Several months after the YES Bank AT-1 (Additional Tier-1) bond fiasco, market regulator SEBI has made an attempt to revive the debt instruments. On Tuesday, SEBI said that AT-1 issuance will be restricted only to qualified institutional buyers (QIBs).

SEBI has said that the minimum lot size of the bonds which a single player can subscribe to will be ₹1 crore.

AT-1 bonds are complex hybrid instruments, ideally meant for institutions and smart investors who can decipher their terms and assess if their higher rates compensate for their higher risks. But in India, these bonds seem to have been sold to a fair number of retail investors as fixed deposit or NCD (non-convertible debenture) substitutes.

The YES Bank AT-1 bonds were subscribed by retail investors who later lost huge money as bonds worth ₹8,500 crore were written off by the lender. AT-1 bonds are quasi-equity instruments which are meant to be or deemed equity, but in the YES Bank case, were structured as bonds.

The promise of equity is giving money to companies to grow and seeking no dividend in return. But the capital is deemed to be secured with some interest on it.

SEBI has now said that these bonds can be issued only on exchange platforms. Further, the issuers will have to come out with disclosure prospectus and make the risk factors known during the issue. SEBI has said that details of all the conditions upon which the call option will be exercised by AT-1 instruments should be mentioned in the Information/Private Placement Memorandum.

AT-1 are a type of unsecured, perpetual bonds that banks issue to shore up their core capital base to meet the Basel-III norms.

If the RBI feels that a bank is tottering on the brink and needs a rescue, it can simply ask the bank to cancel its outstanding AT-1 bonds without consulting its investors.

This is what has happened to YES Bank’s AT-1 bond-holders.