Home / News / India /  Bombay HC rejects write-off of Yes Bank’s AT1 bonds. Which MFs will benefit?

The Bombay High Court has set aside Yes Bank and Reserve Bank of India’s (RBI) decision to write-off 8,500 crore worth of additional tier 1 (AT-1) bonds of Yes Bank, according to people in the know. This order was passed in a batch of petitions filed by bond holders including financial institutions as well as retail individual investors.

About 32 individual schemes of mutual funds were exposed to Yes Bank debt and total exposure stands at 2,848 crore.

The largest exposure of 637.8 crore was with Nippon India Equity Hybrid Fund (8.11%) of its assets, followed by Nippon India Credit Risk Fund at 540.1 crore (10.96% of its assets) and Nippon India Strategic Debt Fund at 436.3 crore (21.25% of its assets).

Fund houses including Nippon India Asset Management Co., Baroda Asset Management India Ltd, UTI Asset Management Co. Ltd, Franklin Templeton Asset Management (India) Pvt. Ltd, PGIM India Asset Management Pvt. Ltd have side-pocketed their exposure to Yes Bank.

Side-pocketing is the separation of a part of the portfolio in lieu of bad debt. Investors can exit the remaining portfolio without giving up their chance of debt recovery, which will accrue to the side-pocketed units. Retail investors were also mis-sold these bonds in large numbers.

Apart from institutional investors, several other individual bondholders had exposure to the AT1 bonds of Yes Bank.

Clarity is awaited on whether the ruling will be challenged further by Yes Bank and RBI.

Neil Borate
Neil heads the personal finance team at Mint. A former colleague called them 'money nerds' and that's what they are. They cover topics like mutual funds, taxation and retirement, all to improve your chances of building wealth. Neil graduated with a degree in law and economics. He passed the CFA Level I exam and began his writing career at Value Research, a mutual fund research firm in 2016. He joined the personal finance team Mint in 2019. Everyday, the Mint Money Team tackles personal finance questions such as where to invest and where to borrow, through articles, charts and reader queries. They also have a daily podcast - 'Why Not Mint Money' and an annual ranking of mutual funds - the Mint 20.
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