Deposit with Reserve Bank of India u/s 7 of Insurance act 1938 Is shown in the balance sheet of an insurance company under
Answers
Answer:
section 27A
Explanation:
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The deposit with Reserve Bank of India (RBI) under section 7 of the Insurance Act, 1938 is shown in the balance sheet of an insurance company under the head "Other Assets".
Section 7 of the Insurance Act, 1938 mandates that every insurer registered under the Act must deposit with the RBI a certain amount of money as security for the insurer's financial obligations to its policyholders. The deposit amount is a percentage of the insurer's net premium income for the previous year, and it is subject to a minimum and maximum limit.
The purpose of this deposit is to protect the interests of the policyholders and ensure the financial stability of the insurance company. The RBI holds the deposit in trust and may use it to pay policyholders in case the insurer fails to meet its obligations.
In the balance sheet, the deposit with RBI is reported under the "Other Assets" section because it represents a financial asset that the insurer holds but is not directly related to its core business operations. The deposit with RBI is classified as a current asset because it is expected to be recovered within one year.
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