What changed
Previously, banks could not invest in non-SLR securities proposed for listing but not yet listed, due to the time lag between issuance and listing. Now, such securities are considered listed at the time of investment, enabling banks to participate in primary issues. If the security fails to list within the specified period, it is retroactively counted under the 10% unlisted non-SLR limit.
What it means for you
Banks can now invest in primary issues of non-SLR debt securities that are intended for listing, without immediately breaching the unlisted securities cap. This increases investment flexibility and access to primary market opportunities. However, banks must monitor listing timelines closely, as failure to list within the period triggers the unlisted limit and can halt further non-SLR investments if the 10% cap is breached.
What you must do
- Treat non-SLR debt securities proposed for listing as listed investments at the time of purchase, but track their listing status diligently.
- Ensure that any security not listed within the specified period is reclassified under the 10% unlisted non-SLR limit.
- If reclassification causes a breach of the 10% cap, immediately stop all new non-SLR investments (including unrated infrastructure bonds) until compliance is restored.
- Update internal investment policies and monitoring systems to flag listing deadlines and cap breaches.
Who it affects
All Scheduled Commercial Banks (excluding RRBs), Treasury and investment departments, Risk management teams handling non-SLR portfolios
What happens if a security proposed for listing is not listed within the specified period?
It will be counted under the 10% limit for unlisted non-SLR securities. If this causes a breach, the bank cannot make further investments in non-SLR securities (primary or secondary) or unrated infrastructure bonds until the limit is restored.
Does this circular affect the existing 10% cap on unlisted non-SLR securities?
No, the 10% cap remains unchanged. The circular only allows banks to treat proposed-to-be-listed securities as listed temporarily, but they revert to unlisted status if not listed on time.
Can banks invest in unrated bonds of infrastructure companies under this circular?
Yes, but only within the overall 10% unlisted non-SLR ceiling, as per earlier instructions. Breaching the cap halts such investments too.