RBI reviewed Basel-III capital regulations on Monday to help banks raise non-equity regulatory capital under the framework. Considering the large requirement for additional tier-1 (AT1) capital over FY15-19, besides the stipulation that any shortfall in AT1 capital has to be met out of common equity (CET1), these relaxations have the potential to give a relief to banks, it said.
Icra said relaxations on coupon payment on perpetual debt instruments in a loss situation and provisions for temporary writedown could reduce, respectively, the probability of default and eventual losses after the breach of the pre-specified threshold. RBI has allowed call option on additional tier-1 instrument, perpetual non-cumulative preference shares (PNCPS) and perpetual debt instruments (PDI) after the instrument has run for at least five years from the earlier 10-year limit. At the same time, an effectively shorter tenure for non-equity capital instruments and the permission granted to banks to issue such instruments to retail investors could help them widen their investor base, the agency said.