The Chief Executives,
All Banks/DFIs.

Dear Sirs/Madam,

 

Calculation of Maximum Limit for Investment in Shares

Please refer to the Prudential Regulations issued vide BPD Circular No.35 dated 28th October, 2003.

2- It is clarified that while calculating the maximum limit for Investment in shares as prescribed under R-6 of the Prudential Regulations for Corporate/ Commercial Banking:

i. The amount of provisions created against permanent diminution by debiting the Profit & Loss account, as instructed vide BSD Circular No. 10 dated July 13, 2004, may be deducted from the cost of acquisition of such investments and their maximum limit.

ii. Investment in Preference Shares, which fulfill the criteria of equity instrument as laid down in BPD Circular No. 18 dated June 16, 2004, shall be considered as part of investment in equities. Correspondingly, any investment in Preference Shares that do not conform to the conditions specified in the said circular shall not be included in the limits prescribed under the Prudential Regulation i.e. R-6. However, such investment portfolio will be considered as part of the maximum exposure limit as prescribed under R-1 of the Prudential Regulations for Corporate/ Commercial Banking.

3. All other instructions on the subject shall, however, remain unchanged.
4. Please acknowledge receipt.