The Indian financial industry has realised that shift of monthly compliance exercise to daily Fund management and executive strategies-based approach is an operational harmonisation success story.

There is a surge in the number of audits undertaken by the Reserve Bank of India (RBI), then there is also an increasing strain on demands that are being made by the Securities and Exchange Board of India (SEBI); and GST compliance system is currently seeking near perfection of its data. Such trends have increased the scrutiny, especially in the International Financial Services Centre (IFSCA) of GIFT City.

Reconciliation, particularly fund accounting reconciliation and broader fund reconciliation practices, have consequently turned out to be an indicator of the health of a business holistically. Any company that can replenish capital or redirect trades in varied sources of income will face multifaceted business issues.

With monthly payments of GST, inter-branch audits, the move towards a T+1 settlement cycle, major audits are now focused on the consolidation process because it allows the stakeholders not only to view the reconciliation process as an administrative tool but as a protective system within Fund administration frameworks and for every Fund administrator.

Reconciliation Problems

When T +1 is substituted with T, the safety margin is eliminated. Mismatches that previously have been accepted to roll over a few days now have to be resolved in real time and often, without an extensive analysis which means the difference in data and format inconsistencies, as well as the delay in submitting them. This environment increases the strain on fund accounting reconciliation, requiring Fund accounting teams and Fund Admin units to handle exceptions more frequently.

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The number of regulatory layers is high: RBI, SEBI, GST and in some instances, Indian Foreign Services Commission of Activities (IFSCA). These bodies have overlapping or even conflicting requirements, and that makes the reconciliation team spend considerable amount of time trying to understand compliance requirements; any minute glitch will only compound the workload of auditors and affect fund reconciliation cycles.

The IT systems are still disappointed; most institutions use old ERP systems, partner portal system and disjointed banking solutions. This hampers automaticity of integration which causes the staff to reslice missing parts, remanence files, or damaged definitions due to code or date anomalies. Phantom exceptions identification thus comes to be an inseparable aspect of the job and burdens the Fund management and Fund administration infrastructure.

Continued dependency on GST compliance also imposes other dependencies on beyond numerical accuracy as suppliers need the right information at the right time. Any lateness or end minute alteration by the suppliers poses a risk to the Input Tax Credit and an organization will be derailed in case the variance is not realised early enough, affecting end-to-end fund accounting reconciliation.

The inter-branch reconciliation is very complex. Making corrections to a defective record requires tracking the root cause of the mistake and explaining the reasoning behind it. This may involve re-creating matches that are several months old, as any gap in an entry can be noted by an auditor. This complexity multiplies within fund reconciliation environments where multi-entity matching is central to Fund accounting accuracy.

Good Reconciliation Principles

Regulatory Alignment

Everything must be in sync with the relevant regulatory requirements and then formalised into a process. There is no secret about the fact that the teams that can turn RBI, IFSCA and SEBI needs to smoother audits and teams that can enhance documentation and the use of spreadsheets are more efficient. Strong compliance alignment reinforces fund accounting reconciliation discipline within Fund administration.

Risk‑Based Prioritisation

Different levels of account risk should be clearly identified. High-risk and vulnerable accounts must be monitored daily, while stable accounts can be reviewed monthly or quarterly. Emerging challenges in rapidly changing accounts should be assessed promptly to maintain strong fund reconciliation practices and ensure sound fund management outcomes.

Master Data Governance

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Such identifiers as PAN, GSTIN, ISIN, client codes, and LEIs need to be similar to avoid the mismatch of the data. Clean master data is the backbone of strong Fund accounting and reduces breaks in fund accounting reconciliation cycles.

Openness and Accounting

The audit trail is not a record on paper but should have an account of accepted matches and discrepancies which should be transparent so that the auditors and regulators can trace the decisions which were made. Transparency strengthens Fund Admin environments and supports consistent fund reconciliation.

Clear Segregation of Duties

The various functions performed by the preparers, reviewers, compliance officers, and the management will have different roles and responsibilities; This will remove any grey area in the escalation process or supervisory powers. This segregation is essential in large Fund administration and Fund accounting operations.

Data Integrity Procedures and Data Integrity Office Holders

Exception Handling

Teams that are highly performing use technology to help in automating little inconsistencies. Good AI differentiates irrelevant matches or non-material reversals so that the analysts do not spend time inputting data but do serious analytical tasks. Automation directly enhances fund accounting reconciliation efficiency inside Fund Admin teams.

Dynamic Cloud Dashboards

Dashboards are stress relievers, which provide real-time information about individuals in a situation about the current exceptions, new areas of inconsistency and timing. These resources will be essential within the period of reporting, especially for fund reconciliation and Fund management monitoring.

Upstream Controls

Mismatches need to be found in post-hoc reconciled reports not as the prominent method. Strict control measures have to be put in place so that the information cannot circulate freely within the system without any confirmation upon entry. This is a foundational component of reliable Fund accounting and Fund administration workflows.

Documentation and Professional Development

Staff competence is directly attributable to staff-level reconciliation; operational risks are reduced by way of periodically scheduled refreshing of staff, simultaneous recording of a procedure, and regular reviews of compliance. Well-trained teams maintain stronger fund accounting reconciliation and fund reconciliation standards.

Long-term Process Optimization

Each remedial action uncovers new vices. Those teams that review their systems regularly can react well to the changes in regulations and market forces; those who have stagnant processes are doomed to fade away. Continuous optimization is the heart of modern Fund management and future-ready Fund administration.

Key Takeaway

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Reconciliation serves its primary purpose when it goes unnoticed, which happens only if it is performed accurately and efficiently. It exhibits regulatory confidence and monetary orderliness and attempts to avoid the unexpected. The interplay of advanced automation and people, who understand all the processes, and the consideration of the context as the business productions can be termed as successful, making operations to be audit-proof. It is not about perfection but consistency and stability — the same principles that underpin strong fund accounting reconciliation, long-term fund reconciliation, and resilient Fund administration functions.

Conclusion

Many years of working in this sphere have shown that reconciliation is a combination of operational and control aspects. Without such a practice, an organization will remain behind, but on the other hand, its factual integration into a corporate culture, compliance, stakeholder trust and efficiency is inevitably bound to follow. The demands of the dynamic nature of GST and of markets and regulatory scrutiny will continue. Still, with hard work and use of technology, teamwork, and experience gained, one can not only adjust to the needs in modern society but improve the profession. These principles continue to strengthen Fund accounting, elevate Fund management, and support robust fund accounting reconciliation foundations required by every Fund administrator.

Why Choose InCorp Global?

At InCorp, our dedicated on-ground team is committed to supporting your business journey at every stage. We guide you through the entire process, from incorporation to post-incorporation compliances, ensuring a smooth and efficient experience. Backed by a strong understanding of regulatory frameworks, we provide the necessary support to meet all compliance requirements seamlessly. To learn more about our Fund Services, you can write to us at info@incorpadvisory.in or WhatsApp us on (+91) 77380 66622.

Authored by:
Mitul Shah | Fund Services

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