What changed
RBI issued a circular on March 21, 2006, detailing irregularities observed by NABARD in the half-yearly review of investment portfolios of StCBs/DCCBs. The circular lists eight specific deficiencies, including failure to conduct half-yearly reviews, lack of investment policies, unauthorized deposits with PSUs/companies/UCBs/NBFCs, and violations of non-SLR investment limits. It mandates corrective actions such as framing time-bound retirement plans for excess investments and submitting quarterly progress reports.
What it means for you
StCBs/DCCBs face heightened regulatory scrutiny on investment compliance. Banks must immediately address gaps in portfolio reviews, policy frameworks, and broker panels to avoid penalties. Unauthorized deposits and non-SLR violations require urgent rectification with RBI/NABARD approval, impacting liquidity management and investment strategies.
What you must do
- Conduct half-yearly investment portfolio reviews and submit 'NIL' reports if no investments are made.
- Frame or update investment policy and adopt board resolution if not investing in government securities/PSU bonds.
- Prepare an approved panel of brokers and ensure all transactions use only panel brokers.
- Retire unauthorized deposits with PSUs/companies/UCBs/NBFCs via a time-bound plan approved by RBI/NABARD and submit quarterly progress reports.
- Submit quarterly certificate of securities held to RBI within one month of quarter-end and ensure concurrent audit of SLR portfolio.
Who it affects
State Co-operative Banks (StCBs), District Central Co-operative Banks (DCCBs), NABARD, RBI regional offices
What are the key non-SLR investment limits for StCBs/DCCBs?
Total non-SLR investments in PSU bonds and bonds/equity of All-India Financial Institutions cannot exceed 10% of total deposits as of March 31 of the previous year, with a sub-ceiling of 5% for PSU bonds. Investments in mutual funds or non-PSU bonds are not allowed.
What should a bank do if it does not invest in government securities or PSU bonds?
The bank must adopt a board resolution to that effect and forward it to the Regional Office of NABARD and RBI. It must also submit a 'NIL' report for the half-yearly review within one month from the end of the half-year.
What is the deadline for submitting the quarterly certificate of securities held?
The certificate must be submitted to the Regional Office of RBI within one month from the end of each quarter.