Finance Ministry asks Sebi to withdraw circular on AT1 bonds: Report

Panic redemption by mutual funds would impact the overall corporate bond market as MFs may resort to selling other bonds to raise liquidity in debt schemes, says the memorandum

The Department of Financial Services (DFS) has issued a memorandum to Sebi Chairman Ajay Tyagi asking him to withdraw a rule treating AT1 bonds (perpetuals) as having 100-year maturity, said multiple news reports on Friday. The memorandum was sent on Thursday, said the reports.

"Considering the capital needs of banks going forward and the need to source the same from the capital markets, it is requested that the revised capital norms to treat all perpetual bonds as 100-year tenor be withdrawn. The clause on valuation is disruptive in nature. Instructions that reduce concentration risks on such instruments in MF portfolio