ABC Gramin Bank is a regional rural bank (RRB) sponsored by XYZ Bank, a public sector bank with the stake of Central Government and State Government of Uttar Pradesh. It has carried out several CSR activities. However, t

Since the Regional Rural Banks comes under the purview of Nationalized Banks and are not incorporated as a company under the Companies Act, 2013, hence they are not covered under section 135 of the Act & accordingly, the requirement to spent 2% of net profits on CSR activities remains voluntary for such banks. However, they are allowed to spend a maximum of 1% of net profits through donations as specified by the Reserve Bank of India (RBI). In terms of Circular issued by RBI in this regard donations by Banks are capped at 1% of the published net profit. Donations are plain contribution as opposed to CSR which is a collaborative and monitored exercise. The said circular set the following guiding principles for donations by banks in India: The profit-making banks may make donations during a financial year aggregating upto 1% of the published profit of the banks for the previous year. In some cases, banks create funds for specific purposes to encourage research and development in fields related to banking. The Board of the banks may determine the amount of contribution to be made to such funds. The contribution made to such funds in a year will be reckoned for computation of the 1% ceiling. The donations out of the research and development funds should normally be made for setting up professional chairs, granting fellowships/ scholarships for studies and research at universities and approved institutions and for commissioning special projects for investigation, analysis and research for areas pertaining to banking, finance, statistics, management, and economics, etc. The donations to Prime Minister's National Relief Fund and subscriptions / contributions to professional bodies / institutions related to banking industry like Indian Banks' Association, National Institute of Bank Management, Indian Institute of Banking and Finance, Institute of Banking Personnel Selection and Foreign Exchange Dealers' Association of India may be excluded from the limit indicated in para (i) above. Loss-making banks can make donations totalling ₹5 lakh only in a financial year including donations to exempted entities / funds indicated in para (iii) above. Unutilised portion of the limit of 1% should not be carried forward to the next year. The banks may continue to submit annual review of donations to their Boards of Directors.