The entire investment portfolio of the banks (including SLR securities and non-SLR securities) are classified under three categories viz. ‘Held to Maturity’, ‘Available for Sale’ and ‘Held for Trading’.
Held-to-maturity securities are debt security investments which the holder has the intention and ability to hold them until specific date of maturity. The investments classified under HTM need not be marked to market and will be carried at acquisition cost, as subsequent changes in market value are ignored because the return is predetermined. Therefor this type of security is reported at amortized cost on a bank’s balance sheet.
RBI has decided to reduce statutory liquidity ratio, the portion of funds which banks are required to park in treasury bills and other instruments under HTM category up to 19 per cent of Bank’s total investments as on April 1st 2019. Further, RBI has decided to reduce statutory liquidity ratio, by 0.25% every quarter beginning January 2019. The calibrated reduction in statutory liquidity ratio (SLR) will continue till it reaches 18% on April 1st 2020.
However, banks are required to categories and report their investments at the time of acquisition and the decision should be recorded on the investment proposals. Banks should frame Internal Investment Policy Guidelines and obtain the Board’s approval for their investments 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 decision to categorise the investments should be taken at the time of acquisition and such decision should be recorded on the investment proposals.