Reserve Bank of India (Rural Co-operative Banks – Classification, Valuation and Operation of Investment Portfolio) Directions, 2025

RBI/DOR/2025-26/309 DOR.MRG.REC.No.228/00-00-011/2025-26 November 28, 2025 Previous Versions Reserve Bank of India (Rural Co-operative Banks – Classification, Valuation and Operation of Investment Portfolio) Directions, 2025 (Updated as on May 18, 2026)

Table of Contents Chapter I: Preliminary A. Short Title and Commencement B. Applicability C. Definitions Chapter II: Role of the Board Chapter III: General Guidelines A. Investment Policy B. General Instructions Chapter IV: Classification of Investments A. Categorization of Investments B. Permanent Investments C. Current Investments D. Shifting Among Categories Chapter V: Valuation of Investments A. Permanent Investments B. Current Investments Chapter VI: Market Value A. Quoted Securities B. Unquoted SLR Securities C. Unquoted non-SLR Securities Chapter VII: Investments in Government Securities A. General Instructions B. Access of NDS-OM C. Subsidiary General Ledger (SGL) Account D. Gilt Account E. Settlement of transactions in Government securities F. Investment in Government Security through primary auction G. Repo / Reverse Repo in Government Securities H. Short Sale Transactions I. Retailing of Government Securities J. Trading of Government Securities on Stock Exchanges Chapter VII: Investments in non-SLR Securities A. Non-SLR Instruments B. Prudential Limit C. Transactions in Commercial Papers (CPs) and Certificates of Deposits (CDs) D. Trading and Settlement in Corporate Bonds E. Role of Boards F. Other Requirements Chapter VIII: Prudential Systems / Controls A. Internal Control System B. Engagement of Brokers B.1 Empanelment of Brokers B.2 Prudential Limits for Brokers Chapter IX: Audit, Review and Reporting A. Audit B. Review / Reporting Chapter X: Accounting and Provisioning A. Income Recognition B. Investment Fluctuation Reserve (IFR) C. Non-Performing Investment (NPI) Chapter XI: Repeal and Other Provisions A. Repeal and Saving B. Application of other laws not barred C. Interpretations Annex I: Half Yearly Review

In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949 (‘BR Act’), read with section 56 thereof, and all other provisions / laws enabling the Reserve Bank of India (‘RBI’) in this regard, the RBI being satisfied that it is necessary and expedient in the public interest so to do, hereby issues the Directions hereinafter specified.

Chapter I: Preliminary

A. Short Title and Commencement

1. These Directions shall be called the Reserve Bank of India (Rural Co-operative Banks – Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025.
2. These Directions shall come into effect from the date of issue.

B. Applicability

3. These Directions shall be applicable to Rural Co-operative Banks (hereinafter collectively referred to as 'RCBs' and individually as 'RCB') operating in India.

Explanation: In this context, rural co-operative banks shall mean State Co-operative Banks and Central Co-operative Banks, as defined in the National Bank for Agriculture and Rural Development Act, 1981.

C. Definitions

4. For the purpose of these Directions, unless the context states otherwise, the terms herein shall bear the meanings assigned to them below:

(1) ‘Current or Valid Credit Rating’ for the purpose of determining rated security means a credit rating granted by a credit rating agency in India, registered with the Securities and Exchange Board of India (SEBI) and fulfilling the following conditions: i The credit rating letter and rating rationale from the credit rating agency shall preferably be part of offer document. ii The credit rating letter shall not be more than one month old and rating rationale shall not be more than one year old from the date of opening of issue. iii In the case of secondary market acquisition, the credit rating of the issue shall be in force and confirmed from the website of the respective credit rating agency.

(2) ‘Listed Security’ is a security which is listed on an exchange.

(3) ‘Rated Security’ means a security which carries current or valid credit rating.

(4) ‘Unrated Securities’ means securities which do not have a current or valid credit rating.

5. All other expressions unless defined herein shall have the same meaning as have been assigned to them under the Banking Regulation Act (As applicable to Co-operative Societies), the Reserve Bank of India Act (RBI Act), rules / regulations made thereunder, or any statutory modification or re-enactment thereto or as used in commercial parlance, as the case may be.

Chapter II: Role of the Board

6. The Board of Directors (Board) shall approve the Investment Policy of an RCB as specified in paragraph 14(1).
7. The Board shall approve the shifting of investments to / from the Permanent Category as specified in paragraph 28.
8. The Board shall be responsible to ensure that appropriate risk management systems are in place for capturing and analysing the risk in respect of non-SLR investments and for taking remedial measures in time as specified in paragraph 81.
9. The Board shall review the following aspects of non-SLR investment at least on a half yearly interval as specified in paragraph 82.
10. The Board shall approve and conduct an annual review of the panel of brokers with whom an RCB may undertake transactions as specified in paragraph 101.
11. The Board shall be informed post facto of any breach of the upper aggregate contract limit for individual brokers as specified in paragraph 103(4).
12. The Board shall review the investment portfolio of an RCB on a half-yearly basis as on March 31st and September 30th, and ensure that the same is placed before it within two months, i.e., by end-May and end-November respectively, as specified in paragraph 109.
13. The Board shall approve any decision of an RCB to build up a higher percentage of IFR up to 10 per cent depending on the size and composition of its portfolio, as specified in paragraph 115(2).

Chapter III: General Guidelines

A. Investment Policy

14. An RCB shall undertake investment activities as per the terms and conditions specified in these Directions. (1) An RCB shall adopt a comprehensive Investment Policy duly approved by the Board. (2) The Investment Policy shall, at the minimum, include: i The investment criteria and objectives to be achieved while undertaking investment transactions, keeping in view the various regulatory / statutory guidelines and the RCB's own internal requirements. ii Securities in which investments can be made by an RCB. iii The authority designated to put through deals. iv The procedure for obtaining the sanction of the appropriate authority and putting through deals. v Adherence to various prudential exposure limits including quantity (ceiling) and quality of each type of security to be held on its own investment account. vi Policy regarding internal control mechanism, accounting standards, audit, review, dealings through brokers, systems for management of various risks, guidelines for valuation of the portfolio, and the reporting systems. vii Proper risk management systems for making investment in non-SLR securities which shall include entry-level minimum credit ratings / quality standards and industry-wise, maturity-wise, duration-wise, and issuer-wise limits to mitigate the adverse impact of concentration and liquidity risk.

B. General Instructions

15. An RCB shall not undertake any transactions on behalf of Portfolio Management Scheme (PMS) clients.
16. Investment proposals shall be subjected to same degree of credit analysis as any loan proposal, irrespective of the fact that the proposed investments may be in rated securities. An RCB shall make its own internal credit analysis and credit rating even in respect of rated issues and shall not entirely rely on the ratings of external credit rating agencies.
17. An RCB shall ensure robust internal credit rating systems, including a mechanism for regular (quarterly or half-yearly) tracking of the financial position of the issuer to ensure continuous monitoring of the rating migration of the issuers / issues.
18. An RCB shall settle the transactions in securities as per procedure prescribed in notifications / directions / guidelines issued by the concerned regulator.
19. An RCB shall hold its investments in securities only in dematerialised form.