BoI to raise Rs 1,500 cr via Basel III bonds

Bank of India has firmed up plans to raise up to Rs 1,500 crore through Basel III compliant bonds to boost its tier II capital for business growth.

BoI has obtained the ratings of ‘AAA/Stable’ to its Tier II bonds from CRISIL, which also carry a feature called “Point of non-viability (PONV)” trigger. Occurrence of such event results in loss of principal amount to investors and default on the instrument.

Although PONV trigger will be determined by the Reserve Bank of India, the possibility of such trigger is remote in the Indian context due to the robust regulatory and supervisory framework. For one, the rating  rating assigned to bonds issued under Basel III norms factors in the risk associated with the PONV feature.

Meanwhile, rating agency CRISIL has also reaffirmed its ratings on the bank’s existing debt instruments at ‘CRISIL AAA/Stable/CRISIL A1+’.

According to CRISIL, BoI is adequately capitalised with comfortable resource profile, and established market position. These rating strengths are partially offset by BoI’s average asset quality and earnings profile.

BoI’s capitalisation is adequate (under Basel II norms), with Tier I of 7.84 percent and overall CAR of 10.36 per cent, as on June 30, 2013.