The Governor of the Reserve Bank of India recommends enterprises use sound accounting procedures

10 Jun 2022 , 03:31 PM

Shaktikanta Das, serving as the 25th governor of the Reserve Bank of India, has recommended firms put in place corporate governance and risk management systems in order to ensure their long-term viability in an increasingly technology-driven world.
 
According to the governor of RBI, such procedures are also necessary for the system's financial stability. The Reserve Bank is also likely to release a regulatory framework for technology-based digital lending, which is growing in popularity.
 
"Taking risks is a necessary part of conducting business. What I'm emphasizing today is the need to properly weigh the benefits and drawbacks of any risk before taking it," said RBI governor ShaktiKanta das at a Central Board of Indirect Taxes and Customs event in Mumbai on Thursday. "Any business's long-term performance is strongly tied to the quality of its governance, internal control systems, and risk and organizational culture."
 

Through a number of steps, the Reserve Bank has pushed for changes in the governance and compliance culture of its regulated firms. "In terms of digital lending platforms, we're still working on that," Governor Das stated. "We'll be releasing a wide regulatory framework very shortly that should be able to cope with the issues of lending through digital platforms, many of which are unregistered, unlicensed, and illegal," he says.
 
Das emphasized the importance of a strong corporate governance structure, which would necessitate corporations adhering to sound accounting processes and making honest disclosures. Market players should be given enough information to make educated decisions regarding a company's health and viability.
 
"Creative and aggressive accounting practices and policies tend to exaggerate financial strength, which is harmful to a company's long-term viability," Das added. "The Audit Committee and the Board of Directors shall guarantee that the financial statements' integrity is not jeopardized in any way."
 
Data analytics, artificial intelligence, and deep learning are increasingly being used to aid decision-making. Customers' wants, innovations, and market trends are being assessed virtually in real-time, which is assisting manufacturers in managing production capacity, reducing costs, reducing risks, and meet changing consumer needs more swiftly. "We live in a data-driven, smart manufacturing era. If Indian firms want to remain competitive and achieve world-class status, they must prepare to make the necessary expenditures as soon as possible, according to Das.