What changed
This is an updated master circular that incorporates all instructions issued up to June 30, 2013, replacing the July 2, 2012 version. It consolidates prudential norms for classification (HTM, AFS, HFT), valuation (including unquoted securities), and operational aspects like investment policy, broker engagement, and audit. The circular also includes specific guidance on STRIPS, repos, and non-performing investments.
What it means for you
Banks must ensure their investment policies and practices align with the consolidated norms, especially regarding classification shifts and valuation of unquoted securities. The circular reinforces the need for robust internal controls and board-approved investment policies. It also clarifies that PD business is limited to government securities, not corporate bonds or mutual funds.
What you must do
- Review and update your bank's internal investment policy to align with this master circular, ensuring board approval.
- Verify classification of all investment holdings (HTM, AFS, HFT) and ensure any shifts comply with RBI norms.
- Implement proper valuation methods for unquoted SLR and non-SLR securities as per the circular's annexures.
- Strengthen internal controls, audit, and reporting mechanisms for investment transactions.
Who it affects
All commercial banks (excluding RRBs), Treasury and investment departments, Risk management and compliance teams, Internal audit and board-level committees
Does this circular apply to Regional Rural Banks?
No, the circular explicitly excludes Regional Rural Banks from its scope.
What is the key change from the 2012 master circular?
This version incorporates all guidelines issued up to June 30, 2013, updating the previous circular. The core prudential norms remain largely the same, but banks must ensure compliance with the latest consolidated instructions.
Are PD activities covered under the investment policy?
Yes, banks with PD business must include it in their investment policy, but PD activities are limited to dealing, underwriting, and market-making in government securities only.