Worst case scenario may be 3% hit on core capital, says YES Bank CEO

In a bid to quell concerns doing the rounds around the implication of Bombay High Court’s verdict — which quashes the Reserve Bank of India-appointed administrator’s order writing down ₹8,300 crore of additional tier-1 (AT-1) bonds — Prashant Kumar, MD & CEO, YES Bank, said the bank would appeal Bombay HC’s judgment at the Supreme Court.

Given that it has six weeks to initiate the appeal, work has started on this front, and lawyers will soon be appointed. It is gathered from sources that the RBI may join the bank in appeal. “Since this pertains to RBI’s reconstruction plan for YES Bank, which it has rolled out and approved by the Government of India, the RBI may join the appeal process,” said a person aware of the development.

Email sent to the central bank seeking clarity on the matter remained unanswered till press time.

Meanwhile, Kumar indicated if the worst-case scenario plays out, that is, the SC upholds Bombay High Court’s decision, it will not impact YES Bank’s overall capital position. “At best, the core equity tier- 1 or CET-1 may reduce by three per cent and the share of AT-1 bonds will increase by three per cent. So, the overall tier-1 capital and overall capital position of the bank will remain unchanged,” he explained.

However, it is understood that the grounds of appeal are in favour of the bank and hence at this juncture it is not setting aside capital should the worst-case option plays out. “Firstly, these are perpetual instruments, and it is at the decision of the bank to vest the call options on the (AT-1) bonds. Payment of coupon is also at the discretion of the bank,” he said.  

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