Valuation of Investments of Urban Co-operative Banks
Valuation Standards
1. Held to Maturity (HTM)
- Investments in HTM don’t need market valuation.
- They are carried at acquisition cost if it’s less than face value.
- If the cost is more than face value, the premium is spread over the remaining maturity period.
Note: The book value decreases by the amortized amount each accounting period.
2. Held for Trading (HFT) and Available for Sale (AFS)
- HFT securities are valued monthly or more often.
- AFS securities are valued quarterly or more often.
- The book value of HFT and AFS securities stays the same after valuation.
- Securities in AFS and HFT are valued individually. Net depreciation or appreciation is calculated for each category. Only net depreciation is accounted for.
- Net depreciation in one category can’t be offset by net appreciation in another.
Market Value
Quoted Securities
Quoted securities are valued using prices from Financial Benchmarks India Pvt. Ltd. (FBIL) or, if not available, from authorized exchanges or platforms.
Unquoted SLR Securities
- Central Government Securities: Valued using FBIL prices/YTM rates. Treasury Bills are valued at carrying cost.
- State Government Securities: Valued using FBIL prices/YTM rates.
- Other Approved Securities: Valued using the YTM method, marked up by 25 basis points above equivalent Central Government Securities yields.
Unquoted non-SLR Securities
- Corporate Bonds: Valued on a YTM basis, with a mark-up over Central Government securities rates. The mark-up depends on the bond’s credit rating.
- Special Securities1: Valued at a spread of 25 basis points above corresponding Government of India securities yields.
- Mutual Fund Units: Unquoted units are valued at the latest repurchase price or NAV. If unavailable, they are valued at cost.
- Commercial Paper and Certificate of Deposits: Valued at carrying cost.
- Zero Coupon Bonds (ZCBs): Valued at carrying cost, marked to market with reference to market value or present value.
Securities issued by Asset Reconstruction Companies (ARC)
Valued as per specific RBI directions.
Shares of Co-operative Institutions2
- Regular dividend-paying shares are valued at face value.
- Full provision is made for shares of institutions in liquidation or not paying dividends.
- Shares of institutions without recent balance sheets are valued at Re. 1 per institution.
Equity Warrants from Punjab and Maharashtra Co-operative Bank Limited Scheme
- Valued at ₹1 per warrant. Post-conversion into equity shares, they are valued at market prices.
- Special Securities include Oil Bonds, Fertiliser Bonds, and others issued to specific institutions.
- Co-operative institutions refer to various cooperative bodies where UCBs might invest.
Investment Portfolio of Primary (Urban) Co-operative Banks
Shifting Among Categories in the Investment Portfolio of UCBs
Investments in Government Securities by Urban Co-operative Banks
Investment in Non-SLR Securities by Urban Co-operative Banks
Placement of Deposits with Other Banks/Institutions by Urban Co-operative Banks
Accounting and Provisioning by Urban Co-operative Banks
Restrictions on holding shares in other Co-operative Societies
