Edited By: Mohammad Haris
Last Updated: March 06, 2023, 13:24 IST
AT1 bonds are often the primary a part of a financial institution’s general debt that will likely be written down in case of non-viability.
AT1 bonds are a kind of perpetual debt instrument that don’t carry any maturity date
The authorities is contemplating stress-free valuation guidelines for added tier-I, or AT-I, bonds, in line with a livemint report. It will make the AT-1 bonds extra enticing to traders and can make it simpler for banks to boost funds from the home market.
The finance ministry’s Department of Financial Services has begun discussions to ease valuation norms, as there’s a broad understanding in favour of aligning the valuation of the perpetual bonds with international practices, as an alternative of treating them as having a 100-year maturity, in line with the livemint report quoting two individuals conscious of the event. It is to make sure that AT-I bonds stay a viable fundraising possibility.
What Are AT-1 Bonds?
AT1 bonds are a kind of perpetual debt instrument that don’t carry any maturity date. Banks use them to reinforce their core fairness base and thus adjust to Basel-III norms. These bonds had been launched by the Basel accord after the worldwide monetary disaster to guard depositors.
Are AT-1 Bonds Safe for Investors?
The AT-1 bonds are seen as high-risk devices, as these bonds could be written down by banks below the instructions of the Reserve Bank of India (RBI) within the occasion of an institutional failure. AT1 bonds are often the primary a part of a financial institution’s general debt that will likely be written down in case of non-viability.
Last week, the Supreme Court stayed the Bombay High Court order which had put aside the writing down of Yes Bank’s AT-1 bonds of greater than Rs 8,300 crore in January. The apex court docket additionally issued a discover to bondholders.
The Bombay High Court quashed a choice taken by the Yes Bank Administrator on March 14, 2020, to put in writing off Additional Tier 1 (AT-1) bonds noting the Administrator didn’t have the authority to take such a choice.
AT1 bonds price Rs 8,414 crore had been written off totally through the Yes Bank reconstruction scheme in March 2020.
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