**Policy Summary: RBI/2018-19/205 - Sale of Securities held in Held to Maturity (HTM) Category – Accounting Treatment for Primary Urban Cooperative Banks (UCBs)**
This circular, issued by the Reserve Bank of India (RBI) on June 10, 2019, clarifies the accounting treatment for the sale of securities held in the Held to Maturity (HTM) category by Primary Urban Cooperative Banks (UCBs). The circular reiterates that UCBs should generally avoid selling securities from their HTM portfolio, as these are intended to be held until maturity. However, in situations of liquidity stress, UCBs may sell HTM securities with the explicit permission of their Board of Directors, and a clear rationale for the sale must be documented. Profits realized from such sales must be initially recorded in the Profit and Loss account, and subsequently appropriated to the Capital Reserve from the net profit for the year, following statutory appropriations. Losses incurred from the sale of HTM securities must be recognized in the Profit and Loss account in the year the sale occurs. This circular refers to Para 16.2 of Master Circular DCBR.BPD.PCB.MC.No.4/16.20.00/2015-16 dated July 1, 2015, on Investments by Primary Urban Cooperative Banks.
The Department of Cooperative Bank Regulation, Central Office can be contacted at: C-7, 1st/2nd Floor, Bandra-Kurla Complex, Bandra (E), Mumbai – 400 051. Phone: 022-26578300 / 26578100; Fax: 022-26571117; Email: cgmdcbrcorbi.org.in. The issuing Chief General Manager is Neeraj Nigam.
Key Entities Referenced
Reserve Bank of India: The central bank of India, referred to as RBI.
Primary Urban Cooperative Banks: A type of banking institution regulated by the RBI.
Held to Maturity: An accounting category (HTM) for securities that banks intend to hold until maturity.
Board of Directors: The governing body of the Urban Cooperative Banks responsible for decision making.
Capital Reserve: A specific reserve account to which profits from the sale of HTM securities are appropriated.
Profit and Loss account: The financial statement where profits and losses from the sale of HTM securities are recorded.
Neeraj Nigam: Chief General Manager at Reserve Bank of India.
Mumbai, Maharashtra: City in India, where the Central Office of Department of Cooperative Bank Regulation is located.
RBI/2018-19/205
DCBR.BPD.(PCB) Cir.No.10/16.20.000/2018-19 June 10, 2019
The Chief Executive Officers of
All Primary (Urban) Co-operative Banks
Madam / Dear Sir,
Sale of Securities held in Held to Maturity (HTM) Category - Accounting treatment
Please refer to Para 16.2 of Master Circular DCBR.BPD.(PCB).MC.No.4/16.20.000/2015-16
dated July 01, 2015 on Investments by Primary (Urban) Co-operative Banks (UCBs) indicating
that securities acquired by banks with the intention to hold them up to maturity will be classified
under HTM category.
2. In this connection, it is reiterated that 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.
Yours faithfully,
(Neeraj Nigam)
Chief General Manager
सहकार� बक� �व�नयमन �वभाग, क�द्र�य कायार्लय, सी-7, पहल�/ दसू र� मिंज़ल, बांद्रा कुला र् संकुल, बांद्रा (पवू )र्, मंबु ई – 400 051
फोन: 022 – 26578300/ 26578100 ; फैक्स: 022 - 26571117 ; ई-मेल: cgmdcbrco@rbi.org.in
Department of Co-operative Bank Regulation, Central Office, C-7, 1st/ 2nd Floor, Bandra-Kurla Complex, Bandra (E), Mumbai – 400 051
Phone: 022 – 26578300/ 26578100; Fax: 022 - 26571117; E-mail: cgmdcbrco@rbi.org.in
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