News Items on Financial Markets

A cash flow hedge is a hedge of the exposure to variability in cash flows attributable to a particular risk associated with a recognised asset or liability or a component thereof. It covers future interest payments on variable-rate debt. It also covers a highly probable forecast transaction. The requirement is that such cash flows should affect the profit and loss account.

Basel III reforms strengthen the rules for individual banks to make them more resilient during tough times. They also focus on reducing risks across the banking sector and over time. These regulations raise the quality and amount of capital that banks must have to handle losses, introduce a backstop for measuring risk, and set higher standards for how banks are supervised and must report their financial information. The regulations also include buffers to protect against excessive credit growth.

The Basel III reforms are an international regulatory framework that was introduced by the Basel Committee on Banking Supervision (BCBS) in December 2010 to strengthen the resilience of banks and banking systems in times of financial and economic stress.

The Reserve Bank of India has released guidelines for the implementation of Indian Accounting Standards (Ind AS) by Non-Banking Financial Companies (NBFCs) and Asset Reconstruction Companies (ARCs). The responsibility of preparing and ensuring fair presentation of financial statements vests primarily with the Board of Directors of the NBFC/ARC. The guidelines provide clarity on regulatory capital in the light of Ind AS implementation, including asset classification and provisioning, and the need to ensure consistency in the application of the accounting standards in specific areas. NBFCs/ARCs are required to put in place board-approved policies, and articulate objectives for managing each portfolio. The…

The Reserve Bank of India vide its notification dated 12th Nov 2021 regarding Prudential norms on Income Recognition, Asset Classification and Provisioning (IRACP) pertaining to Advances have provided clarifications which is likely to have a significant impact on the provisioning for all financial institutions including Banks and NBFCs. The notification applies to all lending institutions and issued to clarify and harmonise certain aspects of the extant regulatory guidelines.