Prudential Norms for Investment Portfolio by Banks
The Reserve Bank of India has outlined prudential norms for the classification, valuation, and operation of investment portfolios by banks.
Investment Policy: Banks must have a board-approved investment policy that covers aspects such as STRIPS, Ready Forward Contracts in Government Securities, and transactions through SGL accounts.
Monetary Penalty: Banks will be subject to a monetary penalty for non-compliance, with the amount of the penalty illustrated as ₹50,000 for a default of ₹5 crore.
Internal Control System: Banks must have an internal control system in place to ensure compliance with investment regulations.
Engagement of Brokers: Banks may engage brokers for investment transactions, with certain exceptions.
Audit and Reporting: Banks must conduct regular audits and reviews of their investment transactions and report any discrepancies.
Non-SLR Investments: Banks must appraise and disclose their non-SLR investments, with internal assessments and regulatory requirements in place.
Prudential Guidelines: Banks must follow prudential guidelines for investments in non-SLR securities, including listing and rating requirements, and fixing of prudential limits.
Role of Boards: The board of directors of banks must play an active role in overseeing investment decisions and ensuring compliance with regulatory requirements.
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