Move To Ind-AS Could Lead To 30% Higher Provisioning For Banks
By Team Legistify / 2017-06-29

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Indian banks may have to set aside higher provisions in the medium term, as they move to the Indian Accounting Standards (Ind-AS), said SS Mundra, deputy governor, Reserve Bank of India (RBI) on Friday.

Speaking at an event about the banking and financial sector, Mundra pointed out that the migration to the Ind-AS would be a "demand" on the capital of banks, considering the experience from when companies across the world moved to the new accounting standards.

Generally, it is found that the first migration on an average translates into a 30 percent increase in the provisioning requirements of the credit portfolio

SS Mundra, Deputy Governor, RBI

Banks are required to move to Ind-AS accounting standards staring April 1, 2018.

The increase in provisioning will be due to the migration to expected loss mechanism of provisioning from the current incurred loss method. This would most likely raise the provisioning requirements on loan losses in the medium term, in line with the experience across the globe, he added.

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