SEBI’s October circular on the issuance and sale of Alternate Tier 1(AT1) bonds restricts the sale of these instruments to only Qualified Institutional Buyers (QIBs) and pegged the minimum allotment and trading lot size to Rs 1 crore. This was intended to exclude retail consumers from having any direct exposure to such instruments.
The underlying rationale for such exclusion has been that AT1 bonds are complex financial instruments with risk characteristics that might not be fully understood by the retail consumer. SEBI’s issuance of the circular was motivated by an incident earlier in 2020, wherein AT1 bonds issued by Yes Bank had to be written down, inflicting larges losses on retail investors.
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