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The Securities and Exchange Board of India (Sebi) is likely to impose limits on debt mutual funds’ (MFs’) exposure to the additional tier-I (AT-1) bonds, with the YES Bank crisis putting the spotlight on equity-like risks involved in such instruments, according to people in the know.
According to the data sourced from primemfdatabase.com, MFs’ exposure to the AT-1 bonds — also called perpetual bonds — stood at Rs 37,687 crore as of January 31, 2020.
Classified as a quasi-equity instrument, the AT-1 bonds are intended to provide additional cushion to a bank’s overall capital adequacy. However, in terms of risk, they are riskier than tier-1 bonds.
