RBI directs banks to disclose sector-wise advances in financial statements

The Reserve Bank of India (RBI) has asked banks to disclose sector-wise advances in the 'Notes to Accounts' to their annual financial statements beginning the current financial year (2014-15).

Within the sector-wise advances, RBI has asked banks to disclose priority sector (agriculture and allied activities, advances to industries sector eligible as priority sector lending, services, and personal loans) loans and non-priority sector advances (agriculture and allied activities, industry, services, and personal loans).

The central bank said banks may also make disclosures on sub sectors where the outstanding advances exceed 10 per cent of the outstanding total advances to that sector.

For instance, if a bank's outstanding advances to the mining industry exceed 10 per cent of the outstanding total advances to 'Industry' sector it should disclose details of its outstanding advances to mining separately under the 'Industry' sector.

''Banks may also disclose in the format above, sub sectors where the outstanding advances exceeds 10 per cent of the outstanding total advances to that sector.  For instance, if a bank's outstanding advances to the mining industry exceed 10 per cent of the outstanding total advances to 'Industry' sector it should disclose details of its outstanding advances to mining separately in the format above under the 'Industry' sector,'' RBI said.

RBI had, in its first bi-monthly monetary policy statement in May, has indicated that it would come out with the final framework for dealing with systemically important domestic banks by the end of the month.

RBI noted that banks have made some progress on a number of regulatory and supervisory measures. However, as the liquidity coverage ratio (LCR) stipulated by the Basel Committee becomes a standard with effect from 1 January 2015, RBI proposed to issue guidelines relating to Basel III LCR and Liquidity Risk Monitoring tools by end-May 2014.

RBI had, meanwhile, appointed a Committee on Comprehensive Financial Services for Small Businesses and Low Income Households with Nachiket Mor as its chairperson, in order to encourage banks to actively manage their exposures to various sectors, including priority sector.

RBI has now proposed to prescribe certain additional disclosure requirements in the financial statements by end of this month.

The Reserve Bank of India had, in January, released on its website the report of the Committee on Comprehensive Financial Services for Small Business and Low Income Households with additional comments from two members.

The committee, while laying down its vision statement for financial inclusion and deepening, had suggested providing a universal bank account to all Indians above the age of eighteen years and had recommended a Vertically Differentiated Banking System with Payments Banks for Deposits and Payments and Wholesale Banks for credit outreach with relaxed entry point norms of Rs50 crore.

On priority sector, the committee had recommended Adjusted Priority Sector Lending Target of 50 per cent against the current requirement of 40 per cent with sectoral and regional weightages based on the level of difficulty in lending.

The committee had also recommended risks and liquidity transfers through markets. In view of the fact that banks might choose to focus their priority sector strategies on different customer segments and asset classes, the committee had recommended that the regulator provide specific guidance on differential provisioning norms at the level of each asset class.

A bank's overall non-performing assets coverage ratio would therefore be a function of its overall portfolio asset mix.