YES Bank’s AT-1 investors have secured a decisive legal victory. Translating that victory into cash is a separate exercise. On October 15, the Supreme Court declined to interfere with the Bombay High Court’s decision quashing the ₹84.15 billion write-off imposed during the bank’s March 2020 reconstruction. Attention now turns to which claims survive and how they can be enforced.

In an article on the Swiss AT-1 ruling, I argued that these instruments’ loss-absorbing character and contractual terms were central to understanding investors’ exposure. That remains the starting point. The Supreme Court’s decision now shifts the focus to the consequences of an unlawful write-off.

The relief rests on defects in the exercise of the write-down power. The Bombay High Court found that the administrator lacked authority to take the write-off action after the reconstruction scheme had come into effect. This preserves a fundamental discipline in bank resolution: accepting the risks of an instrument does not dispense with the legal requirements for imposing losses.

In an argument otherwise centred on the lawful exercise of write-down powers, the judgment surprisingly also brings in the role of banking supervisor. It criticised the quality and timeliness of supervision into the argument, describing the RBI as a “mere bystander” as YES Bank’s CET1 ratio fell to 0.6%.

The High Court quashed the write-off and added: “Necessary consequences shall follow.” The implication is that claims extinguished by that decision cannot continue to be treated as erased on that basis. Yet the court did not prescribe the operational steps for restoring the instruments. Recognition of surviving claims, their restoration in the bank’s records and the identification of enforceable payments remain distinct questions.

The comparison with Credit Suisse is instructive. Switzerland’s Federal Administrative Court annulled FINMA’s write-off decree but expressly left the request to reverse the write-off undecided. Appeals remain pending before the Federal Supreme Court, with the Swiss authorities still describing the relevant legal question as awaiting judicial assessment. The remedy, including its implications for UBS as Credit Suisse’s successor, remains unresolved. YES Bank continues as the issuing entity, making restoration less complicated in that respect. This strengthens the practical case for reinstatement without answering every question about recovery.

Principal requires particular care. These are perpetual instruments, with no scheduled maturity or ordinary investor right to demand redemption. Restoring them therefore does not itself make their face value immediately repayable. An issuer call remains subject to contractual and regulatory conditions. Perpetuity nevertheless does not make valuation redundant. Any proposed cash settlement or equity conversion would require a defensible valuation of the surviving rights, reflecting maturity, coupon discretion, credit risk, call provisions and the basis of the proposed remedy. The original investment amount alone cannot settle that exercise.

The immediate controversy is likely to concern coupons unpaid since March 2020. The Supreme Court has ruled that the payment of annual coupon rate shall remain unaffected by the appeals’ outcome and must be made in accordance with the information memorandum. That reference to the memorandum is central to determining what payment obligations survive.

AT-1 coupons are non-cumulative. The bank’s published terms for its 2016 AT-1 issue give it discretion to cancel coupons and provide that cancelled or unpaid coupon amounts will not be paid in future years. Reinstatement therefore cannot simply be translated into years of accumulated interest. Future coupons also remain subject to contractual and regulatory conditions.

The critical inquiry is how those provisions operate after the write-off has been quashed. An administrator’s extinguishment of the instruments and a valid contractual cancellation of coupons are separate legal acts. It will matter whether the bank exercised its coupon discretion, what it communicated to bondholders and whether it complied with any applicable notice requirements under the respective memoranda.

For investors, the next contest concerns the content and enforceability of the rights that survive. For the market, the judgment reinforces the importance of lawful execution when loss-absorbing capital is called upon. The financial outcome will turn on the bond terms and the bank’s actions under them. The devil remains in the fine print.