Contingent convertible bonds in Indian economic scenario

Abstract

The report analyses CoCos at a fundamental level and tries to understand where India stands in relation to these issues. What do the current issues from Indian Banks tell us about these bonds and India’s standing in the future of the CoCo market? The report says that according to the analysis, the primary use of the CoCo bonds has been to recapitalize the banks rather than transfer subordinated debts to security that would help in stress situations or tail events. We further conclude that given the risks associated with CoCos and the Bonds market in India, it would be safe to assume that CoCos do not represent a sound strategy to fight tail risk events. Further, the report has analyzed the factors that fundamentally affect the CDS spread of the different Bonds issuances.