Perpetual Bond

Perpetual Bonds (also called perps) provide regular interest (coupon) payments forever, but the principal is typically not returned unless the issuer chooses to redeem it.

They are often issued by banks and financial institutions as part of regulatory capital, especially under Basel norms implemented by the Reserve Bank of India.

Key Features of Perpetual Bonds

• No maturity date
• Fixed or floating interest payments
• Callable (issuer may redeem after certain period)
• Higher interest rate due to higher risk

Why Perpetual Bonds Matter

• Helps banks strengthen capital
• Provides higher yield to investors
• Used in long-term financing

Risks & Considerations

• Interest payments may be skipped in stress situations
• No guaranteed principal repayment
• Sensitive to interest rate changes

Perpetual Bond vs Regular Bond

• Perpetual Bond: No maturity
• Regular Bond: Fixed maturity date

"A bank issues a bond paying 8% interest annually forever without a maturity date—this is a perpetual bond."