HDFC Bank on Tuesday said its board will consider a proposal to raise Rs 50,000 crore through bonds in the next 12 months on a private placement basis.

The board of the country’s largest private-sector bank will meet on Saturday to consider the proposal. Its directors will also then consider the results for the quarter ended March 31, 2023.

“The bank proposes to raise funds by issuing perpetual debt instruments (partof additional Tier I capital), Tier II capital bonds and long-term bonds (financing of infrastructure and affordable housing) up to a total amount of Rs 50,000 crore over the period of the next 12 months through private placement mode.

The board of directors would consider this proposal at its ensuing board meeting to be held on April 15, 2023,” the lender said in a regulatory filing on Tuesday.

While the Reserve Bank of India (RBI) has raised the policy repo rate by 250 basis points since May last year, the banking system is continuing to witness good demand for credit, though it has softened in some pockets that are sensitive to rising rates.

With liquidity in the system remaining tight and deposit growth lagging the demand for credit, this has seen them raising resources through AT1 bonds and other instruments over the past few months.

Last month, the State Bank of India (SBI) raised Rs 3,717 crore of AT1 bonds at a coupon rate of 8.25 per cent with a 10-year call option. Before this, the state-owned lender had mobilised Rs 4,544 crore in February

While AT1 bonds are a perpetual debt instrument used by banks to augment their core capital, issuerscan redeem them through a call option after a specified period.

The bonds hogged the limelight when Credit Suisse was rescued by its larger rival UBS. As much as $16 billion AT1 bonds off Credit Suisse were written off as part of the deal.

In India, Rs 8,300 crore of AT1 bonds of Yes Bank were also written off in 2020, and the dispute is now pending with the Supreme Court.

RBI governor Shaktikanta Das has defended the AT1 bonds. Speaking to the press after the monetary policyannouncement last week, he said the AT1 bonds ecosystem remains quite robust and stable.

“And it is a part of the Basel III regulations and we have adopted that in our country as well... When banks sell such bonds, the terms and conditions are given out clearly and investors, who are mostly ultra-high net worth individuals, are expected to read the terms and conditions,’’ he said.