What changed
This master circular consolidates all prior instructions on investment portfolio norms for FIs up to June 30, 2009, replacing the July 1, 2008 version. It includes updated guidelines on investment policy, internal controls, classification into three categories (HTM, AFS, HFT), valuation methods, and repo accounting.
What it means for you
FIs must align their investment operations with this consolidated framework, ensuring clear board-approved policies, proper classification of securities, and robust internal controls. The circular reinforces prudential norms to prevent irregularities in securities transactions, as highlighted by the Janakiraman Committee.
What you must do
- Review and update your FI's investment policy to comply with the consolidated guidelines.
- Ensure all securities are classified correctly into Held to Maturity, Available for Sale, or Held for Trading categories at acquisition.
- Strengthen internal control systems, including audit, review, and reporting of investment transactions.
- Verify that valuation of investments follows the prescribed norms, especially for unquoted securities.
- Train staff on the updated repo accounting and hedging guidelines.
Who it affects
Exim Bank, NABARD, NHB, SIDBI, All-India term-lending and refinancing institutions
What is the effective date of this master circular?
The circular is dated July 1, 2009, and consolidates instructions up to June 30, 2009.
Does this circular apply to commercial banks?
No, it applies only to all-India term-lending and refinancing institutions: Exim Bank, NABARD, NHB, and SIDBI.
What are the three categories for investment classification?
Investments must be classified as Held to Maturity, Available for Sale, or Held for Trading, with the category decided at acquisition.