RBI – 2007-08/329 DBOD.No.BP.BC.86/21.04.141/2007-08
May 22, 2008 The Chairman/Chief Executive Officer All Scheduled Commercial
Banks (excluding Regional Rural Banks) Dear Sir, Valuation
of Non-SLR securities issued by the Government of India Please
refer to our Master Circular issue vide letter DBOD.No.BP.BC.15/21.04.141/
2007-08 dated July 2, 2007 on ‘Prudential Norms for classification,
valuation and operations of investment portfolio by banks’. 2. It
has been observed that, over the years, the Government of India has, from time
to time, issued several special securities which do not qualify for the purpose
of complying with the SLR requirements of banks. Such Government securities are
governed by a separate set of terms and conditions and entail a higher degree
of illiquidity spread. Currently, the guidelines issued by FIMMDA regarding the
valuation of such non-SLR securities provide that such securities be valued by
applying a mark-up of 50 basis points (bps) above the corresponding yield on Government
of India securities. 3. The issue of valuation of such special securities
has since been examined. It has been decided that, for the limited purpose of
valuation, all special securities issued by the Government of India, directly
to the beneficiary entities, which do not carry SLR status, may be valued at a
spread of 25 bps above the corresponding yield on Government of India securities.
This amendment would come into force from the financial year 2008–09.
4. It may be noted, that at present, such special securities comprise:
Oil Bonds, Fertiliser Bonds, bonds issued to the State Bank of India (during the
recent rights issue), Unit Trust of India, Industrial Finance Corporation of India
Ltd., Food Corporation of India, Industrial Investment Bank of India Ltd., the
erstwhile Industrial Development Bank of India and the erstwhile Shipping Development
Finance Corporation. Yours faithfully, (Prashant
Saran) Chief General Manager-in-Charge |