The investment portfolio of the banks are classified under three categories viz. ‘Held to Maturity’, ‘Available for Sale’ and ‘Held for Trading’. Banks take decision to categorise their investments at the time of acquisition of these securities and recorded on the investment proposals of the bank.
The Available for Sale (AFS) are debt and equity securities purchased and held by banks principally for trading (buying and selling) purpose in the short term usually less than one year. The securities so acquired are differentiated as domestic securities and foreign securities. The individual scrip (both domestic and foreign) in the Available for Sale category will be marked to market at quarterly or at more frequent intervals. Domestic scrip are valued scrip-wise in six different categories viz. (i) Government securities,(ii) Other approved securities,(iii) Shares,(iv) Debentures & Bonds,(v) Subsidiaries/ joint ventures and (vi) Others (CP, Mutual Fund Units, etc.). The foreign investments are valued scrip-wise under five different classifications viz. (i) Government securities (including local authorities), (ii) Shares, (iii) Debentures & Bonds, (iv) Subsidiaries and/or joint ventures abroad and (v) other investments (to be specified). The investment in a particular classification, both in domestic and foreign securities, may be aggregated for the purpose of arriving at net depreciation/appreciation of investments under that category. Net depreciation, if any, shall be provided for and Net appreciation if any, should be ignored. (The gains for available‐for‐sale securities are not reported on the income statement until the securities are sold).
Further, net depreciation required to be provided for in any one classification should not be reduced on account of net appreciation in any other classification. The balance sheet of the bank shall reflect fair value of foreign securities under three categories (Government securities (including local authorities), Subsidiaries and/or joint ventures abroad and other investments (to be specified). In case of Inflation Indexed Bonds (IIBs) classified under AFS or HFT may be valued at clean price quoted in the market at the time of acquisition. At the time of subsequent mark to market, the clean price quoted in the market as available from trades/quotes or clean price provided by FIMMDA may be treated as market value. Once this market value has been determined, the standard accounting procedures as applicable to HFT/AFS may be applied. The book value of the individual securities would not undergo any change after the marking of market.