Banks play a vital role in the economy by acting as an intermediary between customers that have surplus capital and those that have deficits. They accept deposits from customers and channel those funds into lending activities. Banks are regulated in India by acts like the Banking Regulation Act of 1949 which defines banking and banking companies. Their books of account are maintained through systems like the slip system and include ledgers, registers, and control accounts to ensure accuracy.
Banks play a vital role in the economy by acting as an intermediary between customers that have surplus capital and those that have deficits. They accept deposits from customers and channel those funds into lending activities. Banks are regulated in India by acts like the Banking Regulation Act of 1949 which defines banking and banking companies. Their books of account are maintained through systems like the slip system and include ledgers, registers, and control accounts to ensure accuracy.
Banks play a vital role in the economy by acting as an intermediary between customers that have surplus capital and those that have deficits. They accept deposits from customers and channel those funds into lending activities. Banks are regulated in India by acts like the Banking Regulation Act of 1949 which defines banking and banking companies. Their books of account are maintained through systems like the slip system and include ledgers, registers, and control accounts to ensure accuracy.
Banks play a vital role in the economy by acting as an intermediary between customers that have surplus capital and those that have deficits. They accept deposits from customers and channel those funds into lending activities. Banks are regulated in India by acts like the Banking Regulation Act of 1949 which defines banking and banking companies. Their books of account are maintained through systems like the slip system and include ledgers, registers, and control accounts to ensure accuracy.
A Bank is a financial institution and a financial intermediary that accepts deposits and channels those deposits into lending activities. A Bank is the connection between customers that have capital deficits and customers with capital surpluses. Banks are vital to business and may be likened to the heart in a human being, circulating money through economy. Banks in India and their activities are regulated by the Banking Regulation Act, 1949. Reserve Bank of India is the apex organisation for regulating Banking activities.
DEFINITION OF BANKING
According to Section 5(b) of the Banking Regulation Act, 1949 “banking” means the accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by cheque, draft, order or otherwise.
DEFINITION OF BANKING COMPANY
According to Section 5(c) of the Banking Regulations Act, 1949 “banking company” means any company which transacts the business of banking [in India]. Explanation— Any company which is engaged in the manufacture of goods or carries on any trade and which accepts deposits of money from the public merely for the purpose of financing its business as such manufacturer or trader shall not be deemed to transact the business of banking within the meaning of this clause.
STATUTES GOVERNING BANKING COMPANIES
➢ Banking Regulation Act, 1949
It is an act that consolidates the law relating to banking and provide for the nature of transaction carried on by banks in India. It contains the provisions of power of RBI to control advances by banking companies, accounts and audit of banks, restrictions as to minimum paid up capital and reserves, restrictions as to payment of dividends, validation of license granted by RBI to multi sate co-operative societies. It also contains provisions of suspension of business and winding up of banking business.
➢ Banking Companies (Acquisition and Transfer of Undertakings)
Act,1970 This act provides provisions for the acquisition and transfer of the undertakings of certain banking companies, having regard to their size, resources, coverage and organisation, in order to control the heights of the economy and to meet progressively, and serve better, the needs of development of the economy in conformity with national policy and objectives and for matter connected therewith or incidental thereto.
Page 1 ➢ Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 This act provides provisions for the acquisition and transfer of the undertakings of certain banking companies, having regard to their size, resources, coverage and organisation, in order to further control the heights of the economy, to meet progressively, and serve better, the needs of the development of the economy and to promote the welfare of the people.
➢ State Bank of India Act, 1955
It is an act that constituted State Bank of India and transferred to it the undertaking of the Imperial Bank of India and to provide for other matters connected therewith or incidental thereto. Its purpose is to extend the banking facilities on a large scale, more particularly in the rural and semi-urban areas, and for diverse other public purposes.
➢ Regional Rural Banks Act, 1976
It is an act that provide for the incorporation, regulation and winding up of Regional Rural Banks with a view to developing the rural economy by providing, for the purpose of development of agriculture, trade, commerce, industry and other productive activities in the rural areas, credit and other facilities, particularly to the small and marginal farmers, agricultural labourers, artisans and small entrepreneurs, and for matters connected therewith and incidental thereto.
➢ Companies Act, 1956
As per section 2 of banking regulation act, 1949 the provisions of banking regulation act, 1949Act shall be in addition to, and not, save as here in after expressly provided, in derogation of the Companies Act, 1956 (1 of 1956), and any other law for the time being in force. The Banking Regulation Act is to be read as supplemental to the Companies Act.
➢ Co-operative Societies Act, 1912 or the relevant state Co-operative
Societies Act. It is an act to facilitate the formation of Co-operative Societies for the promotion of thrift and self-help among agriculturists, artisans and persons of limited means, and for that purpose to amend the law relating to Co-operative Societies.
➢ Prevention of Money Laundering Act, 2002
As per the provisions of the Act, every banking company, financial institution and intermediary shall have to maintain a record of all the transactions; the nature and value of which has been prescribed in the Rules under the PMLA.
Page 2 ➢ Credit Information (Companies Regulation Act), 2005 This act provides provisions for regulation of credit information companies and to facilitate efficient distribution of credit and for matters connected therewith or incidental thereto.
➢ Securitisation and Reconstruction of Financial Assets and
Enforcement of Security Interest Act, 2002
It is an act to regulate securitisation and reconstruction of financial assets and
enforcement of security interest and for matters connected therewith or incidental thereto.
➢ Banking Cash transaction tax (Chapter VII of Finance act, 2005)
The Finance Act, 2005 has introduced a new levy, namely, the Banking Cash Transaction Tax on certain banking transactions. The provisions relating to levy of this tax are contained in Chapter VII (sections 93 to 112) of the Act. This act comes into force from 1st June 2005. The tax base for the purposes of BCTT is the value of taxable banking transaction.
➢ Income tax act, 1961
The income of a Bank is chargeable to income tax under section 28, Profits and Gains of Business and Profession. Apart from normal deductions under section Chapter IV D. Certain Specific Sections deal with the income chargeable to tax of a banking company. Section 43D provides that interest income of bad and doubtful debts, i.e. NPAs shall be chargeable to tax in the year in which they are credited to the profit and loss account or the year in which they are received. Hence the banks are allowed to follow a Hybrid System of Accounting, which is banned in case of other assesses by virtue of section 145 of the Income tax act.
Page 3 FUNCTIONS OF BANKS Some of the main functions of commercial banks are as follows:
• Overdraft • Cash Credits • Loans • Discounting of Bill of Exchange
❖ Secondary Functions of Banks
➢ Agency Functions • Transfer of Funds • Collection of Cheques • Periodic Payments • Portfolio Management • Periodic Collections • Other Agency Functions
➢ General Utility Functions
• Issue of Drafts, Letter of Credits, etc. • Locker Facility • Underwriting of Shares • Dealing in Foreign Exchange • Project Reports • Social Welfare Programmes • Other Utility Functions - Referee to financial standing of customers - Traveller’s cheque
Page 4 SYSTEM OF BOOK-KEEPING IN BANKS
➢ OBJECTIVES Every bank is required to maintain proper books of accounts and have its accounts audited. A bank has to ensure that its books and accounts are • Accurate, and • Up-to-date.
➢ SYSTEM
Slip (or Voucher) System of Ledger posting:
As a safe guard against any payment being made in the account of a customer in excess of the amount standing to his credit or a cheque of a customer being dishonoured due to a mistake in the balance in his account, it is necessary that customer’s accounts should be kept up-to-date and checked regularly.
Voucher summary sheets:
The voucher entered into different personal ledgers each day are summarised on summary sheets, totals of which are posted to the control accounts in the general ledger.
Daily Trial Balance:
The general ledger trial balance is extracted and agreed every day.
Control Accounts: A trial balance of the detailed personal ledgers is prepared periodically, usually every two weeks, agreed with general ledger control account.
Double Voucher System:
Two vouchers are prepared for every transaction not involving cash – one debit voucher and another credit voucher.
Page 5 BOOKS OF ACCOUNT
❖ GENERAL LEDGER The General Ledger contains the control accounts of all personal ledgers, the profit and loss accounts (income and expense items) and the balance sheet accounts (assets and liabilities). The General Ledger is kept in such a manner that the Balance Sheet can be readily prepared there from.
❖ SUBSIDIARY BOOKS ➢ Personal Ledgers: Banks keep separate ledgers for different types of accounts, such as Current accounts, Savings accounts, Fixed Deposits accounts, Loans, Overdrafts etc. These ledgers are posted directly from the vouchers (mainly pay- in-slips and Cheques).
➢ Bills Registers: These record transactions pertaining to different types of bills, such as Bills purchased, Bills for Collection, Outward Bills for Collection etc. Entries in Bills Registers are made on the basis of the original documents or bills.
➢ Other Subsidiary Registers: Other subsidiary registers are
• Registers for Demand Drafts, Telegraphic Transfers and Mail Transfers Issued to or Received from Branches and Agencies. • Letters of Credit Registers. • Letters of Guarantee Registers etc.
Entries in these subsidiary registers are made from original documents which too are summarised on vouchers every day. These vouchers are posted into the Day Book. Outstanding entries are tallied with the respective control accounts in the General Ledger.
❖ MEMORANDUM BOOKS Departmental Journals Each department of the bank maintains a journal to record the transfer entries passed by it. These are only Memorandum entries and do not affect the Main Books of account.
Cash Department The Cash Department maintains the following books- • Receiving Cashiers Cash Book; • Paying Cashiers Cash Book; • Main Cash Book; • Cash Balance Book. The Main Cash Book is maintained by persons other than the cashiers.
Page 6 FINAL ACCOUNTS
Legal Provisions
➢ Preparation of Accounts and balance-sheet (Section 29)
At the expiration of each calendar year 1[or at the expiration of a period of twelve months ending with such date as the Central Government may, by notification in the Official Gazette, specify in this behalf,] every banking company incorporated [in India], in respect of all business transacted by it, and every banking company incorporated [outside India], in respect of all business transacted through its branches [in India], shall prepare with reference to [that year or period, as the case may be,] a balance-sheet and profit and loss account as on the last working day of [that year or the period, as the case may be] in the Forms set out in the Third Schedule or as near thereto as circumstances admit.
➢ Audit of Accounts (Section 30)
The balance-sheet and profit and loss account prepared in accordance with section 29 shall be audited by a person duly qualified under any law for the time being in force to be an auditor of companies.
➢ Submission of returns (Section 31)
The accounts and balance-sheet referred to in section 29 together with the auditor’s report shall be published in the prescribed manner and three copies thereof shall be furnished as returns to the Reserve Bank within three months from the end of the period to which they refer. Provided that the Reserve Bank may in any case extend the said period of three months for the furnishing of such returns by a further period not exceeding three months
➢ Copies of balance-sheets and accounts to be sent to registrar (Section 32)
Where a banking company in any year furnishes its accounts and balance-sheet in accordance with the provisions of section 31, it shall at the same time send to the registrar three copies of such accounts and balance-sheet and of the auditor's report, and where such copies are so sent, it shall not be necessary to file with the registrar, in the case of a public company, copies of the accounts and balance-sheet and of the auditor's report, and, in the case of a private company, copies of the balance-sheet and of the auditor's report as required by sub-section (1)of section 220 of the Companies Act, 1956 (1 of 1956); and the copies so sent shall be chargeable with the same fee and shall be dealt with in all respects as if they were filed in accordance with that section.]
➢ Display of audited balance-sheet by companies incorporated outside India
(Section 33) Every banking company incorporated [outside India] shall, not later than the first Monday in August of any year in which it carries on business, display in a conspicuous place in its principal office and in every branch office [in India] a copy of its last audited balance-sheet and profit and loss account prepared under section 29, and shall keep the copy so displayed until replaced by a copy of the subsequent balance-sheet and profit and loss Page 7 account so prepared, and every such banking company shall display in like manner copies of its complete audited balance-sheet and profit and loss account relating to its banking business as soon as they are available, and shall keep the copies so displayed until copies of such subsequent accounts are available.
IndusInd Bank
The idea behind IndusInd Bank, named after the Indus Valley civilization, was conceived by Mr. Srichand P. Hinduja, the head of the Hinduja Group. One of the first new- generation private banks in India, IndusInd Bank was inaugurated in April 1994. It was established with the help of collective contributions from the NRI community, towards the economic and social development of India. The operations of IndusInd Bank were started with a capital base of Rs. 1,000 million. Of the total 1,000 million, Rs. 600 million was raised through private placements by Indian Residents and Rs. 400 million was contributed by Non-Resident Indians (NRIs). A decade after its establishment i.e. in June 2004, IndusInd Bank was merged with Ashok Leyland Finance Ltd, which was one of the largest leasing finances and hire purchase companies in India, at that time. With this, the bank increased its customer base and geographical penetration.
Vision:
IndusInd Bank (we) will be:
• A relevant business and banking partner to our clients • Customer Responsive, striving at all times to collaborate with clients in providing • solutions for their banking needs • A forerunner in the market place in terms of profitability, productivity and efficiency • Engaged with all our stakeholders and will deliver sustainable and compliant returns
Mission:
We will consistently add value to all our stakeholders and emerge as the ‘best-in-class’ in the chosen parameters amongst the comity of banks, by doubling our profits, clients and branches within the next three years.
Products & Services:
IndusInd Bank provides multi-channel facilities, which comprise of ATMs, Net Banking, Mobile Banking, Phone Banking, Multi-city Banking and International Debit Cards. It is also credited for being one of the first banks to become a part of RBI’s Real Time Gross Settlement (RTGS) system. Enlisting the help of KPMG, IndusInd Bank has adopted an
Page 8 enterprise-wide risk management system, including global best practices in the area of Risk Management.
The other products and services offered by the bank include:
Page 10 PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED MARCH 31, 2018
Page 11 Schedules
Page 12 Page 13 Page 14 Page 15 Page 16 CONCLUSION The balance-sheet along with the income statement is an important tool for investors and many other parties who are interested in it to gain insight into a company and its operation. The balance sheet is a snapshot at a single point of time of the company’s accounts- covering its assets, liabilities and shareholder’s equity. The purpose of the balance-sheet is to give users an idea of the company’s financial position along with displaying what the company owns and owes. It is important that all investors know how to use, analyse and read balance-sheet. P & L account tells the net profit and net loss of a company and its appropriation. In the case of ICICI Bank, the bank continued to grow and diversify its assets base and revenue streams. Bank maintained its position in all main areas such as retail credit, insurance, mutual fund, rural banking etc. Continuous increase in the number of branches, ATM and electronic channels shows the growth take place in bank.
