MUMBAI: With the Reserve Bank of India (RBI) deferring the Basel III implementation deadline by a year to March, 2019, banks, especially the state-run lenders, may to wait to understand investor appetite before issuing hybrid tier 1 bonds, say analysts.
Given the low investor appetite and complex structure of the Basel III-compliant tier 1 bonds, banks are wary of issuing such products.
Taking into account industry concerns over potential stress to asset quality, the RBI last week had extended the transitional period for implementation of the stringent Basel III capital norms to March 31, 2019 from March 31, 2018 earlier.
“I don’t see banks focusing on hybrid tier 1 bonds in FY 2015, given that the market is yet to develop,” India Ratings Senior Director and Head of financial institutions Ananda Bhoumik told PTI.
Basel III reform measures, developed by the Basel Committee on Banking Supervision, aim at strengthening the regulation, supervision and risk management of the banking sector.
The postponement move pushed up the Bank Nifty to a nine-month high on Friday, a day after the RBI decision.
“Banks will wait for greater investor familiarity of the product before hitting the market,” Bhoumik said.
In FY15, banks are required to issue Rs 25,000-26,000 crore of hybrid Tier I bonds.