What changed
RBI issued a circular on May 19, 2022, amending the Financial Statements Directions, 2021, to specify the exact balance sheet presentation of reverse repos. All reverse repos with RBI (including LAF) must now be reported under 'In Other Accounts' of 'Balances with RBI' in Schedule 6. Reverse repos with banks and others of original tenor up to 14 days are classified under 'Money at call and short notice' in Schedule 7, while those over 14 days go under 'Advances' in Schedule 9, secured by tangible assets. Additionally, editorial corrections were made to the Directions, including updating a statutory reference from section 11(1)(b)(ii) to 11(2)(b)(ii) and clarifying that advances secured by tangible assets include book debts.
What it means for you
This circular standardizes how banks report reverse repos, reducing ambiguity in financial statements. For lenders, it ensures consistent classification across all banks, making balance sheets more comparable. The change may affect liquidity ratios and regulatory reporting, as reverse repos with RBI are now part of cash balances rather than advances. Banks must update their accounting systems to reflect these classifications for accurate compliance.
What you must do
- Reclassify all reverse repos with RBI (including LAF) under 'Balances with RBI' in Schedule 6, sub-item 'In Other Accounts'.
- Classify reverse repos with banks and other institutions of original tenor ≤14 days under 'Money at call and short notice' in Schedule 7.
- Classify reverse repos with banks and other institutions of original tenor >14 days under 'Advances' in Schedule 9, secured by tangible assets.
- Update internal reporting systems and training materials to reflect these classification changes.
- Review and incorporate the editorial corrections in the Directions, including the updated statutory reference and book debt disclosure.
Who it affects
All commercial banks in India, Bank finance and accounting departments, Regulatory compliance teams, Auditors reviewing bank financial statements
How should we report reverse repos with RBI under LAF?
All reverse repos with RBI, including those under LAF, must be presented under sub-item (ii) 'In Other Accounts' of item (II) 'Balances with Reserve Bank of India' in Schedule 6.
What is the classification for reverse repos with other banks that have a tenor of 10 days?
Reverse repos with banks and other institutions having original tenors up to and inclusive of 14 days should be classified under item (ii) 'Money at call and short notice' in Schedule 7.
Where do we report reverse repos with original tenor exceeding 14 days?
Reverse repos with original tenor more than 14 days are classified under Schedule 9 – 'Advances', specifically under 'Cash credits, overdrafts and loans repayable on demand' and 'Secured by tangible assets', with the counterparty shown as 'Banks' or 'Others' as applicable.