Answer-The Reserve Bank of India (RBI) has revised investment norms for commercial banks, making it more ri...

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The Reserve Bank of India RBI has revised investment norms for commercial banks, making it more stringent as it created a new category namely  fair value through profit and loss FVTPL.  The held for trading HFT will now be a separate investment subcategory within FVTPL.    From April 1, 2024, when these new norms come into effect, banks will classify their entire investment portfolio except investments in their own subsidiaries, joint ventures and associates under three categories - held to maturity HTM, available for sale AFS, and fair value through profit and loss FVTPL.   Importantly, sale of investments from the HTM category in any financial year should not exceed 5 per cent of the opening carrying value of the HTM portfolio. Any sale beyond this threshold will require the RBIs approval.    The banks should create an investment fluctuation reserve IFR until the amount of IFR is at least 2 per cent of the AFS and FVTPL including HFT portfolio, on a continuing basis, by transferring to the IFR an amount not less than the lower of the net profit on sale of investments during the year or net profit for the year, less mandatory appropriations.    IFR will be eligible for inclusion in Tier II capital to address the systemic impact of sharp increase in yields in government securities.

The Reserve Bank of India (RB

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