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Final Accounts of Banking Companies

Final Accounts of Banking Companies

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Published by pushkar
bank accounting and final accounts of banking companies
bank accounting and final accounts of banking companies

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Published by: pushkar on Nov 01, 2009
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10/28/2013

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Project report of accounting in banks and balance sheet
1. INTRODUCTION
A banking company means and includes any company which carries on business or which transacts banking business in India. A banking businessis generally governed by the provisions of the Companies Act 1956 andspecifically by the Banking Regulation Act. The Banking regulation Actof 1949 came into force on 16
th
March 1949 as a result of long-felt need toregulate the banking business in India and protect the interest of number of depositors.The existence of well- organized, regulated and efficient banking systemis pre-requisite for economic growth. Banks are agencies responsible for mobilizing and channeling of funds in a country. The major institutionscarrying business,in India, include:(a)Nationalized banks(b)State bank of India and Associates banks(c)Foreign banks having branches in India(d) Co-operative banks(e)Rural banks and(f)Private sector banks.
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Project report of accounting in banks and balance sheet
2. DEFINITION AND FUNCTIONS OF A BANK 
Banking has been defined by section 5 of the Banking Regulation Act andmeans:(a)accepting deposits of money from public
(b)
for the purpose of lending or investment and deposits are repayableon demand or otherwise by cheque, draft, and order or otherwise. Itshould be noted that company which is engaged in manufacturinggoods and for the purpose of financing business accepts depositsfrom the public should not be deemed to transact business of  banking.In addition to banking business, a bank is permitted under Section 6 of theBanking Regulation Act to engage in certain class of business which isincidental to the business of banking. Section 8 of the Banking RegulationAct prohibits a bank from buying and selling or dealing in goods except inconnection with realization of a security held by it or in connection withthe business of collections or negotiating bills of exchange.Some of the main functions of modern commercial banks are:
(a)
Accepting deposits and providing facilities to depositors of payment by cheques.
(b)
Granting loans and advances (cash credits, overdraft, term loans,etc.).
(c)
Dealing in securities on its own account or on behalf of itscustomers.(d)Opening letters of credits.(e)Issuing guarantees.(f) Dealing in foreign exchange.
(g)
Transferring money from one place to another through demanddraft, telegraphic transfers, traveler’s cheques, bills, etc.
(h)
Merchant banking, i.e. acting as managers to public issues, etc.
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Project report of accounting in banks and balance sheet
However, any company which is engaged in the manufacturer of goods or carries on any trade and which accepts deposits of money from the publicmerely for the purpose of financing its business as manufacturer or trader shall not be deemed to transact the business of banking. It may bementioned that the Banking Regulation Act, 1949 is not applicable to a primary agricultural society, a co-operative land mortgage bank and anyother co-operative society except in the manner and to the extent specifiedin Part V of the Act.Some banks are included in the Second Schedule to the Reserve Bank of India Act, 1934; these are called Scheduled Banks. The Reserve Bank includes a bank in this schedule if it fulfils certain conditions. The ReserveBanks gives certain facilities to schedule banks including the following:(a) The purchase, sale, and re-discounting of certain bills of exchange, or  promissory notes;(b) Purchase and sale of foreign exchange;(c) Purchase, sale and re-discounting of foreign bills of exchange;(d) Making of loans and advances to scheduled banks;(e) Maintenance of accounts of the scheduled bank in its bankingdepartment and issue department;(f) Remittance of money between different branches of scheduled banksthrough the offices, branches or agencies of Reserve Bank free of cost or at nominal rates.Section 6 of the Banking Regulation Act, 1949 specifies the forms of  business in which a banking company may engage. These are :(i) borrowing, raising or taking up of money; lending or advancing of money; drawing, making, accepting, discounting, buying, selling,collecting and dealing in bills of exchange, hundies, promissory notes,etc.;(ii) acting as agents for any government or local authority or any other  person;(iii) directing for public and private loans and negotiating and issuing thesame;(iv) effecting, insuring, guaranteeing, under-writing, participating inmanaging and carrying out of any issue of shares, stock, debentures etc.;(v) carrying on and transacting every kind of guarantee and indemnity business;(vi) managing, selling and realising property which may come into the possession of the banking company in satisfaction of its claim;
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