MUMBAI, Aug 13 Reuters India easing norms for how mutual funds value perpetual bonds will prompt banks to resume issuing the notes and revive the market, bank officials and investors said.

The Securities and Exchange Board of India SEBI, which had tightened valuation norms in March 2021 after Yes Bank completely wrote off its perpetual bonds, said last week that mutual funds can use the call option maturity to price the notes.

Additional tier I perpetual bonds are debt instruments that have no predefined maturity date, and mature when issuing bank exercises the call option.

Banks had slowed issuing the notes as the 2021 valuation norm change hurt appetite. In January this year, they had sought a relaxation.

Now, the country39;s largest lender State Bank of India and its staterun peers Canara Bank, Bank of Baroda and Punjab National Bank are likely to raise around 150 billion rupees about 1.8 billion through perpetual bonds by September end, bankers said.

The lenders did not immediately respond to Reuters39; emails seeking comment.

We see relatively better interest from mutual funds after the revised norms, Mahendra Kumar Jajoo, fixed income CIO at Mirae Asset Investment Managers India, said.

No bank has issued perpetual bonds so far this fiscal year. Funding raising through the notes dropped to 175 billion rupees in fiscal year 2024 from 344 billion rupees in the previous year, data compiled by Reuters showed.

…The change in valuation recognises the market…