The Hindu Business Line : Profit-making banks' donations capped at 1 pc of previous net

THE Reserve Bank of India has set a cap on the donations that may be made by profit-making banks in any fiscal at one per cent of the published profit of the bank for the previous year.

Loss-making banks can make donations totalling Rs 5 lakh only in a fiscal, including donations to exempted entities and funds as indicated by the RBI in its notification of Wednesday.

"In some cases, banks create funds for specific purposes to encourage R&D in fields related to banking. The boards of the banks may determine the amount of contribution to be made to such funds. The contribution made to such funds in a year will be reckoned for computation of the one per cent ceiling," said the notification.

The donations out of the R&D funds should normally be made for setting up professional chairs, granting fellowships and scholarships for studies, and research at Universities and approved institutions.

They may also be made for commissioning special projects for investigation, analysis and research in areas pertaining to banking, finance, statistics, management and economics, etc.

Donations to the Prime Minister's National Relief Fund and subscriptions and contributions to professional bodies and institutions related to the banking industry - like Indian Banks' Association, National Institute of Bank Management, Indian Institute of Banking and Finance, Institute of Banking Personnel Selection and Foreign Exchange Dealers' Association of India - are excluded from the limit.

There is a procedure set by the RBI for contribution to the PMNRF.