Disclosure Requirements :
In order to encourage market discipline, the Reserve Bank has over the years developed a set of disclosure requirements which allow the market participants to assess key pieces of information on capital adequacy, risk exposures, risk assessment processes and key business parameters which provide a consistent and understandable disclosure framework that enhances comparability. Banks are also required to comply with the Accounting Standard 1 (AS 1) on Disclosure of Accounting Policies issued by the Institute of Chartered Accountants of India (ICAI). The enhanced disclosures have been achieved through revision of Balance Sheet and Profit & Loss Account of banks and enlarging the scope of disclosures to be made in “Notes to Accounts”.
Additional/Supplementary Information
In addition to the 16 detailed prescribed schedules to the balance sheet, banks are required to furnish the following information in the “Notes to Accounts”: Such furnished (Information should cover the current year and the previous year) “Notes to Accounts” may contain the supplementary information such as:-
(a) Capital (Current & Previous year) with breakup including CRAR – Tier I/II capital (%), % of shareholding ofGOI, amount of subordinated debt raised as Tier II capital. Also it should show the total amount of subordinated debt through borrowings from Head Office for inclusion in Tier II capital., etc.
(b) Investments: Total amount should be mentioned in crores, with the total amount of investments, showing the gross value and net value of investments in India andAbroad. The details should also cover the movement of provisions held towards depreciation on investments.
Under investments a separate note should cover on Repo Transactions (in face value terms- Amount in crores), covering the details relating to minimum and maximum outstanding during the year, daily average outstanding during the year and also outstanding as on March 31st. Non-SLR Investment Portfolio would consist of (i) Issuer composition of Non SLR investments. (ii) Sale and Transfers to/from HTM Category.
Sale and Transfers to/from HTM Category
If the value of sales and transfers of securities to/from Hold To Maturity (HTM) category exceeds 5 percent of the book value of investments held in HTM category at the beginning of the year, the bank should disclose the market value of the investments held in the HTM category and indicate the provision not made for the excess of book value over the market value. This disclosure is to be made in ‘Notes to Accounts’ in banks’ audited Annual Financial Statements. The 5 percent threshold referred to above will exclude the one time transfer of securities to/ from HTM category with the approval of Board of Directors permitted to be undertaken by banks at the beginning of the accounting year and sales to the Reserve Bank of India under per-announced OMO auctions.
The changes in guidelines regarding HTM/HFT and AFS securities are very dynamic and reflect the market developments and regulatory concerns. The students may do well to note the changes/developments in the area by referring to the RBI website.