Reserve Bank paper proposes new investment category for banks

The Reserve Bank of India proposed a new investment category for banks-fair value through profit and loss (FVTPL) account-as part of its initiatives to align lenders’ investment portfolio regulations with the global accounting standards.

In a discussion paper released, RBI said the investment portfolio of banks shall now be divided into three categories-held to maturity (HTM), available for sale (AFS) and FVTPL.

The existing held-for-trading (HFT) category will now come under the FVTPL category, according to the proposed rules. The HFT category was for debt securities purchased by banks with the intent of selling them within a short period of time. Under FVTPL, debt instruments are measured at fair value through a profit and loss account.

The new bank portfolio classification norms will come into effect from 1 April 2023, the paper said, while inviting comments on a discussion paper from stakeholders by 15 February.