YES Bank fallout: Retirees stare at a gaping hole in their savings

Retired employees who had directly invested in additional tier-1 (AT-1) bonds of YES Bank are staring at the possibility of their life savings being wiped out with the bank deciding to write down AT-1 bonds as part of the reconstruction scheme.

"The complete write-off of our investments is akin to a lifetime punishment as we had kept this money aside after paying all taxes to run our lives in old age. YES Bank's relationship managers (RMs) aggressively sold these bonds to saving account holders like me in order to meet their own targets, when I clearly showed my preference for a safer instrument like the bank's fixed deposit. They gave assurances of safety as the bank was regulated by the Reserve Bank of India (RBI)," said 66-year-old retired wing commander Dev.  

According to estimates, individual investors have Rs 1,000 crore of exposure to these bonds, with retirees from varied backgrounds such as army veterans, government employees and IT sector among individual bondholders that made investments in YES Bank's AT-1 bonds.

After Axis Trustee has moved Bombay High Court (HC) on behalf of majority of institutional bondholders, individual bondholders are also planning to club their pleas and present them before the High Court. The next hearing is on Monday, with Axis Trustee-bondholders yet to conclude arguments and YES Bank, Reserve Bank of India (RBI) and Finance Ministry yet to present their case.

Individual bondholders accuse the bank's RMs of mis-selling, which they say has put them at risk of losing significant share of lifesavings in YES Bank's AT-1 bonds.

YES Bank didn't elicit any response at the time of going to press, as the matter is sub-judice.

Individual bondholders, several of whom were also bank's depositors, claim these bonds were aggressively sold by bank's RMs.

Renuka Sharma (name changed), daughter of a decorated army veteran, said that a YES Bank RM, along with a colleague, had pitched the bonds to her as safer than fixed deposits (FDs). "They even told us they were doing a special favour by offering us these bonds, as only large corporates are given access them," she said.

After resisting for a while as some expenses were being planned for their daughters' education, the Delhi-based husband-wife duo finally gave in to bank employees' continued persistence.

"Regrettably, I also suggested the bonds to my father, who is a decorated army veteran. He was hesitant, but my mother came around on my advice and they invested their savings in it as well," Sharma said. The Sharma household and Renuka's father have invested Rs 20 lakh each in YES Bank's AT-1 bonds.

A scientist who has worked in environment protection department of the central government had kept all his corpus for his twilight years in YES Bank's FD.

Kapil Vartak (name changed), 66, started consultancy work after availing the voluntary retirement scheme. In 2016, he was approached by YES Bank's RMs, who advised him to shift his savings from the bank's FDs to these bonds, as these offered better coupon rates of 9.5 per cent.

Vartak says he was under the impression these bonds were like any other bank’s regular bonds. "We were not given the term-sheet or any document mentioning any risk of write-down. We thought of this as any other bank bond. we haven't had any negative experience with such bonds in the past. We received a term-sheet mentioning the risks in these bonds long after we invested," he said.

Vartak also alleges that he was misguided and told that he needs to buy a minimum of five bonds. "Only now I know that the minimum investment could have been Rs 10 lakh, but I ended up making an investment of Rs 50 lakh as we were told that would be minimum required investment," he said.

Delhi-based Mukul Gupta, 54, planned to retire early from his job as a software professional. He says YES Bank's RM initially approached him in March 2018. He refrained from investing and told the bank's representatives the bond doesn't look safe as it was not AAA-rated.

"After I expressed reservations initially, the RM came to my office. She told me that the bonds were very secure as it was a bank regulated by the RBI," Gupta said.

He finally made the minimum investment of Rs 10 lakh. Gupta says he was never given a term sheet or any other document explaining the risks of investing or the possibility of write-down.

According to financial planners, it is common for those planning retirement to opt for products where they can optimise their returns for better income stream post-retirement.

“Retirees typically have limited corpus to invest, while a sizeable income stream is needed to handle day-to-day expenses. So, they do consider products with slightly higher yields,” said Amol Joshi, founder of Plan Rupee Investment Services.  


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