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Implementation of Ind AS by banks in India

In 2023, the RBI issued a DP on provisioning per the ECL approach, which was largely acknowledged as a paradigm shift in how banks in India were required to provide financial assets like loans and investments. In response to comments received from stakeholders, the RBI issued a press release on 04 October 2023 and announced the constitution of a working group for independent inputs on technical aspects of ECL. While the final directions on ECL-based provisioning are awaited, the RBI issued final directions on the Classification, Valuation, and Operations of Investments on 12 September 2023. The issuance of revised directions on the classification, valuation, and operations of investments marks a significant shift in the financial reporting requirements of banking entities.

Currently, banks prepare financial statements using I GAAP. The financial reporting framework under IGAAP comprises directions stipulated by the Third Schedule of the Banking Regulation Act, 1949, various guidelines issued by the RBI over a period, the Accounting Standards (‘AS’) specified under Section 133 of the Companies Act, 2013 read together with the Companies (Accounts) Rules, 2014 and the Companies (Accounting Standards) Rules, 2021. Furthermore, disclosures stipulated under IGAAP do not cover policies, processes, and systems relating to risk management, which are pertinent to better understanding a banking company’s financial performance and results.

This publication highlights the journey of the transition to Ind AS, key issues to be addressed during the transition to Ind AS based on our global and local experience of implementing IFRS 9 & Ind AS, and a point of view on the timing of the transition to Ind AS by banks in India.

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