What changed
RBI issued an updated master circular on prudential norms for investment portfolios, incorporating guidelines issued between July 1, 2010 and June 30, 2011. The previous master circular from July 1, 2010 was replaced. The circular applies to all commercial banks except Regional Rural Banks.
What it means for you
Banks must ensure their investment policies and practices align with the updated norms, covering classification into Held to Maturity, Available for Sale, and Held for Trading categories, along with valuation methods. The circular reinforces the need for board-approved investment policies and internal controls. Non-compliance could affect capital adequacy and provisioning.
What you must do
- Review and update your bank's internal investment policy to align with the 2011 master circular.
- Ensure classification of securities (HTM, AFS, HFT) and valuation methods comply with the updated norms.
- Verify that all investment transactions, including non-SLR and government securities, follow the prescribed audit and reporting requirements.
- Train treasury and risk management teams on the updated prudential norms and shifting rules between categories.
Who it affects
All commercial banks (excluding RRBs), Treasury departments, Risk management teams, Internal audit and compliance functions, Board of directors (for policy approval)
Does this master circular replace the 2010 version?
Yes, it supersedes the master circular dated July 1, 2010, and includes all instructions issued up to June 30, 2011.
Are Regional Rural Banks covered under this circular?
No, the circular explicitly excludes Regional Rural Banks from its scope.
What are the key areas covered in the circular?
It covers investment policy, classification of securities (HTM, AFS, HFT), valuation norms, non-performing investments, and accounting for repo/non-repo transactions.