Sebi moots new norms for InviT, AT1 bond public issues

Heralding new avenues for raising funds, markets regulator Sebi on Friday proposed fresh norms for retail issuance of ‘core capital’ instruments by banks and for the public issue of Infrastructure Investment Trusts (InviTs). The proposed norms for retail or public issuance of Additional Tier-1 or AT1 capital instruments, which are considered to be core measure of a bank’s financial strength from a regulatory viewpoint, seek to keep very small investors out of its purview by keeping the minimum amount of investment at Rs 2 lakh. Sebi said AT1 instruments carry additional risks in relation to vanilla debt instruments such as risk of loss of coupon as well as principal, in certain circumstances. “In view of the same, it is proposed that in order to ensure that only well informed retail investors with adequate risk tolerance level subscribe to these instruments, a minimum amount of investment, for example Rs 2 lakh, may be prescribed for such instruments,” Sebi said in its draft norms. RBI had last year allowed banks to issue AT1 instruments to retail investors, but it was felt that the retail investors may not fully appreciate the characteristics of these instruments.