The Hindu Business Line : Keep off unrated non-SLR papers, banks told

THE Reserve Bank of India has told banks that, henceforth, they may not invest in unrated non-SLR securities, and non-SLR securities of original maturity of less than one year, other than commercial papers and certificates of deposits.

The RBI has said that not only must banks undertake usual due diligence in respect of investments in non-SLR securities, but also ensure that they do not finance credit facilities for certain purposes that they have been prohibited from doing so, by way of funds raised through non-SLR securities. As per the latest prudential guidelines, for bank's investment in non-SLR securities, RBI has said thatwhile making fresh investments in non-SLR debt securities, banks should ensure that such investment are made only in listed debt securities of companies which comply with the Securities and Exchange Board of India (SEBI) guidelines stipulating full disclosures.

Banks' investment in unlisted non-SLR securities should not exceed 10 per cent of the total investment in non-SLR securities as on March 31 of the previous year.

The unlisted non-SLR securities in which banks may invest up to the limits specified above should comply with the disclosure requirements as prescribed by SEBI for listed companies, the apex bank has said.

RBI has said that banks' investment in unlisted non-SLR securities may exceed the limit of 10 per cent, by an additional 10 per cent, provided the investment is insecurities issued by special purpose vehicles (SPVs) for mortgage-backed securities (MBS), securitisation papers issued for infrastructure projects, and bonds, debentures, security receipts, pass through certificates issued by securitisation companies and reconstruction companies set up under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 and registered with the RBI.

Banks which have exposure to investments in unlisted non-SLR securities in excess of the prudential limit, prescribed as on March 31, 2003 should not make any fresh investment till they ensure compliance with the above prudential limit.

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