IndAS
Why in news?
The government and the Reserve Bank of India (RBI) may postpone the implementation of new accounting standards for banks because of the legislative changes and additional capital requirements the process would entail.
What is IndAS?
IndAS (Indian Accounting Standards) is the new accounting standard for banks.Banks and non-banking financial companies are due to switch to Indian Accounting Standards (IndAS) from 1 April 2018.
They currently follow Indian generally accepted accounting principles (GAAP) standards.
Legislative changes required: The implementation of IndAS for public sector banks requires an amendment to the Banking Regulation Act.
The transition to IndAS is expected to see a significant jump in bad-loan provisions.Under the current rules, banks set aside money to cover loans that have turned bad. Under IndAS, they must make provisions after assessing the expected loss from the time a loan is originated rather than waiting for a trigger event.
These norms, which are in line with international norms, the International Financial Reporting Standards, were designed to avoid credit shocks like those seen in the aftermath of the global financial crisis in 2008
Why in news?
The government and the Reserve Bank of India (RBI) may postpone the implementation of new accounting standards for banks because of the legislative changes and additional capital requirements the process would entail.
What is IndAS?
IndAS (Indian Accounting Standards) is the new accounting standard for banks.Banks and non-banking financial companies are due to switch to Indian Accounting Standards (IndAS) from 1 April 2018.
They currently follow Indian generally accepted accounting principles (GAAP) standards.
Legislative changes required: The implementation of IndAS for public sector banks requires an amendment to the Banking Regulation Act.
The transition to IndAS is expected to see a significant jump in bad-loan provisions.Under the current rules, banks set aside money to cover loans that have turned bad. Under IndAS, they must make provisions after assessing the expected loss from the time a loan is originated rather than waiting for a trigger event.
These norms, which are in line with international norms, the International Financial Reporting Standards, were designed to avoid credit shocks like those seen in the aftermath of the global financial crisis in 2008
