CURRENT AFFAIRS

Detailed explanation-1: -Recently, the Reserve Bank of India (RBI) has made a proposal to write-down Additional Tier-1 (AT-1) bonds as part of the SBI-led restructuring package for Yes Bank.

Detailed explanation-2: -AT-1 bonds are a type of unsecured bonds issued by banks to shore up their core capital base to meet Basel III norms. It pays a periodic coupon and has a call option, which can be used by the banks to buy these bonds back from investors after a certain period.

Detailed explanation-3: -Additional Tier-1 bonds are high-yield securities that typically have loss-absorbing features, meaning they can be written off if a lender’s capital falls below a crucial level, which was invoked in Yes Bank’s case. These bonds are a type of perpetual securities which offer higher risk and reward.

Detailed explanation-4: -Additional Tier 1 bonds, or AT1s for short, are part of a family of bank capital securities known as Contingent Convertibles or ‘Cocos’. They are bonds issued by banks that contribute to the total level of capital they are required to hold by regulators.

Detailed explanation-5: -What are AT1 bonds? AT-1, short for Additional Tier-1 bonds, are a type of unsecured, perpetual bonds that banks issue to shore up their core capital base to meet the Basel-III norms.