The decision to issue AT1 bonds may have been influenced by the COVID-19 pandemic, which has put a strain on the finances of many businesses. The RBI has also relaxed some of the rules around AT1 bonds, allowing banks to skip coupon payments without triggering a default. However, banks that skip payments may have to pay a higher coupon rate in the future, which could make these bonds less attractive to investors.
Source:- The Economic Times
PNB, IOB, and DCB Bank may have to offer premium rates to entice investors to buy their AT1 bonds. This is because these banks are perceived to be riskier than larger, more established banks. Investors may also be hesitant to invest in AT1 bonds due to the recent defaults of YES Bank and LVB. However, these banks have stated that they are confident in their ability to service their debt obligations and maintain their CAR.
Source: Study IQ IAS
Overall, the decision to issue AT1 bonds is a strategic move by PNB, IOB, and DCB Bank to raise capital and strengthen their balance sheets. However, they will need to carefully consider the risks associated with these bonds and offer competitive rates to attract investors.
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