What changed
The exemption from mark-to-market norms for RRBs' SLR investments, previously valid up to FY 2006-07, has been extended for FY 2007-08. RRBs may now classify all SLR securities under Held to Maturity for this period, using book value and amortising any premium over the remaining life.
What it means for you
This extension shields RRBs from market volatility in their SLR portfolios for another year, reducing pressure on capital adequacy. It allows simpler valuation but delays full adoption of mark-to-market discipline. RBI also seeks data on book and market values to assess future transition impact.
What you must do
- Classify entire SLR investment portfolio under Held to Maturity for FY 2007-08, valuing at book value with premium amortisation.
- Report book value and market value of SLR investments as on March 31, 2007 to RBI by May 31, 2007.
- Acknowledge receipt of this circular to your respective Regional Office.
Who it affects
All Regional Rural Banks (RRBs), Sponsor Banks of RRBs
What is the key change for RRBs regarding SLR securities valuation?
RRBs are exempt from mark-to-market norms for SLR securities for FY 2007-08, allowing them to classify the entire portfolio under Held to Maturity and value at book value with premium amortisation.
What data must RRBs submit to RBI and by when?
RRBs must provide the book value and market value of their SLR investments as on March 31, 2007, to RBI by May 31, 2007.
Why is RBI collecting this data from RRBs?
RBI needs this data to analyse the impact of moving towards full mark-to-market norms for RRBs in the future.