Banks can use statutory reserves for AT1 bond coupon payment

The amendments are applicable with immediate effect, said RBI

The Reserve Bank of India has allowed banks to use statutory reserves to pay coupon (interest) on additional tier-I bonds, subject to certain riders.
 
“Coupons must be paid out of 'distributable items'. In this context, coupon may be paid out of current year profits,” RBI said. The amendments are applicable with immediate effect, it said.
 
The apex bank said if current year profits are not sufficient, coupon may be paid subject to availability of profits brought forward from previous years and reserves.
 

The accumulated losses and deferred revenue expenditure, if any, shall be netted off from the two to arrive at the available balances for payment of coupon, it added.

 
Payment of coupons on perpetual debt instruments from the reserves is subject to the issuing bank meeting minimum regulatory requirements for CET1, Tier 1 and Total Capital ratios, it clarified.