Disclosing this at the conference of chairmen of banks on "Banking in the next millennium" organised by the National Institute of Bank Management in Pune on Friday, RBI executive director GP Muniappan said banks' investments in non-SLR securities and credit substitutes has risen phenomenonally from Rs 47,000 crore in March 1997 to Rs 95,000 crore in September 1999 accounting for over 10 per cent of the total assets of the banking system.

As against an increase of 31 per cent registered by the banking system in fiscal 1999, the growth registered by foreign banks and new private banks towards non-SLR investments was to the tune of 233 per cent and 94 per cent, respectively. The growth in this segement varied between 300 and 500 per cent in respect of some of the new generation private sector banks, the RBI official said.

Most of the non-SLR investments, according to the RBI executive director, were in "unrated and unquoted category". Though the non-performing investment constituted a negligible portion of the total investment in this category, the central bank will come out with prudential guidelines for investment, asset classification and income recognition in regard to non-SLR investment portfolio, Muniappan said. On NPAs, the RBI official said the central bank is infavour of "healthy and transparent restructuring of deserving borrowal accounts".

Emphasising on the need for evolving a uniform approach towards industrial units suffering from temporary cash flow problem, he said banks and financial institutions should jointly "reschedule" these loans which can turn into NPAs for reasons beyond the control of the borrowers. "The rules of the game in the normal course should ensure acceptance of the majority decision by all the banks financing such an unit," he said.