RBI's Rao Highlights Concerns Over NBFCs' Disclosure Standards

RBI Deputy Governor M Rajeshwar Rao has raised concerns about the quality of disclosures provided by some NBFCs and urged auditors to ensure comprehensive qualitative information for stakeholders. Speaking at a conference, he emphasized the necessity of transparent and comparable financial statements to maintain market trust.

RBI Deputy Governor M Rajeshwar Rao has raised alarms over the quality of disclosures by some Non-Banking Financial Companies (NBFCs). He emphasized the role of statutory auditors in maintaining confidence in audited financial statements, especially in the banking sector, which is heavily reliant on trust from fragmented and unorganized depositors.

Addressing a conference of statutory auditors and Chief Financial Officers (CFOs) of Commercial Banks and All India Financial Institutions (AIFIs), Rao highlighted the RBI's commitment to promoting high-quality accounting standards. He noted that the RBI has been supplementing rule-based regulations with principle-based ones to offer regulated entities greater flexibility.

Rao pointed out that comprehensive disclosures are critical for transparency and trust in the market. He shared concerns over NBFCs' disclosures related to the Expected Credit Loss (ECL) framework, calling for the auditing community to improve the quality of information provided.

He urged auditors to critically evaluate disclosure practices and ensure they meet the accounting standards and the needs of end-users. Rao stated that a harmonized approach between regulators and auditors could eliminate blind spots in risk identification, thereby contributing to financial stability and institutional robustness.

(With inputs from agencies.)