Module: | MODULE B: RISK MANAGEMENT
Q322: Based on the RBI Master Direction update effective October 1, 2025, calculate the maximum limit up to which a bank can include Perpetual Debt Instruments (PDIs) issued in foreign currency as eligible Additional Tier 1 (AT1) capital, given its Total Risk-Weighted Assets (RWA) are ₹ 2,00,000 Crore.
✅ Correct Answer: A
The correct answer is A (₹ 3,000 Crore). According to the dynamic regulatory updates from the RBI effective October 1, 2025, there is a strict cap on the inclusion of foreign currency-denominated Perpetual Debt Instruments (PDIs) in a bank's capital structure.
To mitigate external exchange and funding risks, the RBI mandated that such PDIs issued overseas (or rupee-denominated bonds settled in foreign currency) can only be recognized as eligible Additional Tier 1 (AT1) capital up to a maximum limit of 1.5% of the bank's Total Risk-Weighted Assets (RWA). Given the Total RWA is ₹ 2,00,000 Crore, the calculation is straight-forward: 1.5% of ₹ 2,00,000 Crore = ₹ 3,000 Crore.
Any issuance exceeding this ₹ 3,000 Crore cap will not qualify as AT1 capital for regulatory purposes.
Options B, C, and D reflect incorrect percentage applications.
To mitigate external exchange and funding risks, the RBI mandated that such PDIs issued overseas (or rupee-denominated bonds settled in foreign currency) can only be recognized as eligible Additional Tier 1 (AT1) capital up to a maximum limit of 1.5% of the bank's Total Risk-Weighted Assets (RWA). Given the Total RWA is ₹ 2,00,000 Crore, the calculation is straight-forward: 1.5% of ₹ 2,00,000 Crore = ₹ 3,000 Crore.
Any issuance exceeding this ₹ 3,000 Crore cap will not qualify as AT1 capital for regulatory purposes.
Options B, C, and D reflect incorrect percentage applications.