AT1 bonds back as preferred avenue for PSBs to raise capital

Private banks stick to equity capital; fund-raising spree driven by RBI's call for adequate capitalisation

After going out of fashion for a year or two, additional tier-1 (AT1) bonds have come back as a favoured instrument for bank recapitalisation.  

However, public sector banks are the issuers of these bonds, while private banks are raising equity capital. The capital raising spree is prompted by the Reserve Bank of India (RBI), which wants banks to be adequately capitalised to lend in the coming days and to take care of the bad debts.  

Meeting the minimum capital requirement would be necessary, but not a sufficient condition for financial stability, the RBI governor had said in July. Covid like