Accounts of Banking Companies

Form ‘B’ Form of Profit & Loss Account for the year ended 31st March (Year) Schedule no. Year ended 31-3-00 (current year) Year ended 31-3-01 (previous year) I. II. Income: Interest earned Other Income Total Expenditure: Interest expended Operating expenses Provisions & contingencies 13 14 15 16

Schedule no. Year ended 31-3-00 (current year) Year ended 31-3-01 (previous year) III. IV. Profit/Loss: Net profit/Loss(-) for the year Profit/Loss(-)brought forward Total Appropriations Transfer to Statutory reserve Transfer to other reserves Transfer to Govt/Proposed dividend Balance carried over to B/S

Schedule 13-Interest earned Year ended on 31-3-00 (current year) Year ended on 31-3-01 (previous year) I. II. III. IV. Interest/ discount on advance/ bills Income on investments Interest on balances with RBI and other inter bank funds Others Total

Schedule 14- Other Income Year ended on 31-3-00 (current year) Year ended on 31-3-01 (previous year) I. II. III. IV. V. VI. VII. Commission, exchange & brokerage Profit on sale of investments Less: Loss on sale of investment Profit on revaluation of investments Less: Loss on revaluation of investments Profit on sale of land, buildings and other assets Less: Loss on sale of land, buildings and other assets Profit on exchange transactions Less: Loss on exchange transactions Income earned by way of dividends etc. from subsidiaries/ companies and/or joint ventures abroad /in India Miscellaneous Income Total

Schedule 15- Interest Expended Year ended on 31-3-00 (current year Year ended on 31-3-01 (previous year) I. II. III. Interest on deposits Interest on RBI/ inter-bank borrowings Others Total

Schedule 16- Operating expenses Year ended on 31-3-00 (current year Year ended on 31-3-01 (previous year) I. II. III. IV. V. VI. VII. VIII IX. X. XI. XII. Payment to and provisions for employees Rent, taxes and lighting Printing & stationery Advertisement & publicity Depreciation on banks property Directors fees, allowances and expenses Auditors fees, allowances and expenses (including branch auditors) Law charges Postages, telegrams, telephones etc. Repairs & maintenance Insurance Other expenditure Total

Form of Balance Sheet Balance Sheet of… as on 31st March (year) Capital & Liabilities Schedule As on 31-3-00 (current year) As on 31-3-01 (previous year) Capital Reserve & Surplus Deposits Borrowings Other liabilities and provisions Total 1 2 3 4 5

As on 31-3-01 (previous year) Schedule As on 31-3-00 (current year) As on 31-3-01 (previous year) Assets Cash & balances with RBI Balances with banks and money at call and short notice Investments Advances Fixed Assets Other Assets Total Contingent liabilities Bills for collection 6 7 8 9 10 11 12

Schedule 1- Capital As on 31-3-00 As on 31-3-01 I. II. For nationalised banks Capital (Fully owned by Central Govt.) 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 the Banking Regulation Act, 1949. Total

As on 31-3-00 As on 31-3-01 III. For other banks Authorised Capital (….shares of Rs…each) Issued Capital (….shares of Rs… each) Subscribed Capital (…shares of Rs… each) Called up Capital (…shares of Rs…each) Less: Calls unpaid Add: Forfeited shares

As on 31-3-00 (current year) As on 31-3-01 (previous year) I. II. III. Statutory Reserve Opening Balance Additions during the year Deductions during the year Capital Reserves Securities Premium

As on 31-3-00 (current year) As on 31-3-01 (previous year) IV. V. Revenue & Other Reserves Opening Balance Additions during the year Deductions during the year Balance in P&L A/c Total

Schedule 3- Deposits As on 31-3-00 As on 31-3-01 A. B. Demand Deposits From Banks From Others Saving Bank Deposits Term Deposits Total Deposits of branches in India Deposits of branches outside India

Schedule 4-Borrowings As on 31-3-00 (current year) As on 31-3-01 (previous year) I. II. Borrowing in India Reserve Bank of India Other Banks Other institutions and agencies Borrowings outside India Total

Schedule 5- Other Liabilities & Provisions As on 31-3-00 (current year) As on 31-3-01 (previous year) I. II. III. IV. Bills Payable Inter-office adjustments (net) Interest accrued Others (including provisions) Total

Schedule 6- Cash & Balance with RBI As on 31-3-00 (current year) As on 31-3-01 (previous year) I. II. Cash in hand (including foreign currency notes) Balances with RBI Current Account In Other Accounts Total

Schedule 7- Balance with banks & Money at call & Short notice As on 31-3-00 As on 31-3-01 I. II. In India Balance with banks In current accounts In other deposit accounts (ii) Money at call and short notice With banks With other institutions Total Outside India (i) In current accounts (ii) In other deposit accounts (iii) Money at call and short notice Grand Total

Schedule 8- Investment As on 31-3-00 As on 31-3-01 I. II. Investments in India in Government securities Other approved securities Shares Debentures & Bonds Subsidiaries and /or joint ventures Others (to be specified) Total Investments outside India in Government securities (including local authorities) Others Investments (to be specified)

Schedule 9- Advances As on 31-3-00 As on 31-3-01 A B. II. Bills Purchased and Discounted Cash credits, overdrafts and loans repayable on demand Term loans Total Secured by tangible assets Covered by bank/ government guarantees Unsecured

As on 31-3-00 As on 31-3-01 C. Advances in India Priority Sectors Public Sector Banks Others Total II. Advances outside India Due from Banks Due from Others Bills purchased and discounted Syndicate Loans

Schedule 10- Fixed Assets As on 31-3-00 (current year) As on 31-3-01 (previous year) I. II. Premises At cost as on 31st March of the proceeding year Addition during the year Deduction during the year Depreciation to date Other fixed assets (including furniture and fixtures) At cost as on 31st March of preceding year Total

Schedule 11- Other Assets As on 31-3-00 (current year) As on 31-3-01 (previous year) I. II. III. IV. V. VI. Inter-office adjustments (net) Interest accrued Tax paid in advance/ tax deducted at source Stationary and stamps Non- banking assets acquired in satisfaction of claims Others Total

Schedule 12- Contingent Liabilities As on 31-3-00 (current year) As on 31-3-01 (previous year) I. II. III. IV. V. VI. Claims against the bank not acknowledged as debts Liability for partly paid investments Liability on account of outstanding forward exchange contracts Guarantees given on behalf of constituents In India (b) Outside India Acceptances, endorsements & other obligations Other items for which the bank is contingently liable Total

Statutory Reserve Under section 17, every banking company incorporated in India is required to transfer at least 25% of its current profits to its reserve fund. It is known as statutory reserve. Only those banks get exemption from this legal condition, whose reserve along with share premium if any become equal to paid up capital. Accounting treatment: It is shown in the P&L A/c under the heading ‘Appropriations’. In the B/S it is disclosed as a separate item under the heading ‘ R&S’ under Schedule 2.

Non- Banking Asset Any asset which does not come in the ordinary course of business of a bank is called non-banking asset. The bank is not allowed to deal in such assets. But a bank can always lend against the security of the assets. The bank may have to take possession of the asset given as security, if the loanee fails to repay the loans. Such asset is a non-banking asset. It appears on the asset side of the B/S under the head ‘Other Asset’. Such assets have to be disposed off within a period of seven years from the date of acquiring these assets. Accounting treatment: Any profit or loss on sale of such asset must be shown in the P&L A/c under Schedule 14. Non- Banking assets acquired in satisfaction of claims must be disclosed as separate item in B/S under Schedule -11 under the head ‘Other Assets’.

Classification of Advances Banks are required to classify their advances into following four broad groups: Standard assets Sub-standard assets Doubtful assets Loss assets

Standard Assets Standard asset is one which does not disclose any problem and which does not carry more than normal risk attached to the business. Such an asset is not non-performing. However , govt. guaranteed advances, although categorised as NPA for the purpose of income recognition are to be treated as standard assets. Further the advances against term deposits, NSC,s eligible for surrender, Indira Vikas Patar, Kisan Vikas Patar and LIC Policies are to be classified as standard Assets.

Sub-standard Assets With effect from 31st March 2001, a sub standard asset is one which has remained NPA for a period not exceeding 18 months. Proper security is not available to the bank for these assets and there are chances that bank may suffer some loss on account of holding such assets. Provision @10% of the total outstanding amount of these assets is to be made.

Doubtful Assets With effect from 31st March 2001 an asset to be classified as doubtful has to remain NPA for a period exceeding 18 months. A proper distinction is made between secured and unsecured portion of the asset. The unsecured portion has to be fully provided i.e. 100% amount for provision be made against unsecured doubtful assets. Also proper provision be made against the secured portion on the following basis: Period for which the advance has been considered doubtful % of the provision for the secured portion Upto 1 year 1 year to 3 years More than 3 years 20% 30% 40%

Loss Asset A loss asset is one where loss has been identified by the bank or internal or external auditors or RBI inspectors, but the amount has not been written off wholly or partly. It is considered non- collected and is of such little value that its continuance as a bankable asset is not warranted although there may be some salvage recoverable value. There is no security available for such advances. These assets should be written off entirely or 100% provision should be made for the amount outstanding.

Rebate on Bills Discounted It represents unearned discount for those bills which will mature after the closing of financial accounts. It is possible that the maturity dates of some bills may fall after the date of preparation of final accounts, the total discount credited in respect of such bills cannot be treated as earned during the current year. So discount for the unexpired period is debited to discount account to cancel the credit given previously and credited to Rebate on Bills Discounted Account or Unexpired Discount Account. Accounting treatment: At the end of the year- Discount A/c Dr. To Rebate on Bills Discounted A/c (ii) At the beginning of the year- Rebate on bills discounted A/c Dr. To Discount A/c

e.g. A person gets a bills of exchange discounted on 1st February 2003 during the financial year ending 31st March 2003. the amount of the bill is say Rs. 1000 and it is for 3 months, the date of the maturity being 4th May,2003. The rate of discount 6% p.a. The total discount charged by the bank is Rs. 15.12. A part of this discount belongs to the nest accounting year i.e. the amount of discount for the period from 1st April to 4th May. This part of discount i.e. Rs. 5.75 is called Rebate on bills Discounted. 31st March: Discount A/c Dr. 5.75 Rebate on Bills Discounted 5.75 (being the amount of unexpired discount) 1st April Rebate on Bills discounted A/c Dr. 5.75 To Discount A/c 5.75 (being the amount of rebate brought in the next accounting year)

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