What changed
RBI consolidated and updated the classification, valuation, and operational framework for UCB investment portfolios into a single comprehensive direction. Key updates include revised definitions for Approved Securities, AFS, and Carrying Cost, along with detailed chapters on shifting among HTM/HFT/AFS categories, valuation of quoted and unquoted securities, and prudential limits on non-SLR investments and broker engagements. The directions also introduce specific guidelines for government securities transactions, including NDS-OM access, SGL accounts, and repo/reverse repo operations.
What it means for you
UCBs must now strictly adhere to the new classification and valuation norms, which could impact their investment strategies and profitability due to tighter rules on shifting categories and valuation of unquoted securities. The enhanced prudential limits on non-SLR securities and broker transactions require banks to strengthen internal controls and risk management frameworks. Compliance with these directions is mandatory from the effective date, and non-compliance may attract regulatory action under Section 35A of the Banking Regulation Act, 1949.
What you must do
- Review and update your bank's investment policy to align with the new classification (HTM/HFT/AFS) and valuation rules.
- Ensure all investment transactions in government securities comply with NDS-OM access, SGL account, and repo/reverse repo guidelines.
- Implement prudential limits on non-SLR securities and broker transactions as specified in the directions.
- Strengthen internal audit and reporting systems to cover the new requirements on investment portfolio operations.
- Train treasury and compliance teams on the updated definitions, shifting rules, and valuation methodologies.
Who it affects
Primary (Urban) Co-operative Banks (UCBs), Treasury departments of UCBs, Compliance and risk management teams of UCBs, Auditors and internal audit teams of UCBs
What is the effective date of these directions?
The directions came into effect from the date of issue, i.e., November 28, 2025.