The Reserve Bank on Wednesday tightened norms for investment by banks in subsidiaries and joint ventures, by making it mandatory for the lenders to reveal whether such investments are for more than one year or not.
"It has been decided that the Board of Directors of banks should invariably record the intent of holding of the investment for a temporary period or otherwise at the time of investment in the subsidiary, associate and joint ventures," the central bank said in a notification.
Henceforth, all investments by banks in their subsidiaries and joint ventures for more than one year will have to be shown in the consolidated financial statement, the notification said.
It said if such investments are made without recording any intent, they would have to be taken into account while preparing the consolidated financial statement.
The intention with regard to disposal of relevant investment, it added, should be considered at the time of acquisition of investment.
RBI has issued the notification in accordance with guidelines of the Institute of Chartered Accountants of India (ICAI) for preparation of consolidated financial statement.
The ICAI guidelines pertain to Accounting Standards (AS 21, 23 and 27) that deal with consolidated financial statements, accounting for investment in associates and financial reporting of interests in joint ventures.
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