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    SEBI caps MF exposure to perpetual bonds: Here's how it could impact banks

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    SEBI caps MF exposure to perpetual bonds: Here's how it could impact banks

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    In an interview to CNBC-TV18, Karthik Srinivasan, group head-financial sector ratings at ICRA, spoke at length about the new SEBI rules on perpetual bonds.

    Securities and Exchange Board of India’s (SEBI) proposal to limit bond investment by mutual funds (MFs) could impact the fundraising for banks.
    In an interview to CNBC-TV18, Karthik Srinivasan, group head-financial sector ratings at ICRA (formerly Investment Information and Credit Rating Agency of India Limited), spoke at length about the new SEBI rules on perpetual bonds.
    “When we did our estimate a few months back, we were looking at high single-digit growth on the bank credit for next year. So we, in any case, were not looking at double-digit growth,” he said.
    “Our estimate for capital for FY22 for public sector banks was largely in the band of Rs 20,000-40,000 crore requirement of which we did expect a part of it would be a replacement of the existing AT-1 (AT1 bonds are issued by banks without any maturity date but they have a call option. Banks issue AT1 bonds to meet their capital adequacy requirement). So, if now that is not going to happen, there would need to be some tweak in plans,” said Srinivasan.
    Talking about share prices, he said, “The other thing which one need to factor in is that the share prices of public sector banks have been increasing last couple of months and we have witnessed some of them raise equity from non-government sources. So it’s difficult to put a number. It will all be a function of how much capital these banks will be able to raise directly from the market or are the AT-1 appetite still open for them and how they play on the growth for the next year.”
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