Reserve Bank of India Sets New Accounting Rules, Tightens Overseas Investment Scrutiny

The Reserve Bank of India (RBI) has issued detailed guidelines for the preparation and presentation of profit and loss accounts by banking companies. The rules mandate the use of the format prescribed in the Third Schedule of the Banking Regulation Act, 1949, with specific heads such as Interest Earned, Other Income, Interest Expended and Operating Expenses. Banks must recognise interest on non‑performing assets only when actually received and disclose all other income sources separately, aiming to improve uniformity, transparency and comparability of financial statements.

In a separate regulatory move, the RBI has heightened scrutiny of outbound foreign investments by Indian corporations. Authorized dealer banks are now required to examine the purpose, structure and promoter track record of each overseas investment, especially for transactions involving complex subsidiary or SPV arrangements. The heightened oversight comes as Indian firms plan to deploy roughly $35 billion abroad, with the regulator seeking to ensure that funds are used for genuine business expansion and to safeguard financial stability.