Banks’ books should not be as per chairman’s wish: RBI
Expressing concern over banks like State Bank of India (SBI), whose profits dipped drastically in Q4 FY’11, RBI deputy governor KC Chakrabarty on Monday said “books should not be as per the minds of the chairman, reporting should be as per books.”
There is a need to improve both the standards of reporting as well as that of examination, he said.
“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 that the issue was a matter of “concern”. Chakrabarty’s comments come at a time when the country’s largest public sector lender SBI’s March quarter profits last fiscal dipped 99 per cent to Rs 20.8 crore after Pratip Chaudhuri took charge as the bank’s chairman.
When asked if the RBI was also responsible for the problem of 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,” he said.
Meanwhile, Shyamala Gopinath, another RBI deputy governor, said she does not see any stress on liquidity in the short term. “We are closely monitoring the liquidity situation and looking into various aspects of liquidity management. As of now, we don’t really see a stress as such if you look at the call rates,” she said while launching Canara Bank’s mobile banking services on Monday. Gopinath was responding to a query on whether the central bank would have to resort to conducting open market operations to tide over an expected cash crunch in mid-June due to quarterly advance tax payments by corporates.
The RBI also expects the new marginal standing facility (MSF) to be tested during the tight liquidity period next week when banks and corporates pay their quarterly advance tax. “Every quarter it (advance tax) happens. I don’t think there is anything different in that. A new type of liquidity management facility has come, so it will be tested,” Chakrabarty said.
If, however, a problem arose, the system would have to adjust itself, he said.
The apex bank had introduced the MSF while unveiling the annual monetary policy, stating that banks can borrow upto one per cent of their total deposits from the RBI under the MSF facility at a rate, which is 100 basis points higher than the short-term lending (repo) rate.
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