Bonds and Hybrid Instruments

Banks and financial institutions raise a variety of bonds, including senior debt, Tier II and Tier I capital. Some of the instruments rated by Crisil are:

Banks

Lower Tier II bonds (under Basel II)

Upper Tier II bonds (under Basel II)

Tier I – IPDI (Innovative Perpetual Debt Instruments) under Basel II

Tier II Bonds under Basel III

Tier I bonds under Basel III

NBFCs

• NCDs
• Subordinated debt
• Perpetual bonds
• Preference shares

These issuances, in addition to providing capital, are also driven by regulatory norms to maintain capital in the form of bonds/hybrids of certain specified structures.

While the assessment of each of these instrument types is based on the CRAMEL framework, specific characteristics of hybrid instruments, such as minimum regulatory capital adequacy ratio, failure to make profits, etc., are also taken into account as they may impact the ability to make interest/principal repayments.