RBI Revises Basel III Guidelines for India’s Banks

India’s banks will be permitted to issue tier 2 capital with a minimum original maturity of five years as against 10 years previously, stated the Reserve Bank of India (RBI) in a notification amending some guidelines on Basel III implementation in India.

The RBI said banks can now issue additional tier 1 capital to retail investors subject to board approval. It added that call options on the additional tier 1 debt will now be permissible at five years instead of 10 years.

Under the new guidelines the call option on additional tier I instruments – perpetual non-cumulative preference shares (PNCPS) and perpetual debt instruments (PDIs) will be permissible at the initiative of the issuer after the instrument has run for at least five years.

“The loss absorbency features of the instrument should be clearly explained, and the investor’s sign-off for having understood these features and other terms and conditions of the instrument should be obtained,” the RBI added.

The revised guidelines will be effective immediately, the notification said.

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