Reserve Bank revises Basel III capital norms

The RBI on Monday issued revised and final guidelines for raising non-equity regulatory capital instruments by banks under the stringent Basel III framework under which lenders can issue tier 2 capital with a minimum original maturity of 5 years as against 10 years now.

"Banks can also issue tier II capital instruments with a minimum maturity of at least 5 years compared to 10 years at present," the central bank said. It further said banks can issue tier 2 debt capital instruments to retail investors, subject to the board approval.

“Banks may now additional tier 1 capital instrument with the principal loss absorption through either conversion into common shares or write-down mechanism (temporary or permanent) which allocates losses to the instruments,” the regulator said in a notification.

The apex bank, however, said the terms and conditions of all non-equity capital instruments (both additional tier I & II) issued by banks must have a provision that requires such instruments to either be permanently written off or converted into common shares upon the occurrence of the 'point of non-viability (PONV)' trigger event.