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| This directive has been issued so that these banks adequately hedge themselves against any adverse movements in interest rates. |
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| UCBs should build up IFR out of realised gains on sale of investments, subject to availability of net profit. For the smaller UCBs, however, IFR build up is optional. |
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| The minimum IFR requirement of five per cent is to be computed with reference to investments in two categories - held for trading (HFT) and available for sale (AFS) category. |
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| Investments under the held to maturity category, however, are not to be reckoned for the purpose. |
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| The IFR, so built-up, will be eligible for inclusion of Tier-II capital. Banks may utilise the amount held in IFR to meet, in future, the depreciation requirement on investment in securities, as per the guidelines issued by the central bank. |
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| The UCBs have been given the freedom to build up a higher percentage of IFR, up to 10 per cent of their investment portfolio, with the approval of their board of directors. |
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| Banks should transfer maximum amount of the gains realised on sale of investment in securities to the IFR. |
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| Transfer to the IFR is to be as an appropriation of net profit after appropriation to the Statutory Reserve. |
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Transfer from the IFR to the profit & loss account to meet depreciation requirement on investments will be a
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