Urban Co-operative Banks Investment Portfolio Classification, Valuation and Operation Directions

RBI/DOR/2025-26/284 DOR.MRG.REC.No.203/00-00-11/2025-26

November 28, 2025

Previous Versions

Reserve Bank of India (Urban 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. Held to Maturity (HTM) C. Held for Trading (HFT) and Available for Sale (AFS) D. Shifting Among Categories D.1 Shift to/from HTM D.2 Shift from AFS to HFT or Vice Versa

Chapter V: Valuation of Investments A. Held to Maturity (HTM) B. Held for trading (HFT) and Available for Sale (AFS)

Chapter VI: Market Value A. Quoted Securities B. Unquoted SLR Securities C. Unquoted non-SLR Securities

Chapter VII: Investment 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. Short sale in Government Securities H. Transaction in Government Securities on When Issued Basis I. Value Free Transfer of Securities J. Investment in Government Securities through Exchanges K. Repo / Reverse Repo in Government Securities L. Retailing of Government Securities M. Separate Trading of Registered Interest and Principal Securities (STRIPS)

Chapter VIII: Investment in non-SLR Securities A. Non-SLR Instruments B. Prudential Limit C. Repo in Corporate bonds D. Transactions in Commercial Papers (CPs) and Certificates of Deposits (CDs) E. Trading and Settlement in Corporate Bonds F. Other requirements G. Role of Boards

Chapter IX: Placement of Deposits with other banks / institutions A. Placement / acceptance of Deposits B. Prudential Limits C. Acceptance of Deposits D. Provisioning on interbank exposure E. Policy for Placement of Deposits

Chapter X: Prudential Systems / Controls A. Internal Control System B. Engagement of Brokers B.1 Empanelment of Brokers B.2 Prudential Limits on transaction through brokers

Chapter XI: Audit, Review and Reporting A. Audit B. Review/Reporting

Chapter XII: Accounting and Provisioning A. Income Recognition B. Investment Fluctuation Reserve (IFR) C. Non-Performing Investments (NPI)

Chapter XIII: Repeal and Other Provisions A. Repeal and Saving B. Application of other laws not barred C. Interpretations

In exercise of the powers conferred by Section 35A of the Banking Regulation Act, 1949, 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 (Urban 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 Primary (Urban) Co-operative Banks (hereinafter collectively referred to as ‘UCBs' and individually as a 'UCB').

Explanation: In this context, urban co-operative banks shall mean Primary Co-operative Banks as defined under Section 5(ccv) read with Section 56 of Banking Regulation Act, 1949.

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) ‘Approved Securities’ shall have the same meaning as defined in Reserve Bank of India (Urban Co-operative Banks – Cash Reserve Ratio and Statutory Liquidity Ratio) Directions, 2025.

(2) ‘Available for Sale’ (AFS) means the category of investment portfolio of a UCB, which does not fall within the HTM or HFT category.

(3) ‘Carrying Cost’ in the context of zero-coupon discounted instruments such as Treasury Bills, Commercial Papers, Certificate of Deposits, and Zero-Coupon Bonds is the acquisition cost adjusted for the discount accrued at the rate prevailing at the time of acquisition.

(4) ‘Certificate of Deposit’ shall have the same meaning as defined in Master Direction – Reserve Bank of India (Certificate of Deposit) Directions, 2021.

(5) ‘Corporate Bonds’ mean debt securities which create or acknowledge indebtedness, including debentures, bonds and such other securities of a company, a multilateral financial institution or a body corporate constituted by or under a Central Act or a State Act, whether constituting a charge on the assets of the company or body corporate or not, but does not include debt securities issued by Central Government or a State Government, or such other persons as may be specified by the Reserve Bank, Certificate of Deposit, Commercial Paper, security receipts, and securitised debt instruments.

(6) ‘Commercial Paper’ shall have the same meaning as defined in Master Direction – Reserve Bank of India (Commercial Paper and Non-Convertible Debentures of original or initial maturity upto one year) Directions, 2024.

(7) ‘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 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.

(8) ‘Derivative’ shall have the same meaning as assigned to it in Section 45U(a) of the RBI Act, 1934, as amended from time to time.

(9) ‘Exchange’ means ‘Recognized stock exchange’ and shall have the same meaning as defined in Section 2 (f) of Securities Contracts (Regulation) Act, 1956, as amended from time to time.

(10) ‘Government Security’ shall have the same meaning as assigned to it in Section 2(f) of the Government Securities Act, 2006, as amended from time to time.

(11) ‘Held to Maturity’ (HTM) means the category of investment portfolio maintained by a UCB with intention to hold securities upto maturity.

(12) ‘Held for Trading’ (HFT) means the category of investment portfolio maintained by a UCB with intention to trade in securities by taking advantage of the short- term price / interest rate movements.

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

(14) ‘Quoted Security’ is a security for which market prices are available at exchanges / reporting platforms / trading platforms authorized by RBI / SEBI.

(15) ‘Rated Security’ means a security which is subjected to a detailed credit rating exercise by a credit rating agency, which is registered with SEBI and shall carry current or valid credit rating.

(16) ‘Reconstitution’ shall have the same meaning as defined in the notification IDMD.1762/2009-10 dated October 16, 2009, on ‘Government Securities - Separate Trading of Registered Interest and Principal of Securities (STRIPS)’.

(17) ‘Repo’ and ‘Reverse Repo’ shall have the same meaning as defined in Section 45U of RBI Act, 1934, as amended from time to time. For the purpose of these Directions, the word ‘repo’ is used to mean both ‘repo’ and ‘reverse repo’ with the appropriate meaning applied contextually.

(18) ‘Securities’ shall have the same meaning as defined in Section 2(h) of Securities Contracts (Regulation) Act, 1956, as amended from time to time.