What changed
The exemption from mark-to-market norms for RRBs' SLR investments, previously valid up to FY 2008-09, has been extended by one more year to FY 2009-10. RRBs can now classify their entire SLR securities portfolio under Held to Maturity for this period, valuing at book value and amortising premium over the remaining life.
What it means for you
This move shields RRBs from interest rate volatility on their SLR holdings for another year, reducing pressure on their profit and loss statements. It provides operational flexibility and stability, especially for smaller banks with limited treasury expertise, but may delay adoption of market discipline.
What you must do
- Classify your entire SLR securities portfolio under Held to Maturity for FY 2009-10 as permitted.
- Value these securities at book value and amortise any premium over the remaining life of each security.
- Acknowledge receipt of this circular to your respective RBI Regional Office.
- Review your investment policy to align with this temporary classification change.
Who it affects
All Regional Rural Banks (RRBs), Sponsor Banks of RRBs
Does this circular apply to all SLR securities held by RRBs?
Yes, the exemption covers the entire investment portfolio of SLR securities, allowing them to be classified under Held to Maturity for FY 2009-10.
What valuation method should RRBs use under this exemption?
RRBs must value these securities at book value and amortise any premium paid over the remaining life of the security.
Is this a permanent change or just for one year?
This is a one-year extension for FY 2009-10 only, following a similar exemption granted up to FY 2008-09.