Page 42 - Banking Finance July 2025

ARTICLE

Ind AS and the Indian

Banking Sector: A

Comprehensive Journey

Through Transparency

Chetan Saraogi
and Transformation Zonal Learning Centre,
Chief Manager

Union Bank of India, Mumbai

While banks primarily earn interest income (outside Ind AS 115's scope), fee-based revenues-like
loan origination fees, credit card fees, or syndication charges-fall under this standard. Ind AS 115
mandates recognizing revenue when performance obligations are satisfied, often deferring income
recognition compared to Indian GAAP.

Introduction: The Dawn of a New adoption, the benefits it unlocks, and the road ahead in an
increasingly interconnected financial world.
Accounting Era

The Indian banking sector, a cornerstone of the nation's The Genesis and Evolution of Ind AS
economy, has undergone seismic shifts over the past decade.
Among the most significant is the adoption of Indian To understand Ind AS's relevance, we must first trace its
Accounting Standards (Ind AS), a set of accounting norms origins. The push for convergence with IFRS stemmed from
aligned with International Financial Reporting Standards India's growing integration into the global economy. As
(IFRS). Introduced in phases starting in 2016 for certain Indian corporations, including banks, sought foreign capital
companies, including banks, Ind AS replaced the traditional and partnerships, the limitations of Indian GAAP-such as its
Indian Generally Accepted Accounting Principles (GAAP) rule-based nature and lack of fair value accounting-became
with a framework designed to enhance transparency, apparent. In 2006, the Institute of Chartered Accountants
comparability, and global relevance. As of February 2025, of India (ICAI) began formulating Ind AS, adapting IFRS to
with nearly a decade of implementation experience, the suit India's unique regulatory and economic context.
banking industry stands at a critical juncture-reflecting on
lessons learned and charting the path forward. The Ministry of Corporate Affairs (MCA) rolled out Ind AS in
2015, mandating its adoption for companies with a net
For banks, which serve as the lifeblood of financial worth exceeding INR 500 crore, including scheduled
intermediation, Ind AS is not merely a compliance exercise. commercial banks, from April 1, 2018. The Reserve Bank of
It's a paradigm shift that redefines how financial India (RBI), however, deferred banking implementation to
performance is measured, risks are assessed, and stakeholder align it with prudential norms, eventually enforcing it from
trust is built. This article delves into the intricacies of Ind April 1, 2019, for most banks. This phased approach allowed
AS, its specific implications for banking, the challenges of time for preparation but also underscored the complexity

38 | 2025 | JULY | BANKING FINANCE