Global accounting standards convergence crucial for capital inflows: Khara

With India standing out for its high economic growth, the convergence in accounting standards across the world is necessary to attract global capital into the country, State Bank of India chairman Dinesh Khara said today.

Convergence is all the more relevant for an economy like India which is at the cusp of moving up in the league table of the global economies.

Soon the Indian economy will be inching toward becoming part of the top three economies.  

A lot of global capital will move into the country. For that accountants will have to give confidence to investors across the globe, Khara said while participating in a session on the Global Economic Recovery at the World Congress of Accountants.

In the financial sector, India has already begun phased rollout for the convergence with global standards. Finance companies are already following Indian Accounting Standard (IndAS) norms as a stepping stone for International Financial Reporting Standards (IFRS).  

Reserve Bank of India has mooted a step for a shift in stance for banks making asset provisions from incurred loss approach to expected loss approach. This is a step towards converging with globally accepted prudential norms.

Khara said accounting is the backbone of commerce and trade. The kind of confidence it can give to readers of the balance sheet is not comparable anywhere else, a foundation for the growth of the economy.

Banks have reported healthy performance this quarter (Q2Fy23). For banks, the foremost important thing is the assessment of credit quality and the accounting profession has a lot to contribute to this. Beyond numbers, accountants (assessments by them) give confidence in terms of the health of a particular entity which goes a long way in building trust.

Khara said the accounting profession has contributed to identifying the quality of assets that are sitting in the books of various banks.

Banks are custodians of trust when it comes to the money of depositors. The accounting profession has a lot to contribute in terms of ensuring that the stability of the system is ensured.  

Also, for banks capital is raw material. Unless there is the capital they cannot grow. The confidence of investors is coming essentially from the kind of reports which are being generated by auditors, he added.