Some of our prudential guidelines on key areas such as investment classification and valuation norms, impairment recognition and loan loss provisioning as well as securitisation are indeed at variance with international accounting norms. However, these guidelines were framed keeping the Indian financial system in perspective. Some of them are more conservative than international practices.
For instance, we do not allow the recognition of unrealized gains in investment portfolios while requiring that unrealized losses be provided for. Similarly, we require banks to provide for standard assets even where there are no signs of impairment. While these have served us well, as our financial system develops we may have to harmonise our guidelines with international requirements. 41.