Chapter 1.

Final Accounts
of
Banking Company
(Lecture 01)

Ms. Sravya B. Peethala

 Overview of Banks
Banks are Financial Institutions established to earn profits.

Backbone of
Savers/
Depositors the economy

Borrowers
Deposit money

Lends money
Bank pays back
Principal +
Interest @ 8%
to Depositor Borrower pays
Profit= 15% - 8% = 7% back Principal +
Interest @ 15%
to Bank
In this way, Banks earn profits which enables
them to carry on day to day activities.
 Definition of Banking

Banking is defined as the

accepting, for the purpose of
lending or investment, of
deposits of money from
public payable on demand or
otherwise and withdrawal by
cheque, draft, order or
otherwise.

Sec 5(b) of the Banking

Regulation Act, 1949
 Definition of Banking Company
A Banking Company means any company which transacts the
business of banking in India.
The major companies carrying on business of banking in India
include:
• Nationalised Banks SBI, Bank of Baroda, Bank of
1. (Owned by Government) (RBI is the first one) India, CANARA Bank etc.

State Bank of India Hyderabad,

• State Bank of India and its subsidiaries State Bank of India Patiala,
2. SBICAP Securities Ltd. etc.

HDFC Bank, Axis Bank, Yes

• Private Banking Companies Bank, ICICI Bank etc.
3.
Citibank, Standard Chartered
• Foreign Banks having branches in India Bank, HSBC, Barclays Bank etc.
4.

• Co-operative Banks New India Co-operative Bank,

5. (Services to agricultural, rural sectors) Saraswat Co-operative Bank etc.
 Functions of Banks
Some of the main functions of modern commercial Banks are as follows:

1. • Receiving deposits withdrawable by cheque etc.

• Lending money by-

2. • i) making loans and advances, and
• ii) purchasing or discounting of bills.

3. • Making investments on its own account or for customers.

4. • Issuing Guarantees.

5. • Safe custody of securities and valuables.

6. • Buying, selling and dealing in foreign exchange.

• Transferring money from place to place by issue of demand drafts,

7. telegraphic transfers, travellers’ cheques etc. and collection of bills.

8. • Issuing Letter of Credit (Guarantee by Bank)

 Statutes Governing Banking Companies
The principle enactments which govern the functioning of various types
of bank in India are as follows:

a. • Banking Regulation Act, 1949;

b. • Banking Companies (Acquisition of Transfer of Undertakings) Act, 1970;

c. • Banking Companies (Acquisition of Transfer of Undertakings) Act, 1980;

d. • State Bank of India Act, 1955;

e. • State Bank of India (Subsidiary Banks) Act, 1959;

f. • Regional Rural Banks Act, 1976;

g. • Companies Act, 1956;

• Co-operative Societies Act, 1912 or the relevant State Co-operative Societies
h. Acts.
The Reserve Bank of India Act, 1934 gives wide powers to Reserve Bank of
India to give directions to Banks and such directions have considerable effect
on the functioning of banks.
 Final Accounts of Banking Company
The provisions of sections 29-33 of the Banking Regulation Act, 1949
related to annual accounts and audit are summed up below:

1. Preparation • On 31st March each banking company must prepare its annual
accounts in the forms set out in third schedule.
of Annual • Form A in the third schedule is the Balance Sheet.
Accounts • Form B in the third schedule is Profit & Loss A/c.

• The Balance Sheet and Profit & Loss A/c of a banking company
2. Audit of should be audited by a Chartered Accountant.
Accounts • The appointment of the auditor should be as per Companies Act,
1956.

• Three copies of the audited Balance Sheet and Profit & Loss A/c together
3. Filing of with the auditors’ report shall be furnished to RBI within three months
from the end of the accounting year.
Accounts • Three copies of the audited Balance Sheet and Profit & Loss A/c together
with the auditors’ report shall also be furnished to Registrar of Companies.

• The Balance Sheet, Profit & Loss A/c and the Auditor’s Report
4. Publication shall be published in any newspaper circulating at the place where
of Accounts it has its principal office, within 6 months from the end of the
accounting year.