**Summary:**
This Reserve Bank of India (RBI) circular, DOR NBFC.CC.PD.No.11622/22.10.106/2020-21 dated July 24, 2020, addresses the implementation of Indian Accounting Standards for Non-Banking Financial Companies (NBFCs) and Asset Reconstruction Companies (ARCs).
The circular modifies the instructions provided in the earlier circular DOR NBFC.CC.PD.No.109/22.10.106/2019-20 dated March 13, 2020, regarding the treatment of unrealized gains and losses on financial instruments for the purpose of calculating regulatory capital. Specifically, it now allows for the offsetting of unrealized gains/losses on derivative transactions undertaken for hedging against the unrealized losses/gains recognized on the corresponding underlying hedged instrument, whether through Profit & Loss or Other Comprehensive Income.
The circular clarifies that after the aforementioned offset and netting with unrealized gains/losses on other financial instruments, any remaining net unrealized gains must be excluded from regulatory capital. Unrealized gains/losses should be considered net of taxation effects. All other existing instructions remain unchanged.
For further information, contact the Department of Regulation, Non-Banking Financial Companies, Central Office, Reserve Bank of India at: 2nd Floor, Main Office Building, Shahid Bhagat Singh Marg, Fort, Mumbai – 400 001. Tel No: 91-22-22709038, Email: helpdnbrbi.org.in. The Chief General Manager, Manoranjan Mishra, signed the circular.
Key Entities Referenced
Reserve Bank of India: The central bank of India, which issued the circular.
Non-Banking Financial Companies: Addressees of the circular, regulated by the Reserve Bank of India.
Asset Reconstruction Companies: Addressees of the circular, regulated by the Reserve Bank of India.
Indian Accounting Standards: Accounting standards implemented by Non-Banking Financial Companies and Asset Reconstruction Companies.
DOR NBFC.CC.PD.No.109 22.10.106201920: Reference to an earlier circular issued by the Reserve Bank of India on March 13, 2020.
Profit or Loss: Accounting term related to unrealized gainloss.
Other Comprehensive Income: Accounting term related to unrealized gainloss.
Mumbai, Maharashtra: Location of the Central Office of the Department of Regulation of Non-Banking Financial Companies.
भारतीय �रजव र् ब�क
RESERVE BANK OF INDIA
www.rbi.org.in
RBI/2020-21/15
DOR (NBFC).CC.PD.No.116/22.10.106/2020-21 July 24, 2020
To
Non-Banking Financial Companies
and Asset Reconstruction Companies
implementing Indian Accounting Standards
Madam / Sir,
Implementation of Indian Accounting Standards
Please refer to paragraph 3 of the Annex to our circular DOR (NBFC).CC.PD.No.109
/22.10.106/2019-20 dated March 13, 2020, on the captioned subject, in terms of which
any net unrealised gains arising on fair valuation of financial instruments, should not
be included in owned funds whereas all such net losses should be considered.
2. On a review, it has been decided that the unrealised gain/loss on a derivative
transaction undertaken for hedging may be offset against the unrealised loss/gain
recognized in the capital (either through Profit or Loss or through Other
Comprehensive Income) on the corresponding underlying hedged instrument. If after
such offset and netting with unrealised gains/losses on other financial instruments,
there are still net unrealised gains, the same should be excluded from regulatory
capital as required by paragraph 3 of the annex to the said circular.
3. It is also clarified that unrealized gains/losses shall be considered net of the effect
of taxation. All other instructions remain unchanged.
Yours faithfully,
-sd-
(Manoranjan Mishra)
Chief General Manager
िविनयमन िवभाग (गैर-ब��कंग िव�ीय कंपिनयां) , क��ीय कायार्लय, 2री मंिज़ल , मुख्य कायार्लय भवन, शहीद भगत �संह माग,र् फोट�, मुंबई-400 001
टेलीफोन:+91-22-22709038, ईमेल:helpdnbr@rbi.org.in
Department of Regulation (Non-Banking Financial Companies), Central Office, 2nd Floor, Main Office Building, Shahid Bhagat Singh
Marg, Fort, Mumbai – 400 001
Tel No: +91-22-22709038, Email :helpdnbr@rbi.org.in
�हदं ी आसान ह,ै इसका �योग बढ़ाइए ।