What changed
RBI issued a consolidated version of the Mortgage Guarantee Companies Investment (Reserve Bank) Directions, 2008, incorporating all amendments up to June 30, 2011. The updated notification replaces the earlier February 15, 2008 version and is now available on the RBI website.
What it means for you
Mortgage guarantee companies must now refer to this consolidated direction for all investment-related prudential norms. Key definitions like fair value (mean of earning value and break-up value) and NPA classification (90-day overdue) remain unchanged but are now in one place for easier compliance.
What you must do
- Review the updated Investment Directions and ensure your investment policy aligns with the definitions and norms.
- Update internal compliance manuals to reference the consolidated notification dated July 1, 2011.
- Train staff on the revised NPA classification criteria for investments (90-day overdue).
- Verify that all investment valuations use the prescribed fair value methodology.
Who it affects
All Mortgage Guarantee Companies registered with RBI, Compliance officers of mortgage guarantee companies, Auditors reviewing investment portfolios of mortgage guarantee companies
What is the fair value of an investment as per these directions?
Fair value is the mean of the earning value and the break-up value of the investee company's equity share.
How is an investment classified as non-performing asset (NPA)?
An investment becomes an NPA if interest, principal, or amortization obligations remain overdue for 90 days or more.