Question

locate a newspaper/magazine articles about a recent incident in Accounting. Next write a summary of the article and identify the issue the incident raises about the industry.

Answer 1

Recent article in Economic times of India:-

"We urge upon RBI to consider, as a one-time measure, to allow NBFCs to draw-down from their Reserves and adjust towards additional Expected Credit Losses provision requirement, in excess of provision calculated as per normal Probability of Default and Loss Given Default," Finance Industry Development Council, a representative body of assets and loan financing NBFCs, said in a letter to RBI Governor Shaktikanta Das.

Summary of the article:-

In this article, Non-banking financial companies (NBFCs) on Friday requested the Reserve Bank of India (RBI) to allow them to draw-down from their reserves for making additional provision for expected losses due to COVID-19 pandemic. NBFCs appropriate Statutory and Other Reserves, and utilization of these reserves is governed by the statute requiring its creation.

NBFCs are required to comply with Indian Accounting Standards (IndAS). The Institute of Chartered Accountants of India (ICAI) has advised NBFCs to measure the impact of COVID-19 on the portfolio quality in the form of PD and LGD with adverse impact on the business of the borrowers or debtors due to COVID-19 on one hand and prudential regulatory actions to sustain the economy such as loan repayment holidays and reduction in interest rates.