May-2015

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COVER PRESIDENT’S STORY COMMUNIQUE and governance aspects with their business strategies. Banks and their stakeholders Integrated reporting includes stakeholders’ engagement, sustainability, community initiatives, governance, environmental and social consciousness. Stakeholder power is an important factor to consider whenever one describes about the relationship between a business and its stakeholders. In the context of strategy, what is important is the power and influence that a stakeholder has over the business objectives. Each stakeholder exhibits a different interest and influence and impact the organizations with their power. The stake holders of a bank include shareholders, investors, peer banks, RBI, directors, managers, employees, customers, community, government and credit rating agencies. See table 1 Why Banks to follow integrated reporting? 1. The Banks are run on Government, public and corporate funds for the cause of public and corporate. More than any corporate it is the banks which deal with the public and their funds. Hence it is their duty to give adequate information about the various aspects which are material to the performance of the banksThe stake holders (mentioned in Table -1) must be given comprehensive information as to fulfill their main interests in the organization. Transparency is required so as to give total information pertaining to the functioning of banks. 2. A special mention may be made about the customers / clients without whom the banks may not survive. When Banks seek scores of particulars about the customers in the name of KYC Norms, then why customers be deprived of the information about Banks with which they want build up financial relationship? 3. Only when an institution measures what it has, it can strive to maintain and improve itself. Banks can report their history, brand value, customer satisfaction levels and socio economic impacts through integrated reporting. Integrated reporting is essential for the survival of Banks in the fiercely competitive environment. 4. It helps Banks to be in the frame work of accounting and other regulatory policies on par with the international banks and get appropriate credit ratings by the credit rating bodies. What is being reported in Indian Banks? - Current Trends On an analysis of annual reports of a few banks in India, it is found that they are able to integrate non financial data with financial data in a Table-2 Sample Banks – Reporting Style Bank Extent of integration Andhra Bank Limited SBH Limited Indian Bank Limited ICICI bank Moderate HDFC Integrated South Indian Bank Limited Stanchart Bank Limited Standard Bank, Africa Integrated Source: Websites of respective Banks limited way. The analysis is based on 3 public sector banks, three private banks and two foreign banks. The banks reports have two distinct aspects i.e., mandatory disclosures and voluntary disclosures. It is observed that out of the eight banks whose reports are analysed, majority of the banks follow limited integration. All the banks have incorporated statements on CSR and corporate governance in addition to financial data. It is observed that Indian Banks have given a note on Basel II requirements which to some extent clarify on risk factors such as operational risk, market risk and investment risk. These initiatives have been taken on the basis of policy framework initiated by the RBI. HDFC is the only bank in India to comply the integrated reporting to a great extent. The best example for the integrated reporting by Banks can be Standard Bank, Africa. What can be integrated reporting in Banks? Banks overview and business model: The Bank’s mission, principal activities, markets, products and services; its business model, value drivers and critical stakeholder dependencies; and its attitude to risk. Operating context, including risks and opportunities: The commercial, social and environmental context within which the bank operates, organization’s ability to create and sustain value in the short, medium and long term and the bank’s key risks and opportunities. Strategic objectives and strategies to achieve those objectives: It sets out how the Banks will measure achievement and target outcomes for the short, medium and long term. It includes risk management strategies, the uniqueness and core competencies of the Banks to convert the forth coming opportunities into reality. Governance and remuneration: It explains the strategies of the Banks in employing key personnel and leaders. Recruitment of these leaders influence the organisational culture, relationships and ethical considerations which in turn be- 32 the MANAGEMENT ACCOUNTANT MAY <strong>2015</strong> www.icmai.in
come strategic issues in governance of Banks and realisation of different set of goals. Performance: An Integrated Report includes qualitative and quantitative information, the bank’s impacts (both positive and negative) on the resources and relationships on which it depends; the significant external factors impacting performance; and how the organization fared against its targets. Along with the external environmental factors, the Banks have to consider the social impacts and inclusive growth models. Future outlook: Banks should provide information, built on sound and transparent analysis, about: how the bank is currently equipped to respond to the operating context that it is likely to face in the future, how the organization balances short- and long-term interests, potential repercussions of where the bank expects it will go in the short, medium and long term, the actions needed to get there, and the associated uncertainties. Integrated reporting in Banks / Companies may be classified as in table 3. Conclusion The evolutionary course of integrated reporting is now taking shape as more companies move from informal statements to formal reporting. The standardized framework of the GRI, RBI and Government of India provide an incremental road map for widening the scope of disclosure aspects in case of Banks in India. It is also pertinent that Indian Banks should adopt and establish a sound reporting process for identifying its material issues and target audience, stakeholders before embarking on the integrated reporting agenda. The more they project their sustainability the higher their stakeholders’ confidence. The details of performance, business, brand positioning, competitive advantages, strategies, shareholders, corporate governance, remuneration etc., are some of the important aspects which should find place in the reporting. The Indian Banks now should move from limited or partial integration to full integration. References 1. Annual Reports of various banks 2. Integrated Reporting- the future of corporate reporting-www.pwc.de 3. Integrated Reporting-Performance insight through better reporting –www. kpmg.com 4. RBI Reports 5. The Landscape of integrated reporting- reflections on next steps – Robert G. Eccles & others usha_ou@yahoo.co.in Table- 3 Integrated Reporting - Elements Business Over view Sustainability Annual Financial Statements Shareholders information 1The year in review 2 Financial performance, share statistics and credit ratings 3.Non-financial performance 4. Awards and recognition 5. Highlights and challenges 6. Economic review 7. Chairman’s report to stakeholders 8.Chief executive’s report to stakeholders 9. Strategy 10. Sustainable competitive advantages 11. Key strategic deliverables 12. Business structure 13. global presence 14 strategy in action 15 history 16 brand 17. socioeconomic impact 1.Introduction 2.Executive committee 3. Financial review 4. Explanation of principal differences between normalised and IFRS results 5 Seven-year review 6. Business unit reviews 7. Personal & Business Banking 8. Corporate & Investment Banking 9. Wealth – Liberty 10. Corporate governance 11.Board of directors 12.Remuneration report 13. Sustainable development 14. Risk and capital management 1.Directors’ responsibility for financial reporting 2.Group secretary’s certification 3. Report of the group audit committee 4. Independent auditors’ report 5. Directors’ report 6. Financial statements 7. Accounting policies 8. Notes to the annual financial statements 9.Group/ Limited – company annual financial statements 1.Chairman’s letter to shareholders 2. Notice to members 3. Proxy form 4. Directorate 5 Shareholder analysis 6. Share statistics 7. Shareholders’ diary 8 Instrument codes 9. Credit ratings 10. Financial and other definitions 11. Acronyms and abbreviations 12. International representation 13. Contact details www.icmai.in MAY <strong>2015</strong> the MANAGEMENT ACCOUNTANT 33
Page 1: SPECIAL FOCUS INSIDE ‘CMAs can id
Page 4 and 5: May 2015 Inside COVER STORY MAY 201
Page 6 and 7: FROM THE EDITOR’S DESK Greetings!
Page 8 and 9: PRESIDENT’S COMMUNIQUE Certificat
Page 10 and 11: PRESIDENT’S COMMUNIQUE a “Pract
Page 12 and 13: ICAI-CMA SNAPSHOTS PP and CCM, ICAI
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that reduction of the same is possi
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National Seminar on "Capital Market
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The Institute of Cost Accountants o
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cept and functions of PB, restricti
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As per RBI guidelines, PB refers to
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pected to grow at 10-15% annually.
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ECONOMY UPDATES Income Tax CBDT Not
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can be utilized for payment of the
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Interest Rates on Deposits In refer
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ELECTIONS 2015 www.icmai.in MAY 201
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ISSN 0972-3528 Registered KOL RMS/1
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May-2015

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