Circulars/Notifications - Banking Supervision Department  
 BPRD Circular No. 1
January 8, 1998 

All Banks

Dear Sirs,

CREATION OF RESERVE FUND.

 

In terms of Section 21 of the Banking Companies Ordinance 1962 every banking company incorporated in Pakistan is required to create a ‘Reserve Fund’ and to transfer to the said Fund certain percentage of profit each year, as discloses in its Profit & Loss Account, before any dividend is declared, In this connection banks were advised vide our BCD Circular No. 28 dated the 21st November, 1972 that profit for the purpose of computing the amount to be transferred to the said Fund should be the profit as disclosed in in a bank’s Profit & Loss Account prepared according to Section 34 of the Banking Companies i.e. before making provision for income tax.

Since the forms of Balance Sheet and Profit & Loss Account of banks as set out in the Second Schedule to the Banking Companies Ordinance, 1962 have since been amended vide BPRD Circular No. 31 dated 13th August 1997 banks may therefore, comply with the provisions vide section 21 abide by creating reserve fund, in the prescribed manner, out of the “Profit after taxation” as disclosed in the Profit & loss Account of a bank.

This supersedes the instructions contained in our earlier BCD Circular No 28 dated the 21st November, 1972.

Please acknowledge receipt.



Yours faithfully,
Sd/-
(Mansur-ur-Rehman Khan)
Director

       
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