Canara Bank plans ₹4,500 crore AT1 bond issuance next week

Canara Bank is set to raise up to ₹4,500 crore through Additional Tier 1 (AT1) bonds, with the issuance scheduled for next Wednesday. The perpetual securities offering represents part of the bank's capital management strategy to strengthen its balance sheet under Basel III norms.

The AT1 bonds are expected to carry a coupon rate in the range of 7.85 to 7.90 per cent, making them attractive to institutional investors seeking higher returns. These perpetual instruments provide the bank with permanent capital, which counts towards regulatory capital requirements but does not mature on a fixed date.

A distinctive feature of the bond issuance is the embedded call option, which will allow Canara Bank to redeem the securities after five years from issuance. This provision gives the lender flexibility to manage its capital structure in response to changing market conditions and regulatory requirements.

The move aligns with regulatory expectations for public sector banks to maintain robust capital ratios. AT1 bonds have become a preferred instrument for Indian banks seeking to diversify their funding sources while meeting Basel III compliance standards. The timing of the issuance will likely be determined by prevailing market conditions and investor appetite for similar securities.