What changed
RBI amended its 2016 non-SLR investment directions to add share capital of NABARD's SSE as a permissible non-SLR instrument for StCBs and CCBs. The investment is capped at 5% of the bank's owned funds and is exempt from the overall non-SLR prudential limit and the restriction on unlisted non-SLR securities.
What it means for you
Co-operative banks now have a new, low-risk investment avenue specifically designed for their sector, which can help them access shared services and technology. The exemption from the unlisted securities ban and the prudential limit gives them flexibility to participate without breaching existing investment caps.
What you must do
- Review your bank's current non-SLR investment portfolio and owned funds to assess capacity for SSE investment up to 5%.
- Update internal investment policies to include SSE share capital as a permissible non-SLR instrument.
- Ensure board approval is obtained before subscribing to SSE shares, as participation is voluntary.
- Monitor compliance with the 5% of owned funds cap and maintain documentation for regulatory reporting.
Who it affects
State Co-operative Banks (StCBs), Central Co-operative Banks (CCBs), NABARD (as the SSE promoter)
What is the maximum amount a co-operative bank can invest in the SSE?
The investment is capped at 5% of the bank's owned funds, which includes paid-up share capital and reserves.
Does this investment count towards the bank's overall non-SLR investment limit?
No, the investment in SSE share capital is specifically exempt from the prudential limit on total non-SLR investments.
Is participation in the SSE mandatory for StCBs and CCBs?
No, the circular states that subscription to the share capital of the SSE is on a voluntary basis.