What changed
RBI issued a consolidated version of the Mortgage Guarantee Companies Investment (Reserve Bank) Directions, 2008, incorporating all amendments up to June 30, 2012. The circular replaces the original February 15, 2008 notification and brings all current instructions into a single reference document.
What it means for you
Mortgage guarantee companies must now refer to this updated consolidated direction for all investment-related prudential norms. Key definitions like fair value, earning value, and NPA classification remain unchanged but are now compiled in one place for easier compliance. This reduces ambiguity and helps MGCs align their investment policies with RBI requirements.
What you must do
- Review the consolidated Mortgage Guarantee Companies Investment Directions 2008 as updated on June 30, 2012.
- Ensure your investment policy and valuation methods comply with the definitions for fair value, earning value, and break-up value.
- Update internal systems to classify non-performing assets (NPAs) on investments as per the 90-day overdue criterion.
- Maintain records of all investments and valuations as per the directions for regulatory reporting.
Who it affects
All Mortgage Guarantee Companies registered with RBI, Compliance and risk management teams of MGCs, Auditors and regulators overseeing MGC operations
What is the effective date of these updated directions?
The directions came into force with immediate effect from July 2, 2012, consolidating all amendments up to June 30, 2012.
How is 'fair value' defined under these directions?
Fair value is the mean of the earning value and the break-up value of the investee company's equity shares.
What is the NPA classification period for investments by MGCs?
An investment is classified as a non-performing asset if interest, principal, or amortization obligations remain overdue for 90 days or more.