The Reserve Bank of India (RBI) on November 28, 2025 issued the Reserve Bank of India (Commercial Banks – Classification, Valuation, and Operation of Investment Portfolio) Directions, 2025 to consolidate and modernise rules governing banks’ investment books. The Directions set out the scope, definitions and an updated investment policy framework requiring board-approved policies, clear categorisation (HTM, AFS, FVTPL/HFT), rules for initial recognition and subsequent measurement, and detailed fair-value valuation standards using Level 1/2/3 inputs. It also prescribes governance, internal controls, broker engagement norms, audit and reporting requirements.
The Directions require banks to maintain robust segregation of investment portfolios, specify conditions and limits for HTM classification and permitted reclassifications, and lay down operational rules for government and non-SLR securities. They introduce guidance on Day-1 gains/losses, treatment of low-coupon bonds, valuation of quoted and unquoted securities, and limits on retained exposures. The framework mandates comprehensive documentation for pricing/valuation, monthly reconciliation, and enhanced disclosures to improve transparency and market discipline.
The Directions also harmonise prudential treatment for income recognition, non-performing investments (NPI) and provisioning, set out rules for Investment Fluctuation Reserve, and include provisions for derivatives, repo transactions and sale from HTM with conditions for disclosures and supervisory oversight. These measures aim to strengthen risk management, ensure consistent accounting/valuation practices across banks, and enhance the integrity of banks’ investment portfolios.
[Notification No. RBI/DOR/2025-26/162]
