Looking back at Reserve Bank of India and the adoption of XBRL
What is XBRL?
XBRL expanded as eXtensible Business Reporting Language (XBRL) has brought a global revolutionary change in business reporting. With evolving times, compliance procedures have moved to include electronic versions of business and financial data facilitating easy access to transmit, use, consume or analyse such business information.
Not only has XBRL proved to be beneficial in saving costs, but it has also helped increase efficiency, augment accuracy and make reports more reliable and comparable. The premise behind the XBRL language is to make it easier to consume facts, with the use of a unique electronically readable tag that is attached to each fact. This tag serves as context to each numerical and text data, giving life to the financial document. Its wide assimilation and use have rendered this XML language a standard for electronic communication between regulators, businesses, and investors.
Library of tags, called taxonomy is published by respective regulators, and helps standardize data elements tagged in various reports making XBRL an open standard.
What is RBI’s OFRS and the adoption of XBRL?
In India, in order to implement XBRL as a standard for financial reporting in India, the Institute of Chartered Accountants of India (ICAI) has been given the responsibility to form a national judicial committee. For the integration of XBRL in banks, the responsibility lies with the RBI. Considering XBRL a natural evolution of the existing Online Returns Filing System (ORFS), RBI mandated the use of XBRL to file online returns in 2012.
The RBI implemented Online Returns Filing System (ORFS) to capture and transmit transactions from banks.
The implementation of the XBRL system is being done in phases. In phase 1, the following returns were mandated:
- Section 42(2) Form A of RBI Act, 1934
- Daily return on Gap
- Positions and Balances (GPB)
- Returns on Capital Adequacy (RCA2 – a set of regulatory returns designed as per
- Basel II guidelines)
- Monthly returns like Form VIII, Form X
- Annual returns like Financial Statement and Form IX.
Within RBI, XBRL implementation is being regularly monitored by a High-Level Steering Committee appointed by the Governor.
Recently in 2021, RBI has also included NBFC’s within the XBRL ambit. NBFCs with an assets size up to 100 crore and NBFC with an assets size between 100 crore to 500 crore usually file annual return in NBS 8 and in NBS 9 respectively.
Additionally it has also mandated AD Category – I banks to upload their compliance and reporting data on the XBRL system on or before the fifth of the succeeding month from July 01, 2021, onwards.
With regulators acknowledging the benefits of XBRL reporting, it would be great if we witness MCA expanding such requirements to a larger set of companies which will in-turn benefit investors, regulator, employees, finance professionals and other external stakeholders similarly.