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Investments in Non-SLR instruments by State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs)

Reserve Bank of India (RBI) has issued directions on investments in non-SLR instruments by State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs).

What is the prudential limit for non-SLR investment by StCBs and CCBs?

Total Non-SLR investments shall not exceed 10% of the total deposits of a bank as on March 31 of the preceding financial year.

Which instruments are permitted for non-SLR investments by StCBs and CCBs?

StCBs / CCBs may invest in the following instruments –

  • "A" or equivalent and higher rated Commercial Papers (CPs), debentures and bonds.
  • Units of Debt Mutual Funds and Money Market Mutual Funds.
  • Shares of Market Infrastructure Companies (MICs), e.g. Clearing Corporation of India Ltd. (CCIL), National Payments Corporation of India (NPCI), Society for World-wide Inter-bank Financial Telecommunication (SWIFT).
  • Share capital of Shared Service Entity (SSE) set up by National Bank for Agriculture and Rural Development (NABARD) for StCBs and CCBs.

Which are the restrictions on non-SLR investments by StCBs and CCBs?

  • Investment in perpetual debt instruments is not permitted.
  • Fresh investments in equity of All India Financial Institutions (AIFIs) are not permitted. 
  • Investment in units of Mutual Funds, other than units of Debt Mutual Funds and Money Market Mutual Funds, is not permitted. 
  • Investment in unlisted securities shall be subject to a minimum rating of "A" or equivalent and shall not exceed 10% of the total Non-SLR investments of a bank at any time. 
  • Investment in deep discount / zero coupon bonds shall be subject to the minimum rating of "A" or equivalent and comparable market yields for the residual duration. No investment shall be made in zero coupon bonds unless the issuer has created a sinking fund for all accrued interest and keeps it invested in liquid instruments / securities (government bonds).
  • Non-SLR investment, other than in units of Debt Mutual Funds and Money Market Mutual Funds, and CPs, shall be in instruments with an original maturity of over 1 year.
  • All fresh investments under Non-SLR category shall be classified under “current” category only and marked to market as applicable to these categories of investments.
  • All Non-SLR investments shall be subject to the prudential limits prescribed for single / group counter-party exposure.
  • StCBs / CCBs may invest in Certificates of Deposits (CDs) issued by scheduled commercial banks (other than Regional Rural Banks and Local Area Banks) and select AIFIs that have been permitted by RBI to raise short-term resources within the umbrella limit fixed by RBI. Investment in CDs will be treated as inter-bank deposits and shall not be reckoned for computing the limit on Non-SLR investments.
  • The investment by an StCB / CCB in the share capital of SSE shall be restricted to 5% of its owned funds (paid-up share capital and reserves). Such investment, however, shall be exempt from the prudential limit on non-SLR investments and the restriction on investment in unlisted non-SLR investments.

What is SSE?

  • NABARD, in collaboration with National Cooperative Development Corporation (NCDC) and Rural Cooperative Banks (RCBs), is establishing an SSE named ‘Sahakar Sarathi’ to modernize RCBs and enhance their digital capabilities. 
  • The authorized capital of ₹1,000 crore will be equally contributed by NABARD (₹333.33 crore), NCDC (₹333.33 crore), and RCBs (₹333.34 crore). 
  • This initiative aims to reduce operational costs, improve service delivery, and ensure regulatory compliance, enabling RCBs to compete effectively with commercial banks and better serve rural customers.
  • RBI had accorded regulatory approval in April 2025 to NABARD’s proposal for setting up of an SSE for StCBs and CCBs wherein it was envisaged that the StCBs and CCBs can subscribe to the share capital of the SSE on a voluntary basis. 


References

National Bank for Agriculture and Rural Development. (n.d.). Retrieved from https://www.nabard.org/auth/writereaddata/tender/pub_1706250309031580.pdf

Reserve Bank of India. (2016, July 14). 'Investments in Non-SLR instruments by State / Central Co-operative Banks'. Retrieved from https://rbi.org.in/Scripts/NotificationUser.aspx?Id=10505&Mode=0

Reserve Bank of India. (2025, September 26). 'Investment by State Co-operative Banks (StCBs) and Central Co-operative Banks (CCBs) in Shared Service Entity (SSE) established by NABARD'. Retrieved from https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12899&Mode=0#AN1

Reserve Bank of India. (2025, September 26). 'RBI issues Reserve Bank of India (Investments in Non-SLR instruments by State / Central Co-operative Banks) Directions, 2025'. Retrieved from https://rbi.org.in/Scripts/BS_PressReleaseDisplay.aspx?prid=61296


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