What changed
Earlier, banks could shift investments between permanent and current categories with prior Board authorization at any time. The new circular restricts such shifts to once a year, at the beginning of the accounting year, with Board approval. Any further shifting during the same year is prohibited.
What it means for you
This change limits flexibility in managing the investment portfolio for SLR compliance or yield purposes. Banks must plan their permanent category holdings more carefully, as they cannot freely reclassify securities mid-year. Any sale of permanent category securities still requires loss write-offs and gain appropriation to Capital Reserve.
What you must do
- Ensure Board approval is obtained for any shift of securities to/from permanent category only at the start of the accounting year.
- Review and finalize investment categorization plans before the beginning of the accounting year to avoid mid-year changes.
- Place this circular before the Board for formal acknowledgment and compliance.
- Acknowledge receipt of the circular to the concerned RBI Regional Office.
Who it affects
All State Co-operative Banks (StCBs), All District Central Co-operative Banks (DCCBs)
Can we shift securities from permanent to current category more than once a year?
No, as per the revised instructions, such shifting is allowed only once a year, at the beginning of the accounting year, with Board approval.
What happens if we sell a security from the permanent category?
Any loss on such sale must be written off, and any gain must first be taken to the Profit and Loss Account and then appropriated to the Capital Reserve Account.
Does this circular apply to all cooperative banks?
Yes, it applies to all State Co-operative Banks (StCBs) and District Central Co-operative Banks (DCCBs).