Sale of Securities held in Held to Maturity (HTM) Category – Accounting treatment
Investments by Primary (Urban) Co-operative Banks (UCBs) indicating that securities acquired by banks with the intention to hold them up to maturity will be classified under HTM category.
In this connection, it is reiterated that UCBs are not expected to resort to sale of securities held in HTM category. However, if due to liquidity stress, UCBs are required to sell securities from HTM portfolio, they may do so with the permission of their Board of Directors and rationale for such sale may be clearly recorded. Profit on sale of investments from HTM category shall first be taken to the Profit and Loss account and, thereafter, the amount of such profit shall be appropriated to ‘Capital Reserve’ from the net profit for the year after statutory appropriations. Loss on sale shall be recognized in the Profitand Loss account in the year of sale.
Prudential Norms for Classification, Valuation and Operation of Investment Portfolio by Banks – Sale of investments held under Held to Maturity (HTM) category
Banks are advise that if the value of sales and transfer of securities to / from HTM category exceeds 5 per cent of the book value of investments held in HTM category at the beginning of the year, banks should disclose the market value of the investments held in the HTM category and indicate the excess of book value over market value for which provision is not made.
Apart from transactions that are already exempted from inclusion in the 5 per cent cap, it has been decided that repurchase of State Development Loans (SDLs) by the concerned state government shall also be exempted.
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