InvestorQ : Is it true that Bank of India has managed to raise funds through the issue of AT-1 bonds?
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Is it true that Bank of India has managed to raise funds through the issue of AT-1 bonds?

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swati Bakhda answered.
5 months ago
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Bank of India confirmed that it has raised Rs 602 crore by issuing additional Tier-1 bonds or AT-1 bonds as they are better known. The AT-1 bonds were in the thick of news in recent days after SEBI had proposed to put strict curbs on mutual funds investing in AT-1 bonds. This had led to a furore as mutual funds account for over 50% of the AT-1 bonds that are outstanding. It is therefore interesting that BOI has managed AT-1 bonds in this scenario.

After the recent decisions by Yes Bank and LVB to write off their AT-1 bonds and the Tier-2 bonds respectively, the costs have gone up. BOI managed to this private placement of bonds at a rather steep cost of 9.3%. However, it must be remembered that AT-1 bonds are quasi equity bonds and if the banks run into trouble then such issuers can either skip interest and in a worst-case scenario they could even repudiate these bonds altogether.

The settlement and allotment of bonds are to take place on March 30, to avoid the stringent regulations of SEBI that take effect from April 01. Though the rules have been diluted, it is still going to entail higher provisioning by mutual fund after the passage of one year. These bonds are issued by the banks to comply with Basel-III capital regulations and strengthen their capital planning processes.

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