Query Detail : SEBI Grade A Officer Phase II Paper 2 General Stream

Kindly explain AT1 bonds and news of waiver of AT1 bonds of Yes bank and its implications.
Mandeep Singh,   March 24th 2020,  
SEBI Grade A Officer Phase II Paper 2 General Stream

Prachi ma'am have done that in the first class on bonds..

To just explain..  AT 1 bonds are additional tier 1 bonds which can be issued by banks and form the part of tier 1 capital..  They are considered as capital because these are perpetual in nature with the condition that in case the bank is in loss and does not have reserves either to pay interest,  then it can be decided to write off these bonds or not pay inyerest on them or convert them into equity (the exact conditions can be discussed later)...  With yes bank, RBI has asked them to write off the AT1 bonds as the bank is on loss and the CAR is not meeting the minimum requirements... What this means for the bank is that its CAR further reduces (as tier 1 capital to that extent is removed)  ... It also shows the bank is weak and cannot pay its obligations..  For investor it means money lost..

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