Ceiling on banks' exposure to unlisted non-SLR papers relaxed

In an effort to promote the corporate bond market, the Reserve Bank of India (RBI) has permitted banks to treat their exposure to unlisted non-statutory liquidity ratio (SLR) debt securities as an investment in listed securities at the time of making investments.

This benefit will be available provided the paper is proposed to be listed on exchanges. This benefit (of treating the investment as exposure to listed security) will cover investments in primary bond offerings as well as paper picked up from the secondary market.

These bond investments are not taken in account for meeting SLR norms. Hence, they are termed as non-SLR securities.

This investment would not be subject to certain restrictions like unlisted non-SLR securities should not exceed 10 per cent of a bank’s total investment in non-SLR securities.

Since, there was a time lag between the issuance and listing of a security, banks might not be able to participate in primary issues of non-SLR securities, which were proposed to be listed but were yet to be listed at the time of subscription, RBI said.

However, if the security was not listed within a specified period, such investment would have to follow the 10 per cent limit prescribed for unlisted non-SLR securities, RBI said.

A senior treasury official with a State Bank of India’s associate bank said this step was part of the efforts to gradually push companies from depending mainly on direct bank credit to raising funds from the market.

The central bank has also issued guidelines for repo transactions in corporate debt securities.

It will enable repo in listed corporate debt securities rated ‘AA’ or above.

The Fixed Income Money Market and Derivatives Association of India is working on the development of a reporting platform and the Global Master Repo Agreement to make it possible to have repo deals in corporate bonds.