Artha: Journal of Business and Finance

Bringing International Accounting Standards to Emerging Markets: Implementing IndAS in Indian Banks

Daitri Tiwary

Keywords: IndAS 32, IndAS 107, IndAS 109, Expected Credit Loss

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Abstract

With an initial commitment by India during G20 Summit in Pittsburgh in 2009 to converge national accounting standards with IFRS, the timeline for adoption of IndAS by Indian banks has shifted from April 2018, past the year 2025, underscoring a need to probe the implications and challenges. It is expected to be an inflection point in the financial reporting regime for Indian banks, as they primarily depend on treasury gains than operating incomes and interest margins. Shifting away from the incurred-loss model under Indian Generally Accepted Accounting Principles (IGAAP), the application of IndAS requires proactive strategic measure to build resilience. This transition involves sophisticated tax ramifications and necessitates the banks to carry out technological overhauls to be compliant. Though the Reserve Bank of India (RBI) has indicated the importance of this change and issued a phased rollout plan, the journey towards an extensive rollout continues to be punctuated with operational, financial, and regulatory hurdles. We discuss the rationale of the transition of Indian banks from IGAAP to IndAS, examining the implementation challenges, implications and anticipated benefits of this accounting reform in enhancing financial reporting quality, comparability, and integration of India as an emerging economy with global financial markets.

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