What are Bank Bonds? Banks lend to businesses & individuals. They need huge capital to maintain liquidity. Issuing "Bank Bonds" is one major way!
Bank Bonds: Fueling Financial Flow Bonds are a key strategy for Indian banks to raise these funds. It's like banks borrowing from you, the investor, for a set period.
Seniority Matters: Types of Bank Bonds Banks raise different types of capital, each with "seniority." Seniority means who gets paid first if things go wrong. Regulators rank bonds by risk.
They finance crucial long-term projects like Infrastructure development, Affordable housing.These bonds offer lower risk due to higher seniority.
Tier 2 Bonds: The Next Layer Issued to meet "Tier 2 Capital" requirements (RBI norms). They are "subordinated," paid after senior bonds but before AT1 bonds and equity holders.
AT1 Bonds: Strengthening Banks' Foundation Banks issue these to boost their "AT1 Capital." They can be riskier; interest or principal can be affected under specific conditions.