Banks are required to make provisions for depreciation on investment as a ‘below the line’ item, after arriving at the profit for the period. Whenever provisions so created on AFS and HFT categories is in excess of requisite amount in any year, such excess amount can be credited to the profit and loss account and…
Reserve Bank of India (RBI) has today (April 4, 2019)announced its first Bi-Monthly Monetary Policy Rates for 2019-20 in Mumbai. The Monitory Policy Committee (MPC) of Reserve Bank of India On the basis of an assessment of the current and evolving macroeconomic situation at its meeting decided to reduce the policy repo rate under the…
A bank’s exposures to its counterparties may result in a concentration of its assets to a single counterparty or a group of connected counterparties. To address this concentration risk RBI has fixed limits on bank exposures to an individual business concern and to business concerns of a group. As per current guidelines of RBI a…
Banks are required to build up of adequate reserves for mark to market (MTM) losses on investments held in AFS and HFT with effect from the year 2018-19. The provisioning for each of these quarters may be spread equally over up to four quarters, commencing with the quarter in which the loss is incurred. The…
Converting volatility (standard deviation) from annual to daily is pretty simple. The thumb rule for calculation is that the volatility is proportional to the square root of time, and not to time itself. For example you have average of 256 days trading days in a year and you find that implied volatility of a particular…
The Reserve Bank of India has mandated the banks to fix limits on their exposure to specific industry or sectors and has prescribed regulatory limits on banks’ exposure to single and group borrowers in India. This measure of RBI is aimed at better risk management and avoidance of credit risks. In addition to credit exposure…
All financial exchanges between one country and another country of the rest of the world are made up of the current account transactions (such as exports and imports of goods and services of a country) and the capital account transaction that reflects net change in ownership of national assets. Capital account includes all kinds of…
Contrasting HTM (held to maturity) securities in which the holder has the intention to hold them until specific date of maturity, ‘Held for Trading’(HFT) investments are the securities that a holder purchases with the intent of selling them within a short period of time, with the sole intent of generating short term profits by taking…
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…
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…
