New Delhi: Amid notional losses being reported by various banks in their dealing in forex derivatives, Finance Minister P Chidambaram today asked banks to review their derivative portfolio and make them understandable to customers.
“I have asked banks to review derivatives portfolio and make sure that customers understand it (derivative product),” Chidambaram told reporters after meeting chief of public sector banks here.
Canara Bank Chairman and Managing Director M B N Rao said the Finance Minister asked the banks to make proper disclosures on derivative portfolio and deal in it in transparent and open manner.
Some of the banks have reported losses owning to exposure to forex derivatives and structured products following sub- prime crisis in the USA.
Bank of India had said its corporate clients would suffer mark-to-market (MTM) losses of about Rs 125 crore while SBI projected the losses to the tune of Rs 700 crore at the end of March 2008.
At the same ICICI Bank has a total derivative portfolio of USD 1.6 billion, comprising 70 per cent of Indian corporates. For the whole year, the bank has made a provisioning of about USD 170 million.
Meanwhile, the accounting standard regulators Indian Chartered Accountants of India (ICAI) asked companies to report losses in forex derivatives for the current fiscal.
It has also asked its members to consider appropriate “disclosures in their reports” if they are not made by the companies in balance sheets.
Initially, the norms to disclose losses in derivatives would be recommendatory from April 1, 2009 and would become mandatory from April 1, 2011.