September 2, 2004 RBI/2004-05/157
DBOD.No.BP.BC.37/
21.04.141/2004-05 All scheduled commercial
banks
(excluding RRBs) Dear Sir, Prudential
norms on classification of investment portfolio of banks Please
refer to our Master Circular DBOD.No.BP.BC.11/21.04.048/
2004-05 dated July 17, 2004. Representations
have been received from banks that the existing guidelines of classification of
investments should be reviewed with a view to bringing them in alignment with
international practices and current state of risk management practices in India,
taking into account the unique requirement of maintenance of statutory reserve
requirement of 25% of Demand and Time Liabilities (DTL) under Section 24 of the
Banking Regulations Act, 1949. Consequently, the Reserve Bank of India is setting
up an Internal Group to review the existing guidelines and the Report of the Group
will be discussed in the Standing Committee on Financial Regulation. In the meantime,
it has been decided as under : i.
Banks may exceed the present limit of 25 per cent of total investments under HTM
category provided
- the excess comprises only of SLR securities, and
- the
total SLR securities held in the HTM category is not more than 25 per cent of
their DTL as on the last Friday of the second preceding fortnight.
(ii) To
enable the above, as a one time measure, banks may shift SLR securities to the
HTM category any time, once more, during the current accounting year. Such shifting
should be done at the acquisition cost/ book value/ market value on the date of
transfer, whichever is the least, and the depreciation, if any, on such transfer
should be fully provided for. The non-SLR securities held as part of HTM may remain
in that category. No fresh non-SLR securities are permitted to be included in
the HTM category. All other prudential
norms applicable to securities included under HTM category shall continue to apply. Yours
faithfully, (C.R.Muralidharan)
Chief
General Manager-in-Charge
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