Banks may soon find it easier to raise capital from the domestic market, as the government is considering relaxing the valuation rules for additional tier-I, or AT-I, bonds to make them more attractive to investors.
In 2021, the Securities and Exchange Board of India (Sebi) changed the rules of AT-I bonds, which are bonds without a fixed maturity date or perpetuals, to be considered as having a maturity of 100 years beginning April 2023, starting from their sale date. However, assigning a 100-year maturity to the bonds would diminish their appeal as a favoured option for banks to raise tier-I capital, as investors would demand higher coupon rates.
To ensure that AT-I bonds remain a viable fundraising option, the department of financial services has started discussions on easing valuation norms, as there is a broad understanding in favour of aligning the valuation of the perpetual bonds with global practices, instead of treating them as having a 100-year maturity, according to two people aware of the development, requesting anonymity.
This story is from the March 06, 2023 edition of Hindustan Times.
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This story is from the March 06, 2023 edition of Hindustan Times.
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