The Securities and Exchange Board of India (Sebi) has taken a pragmatic decision to implement its proposed valuation method for perpetual bonds, or additional tier-1 (AT1) bonds in a phased manner. This comes after a request for review from the finance ministry and frantic lobbying from debt-mutual funds, which stood to lose heavily. The Sebi now proposes to reset valuation in three phases. Until March 31, 2022, residual AT1 maturity may be calculated at 10 years from the date of issue. Over the first half of 2022-23, residual maturity will be reset to 20 years and it will be extended to 30 years in the second half of 2022-23. From April 2023, the bonds will be deemed to have a maturity of 100 years. This glide path gives the market time to adjust and helps avoid a sudden crash in net asset values (NAVs).
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First Published: Tue, March 23 2021. 22:47 IST