Canara Bank Gets RBI Nod for AT-1 Bond Call

Research Analyst: UJVIN NEVATIA (PROPRIETOR: NEVAT INVESTMENTS) | SEBI Registration No.: INH100009628 Canara Bank (

) has received approval from the Reserve Bank of India (RBI) to exercise the call option on ₹1,500 crore of Basel III-compliant Additional Tier 1 (AT-1) bonds. The approval allows the bank to redeem the specified bonds on their applicable call date. What Is an AT-1 Bond Call Option? AT-1 bonds are perpetual regulatory capital instruments issued by banks. Unlike conventional bonds, they do not have a fixed maturity date. However, they may include a call option that allows the issuing bank to redeem the bonds on a specified date, subject to regulatory approval. The RBI's approval is important because banks cannot simply redeem AT-1 instruments at their discretion. Regulatory conditions are intended to ensure that the redemption does not weaken the bank's capital position. Why Does This Matter? Canara Bank's latest action is part of a broader capital-management exercise. The bank has planned to exercise call options on multiple AT-1 bond tranches, with the total redemption plan covering ₹4,000 crore. At the same time, it has announced plans to raise up to ₹4,500 crore through fresh Basel III AT-1 bonds. This creates a refinancing and capital-management cycle: older AT-1 instruments can be redeemed while new regulatory capital is raised. The new issuance can help the bank maintain its capital base while managing the composition and cost of its funding. The development also highlights the role of RBI approvals in banks' management of hybrid capital instruments under the Basel III framework. Source: NDTV Profit No Recommendations