Friday, June 5, 2015

Window Dressing, Human Brain and Technology

Window Dressing of Banks' Profit and Loss accounts and balancesheets has been in vogue for decades and gets highlighted, criticised and  banks are warned every now and then without any tangible result.Top management and the auditors have an understanding and they decide what should be the size of Balance sheet, the profit, the level of NPAs, the growth in deposits and advances. Creative accounting , it is believed will end when technology got into banks but Indian Brains are superb and manipulative mind works wonders to outsmart technology. The balance sheet consists of only 11 itmes or so and all these 11 items except perhaps the paid up capital  and cash are all adjusted figures to suit the top management to provide an impressive picture to the RBI, Government, investors,competitors and anybody who keeps a watch on banks' performance. It is an age old practice and there are specialists accountants and auditors who are very clever to camouflage what is not good and project and look impressive what is really bad. No bank can be an exception is the reality and the NPAs disclosed are not the real picture. One can easily double the figure. Hidden NPAs are the products of banks'inefficient and unprofessional management. While stake holders bear the brunt, the management gets the incentives by way of bonus. More they hide NPAs, more they get as bonus. Is the Government really serious to fix the issue of window dressing? In that case  a lot will have to be done right from the appoinment of banks Board of Directors to the finalisation of auditors who finalises the final accounts.  

Dr .T.V.Gopalakrishnan

( Comment sent to BS)  

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