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