YES Bank shares have fallen about 17% over the past two trading days, October 15 and 16, as the Supreme Court upheld the Bombay High Court’s decision to quash the 2020 write‑off of the lender’s ₹8,415 crore Additional Tier‑1 (AT‑1) bonds. The ruling could require the restoration of the bonds and payment of accrued interest, raising fresh concerns over the bank’s capital adequacy, net worth and future profitability. The bank said it is examining the judgment and evaluating its available legal options, while investors await clarity on the potential financial impact of the ruling.

The sell‑off comes ahead of the bank’s September‑quarter earnings (Q2 FY27), scheduled for Saturday, October 17. Investors are watching the earnings release for signs of strength in YES Bank’s underlying business, including net interest income, net interest margin, deposit growth, loan growth, slippages and provisions, and gross and net non‑performing asset ratios. The bank’s commentary on funding costs, credit quality and capital adequacy will be crucial in determining whether operating performance can cushion the impact of the legal overhang.

Key concerns for investors centre on the potential impact on the bank’s capital adequacy, net worth and earnings. The ₹8,415 crore bond amount is substantial relative to the lender’s profitability, and the eventual treatment of the restored bonds, including accrued interest and accounting implications, will be crucial. Investors will look for clarity on whether the bank expects a material financial impact, how it plans to manage any additional liability, and whether capital‑raising or other measures may be needed.

Kotak Mahindra Mutual Fund has suspended fresh subscriptions in its Kotak Medium Term Fund and Kotak Credit Risk Fund, both of which hold YES Bank AT‑1 bonds, while reviewing the court ruling. Nippon Life India Asset Management has also paused fresh investments in certain funds as it assesses the implications. These moves concern debt‑fund subscriptions and bond valuations, rather than a blanket suspension of investments in YES Bank shares, but add to the uncertainty surrounding the ruling.

According to a CNBC‑TV18 report quoting sources, the Mumbai‑based private sector lender could face a one‑time results hit of ₹5,300 crore to ₹5,400 crore following the Supreme Court’s decision to set aside the write‑off of the Additional Tier‑1 bonds worth ₹8,415 crore. The bank is examining the implications of the judgment, including the accounting treatment required to reinstate the bonds and its obligations towards coupon payments. The lender could recognise the adjustment in the September quarter itself, whose results are due tomorrow, or defer it to the third quarter of FY27, but no later than that.