Indian banks will need to raise Rs54,400 cr through AT1 in next 2 years
Under Basel III norms, the funds raised through these bonds qualify for equity capital and enhance the bank's capital adequacy ratio
Mumbai: The requirement for Basel III Additional Tier I (AT1) capital for banks would be as high as Rs54,400 crore in FY15 and FY16, ratings agency India Ratings & Research said in a statement on Wednesday. The agency expects about 97% of this requirement to come from public sector banks.
Under Basel III norms, the funds raised through these bonds qualify for equity capital and enhance the bank’s capital adequacy ratio by adding to its Tier I capital.
India Ratings said the recent Basel III AT1 issue worth Rs1,250 crore by Bank of India was a modest and slow beginning to the significant need for such capital. The state-owned bank issued these bonds last Friday and has the option of raising an additional Rs1,250 crore.
The coupon on the issue was fixed at 11%, which is about 175 basis points higher than yields on AAA rated bonds, implying a rating in the range of A-/BBB+, the ratings agency said. One basis point is one-hundredth of a percentage point.
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