RBI issues norms for subordinated debt

The Reserve Bank of India (RBI) on Wednesday issued guidelines on subordinated debt to retail investors. The apex bank has also cautioned banks on several issues. The central bank said for floating-rate instruments, banks should not use its fixed deposit rate as the benchmark. Accordingly, the issuer has to clearly explain the difference between a subordinated bond and a fixed deposit, as bond is not covered by deposit insurance. The guidelines would be applicable with immediate effect, the RBI said. Investors have to declare that they have understood the terms of the specific issue, the central bank stated. Tier-II bonds ...

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