What changed
RBI replaced the single 'Other Banking Business' segment with three distinct segments: Corporate/Wholesale Banking, Retail Banking, and Other Banking Operations. Retail Banking is now defined using Basel II criteria: orientation to individuals/small businesses (turnover < Rs 50 crore), product type, granularity (no single exposure > 0.2% of retail portfolio), and low value (max Rs 5 crore per counterpart). Treasury and geographic segments remain unchanged.
What it means for you
Banks must now report granular segment data, making balance sheets more transparent. The clear retail definition helps investors and regulators assess risk concentration and performance of retail vs wholesale lending. Lenders need to reclassify existing exposures and ensure systems capture the new segmentation by the deadline.
What you must do
- Reclassify all advances into the new four business segments: Treasury, Corporate/Wholesale Banking, Retail Banking, and Other Banking Operations.
- Identify retail exposures using the four Basel II criteria: orientation, product, granularity (≤0.2% of retail portfolio), and value (≤Rs 5 crore per counterpart).
- Update internal reporting systems and processes to generate segment-wise disclosures from March 31, 2008 onwards.
- Train staff on the new segmentation definitions, especially for small business turnover (avg last 3 years < Rs 50 crore) and counterpart aggregation rules.
Who it affects
All scheduled commercial banks (excluding RRBs), Treasury and risk management departments, Finance and accounting teams handling AS-17 disclosures, Credit and retail banking divisions
What is the new retail banking definition under this circular?
Retail banking includes exposures to individuals or small businesses (turnover < Rs 50 crore) that meet product, granularity (no single exposure > 0.2% of retail portfolio), and low value (max Rs 5 crore per counterpart) criteria. Individual housing loans are also included.
When do these new segment reporting requirements take effect?
Banks must adopt the new business segments for public reporting from March 31, 2008. The circular was issued on April 18, 2007, giving banks nearly a year to prepare.
Does this circular change geographic segment reporting?
No, the geographic segments remain unchanged as 'Domestic' and 'International'. Only the business segments have been revised.