SEBI guideline on Issuance, listing & trading of PNCPS & IPDIs/PDIs

Last updated: 10 October 2020

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The Securities and Exchange Board of India (SEBI) has issued new guidelines concerning the issuance, listing, and trading of Perpetual Non-Cumulative Preference Shares (PNCPS) and Innovative Perpetual Debt Instruments (IPDIs)/Perpetual Debt Instruments (PDIs), commonly known as Additional Tier 1 (AT1) instruments. These guidelines, effective from October 12, 2020, aim to provide a clearer framework for these complex financial instruments. Key changes include mandatory issuance via the Electronic Book Provider (EBP) platform, participation restricted to Qualified Institutional Buyers (QIBs), and a minimum allotment and trading lot size of Rs. 1 crore. Issuers must also provide enhanced disclosures regarding call option conditions, risk factors, and the Point of Non-Viability (PONV) clause.

Securities and Exchange Board of India CIRCULAR SEBI/HO/DDHS/CIR/P/2020/199 October 6, 2020 To Recognised Stock Exchanges Registered Depositories Issuers of PNCPS and IPDIs/PDIs Merchant Bankers, Stock Brokers and Registrars to an Issue registered with SEBI Madam / Sir, Sub:I

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FAQ :

PNCPS and IPDIs/PDIs are essentially non-equity regulatory instruments that form part of a bank's capital, often referred to as Additional Tier 1 (AT1) instruments. They are governed by Reserve Bank of India (RBI) guidelines.

The new guidelines mandate that AT1 instruments must be issued on the Electronic Book Provider (EBP) platform, participation is limited to Qualified Institutional Buyers (QIBs), and the minimum allotment and trading lot size is Rs. 1 crore. Enhanced disclosures are also required.

Only Qualified Institutional Buyers (QIBs) are permitted to participate in the issuance of AT1 instruments.

The minimum allotment size for AT1 instruments is Rs. 1 crore, and the minimum trading lot size is also Rs. 1 crore.

Issuers must provide specific disclosures including details of call option conditions, all inherent risk factors of AT1 instruments, and the Point of Non-Viability (PONV) clause, which allows the RBI to direct a write-down if a bank requires public sector capital infusion.

These guidelines come into force on October 12, 2020.