Banking system in India is so far accustomed to rule based approach and hence for any implementation, Banks look to the regulator for guidelines i.e. RBI.

In case of Basel II implementation, the National Supervisor i.e. RBI is provided with power to modify the guidelines to suit the country condition. The Objective of Basel seems to be first to achieve robust banking practices and then to have uniformity of approach.

In case of IFRS, it is doubtful whether the National Regulator has role to play.

IFRS recognizes a ‘Carve Out’ procedure for country specific issues. But this has to be approved by IASB. In reality, it is gathered that IASB is not comfortable with carved out procedures, as it will affect the standardization of systems and procedures.

One of the main concerns for banking and financial institution today is that standard on Financial Instrument IAS 39 it is under going change and will be replaced by IFRS 9 (new standard) which will be mandatory with effect from year 2013-2014. There is huge difference between IFRS 9 and IAS 39.

However early adoption is permitted for IFRS 9 but standard is expected to be ready only by December 2010. It is still under draft stage.

Standard covers at least 80-90% of balance sheet items for banking sector. So currently it’s very difficult to say in this regard because either of the standards implemented will involve huge IT cost.

Author: CA Shalini Tibe, IFRS Consultant

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