RBI clarifies HTM valuation for recap bonds from FY22
No longer current — withdrawn, no replacement on file yet
Source: Reserve Bank of India · RBI/2021-22/191 · issued 31 Mar 2022 · ~2 min read
Quick answerRBI now requires banks to recognise recapitalisation bonds received from FY2021-22 onwards at fair value on initial recognition in HTM, with any difference between acquisition cost and fair value taken to P&L immediately.
The rule, in the simplest words
Banks must value recapitalisation bonds at fair value [the price they can be sold for in the market] when they first get them in the Held To Maturity (HTM) category.
The fair value is based on prices from Financial Benchmarks India Pvt. Ltd. (FBIL) or the yield [interest rate] of similar government securities.
Any difference between what the bank paid for the bond and its fair value must be recorded immediately in the Profit and Loss Account [the bank's income statement].
This new rule applies to recapitalisation bonds received from the government from the financial year 2021-22 onwards.
How it plays out — a real example
A treasury officer in Mumbai, responsible for managing the bank's investment portfolio, needs to update the valuation of new recapitalisation bonds received from the government to reflect their fair value on the day they were acquired, using FBIL prices as a reference. This means they have to immediately book any gain or loss in the Profit and Loss Account, which could impact the bank's quarterly earnings. The officer must work closely with the finance team to ensure the bank's accounting processes are adjusted accordingly.
What changed
Previously, recap bonds received from the government were carried at acquisition cost with premium amortised over tenor. Now, for bonds received from FY2021-22 onwards, banks must recognise them at fair value (based on FBIL prices/YTM of similar tenor G-secs) on initial recognition in HTM, and immediately book any difference between acquisition cost and fair value in the Profit and Loss Account.
What it means for you
Banks will face immediate P&L impact from any gap between the acquisition cost and fair value of new recap bonds, potentially affecting quarterly earnings. This aligns HTM treatment of recap bonds with market realities, reducing hidden losses. Banks need to source FBIL data for valuation and adjust accounting processes accordingly.
Historical instruction — do not use for current compliance. This is what was required at the time; it no longer reflects current RBI requirements. If no replacement rule is linked above, that only means none is recorded on our register yet — it does not prove no later applicable rule exists. Confirm on the official RBI source below.
What banks were required to do at the time
Identify all recapitalisation bonds received from Government of India from FY2021-22 onwards held in HTM.
Value these bonds at fair value on initial recognition using FBIL prices/YTM of similar tenor Central Government securities.
Recognise any difference between acquisition cost and fair value immediately in the Profit and Loss Account.
Update internal investment accounting policies and systems to reflect this change for new recap bonds.
Train treasury and finance teams on the revised valuation and P&L recognition requirements.
Who it affects
All Commercial Banks (excluding Regional Rural Banks), Treasury departments, Finance and accounting teams, Auditors and compliance officers
❓ Common questions
Regulatory timeline
Decoded by BankPulse2026-06-18 06:35 IST
Status change: withdrawn2026-07-13T04:47:15
Built from our lineage records — each fact carries its provenance; missing history simply is not shown (never guessed).
Does this apply to recap bonds received before FY2021-22?
No, the clarification specifically applies to special securities received from FY2021-22 onwards. Earlier recap bonds continue to be governed by existing HTM rules (carried at acquisition cost with premium amortised).
How do we determine fair value for these recap bonds?
Fair value must be arrived at using prices or YTM of similar tenor Central Government securities as published by Financial Benchmarks India Pvt. Ltd. (FBIL).
What if the acquisition cost differs from fair value?
Any difference must be immediately recognised in the Profit and Loss Account at the time of initial recognition. This could impact your bank's reported earnings for that period.
📜 Read the original circular — full text as issued by RBI
The guidelines have been repealed. Please refer to the Reserve Bank of India (Classification, Valuation and Operation of Investment Portfolio of Commercial Banks) Directions, 2021 .
RBI/2021-22/191
DOR.MRG.REC.98/21.04.141/2021-22
March 31, 2022
Dear Sir / Madam,
Master Direction - Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2021 - Amendment
Please refer to the Master Direction DOR.MRG.42/21.04.141/2021-22 dated August 25, 2021 – ‘Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2021’ (hereinafter referred as ‘Master Direction’).
2. In terms of Section 9 of the Master Direction ibid, investments classified under HTM shall be carried at acquisition cost, with the premium over the face value being amortised over the tenor of the instrument. It is expected that the acquisition of such instruments shall be at the fair value of the security at the time of its acquisition. This instruction also applies to re-capitalisation bonds received from the Government of India towards banks’ recapitalisation requirement and held in the investment portfolio (cf. Section 6 of the Master Direction ibid).
3. It is clarified that investments in special securities received from the Government of India towards bank’s recapitalisation requirement from FY 2021-22 onwards shall be recognised at fair value / market value on initial recognition in HTM. The fair value / market value of these securities shall be arrived on the basis of the prices / YTM of similar tenor Central Government securities put out by Financial Benchmarks India Pvt. Ltd. (FBIL). Any difference between the acquisition cost and fair value arrived as above shall be immediately recognized in the Profit and Loss Account.
Applicability
4. This circular is applicable to all Commercial Banks (excluding Regional Rural Banks).
5. The relevant sections of the Master Direction are being amended to reflect the aforementioned changes. These instructions come into force with immediate effect.
Yours faithfully,
(Usha Janakiraman)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2021-22/191 · issued 31 Mar 2022. The plain-English explanation above is BankPulse’s own independent summary.
Discuss this circular with fellow bankers — reply, upvote what helps, report what doesn’t belong. Be professional; no client data. Views are the commenter’s own, not BankPulse’s.
BankPulse Compliance Evidence Pack — generated 03 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=12264&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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