Eximkey - India Export Import Policy 2004 2013 Exim Policy
DBOD.No.BP.BC. 21 /21.04.141/2003-04, Dt. 02/09/2003

Master Circular-Prudential Norms for Cassification, Valuation and Operation of Investment Portfolio by Banks

PREVIOUS

ANNEXURE - IV

Para 1.2.8 (ii)

Recommendations of the Group on Non-SLR investments of banks

Pro-forma of minimum disclosure requirements in respect of private placement issues - Model Offer Document

All issuers must issue an offer document with terms of issue, authorised by Board Resolution not older than 6 months from the date of issue. The offer document should specifically mention the Board Resolution authorising the issue and designations of the officials who are authorised to issue the offer document. The offer document may be printed or typed "For Private Circulation Only". The Offer Document should be signed by the authorised signatory. The offer document should contain the following minimum information :

I. General Information

1. Name and address of registered office of the company2. Full names (expanded initials), addresses of Directors and the names of companies where they are Directors.3. Listing of the issue (If listed, name of the Exchange)4. Date of opening of the issueDate of closing of the issueDate of earliest closing of the issue.5. Name and addresses of auditors and Lead Managers/arrangers6. Name address of the trustee-consent letter to be produced (in case of debenture issue)7. Rating from any Rating Agency and / or copy of the rationale of latest rating.II. Particulars of the issue

a. Objectsb. Project cost and means of financing (including contribution of promoters) in case of new projects.III. The model offer document should also contain the following information :

(1) Interest rate payable on application money till the date of allotment.

(2) Security : If it is a secured issue, the issue is to be secured, the offer documents should mention description of security, type of security, type of charge, Trustees, private charge-holders, if any, and likely date of creation of security, minimum security cover, revaluation, if any.

(3) If the security is collateralised by a guarantee, a copy of the guarantee or principal terms of the guarantee are to be included in the offer document.

(4) Interim Accounts, if any.

(5) Summary of last audited Balance Sheet and Profit & Loss Account with qualifications by Auditors, if any.

(6) Last two published Balance Sheet may be enclosed.

(7) Any conditions relating to tax exemption, capital adequacy etc. are to be brought out fully in the documents.

(8) The following details in case of companies undertaking major expansion or new projects :- (copy of project appraisal may be made available on request)

    a. Cost of the project, with sources and uses of funds

    b. Date of commencement with projected cash flows

    c. Date of financial closure (details of commitments by other institutions to be provided)

    d. Profile of the project (technology, market etc)

    e. Risk factors

(9) If the instrument is of tenor of 5 years or more, projected cash flows.

IV . Banks may agree to insist upon the following conditionalities for issues under private placements

All the issuers in particular private sector corporates, should be willing to execute a subscription agreement in case of all secured debt issues, pending the execution of Trust Deed and charge documents. A standardised subscription agreement may be used by the banks, inter-alia, with the following important provisions.

a. Letter of Allotment should be made within 30 days of allotment. Execution of Trust Deed and charge documents will be completed and debentures certificates will be despatched within the time limit laid down in the Companies Act but not exceeding in any case, 6 months from the date of the subscription agreement.

b. In case of delay in complying with the above, the company will refund the amount of subscription with agreed rate of interest, or, will pay penal interest of 2% over the coupon rate till the above conditions are complied with, at the option of the bank.

c. Pending creation of security, during the period of 6 months (or extended period), the principal Directors of the company should agree to indemnify the bank for any loss that may be suffered by the bank on account of the subscription to their debt issue. (This condition will not apply to PSUs).

d. It will be the company’s responsibility to obtain consent of the prior charge-holders for creation of security within the stipulated period. Individual banks may insist upon execution of subscription agreement or a suitable letter to comply with the terms of offer such as appointment of trustee, creation of security etc. on the above lines.

e. Rating : The Group recommends that the extant regulations of SEBI in regard to rating of all debt instruments in public offers would be made applicable to private placement also. This stipulation will also apply to preference shares which are redeemable after 18 months.

f. Listing : Currently, there is a lot of flexibility regarding listing required by banks in private placement issues. However, the Group recommends that listing of companies should be insisted upon, ( exceptions, if any, to this rule shall be provided in the Investment Policy of the banks) which would in due course help develop secondary market. The advantage of listing would be that the listed companies would be required to disclose information periodically to the Stock Exchanges which would also help develop the secondary markets by way of investor information. In fact, SEBI has advised all the Stock Exchanges that all listed companies should publish unaudited financial results on a quarterly basis and that they should inform the Stock Exchanges immediately of all events which would have a bearing on the performance/operations of the company as well as price sensitive information.

g. Security / documentation : To ensure that the documentation is completed and security is created in time, the Group has made recommendations which is contained in this model offer document. It may be noted that in case of delay in execution of Trust Deed and Charge documents, the company will refund the subscription with agreed rate of interest or will pay penal interest of 2% over the coupon rate till these conditions are complied with at the option of the bank. Moreover, Principal Directors of the company will have to agree to indemnify the bank for any loss that may be suffered by the bank on account of the subscription to the debt issue during the period of 6 months (or extended period) pending creation of security.


ANNEXURE V

Para 1.3.1

RETURN/STATEMENT NO. 9


Proforma

Statement showing the position of Reconciliation of Investment
Account as on 31st March

Name of the bank/ Institution : _____________________________________

(Face value Rs. in crore)

Particulars of securitiesGeneral Ledger Balance
SGL Balance

BRs heldSGL Forms heldActual Scrips heldOutstanding deliveries
As per PDO booksAs per bank's institution's books

1.2.3.4.5.6.7.8.

I. Central Government

II. State Government

III. Other approved securities

IV. Public Sector bonds

V. Units of UTI (1964)

VI. Others (Shares & debentures etc.)

TOTAL :


Note : Similar statements may be furnished in respect of PMS client’s Accounts and other constituents’ Accounts (including Brokers). In the case of PMS/other constituents’ accounts, the face value and book value of securities appearing in the relevant registers of the bank should be mentioned under Column 2.

Signature of the AuthorisedOfficial with the Name and Designation.

General instructions for compiling reconciliation statement

    a) Column - 2 (GL balances)

    It is not necessary to give complete details of securities in the format. Only aggregate amount of face value against each category may be mentioned. The corresponding book value of securities may be indicated in bracket under the amount of face value of securities under each category.

    b) Column - 3 and 4 (SGL balances)

    In the normal course balances indicated against item three and four should agree with each other. In case of any difference on account of any transaction not being recorded either in PDO or in the books of the bank this should be explained giving full details of each transaction.

    c) Column - 5 (BRs held)

    If the bank is holding any BRs for purchases for more than 30 days from the date of its issue, particulars of such BRs should be given in a separate statement.

    d) Column - 6 (SGL forms held)

    Aggregate amount of SGL forms received for purchases which have not been tendered with Public Debt Office should be given here.

    e) Column - 7

    Aggregate amount of all scrips held in the form of bonds, letters of allotments, subscription receipts as also certificates of entries in the books of accounts of the issuer (for other than government securities), etc. including securities which have been sold but physical delivery has not been given should be mentioned.

    f) Column - 8 (outstanding deliveries)

    This relates to BRs issued by the bank, where the physicals/scrips have not been delivered but the balance in General Ledger has been reduced. If any BR issued is outstanding for more than thirty days the particulars of such BRs may be given in a separate list indicating reasons for not affecting the delivery of scrips.

    g) General

    Face value of securities indicated against each item in column two should be accounted for under any one of the columns from four to seven. Similarly, amount of outstanding deliveries (BRs issued) which has been indicated in column eight will have to be accounted for under one of the columns four to seven. Thus the total of columns two and eight should tally with total of columns four to seven.


ANNEXURE VI

Para 4.5.5

Disclosure

The following disclosures should be made by banks in the "Notes on Accounts’ to the Balance Sheet.

(Rs. In crore)            

 Minimum outstanding during the yearMaximum outstanding during the yearDaily Average outstanding during the yearAs on March 31
Securities sold under repos    
Securities purchased under reverse repos    


ANNEXURE VII

Para 4.5.6

Illustrative examples for uniform accounting of Repo / Reverse repo transactions


A. Repo/ Reverse Repo of Coupon bearing security

1. Details of Repo in a coupon bearing security:

Security offered under Repo11.43% 2015 
Coupon payment dates7 August and 7 February 
Market Price of the security offered under Repo (i.e. price of the security in the first leg)Rs.113.00(1)
Date of the Repo19 January, 2003 
Repo interest rate7.75% 
Tenor of the repo3 days 
Broken period interest for the first leg*11.43%x162/360x100=5.1435(2)
Cash consideration for the first leg(1) + (2) = 118.1435(3)
Repo interest**118.1435x3/365x7.75%=0.0753(4)
Broken period interest for the second leg11.43% x 165/360x100=5.2388 (5)
Price for the second leg(3)+(4)-(5) = 118.1435 + 0.0753 - 5.2388 = 112.98(6)
Cash consideration for the second leg(5)+(6) = 112.98 + 5.2388 = 118.2188 (7)


* Computation of days based on 30/360 day count convention

** Computation of days based on Actual/365 day count convention applicable to money market instruments

2. Accounting for seller of the security

We assume that the security was held by the seller at the book value (BV) of Rs.120.0000

First leg Accounting

 DebitCredit
Cash Repo Account118.1435120.0000
(Book value)
Repo Price Adjustment account7.0000
(Difference between BV & repo price)
 
Repo Interest Adjustment account 5.1435


Second Leg Accounting

 DebitCredit
Repo Account Repo Price Adjustment account120.00007.02 (the difference between the BV and 2nd leg price)
Repo Interest Adjustment account Cash account5.2388118.2188


The balances in respect of the Repo Price Adjustment Account and Repo Interest Adjustment Account at the end of the second leg of repo transaction are transferred to Repo Interest Expenditure Account. In order to analyse the balances in these accounts, the ledger entries are shown below :

Repo Price Adjustment account

DebitCredit
Difference in price for the 1st leg7.00Difference in price for the 2nd leg7.02
Balance carried forward to Repo Interest Expenditure account0.02  
Total7.02Total7.02


Repo Interest Adjustment account

DebitCredit
Broken period interest for the 2nd leg5.2388Broken period interest for the 1st leg5.1435
  Balance carried forward to Repo Interest Expenditure account0.0953
Total5.2388Total5.2388


Repo Interest Expenditure Account

DebitCredit
Balance from Repo Interest Adjustment account0.0953Balance from Repo Price Adjustment account 0.0200
  Balance carried forward to P & L a/c. 0.0753
Total0.0953Total 0.0953


3. Accounting for buyer of the security

When the security is bought, it will bring its book value with it. Hence market value is the book value of the security.

First leg Accounting:

 DebitCredit
Reverse Repo Account113.0000 
Reverse Repo Interest Adjustment account5.1435 
Cash account 118.1435


Second Leg Accounting

 DebitCredit
Cash account118.2188 
Reverse Repo Price Adjustment account (Difference between the 1st and 2nd leg prices)0.0200 
Reverse Repo account 113.0000
Reverse Repo Interest Adjustment account 5.2388


The balances in respect of the Reverse Repo Interest Adjustment Account and Reverse Repo Price adjustment account at the end of the second leg of reverse repo in these accounts are transferred to Repo Interest Income Account. In order to analyse the balances in these two accounts, the ledger entries are shown below:

Reverse Repo Price Adjustment Account

DebitCredit
Difference in price of 1st & 2nd leg 0.0200Balance to Repo Interest Income a/c.0.0200
Total 0.0200Total0.0200


Reverse Repo Interest Adjustment Account

DebitCredit
Broken period interest for the 1st leg 5.1435Broken period interest for the 2nd leg 5.2388
Balance carried forward to Repo Interest Income Account 0.0953  
Total 5.2388Total5.2388


Reverse Repo Interest Income Account

DebitCredit
Difference between the 1st & 2nd leg prices 0.0200Balance from Reverse Repo Interest Adjustment account 0.0953
Balance carried forward to P & L account 0.0753  
Total0.0953Total0.0953


4. Additional accounting entries to be passed on a Repo / Reverse Repo transaction on a coupon bearing security, when the accounting period is ending on an intervening day.

Transaction Leg
à
1st legEnd of accounting period2nd leg
Dates à19 Jan 0321 Jan 03*22 Jan 03


The difference in the clean price of the security between the first leg and the second leg should be apportioned upto the Balance Sheet date and should be shown as Repo Interest Income / Expenditure in the books of the seller / buyer respectively and should be debited / credited as an income / expenditure accrued but not due. The balances under Income / expenditure accrued but not due should be taken to the balance sheet

The coupon accrued by the buyer should also be credited to the Repo Interest Income account. No entries need to be passed on " Repo / Reverse Repo price adjustment account and Repo / Reverse repo interest adjustment account" . The illustrative accounting entries are shown below:

a) Entries in Seller’s books on January 21, 2003

Account HeadDebitCredit
Repo Interest Income account [ Balances under the account to be transferred to P & L] 0.0133 ( Notional credit balance 0.0133 in the Repo Price Adjustment Account by way of apportionment of price difference for two days i.e. upto the balance sheet day)
Repo interest Income accrued but not due0.0133 


*21 January, 2003 is assumed to be the balance sheet date

b) Entries in Seller’s books on January 21, 2003

Account HeadDebitCredit
Repo interest income 0.0133 
P & L a/c 0.0133


c) Entries in Buyer's Books on January 21, 2003
Account HeadDebitCredit
Repo interest income accrued but not due0.0502 
Repo Interest Income account [Balances under the account to be transferred to P & L] 0.0502 (Interest accrued for 3 days of Rs. 0.0635* - Apportionment of the difference in the clean price of Rs. 0.0133)


*For the sake of simplicity the interest accrual has been considered for 2 days.

d) Entries in Buyer's Books on January 21, 2003

Account HeadDebitCredit
Repo interest income account0.0502 
P& L a/c 0.0502


The difference between the repo interest accrued by the seller and the buyer is on account of the accrued interest forgone by the seller on the security offered for repo.B. Repo/ Reverse Repo of Treasury Bill1. Details of Repo on a Treasury Bill
Security offered under RepoGOI 91 day Treasury Bill maturing on 28 February, 2003 
Price of the security offered under RepoRs.96.0000(1)
Date of the Repo19 January, 2003 
Repo interest rate7.75% 
Tenor of the repo3 days 
Total cash consideration for the first leg96.0000(2)
Repo interest0.0612(3)
Price for the second leg(2)+(3) = 96.0000 + 0.0612 = 96.0612 
Cash consideration for the 2nd leg96.0612  


2. Accounting for seller of the security

We assume that the security was held by the seller at the book value (BV) of Rs.95.0000

First leg Accounting:

 DebitCredit
Cash Repo Account96.000095.0000
(Book value)
Repo Price adjustment account 1.0000
(Difference between BV & repo price )


Second Leg Accounting

Repo Account
Repo Price adjustment account
95.0000
1.0612
(the difference between the BV and 2nd leg price)
 
Cash account 96.0612


The balances in respect of the Repo Price Adjustment Account at the end of the second leg of repo transaction are transferred to Repo Interest Expenditure Account. In order to analyse the balances in this account, the ledger entries are shown:

Repo Price Adjustment account

DebitCredit
Difference in price for the 2nd leg1.0612Difference in price for the 1st leg 1.0000
  Balance carried forward to Repo Interest Expenditure account0.0612
Total 1.0612Total1.0612


Repo Interest Expenditure Account

DebitCredit
Balance from Repo Price Adjustment account0.0612Balance carried forward to P & L a/c. 0.0612
Total 0.0612Total 0.0612


The Seller will continue to accrue the discount at the original discount rate during the period of the repo.

3. Accounting for buyer of the security

When the security is bought, it will bring its book value with it. Hence market value is the book value of the security.

First leg Accounting:

 DebitCredit
Reverse Repo Account96.0000 
Cash account 96.0000


Second Leg Accounting

 DebitCredit
Cash account96.0612 
Repo Interest Income account
(Difference between the 1st and 2nd leg prices)
 0.0612
Reverse Repo account 96.0000


The Buyer will not accrue for the discount during the period of the repo.

4. Additional accounting entries to be passed on a Repo / Reverse Repo transaction on a Treasury Bill, when the accounting period is ending on an intervening day.

Transaction Leg
à
1st leg B/S date2nd leg
Date à19 Jan.0321 Jan.03*22 Jan.03


*21 January, 2003 is assumed to be the balance sheet date

a. Entries in Seller’s books on January 21, 2003

Account HeadDebitCredit
Repo Interest Expenditure account (after apportionment of repo interest for two days) [ Balances under the account to be transferred to P & L]0.0408 
Repo interest expenditure accrued but not due 0.0408


b. Entries in Seller’s books on January 21, 2003

Account HeadDebitCredit
Repo interest expenditure account 0.0408
P & L a/c 0.0408 


c. Entries in Buyer's Books on January 21, 2003

Account HeadDebitCredit
Repo interest income accrued but not due0.0408 
Repo Interest Income account [Balances under the account to be transferred to P & L] 0.0408


d. Entries in Buyer's Books on January 21, 2003

Account HeadDebitCredit
Repo interest income account0.0408 
P & L a/c  0.0408


Appendix


Master Circular

Classification, valuation and operation of investments


List of Circulars consolidated by the Master Circular


NoCircular No.DateRelevant para no. of the circularSubjectPara no. of the master circular
1DBOD.No.Dir.BC.42/C.347-8715 April 19872.B(ii), (iii) and 3,4Buy-back arrangements in Government & Other Approved Securities entered into by commercial banks1.2.1 (ii) (e) (f) (g)
2DBOD.No.Dir.BC.127/ C.347(PSB)-8811 April 19881,3Buy-back arrangements in Government & Other Approved Securities entered into by commercial banks1.2 .1 (ii) (f), (iv) (a) & (b)
3DBOD.No.FSC.BC.69/C.469-90/9118 Jan 19911,2,4Portfolio Management on behalf of clients1.3. 3
4DO.DBOD.No.FSC.46/C.469-91/9226 July 19914(i),(ii),(iii),(iv),(v),(iv)Investment portfolio of banks-Transaction in securities1.2 (i)
5DBOD.No.FSC.BC.143A/24.48.001/91-9220 June 19923(I), 3(I)-(ii)-(iii)-(iv)-(v)-(xi)-(xii)-(xvi)-(xvii), 3(II),3(III), 3(V)-(i)-(ii)-(iii),(3) & (4)Investment portfolio of banks-Transaction in securities1.2 (ii),(iii) & (iv), 1.2.2,1.2.3, 1.2.5, 1.2.6 1.2.7
6DBOD.No.FSC.BC.11/24.01.009/92-9330 July 19923,4,5,6Portfolio Management on behalf of clients1.3.3
7DBOD.No.FMC/BC/17/24.48.001.92/9319 Aug 19922Investment portfolio of banks-Transaction in securities1.3.2
8DBOD.FMC.BC. 62/27.02.001/92-9331 Dec 19921Investment portfolio of banks-Transaction in securities1.2.6
9DBOD.No.FMC.1095/27.01.002/9315 April 19931 & enclosed formatInvestment portfolio of banks- Reconciliation of holdings1.3.1 & Annexure-V
10DBOD.No.FMC.BC.141/27.02.006/93/9419 July 1993AnnexureInvestment portfolio of banks-Transaction in securities-Aggregate contract limit for individual brokers-ClarificationsAnnexure-III
11DBOD.No.FMC.BC.1/27.02.001/93-9410 Jan 19941Investment portfolio of banks-Transaction in securities-Bouncing of SGL transfer forms- Penalties to be imposed. 1.2.2
12DBOD.No.FMC.73/27.07.001/ 94-957 June 19941,2Acceptance of deposits under Portfolio Management Scheme1.3.3
13DBOD.No.FSC.BC.130/24.76.002/94-9515 Nov 19941Investment portfolio of banks-Transaction in securities-Bank Receipts(BRs)1.2.3
14DBOD.No.FSC.BC.129/24.76.002/94-9516 Nov 19942 & 3Investment portfolio of banks-Transaction in securities-Role of brokers1.2.6
15DBOD.No.FSC.BC.142/24.76.002/94-959 Dec 19941& 2Investment portfolio of banks-Transaction in securities-Role of brokers1.2.6
16DBOD.No.FSC.BC.70/24.76.002/95-968 June 19962Retailing of Government Securities1.2.4
17DBOD.No.FSC.BC.71/24.76.001/9611 June 19961Investment portfolio of banks-Transaction in securities1.2.2
18DBOD.No.BC.153/24.76.002/9629 Nov 19961Investment portfolio of banks-Transaction in securities1.2.6
19BP. BC. 9/ 21.04.048/9829 Jan 19973Prudential norms - capital adequacy, income recognition, asset classification and provisioning.5.1 (iii) & (iv)
20BP. BC. 32/ 21.04.048/ 9712 April 19971&2Prudential norms - capital adequacy, income recognition, asset classification and provisioning4.1 (i) &(ii)
21DBOD.FSC.BC.129/24.76.002-9722 Oct 19971Retailing of Government Securities1.2.4
22DBOD.No.BC.112/24.76.002/ 199714 Oct 19971Investment portfolio of banks- Transaction in securities-Role of brokers1.2.6
23BP. BC. 75/ 21.04.048/ 984 Aug 1998AllAcquisition of Government and other approved securities - Broken Period Interest, - Accounting Procedure5.2
24DBS.CO.FMC.BC.18/22.53.014/99-200028 Oct 19992,3,4 &5 Investment portfolio of banks-Transaction in securities 1.2.2
25DBOD.No.FSC.BC.150/ 24.76.002/99-200023 March 20001,2, Annexure(I), & (V)Ready Forward Contracts1.2.1, Annexures II
26DBOD.No.FSC. BC.26/24.76. 002/20006 Oct 20002Sale of Government securities allotted in the auctions for Primary issues1.2(i)(a)
27BP. BC. 32/ 21.04.048 /2000- 0116 Oct 2000AllGuidelines on classification and valuation of investments.2,3 &4
28DBOD.FSC.BC. No.39/24.76.002/200025 Oct 20001Investment portfolio of banks-Transaction in securities-Role of brokers1.2.6
29Dir.BC.107/13.03.00/2000-0119 April 20016Monetary and Credit Policy for the year 2000-2002-Interest Rate Policy4.3
30BP. BC. 119/ 21.04.137/ 2000- 200111 May 2001Annex - 5&12Bank financing of equities and investments in shares - Revised guidelines1.2, 1.2.5 1.3, 1.3.1
31BP. BC. 127/ 21.04.048/ 2000- 017 June 2001AllNon- SLR Investments of Banks2,3 &4 Annexure- IV
32BP.BC. 57/21.04.048/2001-0210, Jan 2002Para 2Valuation of investment by banks3.4
33BP.BC.61/21.04.048/2001-02 Jan 25, 2002AllGuidelines for investments by banks/Fis and Guidelines for financing of restructured accounts by banks/Fis1.2.8 (iv)
34BP.BC.99/21.01.002/2001-02May 3 2002Para 2Monetary & Credit Policy 2002-03 - IFRA3.4
35DBOD.No.FSC.BC.113/24.76.002/2001-02June 7 2002 AllOn Investment Portfolio of Banks Transaction in Govt. Securities1.3.4
36DBOD.No.FSC. BC.84/24.76.002/2002-0326 March 2003AllReady Forward Contracts Annexure II
37DBOD.No.FSC. BC.90/24.76.002/2002-03March 31 2003AllReady Forward Contracts1.2.1(i), (ii) and (iii)
38IDMC.3810/11.08.10/2002-03March 24 2003AllGuidelines for uniform accounting for Repo / Reverse Repo transactions4, Annexure VI & Annexure VII


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