The Reserve Bank of India (RBI) has deferred the implementation of the new accounting norms, Ind AS, indefinitely, as necessary amendments to the relevant law are yet to be made.
The move will bring huge relief to the banks which are yet to recognise stressed assets and make necessary provisions as that would require higher capital.
While the original plan was to implement these accounting norms by April 1, 2018, it had to be deferred by a year due to pending legislative amendments to the Banking Regulation Act, 1949, as also the level of preparedness of many banks.
Now, the implementation has been deferred definitely.
“The legislative amendments recommended by the Reserve Bank are under consideration of the Government of India. Accordingly, it has been decided to defer the implementation of Ind AS till further notice,” RBI said in a statement. Bankers said they had expected the deferment as necessary amendments to the Act were not made and RBI had not issued the final guidelines.
Anshula Kant, managing director, State Bank of India, said while the bank was financially ready to adopt the new norms, some technological changes have not yet been made since RBI had not issued the final guidelines.
“We were more or less financially ready to roll it out. The only thing is RBI has not issued the final guidelines till now. That is one concern because it requires a lot of IT changes in the system,” Ms. Kant said.
“The other thing is the balance sheet format, for which some changes in the Act are required. So, how can you publish the balance sheet in a different format unless it is permitted by the accounting rules of the country?” she added.
Ind AS for non-banking financial companies came into effect last year.
Ratings agencies had pegged capital requirement by public sector banks at ₹1.1 lakh crore in the first quarter of the next financial year, if the new accounting norms were implemented.
“The backend system and the other ecosystem probably were not ready. This required a thorough discussion with the auditors on what should be provided,” said Mrutyunjay Mahapatra, Managing Director & CEO, Syndicate Bank.
In recent times, the banking regulator had raised concerns over ‘divergence’ in asset classification and provisioning, which means the reported numbers of a bank were lower than what RBI’s inspection report had found. The implementation of Ind AS would have taken care of such issues, bankers said.