Basel III:Banks may Raise 3 Tril­lion in Non-core Cap­i­tal by FY17

The Economic Times - - Economy -

Rat­ing agency ICRA on Tues­day said banks would have to mop up .` 3 tril­lion (.`3 lakh crore) in non-eq­uity debt over the next three years as they mi­grate to the cap­i­tal in­ten­sive Basel-III frame­work.

“Banks both pub­lic and pri­vate sec­tor ones, are ex­pected to is­sue non-eq­uity cap­i­tal bonds of .` 2.5-3 tril­lion over the next three years till FY17,” it said in a state­ment.

State-run banks would ac­count for over two-thirds of these bond is­suances while pri­vate banks would ac­count for the rest, it said. Around 40% of this amount would be in tier-II cap­i­tal bond, while the re­main­ing 60% would be in additional tier-I cap­i­tal bonds, it said. How­ever, the agency was a bit pes­simistic about additional tier-I bonds, say­ing that it feared low in­vestor ap­petite since the newly in­tro­duced in­stru­ment is riskier. “Additional tier-I in­vestors could in­cur a loss on the coupon if the com­mon eq­uity falls be­low 8%, and even the prin­ci­pal could be at risk if com­mon eq­uity tier-I drops be­low 5.5%,” it said. —PTI

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