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RBI/2022-23/05
DOR.MRG.REC.10/21.04.141/2022-23 April 01, 2022
All Primary (Urban) Co-operative Banks
Dear Sir / Madam,
Master Circular on Investments by Primary (Urban) Co-operative Banks
Please refer to our Master Circular DOR.MRG.REC.50/21.04.141/2021-22 dated
September 20, 2021 on the captioned subject. The enclosed Master Circular
consolidates and updates all the instructions/guidelines on the subject issued as on
date.
Yours faithfully,
(Usha Janakiraman)
Chief General ManagerINDEX
Para Page
Subject
No. No.
1 Restrictions on Holding Shares in Other Co-operative Societies 3
2 Statutory (SLR) Investments 4
3 Investment Policy 4
4 General Guidelines 5
5 Transactions through SGL Accounts 11
6 Engagement of brokers 14
7 Settlement of Government Securities Transactions through CCIL 16
8 Trading of Government Securities on Stock Exchanges 16
9 Repo/Reverse Repo Transactions 19
10 Short Sale in Government Securities 20
11 When Issued in Government Securities 20
12 Non- SLR Investments 21
13 Internal Control and Investment Accounting 26
14 Recommendations of Ghosh Committee 28
15 Categorisation of Investments 29
16 Valuation of Investments 32
17 Investment Fluctuation Reserve (IFR) 37
Annex
I Certain clarifications regarding brokers’ limits 39
II Definitions of certain terms 41
III Guidelines for accounting of Repo/Reverse Repo transactions 42
III(a) Recommended accounting methodology for Repo/Reverse Repo 45
Transactions
III(b) Illustrative examples for accounting Repo/Reverse Repo transactions 47
Appendix
A List of circulars consolidated in the Master Circular on Investments by 54
primary urban co-operative banks
B List of other circulars from which instructions relating to investments have 63
been consolidated in the Master CircularMASTER CIRCULAR ON INVESTMENTS
BY PRIMARY (URBAN) CO-OPERATIVE BANKS
1. RESTRICTIONS ON HOLDING SHARES IN OTHER CO-OPERATIVE
SOCIETIES
1.1 Section 19 of the Banking Regulation Act, 1949 (As Applicable to Co-operative
Societies) (BR Act, 1949 (AACS)) stipulates that no co-operative bank shall hold
shares in any other co-operative society except to such extent and subject to such
conditions as the Reserve Bank of India (Reserve Bank) may specify in that behalf.
However, nothing contained in the section applies to -
1.1.1 shares acquired through funds provided by the State Government for
that purpose;
1.1.2 in the case of a central co-operative bank, the holding of shares in the
state co-operative bank to which it is affiliated; and
1.1.3 in the case of a primary (urban) co-operative bank (UCB), holding of
shares in the central co-operative bank to which it is affiliated or in the
state co-operative bank of the state in which it is registered.
1.2 In pursuance of the powers conferred by Section 19 read with Section 56 of
the said Act, the Reserve Bank has specified that the extent and conditions subject to
which co-operative banks may hold shares in any other co-operative society shall be
as follows:
1.2.1 The total investments of a co-operative bank in the shares of co-
operative institutions, other than those falling under any of the categories
stated at paragraphs 1.1.1 to 1.1.3 above, shall not exceed 2 per cent of
its owned funds (paid-up share capital and reserves).
1.2.2 The investment of a bank in the shares of any one co-operative
institution coming under paragraph 1.2.1 above shall not exceed 5 per
cent of the subscribed capital of that institution.
Note: When more than one co-operative bank contributes to the shares in a co-
operative society falling under paragraph 1.2.1, the limit of 5 per cent of the subscribed
capital indicated above shall apply not in respect of the investment of each of the
banks but in respect of the investment of all the banks taken together. In other words,
the total investment of all the co-operative banks should be limited to 5 per cent of the
subscribed capital of the enterprise concerned.
3A co-operative bank should offer to make its contribution to the shares of a co-
operative society coming under paragraph 1.2.1 above only if the bye-laws of the
recipient society provide for the retirement of share capital contributed by it.
1.2.3 The retirement of the share capital contributed by a bank to the shares
of any society coming under paragraph 1.2.1 above should be
completed in 10 equal annual installments commencing from the co-
operative year immediately following the year in which the concern
commences business or production.
1.2.4 A co-operative bank should not, except with the permission of the
Reserve Bank, contribute to the share capital of a society coming under
category referred to in paragraph 1.2.1 above, if it is situated outside its
area of operation.
1.2.5 The above restrictions will not apply to holdings by co-operative banks
of shares in non-profit making co-operative societies such as those
formed for the protection of mutual interests, (e.g., co-operative banks'
association) or for the promotion of co-operative education etc., (e.g.,
state co-operative union), or housing co-operatives for the purpose of
acquiring premises on ownership basis, etc.
2 STATUTORY (SLR) INVESTMENTS
2.1 Maintenance of Statutory Liquidity Ratio (SLR) for UCBs
Banks shall refer to the Master Direction-Reserve Bank of India [Cash Reserve Ratio
(CRR) and Statutory Liquidity Ratio (SLR)] Directions, 2021 on the maintenance of
SLR.
3 INVESTMENT POLICY
3.1 Keeping in view the various regulatory/statutory guidelines and the bank's own
internal requirements, UCBs should lay down, with the approval of their Board of
Directors, the broad Investment Policy and objectives to be achieved while
undertaking investment transactions. The Investment Policy should be reviewed each
year. The Board/Committee/Top Management should actively oversee investment
transactions. Banks should not undertake any transactions on behalf of Portfolio
Management Scheme (PMS) clients in their fiduciary capacity, and on behalf of other
4clients, either as custodians of their investments or purely as their agents.
3.2 The bank’s Investment Policy should clearly indicate the authority to put through
investment deals, the procedure to be followed for obtaining sanction of the
appropriate authority for putting through deals, fixing various prudential exposure
limits, and reporting system.
3.3 The Investment Policy of the bank should include guidelines on the quantity
(ceiling) and quality of each type of security to be held on its own investment account.
It should be prepared strictly observing the instructions issued by the Registrar of Co-
operative Societies (Central Registrar of Co-operative Societies, where applicable)
and the Reserve Bank from time to time and clearly spell out the internal control
mechanism, accounting standards, audit, review and reporting system to be evolved.
3.4 All the transactions should be clearly recorded indicating full details. The Top
Management should undertake a periodic review of investment transactions in a
critical manner and put up details of large transactions to the Board, for information.
3.5 A copy of the internal Investment Policy guidelines framed by the bank with the
approval of its Board should be forwarded to the concerned Regional Office of
Department of Supervision, Reserve Bank, certifying that the policy is in accordance
with the prescribed guidelines and the same has been put in place. Subsequent
changes, if any, in the Investment Policy should also be advised to the Regional Office
of the Reserve Bank.
3.6 For investment in non-SLR instruments, banks should review their Investment
Policy and ensure that it provides for the nature and extent of investments intended to
be made, the risk parameters, and cut-loss limits for holding / divesting the
investments. The banks should put in place proper risk management systems for
capturing and analyzing the risk in respect of non-SLR investments and taking
remedial measures in time. Banks should also be guided by instructions given in
paragraph 12 of this Master Circular.
4 GENERAL GUIDELINES
4.1 UCBs should not undertake any purchase/sale transactions with broking firms
or other intermediaries on principal-to-principal basis.
54.2 Banks should not hold an oversold position in any security except for those
banks which are eligible to undertake short sale position in Government securities as
prescribed in paragraph 10 of this Master Circular. However, scheduled UCBs may
sell a Government Security already contracted for purchase, provided:
4.2.1 the purchase contract is confirmed prior to the sale,
4.2.2 the purchase contract is guaranteed by Clearing Corporation of India
Ltd. (CCIL) or the security is contracted for purchase from the Reserve
Bank and,
4.2.3 the sale transaction will settle either in the same settlement cycle as the
preceding purchase contract, or in a subsequent settlement cycle so that
the delivery obligation under the sale contract is met by the securities
acquired under the purchase contract (e.g. when a security is purchased
on T+0 basis, it can be sold on either T+0 or T+1 basis on the day of the
purchase; if however it is purchased on T+1 basis, it can be sold on T+1
basis on the day of purchase or on T+0 or T+1 basis on the next day).
Sale of Government Securities allotted to successful bidders in primary
issues on the day of allotment, with and between CSGL constituent
account holders is permitted.
4.3 For purchase of securities from the Reserve Bank through Open Market
Operations (OMO), no sale transactions should be contracted prior to receiving the
confirmation of the deal/advice of allotment from the Reserve Bank.
4.4 Banks should exercise abundant caution to ensure adherence to these
guidelines. The concurrent auditors should specifically verify the compliance with
these instructions. The concurrent audit reports should contain specific observations
on the compliance with the above instructions and should be incorporated in the
monthly report to the Chairman/Managing Director/Chief Executive Officer of the bank
and the half yearly review to be placed before the Board of Directors. CCIL will make
available to all market participants as part of its daily reports, the time stamp of all
transactions as received from NDS-OM. The mid office/back office and the auditors
may use this information to supplement their checks/scrutiny of transactions for
compliance with the instructions. Any violation noticed in this regard should
immediately be reported to the concerned Regional Office of Department of
Supervision, Reserve Bank of India. Any violation noticed in this regard would attract
penalties as currently applicable to the bouncing of SGL even if the deal has been
6settled because of the netting benefit under DVP III, besides attracting further
regulatory action as deemed necessary.
4.5 Banks successful in the auction of primary issue of Government Securities,
may enter into contracts for sale of the allotted securities in accordance with the terms
and conditions as indicated below:
4.5.1 The contract for sale can be entered into only once by the allottee bank,
on the basis of an authenticated allotment advice issued by Reserve
Bank. The selling bank should make suitable noting/stamping on the
allotment advice indicating the sale contract number etc., the details of
which should be intimated to the buying entity. Any sale of securities
should be only on a T+0 or T+1 settlement basis.
4.5.2 The contract for sale of allotted securities can be entered into by banks
only with entities maintaining SGL Account with Reserve Bank for
delivery and settlement on the next working day through the DVP
system.
4.5.3 The face value of securities sold should not exceed the face value of
securities indicated in the allotment advice.
4.5.4 The sale deal should be entered into directly without the involvement of
broker/s.
4.5.5 Separate record of such sale deals should be maintained containing
details such as number and date of allotment advice, description and the
face value of securities allotted, the purchase consideration, the number,
date of delivery and face value of securities sold, sale consideration, the
date and details of actual delivery etc. This record should be made
available to Reserve Bank for verification. Banks should immediately
report any cases of failure to maintain such records.
4.5.6 Such type of sale transactions of Government Securities allotted in the
auctions for primary issues on the same day and based on authenticated
allotment advice should be subjected to concurrent audit and the relative
audit report should be placed before the Board of Directors of the bank
once every month. A copy thereof should also be sent to the concerned
Regional Office of Department of Supervision, RBI.
74.5.7 Banks will be solely responsible for any failure of the contracts due to
the securities not being credited to their SGL account on account of non-
payment etc.
4.6 While undertaking OTC transactions in Government securities, banks should
seek a scheduled commercial bank, a Primary Dealer (PD), a financial institution,
another UCB, insurance company, mutual fund or provident fund, as a counterparty
for their transactions. Preference should be given to direct deals with such counter
parties. It will be desirable to check prices from other banks or PDs with whom the
UCB may be maintaining Gilt account. The prices of all trades done in Government
Securities, including those traded through NDS-OM, are also available at Reserve
Bank’s website (www.rbi.org.in).
4.7 Scheduled UCBs may undertake retailing of Government Securities with non-
bank clients, such as provident funds, non-banking financial companies, high net
worth individuals etc. subject to the following conditions:
4.7.1 Banks may freely buy and sell Government Securities on an outright
basis at the prevailing market prices without any restriction on the period
between sale and purchase.
4.7.2 Retailing of Government Securities should be on the basis of ongoing
market rates/yield curve emerging out of secondary market transactions.
4.7.3 Immediately on sale, the corresponding amount should be deducted by
the bank from its investment accounts and also from its SLR assets.
4.7.4 These transactions should be looked into by the concurrent/ statutory
auditors of the bank.
4.7.5 Banks should put in place adequate internal control checks/
mechanisms as advised by the Reserve Bank from time to time.
4.8 Banks may take advantage of the non-competitive bidding facility in the auction
of Government of India dated securities, provided by the Reserve Bank. Under this
scheme, banks may bid upto ₹2 crore (face value) in any auction of Government of
India dated securities, either directly, through a bank or through a PD. For availing
this facility, no bidding skill is required, as allotment upto ₹2 crore (face value) is made
at the weighted average cut-off rate which emerges in the auction. UCBs may also
participate directly or through a bank or a PD in the competitive and non-competitive
auctions of State Development Loans (SDLs) conducted by the Reserve Bank.
8Participation in non-competitive auction of SDLs will be as per guidelines prescribed
in the Scheme of Non-Competitive Bidding in the Auction of SDLs issued vide circular
IDMD.No.954/08.03.001/2009-10 dated August 24, 2009, as amended from time to
time. An advertisement in leading newspapers is issued 4-5 days in advance of the
date of auction. Half yearly auction calendar of Government of India securities is also
issued by the Reserve Bank.
4.9 Gilt Accounts, if opened, should be used for holding the securities and such
accounts should be maintained in the same bank with whom the cash account is
maintained.
4.10 In case Gilt account is opened with any of the eligible non-banking institutions,
the particulars of the designated funds account (with a bank) should be intimated to
that institution.
4.11 All transactions must be monitored to see that delivery takes place on settlement
day. The fund account and investment account should be reconciled on the same day
before close of business.
4.12 Officials deciding about purchase and sale transactions should be separated
from those responsible for settlement and accounting.
4.13 All investment transactions should be perused by the Board at least once a
month.
4.14 When the bank has been specifically permitted to tender physical SGL transfer
forms, it should keep a proper record of the SGL forms received / issued to facilitate
counter-checking by their internal control systems/Inspecting Officers of Reserve
Bank/other auditors.
4.15 All purchase/sale transactions in Government Securities by the banks should
necessarily be through SGL/CSGL account (with Reserve Bank) or Gilt account (with
a scheduled commercial bank/State co-operative bank/PD/SHCIL) or in a
dematerialised account with depositories (NSDL/CDSL).
4.16 No transactions in Government Securities by a UCB should be undertaken in
physical form with any broker.
4.17 The entities maintaining the CSGL/designated funds accounts are required to
ensure availability of clear funds in the designated funds accounts for purchases and
of sufficient securities in the CSGL account for sale transactions.
4.18 The security dealings of banks generally being for large values, it may be
necessary to ensure, before concluding the deal, the ability of the counterparty to fulfill
the contract, particularly where the counterparty is not a bank.
94.19 While buying securities for SLR purpose, the bank should ensure that the
security it intends to purchase has an SLR status. The SLR status of securities issued
by the Government of India and the State Governments will be indicated in the Press
Release issued by the Reserve Bank at the time of issuance of the securities. An
updated and current list of the SLR securities will be posted on the Reserve Bank’s
website (https://dbie.rbi.org.in) under the link “Database on Indian Economy-
Statistics-Financial Market-Government Securities Market.”
4.20 In order to avoid concentration of risk, the banks should have a fairly diversified
investment portfolio. Smaller investment portfolios should preferably be restricted to
securities with high safety and liquidity such as Government Securities.
4.21 UCBs may seek the guidance of Primary Dealers’ Association of India
(PDAI)/Fixed Income and Money Market Dealers' Association (FIMMDA) on
investment in Government Securities.
Negotiated Dealing System – Order Matching
4.22 All licensed UCBs fulfilling the eligibility criteria contained in circular
IDMD.DOD.No.13/10.25.66/2011-12 dated November 18, 2011 as amended from
time to time, are allowed direct access to Negotiated Dealing System – Order
Matching platform. The eligibility criteria are as under:
(a) Current account with RBI or a funds account with one of the Designated
Settlement Banks (DSBs) chosen by Clearing Corporation of India
Limited (CCIL) for funds settlement.
(b) Subsidiary General Ledger (SGL) Account with RBI.
(c) Membership of Negotiated Dealing System (NDS).
(d) Indian Financial Network (INFINET) connectivity.
(e) Membership of CCIL.
(f) Minimum Capital to Risk Weighted Assets Ratio (CRAR) of 9 per cent.
(g) Net Non-Performing Assets (NPA) of less than 5 per cent.
(h) Minimum net worth of ₹25 crore.
4.23 All eligible UCBs desirous of obtaining NDS-OM membership are required to
apply to concerned Regional Office of the Department of Supervision, RBI, for
regulatory clearance before applying to Financial Markets Regulation Department
(FMRD), RBI for NDS-OM membership.
4.24 Eligible UCBs applying for NDS-OM membership need to have the required
infrastructure in place for direct access to NDS-OM and also bear the cost involved in
setting up the infrastructure. After opening a SGL account with the RBI (which is one
10of the several requirements to be fulfilled by a UCB for obtaining NDS-OM
membership), the UCB concerned cannot open / maintain a gilt account with a CSGL
account holder. However, such UCBs can continue to bid for Government securities
under the scheme of non-competitive bidding in Government securities.
5 TRANSACTIONS THROUGH SGL ACCOUNTS
5.1 SGL Account
5.1.1 Transfers through SGL accounts by UCBs having SGL facility can be
made only if they maintain a regular current account with the Reserve
Bank. All transactions in Government Securities for which SGL facility is
available, should be put through SGL accounts only.
5.1.2 Banks should report / conclude their transactions on NDS / NDS-OM
and clear / settle them through CCIL as central counterparty. In such
cases where exceptions have been specifically permitted to tender
physical SGL transfer forms, the guidelines regarding SGL transfer
forms should also be followed.
5.1.3 Before issue of SGL transfer forms covering the sale transactions, banks
should ensure that they have sufficient balance in the respective SGL
accounts. Under no circumstances, an SGL transfer form issued by a
bank in favour of another bank should bounce for want of sufficient
balance in the SGL account. The purchasing bank should issue the
cheques (or make payment by any other eligible mode) only after receipt
of the SGL transfer forms from the selling bank.
5.1.4 In the event of bouncing of SGL transfer forms and the failure of the
account holder concerned to offer satisfactory explanation for such
bouncing, the UCB shall be liable to pay penalties as under:
i. Graded monetary penalties subject to a maximum penalty of ₹5
lakhs per instance:
Illustration
Sl.
Applicable to Monetary penalty [Penal amount on
No
₹5 crore default]
1 First three defaults in a 0.10 per cent
financial year (April to (10 paise per ₹100 ₹50,000/-
March) FV)
2 Next three defaults in the 0.25 per cent
₹1,25,000/-
same financial year (25 paise per ₹100
11FV)
3 Next three defaults in the 0.50 per cent
same financial year (50 paise per ₹100 ₹2,50,000/-
FV)
ii. On the tenth default in a financial year, the bank will be debarred from
using the SGL A/c for undertaking short sales in Government securities
even to the extent permissible under circular
IDMD.No/11.01.01(B)/2006-07 dated January 31, 2007 as amended
from time to time, during the remaining portion of the financial year. In
the next financial year, upon being satisfied that the UCB in question
has made improvements in its internal control systems, RBI may grant
specific approval for undertaking short sales by using the SGL A/c
facility.
iii. The monetary penalty may be paid by the UCB concerned by way of a
cheque or through electronic mode for the amount favouring the
Reserve Bank of India, within five working days of receipt of intimation
of order imposing penalty from RBI.
5.1.5 For the purpose of instructions given in paragraph 5.1.3, ‘SGL bouncing’
shall mean failure of settlement of a Government securities transaction
on account of insufficiency of funds in the current account of the buyer
or insufficiency of securities in the SGL / CSGL account of the seller,
maintained with the Reserve Bank of India.
5.1.6 The defaulting UCB shall make appropriate disclosure, on the number of
instances of default as well as the quantum of penalty paid to the
Reserve Bank during the financial year, under the “Notes to Account” in
its balance sheet.
5.1.7 Notwithstanding anything contained in paragraphs 5.1.3 to 5.1.5, the
Reserve Bank reserves the right to take any action including temporary
or permanent debarment of the SGL account holder, in accordance with
the powers conferred under the Government Securities Act, 2006 as it
may deem fit, for violation of the terms and conditions of the opening and
maintenance of SGL/ CSGL accounts or breach of the operational
guidelines issued from time to time.
125.1.8 In addition to the above, as NDS Members, UCBs should strictly abide
by all other provisions of the NDS (Membership) Regulations, 2002 as
amended from time to time.
5.1.9 Value Free Transfer (VFT) of the government securities, i.e. transfer of
securities from one SGL / CSGL to another SGL / CSGL account, without
corresponding payment leg in the books of RBI, shall be in terms of
instructions issued by Internal Debt Management Department vide
circular IDMD.CDD.No.S930/11.22.003/2021-22 dated October 5, 2021.
5.2 SGL Forms
5.2.1 The SGL transfer forms should be in the standard format prescribed by
the Reserve Bank and printed on semi-security paper of uniform size.
These should be serially numbered and there should be a control system
in place to account for each SGL form.
5.2.2 SGL transfer forms should be signed by two authorised officials of the
bank whose signatures should be recorded with the respective PDO of
Reserve Bank and other banks.
5.2.3 The SGL transfer form received by the purchasing bank should be
deposited in its SGL account immediately. No sale should be affected
by way of return of SGL transfer form held by the bank.
5.2.4 Any bouncing of SGL transfer forms issued by selling bank in favour of
the buying bank should immediately be brought to the notice of the
Reserve Bank by the buying bank.
5.3 Control, Violation and Penalty Provisions
5.3.1 Record of SGL transfer forms issued/received should be maintained.
Balances as per the bank’s books in respect of SGL accounts should be
reconciled with the balances in the books of PDOs. The PDO concerned
will forward a monthly statement of balances of SGL/CSGL account to
all account holders. UCBs having SGL/CSGL accounts with PDOs may
use these statements for the purpose of monthly reconciliation of their
SGL/CSGL balances as per their books and the position in this regard
should be placed before the Audit Committee of the Board. This
reconciliation should also be periodically checked by the internal audit
department. A system for verification of the authenticity of the SGL
transfer forms received from other banks and confirmation of authorised
13signatories should be put in place.
5.3.2 Banks should also forward a quarterly certificate to the PDO concerned,
indicating that the balances held in the SGL accounts with the PDO have
been reconciled and that it has been placed before the Audit Committee
of the Board. A copy thereof should be sent to the concerned Regional
Office concerned of the Department of Supervision, RBI.
5.3.3 Banks should put in place a system to report to the Top Management on
a monthly basis the details of transactions in securities, details of SGL
bouncing and review of investment transactions undertaken during the
period.
5.3.4 All promissory notes, debentures, shares, bonds, etc., held in physical
form, should be properly recorded and held under joint custody. A
separate register may be maintained to record the particulars of
securities taken out/re-lodged. These should be subjected to periodical
verification, say once in a quarter or half-year, by persons unconnected
with their custody.
5.3.5 Certificates should be obtained at quarterly/half-yearly intervals in
respect of securities lodged with other institutions. Similarly, it is
necessary to reconcile the SGL Account balance with the PDO at
monthly intervals.
5.3.6 The internal inspectors and concurrent auditors should peruse the
transactions to ensure that the deals have been undertaken in the best
interest of the bank. The Vigilance Cell should also make surprise
sample checks of large transactions.
5.3.7 The concurrent auditors should certify that investments held by the bank,
as on the last reporting Friday of each quarter and as reported to
Reserve Bank, are actually owned/held by it. Such a certificate should
be submitted to the concerned Regional Office of Department of
Supervision RBI, within 30 days from the end of the relative quarter.
6 ENGAGEMENT OF BROKERS
6.1 Dealing through Brokers
6.1.1 The inter-bank securities transactions should be undertaken directly
between banks and no bank should engage the services of any broker
in such transactions. Banks may, however, undertake securities
transactions among themselves or with non-bank clients through
members of National Stock Exchange (NSE) / BSE wherein the
14transactions are transparent. In case any transactions in securities are
not undertaken on NSE/BSE, the same should be undertaken by the
banks directly without the use of brokers.
6.1.2 Purchase of permissible shares and PSU bonds in the secondary market
(other than inter-bank transactions) should be only through recognised
stock exchanges and registered stock- brokers.
6.1.3 The SBI DFHI has been permitted to operate as a broker in the inter-
bank participation market. This would enable the banks to seek
intermediation of SBI DFHI for borrowing/lending, if required. However,
the banks shall be free to settle transaction in the inter-bank
participations market directly, if so desired.
6.1.4 If a deal is put through with the help of a broker, the role of the broker
should be restricted to that of bringing the two parties to the deal
together. Under no circumstances banks should give power of attorney
or any other authorisation to the brokers/ intermediaries to deal on their
behalf in the money and securities markets.
6.1.5 Disclosure of counter party should be insisted upon on conclusion of the
deal put through brokers.
6.1.6 Contract confirmation from the counter party should be insisted upon.
6.1.7 The brokers should not be involved in the settlement process at all i.e.,
both the fund settlement and delivery of security should be done with the
counterparty directly.
6.2 Empanelment of Brokers
6.2.1 The bank should prepare a panel of brokers with the approval of their
Board of Directors.
6.2.2 Brokers should be empaneled after verifying their credentials e.g.:
(a) SEBI registration
(b) Membership of BSE/NSE for debt market.
(c) Market turnover in the preceding year as certified by the
Exchange/s.
(d) Market reputation etc.
6.2.3 The bank should check websites of SEBI/respective exchanges, to
ensure that the broker has not been put in the banned list.
156.3 Broker Limits
6.3.1 A disproportionate part of the business should not be transacted through
only one or a few brokers. Banks should fix aggregate contract limits for
each of the approved brokers and ensure that these limits are not
exceeded. A record of broker-wise details of deals put through and
brokerage paid should be maintained.
6.3.2 A limit of 5 per cent of total transactions (both purchases and sales)
entered into by the banks during a year should be treated as the
aggregate upper contract limit for each of the approved brokers.
6.3.3 This limit should cover both the business initiated by the bank and the
business offered/brought to the bank by a broker.
6.3.4 It should be ensured that the transactions entered through individual
brokers during a year normally do not exceed the prescribed limit.
However, if it becomes necessary to exceed the aggregate limit for any
broker, the specific reasons, therefore, should be recorded in writing by
the authority empowered to put through the deals. In such cases, post-
facto approval of the Board may be obtained after explaining the
circumstances under which the limit was exceeded.
Note: Clarifications on certain issues raised by the banks in this regard are furnished
in Annex I.
7 SETTLEMENT OF GOVERNMENT SECURITIES TRANSACTIONS –
THROUGH CLEARING CORPORATION OF INDIA LTD. (CCIL)
7.1 All Government Securities transactions (both Outright and Repo) are being
settled through CCIL only.
7.2 UCBs, which are not a member of NDS-CCIL system, should undertake their
transactions in Government Securities through gilt account/demat account maintained
with a NDS member.
7.3 All outright secondary market transactions in Government Securities will be
settled on T+1 basis. However, in case of repo transactions in Government Securities,
the market participants will have the choice of settling the first leg on either T+0 basis
or T+1 basis as per their requirement.
8 TRADING OF GOVERNMENT SECURITIES ON STOCK EXCHANGES
8.1 The facility of trading of Government Securities on the stock exchanges, in the
16dematerialized mode only, is available to banks in addition to the present NDS-OM of
the Reserve Bank, which will continue to remain in place.
8.2 The UCBs have the option to undertake transactions in dated Government of
India securities in dematerialised form on automated order driven system of NSE and
BSE in addition to the existing mode of dealing through SGL/CSGL accounts with
Reserve Bank or gilt accounts with the designated entities such as Scheduled
Commercial Bank/PD/State Co-operative Bank etc.
8.3 As the trading facility on the above stock exchanges will operate parallel to the
present system of trading in Government Securities, the trades concluded on the
exchanges will be cleared by their respective clearing corporations/Clearing Houses.
However, trading members of the stock exchanges shall not be involved in the
settlement process for any regulated entity of Reserve Bank. All stock exchange
trades of banks have to be settled either directly with CCIL/Clearing House (in case
they are clearing members) or else through a clearing member custodian.
8.4 With a view to facilitating participation on the stock exchanges within the
regulations prescribed by Reserve Bank, SEBI and the exchanges, banks are being
extended the following facilities:
8.4.1 Opening demat accounts with a bank depository participant (DP) of
NSDL/CDSL or with SHCIL in addition to their SGL/CSGL accounts with
Reserve Bank/authorised entities.
8.4.2 Value free transfer of securities between SGL/CSGL and demat
accounts is being enabled at PDO, Mumbai, subject to operational
guidelines issued separately by Internal Debt Management Department
to all SGL / CSGL account holders.
8.5 The balances in Government Securities maintained by the banks in the
depositories will be included for SLR purpose. Any shortfall in maintenance of
CRR/SLR resulting from settlement failure (on either the NDS-CCIL market or the
stock exchanges) will attract the usual penalties.
8.6 The Boards of UCBs may take a conscious decision in regard to using the stock
exchange platform for making investments in Government Securities in addition to the
existing NDS-CCIL market and the direct bidding facility. As regulations of SEBI will
also apply insofar as trading of Government Securities is concerned, the Board should
frame and implement a suitable policy to ensure that operations are conducted in
accordance with the norms laid down by Reserve Bank/SEBI and the respective stock
exchange. Prior to commencing operations, the dealing officials should also familiarize
themselves with the basic operating procedures of the stock exchanges.
178.7 Operational Guidelines
8.7.1 Banks should put in place appropriate internal control systems catering
to stock exchange trading and settlement before commencing
operations on the exchanges. The back-office arrangement should be
such that trading on the NDS-OM/OTC market and on the stock
exchanges can be tracked easily for settlement, reconciliation and
management reporting. Banks should, therefore, install enabling IT
infrastructure and adequate risk management systems.
8.7.2 Only SEBI registered brokers who are authorized by the permitted
exchanges (NSE/BSE) to undertake transactions in Government
Securities can be used for placing buy/sell orders. A valid contract note
indicating the time of execution must be obtained from the broker at end
of day.
8.7.3 The dealing officials should independently check prices in the market or
on the stock exchange screens before placing their orders with the
brokers. The decision-making processes cannot be delegated to brokers
by the banks.
8.7.4 The transactions done through any broker will be subjected to the current
guidelines on transactions done through brokers.
8.7.5 Brokers/trading members shall not be involved in the settlement process;
all trades have to be settled through clearing member custodians.
Hence, it will be necessary for UCBs to enter into a bilateral clearing
agreement with such service providers beforehand.
8.7.6 All transactions must be monitored with a view to ensuring timely receipt
of funds and securities. Any delay or failure should be promptly taken up
with the exchange/authorities concerned.
8.7.7 At the time of trade, securities must be available with the banks either in
their SGL or in the demat account with depositories.
8.7.8 Any settlement failure on account of non-delivery of securities/non-
availability of clear funds will be treated as SGL bouncing and the current
penalties in respect of SGL bouncing will be applicable. The stock
exchanges will report such failures to the respective PDOs.
8.7.9 For the limited purpose of dealing through the screen-based trading
system of the stock exchanges the condition that a UCB should seek a
scheduled commercial bank, a PD, a financial institution, another UCB,
insurance company, mutual fund or provident fund as a counterparty,
18while undertaking transactions in Government Securities, will not apply.
8.7.10 Banks should report on weekly basis to their Audit Committee of the
Board, giving the details of trades on aggregate basis done on the stock
exchanges and details of any ‘closed-out’ transactions on the
exchanges.
8.7.11 The banks should take all necessary precautions and strictly adhere to
all instructions/guidelines issued by the Reserve Bank relating to
transactions in Government Securities as hitherto.
9 REPO/REVERSE REPO TRANSACTIONS
9.1 UCBs may execute repo transactions subject to adherence to instructions given
in Repurchase Transactions (Repo) (Reserve Bank) Directions, 2018 issued vide
circular FMRD.DIRD.01/14.03.038/2018-19 dated July 24, 2018.
9.2 However, only Scheduled UCBs with strong financials and sound risk
management practices are eligible to undertake repo transactions in corporate
debt securities. Accordingly, scheduled UCBs, fulfilling the following conditions
only would be permitted to undertake such transactions.
(a) CRAR of 10 per cent or more and gross NPA of less than 5 per cent and
continuous record of profits during the previous three years.
(b) Sound risk management practices and mandatory concurrent audit of the
Investment portfolio.
9.3 Further, the Repo transactions in corporate bonds shall be undertaken only with
scheduled commercial banks / PDs and not with other market participants. UCBs
which are lenders of funds in a repo transaction may provide for Counter-party
credit risk corresponding to the risk weight for such exposure as applicable to the
loan / investment exposure. UCBs may also ensure that securities acquired
under repo along with other non-SLR investment already in the Balance Sheet
should be within the stipulated ceiling of non-SLR investment (i.e., 10 per cent of
a bank's total deposits as on March 31 of the previous year). The funds borrowed
under repo should be within the limit prescribed for call money borrowing (i.e., 2
per cent of the previous year's deposits).
9.4 UCBs can undertake repo transactions only in Government securities held in
excess of the prescribed SLR requirements.
199.5 Repos shall be accounted as per guidelines contained in Annex III of this Master
Circular.
10. SHORT SELLING IN GOVERNMENT SECURITIES
10.1 Well managed UCBs, who are members of NDS-OM and have regular
concurrent audit of their treasury operations, are permitted to undertake intra-day short
selling of Government Securities. Accordingly, Urban Co-operative Banks, fulfilling the
following conditions are required to seek permission from the Regional Offices
concerned to undertake such transactions.
a. NDS-OM Membership.
b. Net Worth of ₹25 crore, CRAR of 9 per cent or more and net NPA of not
more than 3 per cent.
c. Sound risk management practices and mandatory concurrent audit of their
Treasury Operations.
10.2 UCBs are advised to adhere to the instructions/directions as prescribed in Short
Sale (Reserve Bank) Directions, 2018 issued vide FMRD.DIRD.05/14.03.007/2018-
19 dated July 25, 2018.
11. ‘WHEN ISSUED’ TRANSACTIONS IN GOVERNMENT SECURITIES
11.1 UCBs shall adhere to the When Issued Transactions (Reserve Bank)
Directions, 2018 issued FMRD.DIRD.03/14.03.007/2018-19 dated July 24, 2018 for
undertaking “When Issued” (WI) transactions.
11.2 The accounting treatment of transactions undertaken in WI securities would be
as follows:
(a) The ‘WI’ security should be recorded in books as an off- balance sheet item
till issue of the security.
(b) The off- balance sheet net position in ‘WI’ market should be marked to
market scrip-wise on a daily basis at the day's closing price of the ‘WI’
security. In case the price of the ‘WI’ security is not available, the value of
the underlying security be used instead. Depreciation, if any, should be
provided for and appreciation, if any, should be ignored.
(c) The off-balance sheet (net) position in ‘WI’ securities, scrip-wise, would
attract a risk weight of 2.5 per cent.
20(d) On delivery, the underlying security may be classified in any of the three
categories, viz; ‘Held to Maturity’, ‘Available for Sale’ or ‘Held for Trading’,
depending upon the intent of holding, at the contracted price.
11.3 It is clarified that the securities bought in the ‘WI’ market would be eligible for
SLR purposes, only on delivery.
12. NON - SLR INVESTMENTS
12.1 In order to contain risks arising out of the non-SLR investment portfolio of banks,
the banks should adhere to the following guidelines:
12.1.1 Instruments
UCBs may invest in the following instruments:
(a) "A" or equivalent and higher rated Commercial Papers (CPs), debentures
and bonds.
(b) Units of Debt Mutual Funds and Money Market Mutual Funds.
(c) Equity Shares of Market Infrastructure Companies (MICs).
(d) Equity Shares of the Umbrella Organization (UO) for the UCB Sector
12.1.2 Prudential Limits
(a) The Non-SLR investments shall be limited to 10 per cent of a bank’s total
deposits as on March 31 of the previous year.
(b) Investment in unlisted securities shall be subject to a minimum rating
prescribed at 12.1.1 (a) above and shall not exceed 10 per cent of the total
non-SLR investments at any time.
Note:
1. UCBs investing in equity shares of Market Infrastructure Companies
(MICs), if it becomes necessary to do so for acquiring membership of
MICs are allowed to exceed the limit for Investments in Non- SLR /
unlisted securities prescribed in paragraph 12.1.2 (a) and 12.1.2 (b)
above. The MICs eligible for investments by UCBs are Clearing
Corporation of India Ltd., National Payments Corporation of India, and
Society for World Wide Inter-Bank Financial Tele-Communication
(SWIFT). The list of eligible MICs will be updated from time to time by the
21Reserve Bank of India.
2. Investment by UCBs in the equity shares of the UO, for acquiring its
membership, shall be exempt from the limits for investments in Non- SLR
/ unlisted securities prescribed in paragraph 12.1.2 (a) and 12.1.2 (b)
above.
12.1.3 Restrictions
(a) Investment in perpetual debt instruments is not permitted.
(b) In terms of UBD.(PCB).BPD.Cir.No.14/16.20.000/2007-08 dated
September 18, 2007, where banks have already exceeded the limit for
investment in unlisted securities, no further investment in such securities
will be permitted. Since there is a time lag between issuance and listing of
securities, which are proposed to be listed but not listed at the time of
subscription, banks may not be able to participate in primary issues of non-
SLR securities. In view of this, investments in non-SLR debt securities
(both primary and secondary market) by banks where the security is
proposed to be listed in the Exchange(s) may be considered as investment
in listed security at the time of making investment. However, if such security
is not listed within the period specified, the same will be reckoned for the
10 per cent limit specified for unlisted non-SLR securities. In case such
investments included under unlisted non-SLR securities lead to a breach
of 10 per cent limit, the bank would not be allowed to make further
investments in non-SLR securities (both primary and secondary market) till
such time its investment in unlisted securities comes within the limit of 10
per cent.
(c) Investment in deep discount / zero coupon bonds should be subject to the
minimum rating as stated above and comparable market yields for the
residual duration. However, banks are not permitted to invest in Zero
Coupon Bonds from February 18, 2011 as advised vide circular
No.UCB(PCB)BPD.Cir.No.36/16.20.000/2010-11 dated February 18, 2011
unless the issuer builds up a sinking fund for all accrued interest and keeps
it invested in liquid investments / securities (Government bonds).
(d) Investment in units of Mutual Funds, other than units of Debt Mutual Funds
22and Money Market Mutual Funds, are not permitted. The existing holding
in units of Mutual Funds other than Debt Mutual Funds and Money Market
Mutual Funds, including those in UTI should be disinvested. Till such time
that they are held in the books of the bank, they will be reckoned as Non-
SLR investments for the purpose of the limit at 13.1.1 above. The banks
should, however, review their existing risk management policy to ensure
that they do not have disproportionate exposure in any one scheme of a
Mutual Fund.
(e) Non-SLR investment, other than in units of Debt Mutual Funds and Money
Market Mutual Funds, and CPs, shall be in instruments with an original
maturity of over one year.
(f) Investments in shares of All India Financial Institutions (AIFIs) are not
permitted. In terms of UBD.(PCB).BPD.Cir.No.14/16.20.000/2007-08
dated September 18, 2007, the existing shareholding in these institutions
may be phased out and till such time they are held in the books of the bank,
they will be reckoned as non-SLR investments for the purpose of the limit
at 12.1.2 (a) above.
(g) All fresh investments under non-SLR category should be classified under
Held for Trading (HFT) / Available for Sale (AFS) categories only and
marked to market as applicable to these categories of investments.
However, investments in the long-term bonds issued by companies
engaged in executing infrastructure projects and having a minimum
residual maturity of seven years may be classified under Held to Maturity
(HTM) category
(h) All non-SLR investments will be subject to the prescribed prudential
single/group counter party exposure limits.
(i) All transactions for acquisition / sale of non-SLR investments in secondary
market may be undertaken with mutual funds, pension / provident funds
and insurance companies, in addition to undertaking transactions with
commercial banks and primary dealers, subject to adherence to the
instructions contained in Para 7 of RBI Master Direction
FMRD.DIRD.2/14.01.002/2017-18 dated August 10, 2017.
23Note: For the definitions of certain items such as rated security, investment grade
rating, etc., please see Annex II.
12.1.4 Review of non-SLR investment
The Board should review the following aspects of non-SLR investment at least
at half-yearly intervals:
(a) Total business (investment and divestment) during the reporting period.
(b) Compliance with prudential limits prescribed for non-SLR investment.
(c) Compliance with the prudential guidelines issued by Reserve Bank on Non-
SLR securities.
(d) Rating migration of the issuers/issues held in the bank's books and
consequent diminution in the portfolio quality.
(e) Extent of non-performing investments in the non-SLR category and
sufficient provision thereof.
12.1.5 Disclosure
The banks shall disclose the details of the issuer-wise composition of non-SLR
investments and the non-performing investments, as indicated in Annexure III -
C.3(d) of Master Direction on Financial Statements - Presentation and
Disclosures dated August 30, 2021.
12.2 Security Receipts (SR) / Pass Through Certificates (PTCs) / other securities
received through Asset Reconstruction Companies (ARC)
(i) Investment by UCBs in SRs / PTCs / other securities issued by ARCs as
consideration towards transfer of stressed loans to the ARCs will be classified
as non-SLR investment in the books of UCBs. Accordingly, the valuation,
classification and other norms applicable to investment in non-SLR instruments
prescribed by RBI from time to time shall be applicable to UCBs’ investment in
SRs / PTCs / other securities issued by ARCs.
(ii) UCBs are allowed to hold these investments, over and above the limit of 10 per
cent of its deposits as on 31 March of the previous year, for non-SLR securities.
UCBs are not permitted to make any direct investment in the SRs/ PTCs/ other
securities issued by ARCs.
2412.3 Placement of deposits with other banks by UCBs
12.3.1 Prudential inter-bank (gross) exposure limit
The total amount of deposits placed by an UCB with other banks (inter-
bank) for all purposes including call money/ notice money, and deposits,
if any, placed for availing clearing facility, CSGL facility, currency chest
facility, remittance facility and non-fund based facilities like Bank
Guarantee, Letter of Credit, etc. shall not exceed 20 per cent of its total
deposit liabilities as on March 31 of the previous year. The balances held
in deposit accounts with commercial banks (including scheduled Small
Finance Banks), scheduled UCBs, State Cooperative Banks, District
Central Cooperative Banks and investments in Certificate of Deposits
issued by commercial banks, being interbank exposures, will be
included in this 20 per cent limit.
In cases where the smaller non-scheduled UCBs are keeping current
account/minimum required balance for clearing purpose with relatively
larger non-scheduled bank for sub-member clearing arrangements, it is
possible that the financial position of the non- scheduled UCB with whom
such deposits are kept, could take a hit due to unexpected downturn in
its business and which could have an effect on the financial position for
the depositing bank and its business. Non-scheduled UCBs, which have
exposures to other non-scheduled UCBs on account of clearing
arrangements may, therefore, review their exposures to such banks
periodically based on their published balance sheet and Profit and Loss
Account statements.
12.3.2 Prudential inter-bank counter party limit
Within the prudential inter-bank (gross) exposure limit, deposits with any
single bank should not exceed 5 per cent of the depositing bank's total
deposit liabilities as on March 31 of the previous year.
12.3.3 Scheduled UCBs may accept deposits from other scheduled UCBs, if it
is part of an arrangement for providing specific services to the latter bank
such as acting as the sponsor bank for clearing purposes, DD
arrangement, CSGL facility, currency chest facility, foreign exchange
25transactions, remittance facility and non-fund based facilities like bank
guarantee (BG), letter of credit (LC), etc. However, the acceptance of
deposits by scheduled UCBs from other scheduled UCBs in the nature
of placement of deposits for investment purposes is not permitted.
12.3.4 Only Scheduled UCBs fulfilling the criteria provided in circular
DCBR.BPD.(PCB).Cir.No.8/16.20.000/2015-16 dated November 19,
2015 are permitted to accept deposits from scheduled/ non-scheduled
UCBs. Those scheduled UCBs which fail to meet the criteria shall phase
out the deposits as provided in circular ibid. The total inter-UCB deposits
accepted by a scheduled UCB satisfying the criteria should not exceed
10 per cent of its total deposit liabilities as on 31st March of the previous
financial year.
12.3.5 The interbank exposures arising from deposits placed by UCBs with a
UCB under All-inclusive Directions (AID) shall be fully provided within
five years at the rate of 20 per cent annually in terms of circular
DOR.(PCB).BPD.Cir.No.11/16.20.000/2019-20 dated April 20, 2020.
Further, wherever UCBs are facing difficulty in withdrawal of deposits
from a weak State Cooperative Bank/District Central Cooperative Bank,
they shall make provision to the extent of 10 per cent per annum on their
exposure to such State Cooperative Banks/District Central Cooperative
Banks. The interest receivable on such deposits shall not be recognised
as income by the UCBs.
12.3.6 Keeping in view the prescribed prudential limits, UCBs may formulate a
policy taking into account their funds position, liquidity and other needs
for placement of deposits with other banks, the cost of funds, expected
rate of return and interest margin on such deposits, the counter party
risk, etc., and place it before their Board of Directors. The Board should
review the position at least at half yearly intervals.
13. INTERNAL CONTROL AND INVESTMENT ACCOUNTING
13.1 Internal Control
13.1.1 For every transaction entered into, a deal slip should be prepared which
should contain details relating to name of the counterparty, whether it is
26direct deal or through a broker, and if through a broker, details of security,
amount, price, contract date and time. For each deal, there must be a
system of issue of confirmation to the counterparty.
13.1.2 The Deal Slips should be serially numbered and controlled separately to
ensure that each deal slip has been properly accounted for.
13.1.3 On the basis of vouchers passed after verification of actual contract
notes received from the broker/counterparty and confirmation of the deal
by the counterparty the Accounts Section should independently write the
books of accounts.
13.1.4 A record of broker-wise details of deals put through and brokerage paid
should be maintained.
13.1.5 The Internal Audit Department should audit the transactions in securities
on an ongoing basis and monitor compliance with the laid down
management policies and prescribed procedures and report the
deficiencies directly to the management of the bank.
13.2 Investment Accounting
13.2.1 Accounting Standards
In order to bring about uniform accounting practice among banks in
booking of income on units of mutual funds (debt mutual funds and
money market mutual fund) and equity of AIFIs, as a prudent practice,
such income should be booked on cash basis and not on accrual basis.
However, in respect of income from Government Securities/bonds of
public sector undertakings and AIFIs, where interest rates on the
instruments are predetermined, income may be booked on accrual basis,
provided interest is serviced regularly and is not in arrears.
13.2.2 Broken Period Interest - Government and Other Approved
Securities
13.2.2.1 With a view to bringing about uniformity in the accounting treatment
of broken period interest on Government Securities paid at the time of
acquisition, the banks should not capitalise the broken period interest paid to
seller as part of cost but treat it as an item of expenditure under Profit & Loss
Account.
13.2.2.2 It is to be noted that the above accounting treatment does not take
27into account taxation implications and hence the bank should comply with the
requirements of income tax authorities in the manner prescribed by them.
13.2.2.3 Accounting Procedure for investments in Government
Securities – Settlement Date Accounting
With a view to bringing in uniformity in the practice adopted by banks while
accounting for investments in Government Securities, it has been decided that
banks should follow "Settlement Date" accounting for recording both outright
and repos/reverse repo transactions in Government Securities.
14. RECOMMENDATIONS OF GHOSH COMMITTEE
The following recommendations made by the Ghosh Committee should be
implemented by the banks to prevent frauds and malpractices:
14.1 Concurrent Audit
14.1.1 In view of the possibility of abuse, treasury functions viz. investments,
funds management including inter-bank borrowings, bills rediscounting,
etc. should be subjected to concurrent audit and the results of audit
should be placed before the Chairman and Managing Director of the
bank at prescribed intervals.
14.1.2 It is the primary responsibility of the banks to ensure that there are
adequate audit procedures for ensuring proper compliance of the
instructions in regard to the conduct of investment portfolio.
14.1.3 The concurrent audit should cover the following aspects:
(i) Ensure that in respect of purchase and sale of securities the
concerned department has acted within its delegated powers.
(ii) Ensure that the securities other than those in SGL and in demat
form, as shown in the books, are physically held.
(iii) Ensure that the Accounting Unit is complying with the guidelines
regarding SGL forms, delivery of scrips, documentation and
accounting.
(iv) Ensure that the sale or purchase transactions are done at rates
beneficial to the bank.
(v) Scrutinise conformity with broker limits and include excesses
28observed in their periodical reports.
14.1.4 Banks should formulate internal control guidelines for acquisition of
permissible shares, debentures and PSU bonds in the secondary market
duly approved by their Boards.
14.2 Internal Audit
Purchase and sale of Government Securities etc. should be separately subjected to
audit by internal auditors. In the absence of internal auditors, audit may be conducted
by Chartered Accountants. The results of their audit should be placed before the Board
of Directors once in every quarter.
14.3 Review
Banks should undertake a half-yearly review (as of March 31 and September 30) of
their investment portfolio, which should, apart from other operational aspects of
investment portfolio, clearly indicate and certify adherence to the laid down internal
Investment Policy and procedures and Reserve Bank’s guidelines and put up the
same before the Board within a month. Such review reports should be forwarded to
Regional Office of Department of Supervision (erstwhile Urban Banks Department) by
May 15/November 15 respectively.
14.4 Penalties for Violation
Banks should scrupulously follow the above instructions. Any violation of these
instructions will invite penal action against defaulting banks which could include raising
of reserve requirements, withdrawal of refinance from the Reserve Bank, denial of
access to money markets, denial of new branches/extension counters and advising
the President of Clearing House to take appropriate action including suspension of
membership of the Clearing House.
15. CATEGORISATION OF INVESTMENTS
15.1 UCBs are required to classify their entire investment portfolio (including SLR and
Non-SLR securities) under three categories, viz.:
(i) Held to Maturity (HTM)
(ii) Available for Sale (AFS)
(iii) Held for Trading (HFT)
Banks should decide the category of the investment at the time of acquisition and the
29decision should be recorded on the investment proposals. Investments in non-SLR
securities, since September 18, 2007, should be classified under HFT / AFS
categories only and marked to market as applicable to these categories of
investments. However, investments in the long-term bonds issued by companies
engaged in executing infrastructure projects and having a minimum residual maturity
of seven years may be classified under HTM category.
15.2 Held to Maturity
15.2.1 Securities acquired by the banks with the intention to hold them up to
maturity will be classified under HTM category.
15.2.2 The investments included under HTM category should not exceed 25 per
cent of the bank's total investments. However, banks are permitted to
exceed the limit of 25 per cent of their total investments under HTM
category provided,
(a) the excess comprises only of SLR securities
(b) the total SLR securities held in the HTM category is not more than
25 per cent of their NDTL as on the last Friday of the second
preceding fortnight.
15.2.3 UCBs are not expected to resort to sale of securities held in HTM
category. However, if due to liquidity stress, UCBs are required to sell
securities from HTM portfolio, they may do so with the permission of their
Board of Directors and rationale for such sale may be clearly recorded.
Profit on sale of investments from HTM category shall first be taken to
the Profit and Loss account and, thereafter, the amount of such profit
shall be appropriated to ‘Capital Reserve’ from the net profit for the year
after statutory appropriations. Loss on sale shall be recognized in the
Profit and Loss account in the year of sale.
15.3 Held for Trading
15.3.1 Securities acquired by the banks with the intention to trade by taking
advantage of the short-term price/interest rate movements will be
classified under HFT category.
15.3.2 If banks are not able to sell the security within 90 days due to exceptional
30circumstances such as tight liquidity conditions, or extreme volatility, or
market becoming unidirectional, the security should be shifted to the AFS
category, subject to conditions stipulated in paragraphs 15.5.3 and
15.5.4 below.
15.4 Available for Sale
15.4.1 Securities which do not fall within the above two categories will be
classified under AFS category.
15.4.2 Banks have the freedom to decide on the extent of holdings under AFS
category. This may be decided by them considering various aspects
such as basis of intent, trading strategies, risk management capabilities,
tax planning, manpower skills, capital position, etc.
(Profit or loss on sale of investments in HFT and AFS categories should be taken to
the Profit and Loss Account).
15.5 Shifting of investments
15.5.1 Banks may shift investments to/from HTM category with the approval of
the Board of Directors once in a year. Such shifting will normally be
allowed at the beginning of the accounting year. No further shifting
to/from this category will be allowed during the remaining part of that
accounting year.
15.5.2 Banks may shift investments from AFS category to HFT category with
the approval of their Board of Directors. In case of exigencies, such
shifting may be done with the approval of the Chief Executive of the
Bank, but should be ratified by the Board of Directors.
15.5.3 Shifting of investments from HFT category to AFS category is generally
not allowed. However, it will be permitted only under exceptional
circumstances such as mentioned in paragraph 15.3.2 above, subject to
depreciation, if any, applicable on the date of transfer, with the approval
of the Board of Directors/Investment Committee.
15.5.4 Transfer of scrips from one category to another, under all circumstances,
should be done at the acquisition cost/book value/market value on the
date of transfer, whichever is the least, and the depreciation, if any, on
31such transfer should be fully provided for.
15.6 Classification of Investments in the Balance Sheet
For the purpose of Balance Sheet, the investments should continue to be classified in
the following categories:
(i) Government securities
(ii) Other approved securities
(iii) Shares
(iv) Bonds of PSU
(v) Others
16. VALUATION OF INVESTMENTS
16.1 Valuation Standards
16.1.1 Investments classified under HTM category need not be marked to
market and will be carried at acquisition cost unless it is more than the
face value, in which case the premium should be amortised over the
period remaining to maturity.
16.1.2 The individual scrip in the AFS category will be marked to market at the
year-end or at more frequent intervals. The book value of the individual
securities would not undergo any change after the revaluation.
16.1.3 The individual scrip in the HFT category will be marked to market at
monthly or at more frequent intervals. The book value of individual
securities in this category would not undergo any change after marking
to market.
Note: Securities under AFS and HFT categories shall be valued scrip-wise and
depreciation/appreciation shall be aggregated for each classification as indicated at
paragraph 15.6 above separately for AFS and HFT. Net depreciation, if any, shall be
provided for. Net appreciation, if any, should be ignored. Net depreciation required
to be provided for in any one classification should not be reduced on account of net
appreciation in any other classification. Similarly, net depreciation for any
classification in one category should not be reduced from appreciation in similar
classification in another category.
3216.1.4 (i) Investment Depreciation Reserve (IDR) required to be created on
account of depreciation in the value of investments held under 'AFS' or
'HFT' categories in any year should be debited to the Profit & Loss
Account and an equivalent amount (net of tax benefit, if any, and net
of consequent reduction in the transfer to Statutory Reserve) or the
balance available in the Investment Fluctuation Reserve (IFR)
Account, whichever is less, shall be transferred from the IFR Account
to Profit & Loss Account.
(ii) In the event that IDR created on account of depreciation in
investments is 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 the IFR Account to be utilised to meet future
depreciation requirement for investments.
(iii) The amounts debited to the Profit & Loss Account for depreciation
provision and the amount credited to the Profit & Loss Account for
reversal of excess provision should be debited and credited
respectively under the head "Expenditure - Provisions &
Contingencies".
(iv) The amounts appropriated from the Profit & Loss Account/ to IFR
and the amount transferred from the IFR to the Profit & Loss Account
should be shown as 'below the line' items after determining the profit
for the year.
16.1.5 In respect of securities included in any of the three categories where
interest/principal is in arrears, the banks should not reckon income on
the securities and should also make appropriate provisions for the
depreciation in the value of the investment. The banks should not set-
off the depreciation requirement in respect of these non-performing
securities against the appreciation in respect of other performing
securities.
3316.2 Market Value
16.2.1 Quoted Securities
The 'market value' for the purpose of periodical valuation of investments
included in the AFS and the HFT categories would be the market price of the
scrip as available from the trades/quotes on the stock exchanges, SGL account
transactions, and prices declared by Financial Benchmarks India Pvt. Limited
(FBIL)/FIMMDA.
16.2.2 Unquoted SLR Securities
In respect of unquoted securities, the procedure as detailed below should be
adopted.
(i) Central Government Securities
(a) The Reserve Bank will not announce the YTM rates for unquoted
Government securities, for the purpose of valuation of investments
by banks. The banks shall value the unquoted Central Government
securities on the basis of the prices/YTM rates put out by the
Financial Benchmark India Pvt. Ltd. (FBIL) at periodical intervals.
(b) It is clarified that the reckoning of number of years for the purpose
of deciding upon appropriate ‘Yield To Maturity’ (YTM) Rate be done
by rounding off the fractional period of a year to the nearest
completed year.
(c) As regards valuation of other unquoted securities including PSU
bonds, banks should uniformly follow YTM method for arriving at
valuation of unquoted securities.
(ii) Treasury Bills should be valued at carrying cost.
(iii) State Government Securities
State Government securities shall be valued on the basis of the prices /
YTM rates put out by FBIL periodically.
(iv) Other Approved Securities
Other approved securities will be valued applying the YTM method by
marking it up by 25 basis points above the yields of the Central
34Government Securities of equivalent maturity put out by FBIL periodically.
16.2.3 Unquoted Non-SLR securities
(i) Debentures/Bonds
All debentures/bonds other than debentures/ bonds which are in the
nature of advance should be valued on the YTM basis. Such
debentures/bonds may be of different ratings. These will be valued with
appropriate mark-up over the YTM rates for Central Government
securities as put out by FBIL/FIMMDA periodically. The mark-up will be
graded according to the ratings assigned to the debentures/bonds by the
rating agencies subject to the following:
(a) The rate used for the YTM for rated debentures/bonds should be at
least 50 basis points above the rate applicable to a Government of
India security of equivalent maturity,
(b) The rate used for the YTM for un-rated debentures/ bonds should
not be less than the rate applicable to rated debentures/bonds of
equivalent maturity. The mark-up for the un-rated debentures/bonds
should appropriately reflect the credit risk borne by the bank.
(c) Where interest/principal on the debenture/bonds is in arrears, the
provision should be made for the debentures as in the case of
debentures/bonds treated as advances. The depreciation/provision
requirement towards debentures where the interest is in arrears or
principal is not paid as per due date, shall not be allowed to be set-
off against appreciation against other debentures/bonds.
(ii) Where the debentures/bond is quoted and there have been transactions
within 15 days prior to the valuation date, the value adopted should not
be higher than the rate at which the transaction is recorded on the stock
exchange.
(iii) Shares of Co-operative Institutions
If UCBs have regularly received dividends from co-operative institutions,
then their shares should be valued at face value. In a number of cases,
the co-operative institutions in whose shares the UCBs have made
35investments have either gone into liquidation or have not declared
dividend at all. In such cases, the banks should make full provision in
respect of their investments in shares of such co-operative institutions. In
cases where the financial position of co-operative institutions in whose
shares banks have made investments is not available, the shares have to
be taken at Re. 1/- per co-operative institution.
(iv) Valuation of Non-SLR securities issued by the Government of India
(a) Over the years, the Government of India has, from time to time,
issued several special securities which do not qualify for the purpose
of complying with the SLR requirements of UCBs. Such Government
securities are governed by a separate set of terms and conditions
and entail a higher degree of illiquidity spread.
(b) For the limited purpose of valuation, all special securities issued by
the Government of India, directly to the beneficiary entities, which
do not carry SLR status, may be valued at a spread of 25 bps above
the corresponding yield on Government of India securities.
(c) It may be noted, that at present, such special securities comprise:
Oil Bonds, Fertiliser Bonds, bonds issued to the State Bank of India
(during the rights issue), Unit Trust of India, Industrial Finance
Corporation of India Ltd., Food Corporation of India, the erstwhile
Industrial Investment Bank of India Ltd., the erstwhile Industrial
Development Bank of India and the erstwhile Shipping Development
Finance Corporation.
(v) Investment in securities issued by Asset Reconstruction Company (ARC)
UCBs are advised to refer to Paragraph 76-79 of the Reserve Bank of India
(Transfer of Loan Exposures) Directions, 2021 dated September 24, 2021, in
this regard.
16.2.4 Units of Mutual funds
Investments in quoted debt/money market Mutual Fund Units should be valued
as per stock exchange quotations. Investments in un-quoted Mutual Funds
Units are to be valued on the basis of the latest re-purchase price declared by
36the Mutual Funds in respect of each particular Scheme. In case of funds with a
lock-in period, or where repurchase price/market quote is not available, units
could be valued at Net Asset Value (NAV). If NAV is not available, then these
could be valued at cost, till the end of the lock-in period.
16.2.5 Commercial Paper
Commercial paper shall be valued at the carrying cost
17. INVESTMENT FLUCTUATION RESERVE (IFR)
With a view to build up adequate reserves to guard against market risks:
17.1 All UCBs shall build IFR out of realised gains on sale of investments, and
subject to available net profit, of a minimum of 5 per cent of the investment portfolio.
This minimum requirement should be computed with reference to investments in two
categories, viz. HFT and AFS. However, banks are free to build up a higher
percentage of IFR up to 10 per cent of the portfolio depending on the size and
composition of their portfolio, with the approval of their Board of Directors.
17.2 Banks should transfer maximum amount of the gains realised on sale of
investment in securities to the IFR. Transfer to IFR shall be as an appropriation of
net profit after appropriation to Statutory Reserve.
17.3 The IFR consisting of realised gains from the sale of investments held in AFS
& HFT would be eligible for inclusion in Tier II capital.
17.4 Transfer from IFR to the Profit and Loss Account to meet depreciation
requirement on investments would be a ‘below the line’ extraordinary item.
17.5 Banks should ensure that the unrealised gains on valuation of the investment
portfolio are not taken to the Income Account or to the IFR.
17.6 Banks may utilise the amount held in IFR to meet, in future, the depreciation
requirement on investment in securities.
17.7 A bank may, at its discretion, draw down the balance available in IFR in excess
of 5 per cent of its investment in AFS & HFT for credit to the balance of profit / loss
as disclosed in the profit and loss account at the end of any accounting year. In the
event the balance in the IFR is less than 5 per cent of its investment in AFS & HFT,
a draw down will be permitted subject to the following conditions:
37(a) The drawn down amount is used only for meeting the minimum Tier I
capital requirements by way of appropriation to free reserves or reducing
the balance of loss, and
b) The amount drawn down is not more than the extent to which the MTM
provisions made during the aforesaid year exceed the net profit on sale of
investments during that year.
17.8 Distinction between IFR and Investment Depreciation Reserve (IDR)
It may be noted that IFR is created out of appropriation of net profit from the realised
gains from the sale of investments held in AFS & HFT, and forms part of the reserves
of the bank qualifying under Tier II capital.
IDR is a provision created by charging diminution in investment value to Profit and
Loss Account. While the amount held in IFR should be shown in the balance sheet
as such, the amount held in IDR should be reported as Contingent provisions against
depreciation in investment.
38Annex I
Certain clarifications on brokers’ limits
[Paragraph 6.3]
Sr. Issue raised Response
No.
1. The year should be calendar Since banks close their accounts at
year or financial year? the end of March, it may be more
convenient to follow the financial year.
However, the banks may follow
calendar year or any other period of 12
months provided, if it is consistently
followed in future.
2. Whether to arrive at the total Not necessary. However, if there are
transactions of the year, any direct deals with the brokers as
transactions entered into directly purchasers or sellers the same would
with counterparties, i.e. where have to be included in the total
no brokers are involved would transactions to arrive at the limit of
also be taken into account? transactions to be done through an
individual broker.
3. Whether in case of ready Yes
forward deals both the legs of
the deals i.e., purchase as well
as sale will be included to arrive
at the volume of total
transactions?
4. Whether central loan/state No, as brokers are not involved as
loan/treasury bills etc. intermediaries.
purchased though direct
subscriptions/auctions will be
included in the volume of total
transactions?
5. It is possible that even though If the offer received is more
bank considers that a particular advantageous the limit for the broker
broker has touched the may be exceeded and the reasons
prescribed limit of 5 per cent, he therefore recorded, and approval of
may come with an offer during the competent authority/Board
the remaining period of the year obtained post facto.
which the bank may find to its
advantage as compared to
offers received from the other
brokers who have not yet done
business upto the prescribed
limit.
39Sr. Issue raised Response
No.
6. For a bank which rarely deals There may be no need to split an
through brokers and order. If any deal causes, the
consequently the volume of particular broker's share to exceed 5
business is small maintaining per cent limit, our circular provides the
the broker-wise limit of 5 per necessary flexibility inasmuch as
cent may mean splitting the Board's post facto approval can be
orders in small values amongst obtained.
different brokers and there may
also arise price differential.
7. During the course of the year, it The bank may get post facto approval
may not be possible to from the Board after explaining to it,
reasonably predict what will be the circumstances in which the limit
the total quantum of transactions was exceeded.
through brokers as a result of
which there could be deviation in
complying with the norm of 5 per
cent.
8. Some of the small private sector As already observed the limit of 5 per
banks have mentioned that cent can be exceeded subject to
where the volume of business reporting the transactions to the
particularly, the transactions competent authority post facto.
done through brokers is small Hence, no change in instructions is
the observance of 5 per cent considered necessary.
limit may be difficult. A
suggestion has, therefore, been
made that the limit may be
required to be observed if the
business done
through a broker, exceeds a cut-
off point of say ₹10 crore.
9. Whether the limit is to be The limit has to be observed with
observed with reference to total reference to the year under review.
transactions of the previous year While operating the limit, the bank
as the total transactions of the should consider the expected turnover
current year would be known of the current year which may be
only at the end of the year? based on turnover of the previous year
and anticipated rise or fall in the
volume of business in the current
year.
40Annex II
Definitions of certain terms
[Paragraph 12.1.3]
1. With a view to imparting clarity and to ensure that there is no divergence in the
implementation of the guidelines, some of the terms used in the guidelines are defined
below.
2. A security will be treated as rated if it is subjected to a detailed rating exercise by an
external rating agency in India which is registered with SEBI and is carrying a current or
valid rating. The rating relied upon will be deemed to be current or valid if:
(i) the credit rating letter relied upon is not more than one month old on the date
of opening of the issue, and
(ii) the rating rationale from the rating agency is not more than one year old on the
date of opening of the issue, and
(iii) the rating letter and the rating rationale is a part of the offer document.
(iv) In the case of secondary market acquisition, the credit rating of the issue should
be in force and confirmed from the monthly bulletin published by the respective
rating agency.
(v) Securities which do not have a current or valid rating by an external rating
agency would be deemed as unrated securities.
3. A ‘listed’ debt security is a security which is listed in a stock exchange. If not so, it is
an ‘unlisted’ debt security.
4. A Non Performing Investment (NPI), similar to a Non Performing Advance (NPA), is
one where:
(a) Interest/ instalment (including maturity proceeds) is due and remains unpaid for
more than 90 days.
(b) if any credit facility availed by the issuer is NPA in the books of the bank,
investment in any of the securities issued by the same issuer would also be
treated as NPI.
41Annex III
Guidelines for accounting of Repo/Reverse Repo transactions
[Paragraph 9.5]
1. The Reserve Bank of India (Amendment) Act, 2006 (Act No. 26 of 2006) provides a
legal definition of 'repo' and 'reverse repo' (vide sub- sections (c) and (d) of section 45 U of
Chapter III D of the Act) as an instrument for borrowing (lending) funds by selling
(purchasing) securities with an agreement to repurchase (resell) the securities on a mutually
agreed future date at an agreed price which includes interest for the funds borrowed (lent).
Accordingly, to bring such transactions onto the balance sheet in their true economic
sense and enhance transparency, the accounting guidelines have been reviewed and the
revised guidelines are given below:
2. Applicability of the accounting guidelines: The revised accounting guidelines will
apply to market repo transactions in Government Securities and corporate debt securities
including the tri-party repo in such securities. These accounting norms will, however, not apply
to repo / reverse repo transactions conducted under the Liquidity Adjustment Facility (LAF)
with Reserve Bank.
3. Market participants may undertake repos from any of the three categories of
investments, viz., Held for Trading, Available for Sale and Held to Maturity.
4. The economic essence of a repo transaction, viz., borrowing (lending) of funds by
selling (purchasing) securities shall be reflected in the books of the repo participants, by
accounting the same as collateralised lending and borrowing transaction, with an
agreement to repurchase, on the agreed terms. Accordingly, the repo seller, i.e., borrower
of funds in the first leg, shall not exclude the securities sold under repo but continue to
carry the same in his investment account (illustration given in the Annex III (a) & III (b))
reflecting his continued economic interest in the securities during the repo period. On the
other hand, the repo buyer, i.e., lender of funds in the first leg, shall not include the
securities purchased under repo in his investment account but show it in a separate sub-
head (Annex (III) (a) & (III) (b)). The securities would, however, be transferred from the
repo seller to repo buyer as in the case of normal outright sale/purchase transactions and
such movement of securities shall be reflected using the Repo/Reverse Repo Accounts
and contra entries. In the case of repo seller, the Repo Account is credited in the first leg
for the securities sold (funds received), while the same is reversed when the securities are
repurchased in the second leg. Similarly, in the case of repo buyer, the Reverse Repo
Account is debited for the amount of securities purchased (funds lent) and the same is
reversed in the second leg when the securities are sold back.
5. The first leg of the repo transaction should be contracted at the prevailing market
42rates. The reversal (second leg) of the transaction shall be such that the difference
between the consideration amounts of first and second legs should reflect the repo
interest.
6. The accounting principles to be followed while accounting for repo / reverse repo
transactions are as under:
(i) Coupon /Discount
(a) The repo seller shall continue to accrue the coupon/discount on the
securities sold under repo even during the repo period while the repo
buyer shall not accrue the same.
(b) In case the interest payment date of the security offered under repo falls
within the repo period, the coupons received by the buyer of the security
should be passed on to the seller of the security on the date of receipt as
the cash consideration payable by the seller in the second leg does not
include any intervening cash flows.
(ii) Repo Interest Income / Expenditure
After the second leg of the repo / reverse repo transaction is over,
(a) the difference between consideration amounts of the first leg and second
leg of the repo shall be reckoned as Repo Interest Income / Expenditure
in the books of the repo buyer / seller respectively; and
(b) the balance outstanding in the Repo Interest Income / Expenditure
account should be transferred to the Profit and Loss account as an income
or an expenditure. As regards repo / reverse repo transactions
outstanding on the balance sheet date, only the accrued income /
expenditure till the balance sheet date should be taken to the Profit and
Loss account. Any repo income / expenditure for the remaining period
should be reckoned for the next accounting period.
(iii) Marking to Market
The repo seller shall continue to mark to market the securities sold under repo
transactions as per the investment classification of the security. To illustrate, in case
the securities sold by banks under repo transactions are out of the Available for
Sale category, then the mark to market valuation for such securities should be done
at least once a quarter. For entities which do not follow any investment classification
norms, the valuation for securities sold under repo transactions may be in
accordance with the valuation norms followed by them in respect of securities of
similar nature.
437. Accounting Methodology
The accounting methodology to be followed along with the illustrations is given in Annexes
III (a) and III (b). Participants using more stringent accounting principles may continue using
the same principles.
8. Classification of Accounts
Banks shall classify the balances in Repo Account under Schedule 4 under item I (ii) or I
(iii) as appropriate. Similarly, the balances in Reverse Repo Account shall be classified
under Schedule 7 under item I (ii) a or I (ii) b as appropriate. The balances in Repo interest
expenditure Account and Reverse Repo interest income Account shall be classified under
Schedule 15 (under item II or III as appropriate) and under Schedule 13 (under item III or
IV as appropriate) respectively. The balance sheet classification for other participants shall
be governed by the guidelines issued by the respective regulators.
9. Disclosure
The disclosures should be made by banks in the “Notes on Accounts’ to the Balance
Sheet, as provided in Annexure III - C.3(e) of Master Direction on Financial Statements -
Presentation and Disclosures dated August 30, 2021.
44Annex III (a)
Recommended Accounting Methodology for accounting of
Repo / Reverse Repo transactions
[Paragraph 7 of Annex III]
(i) The following accounts may be maintained, viz. i) Repo Account, ii) Reverse Repo
Account, iii) Reverse Repo Interest Income Account, iv) Repo Interest Expenditure
Account v) Reverse Repo Interest Receivable Account and vi) Repo Interest Payable
Account.
(ii) In addition to the above, the following 'contra' accounts may also be maintained,
viz. i) Securities Sold under Repo Account, (ii) Securities Purchased under Reverse Repo
Account, (iii) Securities Receivable under Repo Account and (iv) Securities Deliverable
under Reverse Repo Account.
Repo
(iii) In a repo transaction, the securities should be sold in the first leg at market
related prices and re-purchased in the second leg at the same prices. The
consideration amount in the second leg would, however, include the repo interest.
The sale and repurchase should be reflected in the Repo Account.
(iv) Though the securities are not excluded from the repo seller's investment account
and not included in the repo buyer's investment account, the transfer of securities shall
be reflected by using the necessary contra entries.
Reverse Repo
(v) In a reverse repo transaction, the securities should be purchased in the first leg at
prevailing market prices and sold in the second leg at the same prices. The consideration
amount in the second leg would, however, include the repo interest. The purchase and
sale should be reflected in the Reverse Repo Account.
(vi) The balances in the Reverse Repo Account shall not be a part of the Investment
Account for balance sheet purposes but can be reckoned for SLR purposes if the
securities acquired under reverse repo transactions are approved securities.
Other aspects relating to Repo/Reverse Repo
(vii) In case the interest payment date of the securities sold under repo falls within the
repo period, the coupons received by the buyer of the security should be passed on to
the seller on the date of receipt as the cash consideration payable by the seller in the
45second leg does not include any intervening cash flows.
(viii) To reflect the accrual of interest in respect of the outstanding repo transactions at
the end of the accounting period, appropriate entries should be passed in the Profit and
Loss account to reflect Repo Interest Income / Expenditure in the books of the buyer /
seller respectively and the same should be debited / credited as an expenditure
payable/income receivable. Such entries passed should be reversed on the first working
day of the next accounting period.
(ix) Repo seller continues to accrue coupon/discount as the case may be, even during
the repo period while the repo buyer shall not accrue the same.
(x) Illustrative examples are given in Annex III (b)
46Annex III (b)
Illustrative examples for accounting of Repo / Reverse repo transactions
[Paragraph 7 of Annex III]
While in the body of the circular, the term "repo" is used generically to include both repo
and reverse repo (which is simply a mirror image of a repo transaction), in this Annex the
accounting guidelines have been set out separately for repo and reverse repo for clarity.
A. Repo/Reverse Repo of dated security
1. Details of Repo in a coupon bearing security:
Security offered under repo 7.17% 2028
Coupon payment dates 08 January and 08 July
Market Price of security ₹96.9000 (1)
Date of the repo 26-Mar-2018
Repo interest rate 6.00%
Tenor of the repo Reversal 8 days
date for the repo 03-Apr-2018
Broken period interest for the first leg* 7.17% x 78 / 360 x (2)
100 = ₹1.5535
Cash consideration for the first leg (1) + (2) = (3)
₹98.4535
Repo interest** ₹98.4535 (4)
x8/365x6.00%=
₹0.1295
Cash Consideration for the second leg (3)+(4) = ₹98.4535 + ₹0.1295 =
₹98.5830
* Using 30/360 day count convention
** Using Actual/365 day count convention
2. Accounting for Repo Seller (Borrower of Funds)
First leg
Debit Credit
Cash 98.4535
Repo A/c 98.4535
Securities recoverable under Repo A/c (by contra) 98.4535
Securities sold under Repo A/c (by contra) 98.4535
47Second Leg
Debit Credit
Repo A/c 98.4535
Repo Interest Expenditure A/c 0.1295
Cash A/c 98.5830
Securities sold under Repo A/c (by contra) 98.4535
Securities Receivable under Repo A/c (by contra) 98.4535
3. Accounting for Repo Buyer (Lender of Funds)
First leg
Debit Credit
Reverse Repo A/c
98.4535
Cash A/c 98.4535
Securities purchased under Reverse Repo A/c (by
98.4535
contra)
Securities Deliverable under Reverse Repo A/c (by 98.4535
contra)
Second Leg
Debit Credit
Cash A/c
98.5830
Reverse Repo A/c 98.4535
Reverse Repo Interest Income A/c 0.1295
Securities Deliverable under Reverse Repo A/c (by
98.4535
contra)
Securities Purchased under Reverse Repo A/c (by 98.4535
contra)
4. Ledger entries for the adjustment accounts
Securities Receivable under Repo A/c
Debit Credit
To Securities Sold 98.4535 By Securities Sold 98.4535
under Repo A/c under Repo A/c
(repo 1st leg) (repo 2nd leg)
48Securities Sold under Repo A/c
Debit Credit
To Securities Receivable 98.4535 By Securities 98.4535
under Repo A/c (repo 2nd leg) Receivable under
Repo A/c (repo 1st
leg)
Securities Purchased under Repo A/c
Debit Credit
To Securities Deliverable 98.4535 By Securities 98.4535
under Reverse Repo A/c Deliverable under
(reverse repo 2nd leg) Reverse Repo A/c
(reverse repo 2nd
leg)
Securities Deliverable under Repo A/c
Debit Credit
To Securities purchased 98.4535 By Securities 98.4535
under Reverse Repo A/c Purchased under
(reverse repo 2nd leg) Reverse Repo A/c
(reverse repo 1st
leg)
5. If the balance sheet date falls during the tenor of the repo, participants may use the transit
accounts, i.e., Repo Interest Payable A/c and Reverse Repo Interest Receivable A/c to
record the accrued interest and reverse the same the following day. The balances in the
repo interest receivable and payable shall be taken to the P & L Account with appropriate
entries passed in the Balance sheet, as below:
Transaction Leg 1st leg Balance Sheet Date 2nd leg
Dates 26-Mar-18 31-Mar-18 03-Apr-18
(a) Entries in the Books of Repo Seller (borrower of funds) on 31-Mar-18
Account Head Debit Credit
Repo Interest Expenditure A/c 0.0971 (being the repo
[Balances under the account to interest for 6 days)
be transferred to P & L]
Repo Interest Payable A/c 0.0971
Account Head Debit Credit
P & L A/c 0.0971
Repo Interest Expenditure A/c 0.0971
49(b) Reversal of entries in the Books of the Repo Seller (borrower of funds) on
01-Apr-18
Account Head Debit Credit
Repo Interest Payable A/c 0.0971
Repo Interest Expenditure 0.0971
A/c
(c) Entries in books of Repo Buyer (Lender of Funds) on 31-Mar-18
Account Head Debit Credit
Reverse Repo Interest 0.0971
Receivable A/c
Reverse Repo Interest 0.0971 (being the repo
Income A/c [Balances under interest for 6 days)
the account to be
transferred to P&L]
Account Head Debit Credit
Reverse Repo Interest 0.0971
Income A/c
P & L A/c 0.0971
(d) Reversal of entries in the Books of Repo Buyer (Lender of Funds) on
01-Apr-18
Account Head Debit Credit
Reverse Repo Interest 0.0971
Income A/c
Reverse Repo Interest 0.0971
Receivable A/c
B. Repo/Reverse Repo of Treasury Bill
1. Details of Repo on a Treasury Bill
Security offered under Repo GOI 91 day Treasury Bill
maturing on 21 June
2018
Price of the security offered under Repo ₹ 98.5785 (1)
Date of the Repo 26-Mar-2018
Repo interest rate 6.00%
Tenor of the repo 8 days
Total cash consideration for the first leg ₹ 98.5785 (2)
Repo interest* ₹ 98.5785×6%×8/365 = (3)
₹ 0.1296
50Cash consideration for the second leg (2)+(3) = ₹ 98.5785 +
₹ 0.1296 = ₹ 98.7081
* Using actual/365 day count convention
2. Accounting for Repo Seller (Borrower of Funds)
First leg
Debit Credit
Cash 98.5785
Repo A/c 98.5785
Securities Receivable 98.5785
under Repo A/c (by contra)
Securities Sold under Repo 98.5785
A/c (by contra)
Second leg
Debit Credit
Repo A/c 98.5785
Repo Interest Expenditure A/c 0.1296
Cash A/c 98.7081
Securities Sold under Repo A/c (by contra) 98.5785
Securities Receivable under Repo A/c (by 98.5785
contra)
3. Accounting for Repo Buyer (Lender of Funds)
First leg
Debit Credit
Reverse Repo A/c 98.5785
Cash A/c 98.5785
Securities Purchased under Reverse Repo 98.5785
A/c (by contra)
Securities Deliverable under Reverse 98.5785
Repo A/c (by contra)
Second leg
Debit Credit
Cash A/c 98.7081
Reverse Repo A/c 98.5785
Reverse Repo Interest Income A/c 0.1296
Securities Deliverable under Reverse 98.5785
Repo A/c (by contra)
Securities Purchased under Reverse Repo 98.5785
A/c (by contra)
514. Ledger entries for the adjustment accounts
Securities Receivable under Repo A/c
Debit Credit
To Securities Sold under 98.5785 By Securities Sold under 98.5785
Repo A/c (repo 1st leg) Repo A/c (repo 2nd leg)
Securities Sold under Repo A/c
Debit Credit
To Securities Receivable 98.5785 By Securities 98.5785
under Repo A/c (repo 2nd leg) Receivable under
Repo A/c (repo 1st
leg)
Securities Purchased under Repo A/c
Debit Credit
To Securities Deliverable 98.5785 By Securities 98.5785
under Reverse Repo A/c Deliverable under
(reverse repo 1st leg) Reverse Repo A/c
(reverse repo 2nd
leg)
Securities Deliverable under Reverse Repo A/c
Debit Credit
To Securities Purchased 98.5785 By Securities 98.5785
under Repo A/c (reverse repo Purchased under
2nd leg) Reverse Repo A/c
(reverse repo 1st
leg)
5. If the balance sheet date falls during the tenor of the repo, participants may use the
transit accounts, i.e. Repo Interest Payable A/c and Reverse Repo Interest Receivable
A/c to record the accrued interest and reverse the same the following day. The balances
in the repo interest receivable and payable shall be taken to the P & L Account with
appropriate entries passed in the Balance sheet, as below:
Transaction Leg 1st leg Balance Sheet 2nd leg
Date
Dates 26-Mar-18 31-Mar-18 03-Apr-18
52(a) Entries in the Books of Repo Seller (borrower of funds) on 31-Mar-18
Account Head Debit Credit
Repo Interest Expenditure 0.09723 (being the
A/c [Balances under the repo interest for 6
account to be transferred to days)
P & L]
Repo Interest Payable A/c 0.09723
Account Head Debit Credit
P & L A/c 0.09723
Repo Interest Expenditure 0.09723
A/c
(b) Reversal of entries in the Books of Repo Seller (borrower of funds) on 01-
Apr-18
Account Head Debit Credit
Repo Interest Payable A/c 0.09723
Repo Interest Expenditure 0.09723
(c) Entries in books of Repo Buyer (Lender of Funds) on 31-Mar-18
Account Head Debit Credit
Reverse Repo Interest 0.09723
Receivable A/c
Reverse Repo Interest 0.09723 (being the
Income A/c [Balances under repo interest for 4
the account to be days)
transferred to P & L]
Account Head Debit Credit
Reverse Repo Interest 0.09723
Income A/c
P & L A/c 0.09723
(d) Reversal of entries in the Books of Repo Buyer (Lender of Funds) on
01-Apr-18
Account Head Debit Credit
Reverse Repo Interest 0.09723
Income A/c
Reverse Repo Interest 0.09723
Receivable A/c
53Appendix A
A. List of Circulars consolidated in the Master Circular
Sr.
Circular No. Date Subject
No.
1. D OR.REC.MRG.90/16.20.000/2021-22 03.03.2022 Investment in Umbrella Organization (UO)
by Primary (Urban) Co-operative Banks
2. ID MD.CDD.No.S930/11.22.003/2021-22 05.10.2021 Value Free Transfer (VFT) of Government
Securities – Guidelines
3. D OR.(PCB).BPD.Cir.No.11/16.20.000/2019-20 20.04.2020 Provisioning on interbank exposure of
Primary (Urban) Co-operative Banks
(UCBs) under All Inclusive Directions
4. D CBR.BPD.(PCB).Cir.No.10/16.20.000/2018-19 10.06.2019 Sale of Securities held in Held to Maturity
(HTM) Category - Accounting treatment
5. D BR.No.Ret.BC.10/12.02.001/2018-19 05.12.2018 Section 24 and Section 56 of the Banking
Regulation Act, 1949 - Maintenance of
Statutory Liquidity Ratio (SLR)
6. D CBR.BPD.(PCB).Cir.No.02/16.20.000/2018-19 16.08.2018 Investments in Non-SLR Securities by
Primary (Urban) Co-operative Banks –
Approved counterparties for secondary
market transactions
7. D BR.BP.BC.No.002/21.04.141/2018-19 27.07.2018 Prudential Norms for Classification,
Valuation and Operation of Investment
Portfolio by banks – Valuation of State
Development Loans
8. F MRD.DIRD.05/14.03.007/2018-19 25.07.2018 Secondary Market Transactions in
Government Securities – Short Selling
9. F MRD.DIRD.03/14.03.007/2018-19 24.07.2018 Transactions in the ‘When Issued’ (WI)
market in Central Government Securities
10. F MRD.DIRD.01/14.03.038/2018-19 24.07.2018 Repurchase Transactions (Repo)
(Reserve Bank) Directions, 2018
11. D CBR.BPD.(PCB/RCB)Cir.No.1/16.20.000/2018-19 06.07.2018 Prudential Norms for Classification,
Valuation and Operation of Investment
Portfolio by Banks – Spreading of MTM
losses and creation of Investment
Fluctuation Reserve (IFR) by Co-operative
banks
12. F MRD.DIRD.7/14.03.025/2017-18 31.03.2018 Taking over of valuation of Government
Securities (G-Sec) by Financial
Benchmark India Pvt. Ltd. (FBIL) -
valuation of portfolios
13. D CBR.BPD.(PCB).Cir.No.8/16.20.000/2015-16 19.11.2015 Placement of Deposits with Other Banks
by Primary (Urban) Co-operative Banks
(UCBs)
14. U BD.BPD.(PCB).Cir.No.68/16.26.000/2013-14 05.06.2014 The Banking Laws (Amendment) Act 2012
-Amendments to Section 18 & 24 of
Banking Regulation (B.R.) Act, 1949
(AACS)- Maintenance of Cash Reserve
Ratio (CRR) for Non-Scheduled
54Sr.
Circular No. Date Subject
No.
UCBs and Statutory Liquidity Ratio (SLR)
for UCBs
15. U BD.BPD.(PCB).Cir.No.58/16.20.000/2013-14 07.05.2014 Investments in Market Infrastructure
Companies by Primary (Urban)
Cooperative Banks
16. U BD.BPD.(PCB).Cir.No.9/09.29.000/2013-14 04.09.2013 Secondary Market Transactions in
Government Securities - Intra-day Short
Selling
17. U BD.BPD(SCB).No.4/16.20.000/2012-13 10.6.2013 Ready Forward Contracts in Corporate
Debt Securities
18. ID MD.PCD.1423/14.03.02/2012-13 30.10 2012 Ready Forward Contracts in Corporate
Debt Securities – Permitting Scheduled
UCBs.
19. U BD.BPD(PCB).No.17/12.05.001/2011-12 03.01.2012 Negotiated Dealing System (NDS) – Order
Matching (OM)- Grant of membership to
UCBs
20. ID MD.DODNo.13/10.25.66/2011-12 18.11.2011 Direct access to Negotiated Dealing
System – Order Matching (NDS-OM)
21. U BD.CO.(PCB).BPD.Cir.6/09.11.00/2011-12 25.10.2011 SGL and CSGL Accounts – Eligibility
Criteria and Operational Guidelines
22. ID MD.No.29/11.08.043/2010-11 30-05-2011 Guidelines for Accounting of Repo /
Reverse Repo Transactions- Clarification
23. U CB(PCB)BPD.Cir.No.36/16.20.000/2010-11 18-02-2011 Prudential Norms on Investment in Zero
Coupon Bonds
24. U BD.(PCB).Cir.No.34/09.80.00/2010-11 18-01-2011 Accounting Procedure for Investments -
Settlement Date Accounting
25. U BD.BPD.(PCB).Cir.No.24/12.05.001/2010-11 16.11.2010 Opening of Current account and
Subsidiary General Ledger Account with
Reserve Bank and Membership of Indian
Financial network (INFINET) and Real
Time Gross Settlement (RTGS) system.
26. ID MD.PCD.22/11.08.38/2010-11 09.11.2010 Ready Forward Contracts in Corporate
Debt Securities
27. ID MD.DOD.17/11.01.01(B)/2010-11 14.07.2010 Government Securities Act, 2006,
Sections 27 & 30 - Imposition of penalty for
bouncing of SGL forms
28. U BD.CO.BSD./PCB.Cir./68/12.22.351/2009-10 07-06-2010 Placement of deposits with other banks by
Primary (Urban) Co-operative Banks for
availing clearing facility
29. U BD.BPD.PCB.Cir.No.63/16.20.000/2009-10 04-05-2010 Investment in unlisted Non-SLR securities
by Primary (Urban) Co-operative Banks
30. U BD.BPD.PCB.Cir.No.62/16.20.000/2009-10 30-04-2010 Classification of investments in bonds
issued by companies engaged
in infrastructure activities
31. U BD. (PCB).BPD.Cir.52/09.11.000/2009-10 05-04-2010 Maintenance of CSGL accounts
55Sr.
Circular No. Date Subject
No.
32. ID MD/4135/11.08.43/2009-10 23-03-2010 Guidelines for accounting Repo/Reverse
Repo transactions
33. ID MD.DOD.05/11.08.38/2009-10 08.01.2010 Ready Forward Contracts in Corporate
Debt Securities
34. U BD(PCB).BPD.Cir.No.34/16.26.000/2009-10 17-12-2009 Banking Regulation Act, 1949 (AACS),
Section 24-Investment in Government and
other approved securities by UCBs
35. U BD.BPD.(PCB).Cir.No.27/16.20.000/2009-10 03-12-2009 Master Circular on Investments by UCBs
– Corrigendum
36. ID MD.DOD.No.334/11.08.36/2009-10 20-07-2009 Ready forward contracts
37. U BD BPD (PCB) No 47/16.20.000/08-09 30-01-09 Placement of deposits with other banks by
primary (urban) cooperative banks
(UCBs)
38. U BD BPD (PCB) No 46/16.20.000/08-09 30-01-09 Investments in Non-SLR securities by
primary (urban) cooperative banks
39. U BD BPD (PCB) No 37/16.26.000/08-09 21-01-09 Banking Regulation Act 1949 (AACS)-
Investments in Government and other
approved securities by UCBs –
Exemption under Section 24A
40. U BD BPD (PCB) No 28/16.26.00/08-09 26-11-08 Banking Regulation Act, 1949 (As
Applicable to Co-operative Societies)
Section 24-Investment in Government
and other approved securities by Urban
Co-operative Banks (UCBs)
41. U BD BPD No:56/16.20.000/07-08 17-06-08 Valuation of Non-SLR securities issued
by the Government of India
42. ID MD/ No. 3166/11.01.01(B) 01-01-08 WI transactions on Government Securities
43. U BD BPD No:14/16.20.00/07-08 18-09-07 Investments in Non-SLR securities
44. U BD BPD No: 7/09.29.000/2006-07 18-08-2006 'When issued' transactions in Govt.
Securities
45. U BD BPD No: 1/09.09.001/2006-07 11-07-2006 Priority Sector Lending – Investments in
NHB / HUDCO
46. U BD BPD No: 41/16.20.000/2005-06 29-03-2006 Investment portfolio of UCBs - valuation
47. U BD BPD No: 31/13.01.000/2005-06 17-02-2006 Investment in Government Securities
48. U BD BPD No: 41/16.20.000/2004-05 28-03-2005 Investment portfolio of UCBs - valuation
56Sr.
Circular No. Date Subject
No.
49. U BD BPD No: 16/16.20.000/2004-05 02-09-2004 Investments – classification and valuation
50. U BD BPD No: 49/09.80.00/2004-05 20-06-2005 Ready Forward Transactions
51. U BD BPD No: 50/09.80.00/2004-05 20-06-2005 Govt Sec- T + 1 settlement
52. U BD BPD No: 51/09.80.00/2004-05 20-06-2005 Settlement of securities on primary issues
53. U BD.BPD.No.37/12.05.01/2004-05 26.02.2005 Investment portfolio of banks – Reporting
system
54. U BD.BPD.SUB.CIR.5/09.80.00/2003-04 28-04-2004 Transactions in Government Securities
(DVP III)
55. U BD.BPD.PCB.Cir.45/16.20.00/2003-04 15-04-2004 Investment in non-SLR debt securities by
UCBs
56. U BD.BPD.PCB.Cir.44/09.29.00/2003-04 12-04-2004 Sale of Govt. Securities allotted in
the auctions for primary issues on the
same day.
57. U BD.BPD.PCB.Cir.42/09.11.00/2003-04 1-04-2004 Maintenance of CSGL Accounts
58. U BD.BPD.PCB.Cir.35/13.05.00/2003-04 27-02-2004 Placement of deposits by NSCBs with
strong sch UCBs
59. U BD.BPD.PCB.Cir.34/13.05.00/2003-04 11-02-2004 Maximum limit on advances – limits on
exposure to individual/group borrowers –
Computation of capital funds
60. U BD.BPD.PCB.Cir.33/09.11.00/2003-04 11-02-2004 Maintenance of CSGL Accounts
61. U BD.BPD.PCB.FIR.26/16.20.00/2003-04 2-12-2004 Investment in shares of ICICI Bank Ltd.
62. U BD.BPD.PCB.Cir.12/09.29.00/2003-04 04-09-2003 Investment Portfolio of UCBs – Guidelines
for Investment Fluctuation Reserve
63. U BD.BPD.Cir.No.11/09.29.00/2003-04 02-09-2003 Investment Portfolio of UCBs –
Classification & Valuation of investments
64. U BD.BPD.PCB.Cir.8/9.2900/2003-04 16-08-2003 Trading of Government Securities in Stock
Exchanges
65. U BD.BPD.Cir.No.1/09.11.00/2003-04 08-07-2003 Settlement in respect of Government
Securities Transaction – Compulsory
settlement through CCIL
66. U BD.BPD.PCB.Cir.No.2/09.80.00/2003-04 08-07-2003 Scheme for Non-Competitive Bidding
Facility in the Auction of Government of
India dated securities
57Sr.
Circular No. Date Subject
No.
67. U BD.PCB.56/09.29.00/2003-04 02-07-2003 Investment Portfolio of Banks –
Transactions in Securities
68. U BD.BPD.PCB.Cir.No.46/16.20.00/2002-03 17-05-2003 Placement of deposits by non-scheduled
UCBs with Scheduled UCBs
69. U BD.BPD.PCB.No.44/09.80.00/2002-03 12-05-2003 Guidelines for uniform accounting for
Repo/Reverse Repo transactions
70. U BD.BPD.PCB.Cir.No.39/09.29.00/2002-03 13.03.2003 Trading of Government Securities on
Stock Exchange
71. U BD.BP.No.35/16.26.00/2002-03 18-02-2003 Prices of Government Securities in the
Secondary Market
72. U BD.BPD.SPCB.No.9/09.29.00/2002-03 27-01-2003 Reconciliation Procedure for Government
Loans
73. U BD.POT.PCB.Cir.No.06/09.29.00/2002-03 06-08-2002 Investment Portfolio of UCBs –
Transactions in Government Securities
74. U BD.POT.PCB.Cir.No.5/09.29.00/02-03 22-07-2002 Investment portfolio of banks – transaction
in securities
75. U BD.POT.No.49/09.80.00/2001-02 17-06-2002 Ready Forward Contracts
76. U BD.CO.POT.PCB.Cir.No.48/09.29.00/2001-02 11-06-2002 Certification of holding of securities in
banks’ investment portfolio
77. U BD.BR.No.47/16.26.00/2001-02 07-06-2002 Investments in Government and other
approved securities by UCBs
78. U BD.PCB.Cir.No.46/09.29.00/2001-02 06-06-2002 Investment Portfolio of Banks –
Transaction in Securities
79. U BD.Plan.SCB.Cir.No.10/09.29.00/2001-02 26-04-2002 Investment Portfolio of Urban Banks –
Transactions in Government Securities
80. U BD.Plan.PCB.Cir.No.41/09.29.00/2001-02 20-04-2002 Investment Portfolio of Banks –
Transactions in Securities
81. U BD.BR.Cir.No.19/16.26.00/2001-02 22-10-2001 B,R.Act, 1949 (AACS) Section 24 –
Investment in Government and other
approved securities
82. U BD.No.BR.6/16.26.00/2000-01 09-08-2001 B.R. Act, 1949 (AACS) Section 24 –
Investment in Government and other
approved securities
83. U BD.No.CO.BSD.I.PCB.44/12.05.05/2000-2001 23-04-2001 Guidelines for Classification and Valuation
of Investments by Banks
84. U BD.No.BR.Cir/42/16.26.00/2000-01 19-04-2001 Banking Regulation Act, 1949 (As
Applicable to Co-operative Societies) -
Section 24 - Investment in Government
and other approved Securities by Urban
Co-operative Banks (UCBS)
58Sr.
Circular No. Date Subject
No.
85. U BD.No.43/16.20.00/2000-01 19-04-2001 Investment of Funds by Urban Co-
operative Banks as deposits with other
institutions and other Urban Co-operative
Banks
86. U BD.No.POT.Cir.PCB.39/09.29.00/2000 18-04-2001 Sale of Government Securities Allotted in
the Auctions of Primary Issues
87. U BD.No.Plan.PCB.Cir/22/09.29.00/2000-2001 30-12-2000 Investment Portfolio of banks -
Transactions in securities - Role of brokers
88. U BD.Plan.PCB.Cir/26/09.80.00/99-2000 28-03-2000 Ready Forward Contracts
89. U BD.Plan.18/09.80.00/1999-2000 30-12-1999 Banks' own investment in State
Government Loans - Payment of
brokerage commission
90. U BD.No.Plan.PCB.04/09.80.00/99-2000 25-08-1999 Ready Forward Transactions
91. R ef.UBD No.BR.26/18.20.00/98-99 07-04-1999 Investment of funds by primary (urban) co-
operative banks in public sector
undertakings/ companies
92. U BD.No.Plan.PCB.DIR.3/09.80.00/98-99 17-08-1998 Reverse Ready forward transactions
93. U BD.No.BR.1/16.20.00/98-99 10-07-1998 Investment by urban co-op. banks –
Valuation of Investments – US – 64 units
94. U BD No.61/16.20.00/97-98 04-06-1998 Investment of Investment by Urban
Cooperative Banks - Valuation of
Investment - US- 64 Units funds by primary
(urban) co-operative banks in public sector
undertakings/companies
95. U BD.No.Pl.an.PCB/Cir.56/09.60.00/97-98 13-05-1998 Investment in Certificates of Deposit (CDs)
by primary (urban) co-operative banks
96. U BD.No.Plan.SUB.20/09.81.00/97-98 19-02-1998 Retailing of Government Securities
97. U BD.No.BP.37/16.20.00/97-98 29-01-1998 Investment by Urban Co-operative Banks
- Valuation of Investments
98. U BD.No.BSD.I (PCB) 22/12.05.00/97-98 26-11-1997 Investment by Urban Co-operative Banks
Valuation of Investments
99. U BD.No.Plan.SUB.No.17/09.83.00/97-98 19-11-1997 Statistical data relating to investments in
Money Market Instruments/ Government
Securities
100. U BD.No.Plan.PCB/Cir.21/09.60.00/97-98 11-11-1997 Investment in certificates of deposit (CDs)
by Urban Co-operative Banks
101. U BD.No.Plan.PCB.Cir.19/09.29.00/97-98 10-11-1997 Investment Portfolio of banks -
Transactions in securities-Role of brokers
59Sr.
Circular No. Date Subject
No.
102. U BD.No.Plan.PCB.56/09.60.00/96-97 06-06-1997 Investment in Certificates of Deposit (CDs)
by Urban Co-operative Banks
103. U BD.No.DS.SUB.CIR.7/13.07.00/96-97 07-01-1997 Investment of Surplus Funds by primary
co-operative Banks in Bills Rediscounting
Scheme
104. U BD.No.Plan.PCB.34/09.29.07/96-97 30-12-1996 Investment portfolio of banks Transactions
in securities
105. U BD.No.Plan.PCB.No.30/09.82.00/96-97 27-11-1996 Investment by Urban Co-operative Banks
in the Units of Unit Trust of India (UTI)
106. U BD.No.Plan.PCB.19/09.29.00/96-97 11-09-1996 Investment portfolio of banks - System for
custody and control of unused B. R.
Forms
107. U BD.No.Plan.PCB.7/09.60.00/96-97 19-07-1996 Investment in certificates of deposit by
Urban Co-operative Banks
108. U BD.No.Plan/PCB/69/09.29.00/95-96 21-06-1996 Investment portfolio of banks -
Transactions in securities
109. U BD.No.BR.Cir.52/16.20.00/95-96 16-03-1996 Investment of funds by Urban Co-
operative Banks in Public Sector
Undertakings/Companies
110. U BD.No.Plan.PCB.47/09.60.00/95-96 29-02-1996 Investment in Certificates of Deposit
(CDs) by Urban Co-operative Banks
111. U BD.No.BR.12/16.20.00/95-96 06-01-1996 Investment of funds by urban co-
operative banks in bonds of public sector
Undertakings
112. U BD.No.BR.Cir.33/16.26.00/95-96 03-01-1996 Banking Regulation Act, 1949 (As
applicable to Co-operative Societies)
Section 24-Investment in Government and
other approved securities by primary
co-operative banks
113. U BD.No.Cir.63/16.26.00/94-95 16-06-1995 Banking Regulation Act, 1949 (As
applicable to Co-operative Societies)
Section 24-Investment in Government and
other approved securities by primary co-
operative banks
114. U BD.No.BR.CIR.53/16.20.00/94-95 24-04-1995 Investment of funds by Urban Co-
operative Banks in Public Sector
Undertakings/Companies
115. U BDNo.Plan.PCB.32/09.29.00/94-95 24-11-1994 Investment Portfolio of Banks -
Transactions in Securities – Bank
Receipts/Role of brokers
116. U BD.No.Plan.PCB.29/09.80.00/94/95 09-11-1994 Ready Forward Transactions
117. U BD.No.Plan.PCB.14/09.80.00/94-95 24-08-1994 Ready Forward Transactions
118. U BD.BR.10/PCB(CIR)/16.20.00/9495 01-08-1994 Investment of funds by primary co-
operative banks in public sector
undertakings/companies
60Sr.
Circular No. Date Subject
No.
119. U BD.BR.CIR.72/16.20.00/93-94 16-05-1994 Investment of funds by urban co- operative
banks in public sector
undertakings/companies
120. U BD.No.PLAN (PCB).CIR.56/09.29.00/93-94 11-02-1994 Investment portfolio of banks -
Transactions in Securities.
121. U BD.No.Plan.51/09.29.00/93-94 20-01-1994 Investment portfolio of banks -
Transactions in Securities - Bouncing of
SGL transfer forms - Penalties to be
imposed:
122. U BD.No.3/09.29.00/93-94 02-08-1993 Investment port-folio of banks -
Transactions in securities - Aggregate
contract limit for individuals brokers –
Clarifications
123. U BD.No.Plan.74/UB.81-92/93 17-05-1993 Investment portfolio of banks -
Transactions in securities
124. U BD.No.Plan.13/UB.81/92-93 15-09-1992 Investments portfolio of banks
Transactions in securities
125. U BD.No.BR.1866/A.12(19)-87/88 13-06-1988 Investments of Funds by Urban Co-
operative Banks as Deposits with Public
Sector Undertakings/Companies/
Corporations/Co-operative Institutions
126. U BD.No.DC.84/R.1(B).87/88 13-02-1988 Bills Rediscounting Scheme –
Rediscounting of bills with Banks and
Financial Institutions
127. U BD.No.BR.1455/A12(24)-85/86 31-05-1986 Banking Regulation Act, 1949 (as
applicable to co-operative societies) -
Section 24 - Investment in Units issued by
the Unit Trust of India
128. U BD.BR.871/A.12 (24)-84/85 10-05-1985 Banking Regulation Act, 1949 (as
applicable to co-operative societies) -
Section 24 - Investment made under
national deposit scheme
129. U BD.BR.498/A.12 (24)-84/85 08-01-1985 Banking Regulation Act, 1949 (As
Applicable to Co-operative Societies)
Section 24 - Investment in Government
and Other Trustee Securities by primary
co-operative banks
130. U BD.NO.DC.597/R.41-84/85 31-10-1984 7% Capital Investment Bonds
131. U BD.P&O.1121/UB.-63-83/84 01-06-1984 Bank's own investment in central state
government loans-payment of brokerage
132. A CD.ID (DC) 1799/R.36/79/80 10-01-1980 Subscription/purchase of 7 year national
rural development bonds
133. A CD.ID. (DC) 1800/R.36-79/80 10-01-1980 Directive relating to subscription/purchase
of 7 year national rural development
Bonds
134. A CD.BR.446/A.12 (19)/72-3 01-11-1972 Banking Regulation Act, 1949 (As
Applicable to Co-operative Societies)
Section 19
61Sr.
Circular No. Date Subject
No.
135. A CD.BR.463/A.12 (19)/70-7 09-11-1970 Banking Regulation Act, 1949 (As
Applicable to Co-operative Societies):
Section 19
136. A CD.BR.1/A.12 (19)/68-9 01-07-1968 Section 19 of the Banking Regulation act
1949 (as applicable to co-operative
societies): Restriction on holding shares in
other co-operative societies
137. A CD.BR.3/A.12 (19)/68-9 01-07-1968 Section 19 of the Banking Regulation Act,
1949 (as applicable to co-operative
societies): Restriction on holding shares
in other co-operative societies
138. A CD.BR.903/A.12 (19)/67-8 22-12-1967 Banking Regulation Act, 1949 (as
applicable to Co-operative Societies):
Section 19: Restriction on holding of
shares in other co-operative societies
139. A CD.BR.388/A.11 (19) 65-6 01-03-1966 Section 19 of the Banking Regulation Act:
Restriction on holding shares in other co-
operative societies
62Appendix B
B. List of Other Circulars from which instructions relating to
Investments have also been consolidated in the Master Circular
Sr.
Circular No. Date Subject
No.
1. DOR.STR.REC.51/21.04.048/2021-22 24-09-2021 Reserve Bank of India (Transfer of
Loan Exposures) Directions, 2021
2. UBD.No.POT.PCB.Cir.No.45/09.116.00/2000-01 25-04-2001 Application of Capital Adequacy
Norms to Urban (Primary) Co
operative Banks
3. UBD.CO.No.BSD-I.PCB(Cir)34/12.05.05/99-2000 24-05-2000 Income Recognition, Asset
Classification, Provisioning and
Valuation of Investments
4. UBD.No.BSD.PCB./25/12.05.05/99-2000 28-02-2000 Income Recognition, Asset
Classification, Provisioning and other
related matters
5. UBD.No.I&L(PCBs)42/12.05.00/96-97 20-03-1997 Prudential norms – Income
Recognition, Assets Classification,
Provisioning and other related
matters -
6. UBD.No.I&L(PCBs)68/12.05.00/95-96 10-06-1996 Income Recognition, assets
classification, provisioning and other
related matters Clarifications
7. UBD.No.I&L(PCB)61/12.05.00/94-95 06-06-1995 Income recognition, asset classification,
provisioning and other related matters
Valuation of investment and others
8. UBD.No.I&L86/12.05.00/93-94 28-06-1994 Income recognition, assets
classification, provisioning and other
related matters
9. UBD.21/12:15:00/93-94 21-09-1993 Committee to enquire into various
aspects relating to frauds and
malpractices in banks primary (urban)
co-operative banks
10. UBD.NO.I&L.38/J.1-92/93 09-02-1993 Income recognition, assets
classification, provisioning and other
related matters
11. UBD.BR.16/A.6-84/85 09-07-1984 Banking Law (Amendment) Act, 1983
12. ACD.Plan.358/UB.1-78/9 20-04-1979 Report on the committee on urban co-
operative banks
13. ACD.BR.184/A.12(19)-78/9 23-08-1978 The Banking Regulation Act, 1949
(as applicable to co-operative
societies) Section 10: Restriction on
holding shares in other co-operative
societies
14. ACD.BR.760/A.1/68-9 23-01-1969 The Banking Laws (Amendment)
Act, 1968
15. ACD.BR.464/A.12(24)/68-9 12-11-1968 Section 24 of the Banking Regulation
Act 1949 (As Applicable to Co-
operative Societies): Maintenance of
Percentage of Assets
63