What changed
This master circular consolidates all previous guidelines on investment portfolio norms for FIs up to June 30, 2011, replacing the earlier circular of July 1, 2010. It updates instructions on classification, valuation, and operation of investments, including shifts among categories and valuation of unquoted securities.
What it means for you
FIs must now follow a single, updated reference document for investment portfolio compliance, reducing ambiguity from multiple circulars. The circular reinforces prudential norms like three-category classification (HTM, AFS, HFT) and strict valuation rules, impacting how FIs manage their securities portfolios and report to RBI.
What you must do
- Review and align your investment policy with the consolidated master circular, ensuring board approval for investment objectives and delegation of authority.
- Update internal control systems to comply with guidelines on broker dealings, audit, and reporting of investment transactions.
- Ensure proper classification of all securities into Held to Maturity, Available for Sale, or Held for Trading at acquisition, and follow prescribed shifting rules.
- Implement valuation norms for all securities, including unquoted ones, and maintain accurate mark-to-market records.
Who it affects
All-India Financial Institutions: Exim Bank, NABARD, NHB, SIDBI, Investment and treasury departments of these FIs, Compliance and audit teams handling investment portfolios
Does this master circular apply to commercial banks?
No, this circular is specifically addressed to all-India term-lending and refinancing institutions (Exim Bank, NABARD, NHB, SIDBI). Banks have separate circulars for investment portfolio norms.
What are the three categories for classifying investments?
Investments must be classified as Held to Maturity (HTM), Available for Sale (AFS), or Held for Trading (HFT) at the time of acquisition, with specific rules for shifting between categories.
Where can I find the full list of previous instructions consolidated in this circular?
The list of circulars containing previous instructions is provided in Annex V of the master circular, which is available on the RBI website.