Master Circular - Disclosure Norms for Financial Institutions - આરબીઆઈ - Reserve Bank of India
Master Circular - Disclosure Norms for Financial Institutions
RBI / 2008-2009/ 63 01 July, 2008 The CEOs of the all-India Term-lending and Refinancing Institutions Dear Sir, Master Circular - Disclosure Norms for Financial Institutions Please refer to the Master Circular DBOD No.FID.FIC.2 /01.02.00/2007-08 dated July 02, 2007 consolidating instructions/ guidelines issued to banks till 30 June 2007 on matters relating to norms for disclosure in the published financial statements. The Master Circular has been consolidated and updated by incorporating instructions issued up to 30th June 2008 and has also been placed on the web-site of RBI (http://www.rbi.org.in). 2. It may be noted that the instructions contained in the Annex 3 have been consolidated in this master circular. Yours faithfully, (Vinay Baijal) Master Circular – Disclosures in Financial Statements of Purpose To provide a detailed guidance to all-India term-lending and refinancing institutions in the matter of disclosures in the ‘Notes to Accounts’ to the Financial Statements. Previous instructions This master circular consolidates and updates the instructions on the above subject contained in the circulars listed in the Annex 3. Application To all the all India Financial Institutions viz. Exim Bank, NABARD, NHB and SIDBI. Structure 1. Introduction Guidelines on disclosure requirements
Recognising considerable divergence amongst the financial institutions in the nature and manner of disclosures made by them in their published financial statements the disclosure norms were introduced by Reserve Bank of India for the financial institutions in March 2001 with a view to bringing about uniformity in the disclosure practices adopted by them and improving the degree of transparency in their affairs. Such disclosures, which came into effect from the financial year 2000-2001 and were subsequently enhanced, are required to be made as part of the "Notes to Accounts" to enable the auditors to authenticate the information and notwithstanding the fact that the same information might be contained elsewhere in the published financial statements. These disclosures constitute only minima and if an FI desires to make any additional disclosures, it would be well advised to do so. 2 Guidelines on Disclosure requirements The various disclosure requirements are as under: a) CRAR, core CRAR and supplementary CRAR b) The amount of subordinated debt raised and outstanding as Tier–II capital c) Risk weighted assets – separately for on- and off-balance sheet items 2.2 Asset quality and credit concentration (e) Percentage of net NPAs to net loans and advances (f) Amount and percentage of net NPAs under the prescribed asset classification categories. (g) Amount of provisions made during the year towards Standard assets, NPAs, investments (other than those in the nature of an advance), income tax (h) Movement in net NPAs (i) Credit exposure as percentage to capital funds and as * The largest borrower group; * The 10 largest single borrowers; * The 10 largest borrower groups; (Names of the borrowers / borrower groups need not be disclosed). (i) Credit exposure to the five largest industrial sectors (if applicable)as percentage to total loan assets (k) Maturity pattern of rupee assets and liabilities; and
(m) Interest income as a percentage to average working funds (n) Non-interest income as a percentage to average working funds (q) Net Profit per employee 2.5 Movement in the provisions The movement in the provisions held towards Non Performing Assets and depreciation in investment portfolio should be disclosed as per the following format: Add: Provisions made during the year Less: Write off, write back of excess provision II. Provisions for depreciation in investments c) Opening balance as at the beginning of the financial year Add: d) Closing balance as at the close of the financial year The total amount of loan assets as also of the sub standard assets/ doubtful assets separately, which have been subjected to restructuring, etc should be disclosed. 2.7 Assets Sold to Securitisation Company/ Reconstruction Company FIs which sell their financial assets to an SC/ RC, shall be required to make the following diclosures : a) Number of Accounts b) Aggregate value (net of provisions) of accounts sold to SC /RC c) Aggregate consideration d) Additional consideration realised in respect of accounts transferred in earlier years e) Aggregate gain / loss over net book value. 2.8 Forward Rate Agreements and Interest Rate Swaps The following disclosures should be made in the note to the balance sheet:
The FIs dealing in interest rate derivatives on exchanges should disclose as a part of the 'notes on accounts' to balance sheets the following details:
2.10 Investments in Non Government Debt Securities: The FIs should disclose the details of the issuer composition of investments made through private placement and the non-performing investments in the ‘Notes on Accounts’ of the balance sheet in the format furnished in the Annex 1. 2.11 Consolidated Financial Statements (CFS) 2.11.1 Extent of Consolidation: 2.12 Disclosures on Risk Exposures in Derivatives Best international practices require meaningful and appropriate disclosures of FIs' exposures to risk and their strategy towards managing the risk. FIs should make meaningful disclosures of their derivatives portfolio. A minimum framework for disclosures by FIs on their risk exposures in derivatives is furnished in Annex 2. The disclosure format includes both qualitative and quantitative aspects and has been devised to provide a clear picture of the exposure to risks in derivatives, risk management systems, objectives and policies. FIs should make these disclosures as a part of the 'Notes on Accounts' to the Balance Sheet with effect from March 31, 2005 (June 30, 2005 in the case of National Housing Bank). 2.13 Exposures where the FI had exceeded the prudential exposure limits during the yearThe FI should make appropriate disclosures in the ‘Notes on account’ to the annual financial statements in respect of the exposures where the FI had exceeded the prudential exposure limits during the year. 2.14 Corporate Debt Restructuring (CDR) FIs should also disclose in their published Annual Accounts, under the "Notes on Accounts", the following information in respect of CDR undertaken during the year :
Notes: (i) The CRAR and other parametersThe CRAR and other related parameters, determined as per the extant capital adequacy norms for the FIs, should be disclosed. (ii) The Asset quality and credit concentrationFor the purpose of asset quality and credit concentration, the following should also be reckoned for determining the amount of loans and advances and the NPAs and included in the disclosures: (i) Bonds and Debentures : The bonds and debentures should be treated in the nature of advance when :
and
and
(ii) Preference Shares : The preference shares, other than convertible preference shares, acquired as part of project financing and meeting the criteria as at (i) above. (iii) Deposits : The deposits placed with the corporate sector. (III) The Credit Exposure However, in cases where disbursements are yet to commence, exposure limit should be reckoned on the basis of the sanctioned limit or the extent upto which the FI has entered into commitments with the borrowing companies in terms of the agreement. FIs should include in the non-funded credit limit, the forward contracts in foreign exchange and other derivative products like currency swaps, options, etc as per the extant exposure norms. Capital funds for the purpose of credit concentration, would be the total regulatory capital as defined under capital adequacy standards ( i.e.Tier I and Tier II Capital ). (V) The definition of Borrower Group The definition of ' borrower group' would be the same as applied by the FIs in complying with group exposure norms. (VI) The maturity pattern of Assets and Liabilities For operating results, the working funds and total assets should be taken as the average of the figures as at the end of the previous accounting year, the end of the succeeding half year and the end of the accounting year under report. (The “working funds” refer to the total assets of the FI.) (VIII) Computing per employee net profit All permanent, full-time employees in all cadres should be reckoned for computing per employee net profit. Format For Disclosure Of Issuer Composition For Investment In Debt Securities
# Only aggregate amount of provision held to be disclosed in column 3. * NOTES: a) Shares b) Debentures & Bonds 2. Amounts reported under columns 4, 5, 6 and 7 above might not be mutually exclusive.
(Rs. in Crore)
Disclosures on risk exposure in derivatives FIs shall discuss their risk management policies pertaining to derivatives with particular reference to the extent to which derivatives are used, the associated risks and business purposes served. The discussion shall also include:
(Rs. in Crore)
Note: 2. FIs should adopt the Current Exposure Method prescribed by RBI on Measurement of Credit Exposure of Derivative Products which is described in brief as follows: In order to calculate the credit exposure equivalent of off-balance sheet interest rate and exchange rate instruments under current exposure method, a FI would sum:
Part A List of instructions and circulars superseded
Part B List of other circulars containing Instructions/Guidelines/Directives related to Disclosure Norms
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