The Reserve Bank of India (RBI) has said banks can
continue to invest in mutual funds units, which have fully
invested in non-statutory liquidity ratio debt securities,
listed or unlisted. They will, however, not be allowed
to invest in mutual fund plans that invest more than 10
per cent of funds in unlisted securities from 1 January
a release, the central bank said investment norms for
non-statutory liquidity ratio (SLR) securities will be
applicable to all types of bonds, including capital gains,
bonds eligible for priority sector status, bonds issued
by central or state-owned units, with or without government
guarantees, and bonds issued by banks and financial institutions.
The regulator had issued prudential limits on banks' investment
in securities in a set of guidelines on 12 November.
RBI said till the end of the current financial year, banks
could continue to invest in unlisted securities issued
on or before 30 November. From 1 April 2004, banks may
invest in certain categories of unlisted securities until
31 December 2004, provided the issuers have applied to
stock exchanges for listing and the security is rated
minimum investment grade.
31 December 2004, banks may also invest up to 10 per cent
of incremental non-SLR investments in unlisted securities
issued after November 30, 2003.
effect from January 1, 2005, only banks whose investments
in unlisted non-SLR securities are within the prudential
limits prescribed in the guidelines may make fresh investments
in such securities and only up to the prudential limits,
the release stated.