Question

Q. Which of the following statements is/are correct about Additional Tier-1 (AT-1 Bonds)?

Select the correct answer using the codes given below:

• A. 1 only
• B. 2, 3 only
• C. 2 only
• D. 1, 3

Answer 1

The correct option is B 2, 3 only

Explanation:

• Statement 1 is incorrect. Additional Tier – 1 (AT-1 Bonds) Bonds are a type of perpetual bond that doesn’t have any expiry date which is issued to raise long-term capital.
• Statement 2 is correct. AT-1 bonds are known as “unsecured subordinated perpetual non-convertible bonds” that constitute a component of a bank’s permanent capital. Banks issue AT-1 bonds so that Basel III norms regarding equity capital are met.
• Statement 3 is correct. AT-1 bonds are regulated by the Reserve Bank of India (RBI). If there is a need for RBI to bail out a bank, it can tell the bank to write off its outstanding AT-1 bonds without necessarily consulting its investors.