Aiming to align the funding portfolio of banks with the worldwide prudential framework and accounting requirements, the Reserve Bank of India (RBI) on Friday proposed new norms for his or her classification and valuation.
According to a dialogue paper by the central financial institution, ‘Review of Prudential Norms for Classification, Valuation and Operations of Investment Portfolio of Commercial Banks’, the brand new financial institution portfolio classification norms will come into impact from April 1, 2023. It has invited feedback on the paper from stakeholders by February 15.
As per the proposed norms, the funding portfolio of banks might be divided into three classes — held-to-maturity (HTM), obtainable 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 norms suggest to bridge the hole between the present pointers and world requirements and practices on the subject of classification, valuation and operations of the funding portfolio of economic banks.
The extant directions pertaining to the prudential norms on the classification and valuation of the funding portfolio are largely based mostly on the Report of Informal Group on Valuation of Banks’ Investment Portfolio, which was submitted in 1999.
The suggestions of this casual group culminated within the subject of prudential pointers on the funding portfolio in October 2002, which kinds the premise of the present norms.
While the RBI has been tweaking the rules in response to conditions as they emerge, a complete evaluate has not been undertaken to this point, leading to a large hole between the nation’s norms and the worldwide requirements and practices, the regulator stated.
It is towards this backdrop {that a} dialogue paper evaluations the rationale and the evolution of the present framework, the corresponding world requirements, and developments within the monetary markets earlier than framing its proposals. WITH PTI
