What is this news about the AT1 bonds getting nothing for their investments? What are these AT1 bonds and why will they not get anything?

That is broadly correct and even the RBI rescue plan for Yes Bank has clearly outlined that the perpetual bonds get nothing and they have been written down to zero value. The RBI rescue plan has promised an infusion of Rs.2500 crore of capital by SBI with the leeway to expand the capital further. However, the Rs.9300 crore of Additional Tier 1 (AT1) bonds have been fully written off. AT1 bonds are perpetual bonds (no maturity) issued by banks to shore up their Tier 1 capital. This is a form of flexible capital where interest rates are 150 bps higher but payment of interest is subject to the bank making profits. Most mutual funds and institutions had invested in these bonds in the search for higher yields. While investors may take legal recourse on this write-off, this is perfectly legal and there was little choice, anyways. With equity capital being written down, there is little that perpetual bond holders can really do against this RBI decision.