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RBI orders five banks to list zero-coupon bonds

February 22, 2022

RBI orders five banks to list zero-coupon bonds
Mint Road has ordered five state-owned banks, including the Bank of India, to list down zero-coupon government bonds issued in lieu of value at ‘fair value’. Since these bonds are regularly presented at profound limits to their face values, such a request could require the banks to raise more capital, three individuals acquainted with the matter told ET.

The regulatory direction comes after an evaluation showed that esteeming these instruments at face worth could make a deceptive image of the banks’ monetary strength and set a trend that could be taken advantage of in the future by others and debilitate the financial framework.
 
National Bank of India, Indian Overseas Bank, Uco Bank, and Punjab and Sind Bank would have to check their zero-coupon recapitalization bonds at fair worth to satisfy the guidelines set by the Bank of International Settlements standards for banks across the globe, said the sources referred to above.
 
“There must be a level battleground,” said one of the people referred to above. “This could cut down the capital sufficiency proportion of these banks and they need to get more capital.”
 
The Reserve Bank of India (RBI) and individual banks didn’t answer ET’s inquiries.
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