RBI allows banks to invest in unrated infra bonds within 10% cap
No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2007-08/205 · issued 06 Dec 2007 · ~2 min read
Quick answerRBI now permits banks to invest in unrated bonds of infrastructure companies, but only within the existing 10% ceiling for unlisted non-SLR securities. This aims to boost credit flow to infrastructure without relaxing overall unlisted investment limits.
The rule, in the simplest words
Banks can now buy unrated bonds issued by infrastructure companies (bonds that have not been given a credit rating).
These bonds are counted as unlisted non‑SLR securities but must stay within the 10% limit of all unlisted non‑SLR holdings as of March 31 of the previous year.
The 10% ceiling is unchanged; banks still cannot exceed it for any unlisted non‑SLR securities.
The change is meant to help banks fund long‑term infrastructure projects by giving them more investment options.
Banks should review their current portfolio, update policies to allow these bonds, perform careful due‑diligence on each bond, and monitor the March 31 reference date to stay compliant.
How it plays out — a real example
Rohan, a treasury officer at a Mumbai bank, reviews his unlisted bond holdings on March 31 and finds he has 8% of his portfolio in such securities. He decides to purchase an unrated bond from a highway‑construction company, ensuring the new purchase keeps the total under the 10% limit. This allows the bank to support a major infrastructure project while staying within RBI rules.
What changed
Earlier, banks were barred from investing in unrated non-SLR securities. This circular carves out an exception: unrated bonds issued by companies engaged in infrastructure activities are now allowed, provided they fall within the 10% limit on total investment in unlisted non-SLR securities as of March 31 of the previous year.
What it means for you
Banks can now tap into unrated infrastructure bonds to support long-term projects, but the overall unlisted non-SLR exposure remains capped. This gives lenders more flexibility to finance infrastructure without breaching prudential norms. However, credit risk assessment becomes critical since these bonds are unrated.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Review your current unlisted non-SLR investment portfolio to ensure headroom under the 10% ceiling.
Update internal investment policies to explicitly allow unrated infrastructure bonds within the cap.
Strengthen due diligence for unrated infrastructure bonds, focusing on project viability and issuer creditworthiness.
Monitor compliance with the March 31 reference date for calculating the 10% limit.
Who it affects
All scheduled commercial banks (excluding Local Area Banks and Regional Rural Banks), Infrastructure companies seeking bond financing, Bank treasury and credit risk teams
❓ Common questions
Does this circular remove the ban on unrated non-SLR securities entirely?
No. The ban on unrated non-SLR securities remains, except for bonds of companies engaged in infrastructure activities. Those are now permitted, but only within the existing 10% ceiling for unlisted non-SLR securities.
How is the 10% limit calculated for unlisted non-SLR securities?
The limit is 10% of the bank's total investment in non-SLR securities as on March 31 of the previous financial year. Unrated infrastructure bonds count toward this ceiling.
Are there any additional reporting or approval requirements for these investments?
The circular does not specify new reporting or approval steps beyond existing norms. However, banks must ensure compliance with the overall prudential framework for investment portfolio classification and valuation.
📜 Read the original circular — full text as issued by RBI
The guidelines have been repealed. Please refer to the Reserve Bank of India (Classification, Valuation and Operation of Investment Portfolio of Commercial Banks) Directions, 2021 .
RBI/2007-08/205
DBOD.No.BP.BC.56/21.04.141/2007-08
December 06,2007
The Chairman/Chief Executive Officer
All Scheduled Commercial Banks
(excluding Local Area Banks and Regional Rural Banks)
Dear Sir,
Prudential Norms for Classification, valuation and
operation of investment portfolio by banks
Please refer to our Master Circular DBOD.No.BP.BC.15/21.04.141/2007-08 dated July 2, 2007 on the captioned subject.
2. As per para 1.2.14 of the circular, banks must not invest in unrated non-SLR securities. Further, as per para 1.2.17 banks' investment in unlisted non-SLR securities should not exceed 10 per cent of its total investment in non-SLR securities as on March 31 of the previous year.
3. In order to encourage the banks to increase the flow of credit to infrastructure sector, it has been decided that the banks may invest in unrated bonds of companies engaged in infrastructure activities within the ceiling of 10% for unlisted non-SLR securities.
Yours faithfully,
(Prashant Saran)
Chief General Manager-In-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-08/205 · issued 06 Dec 2007. The plain-English explanation above is BankPulse’s own independent summary.
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=3967&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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