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__________RESERVE BANK OF INDIA__________

www.rbi.org.in

RBI/2010-2011/39 01 July, 2010

DBOD. No. FID. FIC.2 /01.02.00/2010-11 10 Aashadha 1932 (Saka)

The CEOs of the All-India Term-lending and Refinancing Institutions

(Exim Bank, NABARD, NHB and SIDBI)

Dear Sir,

Master Circular - Disclosure Norms for Financial Institutions

Please refer to the Master Circular DBOD No.FID.FIC.2 /01.02.00/2009-10 dated July 01,
2009 on the above subject. The enclosed Master Circular consolidates and updates all the
instructions/ guidelines on the subject up to June 30, 2010. The Master Circular has also
been placed on the web-site of RBI (http://www.rbi.org.in).

2. It may be noted that the instructions contained in the Annex 4 have been
consolidated in this master circular.

Yours faithfully,

(Vinay Baijal)
Chief General Manager

Encls : As above

______________________________________________________________________________________________________________
Department of Banking Operations and Development, Central Office, Centre 1, Cuffe Parade, Colaba, Mumbai - 400005
Tel No: 91-22-22189131 /Fax No: 91-22-22183579 Email ID: cgmicdbodco@rbi.org.in
 Master Circular – Disclosures in Financial Statements of
Financial Institutions – Notes to Accounts

Purpose

To provide a detailed guidance to all-India term-lending and refinancing institutions in the

matter of disclosures in the ‘Notes to Accounts’ to the Financial Statements.

Previous instructions

This master circular consolidates and updates the instructions on the above subject
contained in the circulars listed in the Annex 4.

Application

To all the all India Financial Institutions viz. Exim Bank, NABARD, NHB and SIDBI.

Structure

1. Introduction 4

2. Guidelines on disclosure requirements 4

2.1 Capital…………………………………………………….. 4

2.2 Asset quality and credit concentration…………………………. 4

2.3 Liquidity……………………..……………………………………. 5

2.4 Operating results………..………………………………………. 6

2.5 Movement in the provisions..……………………………………. 6

2.6 Restructured Accounts………………………………………….. 7

2.7 Assets Sold to Securitisation Company/Reconstruction 7

Company
2.8 Forward Rate Agreements and Interest Rate Swaps 7

2.9 Interest Rate Derivatives 8

2.10 Investments in Non Government Debt Securities 8

2.11 Consolidated Financial Statements 9

2.11.1 Extent of Consolidation 9

2.11.2 Accounting Policies 9

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2.12 Risk in Derivatives 9

2.13 Exposures where the FI had exceeded the prudential 10

exposure limits during the year

2.14 Corporate Debt Restructuring (CDR) 10

2.15 Additional Disclosures in Notes to Accounts 10

Notes

I The CRAR and other parameters 11

II The Asset Quality and Credit Concentration 11

III The Credit Exposure 11

IV Capital Funds 12

V The definition of borrower group 12

VI The Maturity Pattern of Assets and Liabilities 12

VII Operating Results 12

VIII Computing per employee net profit 12

Annex – 1 13
Format for disclosure of Issuer composition for Investment
in Debt Securities

Annex – 2 14
Disclosure on risk exposure in derivatives:
Qualitative Disclosure
Quantitative Disclosure

Annex - 3 Additional Disclosures 16

Annex - 4 List of Circulars 18

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1 Introduction

Recognising considerable divergence amongst the financial institutions in the

nature and manner of disclosures made by them in their published financial
statements the disclosure norms were introduced by Reserve Bank of India for the
financial institutions in March 2001 with a view to bringing about uniformity in the
disclosure practices adopted by them and improving the degree of transparency in
their affairs. Such disclosures, which came into effect from the financial year
2000-2001 and were subsequently enhanced, are required to be made as part of
the "Notes to Accounts" to enable the auditors to authenticate the information and
notwithstanding the fact that the same information might be contained elsewhere in
the published financial statements. These disclosures constitute only minima and if
an FI desires to make any additional disclosures, it would be well advised to do so.

2 Guidelines on Disclosure requirements

The various disclosure requirements are as under:

2.1 Capital

(a) CRAR, core CRAR and supplementary CRAR

(b) The amount of subordinated debt raised and outstanding as Tier–II capital
(c) Risk weighted assets – separately for on- and off-balance sheet items
(d) The share holding pattern as on the date of the balance sheet

2.2 Asset quality and credit concentration

(e) Percentage of net NPAs to net loans and advances

(f) Amount and percentage of net NPAs under the prescribed asset
classification categories
(g) Amount of provisions made during the year towards Standard assets, NPAs,
investments (other than those in the nature of an advance), income tax
(h) Movement in net NPAs
(i) Credit exposure as percentage to capital funds and as
percentage to total assets, in respect of:

* The largest single borrower;

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* The largest borrower group;

* The 10 largest single borrowers;
* The 10 largest borrower groups;

(Names of the borrowers / borrower groups need not be

disclosed).

(j) Credit exposure to the five largest industrial sectors (if applicable)
as percentage to total loan assets

2.3 Liquidity

(k) Maturity pattern of rupee assets and liabilities; and

(l) Maturity pattern of foreign currency assets and liabilities,

in the following format:

Less than More than More than More than

More than 7
Items or equal to a year up 3 years up 5 years up Total
years
1 year to 3 years to 5 years to 7 years
Rupee
assets
Foreign
currency
assets
Total
assets
Rupee
liabilities
Foreign
currency
liabilities
Total
liabilities
Total

2.4 Operating results

(m) Interest income as a percentage to average working funds

(n) Non-interest income as a percentage to average working funds
 6

(o) Operating profit as a percentage to average working funds

(p) Return on average assets
(q) Net Profit per employee

2.5 Movement in the provisions

The movement in the provisions held towards Non Performing Assets and
depreciation in investment portfolio should be disclosed as per the following format:
I. Provisions for Non Performing Assets (comprising loans, bonds and
debentures in the nature of advance and inter-corporate deposits)
(excluding provision for standard assets)

a) Opening balance as at the beginning of the financial year

Add: Provisions made during the year

Less: Write off, write back of excess provision

b) Closing balance at the close of the financial year

II. Provisions for depreciation in investments

c) Opening balance as at the beginning of the financial year

Add:
i. Provisions made during the year
ii. Appropriation, if any, from Investment Fluctuation
Reserve Account during the year
Less:

i. Write off during the year

ii. Transfer, if any, to Investment Fluctuation Reserve
Account

d) Closing balance as at the close of the financial year

2.6 Restructured Accounts

The total amount of loan assets as also of the sub standard assets/ doubtful assets
separately, which have been subjected to restructuring, etc should be disclosed.
 7

2.7 Assets Sold to Securitisation Company/ Reconstruction Company

FIs which sell their financial assets to an SC/ RC, shall be required to make the
following diclosures :
a) Number of Accounts
b) Aggregate value (net of provisions) of accounts sold to SC /RC
c) Aggregate consideration
d) Additional consideration realised in respect of accounts transferred in earlier years
e) Aggregate gain / loss over net book value.

2.8 Forward Rate Agreements and Interest Rate Swaps

The following disclosures should be made in the note to the balance sheet:

• The notional principal of swap agreements;

• Nature and terms of the swaps including information on credit and market risk and
the accounting policies adopted for recording the swaps;

• Quantification of the losses which would be incurred if the counter parties failed to
fulfil their obligations under the agreements;

• Collateral required by the entity upon entering into swaps;

• Any concentration of credit risk arising from the swaps. Examples of concentration
could be exposures to particular industries or swaps with highly geared
companies; and

• The "fair" value of the total swaps book. If the swaps are linked to specific assets,
liabilities or commitments, the fair value would be the estimated amount that the
entity would receive or pay to terminate the swap agreements at balance sheet
date. For a trading swap, the fair value would be its mark to market value.

2.9 Interest Rate Derivatives

The FIs dealing in interest rate derivatives on exchanges should disclose as a

part of the 'notes on accounts' to balance sheets the following details:
 8

Sr. Particulars Amount

No.
1 Notional principal amount of exchange traded
interest rate derivatives undertaken during the year
(instrument-wise)
a)
b)
c)

2 Notional principal amount of exchange traded

interest rate derivatives outstanding as on 31st March
____ (instrument-wise)
a)
b)
c)
3 Notional principal amount of exchange traded
interest rate derivatives outstanding and not “highly
effective” (instrument-wise)
a)
b)
c)
4 Mark-to-market value of exchange traded interest
rate derivatives outstanding and not “highly effective”
(instrument-wise)
a)
b)
c)

2.10 Investments in Non Government Debt Securities:

The FIs should disclose the details of the issuer composition of investments made
through private placement and the non-performing investments in the ‘Notes on
Accounts’ of the balance sheet in the format furnished in the Annex 1.

2.11 Consolidated Financial Statements (CFS)

2.11.1 Extent of Consolidation:

A parent, presenting the CFS, should consolidate the financial statements of all
subsidiaries – domestic as well as foreign, except those specifically permitted to be
excluded under the AS-21 the ICAI. The reasons for not consolidating a subsidiary
should be disclosed in the CFS. The responsibility of determining whether a
 9

particular entity should be included or not for consolidation would be that of the
Management of the parent entity. In case, its Statutory Auditors are of the opinion
that an entity, which ought to have been consolidated, has been omitted, they
should incorporate their comments in this regard in the "Notes to Account".

2.11.2 Accounting Policies:

CFS should be prepared using uniform accounting policies for like transactions and
other events in similar circumstances. (For the purpose, the FIs should rely on a
Statement of Adjustments for non-uniform accounting policies furnished by the
statutory auditors of the subsidiaries.) If it is not practicable to do so, that fact should
be disclosed together with the proportions of the items in the consolidated financial
statements to which the different accounting policies have been applied.

2.12 Disclosures on Risk Exposures in Derivatives

Best international practices require meaningful and appropriate disclosures of FIs'

exposures to risk and their strategy towards managing the risk. FIs should make
meaningful disclosures of their derivatives portfolio. A minimum framework for
disclosures by FIs on their risk exposures in derivatives is furnished in Annex 2.
The disclosure format includes both qualitative and quantitative aspects and has
been devised to provide a clear picture of the exposure to risks in derivatives, risk
management systems, objectives and policies. FIs should make these disclosures
as a part of the 'Notes on Accounts' to the Balance Sheet with effect from March 31,
2005 (June 30, 2005 in the case of National Housing Bank).

2.13 Exposures where the FI had exceeded the prudential exposure limits during the
year

The FI should make appropriate disclosures in the ‘Notes on account’ to the annual
financial statements in respect of the exposures where the FI had exceeded the
prudential exposure limits during the year.

2.14 Corporate Debt Restructuring (CDR)

 10

FIs should also disclose in their published Annual Accounts, under the "Notes on
Accounts", the following information in respect of CDR undertaken during the year :
• Total amount of loan assets subjected to restructuring under CDR
• The amount of standard assets subjected to CDR.
• The amount of sub-standard assets subjected to CDR.

2.15 Additional Disclosures by FIs in Notes to Accounts

Reserve Bank has been taking several steps from time to time to enhance the
transparency in the operations of banks by stipulating comprehensive disclosures in
tune with the international best practices.
On a review of the existing disclosures, it has been decided to prescribe the following
additional disclosures in the ‘Notes to Accounts’ in the FIs’ balance sheets, from the
year ending March/June 2010:
I. Concentration of Deposits, Advances, Exposures and NPAs
II. Sector-wise NPAs
III. Movement of NPAs (For calculation of gross NPA, please refer to circular DBOD No.
FID.FIC.9/01.02.00/2009-10 dated 26.03.2010)
IV. Overseas assets, NPAs and revenue
V. Off-balance sheet SPVs sponsored by banks
The prescribed formats are furnished in Annex 3.

Notes:

(I) The CRAR and other parameters

The CRAR and other related parameters, determined as per the extant capital
adequacy norms for the FIs, should be disclosed.

(II) The Asset quality and credit concentration

For the purpose of asset quality and credit concentration, the following should also
be reckoned for determining the amount of loans and advances and the NPAs and
included in the disclosures:

(i) Bonds and Debentures : The bonds and debentures should be treated in the
nature of advance when :
 11

• The debenture / bond is issued as part of the proposal for project finance and
the tenor of the bond / debenture is for three years and above.

and

• The FI has a significant stake (i.e. 10% or more) in the issue.

and

• The issue is a part of private placement i.e. the borrower has approached the FI,
and not part of a public issue where the FI has subscribed in response to an
invitation.

(ii) Preference Shares : The preference shares, other than convertible

preference shares, acquired as part of project financing and meeting the
criteria as at (i) above.

(iii) Deposits : The deposits placed with the corporate sector.

(III) The Credit Exposure

The “credit exposure” shall include funded and non-funded credit limits,
underwriting and other similar commitments. The sanctioned limits or outstandings
whichever is higher shall be reckoned for arriving at exposure limit. In case of term
loans, however the exposure limit should be reckoned on the basis of actual
outstandings plus undisbursed or undrawn commitments.

However, in cases where disbursements are yet to commence, exposure limit

should be reckoned on the basis of the sanctioned limit or the extent upto which
the FI has entered into commitments with the borrowing companies in terms of the
agreement.

FIs should include in the non-funded credit limit, the forward contracts in foreign
exchange and other derivative products like currency swaps, options, etc as per
the extant exposure norms.

(IV) Capital Funds

Capital funds for the purpose of credit concentration, would be the total regulatory
capital as defined under capital adequacy standards ( i.e.Tier I and Tier II Capital ).

(V) The definition of Borrower Group

The definition of ' borrower group' would be the same as applied by the FIs in
complying with group exposure norms.

(VI) The maturity pattern of Assets and Liabilities

 12

For the maturity pattern of assets and liabilities, the bucketing of various items of
assets and liabilities in the specified time buckets should be done in accordance
with the RBI Guidelines on Asset Liability Management System, issued to FIs.

(VII) Operating results

For operating results, the working funds and total assets should be taken as the
average of the figures as at the end of the previous accounting year, the end of the
succeeding half year and the end of the accounting year under report. (The
“working funds” refer to the total assets of the FI.)

(VIII) Computing per employee net profit

All permanent, full-time employees in all cadres should be reckoned for

computing per employee net profit.

=====
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Annex 1

Format For Disclosure Of Issuer Composition For Investment In Debt Securities

A. Issuer categories in respect of investments made
(As on the date of the balance sheet)
(Rs. in crore)
Sr. Issuer Amount Amount of
No. invest- ‘below ‘unrated’ ‘unlisted’
ment invest- Securities Securities
made ment held
through grade’
private Securities
place- held
ment
(1) (2) (3) (4) (5) (6) (7)
1 PSUs
2 FIs
3 Banks
4 Private corporates
5 Subsidiaries/ Joint
ventures
6 Others
7 # Provision held XXX XXX XXX XXX
towards depreciation
Total *
# Only aggregate amount of provision held to be disclosed in column 3.
* NOTES:
1. Total under column 3 should tally with the total of investments included under the
following categories in the balance sheet:
a. Shares
b. Debentures & Bonds
c. Subsidiaries/ joint ventures
d. Others
2. Amounts reported under columns 4, 5, 6 and 7 above might not be mutually exclusive.

B. Non performing investments

(Rs. in Crore)

Particulars Amount

Opening balance
Additions during the year since 1st April
Reductions during the above period
Closing balance
Total provisions held
 14

Annex 2
Disclosures on risk exposure in derivatives
Qualitative Disclosure
FIs shall discuss their risk management policies pertaining to derivatives with particular
reference to the extent to which derivatives are used, the associated risks and business
purposes served. The discussion shall also include:

• the structure and organization for management of risk in derivatives trading,

• the scope and nature of risk measurement , risk reporting and risk monitoring
systems,

• policies for hedging and / or mitigating risk and strategies and processes for
monitoring the continuing effectiveness of hedges / mitigants, and

• accounting policy for recording hedge and non-hedge transactions; recognition of

income, premiums and discounts; valuation of outstanding contracts; provisioning,
collateral and credit risk mitigation.

Quantitative Disclosures
(Rs. in Crore)
Sl. Particular Currency Interest rate
No Derivatives derivatives
1 Derivatives (Notional Principal Amount)
a) For hedging
b) For trading
2 Marked to Market Positions[1]
a) Asset (+)
b) Liability (-)
3 Credit Exposure [2]
4 Likely impact of one percentage
change in interest rate (100*PV01)
a) on hedging derivatives
b) on trading derivatives
5 Maximum and Minimum of 100*PV01
observed during the year
a) on hedging
b) on trading
 15

Notes:
1. The net position should be shown either under asset or liability, as the case should be,
for each type of derivatives.

2. FIs should adopt the Current Exposure Method prescribed by RBI on Measurement of
Credit Exposure of Derivative Products which is described in brief as follows:

In order to calculate the credit exposure equivalent of off-balance sheet interest rate and
exchange rate instruments under Current Exposure Method, a FI would sum:

• the total replacement cost (obtained by “marking to market”) of all its

contracts with positive value (i.e., when the FI has to receive money from
the counterparty), and
• an amount for potential future changes in credit exposure calculated on the
basis of the total notional principal amount of the contract multiplied by the
following credit conversion factors according to the residual maturity of
the contract :

Residual Maturity Conversion Factor to be applied on

Notional Principal Amount
Interest Rate Exchange Rate
Contract Contract
Less than one year Nil 1.0 %
One year and over 0.5% 5.0 %

-------
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Annex 3
Additional Disclosures
I. Concentration of Deposits, Advances, Exposures and NPAs
Concentration of Deposits
(Amount in Rupees Crores)
Total Deposits of twenty largest depositors
Percentage of Deposits of twenty largest depositors to Total Deposits

Concentration of Advances*
(Amount in Rupees Crores)
Total Advances to twenty largest borrowers
Percentage of Advances of twenty largest borrowers to Total Advances
*Advances should be computed as per definition of Credit Exposure including derivatives
furnished in our Master Circular on Exposure Norms dated July 1, 2010.
Concentration of Exposures**
(Amount in Rupees Crores)
Total Exposure to twenty largest borrowers/customers
Percentage of Exposures of twenty largest borrowers/customers to Total Exposure on
borrowers/customers
**Exposures should be computed based on credit and investment exposure as prescribed in
our Master Circular on Exposure Norms dated July 1, 2010.
Concentration of NPAs
(Amount in Rupees Crores)
Total Exposure to top four NPA accounts

II: Sector-wise NPAs

Sl. Sector Percentage of NPAs to Total

No Advances in that sector
1 Agriculture & allied activities
Industry (Micro & small, Medium and Large)
2 Industry (Micro & small, Medium and Large)
3 Services
4 Personal Loans
 17

III. Movement of NPAs

Particulars Amount in Rs. Crores

Gross NPAs* as on 1st April of particular year (Opening

Balance)

Additions (Fresh NPAs) during the year

Sub-total (A)

Less:-

(i) Upgradations

(ii) Recoveries (excluding recoveries made from upgraded

accounts)
iii) Write-offs
Sub-total (B)

Gross NPAs as on 31st March of following year (closing

balance) (A-B)

*Gross NPAs as per item 2 of Annex to DBOD Circular DBOD.FID.FIC.9/01.02.00/2009-10

dated March 26, 2010
IV. Overseas Assets, NPAs and Revenue

Particulars Amount in Rs. Crores

Total Assets

Total NPAs

Total Revenue

V. Off-balance Sheet SPVs sponsored (which are required to be consolidated as per

accounting norms)

Name of the SPV sponsore

Domestic Overseas
 18

Annex 4

Part A: List of instructions and circulars superseded

No. Circular No. Date Subject

1. DBS. FID. No. C- 18 / 23.03.2001 Disclosures in the Published Financial
01.02.00/ 2000-01 statements.

2. DBS. FID. No. C-14 / 08.02.2002 Additional Disclosures in the Published

01.02.00/2001-02 Financial statements
3. DBOD.No.FID. FIC- 1 26.04.2005 Disclosures on Risk Exposures in
/01.02.00/ 2004-05 Derivatives
4. DBOD.No.FID. FIC- 2 01.07.2006 Master Circular - Disclosure Norms for
/01.02.00/ 2006-07 Financial Institutions
5. DBOD.No.FID. FIC- 2 02.07.2007 Master Circular - Disclosure Norms for
/01.02.00/ 2007-08 Financial Institutions

Part B: List of other circulars containing Instructions/Guidelines/Directives

related to Disclosure Norms

No. Circular No. Date Subject

1 DBS. FID . No. 20 / 04.12.1997 Limits on Credit Exposures of Term
02.01.00 / 1997-98 Lending Financial Institutions to
Individual/ Group Borrowers
2 MPD. BC. 187 / 07.07.1999 Forward Rate Agreements / Interest
07.01.279 / 1999-2000 Rate Swaps
3 DBS. FID. No. C-9 / 09.11.2000 Guidelines – Classification and
01.02.00 /2000-01 Valuation of Investments
4 DBS. FID. No. C-19 / 28.03.2001 Treatment of Restructured Accounts
01.02.00/2000-01
5 DBS. FID. No. C-26 / 20.06.2001 Monetary and Credit Policy Measures
01.02.00 /2000-01 2001-2002 – Credit Exposure Norms
6 DBS. FID. No. C-2 / 25.08.2001 Corporate Debt Restructuring (CDR)
01.11.00 /2001-02
7 DBS. FID. No. C-6 / 16.10.2001 Guidelines for Classification and
01.02.00 /2001-02 Valuation of Investments –Modifications
/ Clarifications
8 DBOD No. BP.BC. 96 / 23.04.2003 Guidelines on Sale of Financial Assets
21.04.048/ 2002-2003 to Securitisation Company/
Reconstruction Company
9 IDMC. MSRD. 4801 / 03.06.2003 Guidelines on Exchange Traded Interest
06.01.03/2002-03 Rate Derivatives
10 DBS. FID. No. C-5 / 01.08.2003 Guidelines for Consolidated Accounting
01.02.00/2003-04 and Consolidated Supervision
11 DBS. FID. No. C-11 / 08.01.2004 Final Guidelines on investment by the
01.02.00/2003-04 FIs in debt securities
12 DBOD No. FID.FIC. 8/ 26.03.2010 Additional Disclosures in Notes to
01.02.00/2009-10 Accounts
 19

13 DBOD No. FID.FIC. 9/ 26.03.2010 Prudential Norms on Income

01.02.00/2009-10 Recognition, Asset Classification and
Provisioning pertaining to Advances –
Computation of NPA Levels