The RBI has sweeping powers when dealing with stakeholders of any financial entity during a crisis. It has used these powers to prevent the liquidation of large, regulated entities. A high court order quashing RBI’s decision to write down investments made in quasi-equity bonds of Yes Bank as part of its rescue package may define the limits of the central bank’s powers.
Last week, the Bombay High Court quashed Yes Bank’s decision to write off additional tier-1 (AT-1) bonds — a move that the bank administrator’s legal counsel said was lawful and done to protect the interest of more than two lakh depositors. The court, however, did not opine on whether the high-yielding quasi-equity perpetual instrument’s write-off was necessary, or whether they should be converted into shares, or if the sacrifice should have
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