Which of the following statements is/are correct with reference to the AT1 Bonds?
A. AT1 Bonds stand for additional tier-1 bonds.
B. AT1 bonds are subordinate to all other debt and only senior to common equity.
C. Both A & B
D. None of these
Explanation:
The decision of the Securities and Exchange Board of India (SEBI) to slap restrictions on mutual fund (MF) investments in additional tier-1 (AT1) bonds has raised a storm in the MF and banking sectors. AT1 Bonds stand for additional tier-1 bonds. These are unsecured bonds which have perpetual tenure. In other words, the bonds have no maturity date. AT1 bonds are subordinate to all other debt and only senior to common equity. Mutual funds (MFs) are among the largest investors in perpetual debt instruments, and hold over Rs 35,000 crore of the outstanding additional tier-I bond issuances of Rs 90,000 crore.
