IndAS switch to impact banks' earnings, return on equity

All of them will have to report their financial statements from next year under the new rules

The loan loss provisioning as required by the new Indian Accounting Standards (IndAS) is expected to have a significant impact on banks' earnings and return on equity.

Financial year 2018-19 will be the first one where they will be required to report their financial statements under IndAS. The requirements are in line with the global International Financial Reporting Standards (IFRS)-9.

Till now, banks calculated the loss provisions on their loan portfolios based on the guidelines issued by Reserve Bank of India (RBI). These prescribe a percentage-based provisioning methodology, after an asset is overdue for a minimum number of days. However, under IndAS,