On Wednesday, the state-owned Canara Bank said it would raise funds for business growth. The supposed option is proposed to be the bonds to raise Rs 1,500 crores.
In a regulatory filing, Canara Bank said it is planning to raise funds through Basel-III compliant additional tier I (AT-1) bonds. It further claimed that it has floated bids appointment of merchant bankers or arrangers for the fundraising.
Under such Basel-III norms, AT-1 bonds come with loss absorbency features which means that in case of stress, the bank can write off such investments or convert them into common equity if it is later approved by the Reserve Bank of India.
AT-1 bonds qualify as core or equity capital. These are one of the means of raising capital by public sector banks (PSUs) that require Rs 2.40 lakh crore by March 2019 to meet global capital adequacy norms (Basel III).