Mumbai, Nov 14 (NationPress) The Reserve Bank of India (RBI) Deputy Governor Shirish Chandra Murmu highlighted the distinct nature of central banks during a recent event. Central banks are defined by two key characteristics: they serve as public policy entities that operate without the pursuit of profit, and they uniquely hold the power to create money, thus remaining immune to bankruptcy in the traditional sense.

The functions of a central bank, devoid of profit motives, are reflected in its balance sheets, which showcase the policy actions undertaken to respond to the economic conditions of the nation over specific timeframes. Even in instances where the balance sheet indicates losses or negative equity, these institutions can continue executing their duties.

Speaking at an international conference on central bank accounting practices, co-hosted by the RBI and the SEACEN Centre, Murmu noted that the mandates of central banks differ significantly across various jurisdictions, shaped by their unique historical and institutional backdrops.

Regardless of the variations in mandates, roles, or functions among countries, the fundamental focus of all central banks remains on monetary policy and maintaining financial stability.

"Central banks strive to maintain sufficient capital and reserves/risk buffers to effectively perform these essential functions. The Reserve Bank of India is recognized for having one of the most comprehensive mandates, operating as a full-service central bank with a diverse array of responsibilities typically expected of such institutions," Murmu explained.

Regarding accounting standards, the Deputy Governor pointed out that there is no universally accepted accounting standard specifically designed for central banks, which leads to a wide range of accounting and disclosure practices varying in format, depth, and emphasis.

While some central banks have embraced the principles outlined in International Financial Reporting Standards (IFRS), either fully or with adaptations to meet their specific contexts, others opt for their national accounting frameworks or hybrid systems tailored for central banking.

Murmu commended the RBI's accounting methodologies, emphasizing that the entire ownership of the RBI is held by the Government of India.

The preparation of the RBI's financial statements and the establishment of its accounting policies are primarily governed by the RBI Act of 1934 and the RBI General Regulations of 1949.

Over the years, these policies have adapted within this legal framework to align with evolving needs and practices.

"I am proud to state that the Reserve Bank of India possesses a robust and resilient balance sheet, characterized by an appropriate level of risk provisioning," he remarked.

Throughout the years, the RBI has consistently aimed to align its accounting practices with global best practices while adhering to the fundamental principles of prudence and conservatism, he concluded.