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Issue of Long-term Bonds by Banks
- Reserve Bank Guidelines
At present, banks are allowed to issue long-term subordinated debt in the nature of unsecured redeemable bonds, which qualify for Tier II capital. In the context of gradual conversion of term lending institutions into banks and with a view to giving boost to infrastructure lending, there is a felt need to allow banks to raise long-term resources for funding their long-term commitments and concurrently to assist banks in reducing ALM mismatches in the longer term maturities.
2. Accordingly, and as announced in annual policy Statement for the year 2004-05 dated May 18, 2004 , banks will henceforth be allowed to raise long-term bonds with a minimum maturity of five years to the extent of their exposure of residual maturity of more than five years to the infrastructure sector. It is intended that banks should have first provided assistance to such infrastructure projects before raising resources through bonds.
3.Infrastructure sector for this purpose will be as defined by the Reserve Bank from time to time.
NOTE: (A) Click here for list of items included under infrastructure sector .
(B) Click here for the detailed terms of issue for the above mentioned long-term bonds.
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