Bankers have sought clarity from the finance ministry regarding taxation of additional Tier-I bonds through which they are expected to raise capital to meet Basel-III norms. Clarity on taxation would help investors in putting money into such instrument without hesitation.
Banks have requested the ministry to clarify tax treatment issues with regard to additional Tier-I bonds in a meeting held recently.
Sources said bankers in the meeting said investors wanted to know if these instruments will be treated as bonds or equity for taxation purposes.
Under the Basel-III norms, additional Tier-I bonds come with loss absorbency features meaning in case of stress, banks can write off such investments or convert them into common equity if approved by the RBI.