI) approved acquisition of equity securities amounting up to 10% in YES Bank by Verventa Holdings. Verventa Holdings is a private investment holding company registered in Nicosia, Cyprus, on September 15, 2021. It is affiliated with funds managed by Advent International.
Impact on foreign investors
Nivedita Bhardwaj, Partner, King Stubb & Kasiva, Advocates and Attorneys sounded a cautious note for foreign investors. However, she pinned hopes on how regulators issue guidance for future resolutions in the wake of Rs 8,415 crore Additional Tier-1 (AT1) bonds write-off.
"The Supreme Court's verdict on Yes Bank's AT1 bond write-off is likely to shape how foreign investors view India's banking sector, because it goes beyond one lender. Overseas investors look for predictable rules, legal clarity and consistent treatment of creditors, particularly when a bank is being rescued. The court has found this particular write-off illegal, but it has not ruled that such instruments can never absorb losses, and that distinction is important for hybrid capital in banks. In the near term, the uncertainty over the financial impact may make investors cautious. Over the longer term, sentiment will depend on how quickly the liability is clarified and absorbed, and on whether regulators give clear guidance for future resolutions. If those steps are handled transparently, the ruling can strengthen confidence in India's legal and regulatory system instead of weakening it," said Bhardwaj.
Sonam Chadwani, Managing Partner, KS Legal & Associates takes a balanced stance post SC's verdict.
"The verdict is unlikely to drive foreign investors away from India, but it will make them look more closely at how legal and regulatory risks are handled in the banking sector. Investors understand that AT-1 bonds carry the risk of losing their entire investment; what matters is whether that risk is exercised within the boundaries of the law. The concern here is not that investors suffered losses, but whether the authority to impose those losses was legally established. I believe the judgement sends a strong message that even decisions taken during a financial crisis must have a sound legal basis. For foreign investors, this could actually strengthen confidence in the judiciary, even as it raises questions about the predictability of bank resolution mechanisms. Capital is deterred when the rules governing an investment become uncertain. If this verdict leads to greater clarity on the powers of regulators and the rights of investors, it could prove beneficial for India’s long-term investment climate," said Chadwani.
The Supreme Court's decision on striking down YES Bank Ltd's Rs 8,415-crore Additional Tier-1 (AT1) bonds write-off is likely to make foreign investors cautious before entering the country. YES Bank's shareholding data show there were two investors of foreign origin in the private sector lender at the end of September 2026 quarter.
Japan's Sumitomo Mitsui Banking Corporation owned the largest stake of 24.90% or 78.14 crore shares in the bank in Q2. In May last year, Sumitomo Mitsui Banking Corporation inked a deal to buy a 20% stake in Yes Bank for $1.6 billion, making it the largest cross-border merger and acquisition deal in India's financial sector.
In August 2025, the banking and financial services company received the Reserve Bank of India's approval to buy up to a 24.99% stake in YES Bank.
Another investor, which features as a foreign shareholder is Verventa Holdings with a stake of 8.49% or 26.64 crore shares.
In October 2022, Competition Commission of India (CCI) approved acquisition of equity securities amounting up to 10% in YES Bank by Verventa Holdings. Verventa Holdings is a private investment holding company registered in Nicosia, Cyprus, on September 15, 2021. It is affiliated with funds managed by Advent International.
Impact on foreign investors
Nivedita Bhardwaj, Partner, King Stubb & Kasiva, Advocates and Attorneys sounded a cautious note for foreign investors. However, she pinned hopes on how regulators issue guidance for future resolutions in the wake of Rs 8,415 crore Additional Tier-1 (AT1) bonds write-off.
"The Supreme Court's verdict on Yes Bank's AT1 bond write-off is likely to shape how foreign investors view India's banking sector, because it goes beyond one lender. Overseas investors look for predictable rules, legal clarity and consistent treatment of creditors, particularly when a bank is being rescued. The court has found this particular write-off illegal, but it has not ruled that such instruments can never absorb losses, and that distinction is important for hybrid capital in banks. In the near term, the uncertainty over the financial impact may make investors cautious. Over the longer term, sentiment will depend on how quickly the liability is clarified and absorbed, and on whether regulators give clear guidance for future resolutions. If those steps are handled transparently, the ruling can strengthen confidence in India's legal and regulatory system instead of weakening it," said Bhardwaj.
Sonam Chadwani, Managing Partner, KS Legal & Associates takes a balanced stance post SC's verdict.
"The verdict is unlikely to drive foreign investors away from India, but it will make them look more closely at how legal and regulatory risks are handled in the banking sector. Investors understand that AT-1 bonds carry the risk of losing their entire investment; what matters is whether that risk is exercised within the boundaries of the law. The concern here is not that investors suffered losses, but whether the authority to impose those losses was legally established. I believe the judgement sends a strong message that even decisions taken during a financial crisis must have a sound legal basis. For foreign investors, this could actually strengthen confidence in the judiciary, even as it raises questions about the predictability of bank resolution mechanisms. Capital is deterred when the rules governing an investment become uncertain. If this verdict leads to greater clarity on the powers of regulators and the rights of investors, it could prove beneficial for India’s long-term investment climate," said Chadwani.