New accounting standard may hit banks' lending to infra, realty firms

Switch to IndAS may increase debts on the books of firms

The adoption of the new Indian Accounting Standards (IndAS) might compel banks to cut down on the quantum of loans they dole out to companies. 

IndAS will result in a change in the debt-to-equity ratios of companies as capital structures and financial instruments get reclassified, increasing debts and compelling banks to reassess the way they lend to companies, particularly in sectors such as power, infrastructure and real estate.  

“Banks and financial institutions will have to consider how IndAS has potentially changed the balance sheets of companies and relook at the way they review a loan application, test loan covenants