SEBI issues Clarification on the valuation of bonds issued under Basel III framework.

The Securities and Exchange Board of India vide its circular dated 22^nd March 2021 has issued clarification revising the deemed residual maturity period for Basel III AT-1 and Tier 2 bonds.
The deemed residual maturity will be 10 years till March 31, 2022 and it will rise to 20 years from 1^st April that year to 30^th September, 2022 and 30 years from October 1, 2022 till 31^st March, 2023.

Further from 1^st April, 2023 onwards, they will be considered as 100 years from the date of issuance of the bond.

SEBI has also clarified that in case the issuer does not exercise call option then the valuation will be done considering maturity of 100 years from the date of issuance of not just that bond series but all such bonds issued by the entity. This would be the case even if the non-exercise of the call option is due to the financial stress of the issuer or any other adverse news.

Further,  AMFI  is advised  to  issue detailed guidelines  with  respect  to  valuation  of bonds issued under Basel III framework, which shall be implemented by April 01, 2021.