What changed
This master circular consolidates all previous instructions on classification, valuation, and operation of investment portfolios for specified financial institutions, replacing the July 1, 2011 version. It updates guidelines up to June 30, 2012, incorporating market developments and international practices. The circular includes sections on investment policy, internal controls, classification into three categories (HTM, AFS, HFT), valuation norms, and repo accounting.
What it means for you
For Exim Bank, NABARD, NHB, and SIDBI, this circular provides a single reference document for managing investment portfolios, reducing ambiguity from scattered circulars. It reinforces the need for board-approved investment policies, strict internal controls, and proper classification of securities. Lenders must ensure compliance with updated valuation and shifting norms to avoid regulatory penalties.
What you must do
- Review and update your institution's investment policy to align with the consolidated master circular.
- Ensure all investment transactions are classified 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 securities, especially unquoted ones, follows RBI guidelines as per the circular.
- Train treasury and compliance teams on the updated norms for shifting between categories and repo accounting.
Who it affects
Exim Bank, NABARD, NHB, SIDBI, Treasury departments of all-India term lending institutions, Compliance and audit teams of these FIs
What are the three categories for classifying investments under this master circular?
Investments must be classified into Held to Maturity (HTM), Available for Sale (AFS), and Held for Trading (HFT) at the time of acquisition, as per Section 4 of the circular.
Does this circular apply to commercial banks?
No, this master circular specifically applies to all-India term lending and refinancing institutions: Exim Bank, NABARD, NHB, and SIDBI. Commercial banks have separate guidelines.
What is the effective date of this master circular?
The circular is dated July 2, 2012, and consolidates instructions up to June 30, 2012. It replaces the previous master circular of July 1, 2011.