Foreign Currency Translation Reserve (FCTR)
As stated in RBI’s circular no. RBI/2015-16/331 DBR.No.BP.BC.83/21.06.201/2015-16 dated 01st March, 2016, Banks may, at their discretion, reckon foreign currency translation reserve arising due to translation of financial statements of their foreign operations in terms of Accounting Standard (AS) 11 as CET1 capital at a discount of 25% subject to meeting the following conditions:
the FCTR are shown under Schedule 2: Reserves & Surplus in the Balance Sheet of the bank;
the external auditors of the bank have not expressed a qualified opinion on the FCTR.
Deferred Tax Asset (DTA) – As per RBI’s circular no. RBI/2015-16/331 DBR.No.BP.BC.83/21.06.201/2015-16 dated 01st March, 2016:
(i) Deferred tax assets (DTAs) associated with accumulated losses and other such assets should be deducted in full from CET1 capital.
(ii) DTAs which relate to timing differences (other than those related to accumulated losses) may, instead of full deduction from CET1 capital, be recognised in the CET1 capital up to 10% of a bank’s CET1 capital, at the discretion of banks [after the application of all regulatory adjustments].
(iii) The amount of DTAs which are to be deducted from CET1 capital may be netted with associated deferred tax liabilities (DTLs) provided that:
• both the DTAs and DTLs relate to taxes levied by the same taxation authority and offsetting is permitted by the relevant taxation authority;
• the DTLs permitted to be netted against DTAs must exclude amounts that have been netted against the deduction of goodwill, intangibles and defined benefit pension assets; and
• the DTLs must be allocated on a pro rata basis between DTAs subject to deduction from CET1 capital as at (i) and (ii) above.