RBI Tightens Norms For Investment In Non-SLR Securities

Mumbai, Nov 13: | Updated: Nov 14 2003, 05:30am hrs
Tightening its norms on investments in non-statutory liquidity ratio (non-SLR) securities, the Reserve Bank of India (RBI) has barred banks from investing in non-SLR instruments of original maturity of less than one year, other than commercial paper and certificates of deposits covered by RBI guidelines.

Aimed at containing risks arising out of non-SLR investment portfolio, in particular through private placement, RBI in its guidelines to banks said they must also not invest in unrated non-SLR securities.

Banks should undertake due diligence in respect to investments in non-SLR securities. Present norms preclude them from extending credit facilities for certain purposes and banks should ensure that such activities are not financed by way of funds raised through non-SLR securities, RBI said.

RBI said while making fresh investments in non-SLR debt securities, banks should ensure that investment were made only in listed debt securities of companies which comply with the requirements of Sebi circular of September 30.

The debt securities should carry a credit rating of not less than investment grade from a Sebi registered credit rating agency, it added.

On fixing of prudential limits, the apex bank said banks investment in unlisted non-SLR securities should not exceed 10 per cent of its total investment in such instruments as on March 31, of the previous year.