Introduction
Securities Exchange Board of India, the regulator of market securities in India, recently rejected a settlement plea from Anil Ambani, his son Jai Anmol Ambani and YES Bank CEO Rana Kapoor in the YES Bank AT-1 bond case - an episode that had once triggered turmoil in the market. This decision by the SEBI is not just constrained to this case, but portrays a shifting enforcement dynamics. By refusing to settle, SEBI has signaled a decisive shift in its regulatory posture: away from compromise-driven resolutions and towards stricter enforcement that places accountability at the forefront. The move not only revives focus on one of the most high-profile banking crises of the past decade but also raises broader questions about corporate governance, investor protection, and how India intends to address misconduct in its financial sector going forward.
Development of SEBI
Long before the constitution of SEBI, Between 1830 and 1850 a group of ‘share brokers’, traded in shares and stock of banks and the East India Company, under a banyan tree on the Dalal Street, in Bombay, where presently the mighty Phiroze Jeejeebhoy Towers in Horniman Circle stands, which houses the Bombay Stock Exchange, the oldest stock exchange in India. After independence, with the adoption of the constitution on 26 January, 1950, stock markets came under the purview of the Central Government. Eventually, In 1951, the stock markets came under the regulation of the Securities Contracts (Regulation) Act of 1956 (SCRA) drafted by the A.D. Gorwala Committee. Almost three decades after this legislation, In 1988, SEBI was established as a non statutory body, conferred with limited authority, primarily for regulation and development of public markets. Subsequently, The Securities Exchange Board of India Act (SEBI Act) was passed in 1992, making SEBI a statutory body with actual power to enforce compliance and protect investor interests. From an informal marketplace under a banyan tree to a statutory regulator with sweeping enforcement powers, SEBI’s journey reflects India’s evolving commitment to investor protection—a commitment now being tested in cases like the YES Bank AT-1 bond scandal.
The Yes Bank Case
After the 1990s liberalization of markets, multiple private sector banks rose up with permit from the Reserve Bank of India, including the YES Bank under the leadership of Rana Kapoor and Ashok Kapur. Ashok Kapur soon passed away tragically during the terrorist attacks, and Rana Kapoor assumed full leadership. YES Bank, once hailed as India’s fifth-largest private sector lender, represents one of the most dramatic banking crises in recent memory. The bank had a sudden spurge of growth touching the skies of the financial sector. However, deep beneath the shine, the bank used aggressive lending measures, with minimal transparency, risky practices and poor governance leading up to multiple bad loans. In March 2020, the Reserve Bank of India (RBI) superseded the bank’s board and imposed withdrawal restrictions of ?50,000 per depositor. This triggered widespread panic among customers and investors.
One of the most controversial aspects of the YES Bank crisis was its exposure to the Reliance Anil Dhirubhai Ambani Group (ADAG). The bank had extended loans worth nearly ?12,800 crore to at least nine ADAG companies, wherein many eventually turned into non-performing assets. This made the Ambani-led entities one of the largest defaulters in the YES Bank case. The Enforcement Directorate (ED) and other investigative agencies later alleged that several of these loans were sanctioned without appropriate transparency and under dubious measures. This also raised concerns about the credibility of the bank’s management.
The allegations proved to be dangerous for investors as a significant portion of YES Bank’s bad loan book was linked to ADAG, leading up to loss of investor trust and mounting liquidity issues. Matters escalated further with the write-off of Additional Tier-1 (AT-1) bonds, digging up more controversies. AT-1 bonds refer to a debt instrument marketed to retail investors as high-yield generating but relatively safe. Unlike regular bonds, they are perpetual with no maturity date and allow banks to skip interest payments in times of stress. Alongside, if a bank’s capital falls below regulatory thresholds, these bonds can be written off entirely or converted into equity, placing investors at risk of losing all their money. Many retail investors suffered huge losses with YES Bank writing off these bonds.
In this backdrop, SEBI’s decision to reject settlement pleas from Anil Ambani, Anmol Ambani, and Rana Kapoor in the AT-1 bond mis-selling case extends beyond those directly tied to this incident, and signifies precedent for the entire regulation of Indian stock markets.
Conclusion
By refusing settlement, SEBI is attempting to reshape expectations. Traditionally, settlement mechanisms allowed companies and individuals to pay fines or agree to restrictions in exchange for closure of investigations, particularly in corporate crimes. This approach, while functional, often raised concerns that influential players could escape accountability with minimal risks. The rejection in this case reflects SEBI’s intent to pursue tougher enforcement policies and send stronger deterrence signals, so as to ensure that investor grievances are addressed substantively.
As SEBI pursues action against some of the most high-profile names in India, it is also intending to set a precedent for stricter accountability. The rejection of the Ambanis’ and Rana Kapoor’s settlement pleas signals that the era of compromise is giving way to an era of enforcement. For investors, it is a reminder that regulators are sharpening their teeth; for corporate India, it is a warning that reputational stature will not shield misconduct. The question now is whether these stronger moves will restore lasting trust in India’s markets—or merely serve as one more chapter in the country’s long struggle to balance growth with governance.
References
https://www.sebi.gov.in/about-sebi.html
https://the1991project.com/writing/essays/evolution-indian-securities-market-regulator
https://groww.in/p/sebi-securities-and-exchange-board-of-india
https://ifsa-network.com/publications/from-trust-to-turmoil-the-yes-bank-financial-scam/
