What changed
The exemption from mark-to-market norms for RRBs' SLR securities, which was valid up to FY 2009-10, has been extended for three more financial years: 2010-11, 2011-12, and 2012-13. RRBs can now classify their entire SLR investment portfolio under Held to Maturity for this period, with valuation on book value basis and amortization of premium over the remaining life of securities.
What it means for you
This extension allows RRBs to avoid marking their SLR securities to market, reducing volatility in their profit and loss statements. It provides stability in valuation and helps RRBs manage interest rate risk more comfortably, as they can hold securities to maturity without worrying about short-term price fluctuations.
What you must do
- Classify your entire SLR securities portfolio under Held to Maturity for FY 2010-11 to 2012-13.
- Value these securities on book value basis and amortize any premium over the remaining life.
- Acknowledge receipt of this circular to your respective Regional Office.
Who it affects
All Regional Rural Banks (RRBs), Sponsor Banks of RRBs
What is the key benefit of this exemption for RRBs?
RRBs can avoid mark-to-market valuation on their SLR securities, which reduces income volatility and allows them to hold securities at book value with premium amortization.
For how long is this exemption extended?
The exemption is extended for three financial years: 2010-11, 2011-12, and 2012-13.
Does this apply to all SLR securities held by RRBs?
Yes, RRBs have the freedom to classify their entire investment portfolio of SLR securities under Held to Maturity for the specified period.