India – Issue of Long Term Bonds By Banks For Financing Of Infrastructure And Affordable Housing, Cross Holding.

In its circular dated July 15, 2014, the Reserve Bank of India (RBI) had allowed the banks to issue long term bonds to finance infrastructure and affordable housing loans provided by them. The above mentioned circular imposed a restriction on the banks on cross-holdingof such bonds amongst themselves. The circular dated June 1, 2015 now permits banks to invest in long term bonds issued by other banks subject to the conditions mentioned therein. These conditions inter alia include that banks should (i) not hold their own bonds, (ii) not hold more than 20% of the primary issue size of such bonds, and (iii) invest in bonds in the 'held to maturity' category.

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