The Reserve Bank today asked primary dealers to phase out Tier III bonds, a short-term fund raising tool made available to such companies for meeting risk.
Primary dealers (PDs) are entities which deals 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 July 1, 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.
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