A fixed line telephone and a calculator sit next to a pair of spectacles (Photographer: Chris Ratcliffe/Bloomberg)  

Monetary Policy: RBI Defers Ind-AS Implementation By A Year 

The Reserve Bank of India has deferred the adoption of Indian Accounting Standards by banks, for a year, on account of incompatible formats and unpreparedness of banks.

The format of financial statements as prescribed under Schedule 3 of Banking Regulation Act is not compatible with reporting standards under Ind-AS, Deputy Governor NS Vishwanathan said at a press conference after the central bank’s monetary policy announcement today. “In our assessment, some of the banks are also not prepared to transition to the new regime.”

Anshula Kant, deputy managing director at the State Bank of India, told BloombergQuint they were not very keen on postponement of the new accounting regime. “We are fully geared up for Ind-AS to come through next year.”

According to a February 2016 RBI circular, commercial banks, barring regional rural banks, had to implement the new accounting standards from April 1. A key change under the new rules was the need to provision for accounts based on expected loss, instead of when an account turns into a non performing asset.

The Cost Of New Standards

In February this year the RBI Deputy Governor had said the timeline to implement the accounting rules is under consideration.

The change in accounting standards could have cost scheduled commercial banks up to Rs 89,000 crore towards incremental provisioning for advances said an India Ratings and Research report published earlier this year.

Of this, public sector banks would need Rs 63,100 crore, equivalent to an equity write-down of 1.10 percent of the banks’ risk weighted assets and 11.5 percent of net worth at end-March 2017. Private sector banks would also need a whopping Rs 25,800 crore; however, their higher capitalisation would enable a smooth transition, said the report.

Meanwhile, the monetary policy committee today left interest rates unchanged at its first meeting of the new financial year and cut its inflation forecast. The MPC also maintained a neutral stance on monetary policy.

The benchmark repo rate remained unchanged at 6 percent, and the reverse repo rate was retained at 5.75 percent. The decision was taken by a vote of 5-1 with Michael Patra voting for a 25 basis point hike in rates.