Home › Circulars › RBI/2008-09/367

UCBs: Revised Non-SLR Investment Rules

Current · Source: Reserve Bank of India · RBI/2008-09/367 · issued 30 Jan 2009 · ~2 min read
Quick answerRBI has revised Non-SLR investment guidelines for Primary Urban Co-operative Banks. The 10% of total deposits cap remains, but eligible instruments now include A-rated CPs, debentures, bonds, and debt/money market mutual fund units. Perpetual debt and equity mutual funds are banned; unlisted securities capped at 10% of Non-SLR holdings.
The rule, in the simplest words
How it plays out — a real example

Ramesh Patel, a treasury officer at a UCB in Pune, reviews the bank’s investment list each morning. He spots a holding in an equity‑oriented mutual fund, orders its sale, and then puts the cash into an A‑rated commercial paper, recording it as Held for Trading and marking it to market, all while keeping the total Non‑SLR amount within the 10% deposit cap.

What changed

The existing September 2007 guidelines were reviewed based on bank representations. Key changes include: allowing investment in 'A' or equivalent rated Commercial Papers, debentures, bonds, and units of Debt/Money Market Mutual Funds; banning perpetual debt instruments and equity-oriented mutual funds; capping unlisted securities at 10% of total Non-SLR investments; requiring all fresh Non-SLR investments to be classified as HFT or AFS and marked to market; and mandating that secondary market transactions be done only with commercial banks or primary dealers.

What it means for you

UCBs now have a clearer, more restrictive framework for Non-SLR investments. The ban on perpetual debt and equity mutual funds reduces risk, but the 10% unlisted securities sub-limit and mandatory HFT/AFS classification increase compliance and market risk. Banks must review their investment policies, strengthen risk management, and ensure half-yearly board reviews of rating migrations and portfolio quality. The disclosure requirements will improve transparency in balance sheets.

What you must do

Who it affects

All Primary (Urban) Co-operative Banks, Treasury and investment departments of UCBs, Board of Directors of UCBs, Compliance and risk management teams

❓ Common questions

What is the prudential limit for Non-SLR investments?

Non-SLR investments are capped at 10% of the bank's total deposits as on March 31 of the previous year. This limit remains unchanged from earlier guidelines.

Can we invest in perpetual debt instruments or equity mutual funds?

No. Investment in perpetual debt instruments is not permitted. Also, investment in units of mutual funds other than Debt Mutual Funds and Money Market Mutual Funds is banned; existing holdings must be disinvested.

What are the counterparty restrictions for secondary market transactions?

All acquisition or sale of Non-SLR investments in the secondary market must be undertaken only with commercial banks or primary dealers as counterparties.

📜 Read the original circular — full text as issued by RBI
Notifications - Reserve Bank of India Skip to main content Selected Selected Change Language हिंदी Search the Website Search Home About Us ▼ About Us Organisation & Functions ▶ Organisation Structure Departments Offices Training Establishment ▶ College of Agricultural Banking Reserve Bank Staff College College of Supervisors RBI's Functions and Working Governors Deputy Governors Executive Directors Communication Policy of RBI Sources of Information ▶ Annual Publications Half-yearly Publications Quarterly Publications Monthly Publications Weekly Publications Occasional Publications SDDS NSDP Data Releases Publications available on Subscription General Information RBI History Museum ▶ The RBI Museum RBI Monetary Museum Notification ▼ Notifications Master Directions Master Circulars Amendment Directions Draft Notifications/Guidelines ▶ Draft Notifications/Guidelines Draft Directions (RE-wise) Index To RBI Circulars Standalone Circulars Circulars Withdrawn Press Releases Speeches & Media Interactions ▼ Speeches Media Interactions Memorial Lectures Podcasts Publications ▼ Biennial Annual Half-Yearly Quarterly Bi-monthly Monthly Weekly Occasional Reports Working Papers Legal Framework ▼ Act Rules Regulations Schemes Research ▼ External Research Schemes RBI Occasional Papers Working Papers RBI Bulletin History DRG Studies KLEMS State Statistics and Finances Statistics ▼ Data Releases Database on Indian Economy Public Debt Statistics Regulatory Reporting ▼ List of Returns Data Definition Validation rules/ Taxonomy List of RBI Reporting Portals FAQs of RBI Reporting Portals Home Notifications Notifications ( 58 kb ) UCBs - Investments in Non-SLR Securities RBI/2008-09/367 UBD (PCB) BPD Cir No: 46 /16.20.000/2008-09 January 30, 2009 The Chief Executive Officers of All Primary (Urban) Co-operative Banks Dear Sir/Madam, Investments in Non-SLR securities by primary (urban) cooperative banks Please refer to the guidelines on the captioned subject issued vide our circular UBD BPD PCB Cir 14/16.20.00/2003-04 dated September 18, 2007. 2. On the basis of representations received from banks and their Federations, the existing guidelines have been reviewed and it has been decided as under: i) Prudential Limit The Non-SLR investments will continue to be limited to 10% of a bank’s total deposits as on March 31 of the previous year. ii) Instruments UCBs may invest in the following instruments: (a) "A" or equivalent and higher rated Commercial Papers (CPs), debentures and bonds (b) Units of Debt Mutual Funds and Money Market Mutual Funds. iii) Restrictions (a) Investment in perpetual debt instruments is not permitted. (b) Investment in unlisted securities should be subject to a minimum rating prescribed at (ii) above and should not exceed 10% of the total Non-SLR investments at any time. Where banks have already exceeded the said limit, no further investment in such securities will be permitted. (c) Investment in deep discount / zero coupon bonds should be subject to the minimum rating as stated above and comparable market yields for the residual duration. (d) Investment in units of Mutual Funds, other than units of Debt Mutual Funds and Money Market Mutual Funds, are not permitted. The existing holding in units of Mutual Funds other than Debt Mutual Funds and Money Market Mutual Funds, including those in UTI should be disinvested. Till such time that they are held in the books of the bank, they will be reckoned as Non-SLR investments for the purpose of the limit at (i) above. The banks should, however, review risk management policy in place that ensures that they do not have disproportionate exposure in any one scheme of a Mutual Fund. (e) Non-SLR investment, other than in units of Debt Mutual Funds and Money Market Mutual Funds , and CPs, shall be in instruments with an original maturity of over one year. (f) Fresh investments in shares of All India Financial Institutions (AIFIs) will not be permitted. The existing share holding in these institutions may be phased out and till such time they are held in the books of the bank, they will be reckoned as Non-SLR investments for the purpose of the limit at (i) above. (g) All fresh investments under Non-SLR category should be classified under Held for Trading (HFT) / Available for Sale (AFS) categories only and marked to market as applicable to these categories of investments. (h) All Non-SLR investments will be subject to the prescribed prudential single/group counter party exposure limits. (i) All transactions for acquisition / sale of non-SLR investments in secondary market may be undertaken only with commercial banks / primary dealers as counterparties. iv) Policy The banks should review their investment policy and ensure that it provides for the nature and extent of investments intended to be made in Non-SLR instruments now permitted, the risk parameters and cut-loss limits for holding / divesting the investments. The banks should put in place proper risk management systems for capturing and analyzing the risk in respect of Non-SLR investments and taking remedial measures in time. v) Review The Boards should review the following aspects of Non-SLR investment at least at half-yearly intervals: Total business (investment and divestment) during the reporting period. Compliance with prudential limits prescribed for non-SLR investment. Compliance with the prudential guidelines issued by Reserve Bank on non-SLR securities. Rating migration of the issuers/issues held in the bank's books and consequent diminution in the portfolio quality. Extent of non-performing investments in the non-SLR category and sufficient provision thereof. vi) Disclosure The banks should disclose the details of the issuer-wise composition of Non-SLR investments and the non-performing investments in the 'Notes on Accounts' of the balance sheet, as indicated in the Annex. 3. The guidelines on placement of deposits by UCBs with other banks are being issued separately. Yours faithfully, (A. K. Khound) Chief General Manager in-Charge Encl: 1. Annex Prudential guidelines on management of the Non-SLR investment portfolio by urban co-operative banks – Disclosure requirements Urban co-operative banks should make the following disclosures in the ‘Notes on Accounts’ of the balance sheet in respect of their non-SLR investment portfolio. i) Issuer composition of Non SLR investments (Rs. in crore) No (1) Issuer 2) Amount (3) Extent of 'below investment grade' securities (4) Extent of 'unrated' securities (5) Extent of 'unlisted' securities (6) 1 PSUs 2 FIs 3 Public Sector Banks 4 Mutual Funds 5 Others 6 Provision held towards depreciation ii) Non performing Non-SLR investments Particulars Amount (Rs. 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Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2008-09/367 · issued 30 Jan 2009. The plain-English explanation above is BankPulse’s own independent summary.
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Worked example & action-note template

Example: if you are a Compliance officer at a bank this circular applies to (All Primary (Urban) Co-operative Banks, Treasury and investment departments of UCBs, Board of Directors of UCBs, Compliance and risk management teams), your first concrete step on “UCBs: Revised Non-SLR Investment Rules” is: “Review and update your bank's investment policy to align with the new eligible instruments and restrictions.” (RBI issued this 30 Jan 2009).

  1. Circular: RBI/2008-09/367 -- UCBs: Revised Non-SLR Investment Rules
  2. Issued: 30 Jan 2009
  3. Action required: Review and update your bank's investment policy to align with the new eligible instruments and restrictions.
  4. Action required: Ensure all fresh Non-SLR investments are classified as Held for Trading or Available for Sale and marked to market.
  5. Action required: Cap unlisted securities at 10% of total Non-SLR investments; if exceeded, stop further purchases.
  6. Action required: Disinvest existing holdings in equity-oriented mutual funds (including UTI) and shares of AIFIs, treating them as Non-SLR until sold.
  7. Action required: Conduct half-yearly board reviews of Non-SLR investment activity, compliance, rating migrations, and non-performing investments.
  8. Owner: ____________ Target date: ____________
  9. Board/committee approval needed? Y / N
  10. Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.

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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=4808&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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