Frequently Asked Questions

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Bond Terminologies

Explain Debt types- Tier I & Tier II.


Tier I: Tier I Bonds also called Perpetual Bonds. As per BASEL III norms, theoretically, these bonds can be carried on till infinity. In reality, they come with a call option after five years or ten years from the date of issuance. It is a popular option among Banks to raise capital to meet their core capital (Tier1 capital) needs as instructed by RBI.

Tier II: As per BASEL III norms, Banks raise money via Tier II bonds to meet regulatory norms around capital adequacy. Tier II bonds are subordinated debt and hence not first to be paid during the liquidation process. Tier II bonds are senior to Tier I Bonds.