Balance Sheet Disclosure
Borrowings of a bank are required to be shown in balance sheet as follows.
I. Borrowings in India
(i) Reserve Bank of India
(ii) Other Banks
(iii) Other Institutions and Agencies
II. Borrowings outside India
RBI vide its circular no. DBOD.BP.BC No.81/ 21.01.002/2009-10 dated March 30, 2010 on “Classification in the Balance Sheet – Capital Instruments” advised that the following classification may be adopted in the balance sheet from the financial year ending March 31, 2010 under Schedule 4 – Borrowings:
1. Innovative Perpetual Debt Instruments (IPDI).
2. Hybrid debt capital instruments issued as bonds/debentures.
3. Perpetual Cumulative Preference Shares (PCPS).
4. Redeemable Non-Cumulative Preference Shares (RNCPS).
5. Redeemable Cumulative Preference Shares (RCPS).
6. Subordinated Debt.
The total amount of secured borrowings included under the above heads is to be shown by way of a note to the relevant schedule (Schedule 4). Secured borrowings for this purpose include borrowings/refinance in India as well as outside India. It may be noted that the inter-office transactions are not borrowings and therefore, should not be presented as such.
RBI, Export-Import Bank of India (EXIM Bank), National Bank for Agriculture and Rural Development (NABARD) and Small Industries Development Bank of India (SIDBI) are the major agencies providing refinance to banks, generally for loans extended to specified sectors. Borrowings from Reserve Bank of India include refinance obtained by the bank from the RBI. Similarly, borrowings from other banks include refinance obtained by the bank from commercial banks, co-operative banks, etc. Refinance obtained by the bank from EXIM Bank, NABARD, SIDBI and other similar institutions and agencies is to be included under ‘borrowings from other institutions and agencies’. This head will also include the bank’s liability against participation certificates on non-risk sharing basis issued by it to participating banks.
Credit balances of Nostro accounts are also to be included under the head borrowings.
‘Borrowings outside India’ include borrowings of Indian branches abroad as well as borrowings of foreign branches. Funds raised by foreign branches by way of certificates of deposit, notes, bonds, etc. have to be classified as ‘deposits’ or as ‘borrowings’ depending upon documentation. The ‘Notes and Instructions for Compilation’ of balance sheet and profit and loss account, issued by the RBI, clarify that since refinance obtained by a bank from the RBI and various institutions is to be shown under the head ‘borrowings’, the related advances should be shown on the assets side at the gross amount.
Money at call or short notice taken by the bank is also shown under this head. RBI through its “Master Circular no. RBI/2015-16/55 FMRD.DIRD. 01 /14.01.001/2015-16 on “Call-Notice Money Market Operations” dated July 1, 2015 has set down the prudential limit for transactions in call/notice money market. In terms of the said circular, on a fortnightly average basis, the borrowings should not exceed 100 percent of the capital funds (i.e., sum of Tier I and Tier II capital) of latest audited balance sheet. However, banks are allowed to borrow a maximum of 125 percent of their capital funds on any day, during a fortnight.