BANKERS AS INVESTOR :

As per bank’s investment policy and guidelines of the regulator, banks invest in securities under SLR and Non SLR investment categories.

These investments are made by banks for the following reasons:

(1) To comply with SLR requirements

(2) To optimally deploy surplus funds

(3) To manage the gap between assets and liabilities (mismatch)

(4) To diversify risks

While investing funds in Non-SLR securities, the following need to be taken into account:

1. They should adhere to exposure limits and counter-party limits.

2. The financial statements of banks and corporate clients, where the funds would be invested, need to be properly analyzed.

3. Like a lending banker, the investing banker also needs to verify all the important parameters to cover various risks.

4. If the investments are in market related instruments, banks also need to do a proper analysis of the market risks and their impact

5. Banks should ensure that all such investments are properly valued by practicing the mark-to-market concept.

6. Apart from trend ratio and other analysis, banks should also carry out PESTEL analysis (Political, Economic, Social, Technological, Environmental and Legal) and impact of the PESTEL factors on their investments.

7. To protect the interests of the bank, while investing, careful assessment of the company’s performance and stock markets, also needs to be carried out.