Accounts of Banking

Companies
Introduction and Meaning - Books of accounts to be maintained by Banking Companies - Special
features of Bank Accounting - Items requiring special attention in Preparing Final Accounts – Rebate on
Bills Discounted – Statutory Reserves – Statutory Liquidity Ratio – Cash Reserve Ratio – Income from
Non-Performing Assets – Basis of Treating a Credit Facility as NPA – Assets Classification and Provisions
– Preparation of Final Accounts according to the Guidelines of RBI and Banking Regulation Act of 1949.
Introduction and Meaning
 Items requiring special attention in
Preparing Final Accounts
• Rebate on Bills Discounted
• Also called unearned discount, unexpired discount or discount
received in advance
Cont…
• Treatment
Journal Entries
1st Year
Discount on Bills A/C……………Dr.
To Rebate on Bills Discounted (Liability) A/C
To P&L A/C
(Being transfer of rebate on bill discount from discount and balance to profit and
loss account)
Next Year
Rebate on Bills Discount A/C……………Dr.
To Discount on Bills A/C
(Being transfer of rebate on bill discount to discount)
Cont…
• Bills for Collection
Example Problem
Cont…
Reserves
• Cash Reserve Ratio (4.5%)
• Every banking company, not being a scheduled bank, has to maintain a cash
reserve (CRR) of at least a percentage of the total of its demand and time
liabilities.
• Cash reserve can be maintained with itself or by way of a balance in the
Current account with the reserve bank or by way of net balance in current
accounts or in one or more of the aforesaid ways.
• Statutory Liquidity Ratio (18%)
• SLR is the minimum percentage of total demand and time liabilities that the
commercial bank maintains through gold, cash and other securities.
Dividend
Basis of Treating a Credit Facility as NPA
Problem
Classification of NPA
Criteria
Rates of Provisioning for Non-Performing
Assets and Restructured Advances
Provision for Advances covered under
DICG/ECGC in case of advance :
• Export Credit Guarantee Corporation (ECGC) or by Deposit Insurance
and Credit Guarantee Corporation (DICGC)
Investment
• Rebate on Bill Discount

• Provisions for NPA (bad and Doubtful debt)

• Provision for statutory reserves

• Provision for general and other reserve

• Dividend payment

• Depreciation

• Valuation of Investment