The RBI has asked banks to classify perpetual non-cumulative preference shares as capital. The bank added that debt instruments such as innovative perpetual debt, hybrid debt capital, perpetual cumulative preference shares, redeemable non-cumulative preference shares and redeemable cumulative preference shares and subordinated debt should be clearly classified as borrowing.
Banks must adopt this classification while preparing their balance sheet for the current financial year, the RBI added.
A senior RBI official however, clarified that the new guideline does not amount to a change in the definition of Tier-I and Tier-II capital. “We cannot make such drastic changes with such a small notification. It will hurt banks badly,” he said. Further, the RBI, in another circular, issued on Tuesday, instructed banks that the “other farmers” under Debt Relief Scheme, may be allowed to repay the amount in one or more instalments upto June 30, 2010.
The move follows the Centre’s decision to extend the last date of payment of 75 per cent of overdue portion by the farmers, due to recent drought in some states and floods in other parts of the country.
The Centre also advised banks to receive even less than 75 per cent of the eligible amount under the programme.