Investment Reserve Account
In the event of provisions created on account of depreciation in the ‘Available for Sale’ or ‘Held for Trading’ categories being found to be in excess of the required amount in any year, the excess should be credited to the Profit & Loss account and an equivalent amount (net of taxes, if any and net of transfer to Statutory Reserves as applicable to such excess provision) should be appropriated to an Investment Reserve Account in Schedule 2 – “Reserves & Surplus” under the head “Revenue and other Reserves” and would be eligible for inclusion under Tier II within the overall ceiling of 1.25 per cent of total Risk Weighted Assets prescribed for General Provisions/ Loss Reserves.
7.18 Banks are allowed to include the ‘General Provisions on Standard Assets’ and ‘Provisions held for Country Exposures’ in Tier II capital. However, the provisions on ‘standard assets’ together with other ‘general provisions/ loss reserves’ and ‘provisions held for country exposures’ will be admitted as Tier II capital up to a maximum of 1.25 per cent of the total risk weighted assets.