1. XBRL Implementation at Reserve Bank of India
Dr.A.S. Ramasastri, Adviser
&
P.R. Ravi Mohan, General Manager

2. Agenda Reporting System at RBI - ORFS Basel II Implementation by RBI
XBRL Implementation at RBI
Issues
Approach
Basel II Return
Process Flow
Potential Benefits
Status
XBRL in India
What RBI Looks Forward . . .

3. Reporting System at RBI

4. Reporting System Multiple Banks Multiple Departments of RBI
Multiple Formats (CSV, Excel Based, XML etc)
Multiple Modes (Paper based, , Online)
Multiple Backend Systems

5. Obvious Problems
Data Entry at Multiple Levels – Quality Suffers & Delays Increase
Changing Formats Difficult
Cross-Departmental View of Data Not Easy
Lack of Standard Definitions of Data Elements
Both Banks and RBI Maintain Multiple Systems

6. Solution – First Step
RBI introduces on-line returns filing system (ORFS) for important statutory returns
Banks file returns through secured channels
All concerned departments receive data
Straight-through Processing implemented
Banks developed XML-based reporting systems from their core banking solutions
RBI interacts with other stakeholders on XBRL
Attempt for rationalisation of returns

7. Basel II Implementation by RBI

8. INDIAN BANKING SYSTEM Public sector banks - 27
Private sector banks –22
Foreign banks -30
Local area banks –4
Regional rural banks -91
Urban co-operative banks – 1770
Co-operative credit institutions –over 100 thousand

9. Basel 1 Implementation
Capital charge for credit risk introduced since on the lines of Basel 1
Surrogates for market risk introduced since 1998
2.5% RW on entire investment portfolio
100% RW for gold and forex open positions
Capital charge for market risks on par with Basel 1 introduced from the
Interest rate risk
Equity risk
Foreign exchange risk

10. Basel I Implementation. (contd.)
Capital charge for market risks extended to AFS portfolio from
Indian banking system can be considered to be more than fully compliant with Basel 1 as on March 31, 2006
Banking regulation & supervision in India assessed as largely compliant with the Basel Core Principles for Effective Banking Supervision in 1999 – since then the level of compliance has improved significantly

11. Indian Scenario
In tune with RBI’s objective to have consistency and harmony with international standards, Standardised Approach for Credit Risk and Basic Indicator Approach for Operational Risk has been prescribed
Minimum CRAR would be 9% -
but banks expected to operate above the minimum level
higher level of CRAR possible under Pillar II
on the basis of risk profile and risk management systems
Tier 1 CRAR to be at least 6% - before March 31, 2010
All Scheduled commercial banks to comply
at solo level on their global position
as well as at the consolidated level

12. Basel II Pillar 1 Pillar 2 Pillar 3 Minimum Capital Requirement
Supervisory Review
Pillar 3
Market Discipline
Capital for Credit Risk
(SA; FIRB; AIRB)
Capital for Market Risk
(SMA; SDA; IMA)
Capital for Operational Risk (BIA; SA; AMA)

13. Why Minimum Approaches ?
Indian banking system not ready for adoption of Advanced approaches which
rely largely on internal methodologies and therefore on corporate governance in banks
are highly data intensive – lack of appropriate data
are likely to increase the cost of compliance
place significant demands on skills in both banks and the RBI
Hence, decision to migrate to minimum approaches available in Basel II

14. Three-track Approach
Basel 2 applicable to all commercial banks (except Regional Rural Banks and Local Area Banks)
Urban Cooperative Banks and Local Area Banks on Basel I
Regional Rural Banks on minimum capital basis

15. Implementation Schedule
Foreign banks operating in India and Indian banks having presence outside India by March 31, 2008
All other Scheduled Commercial Banks to migrate to Basel II in alignment with them but not later than March 31, 2009.

16. RBI Initiatives Required for Implementation
Strengthen banks’ risk management systems
Capacity building at RBI and Banks
Ensure data submission by banks are reliable, accurate and timely
XBRL reporting becomes significant in this context
Especially since submission of information by banks to regulator is very important in view of special status enjoyed by banks

17. XBRL Implementation at RBI

18. Issues Varying technology maturity levels across banks
Lack of Awareness
Skill Set Requirement
Local XBRL jurisdiction yet to be formed
Creation or Extension of Taxonomies
Protection of existing technology investments

19. Approach - Commitment Top Level Commitment
The Governor set up a High-level XBRL steering committee headed by the Deputy Governor in-charge of Regulation, Supervision and Technology
Members from RBI, Commercial Banks, Technology Firms, Institute of Chartered Accountants of India (ICAI)
A core group comprising relevant technical and functional expertise representing different departments within RBI

20. Approach – Phased
Pilot project for studying a few banks’ and RBI’s existing systems and demonstration of the new technology and tools for a few returns.
Based on this pilot project, preparation of approach paper and a roadmap for bank reporting using XBRL
A calibrated and phased approach to full XBRL implementation for reporting purposes
The first report is the Basel II reporting return, which is being newly introduced

21. Approach - Cooperation
Work with vendors having XBRL skills
Discuss with XII and European Central Banks
Specialist training to core group on XBRL
Study the process at Bank of Belgium and Bank of Spain
Coordinate with other Indian stake holders like ICAI
Work towards formation of Indian jurisdiction

22. Approach – Extension of ORFS
ORFS, which has been developed on XML, is being extended to adopt XBRL standards
Investment at RBI and banks is reasonably protected
Both RBI and banks are familiar with the system
Training through workshops, seminars and demonstrations
Conversion software made available to banks – with an option for banks work on their own solutions

23. Approach - Development
Development of taxonomies – a project within project
Both development of taxonomies and system outsourced – the vendor works closely with the core group of RBI
Taxonomies vetted by experts in RBI, experts in India and also experts from other countries
User Acceptance Tests to involve the concerned departments of RBI and also a few banks
Training to banks and departments

24. Approach - Constraints
Formula linkbase, which would have provided extensive validation capabilities, is not yet released
Decided to use the calculation linkbase for basic data validation. However, extensive validations will be taken care of through the application presently
Versioning of taxonomy is a work in progress and not finalised
Alternative methodology for ensuring versioning of taxonomy and compatibility of unchanged elements with older versions of taxonomy.
Automated as well as manual version checking of taxonomy to ensure correct version is used

25. Basel II Return - Basis
Based on Guidelines on the revised capital adequacy framework issued by RBI in April, 2007 and a few amendments in March, 2008
Nature and components of capital and deductions to capital specified
Approaches currently prescribed by RBI:
Standardized Duration Approach for market risk
Standardized Approach for credit risk
Basic Indicator Approach for operational risk
A single spreadsheet based return file consisting of several templates for various individual risks and components
Various individual risk weighted assets feed into the Capital calculation template
Return frequency - Quarterly

26. Basel II Return – Elements & Dimensions
Detailed templates for
Credit Risk– on and off BS items, securitization, Market and non-market related off BS, failed transactions, counterparty credit risk
Market Risk – AFS, HFT, aggregate
Operational Risk – BIA template
Data Model – Primary items and dimensional information
Examples of Dimensional items include counterparty groups, risk weights, ratings etc.
Around 400 unique elements including about 25 dimensions
Granular details elicited when required. However, no attempt to reproduce detailed calculations carried out at bank’s end.
References to RBI capital adequacy guidelines/other relevant RBI circulars for each data element incorporated in the return through reference linkbase

27. Basel II Return- Process flow

28. Basel II Return- Architecture

29. Implementation Status
Taxonomies for Basel II developed
System developed and being used by selected banks
To be formally launched on October 6, 2008
An international seminar organized to coincide with the launch
Several other returns to be taken up over next 3 to 6 months

30. Potential Benefits to Banks (1)
Efficiency gains in external reporting processes
Savings in cost/resources for redundant data related work - XBRL ensures data re-usability
When providing XBRL data for capital markets, potential for decrease in capital costs for relevant firms since better assimilation of data by investors/market
Sharing/Using XBRL data with / of other banks/borrowers can help quicker and better assessment/monitoring of credit risk / counterparty credit risk and also management of moral hazard issue
Can enable more frequent review/updation of internal credit rating system
Due to better credit risk assessment, can enable enhancement and diversification of credit to sections like SMEs, microfinance institutions etc.

31. Potential Benefits to Banks (2)
In the event of pulling/pushing data across disparate systems, say for risk management information systems, XBRL can help in technology independent seamless movement of information
Exchange of fraud details / caution advices with Frauds Monitoring Cell of RBI can enable banks further implement fraud control measures expeditiously
Reporting/exchanging XBRL enabled information to/with Credit information Bureau/s can lead to better credit assessment process and better management of adverse selection problem
In the event of mergers / acquisitions or for consolidation of MIS/accounts, XBRL can be of help in integrating different systems and provide for easier generation of complete, consolidated and centralized information

32. Potential Benefits to Banks (3)
Enhanced internal controls/audit processes if XBRL is extensively leveraged
Can facilitate rural initiatives since can XBRL can link disparate applications/systems
Since both quantitative and qualitative information can be represented in XBRL, over a period of time potential for enhancing “market discipline” through use of automated tools for crunching XBRL data
A taxonomy for incorporating market discipline Pillar 3 requirements would prove very beneficial
Incorporating XBRL capability in core banking and other important systems – can enable direct mapping of taxonomy elements to elements in the specific system and generation of required XBRL instance document as output

33. Potential Benefits to RBI
Generating standard and ad-hoc reports as required
Maximum possible automation of processes
More analysis facilitated since less of data related issues expected
Ease of incorporating data for various analytical studies and periodic reports
Quicker access to bank analysts and inspection officials
Provision for automated signalling of “red flags” in submitted data which would need further analysis
Access of the centralized data repository by other departments like banking policy department, monetary policy department, financial markets department etc. as required
Use of business intelligence tool for advanced analytics and drill-down/roll up facility

34. XBRL in India The XBRL implementation catching up in India
In addition to RBI, initiatives by other bodies like ICAI
XBRL-India jurisdiction is being formed; a steering committee formed
For more widespread use, taxonomies usable for specific purposes need to be developed: requires cooperation and collaboration between relevant stakeholders – Interoperability is key for success of XBRL
More training/awareness of benefits of XBRL need to percolate across to all entities – seminars of this nature would be needed
Scope for more products around XBRL by Indian software industry

35. What RBI Looks Forward . . .
RBI can be involved in sharing of best practices and collaboration in international projects
RBI can share its experience and practices regarding XBRL implementation for the benefit of other countries, particularly developing countries
India’s software proficiency can turbo-charge XBRL by participating in various committees/forums for advancing XBRL specifications, taxonomies etc. for enabling innovative use of XBRL

36. Thank You