Union Bank has issued Basel III compliant bonds to investors for raising Rs 1,500 crore. The bank has allotted unsecured, non-convertible, subordinate taxable perpetual, fully paid-up Basel III complaint additional tier-I bonds in the form of debentures. These bonds are eligible to be included in the tie-I capital of the bank.
Bank has to improve and boost its capital planning processes to comply with Basel-II capital regulations. The norms are being incorporated to alleviate concerns on potential stresses on asset quality and consequential impact on outcome and profitability of banks.
Tier-I capital is considered to be the core capital of a bank’s reserves, which is basically used to fund business activities. Thus, it is important for the bank to hold required levels of tier 1 and tier 2 capital as reserves so that they can absorb the huge losses without threatening their stability.
