Average Coupon: 8.5% - 10.5%
Perpetual Bonds
Perpetual Bonds
Unlock High-Yield, Perpetual Income Streams in India
Perpetual
Bonds
are
debt
instruments
that,
in
theory,
pay
interest
forever.
In
India,
most
are
issued
as
Additional
Tier
1
(AT1)
Bonds
by
banks.
The
key
feature
is
the
Call
Option:
the
issuer
(the
bank/company)
has
the
right
to
redeem
the
bond
(repay
the
principal)
after
a
set
period
(usually
5
or
10
years),
but
the
investor
cannot
force
repayment.
The
vast
majority
of
perpetual
bonds
in
the
Indian
market
are
AT1
Bonds
issued
by
public
and
private
sector
banks
to
meet
the
capital
adequacy
norms
mandated
by
the
RBI
(Basel
III).
Issuance of perpetual bonds: why they exist
Issuance of perpetual bonds: why they exist
Issuance of perpetual bonds: why they exist
Issuance of perpetual bonds: why they exist
Primary Issuers (Banks & FIs)
Banks issue AT1 perpetual bonds to raise Tier 1 Capital. This is essential, non-repayable capital that helps them absorb losses and meet RBI's capital requirements without issuing new shares (equity).
Primary Issuers (Banks & FIs)
Banks issue AT1 perpetual bonds to raise Tier 1 Capital. This is essential, non-repayable capital that helps them absorb losses and meet RBI's capital requirements without issuing new shares (equity).
Primary Issuers (Banks & FIs)
Banks issue AT1 perpetual bonds to raise Tier 1 Capital. This is essential, non-repayable capital that helps them absorb losses and meet RBI's capital requirements without issuing new shares (equity).
Primary Issuers (Banks & FIs)
Banks issue AT1 perpetual bonds to raise Tier 1 Capital. This is essential, non-repayable capital that helps them absorb losses and meet RBI's capital requirements without issuing new shares (equity).
Secondary Issuers (Corporates):
Certain large, well-rated Non-Banking Financial Companies (NBFCs) and Corporates also use perpetual bonds for long-term, non-dilutive capital expenditure financing.
Secondary Issuers (Corporates):
Certain large, well-rated Non-Banking Financial Companies (NBFCs) and Corporates also use perpetual bonds for long-term, non-dilutive capital expenditure financing.
Secondary Issuers (Corporates):
Certain large, well-rated Non-Banking Financial Companies (NBFCs) and Corporates also use perpetual bonds for long-term, non-dilutive capital expenditure financing.
Secondary Issuers (Corporates):
Certain large, well-rated Non-Banking Financial Companies (NBFCs) and Corporates also use perpetual bonds for long-term, non-dilutive capital expenditure financing.
Features of Perpetual Bonds
We believe in transparency. Here is a step-by-step breakdown of how BondScanner, powered by our integrated partners, ensures your account is compliant and ready for trading.
Features of Perpetual Bonds
We believe in transparency. Here is a step-by-step breakdown of how BondScanner, powered by our integrated partners, ensures your account is compliant and ready for trading.
Features of Perpetual Bonds
We believe in transparency. Here is a step-by-step breakdown of how BondScanner, powered by our integrated partners, ensures your account is compliant and ready for trading.
Features of Perpetual Bonds
We believe in transparency. Here is a step-by-step breakdown of how BondScanner, powered by our integrated partners, ensures your account is compliant and ready for trading.
01
No Fixed Maturity Date
The defining feature of a Perpetual Bond is the absence of a maturity date, meaning the principal is never officially scheduled for repayment. This structure creates a perpetual income stream.
01
No Fixed Maturity Date
The defining feature of a Perpetual Bond is the absence of a maturity date, meaning the principal is never officially scheduled for repayment. This structure creates a perpetual income stream.
01
No Fixed Maturity Date
The defining feature of a Perpetual Bond is the absence of a maturity date, meaning the principal is never officially scheduled for repayment. This structure creates a perpetual income stream.
01
No Fixed Maturity Date
The defining feature of a Perpetual Bond is the absence of a maturity date, meaning the principal is never officially scheduled for repayment. This structure creates a perpetual income stream.
02
Callable Provision
Most modern perpetual bonds (especially AT1 Bonds) include a Call Option. This allows the issuer to redeem the bond (repay the principal) after a specified period, typically 5 or 10 years, often at a premium to the par value.
02
Callable Provision
Most modern perpetual bonds (especially AT1 Bonds) include a Call Option. This allows the issuer to redeem the bond (repay the principal) after a specified period, typically 5 or 10 years, often at a premium to the par value.
02
Callable Provision
Most modern perpetual bonds (especially AT1 Bonds) include a Call Option. This allows the issuer to redeem the bond (repay the principal) after a specified period, typically 5 or 10 years, often at a premium to the par value.
02
Callable Provision
Most modern perpetual bonds (especially AT1 Bonds) include a Call Option. This allows the issuer to redeem the bond (repay the principal) after a specified period, typically 5 or 10 years, often at a premium to the par value.
03
Consistent Coupon Payments
Investors receive regular coupon payments at fixed intervals (semi-annually or annually), which are theoretically set to continue indefinitely as long as the issuer remains solvent and meets regulatory metrics.
03
Consistent Coupon Payments
Investors receive regular coupon payments at fixed intervals (semi-annually or annually), which are theoretically set to continue indefinitely as long as the issuer remains solvent and meets regulatory metrics.
03
Consistent Coupon Payments
Investors receive regular coupon payments at fixed intervals (semi-annually or annually), which are theoretically set to continue indefinitely as long as the issuer remains solvent and meets regulatory metrics.
03
Consistent Coupon Payments
Investors receive regular coupon payments at fixed intervals (semi-annually or annually), which are theoretically set to continue indefinitely as long as the issuer remains solvent and meets regulatory metrics.
04
Regulatory (AT1) Classification
In the banking sector, these bonds are classified as Additional Tier 1 (AT1) Capital. This helps financial institutions meet mandated capital adequacy requirements.
04
Regulatory (AT1) Classification
In the banking sector, these bonds are classified as Additional Tier 1 (AT1) Capital. This helps financial institutions meet mandated capital adequacy requirements.
04
Regulatory (AT1) Classification
In the banking sector, these bonds are classified as Additional Tier 1 (AT1) Capital. This helps financial institutions meet mandated capital adequacy requirements.
04
Regulatory (AT1) Classification
In the banking sector, these bonds are classified as Additional Tier 1 (AT1) Capital. This helps financial institutions meet mandated capital adequacy requirements.
05
Subordinated Status
Perpetual bonds typically rank lower in the capital structure. They are subordinated to all other senior debt obligations but hold priority over equity shareholders in a liquidation event.
05
Subordinated Status
Perpetual bonds typically rank lower in the capital structure. They are subordinated to all other senior debt obligations but hold priority over equity shareholders in a liquidation event.
05
Subordinated Status
Perpetual bonds typically rank lower in the capital structure. They are subordinated to all other senior debt obligations but hold priority over equity shareholders in a liquidation event.
05
Subordinated Status
Perpetual bonds typically rank lower in the capital structure. They are subordinated to all other senior debt obligations but hold priority over equity shareholders in a liquidation event.
06
Interest Rate Sensitivity
Due to their indefinite duration, Perpetual Bond prices are highly sensitive to fluctuations in market interest rates. Their prices move inversely to rate changes, making them subject to market volatility.
06
Interest Rate Sensitivity
Due to their indefinite duration, Perpetual Bond prices are highly sensitive to fluctuations in market interest rates. Their prices move inversely to rate changes, making them subject to market volatility.
06
Interest Rate Sensitivity
Due to their indefinite duration, Perpetual Bond prices are highly sensitive to fluctuations in market interest rates. Their prices move inversely to rate changes, making them subject to market volatility.
06
Interest Rate Sensitivity
Due to their indefinite duration, Perpetual Bond prices are highly sensitive to fluctuations in market interest rates. Their prices move inversely to rate changes, making them subject to market volatility.
07
Coupon Deferral Rights
Crucially, issuers often retain the right to defer coupon payments if specific financial health triggers (like a low Capital Adequacy Ratio) are breached.
07
Coupon Deferral Rights
Crucially, issuers often retain the right to defer coupon payments if specific financial health triggers (like a low Capital Adequacy Ratio) are breached.
07
Coupon Deferral Rights
Crucially, issuers often retain the right to defer coupon payments if specific financial health triggers (like a low Capital Adequacy Ratio) are breached.
07
Coupon Deferral Rights
Crucially, issuers often retain the right to defer coupon payments if specific financial health triggers (like a low Capital Adequacy Ratio) are breached.
Benefits That Truly Matter to You
Benefits That Truly Matter to You
Benefits That Truly Matter to You
Benefits That Truly Matter to You
Steady, High Income Stream
They provide regular, predictable interest payments (coupons) indefinitely. This makes them a cornerstone for income-focused portfolios seeking high yields above traditional debt instruments.
Steady, High Income Stream
They provide regular, predictable interest payments (coupons) indefinitely. This makes them a cornerstone for income-focused portfolios seeking high yields above traditional debt instruments.
Steady, High Income Stream
They provide regular, predictable interest payments (coupons) indefinitely. This makes them a cornerstone for income-focused portfolios seeking high yields above traditional debt instruments.
Real-Time Tracking
They provide regular, predictable interest payments (coupons) indefinitely. This makes them a cornerstone for income-focused portfolios seeking high yields above traditional debt instruments.
Superior Coupon Rates
Perpetual bonds inherently offer higher coupon rates compared to conventional bonds of similar credit quality, acting as compensation (a risk premium) for the indefinite tenure and subordination.
Superior Coupon Rates
Perpetual bonds inherently offer higher coupon rates compared to conventional bonds of similar credit quality, acting as compensation (a risk premium) for the indefinite tenure and subordination.
Superior Coupon Rates
Perpetual bonds inherently offer higher coupon rates compared to conventional bonds of similar credit quality, acting as compensation (a risk premium) for the indefinite tenure and subordination.
Effective Portfolio Diversification
Perpetual bonds represent a distinct, hybrid asset class that can effectively diversify fixed-income portfolios beyond G-Secs or plain corporate bonds.
Effective Portfolio Diversification
Perpetual bonds represent a distinct, hybrid asset class that can effectively diversify fixed-income portfolios beyond G-Secs or plain corporate bonds.
Effective Portfolio Diversification
Perpetual bonds represent a distinct, hybrid asset class that can effectively diversify fixed-income portfolios beyond G-Secs or plain corporate bonds.
Effective Portfolio Diversification
Perpetual bonds represent a distinct, hybrid asset class that can effectively diversify fixed-income portfolios beyond G-Secs or plain corporate bonds.
Mitigation of Reinvestment Risk
The lack of a fixed maturity date eliminates the problem of reinvestment risk, meaning investors don't have to scramble to find a new high-yield opportunity when the principal is returned.
Mitigation of Reinvestment Risk
The lack of a fixed maturity date eliminates the problem of reinvestment risk, meaning investors don't have to scramble to find a new high-yield opportunity when the principal is returned.
Mitigation of Reinvestment Risk
The lack of a fixed maturity date eliminates the problem of reinvestment risk, meaning investors don't have to scramble to find a new high-yield opportunity when the principal is returned.
Mitigation of Reinvestment Risk
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High Potential for Capital Appreciation
Due to their extreme duration, perpetual bonds can deliver substantial capital gains (price appreciation) when market interest rates are in a falling trend.
High Potential for Capital Appreciation
Due to their extreme duration, perpetual bonds can deliver substantial capital gains (price appreciation) when market interest rates are in a falling trend.
High Potential for Capital Appreciation
Due to their extreme duration, perpetual bonds can deliver substantial capital gains (price appreciation) when market interest rates are in a falling trend.
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All-in-One View
Keep all your analytics in one place, without jumping between tools.
High Potential for Capital Appreciation
Due to their extreme duration, perpetual bonds can deliver substantial capital gains (price appreciation) when market interest rates are in a falling trend.
High Potential for Capital Appreciation
Due to their extreme duration, perpetual bonds can deliver substantial capital gains (price appreciation) when market interest rates are in a falling trend.
How to calculate the Price of a Perpetual Bond?
How to calculate the Price of a Perpetual Bond?
The price of a perpetual bond is calculated using the Present Value formula for a Perpetuity. Since these bonds pay interest indefinitely, their value is determined by dividing the annual coupon payment by the investor's required rate of return.
The price of a perpetual bond is calculated using the Present Value formula for a Perpetuity. Since these bonds pay interest indefinitely, their value is determined by dividing the annual coupon payment by the investor's required rate of return.
Perpetual Bond Price Formula
Perpetual Bond Price Formula
Price = Annual Coupon Payment / Required Rate of Return
Price = Annual Coupon Payment / Required Rate of Return
The Inverse Relationship in Action (Interest Rate Sensitivity):
-
Scenario 1 (5% Rate): If the bond pays 7,500 annually and the market requires 5% return, the calculated price is 1,50,000.
-
Scenario 1 (5% Rate): If the bond pays 7,500 annually and the market requires 5% return, the calculated price is 1,50,000.
-
Scenario 2 (10% Rate): If market interest rates increase to 10%, the bond's calculated price falls significantly to 75,000 (a 50% drop).
-
Scenario 2 (10% Rate): If market interest rates increase to 10%, the bond's calculated price falls significantly to 75,000 (a 50% drop).
-
Scenario 3 (2.5% Rate): Conversely, if market rates decrease to 2.5%, the price rises to 3,00,000 (a 100% increase).
-
Scenario 3 (2.5% Rate): Conversely, if market rates decrease to 2.5%, the price rises to 3,00,000 (a 100% increase).
This severe movement demonstrates why Perpetual Bonds are significantly more sensitive to interest rate changes than conventional, finite-maturity bonds.
This severe movement demonstrates why Perpetual Bonds are significantly more sensitive to interest rate changes than conventional, finite-maturity bonds.
Calculation
Calculation
Calculation
How to calculate the Price of a Perpetual Bond?
How to calculate the Price of a Perpetual Bond?
The price of a perpetual bond is calculated using the Present Value formula for a Perpetuity. Since these bonds pay interest indefinitely, their value is determined by dividing the annual coupon payment by the investor's required rate of return.
The price of a perpetual bond is calculated using the Present Value formula for a Perpetuity. Since these bonds pay interest indefinitely, their value is determined by dividing the annual coupon payment by the investor's required rate of return.
🟢 Pros
High, Consistent Income
High, Consistent Income
Superior coupon rates (8%+) compared to FDs.
Superior coupon rates (8%+) compared to FDs.
Superior coupon rates (8%+) compared to FDs.
Listed & Tradeable
Listed & Tradeable
Can be sold on exchanges to access capital.
Can be sold on exchanges to access capital.
Can be sold on exchanges to access capital.
Issuer Call Upside
Issuer Call Upside
Potential for principal return if the issuer calls the bond.
Potential for principal return if the issuer calls the bond.
Potential for principal return if the issuer calls the bond.
🔴 Cons
No Guaranteed Principal Repayment
No Guaranteed Principal Repayment
No Guaranteed Principal Repayment
High risk of Principal Write-Down (especially AT1s).
High risk of Principal Write-Down (especially AT1s).
High risk of Principal Write-Down (especially AT1s).
Interest Payment Risk
Interest Payment Risk
Coupon payments can be deferred if issuer is distressed.
Coupon payments can be deferred if issuer is distressed.
Extreme Interest Rate Sensitivity
Extreme Interest Rate Sensitivity
Market price is highly volatile to changes in market rates.
Market price is highly volatile to changes in market rates.
Market price is highly volatile to changes in market rates.
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View your income, expense and spending across all your different accounts.
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View your income, expense and spending across all your different accounts.
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Break down your spending into clear, simple categories and time periods.
Track where your money goes
Break down your spending into clear, simple categories and time periods.
Track where your money goes
Break down your spending into clear, simple categories and time periods.
Track where your money goes
Break down your spending into clear, simple categories and time periods.
Is a perpetual bond considered debt or equity?
It is a hybrid instrument. It is legally debt (it pays fixed interest) but behaves like equity because it has no maturity date and carries a high risk of capital write-down, allowing it to absorb losses like equity.
What is the minimum investment for AT1 perpetual bonds in India?
For direct retail investment, SEBI regulations stipulate a minimum lot size of ₹10 lakhs for certain AT1 bonds. BondScanner provides compliant access and education on these instruments.
What happens if the issuer does not exercise the call option?
The bond continues to exist, and you will continue to receive the interest payments. However, since the principal is not returned, the market price of the bond may drop, and your capital remains locked in indefinitely.
How is the interest (coupon) from perpetual bonds taxed in India?
The regular coupon income is generally taxed as "Income from Other Sources" at your applicable individual income tax slab rate. There is no TDS deduction if the interest amount is below ₹5,000 annually.
What is the difference between Coupon Rate and Yield-to-Call (YTC)?
The Coupon Rate is the fixed interest rate the issuer pays on the face value. Yield-to-Call (YTC) is the actual rate of return you can expect if you buy the bond at its current market price and hold it until the issuer exercises the first call option. YTC is the more relevant metric for investors.
Is it easy to sell a perpetual bond before the call date (Liquidity)?
Perpetual bonds are typically listed on exchanges (BSE/NSE), making them tradeable. However, liquidity can be low compared to highly-traded government securities, meaning you might struggle to sell quickly or get a fair price during market stress.
How do credit ratings affect my investment in perpetual bonds?
Credit ratings are extremely important. A higher rating (like AA+) indicates a lower risk of the issuer defaulting, skipping interest, or having the bond written down. Only invest in perpetual bonds from high-rated, financially strong issuers.
What does the Yes Bank AT1 bond write-down mean for investors?
The Yes Bank incident proved that the Principal Write-Down risk is real. When the RBI reconstructed the bank, the outstanding AT1 bonds were permanently written off, resulting in a total loss of capital for those bondholders. It serves as a critical warning about the subordination risk of AT1 instruments.
Is a perpetual bond considered debt or equity?
It is a hybrid instrument. It is legally debt (it pays fixed interest) but behaves like equity because it has no maturity date and carries a high risk of capital write-down, allowing it to absorb losses like equity.
What is the minimum investment for AT1 perpetual bonds in India?
For direct retail investment, SEBI regulations stipulate a minimum lot size of ₹10 lakhs for certain AT1 bonds. BondScanner provides compliant access and education on these instruments.
What happens if the issuer does not exercise the call option?
The bond continues to exist, and you will continue to receive the interest payments. However, since the principal is not returned, the market price of the bond may drop, and your capital remains locked in indefinitely.
How is the interest (coupon) from perpetual bonds taxed in India?
The regular coupon income is generally taxed as "Income from Other Sources" at your applicable individual income tax slab rate. There is no TDS deduction if the interest amount is below ₹5,000 annually.
What is the difference between Coupon Rate and Yield-to-Call (YTC)?
The Coupon Rate is the fixed interest rate the issuer pays on the face value. Yield-to-Call (YTC) is the actual rate of return you can expect if you buy the bond at its current market price and hold it until the issuer exercises the first call option. YTC is the more relevant metric for investors.
Is it easy to sell a perpetual bond before the call date (Liquidity)?
Perpetual bonds are typically listed on exchanges (BSE/NSE), making them tradeable. However, liquidity can be low compared to highly-traded government securities, meaning you might struggle to sell quickly or get a fair price during market stress.
How do credit ratings affect my investment in perpetual bonds?
Credit ratings are extremely important. A higher rating (like AA+) indicates a lower risk of the issuer defaulting, skipping interest, or having the bond written down. Only invest in perpetual bonds from high-rated, financially strong issuers.
What does the Yes Bank AT1 bond write-down mean for investors?
The Yes Bank incident proved that the Principal Write-Down risk is real. When the RBI reconstructed the bank, the outstanding AT1 bonds were permanently written off, resulting in a total loss of capital for those bondholders. It serves as a critical warning about the subordination risk of AT1 instruments.
Is a perpetual bond considered debt or equity?
It is a hybrid instrument. It is legally debt (it pays fixed interest) but behaves like equity because it has no maturity date and carries a high risk of capital write-down, allowing it to absorb losses like equity.
What is the minimum investment for AT1 perpetual bonds in India?
For direct retail investment, SEBI regulations stipulate a minimum lot size of ₹10 lakhs for certain AT1 bonds. BondScanner provides compliant access and education on these instruments.
What happens if the issuer does not exercise the call option?
The bond continues to exist, and you will continue to receive the interest payments. However, since the principal is not returned, the market price of the bond may drop, and your capital remains locked in indefinitely.
How is the interest (coupon) from perpetual bonds taxed in India?
The regular coupon income is generally taxed as "Income from Other Sources" at your applicable individual income tax slab rate. There is no TDS deduction if the interest amount is below ₹5,000 annually.
What is the difference between Coupon Rate and Yield-to-Call (YTC)?
The Coupon Rate is the fixed interest rate the issuer pays on the face value. Yield-to-Call (YTC) is the actual rate of return you can expect if you buy the bond at its current market price and hold it until the issuer exercises the first call option. YTC is the more relevant metric for investors.
Is it easy to sell a perpetual bond before the call date (Liquidity)?
Perpetual bonds are typically listed on exchanges (BSE/NSE), making them tradeable. However, liquidity can be low compared to highly-traded government securities, meaning you might struggle to sell quickly or get a fair price during market stress.
How do credit ratings affect my investment in perpetual bonds?
Credit ratings are extremely important. A higher rating (like AA+) indicates a lower risk of the issuer defaulting, skipping interest, or having the bond written down. Only invest in perpetual bonds from high-rated, financially strong issuers.
What does the Yes Bank AT1 bond write-down mean for investors?
The Yes Bank incident proved that the Principal Write-Down risk is real. When the RBI reconstructed the bank, the outstanding AT1 bonds were permanently written off, resulting in a total loss of capital for those bondholders. It serves as a critical warning about the subordination risk of AT1 instruments.
Is a perpetual bond considered debt or equity?
It is a hybrid instrument. It is legally debt (it pays fixed interest) but behaves like equity because it has no maturity date and carries a high risk of capital write-down, allowing it to absorb losses like equity.
What is the minimum investment for AT1 perpetual bonds in India?
For direct retail investment, SEBI regulations stipulate a minimum lot size of ₹10 lakhs for certain AT1 bonds. BondScanner provides compliant access and education on these instruments.
What happens if the issuer does not exercise the call option?
The bond continues to exist, and you will continue to receive the interest payments. However, since the principal is not returned, the market price of the bond may drop, and your capital remains locked in indefinitely.
How is the interest (coupon) from perpetual bonds taxed in India?
The regular coupon income is generally taxed as "Income from Other Sources" at your applicable individual income tax slab rate. There is no TDS deduction if the interest amount is below ₹5,000 annually.
What is the difference between Coupon Rate and Yield-to-Call (YTC)?
The Coupon Rate is the fixed interest rate the issuer pays on the face value. Yield-to-Call (YTC) is the actual rate of return you can expect if you buy the bond at its current market price and hold it until the issuer exercises the first call option. YTC is the more relevant metric for investors.
Is it easy to sell a perpetual bond before the call date (Liquidity)?
Perpetual bonds are typically listed on exchanges (BSE/NSE), making them tradeable. However, liquidity can be low compared to highly-traded government securities, meaning you might struggle to sell quickly or get a fair price during market stress.
How do credit ratings affect my investment in perpetual bonds?
Credit ratings are extremely important. A higher rating (like AA+) indicates a lower risk of the issuer defaulting, skipping interest, or having the bond written down. Only invest in perpetual bonds from high-rated, financially strong issuers.
What does the Yes Bank AT1 bond write-down mean for investors?
The Yes Bank incident proved that the Principal Write-Down risk is real. When the RBI reconstructed the bank, the outstanding AT1 bonds were permanently written off, resulting in a total loss of capital for those bondholders. It serves as a critical warning about the subordination risk of AT1 instruments.