Around 10 years back for short period of time, I was part of the team who were responsible for building RBI returns. During that period, I came to know that RBI supports different modes of submission returns (reports)like email, hard copy (paper based), online and distributed systems and various flat file formats like CSV, email etc. The developed countries regulators were either moved or verge of moving to one format on the other side regulator (RBI) was still accepting different modes of submission. Thus it was a BIG surprisefor us. We just thought it would have been daunting reconciliation task for the regulator to support such a complex infrastructure of submission.Also,still wonder how they might be sharing return information within the departments of the regulator.
I recently got another opportunity to engage in RBI reporting and came to know they have started XML/XBRL report submission for all the returns. It was another BIG surprise this time again. Extensible Business Reporting Language (XBRL) has become a global standard by regulators across countries as the electronic financial reporting standard. ICAI initiated the idea of using XBRL in 2007 for regulators in India. It was an instant hit among all the regulators. XBRL made it easier to analyze the information from the returns.Another major benefit was that, information captured from it can be used without relying on third party investments.
The four major regulators in India involved in the adoption of XBRL are the following:
- Ministry of Corporate Affairs (MCA) – the business register for companies in India
- Reserve Bank of India (RBI)– the apex financial regulator
- Securities and Exchange Board of India (SEBI) – regulates listed companies
- Insurance Regulatory and Development Authority (IRDA) – the insurance regulator
Strategies to Implement XBRL
XBRLis a platform independent and offers universal standard for defining business information. It also provides a foundation for the exchange of data/reports. Financial Institutions in India are forced to implement XBRL submission for returns, because regulators like RBI have made it mandatory. It can be implemented in any of the following methods:
- Bolt-on: Under this approach, XBRL is only used for reporting to external regulators. The standard practice, under this approach is to use converter at the end of the reporting generation processing chain. Taxonomy tagging is done at the report instance level. Thus, we need to repeat this exercise every time we are generating or making changes to the reporting instance. As per 2015 EY survey, among the large US bank holding companies and foreign banking organizations, 40 of firms will be performing more than 500 manual adjustments to regulatory reports before filing. Just imagine, if do not have this feature on your XBRL report. Now imagine if XBRL system do not support this then what are the chances of generating correct returns? This approach is also called stop-gap measure, since the scope of it is limited to regulatory reporting only. It makes regulatory report submission audit process complicated, error-prone and reconciliation will be complex. Additionally, a lot of other functionalities like drill down till source level from report return instance, cross report validations, adjustments at returns (XBRL report) etc will not be available.
- Built-in or Tightly-Coupled: XBRL helps to standardization and rationalize the elements of different returns. RBI has realized its importance. RBI had reduced returns from 291 to 223 (vide RBI press release dated 14 Aug 2008) after using XBRL. Also, it is increasing becoming global standard among regulators. For example: in India all the major regulator like SEBI, NSE, BSE and RBI are increasing moving to XBRL. Indian Banks needs a XBRL integrated solution which seamless integrate XBRL and non-XBRL data. Furthermore, it should have capability to map non-XBRL data at the XBRL taxonomy level. Hence helps to expand and enrich content for other reporting purposes like internal or real-time based reports.
XBRL - Current Progress
Regulators receive huge data in form of returns from banks in different structures, formats, naming conventions, level of aggregation and frequencies. They also need to analysis this for various regulatory functions like regulations, supervision etc. Thus, XBRL has been viewed as natural evolution of submitting returns by the financial institutions/companies. Indian regulators are at different phases in terms of progress of moving returns to XBRL.
Listed below is the progress on XBRL submission regulator wise:
1. Ministry of Corporate Affairs (MCA)
MCA has made XBRL as a mandatory requirement for submission of all statements. Currently around 30,000 companies are using XBRL to file their statements with the ministry.MCA has already realized the benefit of it. NAS (National Account Statics) is linking XBRL and non-XBRL data received to generate statics for private corporate sector. Also MCA considering new requirements like corporate social responsibility etc under the Companies Act, 2013 to be covered under XBRL standard, in line with the government's “Digital India” initiative
2. Reserve Bank of India (RBI)
RBI applied a phased approach for submission of returns to XBRL. Phase 1is of XBRL based reporting system was started in 2008, by launching 7 capital reports in XBRL format, through Online Returns Filing System (ORFS). Its aim was eliminate paper based returns. Immediate benefit of this move was the reduction in the number of returns from 291 to 223. Phase 2
, is of 97 reports and it is in parallel run. RBI is working with vendors to build taxonomy for Phase 3 returns (95 reports). The biggest benefit which the regulator has realized with XBRL is that they do not need to submit same report to multiple departments within RBI. It can be easily access with one centralized DW system. Now time is used wisely in data analysis instead of re-key the same information.
3. Securities and Exchange Board of India (SEBI)
SEBI tried to introduce a new system - SUPER-D (SEBI Unified Platform for Electronic Reporting - Dissemination) in 2002 to have a single platform which will be used across listed companies, mutual funds and other SEBI registered intermediaries using XBRL. It was expected that it will have the capability to manage simultaneous filling of 500 documents on normal days and 15,000 during peak-periods. The platform will be useful for MFs and asset management companies to file reports like monthly cumulative reports, half yearly disclosure reports etc. Besides disseminating the information on real-time basis to investors and others, the XBRL technology-based new system would also help regulators like SEBI to monitor any irregularities in the affairs of companies and market intermediaries. Sadly, SEBI had to withdraw this initiative due to lack of support from the other stakeholders
Challenges of Implementing XBRL Solution
Every FI faces some teething problems when adopting a new technology. The same holds true here too. Some of the challenges faced by financial institutions in a bid to implement XBRL solution the right way include (love the way this introduction has come out):
1. Inexperience using XBRL
As per the survey conducted by Global Journal of Finance and Management among 400 Chartered Accountants in India, only 46.13 were of the opinion that XBRL has been implemented in his/her organization. Among auditors, only 30 are of the opinion that XBRL has been implemented by some of their clients. Interestingly participant (CA) of the survey think XBRL is not relevant to their organization and also because it is not mandatory. Thus adoption rate of XBRL is very low. It can be one of the reasons for Indian banks to use it only for XBRL submission.
2. Technological Limitations
As per heat map of EY (expand) 2014 Banking on Technology report, “Compliance and Audit” department capability in IT is still at nascent stage. Thus,“Compliance and Audit” Departments of Indian Banks are still not using latest technology. Currently, we have limited vendors in India who can directly import XBRL taxonomy and provide one integrated platform for XBRL and non XBRL data in one solution. FI’s in India are not aware how technology can change reporting landscape for them. Thus, for them XBRL is a mandatory requirement of the report which they need to oblige and nothing else. Frankly speaking the real benefit of it is much wider and it can be only possible by implementing “Tightly-Coupled” approach.
3. Change Management
Currently regulators in India are in the process of adopting XBRL. Additionally business environment is very dynamic and thus we expect regulators to make lot changes in reporting requirements. It will also trigger changes in “taxonomy” of the returns. Thus solution need to have functionality to import the latest taxonomies as and when it changes.
Future of XBRL in India
XBRL is the way to improve efficiency, accuracy, timeliness and reliability of the financial data. Indian Regulators have already realized it. And thus we believe we will have more new initiatives to push XBRL on financial institutions in future.
RBI may move from return based taxonomy to taxonomy across all of the returns. Hopefully it will further reduce data elements in the range of 120-150 data points. And thus empowering RBI to analyses, compare and validate financial data received from the financial institutions returns
Currently we have inconsistency, as regulators do not have a common database which can be accessed during run time. Hopefully, in future, Indian regulators – RBI, SEBI, NSE and BSE will have such a database on XBRL. This hosting platform using XBRL can be accessed by any regulatory body of the country. It may also avoid future inter-regulatory delays and also might be able to generate early warning signals for the bank’s exposure under different heads. Also strengthen the corporate governance. Additionally, it will act as a constant check on erring companies.