DBOD. No. Dir.BC. 69/13.01.10/98

July 3, 1998
Aashadha 12, 1920 (Saka)

All Scheduled Commercial Banks,

Dear Sir,

Donations

As per the existing instructions, banks are permitted to make "Normal" donations up to one percent of the published profit to the previous year. Besides, banks are also allowed to make donations to National Funds and other Funds recognised/sponsored by the Central or State Government within the overall annual ceiling of two percent of the published profit of the previous year. Certain donations/contributions are exempted as indicated in para 3(vii)(a) to (d) of our circular DBOD. No. Dir. BC. 52/C.347(J)-89 dated December 2, 1989 and DBOD. No. Dir. BC.121/c. 347(j)-90 dated June 18, 1990. In individual cases of loss making banks, on an application being made to Reserve Bank of India, permission is given to make such donations upto Rs. 3 lakhs in a year. Banks have also been advised to ensure that as far as possible donations are not made for construction of premises/other capital expenditure of the donees.

2. On a review and in supersession of all previous instructions in regard to donations it has now been decided that profit making banks may make donations during a financial year, aggregating up to one percent of the publised profit of the bank for the previous year inclusive of donations earlier under exempted category and donations to National Funds and other Funds. Banks are prohibited from making donations in excess of the prescribed ceiling of one percent of the published profit of the previous year. However, loss making banks can make donations totalling Rs. 5 lakhs only in a financial year. Un-utilised amount of the permissible limit in a year should not be carried forward to the next year for the purpose of making donations.

3. Banks may take their own decision in regard to the purpose of the donations. The Boards of Directors of banks may clearly lay down a policy (i) of making donations including the purpose for which donations may be given (ii) that it should not be linked to deposit mobilisation and (iii) the donations should be fairly well distributed rather than being concentrated on a few donees etc.

4. The banks may continue to submit annual review of donations to their Boards of Directors as hitherto.

Yours faithfully

(M.P. Kothari)

General Manager