{"id":158313,"date":"2022-01-04T20:54:26","date_gmt":"2022-01-04T15:24:26","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=158313"},"modified":"2022-01-04T20:54:26","modified_gmt":"2022-01-04T15:24:26","slug":"at1-bonds-did-rbi-change-its-mind-on-yes-banks-at1-bonds","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/at1-bonds-did-rbi-change-its-mind-on-yes-banks-at1-bonds\/","title":{"rendered":"AT1 Bonds: Did RBI Change its mind on YES Banks AT1 Bonds?"},"content":{"rendered":"\n
What is the News?<\/b><\/h5>\n

In March 2020, news emerged that the <\/span>Reserve Bank of India’s(RBI) reconstruction plan for Yes Bank would involve the write-off of Rs 9,000 crore worth of AT-1 bonds. This decision is <\/span>being contested in courts by the bondholders and mutual funds that have taken the <\/span>AT-1 bonds.<\/span><\/p>\n\n\n\n
Read more: Green bonds<\/a><\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
What are AT1 Bonds?<\/b><\/h5>\n

AT1 Bonds stand for additional tier-1 bonds. <\/b>These are unsecured bonds that have perpetual tenure. In other words, the bonds have no maturity date.<\/span><\/p>\n

Purpose:<\/b> These bonds are typically used by banks to bolster their core or tier-1 capital. These bonds were introduced by the Basel accord after the global financial crisis.<\/span><\/p>\n

Returns and Risk:<\/b> These bonds offer higher returns to investors but compared with other debt products, these instruments carry a higher risk as well.\u00a0<\/span><\/p>\n

AT1 bonds are subordinate to all other debt <\/b>and<\/span> only senior to common equity<\/b>. Mutual funds (MFs) are among the largest investors in AT1 Bonds. <\/span>These <\/span>bonds have a call option, <\/b>which can be used by the banks to buy these bonds back from investors.<\/span><\/p>\n

Investors cannot return these bonds to the issuing bank and get the money. This means <\/span>there is no put option available to its holders.<\/b><\/p>\n

Banks issuing AT-1 bonds can <\/span>skip interest payouts for a particular year <\/b>or even reduce the bond’s face value, provided their capital ratios fall below certain threshold levels.<\/span><\/p>\n

If the RBI feels that a bank is on the brink of collapse and needs a rescue, it can<\/span> simply ask the bank to cancel its outstanding AT-1 bonds <\/b>without consulting its investors.\u00a0<\/span><\/p>\n\n\n\n
Read more: Oil bonds and other associated issues \u2013 Explained, pointwise<\/a><\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n

Source: <\/b>This post is based on the article<\/span> \u2018Did RBI Change its mind on YES Banks AT1 Bonds?\u2019 <\/b>published in<\/span> Livemint <\/b>on 4th Jan 2022.<\/b><\/p>\n","protected":false},"excerpt":{"rendered":"

What is the News? In March 2020, news emerged that the Reserve Bank of India’s(RBI) reconstruction plan for Yes Bank would involve the write-off of Rs 9,000 crore worth of AT-1 bonds. This decision is being contested in courts by the bondholders and mutual funds that have taken the AT-1 bonds. Read more: Green bonds… Continue reading AT1 Bonds: Did RBI Change its mind on YES Banks AT1 Bonds?<\/span><\/a><\/p>\n","protected":false},"author":10317,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1566,3127,9],"tags":[10501],"class_list":["post-158313","post","type-post","status-publish","format-standard","hentry","category-daily-factly-articles","category-economy","category-public","tag-live-mint","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704845359},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/158313","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10317"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=158313"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/158313\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=158313"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=158313"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=158313"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}