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Reserve Bank of India (RBI) Proposes New Norms For Classification, Valuation Of Banks’ Investment Portfolio


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RBI Proposes New Norms For Classification, Valuation Of Banks' Investment Portfolio

The new financial institution portfolio classification norms will come into impact from April 1, 2023

Mumbai: The Reserve Bank of India (RBI) on Friday proposed new norms for the classification and valuation of the funding portfolio of banks, with a view to align them with the worldwide prudential framework and accounting requirements.

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According to the proposed norms, the funding portfolio of banks might be divided into three classes — held-to-maturity (HTM), out there on the market (AFS), and honest worth by revenue and loss account (FVTPL).

Within FVTPL, held-for-trading (HFT) shall be a sub-category aligned with the specs of ‘Trading Book’ as per the Basel-III framework.

The new financial institution portfolio classification norms will come into impact from April 1, 2023, the RBI paper mentioned, whereas inviting feedback on a dialogue paper on this regard from stakeholders by February 15.

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The new norms suggest to bridge the hole between the prevailing tips and world requirements and practices on the subject of classification, valuation and operations of the funding portfolio of industrial banks.

The extant directions pertaining to the prudential norms on the classification and valuation of the funding portfolio are largely primarily based on the Report of Informal Group on Valuation of Banks’ Investment Portfolio (Convenor: T C Nair), which was submitted in 1999.

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The suggestions of this casual group culminated within the challenge of prudential tips on the funding portfolio in October 2002, which kinds the idea of our present norms.

There have been important developments within the world prudential framework, accounting requirements in addition to within the monetary markets-both home and world up to now twenty years.

While the RBI has been tweaking the rules in response to conditions as they emerge, a complete overview has not been undertaken to date, leading to a large hole between the nation’s norms and the worldwide requirements and practices, the central financial institution mentioned.

It is towards this backdrop {that a} dialogue paper, on ‘Review of Prudential Norms for Classification, Valuation and Operations of Investment Portfolio of Commercial Banks’, opinions the rationale and the evolution of the present framework, the corresponding world requirements, and developments within the monetary markets earlier than framing its proposals.

The paper proposes to comprehensively align the prudential framework with the worldwide requirements whereas retaining some parts contemplating the home context. PTI NKD CS HRS hrs

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