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HomeBusinessRBI Proposes New Norms For Classification, Valuation Of Banks' Funding Portfolio

RBI Proposes New Norms For Classification, Valuation Of Banks’ Funding Portfolio

The brand new financial institution portfolio classification norms will come into impact from April 1, 2023

Mumbai:

The Reserve Financial institution of India (RBI) on Friday proposed new norms for the classification and valuation of the funding portfolio of banks, with a view to align them with the worldwide prudential framework and accounting requirements.

In accordance with the proposed norms, the funding portfolio of banks will likely be divided into three classes — held-to-maturity (HTM), out there on the market (AFS), and truthful worth via revenue and loss account (FVTPL).

Inside FVTPL, held-for-trading (HFT) shall be a sub-category aligned with the specs of ‘Buying and selling Ebook’ as per the Basel-III framework.

The brand new financial institution portfolio classification norms will come into impact from April 1, 2023, the RBI paper mentioned, whereas inviting feedback on a dialogue paper on this regard from stakeholders by February 15.

The brand new norms suggest to bridge the hole between the prevailing pointers and world requirements and practices with reference to classification, valuation and operations of the funding portfolio of business banks.

The extant directions pertaining to the prudential norms on the classification and valuation of the funding portfolio are largely based mostly on the Report of Casual Group on Valuation of Banks’ Funding Portfolio (Convenor: T C Nair), which was submitted in 1999.

The suggestions of this casual group culminated within the concern of prudential pointers on the funding portfolio in October 2002, which varieties the idea of our present norms.

There have been important developments within the world prudential framework, accounting requirements in addition to within the monetary markets-both home and world up to now 20 years.

Whereas the RBI has been tweaking the rules in response to conditions as they emerge, a complete assessment has not been undertaken up to now, leading to a large hole between the nation’s norms and the worldwide requirements and practices, the central financial institution mentioned.

It’s towards this backdrop {that a} dialogue paper, on ‘Assessment of Prudential Norms for Classification, Valuation and Operations of Funding Portfolio of Business Banks’, opinions the rationale and the evolution of the present framework, the corresponding world requirements, and developments within the monetary markets earlier than framing its proposals.

The paper proposes to comprehensively align the prudential framework with the worldwide requirements whereas retaining some parts contemplating the home context. PTI NKD CS HRS hrs

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