The Reserve Bank of India has issued updated directions amending its prudential framework for State Co-operative Banks and Central Co-operative Banks’ investments in non-SLR instruments, to allow them to subscribe (on a voluntary basis) to the share capital of a Shared Service Entity being set up by NABARD. The Directions add the SSE share capital to the list of permissible non-SLR instruments and cap an StCB or CCB’s investment in the SSE at five percent of its owned funds (paid-up share capital and reserves). This investment is exempt from both the overall prudential limit on non-SLR investments and the restriction on investment in unlisted non-SLR securities under the existing framework. The Directions, issued under Section 35A read with Section 56 of the Banking Regulation Act, 1949, take effect immediately.
Reserve Bank of India permits State and Central Co-operative Banks to invest in NABARD Shared Service Entity share capital with a five percent owned-funds cap
The Reserve Bank of India amended its prudential framework to allow State and Central Co-operative Banks to invest in a Shared Service Entity by NABARD. This investment, capped at five percent of owned funds, is exempt from the prudential limit on non-SLR investments and restrictions on unlisted non-SLR securities. The updated directions are effective immediately under the Banking Regulation Act, 1949.