Canara Bank Board has approved to raise Rs.9500 Crore via Bonds, Know all Details

The Board of Directors of the Canara Bank in its meeting held on 12.06.2025 has approved the Capital Raising Plan of the Bank for the financial year 2025-26 amounting upto Rs 9,500 Crore by way of Debt Instruments (Additional Tier I/Tier II Bonds). Further, out of the above Capital Raising Plan, the Board of Directors of the Bank has approved the following:

1. To raise Capital through Basel III Compliant Additional Tier I Bonds to the extent of Rs 3,500
   Crore during the FY 2025-26, subject to market conditions and necessary approvals.
2. To raise Capital through Basel III Compliant Tier II Bonds to the extent of Rs 6,000 Crore during
   the FY 2025-26, subject to market conditions and necessary approvals.
   The meeting of the Board of Directors commenced at 11.30 A.M (IST) and concluded at 04.00 P.M(IST).

Bonds Explained

Basel III Compliant Additional Tier I (AT-1) Bonds and Tier II Bonds are types of debt instruments that banks use to raise capital, as per the norms set by the Basel III international banking regulations. These are not regular bonds—they are specially designed to help banks maintain financial stability in times of stress.

1. Additional Tier I (AT-1) Bonds

• What they are: These are perpetual bonds, meaning they have no fixed maturity date. They are part of a bank’s Tier I capital, which includes core capital used to absorb losses.
• Who buys them: Typically institutional investors like mutual funds, insurance companies, or large banks.
• Risk & return: AT-1 bonds carry higher risk and therefore offer higher interest rates. In case of the bank’s financial trouble, the interest payments can be skipped, and the bond can even be written off completely or converted to equity.
• Purpose: These bonds help banks strengthen their capital base to comply with regulatory requirements.

2. Tier II Bonds

• What they are: These bonds have a fixed maturity period (usually 10-15 years) and are used to raise Tier II capital, which is secondary to Tier I capital in absorbing losses.
• Risk & return: They carry moderate risk and fixed interest payments. In case of liquidation, Tier II bondholders are paid after all other debts but before shareholders.
• Purpose: They provide an additional buffer for banks to cover unexpected losses, thus ensuring financial health and stability.

Why Canara Bank Is Raising Capital Using These Bonds?

To meet regulatory capital requirements under Basel III norms, maintain financial strength, and support future business growth, Canara Bank plans to:

• Raise ₹3,500 crore through AT-1 Bonds
• Raise ₹6,000 crore through Tier II Bonds

Both are subject to market conditions and regulatory approvals.