Yes Bank Moody’s Rating Affirmed at Ba1 on October 20, 2026 Despite the AT1 Hit

The Yes Bank Moody’s rating has come through its first test since the AT1 verdict. On October 20, 2026, Moody’s Ratings affirmed Yes Bank’s long-term deposit ratings at Ba1 and kept the outlook stable, even though the Supreme Court’s AT1 ruling will take a clear bite out of the bank’s core capital. Yes Bank filed the rating release with NSE and BSE the same morning.

Nothing moved on the scorecard. The bank’s disclosure to the exchanges lists every instrument as reaffirmed: the long-term foreign currency issuer rating at Ba1, the local and foreign currency deposit ratings at Ba1, the standalone Baseline Credit Assessment (BCA) and Adjusted BCA at ba2, and the senior unsecured medium-term note programme at (P)Ba1. The GIFT City branch’s ratings were affirmed too.

Why the Yes Bank Moody’s rating held despite the AT1 ruling

Some context first. On October 15, the Supreme Court upheld the Bombay High Court’s decision to set aside the 2020 write-down of Yes Bank’s AT1 bonds, and dismissed the appeals filed by the bank, the RBI and the Government of India. We covered the verdict in our piece on the Yes Bank AT1 bonds ruling. Moody’s reads the order narrowly. The court, it says, reinstated the bonds because the proper legal process for the write-down wasn’t followed. It didn’t question whether AT1 bonds can absorb losses when a bank fails.

Reinstating those bonds hurts. Management estimates, as quoted by Moody’s, that the CET1 ratio falls to 11.4% from 13.7% on a pro-forma basis as of September 2026. The Tier 1 ratio stays the same, because the revived AT1 bonds count as regulatory capital. There’s also a one-time hit to profit.

Moody’s says the rest of the balance sheet makes up for it:

• Gross NPAs, the share of loans gone bad, fell to 1.2% as of September 2026.
• Annualised net income as a share of tangible assets improved to 0.8% for the half year to September 2026, from 0.7% a year earlier.
• The liquidity coverage ratio was 131% for the September quarter, helped by inflows under the RBI’s FCNR(B) concessional swap window.
• High-quality liquid assets were about 17.9% of tangible banking assets as of March 2026.

The Ba1 deposit rating sits one notch above the ba2 standalone assessment. That notch comes from Moody’s expectation of moderate support from the Government of India if it’s ever needed.

What could change the rating

Moody’s spells out the triggers. A downgrade is possible if funding or asset quality weakens materially, if the tangible common equity to risk-weighted assets ratio drops below 11% without a clear capital-raising plan, or if return on tangible assets stays below 0.5%. For reference, that ratio was 14.8% in March 2026, before the ruling. An upgrade would need stronger support from Sumitomo Mitsui Banking Corporation (SMBC), or a standalone assessment that improves by more than a notch.

The agency also expects Yes Bank to raise fresh equity to rebuild its buffers. So the capital question hasn’t gone away. It’s just been pushed onto management’s to-do list.

One small correction on the Q2 numbers

In a separate filing the same day, Yes Bank corrected the cover page of its October 17 results disclosure. It had said the joint auditors issued an audit report with a modified opinion. The correct wording is that they expressed a qualified conclusion in their limited review report on the unaudited Q2 and half-year results. Nothing else in that disclosure changed. Our Yes Bank Q2 results story has the quarter’s numbers.

For shareholders, the takeaway is fairly plain. The rating agency isn’t panicking about the AT1 hit, but it has drawn a line at 11% on tangible capital, and a share sale looks like part of its base case. Watch for any capital-raising announcement on the exchanges.

Disclaimer: This article is for information only and is not investment advice. Figures are taken from Yes Bank’s exchange filings and the Moody’s rating release linked above. Please do your own research or consult a SEBI-registered adviser before investing.