Fimmda's quotations will now be used by banks to value their securities portfolio on a quarterly basis.

This is for the first time that Fimmda has come out with such quotes. Earlier, it was the Reserve Bank of India (RBI) which announced YTM rates for unquoted GoI-Secs to enable banks and primary dealers (PDs) to value their investments for March 31 balance-sheet purposes.

The RBI, in its just announced monetary and credit policy for 2000-2001, had said that it will not announce YTM rates for unquoted GoI-Secs as before for the purpose of valuation of investments made by banks. The categorisation and valuation of banks' investments will now have to be according to YTM quotes jointly put out by Fimmda with the Primary Dealers Association of India (PDAI).

Valuation of other unquoted non-statutory liquidity ratio (non-SLR) securities wherever linked to YTM rates, will also be with reference to YTM rates as put forth by Fimmda and the PDAI.

Said Fimmda's chief executive officer, B Ratnam: "Officials of both Fimmda and PDAI, and members' working groups have undertaken the work of arriving at prices and YTM rates based on the prices of benchmark securities that are traded in the market".

He added, "Fimmda's quotes are very much in alignment with the market. Private and foreign banks are up-to-date on the valuation of securities and I do not see these banks making huge provisions based on the same".

Fimmda was set up in 1998 under the chairmanship of Bank of America's managing director-India (global capital markets group), Arvind Sethi. It has 60 member banks.

In recent times, Fimmda has submitted a report to the RBI on issues related to primary debt markets including valuation of non-SLR instruments or interest-rate swap valuations. It has also issued clarifications on certain terms for the adoption of international swap and derivative agreements (ISDA) by banks operating in the country.

It might be recalled that the RBI had, in its monetary and credit policy review for the ongoing fiscal, also revised the valuations norms for banks.

The central bank has introduced a new category called `held-to-maturity', and this is seen to be acting as a relief-buffer for banks at the time of provisioning at end-March. The other two categories were `held-for-trading' and `held-for-sale'.