By Raman Jokhakar, Tarunkumar Singhal, Chartered Accountants
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26 Derivative blow : Axis makes Rs.72 crore
provisions
Axis Bank today said it has made provisions of Rs.71.97 crore
during the fourth quarter of 2007-08 for six foreign exchange derivatives
transactions that have been repudiated by two of its customers.
While the bank has 188 derivatives transactions with an
aggregate mark-to-market (MTM) loss of Rs.673.55 crore at the end of March 2008,
there are six transactions where companies are not willing to honour the
contract. Of the 188 deals, 113 are outstanding transactions dealing in foreign
exchange derivatives where the aggregate MTM loss is Rs.547.72 crore.
While a host of banks, a majority of which are new-generation
private players, have sold derivatives products, Axis Bank is the first to
disclose the details of such transactions, some of which involved cross-currency
options and swaps.
The private sector bank did not disclose the identity of the
two companies that have gone to Court, but it is widely known that these are
Rajshree Sugars & Chemicals and Nahar Industries. The bank pointed out that the
outstanding contracts have not turned non-performing assets and involve MTM
losses. Reserve Bank of India guidelines require banks to treat assets as NPAs
90 days after default. ‘None of these assets has turned into an NPA,’ the bank
said in a statement.
The Reserve Bank of India (RBI) has initiated talks with
accounting standards regulator Institute of Chartered Accountants of India (ICAI)
to advance the mandatory implementation of accounting standards for derivatives
transactions by Indian banks and companies from its present 2011 deadline.
(Source : Business Standard, 22-4-2008)
