What changed
RBI issued a Master Direction that consolidates all previous circulars on prudential norms for investment portfolio classification, valuation, and operation into one document. The Direction is issued under Section 35A of the Banking Regulation Act, 1949 and came into effect from August 25, 2021. It was updated on March 23, 2022, March 31, 2022, April 8, 2022, and December 8, 2022, but has since been repealed and replaced by the 2023 Directions.
What it means for you
Banks now have a single reference document for investment portfolio norms, replacing multiple scattered circulars. The Direction defines key terms like Approved Securities, Available for Sale, and Current Rating, ensuring uniform compliance. It also extends applicability to Small Finance Banks and Payments Banks, broadening the regulatory scope.
What you must do
- Review and update internal investment policies to align with the consolidated Master Direction.
- Ensure all investment classification (HTM, AFS, HFT) and valuation practices comply with the 2021 Direction.
- Verify that credit ratings used for securities meet the 'Current or Valid Rating' criteria as defined.
- Note that this Direction has been repealed; refer to the 2023 Directions for current compliance.
Who it affects
All Commercial Banks (excluding RRBs), Small Finance Banks, Payments Banks
What is the effective date of this Master Direction?
The Direction came into effect from August 25, 2021, the date of issuance.
Does this Direction apply to Regional Rural Banks (RRBs)?
No, RRBs are explicitly excluded from the applicability of these Directions.
Has this Direction been superseded?
Yes, the 2021 Direction has been repealed and replaced by the Reserve Bank of India (Classification, Valuation and Operation of Investment Portfolio of Commercial Banks) Directions, 2023.