SEBI to Withdraw Revised Guidelines on AT1 Bonds


The Ministry of Finance has issued a ‘written request’ to Securities and Exchange Board of India (SEBI) to withdraw its revised guidelines for treating all perpetual bonds to be considered as having 100-year maturity.

A circular on the AT1 bonds was issued by SEBI on 10th March and the rule was to take effect from 1st April, 2021.

The Department of Financial Services (DFS) under the Ministry of Finance has said that the revised norms issued by SEBI will lead to huge ‘mark to market losses’ for investors.

According to the letter, the circular had caused a lot of apprehension in the mutual fund industry about losses resulting from the revised valuation norms. The clause of valuation is disruptive in nature. The instructions that reduce concentration risk of such instruments in mutual fund portfolios can be retained even within 10 per cent ceiling.

Further, considering the capital needs of banks going forward and the need to source the same from the capital markets, the department requested SEBI to withdraw the revised valuation norms to treat all perpetual bonds as 100-year tenor.


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