Non-SLR Investment Norms for Banks: Limits, Valuation and Disclosure (IIBF TIRM)

If you are preparing for the IIBF Treasury, Investment and Risk Management (TIRM) paper, you cannot skip the rules that govern what a bank can hold outside its SLR basket. The non-SLR investment norms for banks decide which securities qualify, how much of the book can stay unlisted, what rating and tenor a bond must carry before a treasury can buy it, and how exposure to capital markets and commercial real estate is capped. These rules sit at the intersection of RBI's prudential regulation and a bank's own board-approved investment policy, and examiners test them heavily because a lapse here shows up directly on the balance sheet as a non-performing investment.

📋 What Falls Outside the SLR Basket

Everything a bank buys beyond its statutory liquidity ratio requirement falls into the non-SLR book, and the non-SLR investment norms for banks apply to the entire spread of instruments inside it. The list runs from plain corporate bonds and debentures to commercial paper and certificates of deposit issued by other banks and financial institutions — instruments you will recognise from the Money Market chapter of the TIRM syllabus. It also covers preference shares, listed and unlisted equity, units of mutual funds, security receipts issued by asset reconstruction companies against stressed-asset pools, and pass-through certificates from securitisation deals. Each category behaves differently on the balance sheet — equity and mutual fund units sit in the trading or available-for-sale book and move with the market, while security receipts and pass-through certificates carry credit risk tied to an underlying pool of receivables rather than a single issuer. Desks that deal in the equity and preference-share leg of this book lean heavily on concepts from the Capital Market chapter, since pricing, market depth and settlement cycles differ sharply from the debt instruments sitting in the same portfolio. The common thread is that none of it counts toward SLR, so every rupee invested here is judged purely on credit quality, liquidity and the bank's own risk appetite — which is exactly why the rating floors and exposure ceilings discussed below exist.

🚦 Rating, Tenor and Due-Diligence Conditions

A bank cannot simply buy any bond that offers an attractive yield. Under these norms, debt paper such as corporate bonds, debentures and commercial paper must carry a credit rating from an accredited rating agency, and that rating has to sit at or above the minimum investment-grade cut-off the bank's own board has fixed — a rating below that floor, or no rating at all, keeps the paper out of the eligible list for most categories. Preference shares and security receipts get separate treatment because they do not always carry a conventional debt rating. Where a security is privately placed rather than issued through a public offer, the treasury cannot rely on the offer document alone: the norms require the same credit appraisal discipline a branch would apply before sanctioning a loan of comparable size — cash-flow analysis, security cover, promoter track record and end-use of funds all have to be documented before the deal is booked. Tenor matters too: several categories carry a minimum residual maturity condition so that a bank does not use short-tenor non-SLR paper as a disguised money-market play outside the regulated commercial paper and certificate of deposit framework, and the interest-rate risk on the tenor that remains is tracked using the same duration measures behind PV01 and DV01 in treasury calculations. Skipping the appraisal step is one of the most common inspection findings in treasury audits, which is why the Front, Mid and Back Office structure treats due diligence and deal booking as separate, cross-checked functions rather than a single desk's call.

💡 Exam Tip: IIBF questions often flip the rating condition — remember it is the minimum eligible rating and residual maturity together that decide eligibility, not the coupon or yield on offer.

📊 Exposure Ceilings on Unlisted, Capital Market and CRE-Linked Paper

Three ceilings do most of the work in this part of the non-SLR investment norms for banks framework. First, the unlisted-securities cap: a bank's holding of unlisted non-SLR securities is expected to stay within a small prudential ceiling of its total non-SLR investment portfolio, measured as at the end of the previous quarter, so the book does not drift toward hard-to-price, illiquid paper. Second, aggregate capital-market exposure — direct investment in equity, convertible bonds and equity-oriented mutual fund units, plus indirect exposure such as advances against shares and guarantees issued on behalf of stockbrokers — is capped as a percentage of the bank's net worth as on 31 March of the preceding year, with a tighter sub-limit reserved for direct equity-type investment within that overall ceiling. Third, exposure to commercial real estate — including CRE-linked bonds, debentures and security receipts — is governed by the sectoral limits the board fixes as part of the exposure framework covered in the Regulations, Supervision and Compliance chapter, since CRE carries its own concentration and cyclicality risk. Just as a treasury tracks its net open position limit on the forex book, it must track these layered ceilings on the investment book daily, not just at quarter-end. The table below lines up how these ceilings are typically framed for exam purposes.

Table: non-SLR investment norms for banks — how the key exposure ceilings are structured (illustrative, exam-oriented summary).

⚠️ Common Mistake: Candidates confuse the unlisted-securities ceiling with the capital-market exposure ceiling — they are two separate limits measured against two different bases, the non-SLR book versus net worth, and mixing them up is a frequent wrong-answer trap.

💰 Valuation and Provisioning for Non-Performing Investments

Once a security is on the books, the norms continue to apply through valuation and provisioning. Securities held in the Available for Sale and Held for Trading categories are marked to fair value at the frequency RBI's investment classification and valuation framework prescribes, so unrealised gains and losses flow through the profit and loss account or reserves — including the investment fluctuation reserve for banks built up precisely to cushion these swings — rather than sitting hidden at historical cost. Held to Maturity holdings stay at acquisition cost, with any premium over face value amortised over the residual life of the security. The sharper test comes when a non-SLR investment turns non-performing. If interest or an instalment of principal remains in arrears, the interest-in-arrears rule brings the same discipline used for loan accounts into the investment book: income recognition on the security stops, and the investment is classified as a non-performing investment once the default crosses the prescribed period. From that point, the bank must provide for the investment broadly in line with the provisioning norms applied to non-performing advances, moving in stages as the default ages. Equity and preference-share holdings in a defaulting issuer, and pass-through certificates backed by a pool with rising delinquency, are watched even more closely because there is no fallback security cover of the kind a term loan might carry. For the primary regulatory text on classification and valuation, refer to the Master Directions section of the RBI website.

🗂️ Disclosure and the Board-Approved Investment Policy

Transparency is the last leg of the non-SLR investment norms for banks framework, and it shows up in two places. First, the notes to accounts in the audited financial statements must disclose the composition of the non-SLR investment portfolio — issuer-wise break-up, and the proportion that is unrated, unlisted, or below investment grade — so that shareholders, rating agencies and RBI supervisors can see concentration risk that would otherwise stay buried inside a single investment-portfolio line item. Second, every bank is required to run this entire chain — eligible instruments, rating floors, tenor conditions, exposure ceilings, valuation and provisioning — off a board-approved investment policy rather than desk-level discretion. The policy fixes delegation of powers for who can sanction which ticket size, sets counterparty and issuer limits, and prescribes the review cycle for the policy itself. Equally important is the audit trail: treasury operations are subject to concurrent audit on deal-by-deal booking and periodic internal audit of the entire non-SLR book, with findings reported to the board's audit or risk committee, the same governance loop tested under Risk Analysis and Control. The framework also connects to related market-conduct rules, such as those on short selling in government securities, since both sit under the same treasury compliance umbrella. Inspectors use the audit trail to check that a deal was appraised, approved and disclosed exactly the way the policy said it would be — gaps here are treated as seriously as a breach of an exposure ceiling itself.

📌 Remember: The non-SLR investment norms for banks are enforced through the board-approved investment policy and its audit trail, not the RBI text alone — an examiner can ask you to name the internal control rather than the regulation.

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✅ Get Exam-Ready on Non-SLR Investments

The non-SLR investment norms for banks pull together instrument eligibility, rating and tenor floors, exposure ceilings, valuation discipline and disclosure into one board-governed chain — and IIBF examiners like to test the joints between these pieces rather than any single rule in isolation. Revise the unlisted-securities ceiling against the capital-market exposure ceiling, know where the interest-in-arrears rule bites, and be ready to name the internal control, not just the regulation. Browse more TIRM coverage on the Treasury Investment and Risk Management tag hub, then lock in the concepts with a timed set on iibf.store/tests before exam day.