The Reserve Bank of India (RBI) on Tuesday released guidelines on how banks must classify capital in their balance sheets to ensure uniformity in reporting from the financial year ending March 31, 2010.
The RBI has asked banks to classify perpetual non-cumulative preference shares as capital.
The bank added that debt instruments such as innovative perpetual debt, hybrid debt capital, perpetual cumulative preference shares, redeemable non-cumulative preference shares and redeemable cumulative preference shares and subordinated debt should be clearly classified as borrowing.
Banks must adopt this classification while preparing their balance sheet for the current financial year, the RBI added.
However the new guidelines do not amount to a change in the definition of tier-I and tier-II capital.
It has been observed that there is no uniformity in the accounting practice followed by banks in classifying the various regulatory capital instruments for the purpose of presentation in the balance sheet, the apex bank said.
?We have recently examined the issue and advise that the following classification may be adopted in the balance sheet from the financial year ending March 31, 2010,?? RBI added.