The Reserve Bank of India (RBI) issues various circulars, notifications, guidelines, and instructions to regulate the activities of banks and other financial institutions in India. These are collectively known as RBI Master Directions. The RBI reviews and updates Master Directions to reflect the changes in the legal, economic, and financial environment. Considering the significant developments in the global prudential framework, accounting standards as well as in the financial markets-both domestic and global in the last two decades, RBI felt the need for a comprehensive review of regulatory guidelines on investment classification and valuation. Therefore, on 12 September 2023, RBI issued revised regulatory guidelines on investment classification and valuation – the Master Directions – Classification, Valuation and Operations of Investment Portfolio of Commercial Banks (Directions), 2023 (RBI Master Directions, 2023). The RBI Master Directions, 2023 are applicable to banks effective 1 April 2024. The financial results for the quarter ended 30 June 2024 published by banks include disclosures that explain the impact of the transition requirements of the RBI Master Directions, 2023. In this edition of Accounting and Auditing Update, we have presented the transition impact by listed banks due to application of the Master Directions, 2023. The article compiles and analyses the disclosures by 21 banks, which are part of the top 200 companies by market capitalisation as of 31 March 2024.
Under IFRS 9, Financial Instruments it was unclear whether the contractual cash flows of some financial assets with Environmental, Social and Governance (ESG) linked features represented solely payments of principal and interest on the principal amount outstanding (SPPI), which is a condition for measurement at amortised cost. The International Accounting Standards Board (IASB) has now amended IFRS 9 following its post-implementation review of the classification and measurement requirements. The amendments include guidance on the classification of financial assets, including those with contingent features (including those with linked to ESG parameters). The IASB has also amended IFRS 7, Financial Instruments: Disclosures. Companies will now be required to provide additional disclosures on financial assets and financial liabilities that have certain contingent features. The article on this topic highlights the amendments for classification of financial instruments with contingent features such as ESG-linked financial instruments.
As is the case each month, we have also included a regular round-up of some recent regulatory updates in India and internationally.
We would be delighted to receive feedback/suggestions from you on the topics we should cover in the forthcoming editions of AAU.
For more information on this update, please write to aaupdate@kpmg.com.
