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Statutory reserve

Keerthi (4 Points)

05 May 2016

Is the statutory reserves and Statutory liquidity ratio same? I know Statutory liquidity ratio is % of depsoit a bank has to keep in the form of gold or invest in G bonds. But I see a column in balance sheet "transfer to Statutory reserve". So wonder both are same if not what is the purpose of statutory reserves.

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sumeet (india) (267 Points)
Replied 05 May 2016

Both are reserves but meant for different purposes, statutory liquidity ratio is maintained generally by banks to meet unforseen future contingencies and liabilities and on the other side statutory reserves are maintained in as per requirement of a particular provision of a law and are meant to utilize that reserve under that law only. for example Statutory reserves required by income tax act for the purpose of securing tax amount due in case of contravention.