Additional Tier 1 bonds (AT 1)
Recently State Bank of India (SBI) in an announcement on September 3, 2021, said that it has raised Rs 4,000 crore through Additional Tier 1 (AT1) bonds.
Key Points
- AT1 bonds were raised at a coupon rate of 7.72 percent.
- This is the first such issue in the domestic market after the Securities and Exchange Board of India (SEBI) notified the new rules.
- State Bank of India enjoys AAA credit rating from local credit agencies while the AT1 offering is rated AA+. This is the highest rating in India for such devices.
- State Bank of India became the first lender to raise capital through offshore AT1 bonds in 2016.
Securities and Exchange Board of India (SEBI) Rules
SEBI amended the 100-year valuation rule for perpetual bonds in March 2021. Under the new rules, the residual maturity period of Basel III AT-1 bonds will be ten years till March 31, 2022. As per the new rules, with effect from April 2023, the remaining maturity of AT-1 bonds will be 100 years from the date of issue of these bonds.
AT-1 bond
The AT1 bond is also called a ‘perpetual bond’. They have no maturity date, but they do have a call option. The issuer of these bonds can call or redeem the bond if they are getting the money at a cheaper rate, especially when interest rates are falling.
Source – The Hindu
