Bank of Baroda (BoB) plans to raise up to Rs 1,650 crore from Additional Tier-I (AT-1) bonds in one or multiple issuances to fund business expansion.
Finance committee of the bank today approved issuance of AT-1 capital bonds compliant with the Basel III capital norms of the Reserve Bank of India for a minimum amount of Rs 500 crore with green shoe option. The total issuance will not exceed Rs 1,650 crore, BoB said in a BSE filing today.
This is within the overall board approved limit of Rs 3,000 crore for AT-1 bonds, the filing said.
These are perpetual debt instruments which neither carry maturity date nor are they redeemable, which means these bonds are eligible to be treated as equity than debt.
Under the Basel-III norms, AT-1 bonds come with loss absorbency features, meaning that in case of stress, banks can write off such investments or convert them into common equity if approved by the RBI.
AT-1 bonds, which qualify as core or equity capital, are one of the means of raising capital by public sector banks to meet the global norms on capital adequacy (Basel III).