What changed
This master circular consolidates all previous instructions on classification, valuation, and operation of investment portfolios for FIs up to June 30, 2013, superseding the July 2, 2012 circular. It updates guidelines on investment policy, internal controls, classification into HTM, AFS, HFT categories, valuation norms, and repo accounting.
What it means for you
FIs must align their investment portfolio practices with the consolidated norms, ensuring proper classification at acquisition, adherence to valuation rules, and robust internal controls. The circular reinforces RBI's focus on transparency and risk management in FI securities transactions, impacting how these institutions manage their investment books.
What you must do
- Review and update your FI's investment policy to align with the consolidated master circular's objectives and procedures.
- Ensure all investment transactions 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, as per the circular.
- Implement proper valuation methods for both quoted and unquoted securities as specified in the circular.
- Update repo accounting practices to comply with the circular's guidelines on coupon, interest income/expenditure, and mark-to-market.
Who it affects
Exim Bank, NABARD, NHB, SIDBI, All-India term-lending and refinancing institutions
Does this master circular apply to commercial banks?
No, this circular specifically applies to all-India term-lending and refinancing institutions (Exim Bank, NABARD, NHB, SIDBI). Commercial banks have separate guidelines.
What are the three categories for investment classification?
The three categories are Held to Maturity (HTM), Available for Sale (AFS), and Held for Trading (HFT). Classification must be decided at the time of acquisition.
What is the effective date of this master circular?
The master circular is dated July 1, 2013, and consolidates instructions up to June 30, 2013. It replaces the previous master circular dated July 2, 2012.