How will Sebi’s perpetual bond rules impact mutual funds?

Additional Tier 1 (AT-1) bonds are issued by banks in order to absorb losses in case of erosion of their capital. For instance, if non-performing assets (NPAs) threaten a bank’s financial viability, AT1 bonds will bear losses before ordinary bond-holders or depositors are hit. These bonds have no maturity date. However, banks can repay them at certain “call dates" without having any obligation to repay on those dates. Though Indian banks have historically not skipped on call dates, there are exceptions. One famous example of AT1 bonds not being repaid is the Yes Bank failure in 2020.

Click here to read