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Post at: Sep 21 2021

'Additional Tier-1 Bonds'

Why in News?

  • On 1st September, 2021, State Bank of India (SBI) announced that it raised `4000 crore of Basel compliant Additional Tier-1 bonds at a coupon rate of 7.72%.
  • This is the first issuance of AT1 bonds in domestic market since SEBI put in place new regulations.

About AT-1 Bonds

  • Additional Tier-1 (AT-1 Bonds) Bonds are a type of perpetual bonds that do not have any expiry date  and it which is issued to raise long-term capital.
    • Thus AT-1 bonds are like standards bonds but have a comparatively higher rate of interests.
    • They are also listed and traded on stock exchanges.

Regulations of AT-1 Bonds

  • AT-1 bonds are regulated by the Reserve Bank of India (RBI).
  • If there is a need for RBI to bail out bank, it can tell the bank to write-off its outstanding AT-1 bonds without necessarily consulting its investors.
  • In India, Basel-III regulates AT-1 Bonds.
    • Basel-III norms require Indian banks to maintain a capital ratio of 11.5%. of this 9.5% needs to be in Tier-1 Capital and 2% in Tier-2. 

Features of AT-1 Bonds 

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