RBI, Reserve Bank of India, primary dealers, TIER III bonds, short-term fund raising, government securities, subordinated debt

New Delhi: The Reserve Bank of India (RBI) asked primary dealers to phase out Tier III bonds, a short-term fund raising tool made available to such companies for meeting risk, reports PTI.

Primary dealers (PDs) are entities which deal in government securities.

It has been decided to phase out short-term subordinated debt (Tier-III bonds) as an eligible source of capital for standalone primary dealers (PDs), it said.

Tier-III capital was issued by standalone PDs to meet solely the market risk capital charge.

Accordingly, it said PDs should not raise fresh funds through issuance of Tier-III bonds with effect from 1 July 2012.

However, PDs which are already having Tier-III capital may continue to recognise it as an eligible capital till the maturity of such subordinated debts, it added.