(a) A scheduled bank or a non-scheduled bank (excluding foreign banks) or a co-operative bank (other than a primary agricultural credit society or a primary co-operative agricultural and rural development bank) can create a reserve of 7.5% of total income (i.e., before allowing deduction under this section and u/s 80) and 10% of aggregate average advances made by the rural branches of such bank.
The limit of 5% has been raised to 10% for the period 1-4-2003 to 3 1-3-2005. The banks can claim further deduction in excess of above limit for an amount not exceeding income from redemption of securities as declared in the return of income.
(b) A foreign bank can create reserve upto a maximum of 5% of total income computed (before allowing this deduction and deductions u/s 80).
(c) A public financial institution, or a State financial corporation or state industrial investment corporation may create reserve upto a maximum of 5% of total income (computed before allowing this deduction and deductions u/s 80).
Rural Branch means a branch of a schedule bank or a non-schedulted bank, which is situated at a place the population of which is not more than 10,000 as per the latest census.