Nippon Life's Indian Asset Manager to Settle Yes Bank Investment Dispute

Nippon Life's Indian Asset Manager to Pay Fine in Yes Bank Investment Case

Japanese insurer Nippon Life's Indian asset management unit, Nippon Life India Asset Management, will pay a fine of 964.6 million Indian rupees ($10.25 million) to settle allegations by Indian regulators that the fund fraudulently invested in bonds from lender Yes Bank. According to a document reviewed by Reuters, the fund offered its customers high-risk Yes Bank bonds and in return the lender extended loans to companies backed by the unit's previous owner, industrialist Anil Ambani.

The settlement stipulates that 93% of the settlement, or 897.4 million rupees, will go to Nippon India's investors that lost money. This is a rare condition in regulatory settlement offers, which typically require companies to deposit the penalties with the Indian government. The settlement between Nippon India, a unit of Japan's Nippon Life Insurance Co, and the Securities and Exchange Board of India (SEBI) has not been previously reported.

Under SEBI's regulations, Nippon India did not acknowledge any wrongdoing by agreeing to the settlement. The regulator alleges that between 2016 and 2019, Anil Ambani and his son Jai Anmol Ambani influenced Reliance Mutual to invest 21.5 billion Indian rupees ($228.57 million) into Yes Bank's additional tier-1 (AT-1) bonds. In return, the Ambani-backed companies received loans from Yes Bank.

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The investment in AT-1 bonds became worthless after Yes Bank was declared insolvent in 2020, resulting in what SEBI said was 18.28 billion rupees of investor losses. AT-1 bonds are a category of capital-raising securities that can be written off when a bank becomes insolvent, rendering them high-risk. A decision from India's top court on whether the write-off of Yes Bank's AT-1 bonds was legal is pending.

Anil Ambani sold Nippon India, then known as Reliance Mutual Fund, to Nippon Life in October 2019. The settlement was reached on April 15, as confirmed by a letter from SEBI to Nippon India. SEBI, Nippon Life, and Nippon India unit did not reply to requests for comment on the settlement. The AT-1 bonds garnered more scrutiny after Credit Suisse's controversial 2023 bond wipeout triggered lawsuits across multiple jurisdictions.