An RBI appointed technicalcommittee has recommended that the central bank's repo transactions be treated as lendings and borrowings and not as investments. This could address the fluctuation in accounts due to change in bond prices. 

The committee headed by Y H Malegam to review to review presentation of RBI'sbalance sheet and Profit & Loss Account said, " Repo and Reverse Repo transactions be accounted for as lending and borrowing of funds and not as sale and purchase of securities." 

The proposed change in accounting treatment in line with the international best practices is expected to stabilise the balance sheet. By treating repo transactions as investment, it factors in daily changes in the bond prices which technically results in fluctuations while accounting for net RBI credit to government." said a former central banker requesting anonymity. " By treating these transactions as borrowing and lending ,this fluctuation is contained as the collaterals and margins are fixed. He said 

The committee has also suggested that while oil bonds will be treated as 'Held to Maturity' and carried in the balance sheet at cost, all other domestic securities, other than treasury bills will be treated as 'Available for Sale' and accounted for accordingly, that is in terms of prevailing market price. All foreign securities would also be treated as 'Available for Sale'.Rupee Securities should be carried at fair value, and any unrealised gain or loss on revaluation should be transferred to the Investment Revaluation Account. 

The committee has also suggested the merger of the Issue and Banking Department balance sheets and preparation of a single balance sheet displaying at one place the total assets and liabilities of the Reserve Bank. Besides is suggested that only the main items of capital, reserves, assets and liabilities be reported in the Balance Sheet and all details be shown in accompanying schedules. 

The committee also said that nomenclature 'Profit & Loss account' may be replaced by the nomenclature 'Income Statement'. (Economic Times)