Banks Can Count Overseas Perpetual Debt Fully in AT1 Limit
Why in the news
A new RBI circular relaxes how much perpetual debt banks can raise from foreign investors and still treat as core capital.
Key facts
- Ceiling: 1.5% of RWA through perpetual debt in AT1.
- Paper in foreign currency or rupees issued overseas counts in full.
- Perpetual debt has no fixed maturity.
| Aspect | Earlier | Now |
|---|---|---|
| Overseas share of the 1.5% room | Under 50% | Entire 1.5% |
Background
AT1 absorbs losses and forms part of Tier-1 capital alongside CET1. RWA means assets weighted by their credit risk.
Significance
- Builds core capital.
- Wider global funding access and possibly cheaper pricing.
Exam angle
- Capital class: Additional Tier-1; framework: Basel III.
- Limit: 1.5% of RWA.