How entities in the financial services sector can plan their year-end closure in 2024

The article explores FY 2024 year-end considerations for financial services sector entities, helping them finalize their financial statements.

In brief 

• There have been various financial reporting and regulatory amendments during the year for entities in the financial services sector, such as framework on classification, valuation and operation of investment portfolio of banks, guidelines on default loss guarantee, etc.
• Entities must assess significant regulatory changes affecting accounting, disclosures, and regulatory compliance.

The financial year 2024 presents intriguing challenges for the Indian financial services sector amid a slowing global economy and multiple disruptive factors reshaping banking and capital markets operations. Recent regulatory actions against non-compliance by certain entities in the Banking, Financial Services and Insurance (BFSI) sector underscore the regulator’s commitment and resolve towards effective supervision and control.

The regulator’s vision encompasses a comprehensive approach to adopting cutting-edge technologies, fostering financial inclusion, and ensuring the security and efficiency of the banking ecosystem.

Thus, it is imperative for entities in the financial services sector to ensure compliance with the latest regulatory and compliance-related matters. Some of the key accounting and regulatory changes include the Master direction on classification, valuation and operation of Investment portfolio of commercial banks (Directions), 2023, guidelines on default loss guarantee in digital lending( India), framework on green deposits, framework for compromise settlement and technical write off, etc. 

Other regulatory changes such as streamlining of internal compliance monitoring function, fair lending practice – penal charges in loan accounts, regulatory measures towards consumer credit and bank credit to NBFCs, etc indicate the increased focus of the regulator towards safeguarding and minimizing the overall risk associated with entities in the BFSI sector. Implementation of these changes requires significant time, cost, and effort from the entity’s perspective.

One of the key considerations for insurance companies is the impact of the new IFRS 17/Ind AS 117 insurance contracts standard. This major accounting change is expected to have far-reaching implications on corporate reporting requiring a comprehensive review of actuarial models, data management, and systems integration. Proactive planning and close collaboration with auditors and consultants will be crucial in ensuring a smooth transition.

In light of the above requirements, the BFSI entities must review their existing policies and procedures. They must focus on leveraging data-driven insights and robust risk management frameworks to navigate this shifting regulatory landscape. 

The regulator constantly aims to increase the transparency on the operations carried out by the entities in the financial services sector by issuing updates and requiring entities to mandatorily build a robust policy and framework to ensure compliance with the new regulations issued. 

As the BFSI sector navigates this complex environment, a holistic approach to year-end considerations is crucial. By aligning strategic priorities with evolving regulatory requirements, embracing technological advancements, and fostering a culture of compliance and risk management, BFSI entities can position themselves for long-term success in the dynamic Indian financial services landscape.

This EY publication, “Year-end considerations: a financial services sector supplement,” covers regulatory changes for BFSI in India. It also provides insight into the financial reporting and regulatory changes issued during this year for various financial services companies, with consequential impacts on accounting, disclosures, and compliance with regulations.