RBI eases rules on banks’ overseas perpetual debt, tweaks rules for SBL

Current Context: On 30 September 2025, the Reserve Bank of India (RBI) issued new directions effective 1 October 2025.

• Banks can now raise the entire 1.5% of Risk-Weighted Assets (RWAs) as Additional Tier-1 (AT1) capital overseas through Perpetual Debt Instruments (PDIs).
• This applies to Scheduled Commercial Banks (SCBs), excluding Small Finance Banks (SFBs), Payments Banks (PBs), and Regional Rural Banks (RRBs).
• For Small Business Loans (SBLs), banks may reset the Credit Risk Spread (CRS) once every 3 years, with borrowers allowed to switch to fixed-rate loans at reset.
• RBI also permitted gold-backed working capital loans for all industries using gold as raw material, not just jewellers.
• Aim: Strengthen banks’ capital base, improve global fundraising, and ease credit access for small businesses.

Question:

Q.1 As per RBI’s directions issued on 30 September 2025, banks can now raise the entire 1.5% of Risk-Weighted Assets (RWAs) as Additional Tier-1 (AT1) capital overseas through which instrument?
a) Perpetual Debt Instruments (PDIs)
b) Masala Bonds
c) Non-Convertible Debentures (NCDs)
d) Green Bonds

Answer: a) RBI allowed Scheduled Commercial Banks (except SFBs, PBs, RRBs) to raise the entire 1.5% of RWAs as AT1 capital from overseas markets via Perpetual Debt Instruments (PDIs).