APPROPRIATION FROM RESERVE FUND : RBI DIRECTIONS
RBI has advised the banks that :
- All expenses including provisions and write-offs recognized in a period, whether mandatory or prudential, should be reflected in the profit and loss account for the period as an ‘above the line’ item (i.e. before arriving at the net profit);
- Banks are also advised in their own interest to take prior approval from the Reserve Bank before any appropriation is made from the statutory reserve or any other reserves.
- Wherever draw down from reserves takes place with the prior approval of Reserve Bank, it should be effected only ‘below the line’ (i.e. after arriving at the profit/loss for the year); and
- It should also be ensured that suitable disclosures are made of such draw down of reserves in the ‘Notes on Accounts’ to the Balance Sheet.
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