It has been reported that the State Bank of India (SBI) and the apex accounting body Chartered Accountants Association of India (ICAI) are at loggerheads. The issue being SBI’s provisions towards pension liability during the January-March 2011 quarter. The provision of Rs 6,059 crore during that quarter was 92 per cent higher than what the bank had provided for in the quarter a year ago. In the preceding quarter, too, the provision was only at Rs 2,059 crore.
It is very rare for the accounting body to raise objections on such provisions. ICAI perhaps smelt a rat when SBI's profits plunged by 99 per cent to Rs 20.88 crore for the quarter ended 31 March, 2011 from Rs 1,866.6 crore in the previous year. Although, SBI’s spokespersons have questioned the authority of ICAI to raise such questions, the accounting body is perhaps right in doing so.
There was a change of guard in SBI and whenever there are changes in top incumbencies, banks begin to undress their balance sheets. They purposely report lower profits so that they can report higher earnings in the subsequent quarters.
Banks’ practice of window-dressing and undressing their books is quite an old one. Unfortunately, the Reserve Bank of India (RBI) has become a mute spectator of such practices. The RBI Deputy Governor K C Chakrabarty recently stated that banks’ profit figures should not fluctuate too much with shifts in officials, so there is a strong case for ICAI to pull up its members when most banks (particularly in the public sector) resort to such practices.
K V Rao, Bangalore
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