Mumbai, Oct 29: The Reserve Bank’s informal group on valuation of banks’ investment has recommended that the central bank need not prescribe the year-end yields to maturity (YTM) for banks to value their investments.

The group has said that banks may refer to the prices available in the Statutory General Ledger (SGL) transactions, National Stock Exchange (NSE) trades/quotes, the price list of the RBI at the year-end and value the securities to the satisfaction of auditors. The RBI traditionally prescribes the year-end YTM and banks accordingly value their investments. “The recommendations say that the banks can value their investments according to the market-related year-end YTM not set by the RBI”, ICICI-Securities analyst MR Madhavan said. The group has also said that the RBI need not prescribe the methodology for valuation of all non-approved securities comprising PSU bonds and non-PSU bonds and debentures and they could be valued at “fair value” by individual banks taking the yield spread between the sovereign yield and the yield on the concerned bonds/similar bonds into consideration.

Among the other recommendations, the RBI informal group has recommended that banks may classify their entire investments in government and other “approved” securities under three categories. These include— “Held for trading”, “Available for sale” and “Permanent”.