Classification of Investments
Banks are required to classify their entire investments portfolio (including SLR securities and non-SLR securities) into three categories: heldto-maturity, available-for-sale and held-for-trading.
(i) Held-to-maturity (HTM)
This category would comprise securities acquired by the bank with the intention to hold them up to maturity.
(ii) Held-for-trading (HFT)
The investments classified under HFT would be those from which the bank expects to make a gain by the movement in interest rates/market rates. These securities are to be sold within 90 days.
(iii) Available-for-sale (AFS)
This category will comprise securities, which do not qualify for being categorised in either of the above categories, i.e., those that are acquired neither for trading purpose nor for being held till maturity.
Banks should decide the category of the investment at the time of acquisition and the decision should be recorded on the investment proposal/deal slip.
Investments under HTM category should not normally exceed 25% of the total investments of the bank, except as specified in the Master Circular, wherein the limit of 25% can be exceeded.
Further, as per Fourth Bi-monthly Monetary Policy Statement, 2014-15 – SLR Holdings under Held to Maturity Category (Notification No. RBI/2014-15/254 DBOD.No.BP.BC.42/21.04.141/2014-15 dated 07th October 2014), it was decided to bring down the ceiling on SLR securities under the HTM category from 24 per cent of NDTL to 22 per cent in a graduated manner. Accordingly it was advised that: the total SLR securities held in the HTM category is not more than 23.50 per cent with effect from January 10, 2015, 23.0 per cent with effect from April 4, 2015, 22.5 per cent with effect from July 11, 2015 and 22.0 per cent with effect from September 19, 2015, of their DTL as on the last Friday of the second preceding fortnight.
The Banks may hold the following securities under HTM:
(a) SLR Securities upto prescribed percentage of their DTL as on the last Friday of the second preceding fortnight (updated vide RBI notification RBI/2016-17/83 DBR.No.Ret.BC.15/12.02.001/2016-17 dated October 13, 2016), which is as follows:
Period |
Prescribed percentage of DTL |
10 January 2015 to 03 April 2015 |
23.50% |
04 April 2015 to 10 July 2015 |
23.00% |
11 July 2015 to 18 September 2015 |
22.50% |
19 September 2015 to 08 January 2016 |
22.00% |
09 January 2016 to 01 April 2016 |
21.50% |
02 April 2016 to 08 July 2016 |
21.25% |
09 July 2016 to 30 September 2016 |
21.00% |
01 October 2016 to 6 January 2017 |
20.75% |
07 January 2017 onwards |
20.50% |
(b) Non-SLR securities included under HTM as on September 02, 2004.
(c) Fresh re-capitalisation bonds received from the Government of India towards their re-capitalisation requirement and held in Investment portfolio, excluding re-capitalisation bonds of other bank acquired for investment purpose.
(d) Fresh investment in the equity of subsidiaries and joint ventures.
(e) RIDF/SIDBI/RHDF deposits.
(f) Investment in long-term bonds (with a minimum residual maturity of seven years) issued by companies engaged in infrastructure activities.
The banks will have the freedom to decide on the extent of holdings under HFT and AFS. This will be decided by them after considering various aspects such as basis of intent, trading strategies, risk management capabilities, tax planning, manpower skills, capital position.
RBI vide its circular dated 16th July 2015 decided that for accounting periods commencing on or after April 1, 2015, deposits placed with NABARD/ SIDBI/ NHB on account of shortfall in priority sector targets should be included under Schedule 11- ‘Other Assets’ under the subhead ‘Others’ of the Balance Sheet instead of disclosing under Schedule 8 “Investments”.