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RBI Temporarily Allows Loans Against CDs Held by Mutual Funds

No longer current — withdrawn, no replacement on file yet

Source: Reserve Bank of India · RBI/2008-09/223 · issued 14 Oct 2008 · ~1 min read

Quick answerRBI has temporarily allowed banks to lend against Certificates of Deposit (CDs) held by mutual funds and to buy back their own CDs from mutual funds, for 15 days from October 14, 2008. This relaxes earlier restrictions.

What changed

Previously, banks and financial institutions were prohibited from granting loans against CDs and from buying back their own CDs before maturity. This circular temporarily lifts those restrictions for 15 days, but only for CDs held by mutual funds.

What it means for you

Banks can now provide liquidity to mutual funds by lending against their CD holdings or by repurchasing their own CDs from them, within a 15-day window. Loans to equity-oriented mutual funds will count toward banks' capital market exposure limits, and banks must comply with SEBI Mutual Funds Regulations.

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

Identify mutual fund clients holding your bank's CDs and assess their liquidity needs within the 15-day window.
Ensure any loan against CDs or buy-back complies with SEBI (Mutual Funds) Regulations, 1996, paragraph 44(2).
Classify loans to equity-oriented mutual funds as part of capital market exposure for regulatory reporting.
Monitor the 15-day validity period ending October 29, 2008, and revert to normal restrictions after that.

Who it affects

All scheduled commercial banks (excluding RRBs and LABs), All-India Term Lending and Refinancing Institutions, Mutual funds holding Certificates of Deposit

❓ Common questions

Regulatory timeline

Decoded by BankPulse 2026-06-19 12:00 IST
repealed_by — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)
Status change: withdrawn 05 Aug 2026, 04:00 IST

Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).

How long is this relaxation valid?

The relaxation is valid for 15 days from the date of the circular, i.e., from October 14, 2008 to October 29, 2008.

Does this apply to all CDs or only those held by mutual funds?

It applies only to CDs held by mutual funds. The restrictions remain for other holders.

Will loans to mutual funds against CDs affect capital market exposure?

Yes, if the mutual fund is equity-oriented, such loans will be counted as part of the bank's capital market exposure.

📜 This document’s life story (1 recorded event, each backed by RBI’s own words)

Repealed by RBI/2025-26/100 — Consolidation of Regulations — Withdrawal of circulars (28 Nov 2025)

RBI’s words: “Official withdrawal register entry #2080: DBOD.BP.BC.No.59/21.03.009 — "Loans to Mutual Funds Against and Buy Back of Certificates of Deposits (CDs)" dated October 14, 2008”

📜 Read the original circular — full text as issued by RBI

RBI/2008-09/223
 DBOD.BP.BC.No.59/21.03.009/2008-09
 October 14, 2008
 All Scheduled Commercial Banks (excluding RRBs and LABs)
 and All-India Term Lending and Refinancing Institutions
 Dear Sirs,
 Loans to mutual funds against and buy back of Certificates of Deposits (CDs) 
 Please refer to para 12 of the  Master Circular No. FMD.MSRG.No.21/02.08.003/ 2008-09  July 1, 2008  on Guidelines for Issue of Certificates of Deposit in terms of which the banks and FIs are not permitted to grant loans against CDs. Furthermore, they are also not permitted to buy-back their own CDs before maturity.
 2. On a review, it has been decided to relax these restrictions on lending and buy back, for a period of 15 days from the date of this Circular, only in respect of the CDs held by mutual funds.
 3. While granting such loans to the mutual funds, the banks should keep in view the provisions of paragraph 44(2) of the SEBI (Mutual Funds) Regulations, 1996. Further, such finance, if extended to equity-oriented mutual funds, will form part of banks' capital market exposure, as hitherto.
 Yours faithfully,
 (Prashant Saran)
 Chief General Manager-in-Charge

Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-09/223 · issued 14 Oct 2008. The plain-English explanation above is BankPulse’s own independent summary.

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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=4539&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.