Taking a note of the unusual fall in the country’s largest lender State Bank of India’s ( SBI) March quarter profits last fiscal, RBI today said there was a need for banks to improve the standards of financial reporting.
“See our banks, I see when the chairman retires the profits go down,” Reserve Bank of India’s Deputy Governor K C Chakrabarty said at the non-financial reporting and risk management for banks and financial institutions in India conference here today.
His comments follow 99 per cent plunge in SBI’s net profit for the fourth quarter ended March 31, reported by the bank a month after Pratip Chaudhuri took charge as Bank Chairman after his predecessor O P Bhatt.
The bank’s net profit for the fourth quarter ended March 2011 was just Rs 20.8 crore against Rs 1,866.60 crore in the same quarter of the previous fiscal.
Chaudhuri had attributed the huge decline to one-time provisions for bad loans, and pensions.
“If we don’t audit or create the standard then anybody will report anything that will not be meaningful and nobody will rely on that… Books should not be as per the minds of the Chairman, but reporting should be as per books,” he said.
On financial reporting standards, Chakrabarty said that there was a need to improve both the standard of reporting as well as that of examination of account books.
“We have to improve the standard of reporting, the standard of examination. If in financial reporting you are not able to bring in the integrity, then how will you do it in non-financial reporting–that is the issue,” he said, adding this issue is a matter of “concern”.
When asked if RBI was also responsible for the problem in reporting standards, he said, “we are all collectively responsible. The issue is what went wrong and how do we improve the system…I don’t think standard has any problem. Integrity of information is a problem, not the standard.”
Source: The Times of India