Why not we have The Collective Will to realise the Dream of an Advanced Economy a reality ?

 

Policy Brief: 360° Balance Sheet Rating System

Restoring Trust in Financial Reporting and Governance

Background

Balance sheets today often conceal more than they reveal. Despite audits and regulatory oversight, window dressing, inflated valuations, and opaque disclosures have eroded public trust. The traditional focus on compliance and arithmetic accuracy no longer guarantees financial integrity or ethical governance. 

The Proposal: 360° Balance Sheet Rating

A 360° Balance Sheet Rating System is proposed to assess not just financial correctness but the entire ecosystem of transparency, governance, and ethics behind an organisation’s financial reporting.

Key Evaluation Dimensions

1. Financial Accuracy – True asset valuation, liability recognition, revenue authenticity.

2. Governance & Ethics – Board independence, accountability, conflict-of-interest controls.

3. Transparency & Disclosure – Clarity, completeness, and honesty in reporting.

4. Compliance Discipline – Adherence to tax, regulatory, and prudential norms.

5. Sustainability & ESG – Ethical, social, and environmental responsibility.

6. Technology & Risk Controls – Fraud resilience, cyber audit trails, AI integrity.

Rating Scale (Indicative)

AAA – Fully transparent and ethically sound
AA / A – Reliable with minor gaps
BBB / B – Moderate to high opacity and risk

Implementation Framework

• Independent Certified Agencies: Empanelled by RBI/SEBI/NFRA.

• AI-Driven Analysis: Data triangulation using audit reports, digital trails, and forensic tools.

• Annual Review: Mandatory re-rating for listed and large unlisted entities.

• Public Disclosure: Ratings to be included in annual reports and filings.

Expected Outcomes

• Restored trust in financial reporting.

• Reduction in frauds, NPAs, and governance failures.

• Strengthened market credibility and investor confidence.

• Promotion of ethical, transparent, and accountable capitalism.

Policy Recommendation

Regulators (RBI, SEBI, MCA,IRDA ) may jointly pilot the 360° Rating Framework for banks, listed companies, and large PSUs. Over time, extend it to NBFCs and major private enterprises. This reform can serve as a national benchmark for financial honesty and governance integrity.

Once a balance sheet is finalized strictly in accordance with accounting standards, regulatory norms, and the due satisfaction of banks, major clients, tax authorities, and professional auditors—with adequate internal and external controls to prevent fraud and manipulation—it should stand as a true and transparent statement of financial reality.

Such integrity in financial reporting strengthens stakeholder confidence, enhances trust, and reflects professionalism of the highest order. When governance standards are upheld consistently and without compromise, they have the potential to become global benchmarks. India can then truly emerge as a role model in accounting practices—where transparency is not an exception but the norm, and where accuracy and ethics inspire respect, admiration, and emulation across borders.

The question now is: Do we have the collective will—regulators, corporate leaders, auditors, and financial institutions—to make this vision a reality?

Satyameva Jayathe. May there be happiness, welfare and the Joy of enjoying Life by all in the Universe. 

Dr T V Gopalakrishnan

(Views are Personal).