Diminished capital, formerly (3)

I believe the answer is:

rio

I'm a little stuck... Click here to teach me more about this clue!

'diminished capital' is the definition.
'rio' can be an answer for 'capital' (I've seen this before). I'm not certain of the 'diminished' bit.

I don't understand the rest of the clue.

Can you help me to learn more?

(Other definitions for rio that I've seen before include "old capital" , "Port, -- de Janeiro" , "A Mexican river - like Grande" , "(Golfer) in the sand" , "The ... Grande borders Texas and Mexico" .)

I've seen this clue in the Evening Standard.

Want a hint initially instead of a full solution? Install my app