Strategizing year-end closure for FY 2025 and beyond: A guide for financial services

Key regulatory considerations for Financial Sector leaders to navigate year-end financial reporting in 2025 and beyond.

In brief

• Entities within the financial services industry are facing a series of regulatory updates aimed at reinforcing internal controls and corporate governance.
• These entities must adopt a proactive approach to be compliant with regulatory changes in accounting and reporting, disclosure requirements, system enhancements, and business strategies.

Financial reporting in 2025 presents distinct challenges for India's financial services industry amid a decelerating global economy and transformative disruptions in banking and capital markets. Recent regulatory actions against non-compliant Banking, Financial Services and Insurance (BFSI) entities highlight the regulator’s commitment to strong supervision and oversight.

The regulator continually seeks to enhance transparency in the financial services sector by issuing updates and mandating entities to establish strong policies and frameworks for regulatory compliance. Staying updated with regulatory compliance updates and Ind AS 117 implementations is essential for maintaining compliance.

The regulator's vision embraces a holistic strategy focused on leveraging advanced technologies, promoting financial inclusion, and enhancing the security and efficiency of the banking system. It aims to implement a forward-looking approach that incorporates emerging technologies, broadens financial access, and reinforces the security and efficiency of the banking ecosystem. To stay resilient, financial institutions must proactively adapt to shifting market dynamics, integrate these emerging technologies, and refine their risk management frameworks to improve financial stability, operational efficiency, and overall customer engagement in a competitive landscape.

To support this regulatory vision and navigate evolving risks, financial institutions must align their strategies with updated policies and frameworks. Therefore, it is crucial for organizations in the financial services sector to stay aligned with the latest regulatory and compliance developments. Some of the key accounting and regulatory changes include the alteration in regulatory framework for Housing Finance Companies (HFCs) and harmonization of regulations applicable to HFCs and NBFCs; Fair Practices Code for Lenders - Charging of Interest, Master Direction on Treatment of Wilful Defaulters and Large Defaulters, Key Facts Statement (KFS) for Loans & Advances; Master Directions on Fraud Risk Management; Master Circular on Expenses of Management, including Commission, of Insurers, 2024; Master Circular on Actuarial, Finance, and Investment Functions of Insurers, etc.

The changes indicate the increased focus of the regulator on safeguarding and minimizing the overall risk associated with the BFSI sector. The adoption of these regulatory modifications demands considerable investment of time, resources, and effort from the entities involved.

To navigate the evolving regulatory landscape requires BFSI entities to refine their policies, harness data-driven insights, and enhance risk management strategies.

In light of ongoing regulatory and technological shifts, BFSI firms must adopt a holistic approach to year-end planning. Aligning business strategies with compliance requirements and fostering a risk-aware culture will be key to long-term success in India’s financial sector. This includes adhering to capital adequacy guidelines, Basel III liquidity standards, and implementing effective loan default risk management strategies.

This EY publication, “Year-end considerations: A financial services sector supplement,” covers key changes relevant to the BFSI sector and provides insight into the financial reporting and regulatory changes issued during this year, with consequential impacts on accounting, disclosures, and compliance with regulations. It helps finance leaders and teams update themselves with the changes applicable for the year-end closure and ensure that the entities are well prepared for the closure.

It is imperative that financial institutions prioritize adherence to regulatory guidelines to preserve the integrity, security, and operational efficiency of their operations.