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 “fair value”, among others.
The directions also outline the classification of investments into three categories: held-to-maturity, available-for-sale, and held-for-trading. The valuation of investments is based on fair value, and the directions provide guidance on the determination of fair value.
In addition, the directions cover the operation of investment portfolios, including the recognition and derecognition of financial assets and liabilities, and the accounting treatment of gains and losses.
The directions are effective from the date of issuance and are applicable to all commercial banks in India.
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