RBI raises overseas perpetual debt ceiling to strengthen bank capital

The Indian central bank has raised the limit for perpetual debt that banks can raise overseas and use as part of their core capital, according to a circular late on Monday.

Perpetual debt is debt that does not have a maturity date.

Perpetual debt issued in foreign currency or in Indian rupees overseas will be eligible for inclusion in banks' additional tier-1 capital of up to 1.5 per cent of risk weighted assets, the RBI said.

Additional tier-1 capital is the core capital of lenders.

Earlier, the RBI had set the limit for such perpetual debt in bank capital at 1.5 per cent of risk assets but said that less than half of this can be raised in foreign currency or in rupees overseas.