Reserve Bank of India (All India Financial Institutions – Classification, Valuation and Operation of Investment Portfolio) Directions, 2025

1. Investment rules

This paper sets how all India financial institutions must class and value what they hold.

2. Rating letter in the offer

The rating letter and the reasoning should form part of the offer document.

3. Start date

These Directions came into effect on the day RBI issued them.

4. Who is covered

These Directions apply to every all India financial institution.

5. Rating must still stand

On a secondary market buy the rating must be in force and checked in the monthly bulletin.

6. Rated means a live rating

A rated security is one rated by a SEBI registered agency and carrying a valid rating.

7. Unrated means no valid rating

An unrated security is one with no current or valid rating from a SEBI agency.

1. Board approves the policy

The Board must approve the investment policy.

2. Committee decides the buying

The Board must set an investment committee to decide and answer for what is bought.

3. Board clears a shift

The Board must approve any move of securities between the three books.

4. Board owns the risk systems

The Board must see that systems exist to catch and weigh non-SLR investment risk.

5. Debt review each quarter

The Board must look at debt holdings at least once a quarter.

6. Market exposure every meeting

The Audit Committee must review the whole capital market exposure at every meeting.

7. Committee watches the shares

The Audit Committee must keep watch over holdings in shares.

8. Board hears the market exposure

The Audit Committee must keep the Board informed of the whole capital market exposure.

1. Private placement, no risk

Buying through private placement must not build up a wider risk.

2. A full written policy

A full investment policy approved by the Board must be adopted.

BankPulse example. A lender cannot buy securities on the strength of practice alone. It must adopt a comprehensive investment policy, and the Board must approve it. A policy the Board has not seen does not count.

3. Sound practice in dealing

The policy must keep dealing in securities within sound business practice.

4. Limits inside the policy

The policy must set limits for each kind of bond and each issuer.

5. Least ratings for bonds

The policy must set least ratings and limits by industry, maturity and issuer.

6. Equity gets its own rules

The policy must set out how equity is bought and how its risk is run.

7. A team for equity research

An equity research team must be built to match the size of the business.

8. Committee decides on equity

An investment committee set by the Board must decide every equity purchase.

9. Committee answers for it

The investment committee must answer for what is bought.

10. Same standard as a loan

Every buying proposal must meet the same credit standard as a loan proposal.

11. Check the defaulter lists

Defaulter lists from the credit bureaus and CRILC must be checked before buying.

12. Track the issuer often

The issuer's health must be tracked each quarter or half year to catch rating drift.

13. Settle as the regulator says

Trades must be settled the way the regulator concerned lays down.

14. Own rating always

Own credit work and an inside rating are needed even on externally rated paper.

1. 90-day trading rule

Any security bought for short-term trading must be sold within 90 days.

1. Low coupon bonds defined

A low coupon bond pays little and is redeemed with a large premium at the end.

1. Only if serviced on time

That accrual holds only where the rate is fixed and interest is not in arrears.

1. Older rules cancelled

This cancels the older RBI rules on how banks classify and value their investment portfolio.

2. Old actions preserved

Actions already taken under the old rules still follow those old rules.