Glossarytaught in M5.01
Tier 1 capital
Also called Tier I capital, tier 1 capital ratio.
The going-concern capital of a bank: core equity plus additional instruments that absorb losses while the bank continues to operate.
Core equity of ₹5,400 crore plus ₹600 crore of additional instruments gives a bank ₹6,000 crore of tier 1 capital.
That additional layer is perpetual, and its coupons can be cancelled or its principal written down. Several investors discovered the feature was real.
Read the core layer for safety and the total for regulatory compliance. They answer different questions.