central banks are mostly government institutions or publicly owned companies, their capital is mostly limited by domestic laws. in cases of substantial balance sheet growth, existing rules might not fit anymore. at such times the financial reporting framework might have to provide possibilities for new appropriate solutions. one such solution might be for recapitalisation by domestic governments after losses, or for potential future losses, to be made mandatory, however such requirements are often difficult to get approved by parliament and by public opinion. designing the adequate level and composition of the capital of a central bank is a sensitive challenge. one has, among a number of other internal and external factors, to take account of the central bank ‘ s legal environment, the relationship to the government, and its special tasks, like lender - of - last - resort function, or a fiscal agent - function vis - a - vis the state. in any event, a central bank ’ s capital must be sufficient to maintain its independence from the political sphere, and to provide a buffer for the inevitable price volatility resulting from the current investment environment. the individually adequate balance for each central bank between a suitable accounting framework, profit distribution rules and the ability to hold or reserve adequate amounts for loss coverage is the key for financial independence. when you apply the accounting rules to arrive at the annual financial result, you are then confronted with the question of applying rules for the distribution of profits. these rules can be classified in six general legal profit and loss schemes according to a recent ecb study on profit distribution and loss coverage of central banks ( by werner studener and his colleagues ). the study, based on the experience of 57 central banks that provided data for the ecb analysis, confirms what the bis found in 2013, namely that there is no one - size - fits - all solution for central banks, neither for the level of capital and financial buffers nor for profit distribution and loss coverage ; nor, indeed, for recapitalisation rules. however, there is evidence that these topics are interconnected and a set of guiding principles have been identified, which help to find an individual balance. 2. commercial banks and corporates as i said earlier, financial reporting is a key issue, not only for central banks, but for all kinds of businesses and, of course, commercial banks as well. modern historians agree that the invention of double entry bookkeeping in the fifteenth century was a major driver for modern economic pursuit and capitalism, as it first introduced the maxim “ increase your equity

consultative process also helps in managing expectations. growth - inflation performance as i mentioned, monetary policy framework in india shifted from a monetary targeting regime to a multiple indicator regime. such a transition was conditioned by the developments of financial markets, increasing integration of the indian economy with the global economy and changing transmission of monetary policy. a pertinent question is how did this transition impact economic outcomes, in particular the growth - inflation performance? bis central bankers ’ speeches from table 1, two broad trends can be gleaned. first, real gdp growth, on an average, improved over the period and became less volatile. second, inflation performance had improved significantly in the last decade coinciding with the adoption of multiple indicator approach. however, inflation performance deteriorated in the years 2010 - 11 and 2011 - 12 so far. in this context, it is important to recognise that the recent inflation surge has followed the global financial crisis. managing inflation in an economy which is recovering from a downturn is much more complex because of associated uncertainties than managing inflation under normal conditions. in the initial phase of the crisis in 2007, it appeared that emerging market economies ( emes ) were better positioned to weather the storm created by the global financial meltdown on the back of their substantial foreign exchange reserve cushion, improved policy frameworks and generally robust banking sector and corporate balance sheets. however, any hope about emes escaping unscathed could not be sustained after the failure of lehman brothers in september 2008 which triggered global deleveraging and heightened risk aversion. eventually, emes were also adversely affected by the spillover effects : first through contraction in world trade and then from reversal in capital flows. india, though initially somewhat insulated from the global developments, was eventually impacted significantly by the global shocks through all the channels – trade, finance and expectations channels. in response, the reserve bank swiftly introduced a comprehensive range of measures to limit the impact of the adverse global developments on the domestic financial system and the economy. the reserve bank, like most central banks, took a number of conventional and unconventional measures to augment domestic and foreign currency liquidity, and sharply reduced the policy rates. in a span of seven months between october 2008 and april 2009, there was unprecedented policy activism. for example : ( i ) the repo rate was reduced by 425 basis points to 4. 75 per cent, ( ii ) the reverse repo rate was reduced by 275 basis points to 3. 25 per cent, ( iii ) the cash