Tier II Bonds

Recently, several banks are actively issuing Tier II bonds to bolster their capital adequacy ratios (CAR) as required under Basel III norms, with total issuances expected to reach Rs 25,000 crore in FY 2025–26.

  • Tier II bonds are subordinated debt instruments banks issue to boost capital and support operations.
  • They count as Tier II (supplementary) capital under Basel-III and help improve the Capital Adequacy Ratio (CAR).
  • Tier II Bonds are different from Tier I Bonds as they strengthen a bank’s supplementary capital, whereas Tier I (AT1) Bonds strengthen its core capital (equity and retained earnings).
  • They are typically long-term ....
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