The Reserve Bank of India Governor Shaktikanta Das on Thursday said businesses should avoid having an aggressive short-term reward-seeking culture without considering the build-up of excessive risks in their balance sheets.
Das said doing business involves risk-taking. But before taking the risk, the upside and downside will have to be carefully considered.
”Businesses should avoid aggressive short-term reward-seeking culture without regard for the build-up of excessive risk in the balance sheet,” Das said while delivering a speech at the Iconic Week celebrations, as part of the ‘Azadi Ka Amrit Mahotsav’, to mark the 75th anniversary of Independence.
The event was organized by the Central Board of Indirect Taxes and Customs (CBIC) here.
The common characteristics of some of the inappropriate business models or strategies that have come to the RBI’s notice include inappropriate funding structure, and building asset-liability mismatches, which are highly risky and not sustainable, he said.
Besides, unrealistic strategic assumptions, particularly excessive optimism about capabilities, growth opportunities, and market trends may lead to poor strategic decisions, he noted.
He said the RBI has mandated a host of disclosure for its regulated entities to ensure that they make full disclosure of all material information in their financial statements.
Tarun Bajaj, Revenue Secretary, and Vivek Johri, Chairman, CBIC were also present at the event.