Banking Company Accounts-Banking Regulation docx

Banking companies are those institutions that deal in money and credit. They accept deposits from the public and lend money to individuals and businesses for various purposes.
The financial statements of banking companies are prepared as per:
• Banking Regulation Act, 1949
• Companies Act, 2013
• RBI Guidelines and Accounting Standards

1. UNIT IV – BANKING COMPANY ACCOUNTS
1. Introduction
Banking companies are those institutions that deal in money and credit.
They accept deposits from the public and lend money to individuals and
businesses for various purposes.
The financial statements of banking companies are prepared as per:
Banking Regulation Act, 1949
Companies Act, 2013
RBI Guidelines and Accounting Standards
2. Meaning and Definition
According to Section 5(b) of the Banking Regulation Act, 1949,
“Banking means 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.”
Thus, a Banking Company is a company that transacts the business of
banking in India.
3. Legal Provisions Regarding Final Accounts
Under Section 29 of the Banking Regulation Act, 1949:
Every banking company must prepare its Balance Sheet and Profit &
Loss Account as per the Third Schedule to the Act.
These accounts must give a true and fair view of the bank’s affairs.
The Profit & Loss Account and Balance Sheet must be audited and
submitted to the Reserve Bank of India (RBI) within three months
from the end of the financial year.
4. Financial Statements of Banking Companies
Banking companies must prepare the following:
1.Profit and Loss Account
2.Balance Sheet

2. 3.Schedules forming part of both statements
(A) PROFIT AND LOSS ACCOUNT
Format (As per Third Schedule – Form B)
Particulars Schedule No.
I. Interest Earned 13
II. Other Income 14
III. Total Income —
IV. Interest Expended 15
V. Operating Expenses 16
VI. Provisions and Contingencies—
VII. Net Profit/(Loss) for the year—
VIII. Appropriations —
Explanation of Items:
Schedule 13: Interest Earned
Interest and discount on advances/bills
Income from investments
Interest on balances with RBI and other banks
Other interest income
Schedule 14: Other Income
Commission, exchange, and brokerage
Profit on sale of investments or land/buildings
Income from lease/other financial services
Miscellaneous income
Schedule 15: Interest Expended
Interest on deposits
Interest on borrowings

3. Other interest expenses
Schedule 16: Operating Expenses
Payments to and provisions for employees
Rent, taxes, and lighting
Printing and stationery
Advertisement and publicity
Directors’ fees, auditors’ fees, law charges
Depreciation on bank property
Postage, telegrams, and telephones
Appropriation of Profit:
After arriving at the net profit, the following appropriations are made:
1.Transfer to Statutory Reserve (minimum 25% of profit)
2.Transfer to Capital Reserve
3.Transfer to Revenue and Other Reserves
4.Proposed Dividend
5.Balance carried forward to Balance Sheet
(B) BALANCE SHEET
Format (As per Third Schedule – Form A)
Liabilities
Schedule
No.
Assets
Schedule
No.
Capital 1
Cash and Balances with
RBI
6
Reserves and Surplus2
Balances with Banks &
Money at Call
7
Deposits 3 Investments 8
Borrowings 4 Advances 9

4. Liabilities
Schedule
No.
Assets
Schedule
No.
Other Liabilities and
Provisions
5 Fixed Assets 10
Other Assets 11
Miscellaneous Expenditure12
Explanation of Schedules:
Schedule 1 – Capital
Authorized, issued, subscribed, and paid-up capital.
Schedule 2 – Reserves and Surplus
Includes:
Statutory Reserve
Capital Reserve
Revenue Reserve
Revaluation Reserve
Balance in Profit & Loss Account
Schedule 3 – Deposits
Demand deposits
Savings bank deposits
Term deposits
Schedule 4 – Borrowings
Borrowings from RBI
Borrowings from other banks and institutions
Borrowings outside India
Schedule 5 – Other Liabilities and Provisions
Bills payable
Inter-office adjustments
Provisions for taxation, doubtful debts, etc.

5. Schedule 6 – Cash and Balances with RBI
Cash in hand
Balances with RBI
Schedule 7 – Balances with Banks and Money at Call
In India and outside India
Money at call and short notice
Schedule 8 – Investments
In Government securities
Other approved securities
Shares, debentures, bonds, etc.
Schedule 9 – Advances
Loans, cash credits, overdrafts, and bills discounted.
Classified as:
oIn India (priority sector, public sector, etc.)
oOutside India
Schedule 10 – Fixed Assets
Premises, furniture, fixtures, and other fixed assets.
Depreciation deducted.
Schedule 11 – Other Assets
Inter-office adjustments
Accrued interest
Stationery and stamps
Non-banking assets acquired in satisfaction of claims
Schedule 12 – Miscellaneous Expenditure
Preliminary expenses
Deferred revenue expenses
Example of Profit and Loss Account (Simplified)

6. ABC Bank Ltd. – Profit & Loss Account for the Year Ended 31st March,
2025
Particulars ₹
Interest Earned (Schedule 13) 5,00,000
Other Income (Schedule 14) 1,00,000
Total Income 6,00,000
Less: Interest Expended (Schedule 15) 2,50,000
Less: Operating Expenses (Schedule 16) 1,00,000
Profit before Provisions and Contingencies2,50,000
Less: Provision for Taxation 50,000
Net Profit 2,00,000
Appropriations:
Transfer to Statutory Reserve (25%) 50,000
Proposed Dividend 1,00,000
Balance carried forward 50,000
Example of Balance Sheet (Simplified)
ABC Bank Ltd. – Balance Sheet as at 31st March, 2025
Liabilities ₹ Assets ₹
Capital 5,00,000Cash & Balances with RBI50,000
Reserves & Surplus2,00,000Balances with Banks 80,000
Deposits 10,00,000Investments 3,00,000
Borrowings 1,50,000Advances 10,50,000
Other Liabilities30,000 Fixed Assets 50,000
18,80,000Total Assets 18,80,000
5. Special Points in Banking Accounts
Provision for Bad and Doubtful Debts must be made.

7. Rebate on Bills Discounted should be adjusted at year-end.
Accrued Interest on deposits and advances must be properly
accounted.
Non-performing assets (NPA) must be shown separately.
6. Advantages of Uniform Format
1.Facilitates comparison among banks.
2.Ensures compliance with legal requirements.
3.Increases transparency.
4.Helps RBI in supervision and regulation.
7. Summary
Topic Key Points
Governing LawBanking Regulation Act, 1949
Main AccountsProfit & Loss Account, Balance Sheet
Schedule FormsForm A (Balance Sheet), Form B (P&L)
Major Items Interest earned, Deposits, Advances, Investments
Objective To show true and fair view of bank’s financial performance