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Banking and Insurance - Laws and Practice · Analysis of Financial Statements of Banks

Structure of Bank Financial Statements under the Third Schedule

Updated 11 October 2026 · Fact-checked

Banks in India prepare their balance sheet and profit and loss account in the Forms A and B given in the Third Schedule of the Banking Regulation Act, 1949. Each form refers to numbered schedules that give details. To answer, name the form, list the main heads, explain the schedules and state the notes and disclosures.

Understand Structure of Bank Financial Statements

A company normally follows Schedule III of the Companies Act, 2013. A bank does not. Section 29 of the Banking Regulation Act, 1949 requires a banking company to prepare its balance sheet and profit and loss account in the forms set out in the Third Schedule. Form A is the balance sheet. Form B is the profit and loss account.

The forms are short on the face. The detail sits in schedules. Each line on the face carries a schedule number, and the schedule breaks that line into its parts. This keeps the statements readable while still giving full information.

The balance sheet (Form A) has two sides. Capital and Liabilities has Capital, Reserves and Surplus, Deposits, Borrowings, and Other Liabilities and Provisions. Property and Assets has Cash and Balances with RBI, Balances with Banks and Money at Call and Short Notice, Investments, Advances, Fixed Assets, and Other Assets. Contingent Liabilities and Bills for Collection are shown at the foot.

The profit and loss account (Form B) has Income and Expenditure. Income is Interest Earned and Other Income. Expenditure is Interest Expended, Operating Expenses, and Provisions and Contingencies. The result is profit or loss, followed by its appropriations to reserves, dividend and the like.

The schedules are numbered 1 to 18 in the usual presentation. Schedules 1 to 5 and 6 to 11 support the balance sheet. Schedules 13 to 16 support the profit and loss account. Schedules 17 and 18 are the significant accounting policies and notes to accounts. Banks also give extra disclosures required by RBI. Learn the order of the heads, because the exam asks you to reproduce or explain it.

Key rules to remember

Statutory basis
Section 29 + Third Schedule → Form A (Balance Sheet) and Form B (Profit and Loss Account)
State this first in any answer. Section 29 is the provision requiring the accounts to be prepared in these forms.
Balance sheet identity
Capital and Liabilities total = Property and Assets total
Both sides must agree. Contingent liabilities are shown below the line and are not added in.
Liabilities side schedules
Sch 1 Capital; Sch 2 Reserves and Surplus; Sch 3 Deposits; Sch 4 Borrowings; Sch 5 Other Liabilities and Provisions
Remember the order: Capital, Reserves, Deposits, Borrowings, Other Liabilities.
Assets side schedules
Sch 6 Cash and Balances with RBI; Sch 7 Balances with Banks and Money at Call and Short Notice; Sch 8 Investments; Sch 9 Advances; Sch 10 Fixed Assets; Sch 11 Other Assets
Assets are shown in order of liquidity, most liquid first.
Profit and loss schedules
Sch 13 Interest Earned; Sch 14 Other Income; Sch 15 Interest Expended; Sch 16 Operating Expenses
Schedule 12 is Contingent Liabilities in the common format. Schedules 17 and 18 are accounting policies and notes to accounts.
Profit and loss result
Net profit = (Interest earned + Other income) − (Interest expended + Operating expenses + Provisions and contingencies)
Appropriations such as transfer to statutory reserve come after net profit.
Net interest income
Net interest income = Interest earned − Interest expended
A useful analytical figure, though not a line in Form B.

How to solve Structure of Bank Financial Statements questions

Use the same frame for any question on the format, whether it asks you to explain, list or read the statements.

  1. 1Open with the law: Section 29 of the Banking Regulation Act, 1949 and the Third Schedule, Forms A and B.
  2. 2Say which statement the question is about: balance sheet (Form A) or profit and loss account (Form B).
  3. 3List the main heads in the prescribed order, with schedule numbers where you know them.
  4. 4Explain what each head contains in one line. For example, Deposits include demand, savings and term deposits.
  5. 5Add the supporting items: contingent liabilities, bills for collection, accounting policies and notes to accounts.
  6. 6If numbers are given, place each item under its correct head and check that both sides agree or that profit works out.
  7. 7Close with the purpose: uniform, comparable and transparent presentation for depositors, regulators and investors.

Quickest way: Two-form, head-by-head recall

When to use it: When time is short and the question asks for the format or the contents of a statement.

  1. Write Form A and Form B at the top with the Section 29 reference.
  2. Write the liabilities heads as C-R-D-B-O: Capital, Reserves, Deposits, Borrowings, Other liabilities.
  3. Write the asset heads in liquidity order: Cash, Bank balances, Investments, Advances, Fixed assets, Other assets.
  4. Write the profit and loss heads: Income (interest earned, other income), Expenditure (interest expended, operating expenses, provisions).
  5. Add one line each on contingent liabilities and notes to accounts, then stop.

Common mistakes in Structure of Bank Financial Statements

  • Applying Schedule III of the Companies Act, 2013 to a bank.

    Students are used to company formats from earlier papers.

    Fix: Remember that banking companies follow the Third Schedule of the Banking Regulation Act, 1949, under Section 29.

  • Mixing the order of heads, such as putting Advances before Investments.

    Students rely on a loose memory of what banks hold.

    Fix: Learn the asset order as Cash, Bank balances, Investments, Advances, Fixed assets, Other assets, and the liabilities as C-R-D-B-O.

  • Adding contingent liabilities into the balance sheet total.

    They appear on the same page and look like liabilities.

    Fix: Treat contingent liabilities and bills for collection as items shown below the totals, not part of them.

  • Treating deposits as the bank's asset.

    Deposits are money the bank holds, so they feel like an asset.

    Fix: Deposits are owed to customers, so they are a liability. The bank's asset is the loan it makes from them.

  • Forgetting provisions and contingencies in the profit and loss account.

    Students stop at interest and operating expenses.

    Fix: Always list the third expenditure head, provisions and contingencies, before arriving at net profit.

  • Quoting schedule numbers wrongly and confidently.

    Numbers 1 to 18 are memorised without the logic of sides.

    Fix: Tie numbers to sequence: 1 to 5 liabilities, 6 to 11 assets, then contingent liabilities, then income and expenses, then policies and notes. If unsure, name the schedule without the number.

Worked examples

Example 1

Explain the structure of the balance sheet of a banking company as prescribed under the Third Schedule of the Banking Regulation Act, 1949.

Show the solution
  1. Under Section 29, a banking company must prepare its balance sheet in Form A of the Third Schedule.
  2. Capital and Liabilities side: Capital, Reserves and Surplus, Deposits, Borrowings, Other Liabilities and Provisions.
  3. Property and Assets side: Cash and Balances with RBI, Balances with Banks and Money at Call and Short Notice, Investments, Advances, Fixed Assets, Other Assets.
  4. Each head refers to a schedule that gives the detailed break-up. For example, the Deposits schedule separates demand, savings and term deposits.
  5. Below the totals, the form shows Contingent Liabilities and Bills for Collection.
  6. The two sides must agree. Accounting policies and notes to accounts accompany the statement.

Answer: The balance sheet is in Form A under Section 29. It has five liability heads and six asset heads, each supported by a schedule, with contingent liabilities and bills for collection shown below the totals.

Example 2

A bank reports these figures for a year (₹ in crore): interest earned 9,000; other income 1,200; interest expended 5,400; operating expenses 2,100; provisions and contingencies 900. Find net interest income and net profit, and state where each item appears.

Show the solution
  1. Interest earned and other income are Income in Form B: 9,000 + 1,200 = ₹10,200 crore.
  2. Interest expended, operating expenses, and provisions and contingencies are Expenditure: 5,400 + 2,100 + 900 = ₹8,400 crore.
  3. Net profit = 10,200 − 8,400 = ₹1,800 crore.
  4. Net interest income = 9,000 − 5,400 = ₹3,600 crore.
  5. Net interest income is an analytical figure and is not a separate line in Form B.

Answer: Net profit is ₹1,800 crore and net interest income is ₹3,600 crore. Net profit is then appropriated to reserves, dividend and other uses.

Exam tips

  • Begin every answer with Section 29 and the Third Schedule. It shows the examiner you know the source.
  • Reproduce the heads in prescribed order. A neat two-column list of liabilities and assets earns marks quickly.
  • In case-based questions, identify the head under which a given item falls, then explain why in one line.
  • Mention notes to accounts and accounting policies. Many students leave them out.
  • If you cannot recall a schedule number, give the schedule name. A correct name is safer than a wrong number.

Practice questions from Analysis of Financial Statements of Banks

Structure of Bank Financial Statements in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Structure of Bank Financial Statements: frequently asked questions

Which law prescribes the format of a bank's financial statements?

The Banking Regulation Act, 1949. Section 29 requires the balance sheet and profit and loss account to be prepared in the forms in the Third Schedule. Form A is the balance sheet and Form B is the profit and loss account.

How many schedules are there in a bank balance sheet?

The usual presentation runs schedules 1 to 18. The balance sheet schedules cover capital, reserves, deposits, borrowings, other liabilities, and the asset heads. The later ones cover income, expenses, accounting policies and notes to accounts.

Why are assets shown in order of liquidity?

A bank must meet deposit withdrawals, so how quickly assets turn into cash matters. Cash and bank balances come first and fixed and other assets come last. This lets readers judge liquidity at a glance.

Where do contingent liabilities appear in a bank balance sheet?

They are shown as a separate item below the balance sheet totals. They are possible obligations, such as guarantees and letters of credit, and are not included in the total of the liabilities side.