RBI/2008-09/425
DBOD.No.BP.BC. 120 /21.01.002/2008-2009
April 2, 2009
The Chairman and Managing Director/
Chief Executive Officers of Commercial Banks
(Excluding Foreign Banks, RRBs and LABs)
Dear Sir
Guidelines for issuing preference shares as part of regulatory capital
Please refer to our circular DBOD.No.BP.BC.42/21.01.002/2007-08 dated October
29, 2007 on the Guidelines for issuing preference shares as part of regulatory
capital.
2.It has been decided to partially modify Para 1.7 (b) & (c) of Annex –I and
Para 1.8.1(d) & (e), Para 1.8.2 of Annex- II of the circular which will read as
follows:
Annex –I
Guidelines on Perpetual Non-Cumulative Preference Shares (PNCPS) as part of Tier
I capital
1.7 Payment of Dividend
(b) The dividend shall not be cumulative. i.e., dividend missed in a year will
not be paid in future years, even if adequate profit is available and the level
of CRAR conforms to the regulatory minimum. When dividend is paid at a rate
lesser than the prescribed rate, the unpaid amount will not be paid in future
years, even if adequate profit is available and the level of CRAR conforms to
the regulatory minimum.
(c) All instances of non-payment of dividend / payment of dividend at a lesser
rate than prescribed in consequence of conditions as at (a) above should be
reported by the issuing banks to the Chief General Managers-in-Charge of
Department of Banking Operations & Development and Department of Banking
Supervision, Central Office of the Reserve Bank of India, Mumbai.
Annex –II
Terms and conditions applicable to
Perpetual Cumulative Preference Shares (PCPS) / Redeemable Non-Cumulative
Preference Shares (RNCPS) / Redeemable Cumulative Preference Shares (RCPS) as
part of Upper Tier 2 Capital
1.8 Payment of coupon
1.8.1 The coupon payable on these instruments will be treated as interest and
accordingly debited to P& L Account. However, it will be payable only if
(d) In the case of PCPS and RCPS the unpaid/partly unpaid coupon will be treated
as a liability. The interest amount due and remaining unpaid may be allowed to
be paid in later years subject to the bank complying with the above
requirements.
(e) In the case of RNCPS, deferred coupon will not be paid in future years, even
if adequate profit is available and the level of CRAR conforms to the regulatory
minimum. The bank can however pay a coupon at a rate lesser than the prescribed
rate, if adequate profit is available and the level of CRAR conforms to the
regulatory minimum.
1.8.2. All instances of non-payment of interest/ payment of interest at a lesser
rate than prescribed rate should be notified by the issuing banks to the Chief
General Managers-in-Charge of Department of Banking Operations & Development and
Department of Banking Supervision, Central Office of the Reserve Bank of India,
Mumbai.
3. Please acknowledge receipt.
Yours faithfully,
( Prashant Saran )
Chief General Manager-In-Charge