Central Bank Disclosures Should Strike Balance Between Transparency, Confidentiality: RBI Dy Guv

 Central bank disclosures need to strike a fine balance between transparency and confidentiality, Reserve Bank Deputy Governor Shirish Chandra Murmu said here on Friday.

Central bank mandates vary widely across jurisdictions, reflecting their historical and institutional contexts, the deputy governor said in his keynote address at the first International Conference on Central Bank Accounting Practices organised by the Reserve Bank of India (RBI) jointly with the SEACEN Centre.

Despite the differences in mandates, functions or roles across countries, at the heart of every central bank is monetary policy and financial stability.

They aim to maintain adequate capital and reserves/risk buffers to be able to perform these critical functions effectively.

The RBI has one of the broadest mandates, functioning as a full-service central bank that undertakes a wide range of responsibilities typically associated with a central bank, Murmu said.

"As widely understood, there is no single globally accepted accounting standard designed specifically for central banks and hence, their accounting and disclosure practices vary considerably in format, depth, and emphasis," he said.

While some central banks have adopted principles set out in International Financial Reporting Standards (IFRS), either in full or with modifications to suit their specific needs, others continue to apply their own national accounting standards or use hybrid frameworks tailored specifically for the central bank.

On accounting practices followed by the RBI, Murmu said the way the central bank prepares its financial statements and sets its accounting policies is guided mainly by the RBI Act of 1934 and the RBI General Regulations of 1949.

Over time, within this legal framework, these policies have evolved to keep up with changing needs and practices, he added.

He said prudent accounting policies over the years have ensured that the RBI has a strong and resilient balance sheet with risk provisions in the form of realised equity and revaluation balances, currently at 7.5% and 17.4% of the balance sheet, respectively.

"Hence, with an economic capital of about 25% of balance sheet, RBI is in a formidable position to effectively fulfil its public policy mandates while ensuring monetary and financial stability," the deputy governor said.

He further said the central bank disclosures need to strike a fine balance between transparency and confidentiality.

"They need to be transparent enough to effectively communicate the central bank policy operations and their financial implications, while maintaining reasonable confidentiality of market sensitive information," he said.

The RBI provides comprehensive and detailed information for each accounting head, along with significant accounting policies, in its annual report, he said.

Additionally, a weekly snapshot of the RBI's balance sheet, foreign exchange reserves, liquidity operations, and variations in reserve money components and sources is also published, Murmu said.

This regular flow of information ensures transparency in communication about our policy actions and the evolving trends in the economy, he added.