PNB board approves Rs 6,000 crore capital raising plan

The plan includes raising of AT-1 bonds or AT-2 bonds or a combination of both. The capital would be raised in one or more tranches

The board of Punjab National Bank has approved raising of capital through Basel III-compliant Additional Tier-1 (AT-1) bonds and Tier II bonds up to an amount of Rs 6,000 crore.

The plan approved by the lender’s board includes raising of AT-1 bonds or AT-2 bonds or a combination of both. The capital would be raised in one or more tranches, the lender said in an exchange filing.

As AT-1 bonds are considered to be risky, the Securities and Exchange Board of India (Sebi) had earlier sought to value banks’ deemed residual maturity of Basel III additional tier 1 (AT1) bonds as 100-year debt from April 1. However, after the finance ministry’s opposition that such a move would increase borrowing costs for public sector banks, the regulator had relaxed the norms and said the maturity of such bonds would be 10 years until March 31, 2022, and would be increased to 20 and 30 years over the subsequent six-month period. From April 2023 onwards, the residual maturity of AT-1 bonds will become 100 years from the date of issuance of the bond.