New Enroll in RBI Grade B New Batch - Starts on May 21

    Question

    Which of the following is an unsecured, perpetual and

    non-convertible bond issued by banks in order to secure an external capital base to be used in times of a financial emergency without being subjected to insolvency and distress measures?
    A Long Term bonds Correct Answer Incorrect Answer
    B AT 1 bonds Correct Answer Incorrect Answer
    C AT 2 bonds Correct Answer Incorrect Answer
    D Investment Grade bonds Correct Answer Incorrect Answer
    E Repo Bonds Correct Answer Incorrect Answer

    Solution

    AT1 Bonds stand for additional tier-1 bonds. These are unsecured bonds that have perpetual tenure. In other words, the bonds have no maturity date. They have a call option, which can be used by the banks to buy these bonds back from investors. These bonds are typically used by banks to bolster their core or tier-1 capital. They carry a higher rate of interest and they are riskier than other debt instruments.

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