RBI/2010-11/349
DBOD.BP.BC.No.72/21.04.141/2010-11
December 31, 2010
The Chairmen / Chief Executives of
All Commercial Banks
(excluding Regional Rural Banks)
Dear Sir,
Investment in Non-SLR Securities- Non-Convertible
Debentures (NCDs) of maturity up to one year
Please refer to circular DBOD.BP.BC.44/21.04.141/2003-04 dated November 12,
2003 on Prudential Guidelines on Banks’ Investment in Non-SLR Securities which,
inter alia, advised the banks that they should not invest in Non-SLR securities
of original maturity of less than one-year, other than Commercial Paper and
Certificates of Deposits which are covered under RBI guidelines.
- We also draw your attention to circulars
IDMD.DOD.09/11.01.01(A)/2009-10 dated June 23, 2010 and
IDMD.PCD.23/ED(HRK)-2010 dated December 6, 2010 on Issuance of
Non-Convertible Debentures (Reserve Bank) Directions, 2010 which, inter
alia, allowed banks to invest in NCDs with original or initial maturity up
to one year issued by corporates [including Non-Banking Financial Companies
(NBFCs)] subject to the approval of the statutes governing them and after
obtaining regulatory approval.
- In this connection, we advise that henceforth banks are permitted to
invest in NCDs with original or initial maturity up to one year issued by
corporates (including NBFCs). However, while investing in such instruments
banks should be guided by the extant prudential guidelines in force, ensure
that the issuer has disclosed the purpose for which the NCDs are being
issued in the disclosure document and such purposes are eligible for bank
finance (refer to para 5 and 7 of Master Circular
DBOD.BP.BC.No.5/21.04.172/2010-11 dated July 1, 2010 on Bank Finance to
Non-Banking Financial Companies).
- We also advise that the guidelines on listing and rating
requirements pertaining to non-SLR securities issued vide circular No.
DBOD.BP.BC.44/21.04.141/2003-04 dated November 12, 2003 and
DBOD.No.BP.BC.53/21.04.141/2003-04 dated December 10, 2003 would not be
applicable to banks’ investments in NCDs.
Yours faithfully,
(B. Mahapatra)
Chief General Manager-in-Charge