NFRA Recommends Regular Review of AT-1 Bonds Valuation to Align with Market Practices

The National Financial Reporting Authority (NFRA) recommends revisiting the valuation methodology of AT-1 bonds every three years to remain consistent with market practices. These bonds, issued by banks as quasi-equity capital, have a higher risk and coupon rate. The suggestion follows a government reference to ensure current market behavior is reflected.

The National Financial Reporting Authority (NFRA) has suggested a review of the valuation methodology for AT-1 bonds every three years to align with evolving market practices.

Banks issue AT-1 bonds as perpetual debt instruments with high-risk absorption features, serving as a significant source of quasi-equity capital. Investors include mutual funds, corporates, and institutional investors.

This recommendation follows a reference from the Ministry of Corporate Affairs and the Department of Economic Affairs earlier this year, emphasizing the importance of current market behaviors in valuation, as per Ind AS 113 standards.