Explained: HTM, AFS, HFT

Here we will understand about entire investment portfolios of the banks including SLR securities and non-SLR securities. Basically they are divided into three categories namely:

  • Held to Maturity (HTM)

Investments made by the bank with a motive to hold them till maturity is classified under Held to Maturity (HTM). Securities or debt securities are classified as HTM as they carry a definite maturity period. HTM securities are reported on balance sheet as its amortized cost. In the RBI bimonthly policy of 5th August 2014, total investments under HTM category should not surpass 24 per cent of the total investments made by the bank.

  • Available for Sale (AFS)

Debt securities which are purchased with a motive to sell before they reach their maturity period are classified under Available for Sale (AFS) category. It depends on bank’s discretion how much investment has to be made under AFS category. Such investments are marked to market at quarterly or at more frequent intervals. Net depreciation should be recognized while net appreciation should not be considered.

  • Held for Trading (HFT)

Such investments are held by banks with an aim to generate short term profits.HFT investments are reported at its fair value on the balance sheet and any change in any the value of investment or dividend and interest income received during the period of holding will be reported in the profit and loss statement. The HFT securities can be shifted to AFS category if such investments are not sold within 90 days of investment being made as is the rule. Such conditions can arise due to tight liquidity conditions or market becoming unidirectional. Investment made under HFT category will be marked to market at monthly or at more frequent intervals.

Explained: HTM, AFS, HFT

Here we will understand about entire investment portfolios of the banks including SLR securities and non-SLR securities. Basically they are divided into three categories namely:

  • Held to Maturity (HTM)

Investments made by the bank with a motive to hold them till maturity is classified under Held to Maturity (HTM). Securities or debt securities are classified as HTM as they carry a definite maturity period. HTM securities are reported on balance sheet as its amortized cost. In the RBI bimonthly policy of 5th August 2014, total investments under HTM category should not surpass 24 per cent of the total investments made by the bank.

  • Available for Sale (AFS)

Debt securities which are purchased with a motive to sell before they reach their maturity period are classified under Available for Sale (AFS) category. It depends on bank’s discretion how much investment has to be made under AFS category. Such investments are marked to market at quarterly or at more frequent intervals. Net depreciation should be recognized while net appreciation should not be considered.

  • Held for Trading (HFT)

Such investments are held by banks with an aim to generate short term profits.HFT investments are reported at its fair value on the balance sheet and any change in any the value of investment or dividend and interest income received during the period of holding will be reported in the profit and loss statement. The HFT securities can be shifted to AFS category if such investments are not sold within 90 days of investment being made as is the rule. Such conditions can arise due to tight liquidity conditions or market becoming unidirectional. Investment made under HFT category will be marked to market at monthly or at more frequent intervals.

Ashish Pandey

I am a business and finance journalist who is currently employed at Financial Express and previously at Zee News. My areas of interest include business and foreign policy. You can reach me on Twitter at @ashuvirgo1984 or @eFundsPlus.

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