Mod - 1 - Reserve Account

[Jin Yoong]

Question : Assuming the bank's profit is RM500mil for the year, paid
up capital is RM400mil. The minimum amount to be transferred to the
reserve account is RM200 million and not 250million right?

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Response:

This question is maintenance of reserve fund under section 36 of
BAFIA. I have check with BNM on this. To answer your question assuming
no other information is given. The answer is to transfer 50% of the
net profit equivalent to 50% of the paid-up capital, i.e., RM200
million as in the above example.

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I also quote section 36 of BAFIA for your information:

Every institution shall maintain a reserve fund; and

i) a sum equal to not less than 50% of the net profits of that year,
so long as the amount of the reserve fund is less than 50% of its paid-
up capital; or

ii) a sum equal to not less than 25% of the net profits of the year,
so long as the amount of the reserve fund is 50% but less than 100% of
its paid-up capital.