BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Under Section 17, every banking company incorporated in India is required to transfer at least 25% of its current profit to its reserve fund. It is known as statutory reserve. Only those banks get exemptions from this legal condition whose reserve along with share premium if any become equal to paid up capital.

Detailed explanation-2: -469(27)-74 dated December 12, 1974, all Indian Scheduled Commercial banks are required to transfer at least 25% of the disclosed profits (before making adjustment/provision for bonus to staff) to Reserve Fund as against the level of 20% prescribed in Sections 17(1) of Banking Regulation Act, 1949.

Detailed explanation-3: -In terms of section 17 (1) and 11 (1)(b) (ii) of the Banking Regulation Act, 1949 banks are required to transfer, out of the balance of profit as disclosed in the profit and loss account, a sum equivalent to not less than 20 per cent of such profit to Reserve Fund. This provision is a minimum requirement.

Detailed explanation-4: -The Statutory Reserve Requirement (SRR) is an instrument to manage liquidity. Banking institutions are required to maintain balances in their Statutory Reserve Accounts (SRA) equivalent to a certain proportion of their eligible liabilities (EL), this proportion being the SRR rate.

Detailed explanation-5: -There is no fixed rate of statutory reserves to be maintained by each organization. Depending upon the nature of business and the ruling state rules and regulations, rates may vary. Like marine insurance companies, they may need to keep 100% of consignment value handled in the form of SRs.