CRR / SLR: Investments- regulations, types, Valuation
 Section 18:- Cash Reserve Ratio (CRR)
Every co-operative bank shall maintain in India by way of
Cash Reserve, a sum equivalent to at least 4% of total of it’s
time & demand liabilities as on last Friday of Second
preceding forth night & submit to RBI before 15th day of
every month a return showing the particulars.
 Section 24:- Statutory Liquidity Ratio (SLR)
Every co-operative bank shall maintain in India by way of
Assets, a sum equivalent to at least 21.50% (Not exceeding
40%) of total of it’s time & demand liabilities as on last
Friday of Second preceding forth night & submit to RBI
before 20th day of every month showing the particulars.
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 Statutory CRR requirements
 Incremental CRR
 Maintenance of CRR
 Maintenance of CRR on daily basis
 Calculation of CRR
 Computation of NDTL for CRR
 Reporting requirements
 Penalty for Non submission/delayed submission of
return
 Penal Interest for default in maintenance of CRR
 Cash Reserves for Non Scheduled UCB’s
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 Current prescription for SLR
 Calculation of SLR
 Manner of maintaining SLR
 Classification & Valuation of Securities
 Computation of NDTL for SLR
 Reporting Requirements
 Penal Provisions
4
 Investments:
 SLR Investments - 21.50% of NDTL
 Investment Policy
 General Guidelines:
- Not to undertake Purchase/Sale transactions with
broking firms on principal to principal basis.
- Investment transactions subjected to concurrent audit.
- No Sale unless they hold in their portfolio.
- No transactions in G-Sec in physical form.
- Fairly diversified Investment portfolio
- NDS - OM negotiated dealing system
5
 Empanelment of Brokers & Broker Limit:
- Bank should prepare panel of brokers after verifying
the credentials.
- Broker limit is fixed at 5% of total transactions.
 Non SLR Investments - Limited to 10% of Banks Total
Deposits
 Restrictions:
Investment
in
perpetual
debt
instruments is not permitted.
- Investment in commercial paper, debentures , bonds,
units of debt mutual fund should not exceed 10% of
Non SLR Investment.
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- Investment in Deep discount - Zero coupon bonds
are not permitted unless issuer built a sinking fund.
- Fresh Investments in shares of AIFIL’s will not be
permitted.
- All Non SLR investments should be classified as
HFT/AFS and mark to market.
- All Non SLR investments will be subject to
Single/Group counter party exposure limits.
- Placement of deposits with other banks by UCB’s
shall not exceed 20% of total deposit liabilities.
- Within exposure limit deposit with any single bank
should not exceed 5% of depositing banks total
deposit liabilities.
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 Categorization of Investments:
- UCB’s are required to classify under 3 categories:
a) Held to Maturity (HTM)
b) Available for Sale ( AFS)
c) Held for Trading (HFT)
- Bank should decide the category at the time of
acquisition.
- Investments included in HTM category should not
exceed 25% of total investments.
- Banks may shift investments to/from HTM category
ones in a year.
- Shifting of Investments from HFT to AFS is generally
not allowed
8
 Valuation of Investments:
- Investments under HTM need not be marked to
market and will be carried at acquisition cost but
premium is to be amortized during the remaining
period of maturity.
- AFS category will be marked to market at the year
end but book value would not undergo any change.
- HFT category will be marked to market at monthly or
more frequent intervals. (book value would not
undergo any change)
- Securities under AFS & HFT shall be valued scripwise but any net depreciation needs to be provided
and appreciation should be ignored.
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 Investment Fluctuation Reserve: Bank should built up
IFR out of realized gains on sale of investments and
subject to available of Net Profit a minimum of 5% of
Investment Portfolio. (This minimum 5% should be
computed with reference to HFT & AFS)
 IFR would be eligible for inclusion in Tier II capital.
 Transfer from IFR to P&L account to meet depreciation
requirement would be below the line.
 Banks with deposits more than 100 Crores are
mandatory to create IFR and for smaller banks it is
optional.
 IFR is a created out of appropriation but IDR is charge
on profit.
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 Returns:
 Form I: Statement of Demand and Time Liabilities
 Form II: Unsecured Loans and advances to companies
in which any of its directors is interested as a Director
or Managing Agent or Guarantor
 Form III: A Co-operative society or a bank desiring to
have a license under Section 22 of the Act (Rule 6)
shall apply to the principal office of the RBI in the
form specified.
1) As a Primary Co-operative Bank, in Form III-A
2) As a Central Co-operative Bank, in Form III-B
3) As a State Co-operative Bank, in Form III-C
11
 Form IV: In case of a co-operative society which at the




commencement of the Banking Laws (Application to Cooperative Societies) Act 1965
Form V: Application for permission to open a new place if
business or change the location of an existing place of business
Form VI: A list relating to the officers of a co-operative bank shall
be sent, within a period of one month from the close of every
quarter along with revised Proforma I & II (Cir No.43 Dated
09.05.2007)
Form VIII: Unclaimed Deposits accounts in India which have not
been operated upon for 10 years or more as on 31st December
Form IX: Statement showing Assets & Liabilities in India as at
the close of business on the last Friday of the month
12
Due date & Date of submission of various
Monthly Returns to RBI & Other Authorities
SR.NO. TYPE OF RETURN
DUE DATE
1
Form I (Demand & Time Liabilities) 20th
of
along with appendix I & II (Sec. 18 & month
24(3) rule 5)
2
Form II : Unsecured Advances to Last Day of subsequent
Directors (Sec.20(2) rule 5)
month
3
Form IX : Asset & Liabilities (Sec.27(i) Last Day of subsequent
rule 9) as on last Friday of every month
month
4
Money Supply & Monetary aggregate 10th
of
as on last Friday of every month in month
Annexure I (Banks with deposits of
Rs.10 Crore & above)
subsequent
subsequent
13
Due date & Date of submission of various
Quarterly Returns to RBI & Other Authorities
SR.NO. TYPE OF RETURN
Quarterly DUE DATE
June: 31st July
Sept.: 31st Oct.
Dec.: 31st Jan.
Mar.: 30th April
1
Form VI (a,b,c) (Sec. 23, Rule 8)
2
Advances granted to Director & their ----- do ----Relatives
3
Loan against Shares & Debentures
(as of last reporting Friday of quarter)
4
Violation of Directives on maximum ----- do ----limit on Advances
5
Review
report
Robbery/Dacoit/Frauds etc.
June: 15th July
Sept.: 15th Oct.
Dec.: 15th Jan.
Mar.: 15th April
of ----- do ----14
Due date & Date of submission of various Fortnightly &
Half Yearly Returns to RBI & Other Authorities
SR.NO.
TYPE OF RETURN
DUE DATE
1
Fortnightly (for scheduled UCB’s only) Within 7 days from the
four copies of Form B (RBI Act 1934 reporting Friday / Last
Sec.42)
Friday of the Month
On Alternatives Friday and also as on
last Friday of the Month
2
Half Yearly Return :
Sep.: 15th Oct.
1) RBI survey of Advances against Mar.: 15th April
Sensitive Commodities
2) DICGC Deposit Insurance Scheme Sep.: 30th Nov.
Form DI-01
Mar.: 31st May
Payment of Premium
15
Due date & Date of submission of various
Annual Returns to RBI & Other Authorities
SR. TYPE OF RETURN
N
O.
DUE
DATE
A
1
RBI :Form No VIII - Deposit account not operated for 10 years & more 31st Jan.
(Sec.26, Rule 9)
2
Speciman Signatures of Officials authorised to sign the Returns 31st Jan.
(Rule 5(i))
3
Advances to Priority Sector - Annual Review Report of the Board 30th
as of 31st March
April
4
Assets & Liabilities - Special Return in Form IX as at 31st March 15th May
(Sec.27(2) Rule 9)
5
Statement of Share Holdings in other Co-op. Societies as on 31st 15th May
March (Sec.19)
16
Due date & Date of submission of various
Annual Returns to RBI & Other Authorities
SR. TYPE OF RETURN
N
O.
DUE
DATE
15th May
6
Copy of Annual Review of Fraud/Dacoity/Robbery by the Board
7
Statement Showing Classification of Advances & Provisioning for 20th May
NPA as of 31st March along with Special Return in Form IX
8
Certificate of Safe Custody of Speciman Signature as on 30th June
9
Three Copies of Balance Sheet, Profit and Loss account & Auditors 30th
Report for the year (Sec. 29 & 31) duly signed by CEO & at least Sept.
Three Directors
10
Three Copies of News Paper in which Balance Sheet, Profit and 31st Dec.
Loss account together with Auditors Report for the year has been
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published (Sec.29 & 31 Rule 10)
31st July
Due date & Date of submission of various
Annual Returns to RBI & Other Authorities
SR. TYPE OF RETURN
N
O.
DUE
DATE
B
DICGC :
Form DI - 02 Distribution of Deposit Accounts according to size as 31st Oct
on the last day of Sept.
C
Registrar of Co-op. Societies :
Annual Return
D
30th Oct.
Others :
Copy of Annual Report for the year to the editor -in -chief, Co-op. 31st Dec.
bankers handbook
Note : (i) Any delay in submitting the Returns will attract the penal
provisions of Sec.46(4) & 47A of Banking Regulation Act 1949
(AACS)
(ii) Copies of Returns in Form I, II, VI & IX are to be furnished to
the DDR & State Co-op. bank of the State.
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Audit Classification of the Banks
in Karnataka
 Government of Karnataka Department of Co-
Operative Audit
 Audit Classification of __________________________
For the year 2014-2015. The Audit Classification of the
Bank is arrived at on the basis of the aggregate marks
secured by it, as indicated below:
19
SR. Particulars
NO.
A
B
Marks
DEPOSIT MOBILISATION
( 05
Marks )
PERFORMANCE UNDER PRIORITY SECTOR/WEAKER
( 15
SECTION ADVANCES
Marks )
i) Percentage of Priority Sector Advances to Total Advances at
the end of the Year.
ii) Percentage of Weaker Section Advances to Total Advances at
the end of Year.
C
RECOVERY PERFORMANCE
i) Percentage of Over Dues to Loans and Advances
Outstanding at the end of the Co-Operative Year
ii) Performance of the Bank in Taking Effective Legal Action
( 25
Marks )
D
RESERVES/PRIVISIONS TO COVER EROSION IN THE
VALUE OF ASSETS
( 05
Marks )
20
SR. Particulars
NO.
E
F
G
MAINTENANCE OF CASH RESERVE/ LIQUID ASSETS
i) Cash Reserve
ii) Liquid Assets
MANAGEMENT OF FUNDS
H
LOANS AND ADVANCES
I) Documentation
II) Security
III) Follow-up
WORKING RESULTS
I
OPERATIONAL EFFICIENCY
Marks
( 10
Marks )
( 05
Marks )
( 10
Marks )
( 08
Marks )
( 12
Marks )
21
SR. Particulars
NO.
J
EFFICIENCY OF MANAGEMENT
AUDIT CLASSIFICATION
Marks
( 05
Marks )
100
Marks
 Depending upon the aggregate marks Secured by the
Bank on the basis of the above 10 norms Audit
Classification may be made on the following basis.
 Marks Secured:
 Audit Classification:
 Date:
For Chartered Accountants
 Place:
22
Loan documentation: Various loans
 Type Loans : Term Loan (Property, Business, Machinery etc.)
 Working Capital Loan
 Housing Loan
 Project Loan
 Member Loan
 Vehicle Loan
 Gold Loan
 Consortium Finance
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 Loan Documents :
 Loan Application Form
 KYC Documents
 Financial Statements with IT Returns (Borrower & Guarantor)
 Collateral Security Papers
 Legal Opinion & Search Report
 Quotation & Valuation Report
 Stock Statement, Book Debt Statements
 CIBIL Report
 Confidential Report
 Project Report
 Documents for creating charge with ROC or Revenue
Authorities
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Stamp Duty & Registration Act
 THE KARNATAKA STAMP ACT, 1957
 Act 34 of 1957.- Different rates on stamp duty are in
force in the various areas of the State. As it is very
desirable to have the same rates of stamp duty in all
the areas in all areas of new State, Government have
decided to undertake legislation to achieve this
object.
25
Accounting Entries to be passed in respect of
Accrued Interest on both the Performing and Nonperforming Advances
 I. Accrued Interest on Performing Advances:
Accrued interest in respect of performing advances
may be charged to borrowal accounts and taken to
income account. Illustratively, if the accrued interest
is Rs. 10,000/- in respect of performing advances of a
borrower 'X' (cash credit, overdraft, loan account,
etc.) the following entries can be passed in the
Books of Account.
 (Dr) Borrower's account (CC, OD loan) Rs.10,000.00
 (Cr) Interest account
Rs.10,000.00
i)
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ii) In case the accrued interest of Rs.10,000/- in respect
of the borrowal account is not actually realised and the
account has become NPA as at the close of subsequent
year, interest accrued and credited to income account
in the corresponding previous year, should be reversed
or provided for if the same is not realised by passing
the following entries :
 (Dr) P&La/c) Rs. 10,000.00
 (Cr) Overdue Interest Reserve Account Rs.10,000.00
27
iii) In case accrued interest is realised subsequently, the
following entries may be passed:
 (Dr) Cash / Bank account Rs.10,000.00
 (Cr) Borrower's Account (CC, OD, Loan) Rs.10,000.00
 (Dr) Overdue Interest Reserve Account Rs.10,000.00
 (Cr) Interest account Rs.10,000.00
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 II. Accrued Interest on Non-Performing Advances
Accrued interest in respect of non-performing
advances may be debited to 'Interest Receivable
Account' and corresponding amount credited to
'Overdue Interest Reserve Account'. For example, if
the interest accrued in respect of Cash Credit / OD /
Loan etc. account of a borrower 'Y' is Rs.20,000/- the
accounting entries may be passed as under :
 (Dr) Interest Receivable Account Rs.20,000.00
 (Cr) Overdue Interest Reserve Account Rs.20,000.00
i)
29
ii) Subsequently, if interest is actually realised, the
following accounting entries may be passed :
 (Dr) Cash / Bank Account Rs.20,000.00
 (Cr) Interest account Rs.20,000.00
 (Dr) Overdue Interest Reserve Account Rs.20,000.00
 (Cr) Interest Receivable Account Rs.20,000.00
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 III. Accounting of Overdue Interest in Loan
Ledgers & Balance Sheet
i) With a view to facilitating the banks to work out the
amount of interest receivable in respect of each nonperforming borrowal account, banks can consider opening
a separate column in the individual ledger accounts of such
borrowers and interest receivable shown therein. This
would enable the banks to determine at a particular point
of time, the amount of interest actually to be recovered
from the borrowers. Total of the amounts shown under the
separate columns in the loan ledgers would be interest
receivable in respect of non-performing advances and it
would get reflected as such on the 'assets' side of balance
sheet with a corresponding item on the liabilities side of
the balance sheet as 'Overdue Interest Reserve'.
31
 ii) Similarly, a separate column should be provided in
the loan ledger in respect of performing advances for
showing accrued interest taken to income account on
31 March every year so that a watch can be kept on
them. If the accrued interest is not realised and the
account becomes NPA in the subsequent year, the
amount has to be reversed or provided for.
32
Charging of Interest at monthly rests
 (i) Banks should charge interest at monthly rests in the context of
adoption of 90 days norm for recognition of loan impairment w.e.f.
from the year ended March 31, 2004 and consequential need for close
monitoring of borrowers' accounts. However, the date of
classification of an advance as NPA as stated in preceding paras,
should not be changed on account of charging of interest at monthly
basis.
 The existing practice of charging / compounding of interest on
agricultural advances would be linked to crop seasons and the
instructions regarding charging of interest on monthly rests shall not
be applicable to agricultural advances.
33
Record of Recovery
 (i) The treatment of an asset as NPA should be based on the record of
recovery. Banks should not treat an advance as NPA merely due to
existence of some deficiencies which are of temporary in nature such
as non-availability of adequate drawing power, balance outstanding
exceeding the limit, non-submission of stock statements and the nonrenewal of the limits on the due date, etc. Where there is a threat of
loss, or the recoverability of the advances is in doubt, the asset
should be treated as NPA.
 A credit facility should be treated as NPA as per norms. However,
where the accounts of the borrowers have been regularised by
repayment of overdue amounts through genuine sources (not by
sanction of additional facilities or transfer of funds between
accounts), the accounts need not be treated as NPAs
34
Thank You!
CA Sunil Nagaonkar, Kolhapur
M: 9823124333
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