Master Direction – Classification, Valuation and Operation of Investment Portfolio of Commercial Banks (Directions), 2023
The Reserve Bank of India has issued directions for the classification, valuation, and operation of investment portfolios of commercial banks. These directions are applicable to all commercial banks, including regional rural banks and local area banks.
The directions define various terms related to investment portfolios, including “active market”, “approved securities”, “associate”, “carrying cost”, and others. These definitions are crucial for understanding the classification and valuation of investments.
The directions also outline the effective date, applicability, and scope of the regulations. They provide guidelines for the classification of investments into different categories, such as government securities, corporate bonds, and debentures.
The valuation of investments is based on fair value, which is determined using observable inputs, such as market prices or quotes. The directions also provide guidelines for the recognition and derecognition of investments, as well as the treatment of gains and losses.
Additionally, the directions cover the operation of investment portfolios, including the management of risks, the maintenance of records, and the reporting requirements.
Overall, the Master Direction provides a comprehensive framework for the classification, valuation, and operation of investment portfolios of commercial banks in India.
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