South Indian Bank bags Digital India Excellence Award 2017 Mr. Thomas Joseph K., EVP (Operations) receiving Digital India Excellence Award 2017 from Sri. K. K Sharma, Secretary (MHRD) & Justice Rajesh Tandon, Former Judge, Uttarakhand High Court in the presence of Prof. Dinesh Sharma, Hon. Deputy Chief Minister, Uttar Pradesh Objectives: To instil in the bank staff a sense of belonging and involvement in the bank’s affairs Corporate Family Magazine of To appreciate and applaud the individual achievements of our members of staff South Indian Bank To act as a communication medium between management and the staff Advisory Board: To increase the professional competence of our bank staff Mr. Sivakumar G., Inside Executive Vice President (Credit) Mr. John Thomas, Message Sr. Gen. Manager (Business Development Dept. ) Articles Mr. Paul V.L., Indian Accounting Standard (Ind AS) Srikumar V.K. Sr. General Manager (Admin) First Time Adoption of Ind AS Dheeraj K.R. Ind AS for Banks, NBFCs and Other Financial Institution Manisha Srivastava Editorial Board: Ind AS - Impact on Banking Sector Visanth P Nair Mr. Ajit C Jacob, Ind AS : Step to a New Dimension of Accounting Rakesh T.R. Dy. GM (CRD) Fair Valuation under Ind AS Vijith S. Mr. Peter A. D., Ind AS - Challenges for Banks C.P. Gireesh Dy. GM & Principal, SIBSTC, Thrissur Assessment of Expected Credit Losses (ECL) under Ind AS 109 Arjun Sunder S Mr. M. T. Jose, SIB Scholar- A Blinking Light House Nearby Narayanan V.C. Dy. GM (Personnel) When Santa Visits RBCPC Arathi AP Mr. Biju E. Punnachalil, A Sporting Initiative Joe Varghese Dy. GM (IRMD) “Safed Rann’ Vinod K. K. Mr. Francy Jos E., Love is Blind or Deaf Radhika R.B AGM (CCO) Regular Features Mr. Nanda Kumar C., Manager, STC Publisher: Editor Layout, Typeset & Printing Mrs. Sherin Thomas, Mr. Thomas Joseph K. Mrs. Sheela Davis, Lumiere Printing Works Clerk, HO Inspection & Vigilance Executive Vice President (Operations) CM, Staff Training College Thrissur 680 020 2 MSME Campaign Magic Smile MD & CEO, Sri. V G Mathew addressing the achievers of MSME Campaign. The function is also attended by Sri. G. Sivakumar EVP (Credit), Sri. Benoy Varghese (Country Head - Wholesale Banking), Sri. John Thomas - SGM (BDD) and Sri. Balakrishnan K.N. JGM(MCCPC) 3 NRE meet at Kuwait Seen in Photo are Mr. Prashanth George Tharakan (CRO), Mr. Shelly Joseph (JGM), Mr. Regunathan K.N. EVP (Treasury), Mr. Salah Saad Al Daas (Chief Police Officer Farwaniya), Mr. Sivakumar G. EVP(Credit), Mr. Sreejil Mukund (AGM), Mr. Sanchay Kumar Sinha (Country Head, Retail banking) and Ms. Beena Davis (CM) ASSOCHAM Award Mr. G Sivakumar, Executive Vice President ( Credit ) receiving “ Social Banking Excellence Award-2017” in Priority Sector Lending instituted by ASSOCHAM, on behalf of South Indian Bank, from Mr. Shiv Pratap Shukla, Hon’ble Minister of State for Finance. 4 MD & CEO Speaks .... The Indian economy has witnessed rapid change and progress since 1991 when the economy was opened up through structural reforms. Today there are many transnational corporations of Indian origin. Similarly several global companies are active in the Indian economy. Global capital supports the equity of several Indian companies. Our own case is no exception. As you are aware more than 40% of our own equity capital is held in the form of FDI. Global capital and global operations would require that we speak the same global accounting language too. International Financial Reporting Standards (IFRS) is the global accounting standard currently being followed. India has taken measures to conform to these standards beginning 2016 in a phased manner, through the implementation of Ind-AS. The Banking sector in our country is expected to migrate to Ind-AS from 1st April 2018. Ind-AS has more rigorous accounting and reporting requirements than the current system. Apart from this, it has a very different treatment for Credit Loss which currently is taken care of by the provisioning on crystallized NPAs primarily. Under Ind-AS, provisioning needs to be made on the basis of Expected Credit Loss which would mean that we need to be in a position to predict credit loss using acceptable models and based on past trends. A certain level of maturity in system capability and data quality is therefore a prerequisite for Ind-AS migration. A number of these aspects are covered in the current issue of SIBLINK which carries the Ind-AS as the primary theme. I hope this issue would make interesting and informative reading for all our enlightened colleagues. Wishing you all the best V G Mathew Managing Director & CEO ... Credit Loss which currently“ is taken care of by the provisioning on crystallized NPAs primarily. Under Ind-AS, provisioning needs to be made on the basis of Expected Credit Loss which would mean that we need to be in a position to predict credit loss using acceptable models and based on past trends. A certain“ level of maturity in system capability and data quality is therefore a prerequisite ... 5 is >= INR 500 crores Indian Accounting Standard (Ind AS) • Holding, subsidiaries, joint ventures or associates of these companies Mandatory Phase 4 applicable from 1 April INTRODUCTION 2019 onward to: Accounting Standard is a guideline for financial • Listed NBFCs whose net worth is < INR 500 accounting such as how a firm prepares and Srikumar V K crores • presents its business income, expenses, assets Chief Manager Unlisted NBFCs whose net worth is >= INR and liabilities and may be in accordance to Mumbai RO 250 crores but < INR 500 crores standards set by the International Accounting • Holding, subsidiaries, joint ventures or Standards Board (IASB). associates of these companies Accounting Standards are needed so that Advisory Committee on Accounting Standards An overseas subsidiary, associate, joint venture financial statements will fairly and consistently (NACAS) recommend these standards to the and other similar entity of such company may describe financial performance. These Ministry of Corporate Affairs (MCA). MCA has to prepare its stand-alone financial statements in principles are “generally accepted” because an spell out the accounting standards applicable accordance with the requirements of the specific authoritative body has set them or the for companies in India. As on date MCA has jurisdiction. However, for group reporting accounting profession widely accepts them as notified 41 Ind AS. This shall be applied to the purposes, it will have to report to its Indian appropriate. companies of financial year 2015-16 voluntarily parent under Ind AS to enable its parent to and from 2016-17 on a mandatory basis. present Consolidated Financial Statements Indian Accounting Standard (abbreviated as (CFS) in accordance with Ind AS Ind-AS) is the Accounting standard adopted by SALIENT FEATURES companies in India and issued under the The following are the Salient features in RBI GUIDELINES ON IMPLEMENTATION OF Ind supervision and control of Accounting Implementation of Ind AS: AS Standards Board (ASB), which was constituted The principal regulator for banks and NBFCs in as a body in the year 1977. The applicability of Voluntary Phase: Early adoption of Ind AS is India, the Reserve Bank of India (RBI), issued a Ind AS standard is based on the Listing Status permitted from financial year beginning on or circular in February 2016 reiterating the and the networth of the company. after 1st April 2015 timeline for Ind AS implementation by banks issued by the MCA and providing further HISTORY Mandatory Phase 1: Application of Ind AS is direction on critical issues that banks need to India was following accounting standards from mandatory from the financial year beginning consider in their Ind AS implementation plan. Indian Generally Acceptable Accounting on or after 1st April 2016 for the following Principle (IGAAP) prior to adoption of the Ind- companies: Key features of the RBI circular: AS • Listed or non- listed companies with net 1. Banks shall comply with Ind AS for financial worth of INR 500 crores (INR 5 billion) or statements for accounting periods beginning The Ministry of Corporate Affairs (MCA) on 16 more. 1stApril 2018, with comparatives for the February 2015 notified 39 accounting • Holding, subsidiaries, joint ventures or periods ending 31st March 2018 or thereafter. standards and laid down an Indian Accounting associate companies of these companies Ind AS shall be applicable to both standalone Standards (Ind AS) transition road map for financial statements and consolidated companies excluding banks, non-banking Mandatory Phase 2: Application of Ind AS is financial statements. financial companies (NBFCs) and insurance mandatory from the financial year beginning 2. Banks shall apply Ind AS only as per the companies and those listed on SME Exchanges. on or after 1 April 2017, for the following above timelines and shall not be permitted However the companies should have a companies: to adopt Ind AS earlier. Networth of Rs 250 crore or more. • All listed companies not covered under 3. The boards of the banks should have the mandatory Phase 1 ultimate responsibility in determining the Ind In January 2016, the MCA announced the Ind • Non -Listed Companies with net worth of AS direction and strategy and in overseeing AS roadmap for scheduled commercial banks Rs 250 crores (INR 2.5 billion) or more and the development and execution of the Ind (excluding regional rural banks [RRBs]), not covered in the mandatory Phase1. AS implementation plan. insurers/insurance companies and NBFCs.The • Holding, subsidiaries, joint ventures or 4. Banks are advised to set up a Steering MCA clarified that notwithstanding the Ind AS associates of these companies Committee headed by an official of the rank roadmap for companies, the holding, subsidiary, of an executive director (or equivalent), joint venture or associate companies of banks Mandatory Phase 3: Applicable from 1 April comprising members from cross functional would also prepare Ind AS financial statements 2018 onward to: areas of the bank to immediately initiate the for accounting periods beginning 1 April 2018 • All commercial banks, term lending implementation process.