labels: rbi, finance - general, investment - general
Financial institutions can invest only in rated securities: RBInews
Our Banking Bureau
05 November 2003

Mumbai: Financial institutions (FIs) will now have to invest only in rated securities, which carry a minimum investment grade rating from a credit rating agency registered with the Securities and Exchange Board of India (SEBI), according to the draft guidelines issued by the Reserve Bank of India.

The FIs should not invest in debt securities of original maturity of less than one year other than the commercial paper and certificates of deposits, which are covered under the RBI guidelines, and should undertake usual due diligence in respect of investments in debt securities.

The FIs must ensure that all fresh investments in debt securities are made only in listed debt securities of companies, which comply with the requirements of SEBI.

The RBI has said that the board of directors of the FIs should fix a prudential limit for their total investment in debt securities (other than government securities and those in the nature of advance) and sub-limits for the other categories of debt securities, which include unlisted securities, mortgage backed securities and securitisation papers issued by the special purpose vehicles (SPVs) for infrastructure projects.

These guidelines apply to the FIs' investments, both in the primary market (public issue as also private placement) as well as the secondary market, in debt instruments issued by companies, banks, FIs and the state- and central government-sponsored institutions, SPVs, but do not apply to government securities and securities that are in the nature of advance under the extant prudential norms of the RBI.

 

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Financial institutions can invest only in rated securities: RBI