Following are the important Final Accounts of Banking Companies as per Banking Regulation Act 1949 and its latest Amendments and Reserve Bank of India’s Circulars.

1. Balance Sheet

2. Profit and Loss Account

Now, Banks need not follow Ind AS. The relevant position is as follows.

On 1st April 2019 – Mandatory Basis — (as postponed by RBI)

(a) Scheduled commercial Banks, excluding RRBs

(b) India term-lending refinancing institution i.e. Exim bank, NABARD etc.

(c) Holding, subsidiary, joint venture or associate companies of scheduled commercial banks

Final Accounts of Banking Companies- NPA Norms

I. Balance Sheet as at 31st March

(000s omitted)

Particulars Schedule No. Amount
CAPITAL AND LIABILITIES
Capital 1
Reserves & Surplus 2
Deposits 3
Borrowings 4
Other Liabilities and Provisions 5
TOTAL
ASSETS
Cash and Balances with Reserve Bank of India 6
Balances with Banks and money at call and short notice 7
Investments 8
Advances 9
Fixed Assets 10
Other Assets 11
TOTAL
Contingent Liabilities 12
Bills for Collection
Significant Accounting Policies 17
Notes to Accounts 18

Schedules referred to above form an integral part of the Balance Sheet

II.Profit and Loss Account for the year ended 31st March

(000s omitted)

Particulars Schedule No. Amount
I. INCOME
Interest earned 13
Other Income 14
TOTAL
II. EXPENDITURE
Interest expended 15
Operating expenses 16
Provisions and contingencies
TOTAL
III. PROFIT
Net Profit for the year
Add: Profit/ (Loss) brought forward  

 

TOTAL
IV. APPROPRIATIONS
Transfer to Statutory Reserve
Transfer to Capital Reserve  

 

Transfer to Investment Fluctuation Reserve
Transfer to Revenue and other Reserves  

 

Dividend for the current year
Balance carried over to Balance Sheet
TOTAL
V. EARNINGS PER EQUITY SHARE (Face value 1 per share)
Basic (in `)
Diluted (in `)
Significant Accounting Policies 17
Notes to Accounts 18

The schedules referred to above form an integral part of the Profit & Loss Account.

III. Non-performing Assets and Provisions

An asset, including a leased asset, becomes non performing when it ceases to generate income for the bank.

A nonperforming asset (NPA) is a loan or an advance where;

i. interest and/ or instalment of principal remains overdue for a period of more than 90 days in respect of a term loan,

ii. the account remains ‘out of order’ as indicated at paragraph 2.2 below, in respect of an Overdraft/Cash Credit (OD/CC),

iii. the bill remains overdue for a period of more than 90 days in the case of bills purchased and discounted,

iv. the instalment of principal or interest thereon remains overdue for two crop seasons for short duration crops,

v. the instalment of principal or interest thereon remains overdue for one crop season for long duration crops,

vi. the amount of liquidity facility remains outstanding for more than 90 days, in respect of a securitisation transaction undertaken in terms of the Reserve Bank of India (Securitisation of Standard Assets) Directions, 2021.

vii. in respect of derivative transactions, the overdue receivables representing positive mark-to-market value of a derivative contract, if these remain unpaid for a period of 90 days from the specified due date for payment.

Categories of NPAs

Banks are required to classify nonperforming assets further into the following three categories based on the period for which the asset has remained non performing and the realisability of the dues:

(i) Substandard Assets

(ii) Doubtful Assets

(iii) Loss Assets

Substandard Assets

With effect from March 31, 2005, a substandard asset would be one, which has remained NPA for a period less than or equal to 12 months.

Doubtful Assets

With effect from March 31, 2005, an asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months.

Loss Assets

A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly.

Upgradation of loan accounts classified as NPAs

If arrears of interest and principal are paid by the borrower in the case of loan accounts classified as NPAs, the account should no longer be treated as nonperforming and may be classified as ‘standard’ accounts.

PROVISIONING NORMS

Loss assets

Loss assets should be written off. If loss assets are permitted to remain in the books for any reason, 100 percent of the outstanding should be provided for.

Doubtful assets

100 percent of the extent to which the advance is not covered by the realisable value of the security to which the bank has a valid recourse and the realisable value is estimated on a realistic basis.

In regard to the secured portion, provision may be made on the following basis, at the rates ranging from 25 percent to 100 percent of the secured portion depending upon the period for which the asset has remained doubtful:

Period for which the advance has remained in ‘doubtful’ category Provisioning requirement

(%)

Up to one year 25
One to three years 40
More than three years 100

Substandard assets

A general provision of 15 percent on total outstanding should be made without making any allowance for ECGC guarantee cover and securities available.

The ‘unsecured exposures’ which are identified as ‘substandard’ would attract additional provision of 10 per cent, i.e., a total of 25 per cent on the outstanding balance

Standard assets

The provisioning requirements for all types of standard assets stands as below. Banks should make general provision for standard assets at the following rates for the funded outstanding on global loan portfolio basis:

a) Farm Credit to agricultural activities and Small and Micro Enterprises (SMEs) sectors at 0.25 per cent;

b) advances to Commercial Real Estate (CRE)1 Sector at 1.00 per cent;

c) advances to Commercial Real Estate – Residential Housing Sector (CRE – RH)2 at 0.75 per cent

d) housing loans extended at teaser rates as indicated in Paragraphs 5.9.9;

e) restructured advances – as stipulated in the prudential norms for restructuring of advances.

f) Advances restructured and classified as standard in terms of the Master Direction – Reserve Bank of India (Relief Measures by Banks in Areas affected by Natural Calamities) Directions 2018 – SCBs, as updated from time to time, at 5%.

g) All other loans and advances not included in (a) – (f) above at 0.40 per cent.

The provisions on standard assets should not be reckoned for arriving at net NPAs.

The provisions towards Standard Assets need not be netted from gross advances but shown separately as ‘Contingent Provisions against Standard Assets’ under ‘Other Liabilities and Provisions Others’ in Schedule 5 of the balance sheet.

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