Indian Bank, Andhra Bank to issue Basel-III bonds

After IDBI Bank raised Rs 1,900 crore through two Basel-III compliant bonds, two more banks have lined up their issuances and will raise Rs 1,500 crore in total from the market. Indian Bank will raise Rs 1,000 crore and Andhra Bank will raise Rs 500 crore through tier-II bonds issued under Basel-III norms.

Under Basel-III norms, banks do not have to pay interest to the investors in case the issuer is in stress. For that, the issuer pays an extra coupon as risk premium. In India though, the Reserve Bank of India has relaxed the guidelines a bit and have said the banks can pay the coupon through accumulated reserves.

IDBI Bank had on December 31 last year, raised Rs 1,000 crore through a 15-year bond and again on January 2 issued Rs 900 crore of bonds maturing in 10 years. Both the bonds carry a coupon of 8.62 per cent.