Hybrid Debt Capital Instruments
Those instruments which have close similarities to equity, in particular when they are able to support losses on an ongoing basis without triggering liquidation, they may be included in Tier II capital. At present following instruments have been recognised and placed under this category.
i. Perpetual Cumulative Preference Shares (PCPS)/ Redeemable Non- Cumulative Preference Shares (RNCPS)/ Redeemable Cumulative Preference shares (RCPS) as part of upper Tier II capital.
ii. Debt capital instruments eligible for inclusion as Upper Tier II capital. The guidelines governing the instruments at (i) and (ii) above, indicating the minimum regulatory requirements are furnished in Annexure 4 and Annexure 3 respectively to the Master Circular on Prudential Guidelines on Capital Adequacy and Market Discipline- New Capital Adequacy Framework (NCAF).
As per RBI’s circular no. RBI/2015-16/428 DBR.BP.BC.No.105/ 21.06.001/ 2015-16 dated 23rd June, 2016, the extant instructions have been reviewed and it has been decided that banks need not submit a copy of the offer document with respect to any debt/capital raised as above, to Reserve Bank of India. Banks shall however, report to the Principal Chief General Manager, Department of Banking Regulation, Reserve Bank of India, Mumbai, the details of the debt raised as per the format prescribed in this circular duly certified by the compliance officer of the bank. The compliance with the Basel III Capital regulations will continue to be examined by RBI’s Department of Banking Supervision, in course of the supervisory evaluation.
Banks shall however, continue to obtain and keep on their records a certificate from statutory auditors and an external legal opinion in terms of Annex 16 of the Master Circular on Basel III Capital Regulations dated 01st July, 2015.