Discussion
The provision of General Reserve Banking companies are made keeping in view the provisions of
Answer: B
Correct answer: Banking Companies Act, 1949
Section 17 of the Banking Regulation Act, 1949 - originally enacted as the Banking Companies Act - requires every banking company to transfer a prescribed percentage of its profit each year to a reserve fund before declaring any dividend.
The obligation is a prudential one, building a capital cushion out of retained earnings, and it is stricter than anything the Companies Act imposes on companies generally. Where the two statutes overlap, the banking legislation prevails for a banking company.
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