RBI proposes new norms for classification of banks’ investment portfolio
The Reserve Bank of India (RBI) on Friday proposed new norms for the classification and valuation of the investment portfolio of banks, with a view to align them with the global prudential framework and accounting standards.
According to the proposed norms, the investment portfolio of banks will be divided into three categories held-to-maturity (HTM), available for sale (AFS), and fair value through profit and loss account (FVTPL).
Within FVTPL, held-for-trading (HFT) shall be a sub-category aligned with the specifications of ‘Trading Book’ as per the Basel-III framework.
The new bank portfolio classification norms will come into effect from April 1, 2023, the RBI paper said, while inviting comments on a discussion paper in this regard from stakeholders by February 15.
The new norms propose to bridge the gap between the existing guidelines and global standards and practices with regards to classification, valuation and operations of the investment portfolio of commercial banks.
The extant instructions pertaining to the prudential norms on the classification and valuation of the investment portfolio are largely based on the Report of Informal Group on Valuation of Banks’ Investment Portfolio (Convenor: T C Nair), which was submitted in 1999.