The Reserve Bank of India (RBI) has decided to tighten the disclosure norms pertaining to provisions made by commercial banks.
A circular dated May 21, 1997 states that banks will have to disclose upfront the specific provisions made for non-performing assets (NPA), depreciation in the value of investments, and income-tax.
In addition, the RBI has also directed the banks to disclose their net non-performing assets (NPA) as a percentage of their net advances.
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These measures are part of a series of steps to make banks accounting practices more transparent. The new norms will have to followed by all banks while drawing up their balance-sheets for 1996-97.
Banks currently disclose net value of investments in India and outside India. From now on, they will have to disclose the gross value of their investments in India and outside India, the provision for depreciation and then arrive at the net value of investments.
Banks have also been asked to indicate the amount of subordinated debt raised as Tier II capital by way of explanatory notes or remarks in the balance sheet as well as in Schedule 5 relating to other liabilities and provisions.
The central bank has also asked all commercial banks to disclose the percentage of share-holding of the central government. The additional information will form part of the additional disclosures that the banks will have to make in the notes on account. In April 1996, the RBI had asked the banks to include their assessments of capital adequacy ratio in the notes on accounts attached to the balance-sheet.
The RBI has also clarified that commercial banks can not write back excess provision provided towards depreciation on investments to boost net profits.