Circular No. 50/2021-2022 Subject: POLICY FOR AVAILING

CASH MANAGEMENT SERVICE (CMS)

Ref. No. JRGB:HO:INVESTMENT Date: 01.04.2021 ALL REGIONAL MANAGERS/BRANCH MANAGERS ALL REGIONS/BRANCHES/OFFICES

A Policy for Availing Cash Management Service (CMS) at Jharkhand Rajya Gramin

Bank is approved by the Board of the Bank in its meeting held on 19-March-2021.

The Policy shall be reviewed at a interval of six months or at earlier intervals, if

necessary. Regulatory/supervisory guidelines issued after the approval of the

policy, will be deemed to be part of the policy, till these are included in the policy

during next review, this may include significant changes in Government policies,

policy guidelines from Sponsor Bank,. Such amendments will be part of the policy

till next review.

This Policy shall remain in force till the next revision is carried out and

disseminated.

CHAIRMAN

For internal Circulation only

INVESTMENT POLICY

(Approved by Board of the Bank on 19-March-2021)

JHARKHAND RAJYA GRAMIN BANK

(Owned by Govt. of India, Govt. of Jharkhand & State Bank of India)

Head Office: 3rd Floor, Zila Parishad Market Complex,

Kutchery Road, Ranchi, Jharkhand-834001

Page 1 of 29

JHARKHAND RAJYA GRAMIN BANK

INVESTMENT POLICY

1. INTRODUCTION:

The Policy is meant to define the parameter within which Bank Investment activities would

be managed. The Policy emphasizes to put in place effective broad framework so as that

the funds are judiciously invested. The guidelines are comprehensive enough to cover and

put in place an effective system for investment with full responsibility and authority so as to

adequately safeguard the investment interest.

The policy guidelines are based on following different circulars issued by Reserve

Bank of India

Circular No.: RBI/2013-14/434 RPCD.CO. RRB.BC.No. 74/03.05.33/2013-14 dated

January 07, 2014 (revised guidelines for Classification and Valuation of Investments of

RRBs),

Circular No.: RBI/2014-15/168 RPCD.CO.RRB.BC.No. 25/03.05.33/2014-15 dated

August 07, 2014 (revised guidelines for cap of SLR securities held in the HTM

category),

Circular No. RBI/2017-18/147. DBR.No.BP.BC.102/21.04.048/2017-18 dated April 2,

2018

Circular No: RBI/2018-19/86 DBR.No.Ret. BC.10/12.02.001/2018-19 dated December

05, 2018,

Circular No: RBI/2019-20/87 DOR.RRB.No.21/31.01.001/2019-20 dated November 01,

2019,

Circular No: RBI/2020-21/29 DoR.No.BP.BC.9/21.04.141/2020-21 dated September 01,

2020,

Circular No: RBI/2020-2021/54 DoR.No.BP.BC.22/21.04.141/2020-21 dated October

12, 2020

Circular No: RBI/2020-21/76 DOR.RRB.No.28/31.01.001/2020-21 dated December 04,

2020,

Circular No: RBI/2020-21/78 FMRD.DIRD.01/14.01.001/2020-21 dated December 04,

2020

Page 2 of 29

2. OBJECTIVES:

The objective of Investment Policy is to mitigate the risk arising out of investment and

manage it in such a manner that it accrues maximum benefit to the fund. Further, the policy

envisages capturing the following broad aspect of investment while taking call for

deployment of funds.

i) Safety: Safety of principal is the prime concern of the investment plan. It shall be

undertaken in a manner that seeks to ensure the preservation of capital and

mitigate credit and market risk.

ii) Liquidity: The investment portfolio shall remain sufficiently liquid to meet all

operating requirements that may be reasonably anticipated. This can be

accomplished by structuring the portfolio so that securities mature concurrent

with cash needs to meet reasonable anticipated demands. The portfolio should

consist of securities with active secondary markets so that these can be sold to

meet unanticipated outflow;

iii) Yields: The investment portfolio shall be designed with the objective of attaining a

target rate of return and also meeting the objective of liquidity and safety.

iv) Surplus deployment: Banking operations may carry surpluses from time to time

due to non-deployment of funds into core banking activity of lending. In such a

scenario, investment activity shall provide an avenue for effective deployment of

funds, until such funds can be re-deployed in core banking activities. While

deploying temporary surplus, the tenor and liquidity shall be major factors.

v) Transparent reporting and accounting of investment: The investment Policy

intends to ensure that investment transactions are appropriately classified, valued

and accounted for to facilitate transparent reporting to stakeholders.

vi) Adherence to statutory compliances and other regulatory requirements as

applicable; As per regulatory requirement Banks are subject to maintain certain

reserves in the form of CRR/SLR either in the form of cash or cash equivalents or

approved securities. Regulation also imposes prudential norms relating to risk

management fort the investment portfolio. The Policy envisages towards ensuring

that all such regulatory requirements are adhered to at all times.

vii) RBI /NABARD Directives /Guidelines :

The prevailing Reserve Bank of India directives / guidelines with regard to

investment by the RRBs in SLR /Non-SLR securities are stated hereunder.

The Bank shall follow the changes /modifications in this respect as advised by

the RBI from time to time.

Page 3 of 29

As per NABARD Circular no.: 244/DoS-12/2015 dated 18 November 2015

“while taking investment decisions, rates prevailing in the market to be

considered to make comparative analysis for competitive returns”.

3. SLR Investment

3.1 Stipulation :

Minimum 18.00 per cent with effective from April 11, 2020 of the Demand & Time

Liabilities as on the last FRIDAY of the second preceding fortnight or as per the

changes advised by RBI from time to time.

(RBI guidelines vide Circular reference RBI/2018-19/86 DBR.No.et.

BC.10/12.02.001/2018-19 December 05, 2018.)

3.2 Nature of Investment

a) in Cash i.e. in excess of CRR ;

b) balances maintained in C/D A/Cs with Banks ;

c) in gold ;

d) in Unencumbered approved securities (e.g. Government securities Central / State

/ Treasury bills and other approved securities )

Jharkhand Rajya Gramin Bank should necessarily hold its investment in

Government securities portfolio in CSGL A/C in the name of Jharkhand Rajya

Gramin Bank with the Sponsor Bank i.e. State Bank of India.

For the purpose of transactions, Bank may also use services of SBI DFHI (PD) Ltd

(The Company is an associate company of state Bank of India) as well as Sponsor

Bank through this account. Moreover web based NDS-OM facility may be availed

and used for such transaction under guidance of sponsor bank.

3.3 REPORTING SYSTEM :

Online submission of monthly Return “Form-VIII” to RBI through XBRL portal, under

Section 18 & 24 - Rule 13 A. of Banking Regulation Act, 1949 along with online filing

on ENSURE portal of NABARD.

Page 4 of 29

3.4 ACCOUNTING STANDARDS :

Reserve Bank of India vide its circular No. RBI/2013-14/434 RPCD.CO.

RRB.BC.No. 74/03.05.33/2013-14 dated 07th January 2014 have revised the

guidelines for Classification and Valuation of Investments of RRBs. The Bank shall

follow the changes /modifications in this respect as advised by the RBI from time to

time in respect of maintaining accounting standard for Investments of RRBs.

4 Non-SLR INVESTMENTS :

4.1 Investment in Non-SLR Securities (Excluding Short / Term deposit with Banks)

would be considered with the assistance /guidance from Sponsor Bank and as

per RBI /NABARD directives in this regard.

4.2 Permitted Non-SLR Investment Avenues :

a) Non-convertible Debentures (NCDs) of PSUs and Corporations;

b) Bonds of Public Sector Undertakings (those fully owned by Central /State

Governments in which Central /State Governments have more than 50% equity

holding) /organizations owned /guaranteed by the State Government who have

not defaulted in their obligations for servicing of their loans, interest on Bonds

etc., at the time of investment and unsecured redeemable bonds floated by

nationalized banks

c) Bonds /Debentures of All India Financial Institutions (AIFIs) like :

i) Industrial Development Bank of India (IDBI)

ii) Industrial Finance Corporation of India (IFCI)

iii) Industrial Credit and Investment Corporation of India Ltd. (ICICI)

iv) Export-Import Bank of India (Exim Bank)

v) Industrial Reconstruction Bank of India (IRBI)

vi) National Bank for Agriculture and Rural Development (NABARD)

vii) Small Industries Development Bank of India (SIDBI)

viii) National Housing Bank (NHB)

ix) Unit Trust of India (UTI)

x) Life Insurance Corporation of India (LIC)

xi) General Insurance Corporation of India (GIC)

xii) Risk Capital and Technology Finance Corp. Ltd. (RCTC)

xiii) Technology Development and Information Company of India Ltd. (TDICI)

Page 5 of 29

xiv) Tourism Finance Corporation of India Ltd. (TFCI)

xv) Shipping Credit and Investment Company of India Ltd. (SCICI)

xvi) Discount and Finance House of India Ltd. (DFHI)

xvii) Securities Trading Corporation of India Ltd. (STCI)

d) Others (Shares / Mutual fund units etc):

Investment in shares and Units of Mutual Funds upto 5(%) percent of the

incremental deposits at the end of preceding financial year including buying the

shares from the secondary market or as per the changes advised by the RBI

from time to time ;

Jharkhand Rajya Gramin Bank must make its investment in Non-SLR securities

in Dematerialized form in a Demat account in the name of Jharkhand Rajya

Gramin Bank with the Sponsor Bank.

e) Restricted Investment:

(Circular No.:RBI/2019-20/87 DOR.RRB.No.21/31.01.001/2019-20 dated

November 01, 2019)

“RRBs are not permitted to invest in the Perpetual Debt Instruments of other

banks including RRBs.”

5. Exposure Norms :

5.1 All the Non-SLR investments made by Jharkhand Rajya Gramin Bank should satisfy

the single exposure norms i.e. the loans granted to a company together with

investments made in its shares/debentures by Jharkhand Rajya Gramin Bank should

not exceed 15 (%) percent of owned funds of Jharkhand Rajya Gramin Bank or

15(%) percent of the paid-up share capital of the company, whichever is less or as

per the changes advised by RBI from time to time.

5.2 The single exposure norms are applicable to all types of investments including

investments in PSUs and AIFIs.

5.3 Owned Funds include paid-up capital, free reserves and additional share capital

contributions received from Central Govt. and Sponsor Bank (even in case where

State Government’s contributions are partially received or are awaited in full)

Reserves created by way of re-valuation of fixed assets are not to be included for

this purpose.

Page 6 of 29

5.4 Computation of owned funds as indicated in 5.3 above is allowed on a "Notional"

basis only for working out exposure limit for advances/ investments.

5.5 Jharkhand Rajya Gramin Bank’s investment in Bonds/NCDs issued by other banks/

financial institutions in the form of subordinate debts for the purpose of Tier II capital

should not exceed 10(%) percent of own funds i.e. aggregate investment should be

restricted to 10.00% of the owned funds.

5.6 With regard to placement of surplus funds in Certificate of Deposits/ Short/ Term

deposits with other banks, the limit will be as under :

a) Nationalized Banks / Public Sector Banks/Private Sector Banks.

The cap of deposits parked with individual Nationalized Banks/Public Sector

Banks and Private Sector Banks will be within 10% of aggregate deposit of our

Bank at the end of preceding financial year, subject to total deposits parked with

Nationalized Banks / Public Sector Banks and Private Sector Banks be within the

maximum ceiling of 25 (%) percent of aggregate deposit of our Bank at the end of

preceding financial year.

b) However these limits will not apply for placement of surplus funds in STRs/TDRs

with Sponsor Bank, within the maximum ceiling of 25 (%) percent of aggregate

deposit of our Bank at the end of preceding financial year.

c) Board in its meeting on 24.05.2019 gave permission to invest with Small finance

Bank to the extent of prudential single exposure limit of 15% of net worth of our

Bank at the end of preceding financial year. Net Worth of our Bank as per audited

financial as on 31.03.2020 is ₹384.71 crore; eligible single exposure @15 (%):

₹57.70 Crore.

6. ACCOUNTING POLICY

Guidelines for Classification and Valuation of Investment by RRBs

(Circular No.: RBI/2013-14/434 RPCD.CO.RRB.BC.No. 74/03.05.33/2013-14 dated 07th

January 2014)

Page 7 of 29

6.1 CLASSIFICATION OF INVESEMTNS:

i) The investment portfolio of the Bank (including SLR securities and non-SLR

securities) will be classified as under:

a) ‘Held to Maturity’,

b) ‘Available for Sale’ and

c) ‘Held for Trading’.

However, in the balance sheet, the investments will be disclosed as per the

following classifications:

a) Government securities

b) Other approved securities

c) Debentures & Bonds,

d) Others (CP, Mutual Fund Units, etc.).

ii) Bank should decide the category of the investment at the time of acquisition and

decision should be recorded on the investment proposal.

6.1.1 Held to Maturity:

The securities acquired by the Bank with the intention to hold them up to maturity will

be classified under ‘Held to Maturity (HTM)’. Bank can classify investments under

HTM category up to 25 per cent of total investments.

However, RRBs are permitted to exceed the limit of 25 per cent of their total

investments under HTM category provided:

a) the excess comprises only of SLR securities and

b) As per RBI guidelines from time to time. Presently up to an overall limit of

22 per cent of NDTL, as per norms advised by RBI and incorporated in

Policy for Compliance with Prudential Norms.

c) Profit on sale of investments in this category should be first taken to the Profit &

Loss Account and thereafter be appropriated to the ‘Capital Reserve Account’.

Loss on sale will be recognized in the Profit & Loss Account.

d) No Non-SLR securities are permitted to be included in HTM.

Page 8 of 29

6.1.2 Held for Trading (HFT):

All securities acquired with the intention to trade by taking advantage of short term

interest rate/price movements will be classified under the Held for Trading portfolio.

All securities held in this portfolio shall have a maximum holding period of 90 days.

6.1.3 Available for Sale (AFS):

Securities that cannot be classified either under the HTM or HFT portfolios shall be

classified under the AFS portfolio. All regulatory guidelines pertaining to holding

securities in the AFS portfolio, especially those pertaining to mark to market should

be adhered to. All equity instruments may be classified under the AFS portfolio

except where such investments are made with the intention of taking advantage of

short term price movement. It should also be noted that if an instrument has fixed

maturity as well as fixed and determinable payments it may be categorized as AFS

(and not as HTM) if the intention at the time of acquisition is not to hold till maturity.

Profit or loss on sale of investments in HFT & AFS categories will be taken to

the Profit & Loss account and thereafter be appropriated to the ‘Investment

Fluctuation Reserve Account’. Loss on sale will be recognized in the Profit &

Loss Account.

(As per RBI Circular no. RBI/2017-18/147. DBR.No.BP.BC.102/21.04.048/2017-

18. April 2, 2018)

7 Authority to Invest:

The RRBs to have Investment Committee which shall comprise of the following:

(a) General Manager-I as Presiding Officer/ Chairman of the committee

(b) General Manager II/ General Manager IT

(c) Chief Manager/ Head of Department Investment - Member

(d) Chief Manager/ Head of Department Accounts - Member

(e) Chief Manager/ Head of Department Planning - Member

(f) Chief Manager/ Head of Department Credit - Member

The Chairman of the Bank is empowered to nominate any other officer/officers to this

Committee.

i) The Investment Committee shall be vested with powers of Investment /

Disinvestment as per powers delegated to them by the Board.

ii) The Committee shall meet as and when required at short notice.

iii) The quorum for the meeting shall be :

a) General Manager of the concerned Department,

Page 9 of 29

b) One General Manager from the remaining two,

c) Department Head of concerned Department. And

d) Any one other member of the committee will fulfill the quorum

iv) The Investment Committee will ensure that Investment/ Disinvestment of the

portfolio of the RRB is conducted within the policy guidelines, exposure limits

and prudential norms prescribed by the Board / Sponsor Bank /

RBI/NABARD.

v) All investment / disinvestment decisions taken by the Investment Committee

shall be presented to the Chairman for noting/ control.

vi) Chief Manager/HOD Investment will be authorized official to execute the

deals jointly with any other member of Investment Committee in accordance

with recommendation of the Investment Committee.

8 Delegation of Powers :

i) The Investment Committee shall be delegated full powers for investment /

disinvestment within the exposure norms fixed by the Board. The Board will

delegate powers to individual officers whenever required in future

ii) All investment / disinvestment decisions taken by the Investment Committee

will be put up to the Board for review at the next Board Meeting.

9 Categorization, Shifting and valuation of investments:

A) Categorisation:

All investments shall be categorized as per stipulated RBI guidelines at the time of

acquisition and the decision should be recorded on the investment

proposal/sanction note/deal ticket or other documents supporting the deal

rationale. Shifting of investments among various categories will be permitted only in

accordance with RBI guidelines

B) Shifting among categories;

Investments to be shifted to/from HTM will be only with the approval of the Board of

Directors. Such shifting will normally be at the beginning of the accounting year.

Value of sales and transfers of securities to/from HTM category shall not exceed as

permitted by the regulator.

i. In order to enable RRBs to shift their excess SLR securities from the HTM category

to AFS/HFT to comply with instructions, it has been decided to allow such shifting of

the excess securities, as also direct sale from HTM category, at the beginning of

Page 10 of 29

every quarter when the HTM ceiling is brought down. This would be in addition to the

shifting permitted at the beginning of the accounting year, i.e., in the month of April.

ii. The RRBs may shift investments from AFS to HFT category with the approval of

their Board of Directors/ALCO/Investment Committee. In case of exigencies, such

shifting may be done with the approval of the Chairman of the bank, but should be

ratified by the Board of Directors/ALCO.

iii. Shifting of investments from HFT to AFS category is generally not allowed. However,

it will be permitted only under exceptional circumstances like not being able to sell

the security within 90 days due to tight liquidity conditions, or extreme volatility, or

market becoming unidirectional, with the approval of the Board of

Directors/ALCO/Investment Committee.

iv. Transfer of scripts from one category to another, under all circumstances, should be

done at the acquisition cost/book value/market value on the date of transfer,

whichever is the least, and the depreciation, if any, on such transfer should be fully

provided for.

v. Transfer of scripts from AFS / HFT category to HTM category should be made at the

lower of book value or market value. In other words, in cases where the market value

is higher than the book value at the time of transfer, the appreciation should be

ignored and the security should be transferred at the book value. In cases where the

market value is less than the book value, the provision against depreciation held

against this security (including the additional provision, if any, required based on

valuation done on the date of transfer) should be adjusted to reduce the book value

to the market value and the security should be transferred at the market value.

vi. In the case of transfer of securities from HTM to AFS / HFT category:

a. If the security was originally placed under the HTM category at a discount, it

may be transferred to AFS / HFT category at the acquisition price / book

value. (It may be noted that as per existing instructions banks are not allowed

to accrue the discount on the securities held under HTM category and,

therefore, such securities would continue to be held at the acquisition cost till

maturity). After transfer, these securities should be immediately re-valued and

resultant depreciation, if any, may be provided.

b. If the security was originally placed in the HTM category at a premium, it may

be transferred to the AFS / HFT category at the amortised cost. After transfer,

these securities should be immediately re-valued and resultant depreciation, if

any, may be provided.

vii. In the case of transfer of securities from AFS to HFT category or vice-versa, the

securities need not be re-valued on the date of transfer and the provisions for the

accumulated depreciation, if any, held may be transferred to the provisions for

depreciation against the HFT securities and vice-versa.

Page 11 of 29

viii. Shifting of investments from “Available for Sale” category to “Held for Trading” and

vice versa (only in exceptional cases) are to be approved by the Board. However, in

case of exigencies, shifting from “Available for Sale” category to “Held for Trading”

category may be done with the approval of the Chairman and ratified by Board

thereafter. Shifting of investment to/from “Held to Maturity” category has to be

approved by the Board of Directors. Shifting of investments to/from “Held to

Maturity”, if considered necessary, shall be undertaken only once in a financial year

(In the start of the Year) with the approval of the Board of Directors.

C) Valuation of Investments:

(Reference RBI Circular No.: RBI/2013-14/434 RPCD.CO.RRB.BC.No.

74/03.05.33/2013-14 dated 07th January 2014 para no.3 and para no. 4.1 & 4.2)

i. Investments classified under Held to Maturity category need not be marked to

market and will be carried at acquisition cost unless it is more than the face value, in

which case the premium should be amortised over the period remaining to maturity.

The banks should reflect the amortised amount in schedule 13-Interest earned: item

II – Income on investments as a deduction. However, the deduction need not be

disclosed separately. The book value of the security should continue to be reduced

to the extent of the amount amortised during the relevant accounting period.

ii. The individual scripts in the Available for Sale category will be marked to market at

quarterly or at more frequent intervals. The book value of the individual securities

would not undergo any change after the revaluation.

iii. The individual scripts in the Held for Trading category will be marked to market at

monthly or at more frequent intervals. The book value of individual securities in this

category would not undergo any change after marking to market.

Valuation of investments is to be done as per guidelines issued by RBI from time to

time. However, Bank may adopt a more conservative approach as a measure of

prudence. Presently as per norms advised by RBI and incorporated in Policy for

Compliance with Prudential Norms.

D) INCOME RECOGNITION

i. Banks may book income on accrual basis on securities of corporate bodies/public

sector undertakings in respect of which the payment of interest and repayment of

principal have been guaranteed by the Central Government or a State Government,

provided interest is serviced regularly and as such is not in arrears.

ii. Banks may book income from dividend on shares of corporate bodies on accrual

basis provided dividend on the shares has been declared by the corporate body in its

Annual General Meeting and the owner’s right to receive payment is established.

Page 12 of 29

iii. Banks may book income from Government Securities and bonds and debentures of

corporate bodies on accrual basis, where interest rates on these instruments are

predetermined and provided interest is serviced regularly and is not in arrears.

iv. Banks should book income from units of mutual funds on cash basis.

E) BROKEN PERIOD INTEREST

Banks should not capitalise the Broken Period Interest paid to seller as part of cost,

but treat it as an item of expenditure under P&L Account in respect of investments in

Government and other approved securities. It is to be noted that the above

accounting treatment does not take into account the tax implications and, hence, the

banks should comply with the requirements of Income Tax Authorities in the manner

prescribed by them.

10 Impairment of HTM securities:

Bank shall recognize any diminution in HTM investments, other than temporary.

Such diminution shall be determined and provided for each investment individually.

The need to determine whether impairment has occurred is a continuous process

and the need for such determination will arise in the following circumstances:

i) On happening of an event which suggests that impairment has occurred.

This would include:

a) The company has defaulted in repayment of its debt obligations.

b) The loan amount of the company with any bank has been restructured.

c) The credit rating of the company has been downgraded to below

investment grade.

ii) When the company has incurred losses for a continuous period of three

years and the net worth has consequently reduced by 25% or more.

iii) In case of a new company or a new project, the originally projected date of

achieving the breakeven point has been extended i.e. the company or the

project has not achieved break-even within the gestation period as

originally envisaged.

iv) If there is a need to determine whether impairment has occurred in a

subsidiary/ joint venture or a material investment, the bank may obtain

valuation of the investment by a reputed/qualified valuer and make

provisions for the impairment, if any.

Page 13 of 29

11 Suitable and Authorized Investments:

Following investments are permitted by the policy:

i) SLR Investments: Investments in SLR Securities –

Indian Central and State Government dated securities including Treasury Bills

and Cash Management Bills (CMB) & Inflation Indexed Bonds.

ii) Non –SLR investment:

Subject to in compliance with regulation and as permitted by the appropriate

authority such RBI/NABARD/SEBI etc, RRB may consider deployment of

excess funds in the avenues as mentioned below:

a) Commercial Paper:

An unsecured, short-term debt instrument issued by a corporation, typically

for the financing of accounts receivable, inventories and meeting short-term

liabilities. The debt is usually issued at a discount, reflecting prevailing market

interest rates and it should earn more than the concurrent Bank deposit rate

available.

b) Certificate of Deposits:

Certificate of Deposit (CD) is a negotiable money market instrument and

issued in dematerialized form or as a usance Promissory Note against funds

deposited at a bank or other eligible financial institution for a specified time

period and it should earn more than the concurrent Bank deposit rate

available.

c) Public Sector Units /Public Sector Banks/All India Financial Institutions

/Private Sector Corporate Bonds:

A debt security issued by a corporation and sold to investors. The backing for

the bond is usually the payment ability of the company, which is typically

money to be earned from future operations.

d) Units of Mutual Funds:

An investment vehicle that is made up of a pool of funds collected from many

investors for the purpose of investing in securities such as stocks,

bonds, money market instruments and similar assets. Securitized Paper

including Pass-Through-Certificates. Fixed-income securities that represent

an undivided interest in a pool of insured mortgages.

e) Investment in Equity: Equity shares investment can be considered as per

RBI Guidelines. However, with a view to protecting investments from volatility

and safeguarding it from losses, to begin with shares of NIFTYT FIFTY, BSE

SENSEX and PSU shares sales through IPO/FPO etc. may be considered.

Page 14 of 29

Also, Equity oriented MFs, CPSEETF floated by MFs under Central Public

Sector Enterprises disinvestments and Nifty/BSE Index fund may be

considered with a small limit initially. A well-defined trading policy and

appropriate risk mitigation measures along with universe of investment must

be put in place before actively taking part in equity investments.

f) Any other investments permitted by Regulators within prescribed limits.

12 Statutory Prescriptions:

The Bank shall comply with statutory prescriptions relating to investments (SLR

maintenance etc.) in managing the Bank’s portfolio. The investments shall be within

the specific and general prudential limits fixed by RBI and in conformity with the

provisions of the Banking Regulation Act and other applicable laws and guidelines

that are issued by the regulators like RBI, SEBI, NABARD or any other such body

from time to time.

13 Investment Parameters:

i) Mitigating credit risk in the portfolio: Credit risk is the risk that a security or a

portfolio will lose some or all of its value due to a real or perceived change in the

ability of the issuer to repay its debt. Bank shall mitigate credit risk by adopting

the following:

a) Credit Risk Assessment and

b) Diversification: The investment shall be diversified by:

Limiting investments to avoid overconcentration in securities from a

specific issuer or business.

limiting investment in securities that have higher credit risks,

investing in securities with varying maturities,

Continuously investing a portion of the portfolio in readily available funds

such as highly liquid fixed income securities, money market funds or

overnight repurchase agreements to ensure that appropriate liquidity is

maintained in order to meet ongoing obligations.

ii) Managing Market Risk of the portfolio:

Market risk is the risk that the portfolio value will fluctuate due to changes in the

general level of interest rates or price risk. Bank recognizes that, over time,

longer-term/core portfolios have the potential to achieve higher returns. On the

other hand, longer-term portfolios have higher volatility of return. The Bank shall

mitigate market risk by providing adequate liquidity for short-term cash needs,

and by making longer-term investments only with funds that are not needed for

Page 15 of 29

current cash flow purpose. Bank therefore, adopts the following strategies to

control and mitigate its exposure to market risk:

Restricting investment for higher tenors to mitigate interest rate risk and

liquidity risk.

Liquid funds are held in the instruments maturing one year and shorter.

Longer term/Core funds are defined as the funds in excess of liquidity

requirements. The investments in this portion of the portfolio will have

maturities between 1 day and 30 years and will be only invested in higher

quality and liquid securities.

14 Credit Appraisal:

i) Investment proposals should be subjected to the same degree of credit risk

analysis as any loan proposal. If possible, Bank has to make its own internal credit

analysis and rating even in respect of rated issues and should not entirely rely on

the ratings of external agencies.

ii) Banks should exercise due caution, while taking any investment decision to

subscribe to bonds, debentures, and refer to the ‘list of defaulters/willful defaulters

disseminated by the RBI and ensure that investments are not made in

companies/entities who are defaulters/willful defaulters to banks/FIs. In case of

investment in Non-SLR securities, Bank may make investments only in those

securities which adhere to the SEBI regulations with respect to the disclosure

norms for issue of debt securities.

15 Exposure Limits:

Quantitative Exposure Limits for Investments: (Limit caps mentioned under this

paragraph would stand revised automatically if revised by the regulators). Presently,

as per norms advised by RBI and incorporated in Policy for Compliance with

Prudential Norms approved by the Board.

i) The aggregate non-SLR investments in instruments to which these guidelines are

applicable should satisfy the single exposure norms, i.e., the loans granted to a

company together with investments made in it's shares by the RRBs, shall not

exceed 25% of the Bank’s Net Worth based on the last audited balance sheet.

These investments should not exceed 50% of the total investments. However,

investment in liquid mutual fund for day-today cash management will not be

counted for reckoning of exposure limit.

Page 16 of 29

i) owned funds of the RRB or 25% of the paid-up share capital of the company,

whichever is less

ii) CDs/CPs shall not exceed 5% of Bank’s Net Worth as per last audited B/S, if

otherwise permitted by Regulator.

iii) PSU/ AIFI Bonds/ Non-convertible Debentures, and shall not exceed 25% of

Bank’s Net Worth as per last audited B/S.

iv) Issuer wise exposure limit to be put in place and for AAA and above rated bond

an exposure cap of 20% of the latest Net worth and for AA rated bond an

exposure cap of 10% of the latest Net worth of the Company can be considered

for investment.

v) Bank shall not take investment in unlisted non-SLR securities and all investments

in non-SLR should comply with the disclosure requirements as prescribed by

SEBI for listed companies.

vi) Banks should not invest in Non-SLR securities of original maturity of less than

one-year, other than Commercial Paper and Certificates of Deposits and NCDs

with original or initial maturity up to one year issued by corporate (including

NBFCs), which are covered under RBI guidelines.

The Bank shall monitor the above mentioned limits on an on-going basis, and put up

a status report to the Board regarding compliance of the limits as at the end of each

calendar quarter.

16 Tenor, Investment Grade Rating and pricing, etc for Non-SLR:

i) Maximum Tenor: 10 years

ii) Minimum Rating:

a) PSU/PSB/All India Financial institutions bond: Minimum AA by at least

one rating agency.

b) Bonds Others; Minimum AA by at least two rating agency.

c) Commercial Paper: A1 (if permitted by Regulator)

d) Certificate of Deposit:A2 (if permitted by Regulator)

iii) Rating Criteria:

a) If there is only one rating by a chosen credit rating agency for a particular

claim, that rating would be used to determine the risk weight of the claim.

Page 17 of 29

b) If there are two ratings accorded by chosen credit rating agencies that

map into different risk weights, the higher risk weight should be applied.

c) If there are three or more ratings accorded by chosen credit rating

agencies with different risk weights, the ratings corresponding to the two

lowest risk weights may be referred to and the higher of those two risk

weights may be applied. i.e., the second lowest risk weight.

d) However, Bank has to mention all the ratings in the investment proposal

and give proper rational for adopting the middle rating for investment

decisions.

iv) Determination of whether an exposure is rated: Issue-specific and

issuer ratings:

Where a bank invests in a particular issue that has an issue-specific rating,

the risk weight of the exposure will be based on this rating. Where the

bank’s exposure is not an investment in a specific rated issue, the

following general principles apply:

a) In circumstances where the borrower has a specific rating for an issued

debt, but the bank’s exposure is not an investment in this particular debt, a

high-quality credit rating (one which maps into a risk weight lower than that

which applies to an unrated claim) on that specific debt may only be applied

to the bank’s unrated exposure if this claim ranks in all respects paripassu

or senior to the claim with a rating. If not, the external rating cannot be used

and the unassessed claim will receive the risk weight for unrated

exposures.

b) In circumstances where the borrower has an issuer rating, this rating

typically applies to senior unsecured claims on that issuer. Consequently,

only senior claims on that issuer will benefit from a high-quality issuer

rating. Other un-assessed exposures of a highly rated issuer will be treated

as unrated. If either the issuer or a single issue has a low-quality rating

(mapping into a risk weight equal to or higher than that which applies to

unrated exposures), an un assessed exposure to the same counterparty

that ranks paripassu or is subordinated to either the senior unsecured

issuer rating or the exposure with a low-quality rating will be assigned the

same risk weight as is applicable to the low-quality assessment.

c) In circumstances where the issuer has a specific high-quality rating (one

which maps into a lower risk weight) that only applies to a limited class of

liabilities such as a deposit assessment or a counterparty risk assessment ,

this may be used for in respect of exposures that fall within the class.

Page 18 of 29

d) In order to avoid any double-counting of credit enhancement factors, no

recognition of credit risk mitigation techniques will be taken into account if

the credit enhancement is already reflected in the issue specific rating.

e) Whether the bank intends to rely on an issuer- or an issue-specific rating,

the rating must take into account and reflect the entire amount of credit risk

exposure the bank has with regard to all payments owed to it

v) Pricing: For investment in Non-SLR bond pricing has to be carefully

determined based on risk and reward. Since better opportunities for

deployment of funds are available under SLR in G-sec and SDL, hence

adequate mark-up of say at least 25-50 bps over corresponding G-

Sec/SDL on annualized basis has to be explored. However, investing fund

wherein there is no yield pick up as envisaged above, the

rationale/reasoning for such investment decision may be clearly explained

in investment note. Further, it should be ensured that these types of

investments are exception and not to be made a regular practice in view of

risk and reward involve for Non-SLR investment.

vi) Transaction through Brokers/ SBI:

The RRB will maintain a list of brokers as empanelled by Sponsor Bank

through SBI and will ensure that not more than 5% of the transactions are

routed through any single broker. All transaction through brokers should

be as per laid down instruction/guidelines of RBI/SEBI/NABARD. All SLR

investments / disinvestments will be done direct or through Sponsor Bank.

Broker limit cap for RRB will be applicable for the deals done by RRB

directly. SBI will follow regulatory guidelines as applicable to them.

vii) Exercise Caution:

Banks may exercise due caution, while taking any investment decision to

subscribe to bonds, debentures, shares etc., and refer to the ‘list of

defaulters/wilful defaulters disseminated by the Reserve Bank /obtained

from the Credit Information Companies to ensure that investments are not

made in companies/entities who are defaulters/wilful defaulters to

banks/FIs. Some of the companies may be undergoing adverse financial

position, turning their accounts to sub-standard category due to recession

in their industry segment. Despite restructuring facility provided under the

Reserve Bank guidelines, the banks have been reported to be reluctant to

extend further finance, though considered warranted on merits of the case.

Banks may not refuse proposals for such investments in companies whose

Page 19 of 29

director’s name(s) find place in the list of defaulters/wilful defaulters

disseminated by the Reserve Bank/obtained from the Credit Information

Companies and particularly in respect of those loan accounts, which have

been restructured under extant RBI guidelines (after the respective bank’s

board approval in case of wilful defaulters), provided the proposal is viable

and satisfies all parameters for such credit extension.

viii) Investment Universe: RRBs should endeavor to prepare abroad

investment universe based on the criteria as envisaged herewith and in

accordance with the guidelines of Regulator such as RBI/SEBI/NABARD

etc so as to enable them to take quicker decisions. However, the

investment in eligible securities may not be held up and postponed in the

absence of universe lest deprive them of opportunity for deployment of

funds and thereby making profit. Such universe as prepared above may be

approved from the investment committee and if need be from the board of

the respective RRBs.

17 Guidelines for Repo/CBLO:

i) Ready Forward Contracts in Government Securities:

Ready forward contracts can be undertaken only in i) Dated Securities and Treasury

bills/Cash Management Bills issued by Government of India ii) dated securities

issued by state government.

ii) Repo in Corporate Debt Securities:

a) Listed corporate debt securities of original maturity of more than one year which

are rated 'AA' or above by the rating agencies registered with Securities and

Exchange Board of India (SEBI), that are held in the security account of the repo

seller, in demat form.

b) Commercial Papers (CPs), Certificates of Deposit (CDs) and Non-Convertible

Debentures (NCDs) of original maturity upto one year which are rated A2 or above

by the rating agencies registered with SEBI.

c) Bonds which are rated 'AA' or above, by the rating agencies registered with SEBI

or internationally recognised rating agencies, and which are issued by multilateral

financial institutions like the World Bank Group (e.g., IBRD, IFC), the Asian

Development Bank or the African Development Bank and other such entities as

may be notified by the Reserve Bank of India from time to time.

d) Double ready forward deals are prohibited in any securities.

Page 20 of 29

iii) CBLO:

Deployment of funds through CBLO for day-today cash management may be

explored as per regulatory guidelines. Emphasis may be given on efficient cash

management with minimal idling of funds and it shall be ensured that no significant

amount is remained un-deployed. For the purpose, CCIL or other authorities

concerned may be approached and all the enablers put in place. SBI shall be

approached to facilitate the hand holding of RRBs in this regard.

iv) LAF & MSF:

A. Introduction of Liquidity Adjustment Facility (LAF) and

B. Marginal Standing Facility (MSF) for Regional Rural Banks

Reserve Bank of India Vide their Circular reference no (RBI/2020-21/76

DOR.RRB.No.28/31.01.001/2020-21 dated 04th December 2020) introduced an

additional avenue for liquidity management to Regional Rural Banks. Liquidity

Adjustment Facility (LAF) and Marginal Standing Facility (MSF) will be extended to

Scheduled RRBs meeting the following criteria:

I. Implemented Core Banking Solution (CBS)

II. There is a minimum CRAR of nine per cent and

III. Fully compliant with the terms and conditions for availing LAF and MSF

issued by Financial Markets Operations Department (FMOD), Reserve

Bank of India.

Jharkhand Rajya Gramin Bank have received communication from RBI on 24 Dec

2020 that our Bank meets the eligibility norms to participate in LAF and MSF and the

name of Jharkhand Rajya Gramin Bank appears in the positive list of RRBs, and

hence shall be able to access the LAF and MSF facility w.e.f. December 28, 2020.

Further with respect to participation in LAF and MSF, it is informed that

a. The bank should have Current Account and SGL Accounts (Principal SGL a/c,

Repo Constituent - RC a/c and Reverse Repo Constituent - RRC A/c) with RBI,

Mumbai.

b. The bank may approach PDO Mumbai (pdomumbai@rbi.org.in & 022-

22603164/22603190) for opening Repo Constituent (RC A/c) and Reverse Repo

Constituent (RRC A/c) SGL accounts and thereafter they may apply to Financial

Markets Operations Department (FMOD) (laffmd@rbi.org.in and 022-

27595662/275950008) for enabling them for the LAF and MSF windows.

c. The bank should have access to Reserve Bank’s E-Kuber portal.

Page 21 of 29

d. The bank may contact eKuber Helpdesk team for necessary configuration and

manuals related to eKuber portal. Any technical issues with respect to eKuber

portal may be directed to e-Kuber Helpdesk through email

(ekuberhelpdesk@rbi.org.in with a copy to laffmd@rbi.org.in) and/or Phone (022-

27595662/67/022-27595591/92/93/94).

At present we are maintain CSGL account with Sponsor Bank Security Service

Branch and have access to Reserve Bank’s eKuber portal.

v). Regional Rural Banks - Access to CALL/NOTICE/TERM MONEY MARKET

1. Under call money market, funds are transacted on an overnight basis and under

notice money market, funds are transacted for a period between 2 days and 14 days.

“Term Money” means deals in funds for 15 days-1 year.

2. Reserve Bank of India Vide their Circular reference no RBI/2020-21/78

FMRD.DIRD.01/14.01.001/2020-21 dated 04th December 2020) permitted RRBs to

participate in the call/notice and term money markets both as borrowers and lenders.

3. The prudential limits and other guidelines on call/notice/term money markets for

the RRBs shall be the same as those applicable to Scheduled Commercial Banks in

terms of the RBI Master Direction No.2/2016-17, dated July 7, 2016 on Money

Market Instruments: Call/Notice Money Market, Commercial Paper, Certificates of

Deposit and Non-Convertible Debentures (original maturity up to one year), as

amended from time to time.

Table: Prudential Limits for Transactions in Call/Notice Money Market

Sr.

No

.

Participan

t

Borrowing Lending

1 Scheduled

Commerci

al Banks

On a daily average basis in a

reporting fortnight, borrowing

outstanding should not exceed

100 per cent of capital funds (i.e.,

sum of Tier I and Tier II capital) of

latest audited balance sheet.

However, banks are allowed to

borrow a maximum of 125 per

cent of their capital funds on any

day, during a fortnight.

On a daily average basis in

a reporting fortnight,

lending outstanding should

not exceed 25 per cent of

their capital funds.

However, banks are

allowed to lend a

maximum of 50 per cent

of their capital funds on

any day, during a fortnight.

Page 22 of 29

4. Bank may, with the approval of Board, arrive at the prudential limits for

borrowing/lending in Call/Notice Money Market in terms of guidelines given in table

above. The limits so arrived at may be conveyed to the Clearing Corporation of India

Ltd. (CCIL) for setting of limits in NDS-CALL System, under advice to Financial

Markets Regulation Department (FMRD), Reserve Bank of India.

5. Interest Rate

Bank is free to decide on interest rates in call/notice money market. Calculation of

interest payable would be based on the methodology given in the Handbook of

Market Practices brought out by the Fixed Income Money Market and Derivatives

Association of India (FIMMDA).

6. Dealing Session

Deals in the Call/Notice/Term money market can be done from 9:00 am to 5:00 pm

on each business day or as specified by RBI from time to time.

7. Trading

The Call/Notice Money transactions can be executed either on NDS-Call, a screen–

based, negotiated, quote-driven electronic trading system managed by the Clearing

Corporation of India (CCIL), or over the counter (OTC) through bilateral

communication.

8. Reporting Requirement

All dealings in Call/Notice/Term money executed on the Negotiated Dealing System-

Call, i.e. NDS-Call (a screen –based, negotiated, quote-driven system), do not

require separate reporting.

It is mandatory that all the OTC Call/Notice/Term money deals be reported over the

reporting platform of NDS-Call by the parties who are having NDS-Call membership.

OTC deals should be reported within 15 minutes on NDS-Call reporting platform,

irrespective of the size of the deal or whether the counterparty is a member of the

NDS-Call or not.

Parties who are not having NDS-Call membership are advised to report the deals to

Financial Markets Regulation Department, RBI in the reporting format given in Annex

II of this Master Direction.

Page 23 of 29

The reporting time for all OTC Call/Notice/Term money deals on NDS-Call is up to

5:00 pm on each business day or as decided by RBI from time to time.

In case of any misreporting or repeated reporting of OTC deals by a party, the same

should be immediately brought to the notice of Financial Markets Regulation

Department, Reserve Bank of India, Central Office, Fort, Mumbai either through e-

mail or through fax (022-22702290).

In case the situation so warrants, the Reserve Bank may call for information in

respect of money market transactions of eligible participants.

9. RRBs have been advised to approach the Chief General Manager, Financial

Market Regulation Department, Reserve Bank of India Central Office, 9th floor,

Central Office building, Shahid Bhagat Singh Marg, Fort, Mumbai-400 001

(cgmfmrd@rbi.org.in) in this regard.

18 Internal Control:

Internal control is a process, effected by Bank’s Board of Directors, management

and other personnel, designed to provide a reasonable assurance regarding the

achievement of objectives relating to operations, reporting and compliance. The

internal control structure shall be designed to provide reasonable assurance that

these objectives are met. The internal controls shall address the following points at

minimum:

i) Control of collusion.

ii) Separation of transaction authority from accounting and recordkeeping.

iii) Custodial safekeeping.

iv) Avoidance of physical delivery securities.

v) Confirmation of transactions for investments.

vi) Staff training.

vii) Review, maintenance and monitoring of security procedures.

viii) Concurrent Audit of treasury transactions is to be conducted at monthly interval

by Inspection & Audit Dept. Officials of the Bank. These reports will be sent to RO

of NABARD and RBI.

ix) Quarterly Certificate will be obtained from Bank’s Internal Auditors / Statutory

Auditors indicating that investments held by the Bank as on last reporting Friday

of each quarter as reported to RBI/NABARD are actually owned / held by it as

evidence by physical securities or custodian’s statement. The certificate will be

sent to RO of RBI / NABARD.

Page 24 of 29

x) Details of Investment Portfolio and Issuer composition of Non-SLR investments

will be disclosed in formats prescribed by NABARD in Notes on Accounts to

Balance Sheet.

xi) Physical securities shall be held in joint custody of Senior Manager and Manager,

Accounts Section.

xii) Securities taken out / re-lodged under joint custody of above officers and

movement of securities shall be recorded in security register and authorized by

the joint custodian.

19 Review of portfolio:

To achieve the objective of the policy, the portfolio should be subjected to periodic

review. The review of the portfolio will be undertaken by the Bank. Following areas

may be commented upon during review on half yearly basis and to be put to the

Board:

a) Income generated by investment activities.

b) Comparing return with the benchmark.

c) c) Composition and size of the portfolio.

d) d) Market value of the portfolio.

e) Compliance with statutory and regulatory requirements

f) Compliance with all limits set out by this Policy and any exceptions with approvals

or ratification received.

g) Any diminution in the rating of the issuer / investment and the consequential effect

on the portfolio’s quality.

h) Details of depreciation on investments and provision held

i) Non performing investment details

j) Details of amortization booked/ required

k) Risk Profile of the Portfolio.

20 Reporting and Disclosure:

The Bank shall on a half-yearly basis submit to the Board investment portfolio review

report within a month of closure of half year (March/September) and submit RBI/

NABARD (concerned Department of Banking Supervision) by May 15 and Nov 15.

This report will include amongst others recent market conditions, economic

developments and anticipated investment conditions. The report shall summarize the

investment strategies employed in the last half year under review and describe the

portfolio in terms of composition of the investment portfolio, risk characteristics (such

as rating migration, depreciation /provisions etc.),compliance of the limits (both

regulatory as well as internal) and other features. The report shall explain half-year’s

total investment portfolio return and compare it with the budgeted figures/benchmark.

The report shall also indicate areas of policy concern and planned revision of

investment strategies, if any, and include the following;

Page 25 of 29

(i) Review Report will be placed in every meeting of the Board of Directors detailing all

investments / disinvestments done during the period under report and also the latest

position of investment portfolio of the bank.

(ii) Review Report will be put up to the Board every half year (31st March & 30th

September detailing the following :

(a) Total business (investment and disinvestment) during the period under report.

(b) Compliance with prudential limits prescribed by the Board for non-SLR

investments.

(c) Rating migration of the issuers / issues held in the Bank’s books and consequent

diminution in the portfolio quality.

(d) Extent of non-performing investments in the non-SLR category.

21 Non Performing Investment (NPI):

In respect of securities included in any of the three categories viz. HTM, HFT & AFS,

where interest/ principal is in arrears, banks should not reckon income on the

securities and should also make appropriate provisions for the depreciation in the

value of the investment. The bank should not set-off the depreciation requirement in

respect of these non-performing securities against the appreciation in respect of other

performing securities. An NPI, similar to a non performing advance (NPA), is one

where:

a) Interest/ installment (including maturity proceeds) is due and remains unpaid for

more than 90 days.

b) If any credit facility availed by the issuer is NPA in the books of the bank,

investment in any of the securities, including preference shares issued by the same

issuer would also be treated as NPI and vice versa. However, if only the preference

shares are classified as NPI, the investment in any of the other performing

securities issued by the same issuer may not be classified as NPI and any

performing credit facilities granted to that borrower need not be treated as NPA.

c) The investments in debentures/bonds, which are deemed to be in the nature of

advance, would also be subject to NPI norms as applicable to investments.

d) Investment in State Government guaranteed securities, including those in the

nature of ‘deemed advance’, will attract prudential norms for identification of NPI

and provisioning, when interest/ installment of principal (including maturity

proceeds) or any other amount due to the bank remains unpaid for more than 90

days.

Page 26 of 29

e) The prudential treatment for Central Government Guaranteed bonds has to be

identical to Central Government guaranteed advances. Hence, bank’s investments

in bonds guaranteed by Central Government need not be classified as NPI until the

Central Government has repudiated the guarantee when invoked. However, this

exemption from classification as NPI is not for the purpose of recognition of

income.

22 Transfer to Investment Under Collection Account (IUCA):

a. Bank’s investments are subject to prudential norms for identification of NPI

and provisioning as prescribed by Reserve Bank of India from time to time.

b. Transfer to IUCA (including partial) of investments shall be permitted to the

extent of availability of provision for the amount proposed to be written off. In

all cases, the amount written off will be parked in Investment under Collection

Account (IUCA).

c. Proposals for transfer to IUCA of investments made directly by the Bank shall

be put up by Bank, unless specified otherwise to the appropriate authority as

per delegation of financial powers.

d. IUCA would be followed up meticulously for recovery. All individual accounts

in IUCA shall be reviewed annually. In case recovery efforts do not yield

desired results, the Bank may decide to reverse the IUCA entries after a

period of three years from the date of transfer to IUCA with the approval of the

appropriate authority. Accounts in IUCA will be considered as part of NPIs for

internal monitoring at all levels.

23 General Guidelines:

RRB can sell a government security already contracted for purchase, provided:

a) The purchase contract is confirmed prior to the sale,

b) The purchase contract is guaranteed by Clearing Corporation of India Ltd.

(CCIL) or settled by an established central counterparty in or the security is

contracted for purchase from the Reserve Bank and,

i) The sale transaction will settle either in the same settlement cycle as the

preceding purchase contract, or in a subsequent settlement cycle so that the

delivery obligation under the sale contract is met by the securities acquired under

the purchase contract (e.g., when a security is purchased on T+0 basis, it can be

sold on either T+0 or T+1 basis on the day of the purchase; if however it is

purchased on T+1 basis, it can be sold on T+1 basis on the day of purchase or

on T+0 or T+1 basis on the next day).

Page 27 of 29

ii) Bank must not invest in unrated non SLR securities. A security will be rated if it is

subjected to detailed rating exercise by an external rating agency registered with

SEBI or one of the leading rating agencies like Fitch, Moody’s and S&P’s and is

carrying a current valid rating. The rating relied upon will be valid if:

a) The credit rating letter relied upon is not more than one month old on the date

of opening of the issue, and

b) The rating rationale from the rating agency is not more than one year old on the

date of opening of the issue, and

c) The rating letter and the rating rationale is a part of the offer document.

d) In the case of secondary market acquisition, the credit rating of the issue should

be in force and confirmed from the monthly bulletin published by the respective

rating agency.

iii) In view of high credit risk involved in long term Zero Coupon Bonds (ZCBs)

Banks should not invest in such ZCBs

iv) Bank will not undertake short selling of securities other than prescribed by

RBI/regulators.

v) Within the overall framework of the investment policy, Bank shall not commit for

underwriting and market–making in Government Securities, Corporate/PSU/FI

bonds, Commercial Papers, Certificate of Deposits, debt mutual funds and other

fixed income securities.

vi) Bank shall not invest in very Low Coupon Bonds.

vii) Custodial Services:

RRBs should endeavor to have centralized database pertaining to their

investments. For the purpose they should examine for custodial services offered

by SBI Securities Services Branch. This will aid and facilitate better decision

making with regard to investment based on customized MIS provided by

custodian.

viii) Dealing with SBI and Its non-Banking Associates/Subsidiaries; generally

there is no bar on dealing with SBI and its sister concerns like DFHI, SBI Caps,

etc at market rates and within the limit as prescribed by regulator. However, an

arms-length distance must be maintained in pricing.

24 Trading Activities:

Price volatility is an integral part of any market. The short-term price volatility can be

translated into profits through active trading and increase in turnover in the investment

Page 28 of 29

portfolio. Trading profit is an additional revenue stream for the Bank. Against this

background, it is considered appropriate to have a Trading Policy for the RRBs. Hence

Individual RRBs depending upon their risk appetite may frame Trading Policy as

suitable to them including, inter alia, trading corpus under different category, dealer

wise corpus, Instruments for trading, authority structure, maximum power for

trade/single trade, trading committee composition, other operation guidelines for stop

loss limit for dealer on tradable position, limit for booking losses, defeasance period,

i.e. the maximum period taken to liquidate a position, single security exposure limit.

Further, the Risk Management Policy of the RRBs will lay down norms on risk

management measures like VaR for the trading book based on past trends and

capability of software support. In order to comply with these parameters for the trading

book, the Chief Dealer will lay down suitable caps and will monitor the dealer wise

positions. All operations in the Trading Policy will be within the provisions of the

Investment Policy of the bank and prevailing RBI / NABARD/SEBI etc guidelines. The

staff undertaking trading activities should be properly trained and follow the norms of

conduct as stipulated by FIMMDA. The Back Office officials should strictly monitor the

dealing activities in terms of the Policy and the values limits fixed. The Mid Office

officials should monitor risk in terms of the risk parameters fixed and on an ongoing

basis review the risk parameters for the consideration of the Management. It is also

suggested that the RRBs Trading Policy may be implemented for proprietary trading of

its portfolio because, presently, all SLR transactions are being done through SBI.

24.1 Secondary Market Operations

24.1.1 Jharkhand Rajya Gramin Bank is permitted to freely participate in the secondary

market for debt and equity securities to achieve the following objectives :

a) to improve the quality of existing investment portfolio in terms of maturity, yield,

credit quality and also to adjust to the desired level of duration;

b) to invest surplus fund in securities where secondary market yields are better than

the primary market OR when suitable maturities are available only in secondary

market;

c) to dispose of weak security on account of change in financial status of issuer/

change in credit rating ; and

d) to improve liquidity.

24.1.2 The market operations for managing overall investment portfolio within the prudential

norms and within the accepted risk parameters are to be carried out as per

requirements of business. Jharkhand Rajya Gramin Bank would from time to time

buy or sell securities, to meet the requirements in this regard. Purchases and sales

for this purpose would be subject to the following conditions and approval at

appropriate level :

Page 29 of 29

the securities purchased in secondary market should meet with prudential norms and

relevant RBI / NABARD directives;

securities may be disposed-off, in case of need, at a loss not exceeding 5% of book

value;

(Modification approved by JGB Board in its 74th meeting Held on 30.10.2018)

the buy sell transactions should be conducted keeping in view available resources ;

and

All secondary market transactions are to be placed to the Chairman for noting/

concurrence.

All secondary market transactions are to be placed to the Board for perusal and

confirmation.

25. Review of Policy:

The Policy/manual shall be reviewed at annual interval or at earlier intervals, if

necessary. Regulatory guidelines issued after the approval of the policy/manual, will

be deemed to be part of the policy/manual, till these are included in the

policy/manual during next review. Any amendments subsequent to the approval of

the policy can be approved by the Board. Such amendments will be part of the

policy till next review.