Types of Investments in Commercial Banks
Investment Classification
The entire investment portfolio of the banks (including SLR securities and non-SLR securities) as per the bank balance sheet, the investments will be disclosed in the six categories namely.,
a) Government securities, b) Other approved securities,
c) Shares, d) Debentures & Bonds,
e) Subsidiaries/ joint ventures and
f) Others (CP, Mutual Fund Units, etc.)
In addition that, the financial securities are further classified on the basis of intention of holding. Such as Held to Maturity (HTM), Available for Sale (AFS) and Held for Trading (HFT).
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Basis |
HTM |
AFS |
HFT |
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Intention & Holding Period |
Liquidity Management Purposes | Hold Up to Maturity |
To Earn Short term Gain. Even Bank Ready to Sell Before Maturity |
Securities must be sold within 90 Days |
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Max. Limit |
Even > 25 % of Total Investment But only 19.50 % taken into SLR. |
No Limit based on the Banks ability |
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Shifting |
AFS |
Is possible Yearly once in the beginning of the Accounting year |
HTM is Not possible |
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HFT is possible subject to approval |
AFS is extraordinary condition subject to approval |
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HFT |
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Treatment of Profit & Loss |
Profit transfer to Capital reserve (i.e. Cap. Profit) Loss report in P& L a/c |
Net depreciation Recognized & Net Appreciation ignored |
Profit and Exp’s related to the securities trade recorded in P&L a/c |
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Valuation & Reporting |
Cost / Market (WEL) Yearly |
Market Value Quarterly |
Market Value Monthly |
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