SEBI changes norms for issuance of AT-1 bonds, minimum allotment size at Rs 1 crore

By Administrator_ India

Capital Sands

Markets regulator Sebi on Tuesday mandated usage of electronic book mechanism for issuance of Additional Tier 1 (AT1) instruments.

The mechanism has been made mandatory for such instruments irrespective of the issue size.

Perpetual non-cumulative preference shares,  innovative perpetual debt instruments and perpetual debt instruments, commonly referred to as AT1 instruments, are essentially non-equity regulatory instruments, forming part of a bank”s capital.

Such instruments are governed by the Reserve Bank of India  guidelines and issued under Sebi”s issuance and listing framework.

The decision has been taken based on the recommendations of the Corporate Bonds and Securitization Advisory Committee.

The instruments have certain unique features which grant the issuer (banks in consultation with RBI) a discretion in terms of writing down the principal or interest, to skip interest payments, to make an early recall, among others, without commensurate right for investors to legal recourse.

Given the nature and contingency impact of AT1 instruments and the fact that full import of the discretion is available to an issuer, it may not be understood in the truest form by retail individual investors, Sebi noted.

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