INSUBCONTINENT EXCLUSIVE:
The new bank portfolio classification norms will come into effect from April 1, 2023Mumbai: The Reserve Bank of India (RBI) on Friday
proposed new norms for the classification and valuation of the investment portfolio of banks, with a view to align them with the global
prudential framework and accounting standards.According to the proposed norms, the investment portfolio of banks will be divided into three
held-for-trading (HFT) shall be a sub-category aligned with the specifications of 'Trading Book' as per the Basel-III framework.The new bank
portfolio classification norms will come into effect from April 1, 2023, the RBI paper said, while inviting comments on a discussion paper
in this regard from stakeholders by February 15.The new norms propose to bridge the gap between the existing guidelines and global standards
and practices with regards to classification, valuation and operations of the investment portfolio of commercial banks.The extant
instructions pertaining to the prudential norms on the classification and valuation of the investment portfolio are largely based on the
Report of Informal Group on Valuation of Banks' Investment Portfolio (Convenor: T C Nair), which was submitted in 1999.The recommendations
of this informal group culminated in the issue of prudential guidelines on the investment portfolio in October 2002, which forms the basis
of our current norms.There have been significant developments in the global prudential framework, accounting standards as well as in the
financial markets-both domestic and global in the past two decades.While the RBI has been tweaking the guidelines in response to situations
as they emerge, a comprehensive review has not been undertaken so far, resulting in a wide gap between the country's norms and the global
standards and practices, the central bank said.It is against this backdrop that a discussion paper, on 'Review of Prudential Norms for
Classification, Valuation and Operations of Investment Portfolio of Commercial Banks', reviews the rationale and the evolution of the
current framework, the corresponding global standards, and developments in the financial markets before framing its proposals.The paper
proposes to comprehensively align the prudential framework with the global standards while retaining some elements considering the domestic
