In this article we will discuss about the management of a banking company in India.

A banking company must have a whole-time chairman appointed for five years at a time. He may become a director of a subsidiary of the banking company or of a guarantee company registered under Section 25 of the Companies Act but cannot take up any other appointment. The Chairman is appointed by the Board of Directors but, in the case of nationalised banks, he is appointed by the Central Government.

At least 51% of the directors of a banking company must be such persons as have specialised knowledge, or practical experience, in respect of accountancy, agriculture, rural company, banking cooperation, economics, finance, law or any other matter which is approved by the Reserve Bank as useful to the banking company. Directors must not be proprietors of any trading, commercial or industrial concerns (other than small industrial concerns) and also must not have substantial interest in, or be connected with (as employee or manager etc.), any commercial company except a guarantee company incorporated under Section 25 of the Companies Act and except a small scale industrial concern. The Reserve Bank of India has the power to order the removal of a director or the chairman.

Accounts and Audit of a Banking Company:


Every banking company, incorporated in India, at the end of financial year expiring a period of 12 months as the Central Government may by notification in the Official Gazette specify, must prepare a Balance Sheet and a Profit and Loss Account as on the last working day of that year or according to the Third Schedule or as circumstances permit.

At the same time, every banking company, which is incorporated outside India, is required to prepare a Balance Sheet and also a Profit and Loss Account relating to its branch in India also. We know that Form A of the Third Schedule deals with form of Balance Sheet and Form B of the Third Schedule deals with form of Profit and Loss Account.

It is interesting to note that a new set of forms have been prescribed for Balance Sheet and Profit and Loss Account of the banking company and RBI has also issued guidelines to follow the new forms with effect from 31st March, 1992. In other words, the annual accounts for the year ending 31st March, 1992, and onwards are to be prepared in the new formats given in the book.

According to Sec. 30 of the Banking Regulation Act, the Balance Sheet and Profit and Loss Account should be prepared according to Sec. 29 and the same must be audited by a qualified person known as auditor. It is needless to mention here that every banking company must take previous permission from RBI before appointing, re-appointing or removing any auditor. RBI can also order special audit for public interest of depositors.


Moreover, every banking company must have to furnish their copies of accounts and Balance Sheet prepared according to Sec. 29 along with the auditors’ report to the RBI and also the Registrar of Companies within three months from the end of the accounting period.

The Government of India, in January 1991, has issued a notification to make amendments to the Third Schedule to the said Act incorporating and considering the recommendations of the Ghosh Committee, relating to the formats of Balance Sheet and Profit and Loss Account since, after nationalisation of commercial banks, the old formats were not found suitable.

As such, the suggestions were examined and a fresh notification was issued on 19th December, 1991, expressing the Government’s intentions to introduce the revised formats. Thus the RBI issued a circular as on 6th February, 1992, to the chief executives of all commercial banks to prepare their accounts under revised formats for the year ended 31st March, 1992, and thereafter.