Banks are required to transfer a part of their profits to a Reserve Fund

(a) u/s 17-1 of B R Act (b) and the amount is to be 20% of such profits (c) after payment of dividend (d) and commercial banks operating in India should transfer not less than 25 per cent of the ‘net profit’

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.  Considering the imperative need for augmenting the reserves, it was advised vide circular DBOD.No.BP.BC.24/21.04.018/ 2000-2001 dated September 23, 2000 that all scheduled commercial banks operating in India (including foreign banks) should transfer not less than 25 per cent of the ‘net profit’ (before appropriations) to the Reserve Fund with effect from the year ending 31 March, 2001.