RBI makes NPA divergence rule easier for banks
PrintListen to this Article
“Some banks, on account of low or negative net profit, are required to disclose small divergences which is contrary to the regulatory intent that only material divergences should be disclosed,” RBI said.
It told banks to disclose divergence when the additional provisioning for NPAs assessed by RBI exceeds 10% of the reported profit before provisions and contingencies for the reference period, instead of the earlier rule of 15% of the published net profits after tax.
There was no change in the second condition: the additional gross NPAs identified by RBI exceed 15% of the published incremental gross NPAs for the reference period.
“This is clearly in line with substance over form. Some of the state-run banks were needed to report even minor non material differences primarily because they were making losses or hardly making profit on account of large provisioning pressure. This could have led to conflicting signals to the market. The current notification would obviate the need for the same,” said Prakash Agarwal, director financial institutions at India Ratings.
Earlier, the public financial statements with material divergences in banks’ asset classification and provisioning from RBI rule did not depict the true and fair view of the financial position of the bank. For the last couple of years, the central bank used to assess compliance by banks with extant prudential norms on income recognition, asset classification and provisioning as part of its supervisory processes. #casansaar (Source - Economic Times)
Category : RBI | Comments : 0 | Hits : 1794
RBI has issued draft rules to tighten dividend payouts by banks by linking distributions to capital adequacy, asset and profit quality, setting a uniform prudential framework effective from FY27. In the previous financial year, banks paid over Rs 75,000 crore dividend after booking record profits. Under RBI's draft rules, dividend payments by banks will be governed by a common set of conditions from FY27. The directions apply to all banking companies, corresponding new banks and SBI, and ...
Listing of an Indian company on international stock exchanges got a push with the Reserve Bank of India (RBI) coming out with regulations under Foreign Exchange Management (FEMA). Experts believe new regulations will help companies utilise foreign exchange more effectively. Regulations have been made public through two notifications. First set of regulations deals with mode of payment and reporting of non-debt instruments. “The proceeds of purchase / subscription of equity shares of an ...
The Lok Sabha elections 2024 are in full swing with electioneering adding much colour to the entire process. However, to ensure that there is no wrongdoing, the Reserve Bank of India (RBI) has sent a missive to Payment System Operators (PSOs) asking them to keep a watch on all suspicious high-value transactions that they may come across in their systems. The general purpose of the letter is to deny the use of electronic fund transfer mechanism to anyone who is intending to influence the election...
he Reserve Bank on Tuesday came out with draft guidelines to further strengthen regulations on payment aggregators, a move aimed at boosting the payment ecosystem. The draft also covers the physical point-of-sale activities of payment aggregators (PAs). The RBI said that given the growth in digital transactions and the significant role that PAs play in this space, the current directions on PAs are proposed to be updated and cover, inter alia, KYC and due diligence of merchants, operations ...
The RBI on Monday eased rules to allow resident entities to hedge their exposures to the price risk of gold using the OTC derivatives in the International Financial Services Centre (IFSC) in addition to the derivatives on the exchanges in the IFSC. Resident entities such as banks were permitted to hedge their exposure to the price risk of gold on the exchanges in the IFSC that are recognised by the International Financial Services Centres Authority (IFSCA), and the new directive provides them...
Comments