Bond that bombed: How AT-1 has wrecked lives of many YES Bank retail investors

Sixty-one-year-old widow Debi Mukherjee from Kolkata has not been able to sleep properly since February 27 after hearing that YES Bank’s rating has been downgraded.

In 2018, the bank had lured Mukherjee to convert ₹30 lakh lying in her fixed deposit (FD) to Additional Tier-I (AT-1) bond of the private sector bank. The bonds would fetch her 9 per cent interest instead of the 6.5 per cent offered by the FD.

Attracted by the higher interest rate, Mukherjee’s sister-in-law and uncle too invested ₹60 lakh and ₹30 lakh respectively, in YES Bank’s AT-1 bonds.

A harried Mukherjee called up the bank after it was downgraded to check out whether she could sell the three bonds of ₹10 lakh each in the secondary market, but her relationship manager assured that nothing was wrong with the bank and her money was safe, since it carried an assurance by the Reserve Bank of India.

Mukherjee’s life is now shattered as she has lost almost all of the savings of her husband who passed away in 2014. Feeling let down by the RBI, she is now waiting to see if the Government rescues the retail investors who have been roped in with false promises.

Incidentally, the AT-I bonds are targeted only at institutional investors and not retail investors. In the case of YES Bank’s AT-1 bonds, even the well-informed institutional investors have been hit badly. The worst-affected mutual funds have already moved the Bombay High Court seeking a remedy.

However, RBI has clarified that the bond write-off is well within the law and the bank’s restructuring cannot be stopped at any cost.

Meanwhile, 71-year-old father of Delhi-based Dr Gaurav Singla is in a deep state of shock and has stopped interacting with his family members.

Singla’s father had deposited his life’s savings of ₹50 lakh in FD but was convinced by the bank to convert it into the then highest AAA-rated bond.

The money was transferred and the bond issued into the demat account of Kamlesh, Singla’s mother. Kamlesh 72, does not know how to console her husband.

Dr Singla is worried as his father is a cardiac patient and had undergone a surgery last year.

“Though we try to tell him that the money is safe, he is confused and has stopped talking. We do not know how to meet his monthly medical expenses of ₹20,000,” he said.

Challenging the RBI decision in Court may be a difficult and costly proposition, but the government can make an exception for retail investors who have been sucked into the bond with false promises by the bank, said Singla.

Retired Vedanta employee HK Mehta who invested in the YES Bank bond in 2017 called up his relationship manager at the bank to blast him for the mess, but felt sorry when he was told by the manager that some of his own relatives have invested in the bond.

RBI cannot treat institutional investors and cheated senior citizens on par, particularly when the Finance Minister has assured that depositors will not lose a single penny, he added.

According to conservative market estimates, direct retail investment of a whopping ₹400-500 crore will be written down in YES Bank’s bailout process.

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