BUSINESS

RBI norms for non-SLR investments

MUMBAI NOV. 13. The Reserve Bank of India (RBI) has asked banks to limit their investments in unlisted corporate debt securities to 20 per cent of total investments in such assets. There was no such cap before this notification. Out of this half must be investments in select asset-backed securities. The prudential guidelines on banks' investments in non-SLR investments issued by the RBI on Wednesday come into force with immediate effect.

The norms will apply to investments both in the primary market as well as the secondary market.

The central bank, in a notification to all scheduled commercial banks, has stated that banks should invest in corporate debt securities that have a maturity of at least a year at the time of issuance, unless they are money market instruments. It has further stated that banks' investments in listed bonds must be limited to those that have an investment grade rating from a credit rating agency registered with the Securities and Exchange Board of India (SEBI).

Banks also should ensure that investments are made only in listed debt securitiesof companies which comply with the requirements of SEBI. The RBI has asked banks to further ensure that their investment policies are approved by the board of directors. Banks should also put in place proper risk management systems in respect of non-SLR investment.