RBI makes bond norms prospective

The final guidelines on non-statutory liquidity (SLR) ratio investment, issued today, retained the 20 per cent cap on banks' investment in unlisted bonds.

But the limit has been bifurcated: there will now be a 10 per cent limit for banks' investment in unlisted bonds and another 10 per cent limit on their investment in securities issued by special purpose vehicles for mortgage- backed securities, securitisation paper issued for infrastructure projects, and bonds, debentures, security receipts or pass- through certificates.

Banks have been further advised not to make any fresh investment in such securities till they ensure compliance with this prudential limit.

The debt securities will carry a credit rating of not less than investment grade from a credit rating agency registered with the Securities and Exchange Board of India.

To help create a central database on paper placed privately, a copy of all offer documents should be filed with the Credit Information Bureau (India) by the investing banks, the RBI said.

The final guidelines cover banks' investment in non-SLR securities issued by corporates, banks, financial institutions, state and central government sponsored institutions and special purpose vehicles, among others, and will apply to investments both in the primary and secondary markets.

The RBI told banks that in addition to complying with the Sebi guidelines, they should ensure that all spot transactions in listed and unlisted debt securities were reported on the negotiated delivery system and settled through the Clearing Corporation of India from a date to be notified later.