So what are perpetual or AT1 Bonds? And what all do we need to know..

There's a lot of buzz going around about the Ministry of Finance (through a memorandum) requesting SEBI to withdraw a provision of its circular to value perpetual bonds at 100 years. 

The MoF cited that there is currently no benchmark for valuing perpetual bonds at 100 years and the move could result in mark-to-market losses, panic redemptions in debt markets. 

So what are perpetual or AT1 Bonds? And what all do we need to know.. 

AT1 bonds/Additional Tier 1 Bonds are also known as perpetual bonds. These bonds are issued by banks without any maturity date but have a call option. Banks issue AT1 bonds to meet their capital adequacy requirement. After the 2008 financial crisis, higher capital adequacy norms came into force with the collapse of few banks and financial institutions. 

 Banks need to maintain capital adequacy ratio of 10.875% and a Capital Conservation Buffer of 1.875% to protect themselves from any systemic risk. Banks aim to keep their capital adequacy ratio above this regulatory limit. 

Perpetual bonds comes into picture here..

Perpetual bonds do not come with any specified maturity, but they can be redeemed by issuers, usually after five years or ten years. The issuer may call or redeem the bonds if they can refinance the issue at a cheaper rate, especially when interest rates are declining. They also have the option to keep paying you interest or skip and extend the tenure of bond.

Perpetual bonds carry credit risk, interest rate risk and liquidity risk.

1. The issuer has the option to write off the principal in times of severe financial stress. So, Credit Risk

2. Since perpetual bonds have no defined maturity, you may earn less interest especially when rates are rising. You could have invested that principal in higher-yielding instruments. Here comes interest rate risk

3. There is no surety that you will get your principal back on the call date as the bank may choose to extend the tenure of bonds at a future date. You'll be left with the option of selling these bonds in the secondary market but may have to exit at a loss as the bond’s price may differ from what you paid. Also, some of these bonds are highly illiquid as they have very limited buyers. Finally Liquidity risk.

How much gold a person can legally hold in India?

This question becomes important after Modi government’s thrust on unearthing black money and the recent changes in income tax laws. What to do, to remain legally correct as also to keep income tax authorities at bay? 

There's no limit to the quantity of gold an individual can possess where the source of such holding is legitimate and can be explained.

However, it has been clarified by the Ministry of Finance that jewellery and ornaments to the extent of below limits will not be seized, even if prima facie, it does not seem to be matching with the income record of the assessee.

500 grams for married lady,

250 grams for unmarried lady and

100 grams for male member

Love Yourself First, Everything Else will Fall in Place

Have you ever felt guilty for prioritizing yourself or considering taking some time for yourself? Felt obligated to do more work or spend more time with my family. Do you run yourself down trying to show up for people?

 

If yes, then your fear of selfishness might be preventing you from expressing self-love.

 

Some people, especially women, feel guilty when they take time to relax. They believe that it is their responsibility to look after everybody else. They become so engrossed in all of their other duties and tasks that they lose sight of their own needs. However, taking care of yourself is something that you should never feel guilty about. Self-love is different from selfishness. Self-Love helps to understand and connect consistently with one-self. It increases love, wisdom, creativity, and compassion whereas Selfishness means to prioritize our thoughts, needs, and feelings at the expense of everyone else.

 

Recall the airhostess announcing how you apply your own oxygen mask on an airplane before you put on someone else’s. It’s exactly the same thing.

Spending time with yourself enables the brain to refresh, enhances focus, increases productivity, makes us think deeply, and helps with the more productive solution to our problem.

Try to get up before everyone else and sit with a cup of your favorite beverage or just plain water, mentally preparing or journaling your day. That will make a huge difference in your day because you'll be prepared for it and know you'll be able to handle whatever comes your way. Sit down today and figure out where you can begin to put yourself first by doing activities that you love. Start with little things like getting a manicure, taking a walk with your partner or having a glass of wine with friends. Focus on contributing to your overall happiness.