Quantitative Disclosures :

Apart from qualitative disclosures, banks should also include the qualitative disclosures. The details for both

– Currency Derivatives, and

– Interest rate derivatives

Information required to be furnished are:

– Derivatives (Notional Principal Amount) showing separate details such as for hedging and for trading

– Marked to Market Positions – a) Asset (+) b) Liability (-)

– Credit Exposure

– Likely impact of one percentage change in interest rate (100*PV01) (a) on hedging derivatives (b) on trading derivatives

– Maximum and Minimum of 100*PV01 observed during the year (a) on hedging (b) on trading

Asset Quality:

Banks’ performances are considered good based on the quality of assets held by banks. With the changing scenario and due to number of risks associated with banks like Credit, Market and Operational risks, banks are concentrating to ensure better quality assets are held by them. Hence, the disclosure needs to cover various aspects of asset quality consisting of :

(a) Non-Performing Assets, covering various details like Net NPAs, movement of NPAs (Gross)/(Net) and relevant details provisioning to different types of NPAs including write-off/write-back of excess provisions, etc., Details of Non-Performing financial assets purchased, sold, are also required to be furnished.

(b) Particulars of Accounts Restructured:

The details under different types of assets such as (i) Standard advances (ii) Sub-standard advances restructured(iii) Doubtful advances restructured (iv) TOTAL with details of number of borrowers, amount outstanding, sacrifice

(c) Banks disclose the total amount outstanding in all the accounts/facilities of borrowers whose accounts have been restructured along with the restructured part or facility. This means even if only one of the facilities/accounts of a borrower has been restructured, the bank should also disclose the entire outstanding amount pertaining to all the facilities/accounts of that particular borrower.

(d) Details of financial assets sold to Securitization/Reconstruction Company for Asset Reconstruction. Banks which purchased non-performing financial assets from other banks are required to make the following disclosures in the Notes to Accounts to their Balance sheets. Similarly banks which sold non-performing financial assets furnish details of such assets sold.

(e) Provisions on Standard Assets:

Provisions towards Standard Assets need not be netted from gross advances but shown separately as Provisions against Standard Assets’ under ‘Other Liabilities and Provisions – Others’ in Schedule No. 5 of the balance sheet.

(f) Other Details:

Business Ratios such as: (i) Interest Income as a percentage to Working Funds, (ii) Non-interest income as a percentage to Working Funds, (iii) Operating Profit as a percentage to Working Funds, (iv) Return on Assets, (v) Business (Deposits plus advances) per employee, (vi) Profit per employee Asset Liability Management:

As part of Asset Liability Management, the maturity pattern of certain items of assets and liabilities such as deposits, advances, investments, borrowings, foreign current assets and foreign currency liabilities.

Banks are required to disclose the information based on the maturity pattern covering daily, monthly and yearly basis such as Day 1; 2 to 7 days; 8 to 14 days; 15 to 28 days; 29 days to 3 months ; Over 3 months and up to 6 months; Over 6 months and up to 1 year; Over 1 year up to 3 years; Over 3 years and up to 5 years; Over 5 years, showing the amount in crores.

Exposures

Breakup of Exposures:

Banks should also furnish details of exposures to certain sectors like Real Estate Sector, by giving details on account of

(a) Direct Exposure for (i) Residential mortgages (ii) Commercial Real Estate (iii) Investments in mortgaged based securities (MBS)

(b) Indirect Exposure covering fund based and non-fund based exposures on National Housing Bank (NHB) and Housing Finance Companies (HFCs)

Exposure to Capital Market

Capital Market exposure details should be disclosed for the current and previous year in crores. The details would include:

(i) direct investment in equity shares, convertible bonds, convertible debentures and units of equity- oriented mutual funds the corpus of which is not exclusively invested in corporate debt,

(ii) details of advances against shares, debentures, bonds or other securities on clean basis to individuals to invest in shares (including IPOs) and other capital market instruments,

(iii) details of advances for any other purposes wherein securities in shares or debentures or bonds are held as primary security,

(iv) loans and advances to stock brokers,

(v) loans sanctioned to corporates against the security of shares, debentures, bonds etc for meeting the promoter’s the quota in anticipation of raising resources,

(vi) bridge loans to companies against expected equity flows, issues,

(vii) financing to stockbrokers for margin trading,

(viii) all exposures to Venture Capital Funds (both registered and unregistered)

Country exposures should be furnished as risk category wise country exposure. The risks are to be categorized as : (a) insignificant (b) low (c) moderate (d) high (e) very high (f) restricted (g) Off-credit.

In case banks have not yet moved over to the internal rating system, they may use the seven category classification followed by the Export Credit Guarantee Corporation of India Ltd (ECGC) for the purpose of classification and making provisions for country risk exposures. Banks may on request obtain the details on quarterly basis from ECGC.

The details should also include the net exposure and provision held as at March current year as well as the previous year.

Apart from the above category of exposures, banks are required to disclose details relating to Single Borrower Limit (SGL)/Group Borrower Limit (GBL) exceeded by the bank and Unsecured Advances are to be furnished.

Miscellaneous items would include Amount of Provisions made for Income Tax during the year and Disclosure of Penalties imposed by RBI, etc.

Disclosure Requirements as per Accounting Standards where RBI has issued guidelines in respect of disclosure items for “Notes to Accounts”

(a) AS-5 – relating to Net Profit or Loss for the period, prior period items and changes in accounting policies.

(b) AS-9 – Revenue Recognition giving the reasons for postponement of revenue recognition.]

(c) AS – 15 – Employee Benefits.

(d) AS – 17 – Segment Reporting such as Treasury, Corporate/wholesale Banking, Retails Banking, ‘Other Banking Operations’ and Domestic and International segments, etc. (e) AS – 18 – Related Party Disclosures.

(f) AS – 21 – Consolidated Financial Statements (CFS).

(g) AS – 22 – Accounting for Tax & Income – Adoption of AS – 22 entails creation of Deferred Tax Assets (DTA) and Deferred Tax Liabilities (DTL) which have a bearing on the computation of capital adequacy ratio and banks’ ability to declare dividends. DTA represents unabsorbed depreciation and carry forward losses which can set-off against Assets future taxable income which is considered as timing difference. DTA has an effect of decreasing future income tax payments which indicates that they are prepaid income taxes and meet the definition of assets. It is created by credit to opening balance of Revenue Reserves on the first day of application of AS – 22 or P & L Account for the current year. DTA should be deducted from Tier I capital.

Deferred Tax Liability (DTL) is created by debit to opening balance of Revenue Reserves on the first day of application of AS-22 or P & L Account for the current year and will not be eligible for inclusion in Tier I and Tier II capital for capital adequacy purpose. DTL have an effect of increasing the future year’s income tax payments which indicates that they are accrued taxes and meet the definition of liabilities.

(h) AS – 23 – Accounting for investments in Associates in Consolidated Financial Statements. It relates to the effects of the investments in associates on the financial position and operating results of a group

(i) AS – 24 – Discontinuing Operations – resulted in shedding of liability and realization of the assets by the bank, etc.

(j) AS – 25 – Interim Financial Reporting – Half yearly reporting.

(k) Other Accounting Standards: Banks are required to comply with the disclosure norms stipulated under the various Accounting Standards issued by ICAI.

Additional Disclosures

(a) Provisions and contingencies – Banks are required to disclose in the “Notes to Accounts” the information on all Provisions and Contingencies giving Provision for depreciation on Investment, Provision towards NPA, Provision towards Standard Assets, Provision made towards Income Tax and Other Provision and contingencies.

(b) Floating Provisions – comprehensive disclosures on floating provisions.

(c) Draw Down from Reserves – Details of draw down of reserves are to be disclosed.

(d) Complaints – Brief details on Customer Complaints and Awards passed by the Banking Ombudsman.

(e) Letters of Comfort (LOC) issued by banks – Details of all the Letters of Comfort (LoCs) issued during the year, including their assessed financial impact, etc.

(f) Provision Coverage Ratio (PCR) – ratio of provisioning to gross non-performing assets.

(g) Banc assurance Business – Details of fees/remuneration received, etc. Concentration of Deposits, Advances, Exposures, and NPAs

(a) Concentration of deposits – Total deposits of 20 large depositors and percentage of the deposits to total deposits of the bank.

(b) Concentration of Advances – Total advances to 20 largest borrowers and percentage of the advance to total advances of the bank.

(c) Concentration of Exposures – Total Exposure to 20 largest borrowers/customers and percentage of the exposures to total exposure of the bank on borrowers/customers.

(d) Concentration of NPAs – Total exposure to top 4 NPA accounts.

01. Sector-wise NPAs – Details of sector-wise NPAs such as Agriculture & Allied Activities, Industry (Micro & Small, Medium and Large), Services and Personal Loans.

02. Movement of NPAs – Additions, Recoveries, Up gradation, Write-offs, etc. from Gross NPAs and the final position as on the date of the Financial Statement.

03. Overseas Assets, NPAs, and Revenue -Giving the Total assets, Total NPAs and Total Revenue.

(e) Off-balance sheet SPVs sponsored – (consolidated) giving Domestic and Overseas SPVs sponsored.

(f) Unamortized Pension and Gratuity Liabilities – Appropriate disclosures of the accounting policy followed in regard to amortization of pension and gratuity expenditure may be made in the Notes to Accounts to the financial statements.

(g) Disclosure of Remuneration – Composition & mandate of Remuneration Committee, meetings, details of staff received variable remuneration awards, etc.

(h) Disclosures relating to Securitization – Giving the total outstanding amount of securitized assets as per books of the SPVs sponsored by the bank and total amount of exposures retained by the bank as on the date of balance sheet to comply with the Minimum Retention Requirements (MRR), etc.

(i) Credit Default Swaps (CDS) – Banks using a proprietary model for pricing CDS, should disclose both the proprietary model price and the standard model price in terms of extant guidelines in the Notes to the Accounts  and should also include an explanation of the rationale behind using a particular model over another.

(The prescribed formats in respect of certain disclosures are given in RBI Circular)