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RBI rethinks Tier 1 structure 

December 17, 2013
Manju Dalal, IFR Asia

The Reserve Bank of India is having second thoughts about allowing banks to issue subordinated bonds with temporary write-down and write-up features.

The RBI has told Bank of India not to include a “temporary write-down and write-up” feature on a planned issue of Additional Tier 1 capital securities, sources aware of the situation have told IFR.

The central bank is the only Asian regulator to have explicitly allowed the reinstatement of capital securities, but its recent move adds to confusion over its position, potentially also complicating efforts to bring the first deals to market.

Under Basel III rules, all AT1 instruments must absorb losses, either through conversion to equity or write-downs at the point that a bank becomes non-viable. This is defined in India as a T1 capital ratio of 6.125% or below.

Read more: IFR Asia

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