RBI Allows Investment in Non-Convertible Debentures/Bonds for Special Rupee Vostro Accounts
Current · Source: Reserve Bank of India · RBI/2025-26/91 · issued 03 Oct 2025 · ~1 min read
Quick answerRBI allows AD banks to permit investment of surplus balances in Special Rupee Vostro Accounts in non-convertible debentures/bonds and commercial papers issued by Indian companies.
The rule, in the simplest words
AD banks (banks that handle foreign‑exchange transactions) can now let customers put extra money from Special Rupee Vostro Accounts (a rupee‑denominated account for foreign‑exchange balances) into non‑convertible debentures/bonds (company loans that cannot be turned into shares) and commercial papers (short‑term company loans).
The new permission starts right away – banks must apply it immediately.
Banks have to tell their customers and other people who use these accounts about the change.
This gives customers more ways to grow their surplus money and helps Indian companies raise funds.
How it plays out — a real example
Rohit, a senior relationship manager at an AD bank in Mumbai, reviews the list of clients with surplus balances in Special Rupee Vostro Accounts. He calls Priya, a corporate client, and warmly explains that, thanks to the RBI’s latest instruction, she can now invest part of her extra rupee balance in a non‑convertible bond issued by Tata Steel, and he helps her complete the investment on the same day.
What changed
RBI has issued a new instruction allowing AD banks to permit investment of surplus balances in Special Rupee Vostro Accounts in non-convertible debentures/bonds and commercial papers issued by Indian companies.
This instruction is applicable with immediate effect.
AD banks are required to bring the contents of this circular to the notice of their constituents and customers concerned.
What it means for you
This change allows AD banks to offer their customers a wider range of investment options for their surplus balances in Special Rupee Vostro Accounts.
It also provides an opportunity for Indian companies to raise funds through the issue of non-convertible debentures/bonds and commercial papers.
What you must do
AD banks must permit investment of surplus balances in Special Rupee Vostro Accounts in non-convertible debentures/bonds and commercial papers issued by Indian companies.
AD banks must bring the contents of this circular to the notice of their constituents and customers concerned.
Who it affects
AD banks, Their constituents and customers, Indian companies issuing non-convertible debentures/bonds and commercial papers
❓ Common questions
What is the purpose of this circular?
The purpose of this circular is to allow AD banks to permit investment of surplus balances in Special Rupee Vostro Accounts in non-convertible debentures/bonds and commercial papers issued by Indian companies.
What is the effective date of this instruction?
This instruction is applicable with immediate effect.
What are the implications of this circular for AD banks?
AD banks must bring the contents of this circular to the notice of their constituents and customers concerned.
📜 Read the original circular — full text as issued by RBI
RBI/2025-26/91
A.P. (DIR Series) Circular No. 14
October 03, 2025
To,
All Authorised Dealer Category-I banks
Madam / Sir,
International Trade Settlement in Indian Rupees (INR)
Attention of Authorised Dealer Category – I banks (AD banks) is invited to Para 8(c) of A.P. (DIR Series) Circular No.10 dated July 11, 2022 wherein it has been indicated that the balance in Special Rupee Vostro Accounts can be used for: ‘Investment in Government Treasury Bills, Government securities, etc. in terms of extant guidelines and prescribed limits, subject to FEMA and similar statutory provision’.
2. In the light of the directions issued through AP DIR Circular No.13 dated October 03, 2025 , AD banks may permit investment of surplus balances in the Special Rupee Vostro Accounts also in non-convertible debentures/bonds and commercial papers issued by an Indian company in terms of guidelines and limits prescribed vide the referred circular dated October 03, 2025 .
3. The above instruction is applicable with immediate effect. AD banks may bring the contents of this circular to the notice of their constituents and customers concerned.
4. The directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act (FEMA), 1999 (42 of 1999) and are without prejudice to permissions / approvals, if any, required under any other law.
Yours faithfully,
(Latha Radhakrishnan)
General Manager-in-Charge
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2025-26/91 · issued 03 Oct 2025. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (AD banks, Their constituents and customers, Indian companies issuing non-convertible debentures/bonds and commercial papers), your first concrete step on “RBI Allows Investment in Non-Convertible Debentures/Bonds for Special Rupee Vostro Accounts” is: “AD banks must permit investment of surplus balances in Special Rupee Vostro Accounts in non-convertible debentures/bonds and commercial papers issued by Indian companies.” (RBI issued this 03 Oct 2025).
Circular: RBI/2025-26/91 -- RBI Allows Investment in Non-Convertible Debentures/Bonds for Special Rupee Vostro Accounts
Issued: 03 Oct 2025
Action required: AD banks must permit investment of surplus balances in Special Rupee Vostro Accounts in non-convertible debentures/bonds and commercial papers issued by Indian companies.
Action required: AD banks must bring the contents of this circular to the notice of their constituents and customers concerned.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
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.
💬 Banker Discussion
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BankPulse Compliance Evidence Pack — generated 03 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=12910&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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