Daily Email Newsletter (Sign-up Free)

What is meant by "Held-to-maturity (HTM) Securities or Investments"?

Meaning of Held-to-maturity securities

The securities acquired by the Financial Institutions with the intention to hold them till maturity are generally classified under "Held to Maturity" head.

Held to Maturity securities is referred, in short, as HTM securities.

Limit of investments held under HTM category

The regulatory authorities of a country fix the ceiling on holding investments under HTM category by a financial institution.

Category of securities classified under HTM category

Mostly, debt securities are to be classified under the HTM category.

Some other securities may be held under HTM category, but are not to be counted for the purpose of ceiling fixed for the category.

Such securities are the equity held in the subsidiaries and joint ventures, investments in preference shares in the nature of advance, non project related redeemable shares and the investments in units of close ended schemes of mutual funds only if such units are listed on the stock exchanges, as listed units of close ended schemes can be sold off in the market at any point of time.

Financial Institutions can shift investments to / from Held to Maturity category only with the approval of their Board of Directors as per limit per year prescribed by regulatory authority.

Valuation of Investments held under HTM category

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 amortized over the period remaining to maturity.

Financial Institutions should recognize any diminution, other than temporary, in the value of their investments in subsidiaries / joint ventures, which are included under Held to Maturity category and provide therefor. Such diminution should be determined and provided for each investment individually.

ref: RBI

No comments:

Post a Comment

In comment with "Name/Url" option, only Name is mandatory to be filled.