rbi: the RBI allows banks to write off additional liabilities after the review of family pensions
MUMBAI: The Reserve Bank on Monday authorized banks to write off the additional liability for the family pension review over five years from 2021-2022.
Banks, the RBI said, will be required to appropriately disclose the accounting policy followed in this regard in “notes to the accounts†to the financial statements.
The easing follows a request by the Association of Indian Banks (IBA) that it would be difficult for some banks to absorb large amounts of family pension review liability in a single year.
The family pension for bank employees has been revised as part of the 11th Bipartite Regulation and Joint Note dated November 11, 2020.
The RBI said the issues had been reviewed from a regulatory perspective and, exceptionally, it was decided that banks covered by the aforementioned regulation could take the following actions in the matter.
“The expenses (…) may, if they are not fully charged to the income statement during the 2021-2022 fiscal year, be amortized over a period not exceeding five years from the fiscal year ended on March 31, 2022, subject to a minimum of 1 / 5th of the total amount involved being spent each year, â€the RBI said.
The liability for improving the family pension, he added, should be fully recognized in accordance with applicable accounting standards.
In another circular, the RBI said several banks had approached it to clarify the amount of capital funds that could be raised overseas.
The RBI said the matter has been reviewed and clarified that the “eligible amount” for issuance of perpetual debt instruments (PDIs) in foreign currency would mean the greater of 1.5% of assets. Risk-weighted (RWA) and Total Additional Tier 1 Capital as of March 31 of the previous fiscal year.
No more than 49% of the “eligible amount” can be issued in foreign currency and / or rupee-denominated bonds abroad, the Reserve Bank added.
Banks, the RBI said, will be required to appropriately disclose the accounting policy followed in this regard in “notes to the accounts†to the financial statements.
The easing follows a request by the Association of Indian Banks (IBA) that it would be difficult for some banks to absorb large amounts of family pension review liability in a single year.
The family pension for bank employees has been revised as part of the 11th Bipartite Regulation and Joint Note dated November 11, 2020.
The RBI said the issues had been reviewed from a regulatory perspective and, exceptionally, it was decided that banks covered by the aforementioned regulation could take the following actions in the matter.
“The expenses (…) may, if they are not fully charged to the income statement during the 2021-2022 fiscal year, be amortized over a period not exceeding five years from the fiscal year ended on March 31, 2022, subject to a minimum of 1 / 5th of the total amount involved being spent each year, â€the RBI said.
The liability for improving the family pension, he added, should be fully recognized in accordance with applicable accounting standards.
In another circular, the RBI said several banks had approached it to clarify the amount of capital funds that could be raised overseas.
The RBI said the matter has been reviewed and clarified that the “eligible amount” for issuance of perpetual debt instruments (PDIs) in foreign currency would mean the greater of 1.5% of assets. Risk-weighted (RWA) and Total Additional Tier 1 Capital as of March 31 of the previous fiscal year.
No more than 49% of the “eligible amount” can be issued in foreign currency and / or rupee-denominated bonds abroad, the Reserve Bank added.
