To strengthen their capital base, banks can raise perpetual debt instruments, which can be considered for calculating a bank's additional tier-1 capital, or debt capital instrument that can go into calculating a bank's tier-2 capital. These bonds will be issued according to the Basel-III norms and therefore, will have loss absorption clause. Under this clause, a bank can choose not to honour the coupon payment in case of financial stress. For financing infrastructure and affordable housing, the banks can issue long-term bonds, which doesn't have the loss absorption clause.
