Reserve Bank of India (RBI) has amended its Prudential Regulations under the Basel III Capital Framework, specifically concerning investment norms for All India Financial Institutions (AIFIs). As per the revised guidelines, AIFI investments in long-term bonds and debentures (with a minimum residual maturity of three years) issued by non-financial entities will not be included in the 25% ceiling under the Held to Maturity (HTM) category. The amendment applies to financial institutions regulated by RBI, including EXIM Bank, NABARD, NaBFID, NHB, and SIDBI. The changes, issued under Section 45L of the RBI Act, 1934, will take effect from April 1, 2025.
Reserve Bank of India
RBI/2024-25/116
DOR.MRG.REC.60/00-00-017/2024-25 Dated: February 17, 2025
Madam / Dear Sir,
Reserve Bank of India (Prudential Regulations on Basel III Capital Framework, Exposure Norms, Significant Investments, Classification, Valuation and Operation of Investment Portfolio Norms and Resource Raising Norms for All India Financial Institutions) Directions, 2023 – Amendment
Please refer to paragraph 34.2 of the Reserve Bank of India (Prudential Regulations on Basel III Capital Framework, Exposure Norms, Significant Investments, Classification, Valuation and Operation of Investment Portfolio Norms and Resource Raising Norms for All India Financial Institutions) Directions, 2023 issued on September 21, 2023.
2. On a review, it has been decided that investments made by All India Financial Institutions (AIFIs), as per their statutory mandates, in long-term bonds and debentures (i.e., having minimum residual maturity of three years at the time of investment) issued by non-financial entities shall not be accounted for the purpose of the ceiling of 25 per cent applicable to investments included under Held to Maturity (HTM) category, specified under the Directions ibid.
3. Accordingly, the relevant instructions have been amended as detailed in Annex.
Applicability
4. This circular shall be applicable to the AIFIs regulated by the Reserve Bank, viz. the Export-Import Bank of India (EXIM Bank), the National Bank for Agriculture and Rural Development (NABARD), the National Bank for Financing Infrastructure and Development (NaBFID), the National Housing Bank (NHB) and the Small Industries Development Bank of India (SIDBI).
5. This circular is issued in exercise of the powers conferred under Section 45L of the Reserve Bank of India Act, 1934.
6. These instructions shall come into force with effect from April 1, 2025.
Yours faithfully,
(Usha Janakiraman)
Chief General Manager-in Charge
Annex
| Sr. No. | Reference Paragraph | Existing text | Amended text (in track- change mode) |
| 1 | 34.2.3 | Investments as specified in sub-sections (ii) and (iii) above, shall not be accounted for the purpose of ceiling of 25 percent specified under section 34.2.1 of these Directions. | Investments as specified in sub-sections (ii) and (iii) above, shall not be accounted for the purpose of ceiling of 25 percent specified under section 34.2.1 of these Directions.
The following investments shall not be accounted for the purpose of ceiling of 25 percent specified under section 34.2.1 of these Directions: (i) investments as specified in sub-sections 34.2.2(ii) and 34.2.2(iii) above; and (ii) investments made by AIFIs, as per their statutory mandates, in long-term bonds and debentures (i.e., having minimum residual maturity of three years at the time of investment) issued by non-financial entities. |
