Paid-up Capital and Reserves in Banks

Paid-up capital is the amount of money that has been subscribed by the shareholders of a bank and that has been actually paid to the bank. Reserves are the accumulated profits of a bank that have not been distributed to the shareholders.

The paid-up capital and reserves of a bank are important because they provide a cushion against losses and help to ensure the stability of the bank. The higher the paid-up capital and reserves, the more secure the bank is considered to be.

The Reserve Bank of India (RBI), the central bank of India, has set minimum requirements for paid-up capital and reserves for different types of banks. For example, the minimum paid-up capital for a universal bank is INR 500 crore, while the minimum paid-up capital for a small finance bank is INR 200 crore.

Here are some MCQs on paid-up capital and reserves in banks:

1. Which of the following is not a component of reserves in a bank?
   • Capital reserves
   • Statutory reserves
   • Profit reserves
   • General reserves
   • The answer is General reserves. General reserves are not a component of reserves in a bank.
2. Which of the following types of banks has the highest minimum requirement for paid-up capital?
   • Universal bank
   • Small finance bank
   • Payment bank
   • Regional rural bank
   • The answer is Universal bank. The minimum paid-up capital for a universal bank is INR 500 crore, which is higher than the minimum paid-up capital for any other type of bank.
3. Which of the following is not a function of reserves in a bank?
   • Protect the bank against losses
   • Provide a cushion against shocks to the financial system
   • Distribute profits to shareholders
   • Fund future growth of the bank
   • The answer is Distribute profits to shareholders. Reserves are not used to distribute profits to shareholders.