PDs can now hold G-secs in HTM up to net owned funds
Current · Source: Reserve Bank of India · RBI/2009-10/394 · issued 12 Apr 2010 · ~2 min read
Quick answerRBI has revised the HTM limit for standalone Primary Dealers from 100% of paid-up capital to 100% of audited net owned funds (NOF) as of end-March of the previous financial year, effective immediately.
The rule, in the simplest words
Standalone Primary Dealers (PDs) can now hold government bonds (G-secs) in the 'held to maturity' (HTM) pile up to 100% of their net owned funds (NOF) instead of just paid-up capital.
NOF means the money the PD truly owns after subtracting debts, checked from the audited books at the end of March of the previous year.
This change lets PDs with more net owned funds keep more bonds without marking them to market (changing their value daily), making their balance sheet steadier.
All other old rules from earlier RBI circulars still apply, so PDs must follow those too.
Banks that do PD work inside their bank must keep using the normal bank rules for classifying investments.
How it plays out — a real example
A treasury officer in Indore, Priya, works for a standalone PD. She recalculates the HTM limit using the firm's audited net owned funds from last March, which is higher than the old paid-up capital. Now she can hold more government bonds in the HTM category, reducing the need to adjust their value daily and giving her treasury team more stability.
What changed
Earlier, standalone PDs could classify government securities in HTM up to 100% of their paid-up capital. Now, the limit is linked to their audited net owned funds (NOF) as at end-March of the preceding financial year, computed per section 45-IA of the RBI Act, 1934. All other conditions from previous circulars remain unchanged.
What it means for you
This change aligns PDs' HTM holdings with their actual net worth, potentially allowing larger HTM portfolios for PDs with higher NOF. It reduces the need to mark securities to market, offering more balance sheet stability. Banks doing PD activities departmentally must continue following existing bank investment classification rules.
What you must do
Recalculate your HTM limit using audited net owned funds as at end-March of the preceding financial year.
Ensure NOF computation follows the explanatory note to section 45-IA of the RBI Act, 1934.
Review and adjust your government securities portfolio to comply with the new HTM cap.
Continue adhering to all other conditions specified in earlier circulars (RBI/2009-10/136 and RBI/2009-10/343).
Who it affects
All standalone Primary Dealers (PDs), Treasury and risk management teams at PDs, Banks undertaking PD activities departmentally (indirectly, as they follow separate rules)
❓ Common questions
What is the new HTM limit for standalone PDs?
Standalone PDs can now hold government securities in the HTM category up to 100% of their audited net owned funds (NOF) as at end-March of the preceding financial year, replacing the earlier limit of 100% of paid-up capital.
How is net owned funds (NOF) computed for this purpose?
NOF must be computed in terms of the explanatory note to section 45-IA of chapter III-B of the Reserve Bank of India Act, 1934. Use the audited figures as at end-March of the previous financial year.
Do banks doing PD activities departmentally need to follow this circular?
No. Banks undertaking PD activities departmentally must continue to follow the extant guidelines applicable to banks regarding classification and valuation of investment portfolios, as issued by RBI's Department of Banking Operations and Development.
📜 Read the original circular — full text as issued by RBI
RBI/2009-10/394
IDMD.PDRD.No. 4537 /03.64.00/2009-10
April 12, 2010
All Standalone Primary Dealers
Dear Sir
Investment Portfolio of Primary Dealers- Quantum of Government securities to be held in the HTM category by PDs
Please refer to the circulars RBI/2009-10/136- IDMD.PDRD.No.1050/03.64.00/2009-10 dated August 31, 2009 and RBI/2009-10/343- IDMD.PDRD.No.3843/03.64.00/2009-10 dated March 9, 2010 allowing the standalone Primary Dealers (PDs) to categorize Government securities up to 100% of their paid up capital in the Held to Maturity (HTM) category, subject to certain conditions, until further advice. The above guidelines have been reviewed and it has been decided to permit the PDs to hold Government securities in the HTM category to the extent of their audited net owned funds (NOF) as at the end March of the preceding financial year. The NOF will be computed in terms of the explanatory note to section 45-IA of chapter III-B of the Reserve Bank of India Act, 1934. All other conditions specified in the circulars referred to above will continue to apply.
2. Banks undertaking PD activities departmentally may continue to follow the extant guidelines applicable to banks in regard to the classification and valuation of the investment portfolio issued by our Department of Banking Operations and Development.
Yours faithfully
(R.N. Kar)
General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2009-10/394 · issued 12 Apr 2010. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (All standalone Primary Dealers (PDs), Treasury and risk management teams at PDs, Banks undertaking PD activities departmentally (indirectly, as they follow separate rules)), your first concrete step on “PDs can now hold G-secs in HTM up to net owned funds” is: “Recalculate your HTM limit using audited net owned funds as at end-March of the preceding financial year.” (RBI issued this 12 Apr 2010).
Circular: RBI/2009-10/394 -- PDs can now hold G-secs in HTM up to net owned funds
Issued: 12 Apr 2010
Action required: Recalculate your HTM limit using audited net owned funds as at end-March of the preceding financial year.
Action required: Ensure NOF computation follows the explanatory note to section 45-IA of the RBI Act, 1934.
Action required: Review and adjust your government securities portfolio to comply with the new HTM cap.
Action required: Continue adhering to all other conditions specified in earlier circulars (RBI/2009-10/136 and RBI/2009-10/343).
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
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BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=5584&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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