2. Banking Company Accounts
Introduction:
Banks play a very important and dynamic role in the economic development
of a nation. They mobilize savings from the investors and lend them to those who
need finance. Banks help to accelerate capital formation, industrial growth and
overall economic growth. A vibrant banking system is absolutely necessary for the
survival and success of the economy.
Bank Accounts:
Banking Companies in India are regulated by the Banking Regulations, Act,
1949, Section 5 of the Act defines banking as “the accepting, for the purpose of
lending or investment, of deposits of money from the public repayable on demand or
otherwise and withdrawable by cheque, draft, order or otherwise”.
3. A company accepting deposits from the public for financing its own business
will not make it a bank. Companies accepting deposits for the purpose of lending and
not providing facilities for withdrawal or transfer of money by means of cheque,
draft, order or otherwise are also not banks. They are commonly called non-banking
finance companies.
Banking Regulation Act applies to all the public and private sector banks, cooperative
banks, development banks, regional rural banks and foreign banks operating in India.
But it does not apply to primary agricultural cooperative societies and cooperative
land mortgage banks, section 2 of this act also provides that Indian Companies Act
will apply to banking companies in areas were Banking Regulation Act has no
specific provisions.
4. Important Functions of Commercial Banks
Accepting deposits of money from the public
Lending money by way of loans and advances, by discounting of bills.
Providing facilities for withdrawal and transfer of money by means of cheques, drafts,
orders, telegraphic transfer, electric fund transfer net banking etc.
Understanding collection of cheques and bills for customers.
Giving guarantees, accepting and endorsing bills, issuing letters of credit etc. on behalf of
customers.
Providing safe deposit valuts for safe keeping of securities and valuables.
Dealing in securities on its own account and on behalf of customers.
Buying, selling and dealing in foreign exchange.
Acting as executors and trustees.
Acting as managers, underwriters, bankers to issues of shares and debentures by
companies.
5. Important legal Requirements
1. Prohibition of Trading (Section - 5):
A banking company cannot directly or indirectly deal in the buying or selling of
goods. However, it may buy, sell or barter in connection with the bills of exchange received
for collection.
2. Disposal of non-banking assets (Section – 8):
A banking company in the course of its business may come into possession of
certain assets charged in its favour on account of the failure of a debtor to repay the loans. A
banking company buy immovable properties and other assets for its own use. But immovable
properties and other assets acquired not for its own use, should be disposed off with in seven
years from the date of acquisition. Reserve Bank of India may extend this time limit. Gain or
loss from sale of non-banking assets should be shown separately in the profit and loss account.
3. Management (Section – 10):
At least 51% of the directors should have special knowledge in one or more of the
following fields: Accountancy, agriculture and rural economy, banking, co-operation,
6. economies, finance, law and small scale industry. At least two directors should have special
knowledge or experience in respect of agriculture and rural economy and co-operation or small
scale industry.
Every banking company shall have at least one of its directors as chairman of its
board of directors. The chairman is a full time employee of the company. He is entrusted with
the management of the bank. The chairman can hold office for a period of five years. Other
whole time directors can hold office for a continuous of period of eight years.
4. Capital and Reserves (Section – 11):
Section 11 of Banking Regulation Act 1949 prescribes the minimum paid up capital
and reserves for a banking company. They are follows:
(a) In case of a banking company incorporated outside India:
(i) If it has a place of business in Mumbai or Kolkata or both ---- 20 lakhs.
(ii) If it has a place of business elsewhere --- 15 lakhs.
The above amounts should be deposited with Reserve Bank of India in cash or in unencumbered
securities.
7. (b) In case of a baking company incorporated in India:
(i) A banking company having places of business in more than one state including places of
business in Mumbai or Kolkata or both --- Rs.10 lakhs.
(ii) A banking company having its places of business in more than one state and none of which
is situated in Mumbai or Kolkata --- Rs.5 lakhs.
(iii) A banking company having all its places of business in one state and none of which is
situated in Mumbai or Kolkata:
Subject to maximum limit of Rs.5 lakhs.
(iv) A banking company having all its places of business in one state and also having places
business in Mumbai or Kolkata – Rs.5 lakhs.
For its main place of business
Plus
Rs. 1 lakhs
2 For each place of business situated in the same district
Plus
Rs.10,000
3 For each place of business out side the district but with in
the same state
Rs.25,000
8. 5. Regulation relating to authorised capital, subscribed capital and paid up capital (Section –
12):
The subscribed capital of a banking company should not be less than one half of he
authorised capital. The paid up capital should not be less than one-half of the subscribed
capital.
6. Voting rights of shareholders (Section – 13):
The voting right of any single shareholder should not exceed 1% of total voting
rights.
7. Transfer to Statutory Reserve (Section – 17):
Every banking company incorporated in India should transfer 25% of its profit to
statutory reserve every year. The profit is the profit arrived as per its profit and loss account
before paying divided.
8. Restriction as to payment of dividend:
A banking company before paying dividend, has to write off completely all its
capitalized expenses including preliminary expenses, organisational expenses, share selling
commission, brokerage and amounts of losses incurred by tangible assets.
9. 9. Cash Reserve (Section – 18):
Every abnking company incorporated in India have to maintain a cash reserve at
certain % of time and demand liabilities with Reserve Bank of India. This reserve may vary
from 3% to 15%. Now this reserve is hovering around 5.5%.
10. Statutory Liquidity Ratio (SLR):
In addition to cash reserve ratio banks are expected to maintain a certain percentage
of their net demand and time liabilities in the form of cash, gold and unencumbered approved
securities. Statutory Liquidity Raito may vary from 25% to 40%.
11. Restriction on loan and advances (Section – 20):
A bank cannot advance loans and advances on the security of its own shares. Also a
bank cannot grant loans and advances to
(a) Any of its directors
(b) any firm in which any of its directors is interested as partner, manager or guarantor
(c) any company of which any of its directors is a director, manager, employee or guarantor
or in which he holds substantial interest or
(d) any individual is respect of whom any of its directors is a partner or guarantor.
10. 12. Prohibition of charge on unpaid capital and floating charge on assets (Section – 14):
A banking company cannot create charge upon its unpaid capital. It also cannot
create a floating charge on the undertaking or any property of the company.
13. Licensing of Banking Companies (Section – 22):
A banking company can function only after getting license from Reserve Bank of
India and is included in the second schedule of the RBI Act.
Similarly, prior permission of the Reserve Bank of India is necessary to open a new
branch or to change the existing place of business situated in India. A bank incorporated in
India has to get permission form Reserve bank of India to open a branch outside India or to
change its place of business.
14. Unclaimed deposits (Section – 26):
At the end of every year, a bank in India has to submit a return in the prescribed
form giving details of account which could not be operated for 10 years. This report is
submitted every year with in 30 days from the end of the year. In case of fixed deposits 10
year period is reckoned form the date of expiry of the deposit period.
11. 13. Accounts and Audit:
Section 29 to 34 deals with preparation of accounts and its audit. At the end of every
financial year every banking company incorporated in India prepare a profit and loss account foor
the financial year and a balance sheet as on the last date of the financial year in the form
prescribed in the Third schedule of Banking Regulation Act. Similarly every banking company
incorporated outside India but carrying on business in India should prepare a balance sheet and
profit and loss account in the form prescribed under third schedule for the business transacted in
India.
The balance sheet and profit and loss account should be audited by a qualified
chartered accountant. Three copies of the audited balance sheet and profit and loss account with
auditors report should be submitted to Reserve Bank of India within three months form the end of
the financial year. Also every company should submit three copies of the audited balance sheet
and profit and loss account to the Registrar of Companies within 3 months form the end of the
relevant financial year.
Every banking company should publish the balance sheet the profit and loss account
and the auditor's report in a news paper circulating at the place where the bank has its principal
place of business. Within six months from the end of the financial year.
12. Main Books of Accounts Maintained in a Bank
The following books are maintained by a Bank
i) Rough cash book
ii) A Fair cash book
iii) Cash balance book
iv) Day book
In addition to the above books, the following ledger and registers are opened
i) Current account ledger
ii) Savings bank ledger
iii) Fixed deposit ledger
iv) General ledger
The principal books required are:
1. Cash book: Summary of receiving cashier’s counter cash book and paying cashier's counter
cash are recorded in cash book.
13. 2. General Ledger: It contains control accounts of subsidiary ledgers given below and accounts of
expenses and assets not covered by the subsidiary ledgers.
3. Subsidiary ledgers: the following are the important subsidiary books maintained by a bank:
Receiving cashier’s counter cash book
Paying casher’s counter cash book
Current Accounts Ledger
Saving Bank Accounts Ledger
Fixed Deposit Accounts Ledger
Investment Ledger
Bills discounted and purchased Ledger
Loan Ledger
Cash Credit Ledger
Customer’s Acceptances, endorsement and Guarantee Ldeger.
14. Form of Balance Sheet – Form A
Balance Sheet of X Bank Company as on 31st March 2020
Particulars Schedule
No.
As on 31.03.2020
(Current Year)
As on 31.3.2019
(Previous Year
Capital and liabilities:
Capital
Reserves and Surplus
Deposits
Borrowings
Other liabilities and
provisions
1
2
3
4
5
Total xxx xxx
15. Assets:
Cash and balances with Reserve
Bank of India
Balances with banks and Money at
call and short notice
Investments
Advances
Fixed Assets
Other Assets
6
7
8
9
10
11
Total xxx xxx
Contingent Liabilities:
Bills for Collection
12
16. Particulars Schedule
No.
Year ended
31.3.2020
Year ended
31.3.2019
Schedule – 1 Capital
Particulars As on 31.03.2020
(Current Year)
As on
31.3.2019
(Previous
Year
I. For Nationalised Banks:
Capital (Fully owned by Central Government)
II. For Banks Incorporated outside India
Capital
i) (The amount brought in by banks by way of start up capital
as prescribed by RBI should be shown under this head)
ii) Amount of deposit kept with RBI under Section 11(2), of
Banking Regulation Act, 1949
III. For other Banks
Authorised Capital (100 shares of Rs.10each)
Issued Capital (100 shares of Rs.10each)
Subscribed capital (100 shares of Rs.10each)
Called up capital (100 shares of Rs.10each)
LESS: Calls unpaid
ADD: Forfeited shares
17. Schedule – 2 Reserves and surplus
Particulars As on
31.03.2020
(Current Year)
As on
31.3.2019
(Previous Year
I. Statutory Reserves:
Opening Balance
Additions during the year
Deduction during the year
II. Capital Reserves:
Opening Balance
Additions during the year
Deduction during the year
III. Share Premium:
Opening Balance
Additions during the year
Deduction during the year
IV. Revenue and other Reserves:
Opening Balance
Additions during the year
Deduction during the year
V. Balance in profit and Loss Account
Total xxx xxx
18. Schedule – 3 Deposits
Particulars As on 31.03.2020
(Current Year)
As on 31.3.2019
(Previous Year
A
I. Demand Deposits
i) From banks
ii) From others
II. Savings Bank Deposit
III. Term Deposits
i) From banks
ii) From others
Total xxx xxx
B
I. Deposits of branches in India
II. Deposits of branches outside India
Total xxx xxx
19. Schedule – 4 Borrowings
Particulars As on
31.03.2020
(Current Year)
As on 31.3.2019
(Previous Year
I. Borrowings in India
i) Reserve Bank of India
ii) Other Banks
iii) Other Institutions and agencies
II. Borrowings Outside India
TOTAL (I and II) xxx xxx
Secured borrowings included in I and II
above Rs.
20. Schedule – 5 Other Liabilities and Provisions
Particulars As on
31.03.2020
(Current
Year)
As on
31.3.2019
(Previous
Year
I. Bills payable
II. Inter – office adjustment
(Net)
III. Interest accrued
IV. Others (including
provisions)
TOTAL xxx xxx
21. Schedule – 6 Cash and Balances with Reserve Bank of India
Particulars As on
31.03.2020
(Current
Year)
As on
31.3.2019
(Previous
Year
I Cash in hand ( Including
foreign currency notes)
II Balance with Reserve Bank
of India
i) In current accounts
ii) In other deposit accounts
TOTAL xxx xxx
22. Particulars As on 31.03.2020
(Current Year)
As on
31.3.2019
(Previous Year
I Bills payable
II Inter – office adjustment (Net)
III Interest accrued
IV Others (including provisions)
TOTAL xxx xxx
Schedule – 7 Balances with banks and money at call and short notice
Particulars As on 31.03.2020
(Current Year)
As on 31.3.2019
(Previous Year
I In India
i) Balances with banks
a) In current accounts
b) In other deposit accounts
ii) Money at call and short notices
a) With banks
b) with other Institutions
TOTAL (i) and (ii) xxx xxx
II Outside India
i) In current accounts
ii) In other deposit accounts
iii) Money at call and short notice
TOTAL (i), (ii) and (iii) xxx xxx
GRAND TOTAL (I) and (II) xxx xxx
23. Schedule – 8 Investments
Particulars As on 31.03.2020
(Current Year)
As on 31.3.2019
(Previous Year
I. Investments in India
i) Government Securities
ii) Other approved securities
iii) Shares
iv) Debentures and Bonds
v) Subsidiaries and / or Joint Ventures
vi) Others (to be specified)
Total xxx xxx
II. Investments outside India
i) Government securities
ii) Subsidiaries and / or Joint venture abroad
iii) Others (to be specified)
Total xxx xxx
24. Particulars As on 31.03.2020
(Current Year)
As on 31.3.2019
(Previous Year
A i) Bills purchased and discounted
ii) Cash credits, overdrafts and loans repayable on demand
iii) Term loans
Total xxx xxx
B i) Secured by tangible assets
ii) Covered by Bank/Govt. Guarantees
iii) Unsecured
Total xxx xxx
C. (I) Advances in India
i) Priority sectors
ii) Public sector
iii) Banks
iv) Others
II. Advances outside India
i) Due from banks
ii) Due from others
a) Bills purchased and discounted
b) Syndicated loans
c) Others
Total xxx xxx
Grand Total (I, II and C)
Schedule – 9 Advances
25. Particulars As on
31.03.2020
(Current Year)
As on
31.3.2019
(Previous Year
I Premises
At cost as on 31st March of the preceding year
Additions during the year
Deductions to date
II Other fixed assets (including furniture and fixtures)
At cost as on 31st March of the preceding year
Additions during the year
Deductions to date
Total xxx xxx
Schedule – 10 Fixed Assets
26. Particulars As on
31.03.2020
(Current
Year)
As on
31.3.2019
(Previous
Year
I. Inter Office Adjustments (Net)
II. Interest accrued
III. stationary and stamps
IV. Non-banking assets acquired in satisfaction of claims
V. Others
Total xxx xxx
Schedule – 11 Other Assets
27. Particulars As on
31.03.2020
(Current Year)
As on
31.3.2019
(Previous
Year
I Claims against the bank not acknowledged as debts
II. Liability for partly paid investments
III. Liability on account of outstanding forward
exchange contracts
iv) Guarantees given on behalf of constituents
a) In India
b) Outside India
V. Acceptances, endorsements and other obligations
VI. Other items for which bank is contingently liable
Total xxx xxx
Schedule – 12 Contingent Liability
28. Particulars Schedule
No.
As on 31.03.2020
(Current Year)
As on 31.3.2019
(Previous Year
I Income
Interest earned
Other Income
13
14
Total xxx xxx
II Expenditure
Interest Expended
Operating Expenses
Provisions and contingencies
15
16
Total xxx xxx
III Profit/ Loss
Net profit/loss for the year
Profit / Loss brought forward
Total xxx xxx
IV Appropriations
Transfer to statutory reserve
Transfer to other service
Transfer to Government / proposed dividend
Balance carried over to balance sheet
Total xxx xxx
Profit and Loss account for the year ended 31st March 2020 (Form – B)
29. Particulars As on
31.03.2020
(Current Year)
As on
31.3.2019
(Previous Year
I. Interest / Discount on advances / bills
II. Income on Investments
III. Interest on balances with Reserve Bank of India
and other inter-bank funds
IV. Others
Total xxx xxx
Schedule – 13 Interest earned
30. Particulars As on 31.03.2020
(Current Year)
As on 31.3.2019
(Previous Year
I. Commission, exchange and brokerage
II. Profit on sale of investments
LESS: Loss on sale of Investments
III. Profit on revaluation of investments
LESS: Loss on revaluation of investments
IV. Profit on sale of land, buildings and other
assets
V. Profit on exchange transactions
VI. Income earned by way of dividends etc.,
from subsidiaries / companies and /or joint
ventures abroad / in India
VII. Miscellaneous Income
Total xxx xxx
Schedule – 14 Other Income
31. Particulars As on
31.03.2020
(Current Year)
As on
31.3.2019
(Previous
Year
I. Interest on Deposits
II. Interest on Reserve Bank of India / Inter-bank
borrowings
III. Others
Total xxx xxx
Schedule – 15 interest Expended
32. Particulars As on 31.03.2020
(Current Year)
As on 31.3.2019
(Previous Year
I. Payments to and provisions for employees
II. Rent, taxes and lighting
III. Printing and stationery
IV. Advertisement and publicity
V. Depreciation on bank’s property
VI. Directors’ fees, allowances and expenses
VII. Auditor’s fees, allowances and expenses
(including branch auditors)
VIII. Law charges
IX. Postages, telegrams, telephones, etc.
X. Repairs and maintenance
XI. Insurance
XII. Other Expenditure
Total xxx xxx
Schedule – 16 Operating Expenses
