CUSTOMER SERVICE IN BANKS (Ref RBI circulars)

CUSTOMER SERVICE IN BANKS (Ref RBI circulars)

GUIDELINES

Banks are required to constitute a Customer Service Committee of the Board and

include experts and representatives of customers as invitees. The role of the

Committee includes:

· formulation of a Comprehensive Deposit Policy

· issues such as the treatment of death of a depositor for operations of his account

· product approval process with a view to suitability and appropriateness

· annual survey of depositor satisfaction

· tri-enniel audit of such services,

· Examination/review of the Awards being issued by Banking Ombudsman in respect

of complaints relating to provision of banking services and address issues of

systemic deficiencies existing in banks brought out by the Awards.

Banks are also required to set up Standing Committee to review the practice and

procedures prevalent in the bank and take necessary corrective action on an ongoing

basis. The committee would act as a bridge between the various departments of the

bank and the Board / Customer Service Committee of the Board.

Banks are further required to establish Customer Service Committee at branch level to

encourage a formal channel of communication between the customers and the bank at

the branch level. Besides these, each bank is expected to have a nodal

department/official for customer service at H.O. and each Controlling Office with whom

customers with grievances can approach at first instance and with whom the Banking

Ombudsman and RBI can liaise.

Policies

Along with profit, growth, and fulfilment of social obligations, customer service is treated

as priority objective of banks. Accordingly, banks are required to have in place Board

approved policies in respect of:-

a) Comprehensive Deposit Policy - covering rights of the depositors in general and

small depositors in particular and aspects of operation of deposit accounts,

charges, and other related issues.

b) Cheque collection policy – covering aspects viz. (i) immediate credit for

local/outstation cheques, (ii) Timeframe for collection of local/outstation

instruments, and (iii) Interest payment for delayed collection (Policy dealt

separately).

c) Customer Compensation Policy – covering (i) Erroneous Debits arising on

fraudulent or other transactions, (ii) Payment of interest for Delays in collection, (iii)

.

Payment of interest for delay in issue of duplicate draft, and (iv) Other unauthorised

actions of the bank leading to a financial loss to customer.

d) Customer Grievance Redressal Policy - To be framed based on the broad

principles (dealt separately)

Banks should give adequate publicity of the policies by placing them prominently in their

Websites and also the notice boards of the branches.

Financial Inclusion– Role of Banks

a) “Basic Savings Bank Deposit Account”

Banks have been advised by RBI to offer “Basic Savings Bank Deposit Account” which

will offer the minimum common facilities as under:-

■ The account should be considered as a normal banking service available to all;

■ No requirement of minimum balance;

■ Facilitate deposit and withdrawal of cash at bank branch as well as ATMs;

■ Receipt/credit of money through electronic payment channels or by means of

cheques/ collection of cheques drawn by Central/State Government Agencies and

departments;

■ Account holders are permitted a maximum of four withdrawals in a month including

ATM withdrawals;

■ Facility of ATM card or ATM-cum Debit Card

■ Facilities are free of charge and no charge would be levied for nonoperation/

activation of in-operative ‘Basic Savings Bank Deposit Account’;

■ Holders of ‘Basic Savings Bank Deposit Account’ are not eligible for opening of any

other savings bank accounts and existing such accounts should be closed down within

a period of 30 days from the date of opening of ‘Basic Savings Bank Deposit Account’.

■ Existing ‘no frills’ accounts can be converted to ‘Basic Savings Bank Deposit Account’

■ The account would be subject to RBI instructions on Know Your Customer (KYC) /

Anti-Money Laundering (AML) for opening of bank accounts issued from time to time.

In case the BSBDA is opened on the basis of simplified KYC norms, the account would

additionally be treated as ”Small Account” and further subject to the conditions

applicable thereof.

b) I.T. enables Financial Inclusion

Banks are required to increase their banking outreach to the remote corners of the

country with affordable infrastructure and technology so as to lower the transaction

costs to make small ticket transactions viable. Care should be taken to ensure that the

solutions developed are highly secure, amenable to audit, and follow widely accepted

open standards to allow inter-operability among different systems adopted by different

banks.

.

c) Printed material in trilingual form

Banks are required to make available all printed material used by retail customers

including account opening forms, pay-in-slips, pass books, etc. in trilingual form i.e.

English, Hindi, and concerned Regional Language.

d) Intra-bank deposit account portability

KYC once done by one branch of the bank is valid for transfer of the account within the

bank. Accordingly, customer is allowed to transfer his/her account from one branch to

another branch without insisting on fresh proof of address and on the basis of a selfdeclaration

from the account holder about his / her current address, subject to

submitting proof of address within a period of six months.

Opening/operation of Deposit Accounts

Banks are required to comply with the guidelines on KYC/AML for opening of accounts.

a) Savings bank rules

■ The Savings Bank Rules must be made available to account holders while opening

the accounts.

■ Photographs of all depositors/account holders whether resident or non-resident

should be obtained in respect of all types of deposit accounts including fixed, recurring,

cumulative, etc. except:-

i) Banks, Local Authorities and Govt. Departments (excl. public sector undertakings

or quasi Government bodies);

ii) Accounts of Staff members (single/joint)

■ Banks should obtain photographs of all persons authorised to operate the accounts

viz. Savings Bank and Current Accounts without exception.

■ Banks may obtain two copies of photographs and obtaining photocopies of

driving licence/passport containing photographs in place of photographs would not

suffice.

■ Banks need not insist for the presence of account holder for making cash withdrawal

of ‘self’ or bearer cheques unless circumstance so warrants.

■ Photographs cannot be a substitute for specimen signatures.

■ Only one set of photographs need be obtained and separate photographs need not

be obtained for each category of deposit.

■ Photographs of the ' Pardanishin' women need to be obtained

.

■ For additional accounts, fresh photographs need not be insisted upon.

■ While opening the accounts, the account holders should be informed in transparent

manner the requirement of minimum balance and other charges, etc. Revision in

charges also needs to be advised from to time.

■ Banks may purchase cheques, drafts, etc. deposited in the account for clearing in

case of suspension of clearing operations temporally or apprehension of prolonging the

suspension. This facility is extended to customers upon examining the credit

worthiness, integrity, past dealing, occupation, etc. so as to guard themselves from the

possibilities of such instrument being dishonored subsequently.

■ Savings Bank Pass Books must be provided invariably to all customers. In case of

account statement, the same should be mailed to the customers regularly. These

facilities should be provided at Bank’s cost. Updating the pass book periodically should

also be arranged by the banks.

■ Banks may avoid the usage of inscrutable entries in pass books/statement of account

and ensure that brief, intelligible particulars are invariably entered in pass books /

statement of account with a view to avoiding inconvenience to depositors.

■ Banks are required to ensure that full address / telephone number of the branch

is invariably mentioned in the Pass Books / Statement of Accounts issued to account

holders.

■ All cheque forms should be printed in Hindi and English irrespective of the language

the customer uses including regional language.

■ Cheque books are to be delivered over the counters on request to the depositors or

his authorized representative.

■ Cheques bearing date in Hindi as per the National Calendar (Saka Samvat) can be

accepted by banks for payment, if otherwise in order. Banks can, however, ascertain the

Gregorian calendar date corresponding to the National Saka calendar in order to avoid

payment of stale cheques.

■ Banks are required to make available the Magnetic Ink Character Recognition (MICR)

code and Indian Financial System Code (IFSC), besides cheque leaf, in all passbook/

statement of account holders.

■ All CBS enabled banks are required to issue only “payable at par” / “multi-city” CTS

2010 Standard cheques to all eligible customers without extra charges.

b) Term Deposit Account

■ Banks are required to issue term deposit receipt indicating therein full details, such

as, date of issue, period of deposit, due date, applicable rate of interest, etc.

.

■ Term Deposit Receipts can be freely transferable from one office of bank to another.

■ Advance instructions from depositors for disposal of deposits on maturity may be

obtained in the application form itself. Wherever such instructions are not obtained, banks

should ensure sending of intimation of impending due date of maturity well in advance to

their depositors. Change in rate of interest should be advised well in advance to the

customers.

■ Deposits repayable in less than three months or where the terminal quarter is

incomplete, interest should be paid proportionately for the actual number of days

reckoning the year at 365 days or 366 days in case of leap year.

■ Banks may allow premature withdrawal of Term Deposits at the request of the

depositor and interest on the deposit for the period that it has remained with the bank

will be paid at the rate applicable. Banks have the freedom to fix penal interest on such

withdrawal. No interest need be paid where premature withdrawal takes place before

completion of the minimum period prescribed.

■ Banks will have the discretion to disallow premature withdrawal of bulk term deposits

of Rs. 1 crore and above of all depositors including deposits of individuals and HUFs.

Banks should, however, notify such depositors of its policy of disallowing premature

withdrawal in advance i.e. at the time of accepting such deposits ( w.e.f. 01.04.2013).

■ Bank should not insist for signatures of both the depositors in respect of Fixed/term

deposit accounts opened with operating instructions ‘Either or Survivor’ on maturity.

■ In case the mandate is “Former or Survivor”, the former can operate/withdraw the

matured amount when both are alive. However, the signatures of both the depositors

are required in case of payment before maturity. If the former expires before the

maturity of the fixed/term deposit, the ‘Survivor’ can withdraw the deposit on maturity.

■ In other words, in case of term deposits with "Either or Survivor" or "Former or

Survivor" mandate, banks are permitted to allow premature withdrawal of the deposit by

the surviving joint depositor on the death of the other, only if, there is a joint mandate

from the joint depositors to this effect. The joint deposit holders are permitted to give the

mandate either at the time of placing fixed deposit or anytime subsequently during the

term / tenure of the deposit.

■Bank can permit addition/deletion of name/s of joint account holders. However, the

period and aggregate amount of the deposit should not undergo any change. Banks

may also allow splitting of joint deposit, in the name of each of the joint account holders

provided that the period and the aggregate amount of the deposit do not undergo any

change.

■ Banks may renew the frozen accounts upon obtaining suitable request letter for

renewal. No renewal receipt be issued but suitable noting may be done in the deposit

.

account. Renewal of the deposit may be advised to the concerned Enforcement

Authority by registered post/Speed Post/Courier. Overdue interest may be paid as per

the policy adopted by the banks.

■ No tax should be deducted in case the depositors submit form 15-G/15-H under

Income Tax Rules 1962.

■ Banks are required to ensure that their branches invariably accept cash over the

counters from all their customers who desire to deposit cash at the counters.

■ Notwithstanding the legal provisions, opening of fixed/recurring and savings bank

accounts be permitted in the name of minor with mother as guardian provided bank

take adequate safeguards in allowing operations in the accounts by ensuring that

such accounts are not allowed to be overdrawn and that they always remain in credit.

The facility may be allowed in Recurring Deposit Accounts also.

c) Current Accounts

■ Banks while opening current account must obtain a declaration to the effect that the

account holder is not enjoying any credit facilities with any other bank. Banks must

scrupulously ensure that their branches do not open current accounts of entities which

enjoy credit facilities (fund based or non-fund based) from the banking system

without specifically obtaining a No-Objection Certificate from the lending bank(s).

■ Bank may open account of prospective customer in case no response is received from

its existing bankers upon waiting for a fortnight. The situation may be reviewed with

reference to the information provided by the prospective customer as well as taking

needed due diligence on the customer.

■ For corporate entities enjoying credit facilities from more than one bank, the banks

should exercise due diligence and inform the consortium leader, if under consortium,

and the concerned banks, if under multiple banking arrangement.

Reconciliation of transactions at ATMs failure

■ Banks are required to resolve complaints within 7 working days from the date of

receipt of the complaint. Failure to recredit the amount with the timeframe shall entail

payment of compensation to the customer @100/- per day by the issuing bank. For

compensation, suitable application is to be made within 30 days of date of the transaction.

■ All disputes regarding ATM failed transactions shall be settled by the issuing bank

and the acquiring bank through the ATM System Provider only. No bilateral settlement

arrangement outside the dispute resolution mechanism available with the system

provider is permissible. Non-adherence to the provision attract penalty under the

Payment and Settlement System Act 2007.

■ Banks are required to display prominently at the ATM locations that complaints should

be lodged at the branches where customers maintain accounts to which the ATM is linked

along with telephone numbers of help desk/contact persons of ATM owning bank, etc.

.

■ Each bank should ensure that the process flow is modified to provide for the pin

validation for every transaction including balance enquiry facilitated through ATM.

■ Failure to this attract penalty. Banks are required to have in place a system of online

alerts for all types of transactions irrespective of the amount involving usage of cards at

various channels.

Electronic Payment Systems

The electronic modes of payment like RTGS, NEFT and IMPS have emerged as

channel agnostic modes of funds transfer. In order to ensure these channels safe and

secure, some additional measures are introduced as under:-

(i) Customer induced options may be provided for fixing a cap on the value / mode of

transactions / beneficiaries. In the event of customer wanting to exceed the cap, an

additional authorization may be insisted upon.

(ii) Limit on the number of beneficiaries that may be added in a day per account could

be considered.

(iii) A system of alert may be introduced when a beneficiary is added.

(iv)Banks may put in place mechanism for velocity check on the number of transactions

effected per day / per beneficiary and any suspicious operations should be subjected

to alert within the bank and to the customer.

(v) Introduction of additional factor of authentication (preferably dynamic in nature) for

such payment transactions should be considered.

(vi)The banks may consider implementation of digital signature for large value

payments for all customers, to start with for RTGS transactions.

(vii) Capturing of Internet Protocol (IP) address as an additional validation check

should be considered.

Levy of Service Charges

Banks should ensure that the service charges fixed are reasonable and they are not out

of line with the cost of providing such services. Customers with low volume of

transactions are not penalized.

Foreclosure charges/prepayment penalty – Home Loans

Banks are not permitted to levy/charge prepayment charges/penalties on Home Loans

on floating interest rates, with immediate effect.

RTGS charges for customers

Banks are not permitted to charge their customers for outward RTGS remittances

beyond the amounts as under:-

RTGS transaction Max. charge

Inward transaction Free

Outward – Rs. 2 – 5 Lakh Rs. 25 + applicable time varying

tariff subject to Max. Rs. 30/-

Above Rs. 5 Lakh Rs. 50 + applicable time varying

.

tariff

Subject to Max. Rs. 55/-

Banking hours/working hours/Operation

■ Banks are required to function for public transactions at least for 4 hours on week days

and 2 hours on Saturdays in the larger interest of public and trading community.

Extension counters, satellite offices, one man offices or other special class of branches

may remain open for such shorter hours as may be considered necessary.

■ Banks may fix, after due notice to customers, whatever business hours are

convenient i.e. double shift, weekly holiday other than Sunday, or functioning Sundays

also (7 days working) etc.

■ The banks' branches in rural areas can fix the business hours (i.e., number of hours,

as well as timings) and the weekly holidays to suit local requirements subject to the

guidelines.

■ Commencement of employees’ working hours 15 minutes before commencement of

business hours could be made operative by banks at branches in metropolitan and

urban centres.

■ Banks are required to extend business hours for banking transactions other than cash

till one hour before close of working hours. Banks can have evening counters at the

premises of existing branches in metropolitan/urban centres for providing facilities to the

public beyond normal business hours to bring about improvement in customer service

and the transactions should be merged with the main accounts of the branch where it is

set up.

■ All branches except very small branches should have “Enquiry” or “May I help You”

counters either exclusively or combined with other duties located near the entry point of

the banking hall. Time norms should also be displayed prominently in the banking hall.

■ All Branch branches are required to display the various products and services they

provide along with various key aspects such as service charges, interest rates, time

norms for various banking transactions and grievance redressal mechanism, etc.

grouped in 4 heads viz. “Customer Service Information”, “Service Charges”, “Grievance

redressal” and “Others” as indicators in the ‘Comprehensive Notice Board’ as per the

format provided by RBI. This would enhance the quality of customer service in banks

and level of customer satisfaction.

■ Further, in addition to the above Board, the banks should also display details such

as ‘Name of the bank / branch, Working Days, Working Hours and Weekly Offdays'

outside the branch premises.

■ Banks are further required to make available the detailed information in their Web-site

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in such a manner that customers are able to easily access the same from the Home

Page of the site, besides in booklet form in the touch screen by placing them in the

information kiosks or Scroll Bars, or Tag Boards. Website should contain the minimum

information such as Policy/Guidelines, Complaints, Opening of accounts/forms, Loans and

Advances, Branches, etc.

Sick/old/incapacitated account holders -- Operational Procedure

■ In case the old/sick/ incapacitated account holder can put his thumb or toe impression,

the same may be accepted for withdrawal of money. It should be identified by two

independent witnesses known to the bank, one of whom should be a responsible bank

official.

■ Where the customer cannot put even his/her thumb impression and also not able to

present in the bank, a mark can be obtained on the cheque/withdrawal form which should

be identified by two independent witnesses, one of whom should be a responsible bank

official.

■ Person to whom the payment is to be made may be indicated by the customer in both

the above cases and he should be identified by two independent witnesses. The person

should be asked to furnish his signature to the bank.

■ As per the opinion obtained by IBA, a toe impression or any mark by a customer who

lost both the hands can be taken for acceptance.

■ Banks are required to take necessary steps to provide all existing ATMs / future

ATMs with ramps so that wheel chair users / persons with disabilities can easily

access them and also make arrangements in such a way that the height of the ATM

does not create an impediment in its use by a wheelchair user.

■ Banks are required to ensure that all the banking facilities such as cheque book facility

including third party cheques, ATM facility, Net banking facility, locker facility, retail

loans, credit cards etc., are invariably offered to the visually challenged without

any discrimination.

■ Banks are required to make at least one third of new ATMs installed as talking ATMs

with Braille keypads and place them strategically in consultation with other banks to

ensure that at least one talking ATM with Braille keypad is generally available in each

locality for catering to needs of visually impaired persons.

■ In respect of disabled persons with autism, cerebral palsy, mental retardation and

multiple disabilities Banks can rely upon the Guardianship Certificate issued either by

the District Court under Mental Health Act or by the Local Level Committees under the

above Act for the purposes of opening / operating bank accounts.

Remittance

■ Remittance (DD/MT/TT, etc.) of Rs. 50000/- and above should be by debit to

customer’s account or against cheques only. DDs of Rs. 20,000/- and above are to

be issued with “Account Payee” crossing only.

.

■ A DD is uniformly valid for a period of three months and procedure for revalidation

after three months should be simplified.

■ Demand Drafts drawn by the branches are to be paid immediately without waiting for

the relative advice of drawing from the respective branches. Passport and postal

identification card could be deemed to be adequate identification for encashment of draft.

Banks may fix ceiling Rs. 25000/-for payment of drafts against the identification.

■ Duplicate Draft in lieu of lost for amount upto and including Rs. 5000/- can be issued

against suitable indemnity without waiting drawing advice within a fortnight from the date of

receipt of the request. Delay beyond the period, penal provision to be invoked.

■ Banks may ensure that both drop box facility and the facility for acknowledgement of

cheques are made available at collection centres (branches) and no branch should refuse

to give acknowledge of cheques if tendered at the counters. Banks should display on the

drop box itself that “Customers can also tender the cheques at the counter and obtain

acknowledgement on the pay-in-slips”.

■ Banks should put in place an appropriate mechanism to confirm successful credit of

funds to the beneficiaries account transferred through NEFT. In case of any delay or

returning the uncredited amount, banks should pay penal interest at the current RBI

LAF Repo Rate plus 2% for the period of delay/till the date of refund as the case may be

to the affected customers suo moto without waiting form customers.

■ Under the NEFT Procedural Guidelines, banks are required to establish dedicated

Customer Facilitation Centres (CFCs) to handle customer queries/complaints regarding

NEFT transactions and the same should be made available in the website of banks as

well as the website of RBI for easy availability to the customers.

■ In order to extend both the National Electronic Clearing System (NECS) and Regional

Electronic Clearing System (RECL), the participating banks are advised to make efforts

in bringing all their branches under NECS/RECS.

NEFT charges for customers

Maximum charges that can be levied by banks for NEFT transactions as under:-

Value Band Max. charges

(incl. Service

Charges

Up to Rs. 10,000/- 2.50

10,001 to 1 Lakh 5.00

Above 1 Lakh up to 2

Lakh

15.00

Above 2 Lakh 25.00

Mobile Banking transaction limits

.

The transaction limit of Rs. 50,000/- per customer per day has been done away and

banks may place per transaction limits based on their own risk perception with the

approval of their Boards.

Domestic Money Transfers

In order to assist migrant population who do not have access to formal banking channel

for want of proof of identity/address, banks are permitted to put in place three schemes

for person to person (P2P) fund transfers viz.

(a) Cash Pay-out scheme which facilitates transfer of funds from the accounts of their

customers to beneficiaries not having bank accounts through the use of ATMs, BCs etc.

up to `Rs. 10,000 per transaction subject to a monthly cap of `Rs. 25,000 with full

details of the beneficiary

(b) Cash Pay-in scheme where a walk-in / non-account holding customer can transfer

funds to a bank account of a beneficiary etc. up to `Rs. 5000/- per transaction with a

monthly cap of ` Rs. 25,000 with minimum details of the remitter.

(c) Card-to-Card transfers up to `Rs. 5000 per transactions subject to a monthly cap of

` Rs 25,000.

Collection of Instruments – Rules relating thereof

■ Factoring the competitive environment, Banks have been permitted to formulate a

comprehensive and transparent cheque collection policy, taking into account their

technological capabilities. The policy may include immediate credit for local/outstation

cheques, time frame for collection of local/outstation instruments, and interest

payment for delayed collection.

■ Banks are also required to comply with the order passed by the National Consumer

Disputes Redressal Commission (Case no. 82 of 2006) which inter alia includes:-

■ For local cheques, credit and debit shall be given on the same day or at the most the

next day of their presentation in clearing.

■ Timeframe for collection of cheques drawn on State Capitals / major cities / other

locations to be 7/10/14 days respectively. If there is any delay in collection beyond this

period, interest at the rate specified in the Cheque Collection Policy (CCP) of the

bank, shall be paid or at rate applicable for Fixed Deposits for corresponding maturity,

etc.

■ Banks are prohibited from crediting 'account payee' cheque to the account of any

person other than the payee named therein. Banks are not permitted to collect account

payee cheques for any person other than the payee constituent. However, in order to

mitigate the difficulties faced by the members of co-operative credit societies in collection

of account payee cheques, the collecting bank may collect ‘account payee’ cheque drawn

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for an amount not exceeding Rs. 50,000/- to the account of their customers who are cooperative

credit societies, if the payees of such cheques are the constituents of such cooperative

societies.

■ Banks need not make payment of cheques/drafts/pay orders/ banker’s cheques

bearing that date or any subsequent date, if they are presented beyond the

period of three months from the date of such instrument (w.e.f. 01.04.12)

■ For loss of cheque in transit or in clearing process or at the paying bank’s branch, the

banks are required to reimburse the accountholder related expenses for

obtaining duplicate instruments and also interest for reasonable delays occurred in

obtaining the same. The onus rests with the collecting banker and not the account

holder.

Bills for collection

■ Bills for collection including bills discounted are required to be collected by the

collecting bank through another bank at the realising centre. The bills are to be

forwarded directly by the collecting bank to the bank at the realising centre.

■ The delayed period is reckoned after the normal transit period based on 2 days each

for:-

(i) Despatch of bills; (ii) Presentation of bills of drawees. (iii) Remittance of proceeds to

the Lodger’s bank. (iv) Crediting the proceeds to drawer's account; the lodger’s bank

(collecting bank) should pay interest to the lodger of the bill at 2% over SB accounts

rate. In case the delay is attributing to the drawee's bank, the lodger's bank may

recover interest for such delay from that bank.

■ Banks are required to implement the recommendation of the Goiporia Committee that

dishonoured instruments are returned / despatched to the customer promptly without

delay, in any case within 24 hours.

■ The paying bank is required to return the dishonoured cheques presented through

clearing houses strictly as per the return discipline prescribed for respective clearing

house and for cheques presented directly, it should return dishonoured such cheques

immediately. The collecting bank on receipt of such dishonoured cheques should

despatch it immediately to the payees / holders indicating the reason for return of the

cheque.

■ In order to enforce financial discipline among customers, in case of

dishonour of cheque of Rs. 1 Crore and above drawn on a particular account

for financial reasons on four occasions in a financial year, no fresh cheque

book should be issued. Bank may also consider closing the account at its

discretion. In respect of advances

accounts such as cash credit account, overdraft account, the need for

continuance or otherwise of these credit facilities and the cheque facility

.

relating to these accounts should be reviewed by appropriate authority higher

than the sanctioning authority.

■ Banks may formulate suitable policy for frequent dishonour of cheques of less than

Rs. 1 Crore as also frequent dishonour of ECS mandate with the approval of respective

Boards.

General

Banks are required to extend full co-operation and furnish documentary proof of

dishonour for proceedings before any forum.

Banks are required to adopt with approval of their Boards appropriate procedure for

dealing with dishonoured cheques.

Complaints

Banks are required to provide Complaints/suggestion box at each office besides

maintaining Complaint Book/Register with perforated copies in each set. A copy of the

complaint is also to be forwarded to Controlling Office along with remark of the Branch

Manager within a time frame.

Complaint form along with name of the nodal officer for complaint redressal be provided in

the Homepage of Website to facilitate submission by customers. Complaints received are

to be reviewed by Board for taking corrective steps wherever required. The details are to

be disclosed in the financial results giving the number of complaints received, redressed,

Awards by Ombudsman, etc.

Banks are also required to put in place a proper Grievance Redressal Mechanism and

examine on an on-going basis whether it is found effective in achieving improvement in

customer service in different areas.

Erroneous Debits arising on fraudulent or other transactions

While opening and allowing operation in deposit accounts, banks should remain vigilant

to avoid lapses to safeguard against unscrupulous persons opening accounts mainly to

use them as conduit for fraudulently encashing payment instruments, etc. In such

cases, banks should compensate the customer upon completion of departmental action

or police interrogation as part of their approved Customer Relation Policy.

Safe Deposit Locker/Safe Custody Article Facility

■ Banks have to refrain from restrictive practices such as linking the lockers facility with

placement of fixed or any other deposit beyond what is specifically permitted. Banks

may obtain Fixed Deposits to cover 3 years rent and charges of breaking open the

locker to take care of an eventuality that the locker-hirer neither operates the locker

nor pays rent.

.

■ Bank branches are required to maintain a wait list for the purpose of allotment of lockers

and ensure transparency in allotment of the lockers. A copy of the Agreement may be

passed on to the locker-hirer at the time of allotment of the locker.

■ Banks may carry out customer due diligence for both new and existing

customers at least to the levels prescribed for customers classified as medium risk. If

the customer is classified in a higher risk category, customer due diligence as per KYC

norms applicable to such higher risk category should be carried out.

■ Where the lockers have remained unoperated for more than three years for

medium risk category or one year for a higher risk category, banks should immediately

contact the locker-hirer and advise him to either operate the locker or surrender it. This

exercise should be carried out even if the locker hirer is paying the rent regularly.

■ Nomination facility is available to locker hirer which would provide for nomination and

release of contents of safety lockers/safe custody article to the nominee and protection

against notice of claim of other persons (Sec. 45ZC to 45 ZF of B.R. Act 1949)

Banking Companies (Nomination) Rules 1985

The Banking Companies (Nomination) Rules 1985 together with the new Sections

45ZA to 45ZF of the Banking Regulation Act, 1949 regarding nomination facilities

came into force w.e.f. 1985 provide for:-

a) Nomination Forms for deposit accounts, articles kept in safe custody and

contents of safety lockers.

b) Forms for cancellation and variation of the nominations.

c) Registration of Nominations and cancellation and variation of

nominations, and matters related to the above.

■ Nomination facility can be made available in respect of deposits held in the name of

individuals (single/Joint accounts) including sole proprietorship concerns and Safe

Deposit Locker/Safe Custody. Nomination shall be made only in favour of individuals

and a nominee cannot be an Association, Trust, Society or any other Organisation or

any office-bearer thereof in his official capacity

■ There cannot be more than one nominee in respect of a joint deposit account. In the

case of a joint deposit account the nominee's right arises only after the death of all the

depositors.

■ Banks may allow variation/cancellation of a subsisting nomination by all the surviving

depositor(s) acting together. This is also applicable to deposits having operating

instructions "either or survivor".

.

■ Banks are required to acknowledge in writing to the depositor(s)/ locker hirers (s)

the filing of the relevant duly completed Form of nomination, cancellation and / or

variation of the nomination.

■ Banks may introduce the practice of recording on the face of the passbook the

position regarding availment of nomination facility with the legend "Nomination

Registered". This may be done in the case of term deposit receipts also.

Deceased Depositors – Settlement of claims – Procedure thereof

Accounts with survivor/nominee clause

In case there exists a valid nomination and the deposit account is opened with the

survivorship clause (“either or survivor” or “anyone or survivor” or “former or survivor” or

“latter or survivor”), bank can make payment of the balance in the deposit account to the

survivor(s)/nominee of a deceased deposit account holder which is considered as a

valid discharge of the bank’s liability provided:-

a) The bank has exercised due care and caution in establishing the identity of the

survivor(s)/ nominee and fact of death of the account holder through appropriate

documentary evidence; there is no order from the competent court restraining the

bank from making the payment from the account of the deceased; and

b) Survivor(s)/nominee has been advised in clear terms that he would be receiving

the payment from the bank as a trustee of the legal heirs of the deceased

depositor.

Banks may desist from insisting production of succession certificate, letter of

administration or probate, etc., or obtain any bond of indemnity or surety from the

survivor(s)/nominee, irrespective of the amount standing to the credit of the deceased

account holder.

Accounts without the survivor/nominee clause

In deceased deposit accounts without the survivor/nominee clause, banks may fix some

minimum threshold limit for settlement of claim without insisting on production of any

documents

other than a letter of indemnity.

Premature termination of Term deposit accounts would not attract any penalty and such

clause may be incorporated in the opening form itself.

Any claim on the balances lying in deceased depositors received from survivor(s) /

nominee(s) should be settled within a period not exceeding 15 days from the date

of receipt of the claim subject to the production of proof of death of the depositor

and suitable identification of the claim(s), to the bank's satisfaction.

.

Access to Safe Deposit Locker/Safe Custody articles (with survivor/nominee

clause)

In the event of death of sole locker hirer, banks may give access to the locker with

liberty to remove the contents of the locker to the nominee and in case of the locker

hired jointly with operational instruction to operate under joint signatures and nomination

exists, bank may give access to the locker with liberty to remove the articles jointly to

the survivor(s)/nominee.

In the case of the locker was hired jointly with survivorship clause and the hirers

instructed that the access of the locker should be given over to "either or survivor",

"anyone or survivor" or "former or survivor" or according to any other survivorship

clause, banks may follow the mandate in the event of the death of one or more of the

locker-hirers.

Access to Safe Deposit Locker/Safe Custody articles (without survivor/nominee

clause)

Banks are required to evolve a customer-friendly procedure drawn up in consultation with

their legal advisers for giving access to legal heir(s) / legal representative of the

deceased locker hirer. Similar procedure should be followed for the articles under safe

custody of the bank.

Banks are also required to prepare an inventory before returning articles left in safe

custody/before permitting removal of the contents of the safe deposit locker. Banks are

not required to open sealed/closed packets left with them in Safe Custody or found in

locker while releasing them to the nominee and surviving locker heirs/depositor of safe

custody article. Banks are required to put in their website the entire procedure for

improvement in customer service.

Settlement of claims in respect of missing persons

Banks are required to formulate a policy which would enable them to settle the

claims of a missing person after considering the legal opinion and taking into

account the facts and circumstances of each case (claims are to be settled as per

provisions u/s 107/108 of Indian Evidence Act 1872).

In order to avoid inconvenience and undue hardship to the common person, banks

may, keeping in view their risk management systems, fix a threshold limit, up to

which claims in respect of missing persons could be settled without insisting on

production of any documentation other than (i) FIR and the non-traceable report issued

by police authorities and (ii) letter of indemnity.

Release of other assets of deceased borrowers to legal heirs

Banks need not insist upon legal representation for release of other assets of

deceased customers irrespective of the amount involved. However, in case there are

.

disputes, bank may call for succession certificates from legal heirs of deceased

borrowers or bank has a reasonable doubt about genuineness of the claimant/s being

the only legal heir/s of the borrower.

Unclaimed deposits/Inoperative Accounts in banks

■ A savings as well as current account should be treated as inoperative / dormant if

there are no transactions in the account for over a period of two years.

■ If credits by way of interest on Fixed Deposit account is being received in the Savings

Bank accounts as per the mandate of the customer, the same can be treated as a

customer induced transaction and the account can be treated as an operative

account. It will become inoperative only after 2 years from the date of the last

credit entry of the interest on Fixed Deposit account.

■ For the purpose of classifying an account as ‘inoperative’ both the type of

transactions i.e., debit as well as credit transactions induced at the instance of

customers as well as third party should be considered. However, the service charges

levied by the bank or interest credited by the bank should not be considered

■ Banks need to ascertain the whereabouts of the account holder(s) by letters,

telephone calls, or contacting legal heirs, or contacting the introducers or employers

as available record or any other means suited to them in case of no operations

(credits other than periodic interest or debiting service charges) for more than one

year.

■ Periodical interest should continue to be credited in the inoperative accounts and

proceeds of FDR unpaid, the amount left unclaimed should attract Savings Bank rate

of interest. Inoperative accounts should get audited periodically. There should not be

any charge on activation of an inoperative account.

Directions on inoperative/dormant accounts

Considering the increase in the amount of the unclaimed deposits with banks year

after year and the inherent risk associated with such deposits, banks should play a

more pro-active role in finding the whereabouts of the account holders whose

accounts

have remained inoperative. Further several complaints were received in respect of

difficulties faced by the customers on account of their accounts having been classified

as inoperative. Moreover, there is a feeling that banks are undeservedly enjoying the

unclaimed deposits, while paying no interest on it. Keeping these factors in view, the

instructions issued by RBI have been reviewed and banks are advised to follow the

instructions detailed below while dealing with inoperative accounts. RBI, in the light of

the foregoing, has issued certain directions to banks while dealing with the inoperative

accounts as under:-

.

a) Banks should undertake an annual review of accounts in which there are no

operations (i.e., no credit or debit other than crediting of periodic interest or

debiting of service charges) for more than one year.

b) In case letters sent returned undelivered, enquiry may be made to ascertain the

whereabouts of customers or their legal heirs in case they are deceased.

c) In case the whereabouts of the customers are not traceable, bank may contact

the introducer or employer/or any other person whose details are available with

them.

d) A savings as well as current account should be treated as inoperative/dormant

if there are no transactions in the account for over a period of 2 years.

e) In case the account holder responds giving reasons for not operating the

account, banks may continue classifying the account as an operative account

for one more year within which period the account holder may be requested to

operate the account.

f) For the purpose of classifying an account as ‘inoperative’ both the

type of transactions i.e., debit as well as credit transactions induced at

the instance of customers as well as third party should be considered.

g) In case of crediting interest on Fixed Deposit account to Savings Bank account

as per the mandate given by the customer and there are no other operations in

the savings bank account, such accounts should not be treated as inoperative

as the credits are customer induced transaction.

h) The account may be segregated, but, with least inconvenience to the

customers. The classification is only to bring to the attention of dealing staff,

the increased risk in the account.

i) Operation in inoperative accounts may be allowed after due diligence as per

risk category of the customer.

j) No charge should be levied for activation of inoperative accounts.

k) The inoperative accounts ledger should be audited by the internal auditors/

statutory auditors of the bank periodically.

l) Interest on savings bank accounts should be credited on regular basis whether

the account is operative or not.

m) If a Fixed Deposit Receipt matures and proceeds are unpaid and left unclaimed

with the bank, the same will attract savings bank rate of interest.

n) Banks may also consider launching a special drive for finding the whereabouts

of the customers / legal heirs in respect of existing accounts which have already

been transferred to the separate ledger of ‘inoperative accounts’, etc.

In addition to the above, banks may also consider displaying the list of unclaimed

deposits/inoperative accounts which are inactive /inoperative for 10 years or more in

their respective websites giving only the names and address. In case such accounts

are not in the name of individuals, the names of individuals authorized to operate the

accounts should also be indicated.

Customer Confidentiality Obligations

.

Banks are not supposed to divulge any information about the account to third parties

except where:-

a) disclosure is under compulsion of law

b) there is duty to the public to disclose

c) interest of bank requires disclosure and

d) the disclosure is made with the express or implied consent of the customer.

The information collected from the customer for the purpose of opening of

account is to be treated as confidential and not divulge any details thereof for cross

selling or any other purposes.

Transfer of account from one branch to another

Instructions from customer for transfer of his account to another office should be carried

out immediately by transferring the account opening form, specimen signature, standing

instructions, etc. under advice to the customer.

Co-ordination with officers of Central Board of Direct Taxes

Banks should maintain greater co-ordination between the Income-Tax departments and

extend necessary help/co-ordination to tax officials whenever required.

Declaration of Holiday under the Negotiable Instruments Act, 1881

In terms of Section 25 of the Negotiable Instruments Act, 1881, the expression "public

holiday" includes Sunday and any other day declared by the Central Government by

notification in the Official Gazette to be a public holiday.

This power has been delegated to State Govt. by Central Govt. subject to the condition

that the Central Government may itself exercise the said function, should it deem fit to

do so and this implies that when Central Government itself has notified a day as "public

holiday" under Section 25 of the Negotiable Instruments Act, 1881, there is no need

for banks to wait for the State Government notification.

Miscellaneous

■ In predominantly residential areas banks may keep their branches open for business

on Sundays by suitably adjusting the holidays and banks should keep rural branches

open on weekly market day.

■ Banks are required to accept standing instructions in Savings and Current

accounts and the same can be enlarged to include payments on account of

taxes, bills, rents, school/college fees, etc.

■ Branch Manger may be permitted to allow clean overdraft for small amounts to

customers whose dealings have been satisfactory.

■ All transactions, including payment of interest on deposits/charging of interest on

advances, should be rounded off to the nearest rupee.

■ In order to keep a watch on the progress achieved by the bank in the implementation

of

the recommendations of various working groups/Committees on customer service,

banks may examine the recommendations which have relevance in the present day

banking and continue to implement them.

■ Banks should follow various provisions of the Code of Bank’s Commitment

to Customers, implementation of which is monitored by the Banking Codes and

Standards Board of India (BCSBI), etc.

Ref Master Circular from RBI on customer service (www.rbi.org.in)

Customer service in banks

1. Introduction

Customer service has great significance in the banking industry. The banking system in India today has perhaps the largest outreach for delivery of financial services and is also serving as

an important conduit for delivery of financial services. While the coverage has been expanding day by day, the quality and content of dispensation of customer service has come under

tremendous pressure mainly owing to the failure to handle the soaring demands and expectations of the customers.

The vast network of branches spread over the entire country with millions of customers, a complex variety of products and services offered, the varied institutional framework – all these add

to the enormity and complexity of banking operations in India giving rise to complaints for deficiencies in services. This is evidenced by a series of studies conducted by various committees

such as the Talwar Committee, Goiporia Committee, Tarapore Committee, etc., to bring in improvement in performance and procedure involved in the dispensation of hassle-free customer service.

Reserve Bank, as the regulator of the banking sector, has been actively engaged from the very beginning in the review, examination and evaluation of customer service in banks. It has

constantly brought into sharp focus the inadequacy in banking services available to the common person and the need to benchmark the current level of service, review the progress periodically,

enhance the timeliness and quality, rationalize the processes taking into account technological developments, and suggest appropriate incentives to facilitate change on an ongoing basis

through instructions/guidelines.

Depositors' interest forms the focal point of the regulatory framework for banking in India. There is a widespread feeling that the customer does not get satisfactory service even after

demanding it and there has been a total disenfranchisement of the depositor. There is, therefore, a need to reverse this trend and start a process of empowering the depositor.

Broadly, a customer can be defined as a user or a potential user of bank services. So defined, a ‘Customer’ may include:

 a person or entity that maintains an account and/or has a business relationship with the bank;

 one on whose behalf the account is maintained (i.e. the beneficial owner);

 beneficiaries of transactions conducted by professional intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors, etc., as permitted under the law, and

 any person or entity connected with a financial transaction which can pose significant reputational or other risks to the bank, say, a wire transfer or issue of a high value demand draft as

a single transaction.

1.1 General

Policy for general management of the branches

Banks' systems should be oriented towards providing better customer service and they should periodically study their systems and their impact on customer service. Banks should have a Board

approved policy for general management of the branches which may include the following aspects:-

(a) providing infrastructure facilities by branches by bestowing particular attention to providing adequate space, proper furniture, drinking water facilities, with specific emphasis on

pensioners, senior citizens, disabled persons, etc.

(b) providing entirely separate enquiry counters at their large / bigger branches in addition to a regular reception counter.

(c) displaying indicator boards at all the counters in English, Hindi as well as in the concerned regional language. Business posters at semi-urban and rural branches of banks should also be

in the concerned regional languages.

(d) posting roving officials to ensure employees' response to customers and for helping out customers in putting in their transactions.

(e) providing customers with booklets consisting of all details of service and facilities available at the bank in Hindi, English and the concerned regional languages.

(f) use of Hindi and regional languages in transacting business by banks with customers, including communications to customers.

(g) reviewing and improving upon the existing security system in branches so as to instil confidence amongst the employees and the public.

(h) wearing on person an identification badge displaying photo and name thereon by the employees.

(i) Periodic change of desk and entrustment of elementary supervisory jobs.

(j) Training of staff in line with customer service orientation. Training in Technical areas of banking to the staff at delivery points. Adopting innovative ways of training / delivery

ranging from job cards to roving faculty to video conferencing.

(k) visit by senior officials from Controlling Offices and Head Office to branches at periodical intervals for on the spot study of the quality of service rendered by the branches.

(l) rewarding the best branches from customer service point of view by annual awards/running shield.

(m) Customer service audit, Customer surveys.

(n) holding Customer relation programmes and periodical meetings to interact with different cross sections of customers for identifying action points to upgrade the customer service with

customers.

(o) clearly establishing a New Product and Services Approval Process which should require approval by the Board especially on issues which compromise the rights of the Common Person.

(p) appointing Quality Assurance Officers who will ensure that the intent of policy is translated into the content and its eventual translation into proper procedures.

2. Customer Service: Institutional Framework

Need for Board's involvement

Matters relating to customer service should be deliberated by the Board to ensure that the instructions are implemented meaningfully. Commitment to hassle-free service to the customer at

large and the Common Person in particular under the oversight of the Board should be the major responsibility of the Board.

2.1 Customer Service Committee of the Board

Banks are required to constitute a Customer Service Committee of the Board and include experts and representatives of customers as invitees to enable the bank to formulate policies and assess

the compliance thereof internally with a view to strengthening the corporate governance structure in the banking system and also to

.bring about ongoing improvements in the quality of customer service provided by the banks.

2.1.1 Role of the Customer Service Committee

Customer Service Committee of the Board, illustratively, could address the following:-

 formulation of a Comprehensive Deposit Policy

 issues such as the treatment of death of a depositor for operations of his account

 product approval process with a view to suitability and appropriateness

 annual survey of depositor satisfaction

 tri-enniel audit of such services.

Besides, the Committee could also examine any other issues having a bearing on the quality of customer service rendered.

2.1.2 Monitoring the implementation of awards under the Banking Ombudsman Scheme

The Committee should also play a more pro-active role with regard to complaints / grievances resolved by Banking Ombudsmen of the various States.

The Scheme of Banking Ombudsman was introduced with the object of enabling resolution of complaints relating to provision of banking services and resolving disputes between a bank and its

constituent through the process of conciliation, mediation and arbitration in respect of deficiencies in customer service. After detailed examination of the complaints / grievances of

customers of banks and after perusal of the comments of banks, the Banking Ombudsmen issue their awards in respect of individual complaints to redress the grievances. Banks should ensure that

the Awards of the Banking Ombudsmen are implemented expeditiously and with active involvement of Top Management.

Further, with a view to enhancing the effectiveness of the Customer Service Committee, banks should also :

.

a) place all the awards given by the Banking Ombudsman before the Customer Service Committee to enable them to address issues of systemic deficiencies existing in banks, if any, brought out

by the awards; and

b) place all the awards remaining unimplemented for more than three months with the reasons therefor before the Customer Service Committee to enable the Customer Service Committee to report

to the Board such delays in implementation without valid reasons and for initiating necessary remedial action.

2.1.3 Board Meeting to Review and Deliberate on Customer Service

Banks are advised to review customer service / customer care aspects in the bank and submit a detailed memorandum in this regard to the Board of Directors, once every six months and initiate

prompt corrective action wherever service quality / skill gaps have been noticed.

2.2 Standing Committee on Customer Service

The Committee on Procedures and Performance Audit of Public Services (CPPAPS) examined the issues relating to the continuance or otherwise of the Ad hoc Committees and observed that there

should be a dedicated focal point for customer service in banks, which should have sufficient powers to evaluate the functioning in various departments. The CPPAPS therefore recommended that

the Ad hoc Committees should be converted into Standing Committees on Customer Service.

On the basis of the above recommendation, banks are required to convert the existing Ad hoc Committees into a Standing Committee on Customer Service. The Ad hoc Committees when converted as a

permanent Standing Committee cutting across various departments can serve as the micro level executive committee driving the implementation process and providing relevant feedback while the

Customer Service Committee of the Board would oversee and review / modify the initiatives. Thus the two Committees would be mutually reinforcing with one feeding into the other.

The constitution and functions of the Standing Committee may be on the lines indicated below :-

.

i) The Standing Committee may be chaired by the CMD or the ED and include non-officials as its members to enable an independent feedback on the quality of customer service rendered by the

bank.

ii) The Standing Committee may be entrusted not only with the task of ensuring timely and effective compliance of the RBI instructions on customer service, but also that of receiving the

necessary feedback to determine that the action taken by various departments of the bank is in tune with the spirit and intent of such instructions.

iii) The Standing Committee may review the practice and procedures prevalent in the bank and take necessary corrective action, on an ongoing basis as the intent is translated into action only

through procedures and practices.

iv) A brief report on the performance of the Standing Committee during its tenure indicating, inter alia, the areas reviewed, procedures / practices identified and simplified / introduced may

be submitted periodically to the Customer Service Committee of the Board.

With the conversion of the Ad hoc Committees into Standing Committees on Customer Service, the Standing Committee will act as the bridge between the various departments of the bank and the

Board / Customer Service Committees of the Board.

2.3 Branch Level Customer Service Committees

Banks were advised to establish Customer Service Committees at branch level. In order to encourage a formal channel of communication between the customers and the bank at the branch level,

banks should take necessary steps for strengthening the branch level committees with greater involvement of customers. It is desirable that branch level committees include their customers

too. Further, as senior citizens usually form an important constituent in banks, a senior citizen may preferably be included therein. The Branch Level Customer Service Committee may meet at

least once a month to study complaints/ suggestions, cases of delay, difficulties faced / reported by customers / members of the Committee and evolve ways and means of improving customer

service.

The branch level committees may also submit quarterly reports giving inputs / suggestions to the Standing Committee on Customer Service thus enabling the

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Standing Committee to examine them and provide relevant feedback to the Customer Service Committee of the Board for necessary policy / procedural action.

2.4 Nodal department / official for customer service

Each bank is expected to have a nodal department / official for customer service in the Head Office and each controlling office, with whom customers with grievances can approach in the first

instance and with whom the Banking Ombudsman and RBI can liaise.

3. Board approved policies on Customer Service

Customer service should be projected as a priority objective of banks along with profit, growth and fulfilment of social obligations. Banks should have a Board approved policy for the

following:

3.1 Comprehensive Deposit Policy

Banks should formulate a transparent and comprehensive policy setting out the rights of the depositors in general and small depositors in particular. The policy would also be required to

cover all aspects of operations of deposit accounts, charges leviable and other related issues to facilitate interaction of depositors at branch levels. Such a policy should also be explicit

in regard to secrecy and confidentiality of the customers. Providing other facilities by "tying-up" with placement of deposits is clearly a restrictive practice.

3.2 Cheque Collection Policy

Banks should formulate a comprehensive and transparent policy taking into account their technological capabilities, systems and processes adopted for clearing arrangements and other internal

arrangements for collection through correspondents. The policy should cover the following three aspects:

 Immediate Credit for Local / Outstation cheques

 Time frame for Collection of Local / Outstation Instruments

 Interest payment for delayed collection

.

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Broad principles enumerated in paragraph 14.1 should be taken into account while formulating the policy.

3.3 Customer Compensation Policy

Banks must have a well documented Customer Compensation Policy duly approved by their Boards. They could use the model policy formulated by the Indian Banks' Association (IBA) in this regard

in formulating their own policy. Banks policy should, at a minimum, incorporate the following aspects:-

(a) Erroneous Debits arising on fraudulent or other transactions

(b) Payment of interest for delays in collection

(c) Payment of interest for delay in issue of duplicate draft

(d) Other unauthorised actions of the bank leading to a financial loss to customer

3.4 Customer Grievance Redressal Policy

Banks must have a well documented Customer Grievance Redressal Policy duly approved by their Boards. The Policy should be framed based on the broad principles enumerated in paragraph 16 of

this Circular.

3.5 Giving publicity to the policies

(i) Banks should ensure that wide publicity is given to the above policies formulated by them by placing them prominently on the web-site and also otherwise widely disseminating the policies

such as, displaying them on the notice board in their branches.

(ii) The customers should be clearly apprised of the assurances of the bank on the services on these aspects at the time of establishment of the initial relationship be it as a depositor,

borrower or otherwise.

(iii) Further, they may also take necessary steps to keep the customers duly informed of the changes in the policies formulated by them from time to time.

.

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4. Financial Inclusion

4.1 Basic Savings Bank Deposit Account (BSBDA)

Banks are advised to offer a 'Basic Savings Bank Deposit Account' which will offer following minimum common facilities to all their customers :

i. The 'Basic Savings Bank Deposit Account' should be considered a normal banking service available to all.

ii. This account shall not have the requirement of any minimum balance.

iii. The services available in the account will include deposit and withdrawal of cash at bank branch as well as ATMs; receipt / credit of money through electronic payment channels or by

means of deposit / collection of cheques drawn by Central / State Government agencies and departments.

iv. While there will be no limit on the number of deposits that can be made in a month, account holders will be allowed a maximum of four withdrawals in a month, including ATM withdrawals.

v. Facility of ATM card or ATM-cum-Debit Card.

vi. The above facilities will be provided without any charges. Further, no charge will be levied for non-operation / activation of in-operative 'Basic Savings Bank Deposit Account'.

vii. Banks would be free to evolve other requirements including pricing structure for additional value-added services beyond the stipulated basic minimum services on reasonable and

transparent basis and applied in a non-discriminatory manner.

viii. The 'Basic Savings Bank Deposit Account' would be subject to RBI instructions on Know Your Customer (KYC) / Anti-Money Laundering (AML) for opening of bank accounts issued from time to

time. If such account is opened on the basis of simplified KYC norms, the account would additionally be treated

.

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as a 'Small Account' and would be subject to conditions stipulated for such accounts as indicated in paragraph 3.2.2(I)(A)(vi) of Master Circular dated July 01, 2015 on 'KYC norms / AML

standards / Combating of Financing of Terrorism (CFT) / Obligation of banks under PMLA, 2002'.

ix. Holders of 'Basic Savings Bank Deposit Account' will not be eligible for opening any other savings bank deposit account in that bank. If a customer has any other existing savings bank

deposit account in that bank, he / she will be required to close it within 30 days from the date of opening a 'Basic Savings Bank Deposit Account'.

x. The existing basic banking 'no-frills' accounts should be converted to 'Basic Savings Bank Deposit Account' as per the instructions contained above.

4.1.1 BSBDA – Frequently Asked Questions (FAQs)

In view of several queries received in connection with BSBDAs, a list of FAQs was issued. These FAQs are furnished in Annex VII.

4.2 IT-enabled Financial Inclusion

Though the banks make available a Basic Savings Bank Deposit Account so as to achieve the objective of greater financial inclusion, yet financial inclusion objectives would not be fully met

if the banks do not increase the banking outreach to the remote corners of the country. This has to be done with affordable infrastructure and low operational costs with the use of

appropriate technology. This would enable banks to lower the transaction costs to make small ticket transactions viable.

A few banks have already initiated certain pilot projects in different remote parts of the country utilizing smart cards/mobile technology to extend banking services similar to those

dispensed from branches. Banks are, therefore, urged to scale up their financial inclusion efforts by utilizing appropriate technology. Care may be taken to ensure that the solutions

developed are:

• highly secure,

• amenable to audit and

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• follow widely accepted open standards to allow inter-operability among the different systems adopted by different banks.

4.3 Printed material in trilingual form

In order to ensure that banking facilities percolate to the vast sections of the population, banks should make available all printed material used by retail customers including account

opening forms, pay-in-slips, passbooks, etc., in trilingual form i.e., English, Hindi and the concerned Regional Language.

4.4 Rights of Transgender Persons – Changes in bank forms/ applications etc.

It has been brought to our notice that transgender persons face difficulties in opening accounts as there is no provision for them in the account opening and other forms.

In this connection, banks are advised to refer to the judgement dated April 15, 2014 of the Supreme Court in the case of National Legal Services Authority v. Union of India and others [AIR

2014 SC 1863: (2014) 5 SCC 438] on treating all transgender persons as ‘third gender’. The Supreme Court, in that case, upheld transgender persons’ right to decide their self-identified

gender and directed the Centre and State Government to grant legal recognition of their gender identity such as male, female or as third gender.

Banks are, therefore, directed to include ‘third gender’ in all forms/applications etc. prescribed by the Reserve Bank or the banks themselves, wherein any gender classification is envisaged.

5. Opening / Operation of Deposit Accounts

5.1 Customer Identification Procedure for individual accounts

Banks should be generally guided by RBI instructions on KYC / AML for opening of accounts.

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5.1.1 Intra-bank Deposit Accounts Portability

Banks are advised that KYC once done by one branch of the bank should be valid for transfer of the account within the bank as long as full KYC has been done for the concerned account. The

customer should be allowed to transfer his account from one branch to another branch without insisting on fresh proof of address and on the basis of a self-declaration from the account holder

about his / her current address, subject to submitting proof of address within a period of six months. Periodical updation of KYC data would continue to be done by bank as per prescribed

periodicity.

5.2 Savings Bank Rules

As many banks are now issuing statement of accounts in lieu of pass books, the Savings Bank Rules must be annexed as a tear-off portion to the account opening form so that the account holder

can retain the rules.

5.3 Photographs of depositors

Banks should obtain and keep on record photographs of all depositors/account holders in respect of accounts opened by them subject to the following clarifications:

(i) The instructions cover all types of deposits including fixed, recurring, cumulative, etc.

(ii) They apply to all categories of depositors, whether resident or non-resident. Only banks, Local Authorities and Government Departments (excluding public sector undertakings or quasi-

Government bodies) will be exempt from the requirement of photographs.

(iii) The banks may not insist on photographs in case of accounts of staff members only (Single/Joint).

(iv) The banks should obtain photographs of all persons authorised to operate the accounts viz., Savings Bank and Current Accounts without exception.

(v) The banks should also obtain photographs of the 'Pardanishin' women.

.

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(vi) The banks may obtain two copies of photographs and obtaining photocopies of driving licence/passport containing photographs in place of photographs would not suffice.

(vii) The banks should not ordinarily insist on the presence of account holder for making cash withdrawals in case of 'self' or 'bearer' cheques unless the circumstances so warrant. The banks

should pay 'self' or 'bearer' cheques taking usual precautions.

(viii) Photographs cannot be a substitute for specimen signatures.

(ix) Only one set of photographs need be obtained and separate photographs should not be obtained for each category of deposit. The applications for different types of deposit accounts should

be properly referenced.

(x) Fresh photographs need not be obtained when an additional account is desired to be opened by the account holder.

(xi) In the case of operative accounts, viz. Savings Bank and Current accounts, photographs of persons authorised to operate them should be obtained. In case of other deposits, viz., Fixed,

Recurring, Cumulative, etc., photographs of all depositors in whose names the deposit receipt stands may be obtained except in the case of deposits in the name of minors where guardians'

photographs should be obtained.

5.4 Minimum balance in savings bank accounts

At the time of opening the accounts, banks should inform their customers in a transparent manner the requirement of maintaining minimum balance and levying of charges, etc., if the minimum

balance is not maintained. Any charge levied subsequently should be transparently made known to all depositors in advance with one month’s notice. The banks should inform, at least one month

in advance, the existing account holders of any change in the prescribed minimum balance and the charges that may be levied if the prescribed minimum balance is not maintained. With effect

from May 6, 2014, banks are not permitted to levy penal charges for non-maintenance of minimum balances in any inoperative account.

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5.4.1 Levy of Penal Charges on Non-Maintenance of Minimum balance in savings bank accounts

With effect from April 1, 2015, while levying charges for non-maintenance of minimum balance in savings bank accounts, banks shall adhere to the following additional guidelines:

(i) In the event of a default in maintenance of minimum balance / average minimum balance as agreed to between the bank and customer, the bank should notify the customer clearly by SMS /

email / letter etc. that in the event of the minimum balance not being restored in the account within a month from the date of notice, penal charges will be applicable.

(ii) In case the minimum balance is not restored within a reasonable period, which shall not be less than one month from the date of notice of shortfall, penal charges may be recovered under

intimation to the account holder.

(iii) The policy on penal charges to be so levied may be decided with the approval of Board of the bank.

(iv) The penal charges should be directly proportionate to the extent of shortfall observed. In other words, the charges should be a fixed percentage levied on the amount of difference

between the actual balance maintained and the minimum balance as agreed upon at the time of opening of account. A suitable slab structure for recovery of charges may be finalized.

(v) It should be ensured that such penal charges are reasonable and not out of line with the average cost of providing the services.

(vi) It should be ensured that the balance in the savings account does not turn into negative balance solely on account of levy of charges for non-maintenance of minimum balance.

These guidelines should be brought to the notice of all customers apart from being disclosed on the bank's website.

5.5 Purchase of Local Cheques, Drafts, etc.,

during suspension of Clearing

There may be occasions when Clearing House operations may have to be temporarily suspended for reasons beyond the control of the authorities concerned. Such suspension entails hardship to the

constituents of the banks because of their inability to

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realize promptly the proceeds of cheques, drafts, etc., drawn on the local banks other than those with whom they maintain accounts. Some remedial action has to be taken during such

contingencies to minimise, as far as possible, the inconvenience and hardship to banks' constituents as also to maintain good customer service. Thus, whenever clearing is suspended and it is

apprehended that the suspension may be prolonged, banks may temporarily accommodate their constituents, both borrowers and depositors, to the extent possible by purchasing the local cheques,

drafts, etc., deposited in their accounts for collection, special consideration being shown in respect of cheques drawn by Government departments/companies of good standing and repute, as

also demand drafts drawn on local banks. While extending this facility, banks would no doubt take into consideration such factors as creditworthiness, integrity, past dealings and occupation

of the constituents, so as to guard themselves against any possibility of such instruments being dishonoured subsequently.

5.6 Statement of accounts / Pass Books

5.6.1 Issuance of Passbooks to Savings Bank Account holders

(Individuals)

(i) A passbook is a ready reckoner of transactions and is handy and compact and as such, is far more convenient to the small customer than a statement of account. Use of statements has some

inherent difficulties viz., (a) these need to be filed regularly (b) the opening balance needs to be tallied with closing balance of last statement (c) loss of statements in postal transit is

not uncommon and obtaining duplicates thereof involves expense and inconvenience (d) ATM slips during the interregnum between two statements does not provide a satisfactory solution as full

record of transactions is not available and (e) there are a large number of small customers who do not have access to computers / internet, etc. As such, non-issuance of pass-books to such

small customers would indirectly lead to their financial exclusion.

Banks are therefore advised to invariably offer pass book facility to all its savings bank account holders (individuals) and in case the bank offers the facility of sending statement of

account and the customer chooses to get statement of account, the banks must issue monthly statement of accounts. The cost of providing such Pass Book or Statements should not be charged to

the customer.

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(ii) It has come to our notice that some banks are not issuing pass books to their savings banks account holders (individuals) and only issue a computer generated account statement even when

the customer desires pass book facility. Banks are, therefore, advised to strictly adhere to the extant instructions.

5.6.2. Updating passbooks

(i) Customers may be made conscious of the need on their part to get the pass-books updated regularly and employees may be exhorted to attach importance to this area.

(ii) Wherever pass-books are held back for updating, because of large number of entries, paper tokens indicating the date of its receipt and also the date when it is to be collected should be

issued.

(iii) It is sometimes observed that customers submit their passbooks for updation after a very long time. In addition to the instructions printed in the passbook, whenever a passbook is

tendered for posting after a long interval of time or after very large number of transactions, a printed slip requesting the depositor to tender it periodically should be given.

5.6.3 Entries in passbooks / statement of accounts

(i) Banks should give constant attention to ensure entry of correct and legible particulars in the pass books and statement of accounts.

(ii) The banks often show the entries in depositors' passbooks / statements of accounts, as "by clearing" or "by cheque". Further, it is observed that in the case of Electronic Clearing

System (ECS) and RBI Electronic Fund Transfer (RBIEFT), banks generally do not provide any details even though brief particulars of the remittance are provided by the receiving bank. In some

cases, computerized entries use codes which just cannot be deciphered. With a view to avoiding inconvenience to depositors, banks should avoid such inscrutable entries in passbooks /

statement of accounts and ensure that brief, intelligible particulars are invariably entered in passbooks / statement of account.

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5.6.4 Maintenance of savings bank pass books: precautions

Negligence in taking adequate care in the custody of savings bank pass books facilitates fraudulent withdrawals from the relative accounts. A few precautions in this regard are given below:

(i) Branches should accept the pass books and return them against tokens.

(ii) Pass books remaining with the branches should be held in the custody of

named responsible officials.

(iii) While remaining with the branch, pass books should be held under lock and

key overnight.

5.6.5 Providing monthly statement of accounts

(i) Banks may ensure that they adhere to the monthly periodicity while sending

statement of accounts.

(ii) The statements of accounts for current account holders may be sent to the

depositors in a staggered manner instead of sending by a target date every

month. The customers may be informed about staggering of the preparation

of these statements.

(iii) Further, banks should advise their Inspecting Officers to carry out sample

check at the time of internal inspection of branches to verify whether the

statements are being despatched in time.

5.6.6 Address / Telephone Number of the Branch in Pass Books / Statement of Accounts

In order to improve the quality of service available to customers in branches, it would be useful if the address / telephone number of the branch is mentioned on the passbooks / statement of

accounts.

Banks are therefore advised to ensure that full address / telephone number of the branch is invariably mentioned in the passbooks / statement of accounts issued to account holders.

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5.6.7 Printing of MICR code and IFSC code on passbook / statement of account

The Magnetic Ink Character Recognition (MICR) code is necessary for all Electronic Clearing Service (ECS – Credit and Debit) transactions and the Indian Financial System Code (IFSC) is a

pre-requisite for National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS) transactions. At present, this information is made available on the cheque leaf along with

the IFSC code of the branch. However, on a review, banks are advised to take necessary steps to provide this information in all passbook / statement of account of their account holders.

5.7 Issue of Cheque Books

5.7.1 Issuing large number of cheque books

(issued to Public Sector Banks)

Banks may issue cheque books with larger number of (20/25) leaves if a customer demands the same and also ensure that adequate stocks of such cheque books (20/25 leaves) are maintained with

all the branches to meet the requirements of the customers.

Banks should take appropriate care while issuing large number of cheque books. It should be done in consultation with the Controlling Office of the bank.

5.7.2 Writing the cheques in any language

All cheque forms should be printed in Hindi and English. The customer may, however, write cheques in Hindi, English or in the concerned regional language.

5.7.3 Dispatching the cheque book by courier

The procedure of disallowing depositors to collect the cheque book at the branch and insisting on dispatching the cheque book by courier after forcibly obtaining a declaration from the

depositor that a dispatch by the courier is at depositor's risk is an unfair practice. Banks should refrain from obtaining such undertakings from depositors and ensure that cheque books are

delivered over the counters on request to the depositors or his authorized representative.

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5.7.4 Acceptance of cheques bearing a date as per

National Calendar (Saka Samvat) for payment

Government of India has accepted Saka Samvat as National Calendar with effect from 22 March 1957 and all Government statutory orders, notifications, Acts of Parliament, etc. bear both the

dates i.e., Saka Samvat as well as Gregorian Calendar. An instrument written in Hindi having date as per Saka Samvat calendar is a valid instrument. Cheques bearing date in Hindi as per the

National Calendar (Saka Samvat) should, therefore, be accepted by banks for payment, if otherwise in order. Banks can ascertain the Gregorian calendar date corresponding to the National Saka

calendar in order to avoid payment of stale cheques.

5.7.5 Issue of Multicity / Payable at All Branches Cheques by CBS enabled Banks:

In order to bring efficiency in the cheque clearing, all CBS enabled banks have been advised to issue only “payable at par” / “multi-city” CTS 2010 Standard cheques to all eligible customers

without extra charges with appropriate Board approved risk management procedures based on risk categorization of accounts. Banks have been advised not to charge their savings bank account

customers for issuance of CTS-2010 standard cheques when they are issued for the first time.

5.8 Term Deposit Account

5.8.1 Issue of term deposit receipt

Bank should issue term deposit receipt indicating therein full details, such as, date of issue, period of deposit, due date, applicable rate of interest, etc.

5.8.2 Transferability of deposit receipts

Term deposits should be freely transferable from one office of bank to another.

5.8.3 Disposal of deposits

Advance instructions from depositors for disposal of deposits on maturity may be obtained in the application form itself. Wherever such instructions are not obtained, banks should ensure

sending of intimation of impending due date of maturity well in advance to their depositors as a rule in order to extend better customer service.

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5.8.4 Notifying the change in interest rates

Change in interest rate on deposits should be made known to customers as well as bank branches expeditiously.

5.8.5 Payment of interest on fixed deposit –

Method of calculation of interest

Indian Banks’ Association (IBA) Code for Banking Practice has been issued by IBA for uniform adoption by the member banks. The Code is intended to promote good banking practices by setting

out minimum standards, which member banks should follow in their dealings with customers. IBA, for the purpose of calculation of interest on domestic term deposit, has prescribed that on

deposits repayable in less than three months or where the terminal quarter is incomplete, interest should be paid proportionately for the actual number of days reckoning the year at 365 days.

Some banks are adopting the method of reckoning the year at 366 days in a Leap year and 365 days in other years. While banks are free to adopt their methodology, they should provide

information to their depositors about the manner of calculation of interest appropriately while accepting the deposits and display the same at their branches.

5.8.6 Premature withdrawal of term deposit

A bank, on request from the depositor, should allow withdrawal of a term deposit before completion of the period of the deposit agreed upon at the time of making the deposit. The bank will

have the freedom to determine its own penal interest rate of premature withdrawal of term deposits. The bank should ensure that the depositors are made aware of the applicable penal rate

along with the deposit rate. While prematurely closing a deposit, interest on the deposit for the period that it has remained with the bank will be paid at the rate applicable to the period

for which the deposit remained with the bank and not at the contracted rate. No interest is payable, where premature withdrawal of deposits takes place before completion of the minimum period

prescribed. With effect from April 1, 2013 banks will have the discretion to disallow premature withdrawal of a term deposit in respect of bulk deposits of `1 crore and above of all

depositors, including deposits of individuals and HUFs. Bank should, however, notify such depositors of its policy of disallowing premature withdrawal in advance, i.e., at the time

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of accepting such deposits. A bank on request from a depositor shall allow withdrawal of a Rupee term deposits of less than 1 crore, before completion of the period of the deposit agreed upon

at the time of making the deposit. Bank will have the freedom to determine its own penal interest rates for premature withdrawal of term deposits. Bank should ensure that the depositors are

made aware of the applicable penal rates along with the deposit rates. The revised guidelines are made applicable with effect from April 1, 2013.

5.8.6.1 Repayment of Term/Fixed Deposits in banks:

Some banks insist on the signatures of both the depositors to allow repayment of money in fixed/term deposits, though the deposit account is opened with operating instructions (sometimes

called ‘repayment instructions’), ‘Either or Survivor’ or ‘Former or Survivor’. Such insistence on the signatures of both the depositors has the effect of making the mandate given by the

depositors redundant. This, in turn, results in unjustified delays and allegations of poor customer service.

1. It is clarified that if fixed/term deposit accounts are opened with operating instructions ‘Either or Survivor’, the signatures of both the depositors need not be obtained for payment of

the amount of the deposits on maturity. However, the signatures of both the depositors may have to be obtained, in case the deposit is to be paid before maturity. If the operating instruction

is ‘Either or Survivor’ and one of the depositors expires before the maturity, no pre-payment of the fixed/term deposit may be allowed without the concurrence of the legal heirs of the

deceased joint holder. This, however, would not stand in the way of making payment to the survivor on maturity.

2. In case the mandate is ‘Former or Survivor’, the ‘Former’ alone can operate/withdraw the matured amount of the fixed/term deposit, when both the depositors are alive. However, the

signature of both the depositors may have to be obtained, in case the deposit is to be paid before maturity. If the former expires before the maturity of the fixed/term deposit, the

‘Survivor’ can withdraw the deposit on maturity. Premature withdrawal would however require the consent of both the parties, when both of them are alive, and that of the surviving depositor

and the legal heirs of the deceased in case of death of one of the depositors.

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3. If the joint depositors prefer to allow premature withdrawals of fixed/term deposits also in accordance with the mandate of ‘Either or Survivor’ or ‘Former or Survivor’, as the case may

be, it would be open to banks to do so, provided they have taken a specific joint mandate from the depositors for the said purpose. In other words, in case of term deposits with "Either or

Survivor" or "Former or Survivor" mandate, banks are permitted to allow premature withdrawal of the deposit by the surviving joint depositor on the death of the other, only if, there is a

joint mandate from the joint depositors to this effect.

4. It has come to our notice that many of the banks have neither incorporated such a clause in the account opening form nor have they taken adequate measures to make the customers aware of

the facility of such mandate, thereby putting the "surviving" deposit account holder(s) to unnecessary inconvenience. Banks are, therefore, advised to invariably incorporate the aforesaid

clause in the account opening form and also inform their existing as well as future term deposit holders about the availability of such an option.

5. The joint deposit holders may be permitted to give the mandate either at the time of placing fixed deposit or anytime subsequently during the term / tenure of the deposit. If such a

mandate is obtained, banks can allow premature withdrawal of term / fixed deposits by the surviving depositor without seeking the concurrence of the legal heirs of the deceased joint deposit

holder. It is also reiterated that such premature withdrawal would not attract any penal charge.

6. When a fixed deposit account is opened in the joint names of two depositors on ‘Either or Survivor’ basis and the said joint depositors already have a savings bank account in their names

jointly on ‘Either or Survivor’ instructions, on maturity of the fixed deposit, proceeds of the matured fixed deposit can be credited to the joint savings bank account already opened in the

bank. There is no need for opening a separate savings bank account in the name of the first depositor for crediting the proceeds of the fixed deposit.

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5.8.7 Renewal of Overdue deposits

All aspects concerning renewal of overdue deposits may be decided by individual banks subject to their Board laying down a transparent policy in this regard and the customers being notified

of the terms and conditions of renewal including interest rates, at the time of acceptance of deposit. The policy should be non-discretionary and non-discriminatory.

5.8.8 Addition or deletion of the name/s of joint account holders

A bank may, at the request of all the joint account holders, allow the addition or deletion of name/s of joint account holder/s if the circumstances so warrant or allow an individual

depositor to add the name of another person as a joint account holder. However, in no case should the amount or duration of the original deposit undergo a change in any manner in case the

deposit is a term deposit.

A bank may, at its discretion, and at the request of all the joint account holders of a deposit receipt, allow the splitting up of the joint deposit, in the name of each of the joint account

holders only, provided that the period and the aggregate amount of the deposit do not undergo any change.

Note: NRE deposits should be held jointly with non-residents only. NRO accounts may be held by non-residents jointly with residents.

5.8.9 Payment of interest on accounts frozen by banks

Banks are at times required to freeze the accounts of customers based on the orders of the enforcement authorities. The issue of payment of interest on such frozen accounts was examined in

consultation with Indian Banks’ Association and banks are advised to follow the procedure detailed below in the case of Term Deposit Accounts frozen by the enforcement authorities:

(i) A request letter may be obtained from the customer on maturity. While obtaining the request letter from the depositor for renewal, banks should also advise him to indicate the term for

which the deposit is to be renewed. In case the depositor does not exercise his option of choosing the term for renewal, banks may renew the same for a term equal to the original term.

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(ii) No new receipt is required to be issued. However, suitable note may be made regarding renewal in the deposit ledger.

(iii) Renewal of deposit may be advised by registered letter / speed post / courier service to the concerned Government department under advice to the depositor. In the advice to the

depositor, the rate of interest at which the deposit is renewed should also be mentioned.

(iv) If overdue period does not exceed 14 days on the date of receipt of the request letter, renewal may be done from the date of maturity. If it exceeds 14 days, banks may pay interest for

the overdue period as per the policy adopted by them, and keep it in a separate interest free sub-account which should be released when the original fixed deposit is released.

Further, with regard to the savings bank accounts frozen by the Enforcement authorities, banks may continue to credit the interest to the account on a regular basis.

5.8.10 Acknowledgement by banks at the time of submission of Form 15-G / 15-H

Banks are not required to deduct TDS from depositors who submit declaration in Form 15-G/15-H under Income Tax Rules, 1962. However, it has been brought to our notice that despite submission

of Form 15-G/15-H by customers, banks are deducting tax at source, at times, causing inconvenience to customers resulting in a number of complaints. Such instances arise because either the

forms are misplaced or a track is not kept of forms received in the branches.

The matter has been examined by us in consultation with Indian Banks’ Association (IBA). With a view to protect interest of the depositors and for rendering better customer service, banks are

advised to give an acknowledgment at the time of receipt of Form 15-G/15-H. This will help in building a system of accountability and customers will not be put to inconvenience due to any

omission on part of the banks.

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5.8.11 Timely Issue of TDS Certificate to Customers

Some banks are not providing TDS Certificate in Form 16A to their customers in time, causing inconvenience to customers in filing income-tax returns.

With a view to protect the interests of the depositor and for rendering better customer service, banks are advised to provide TDS Certificate in Form 16A, to their customers in respect of

whom they (banks) have deducted tax at source. Banks are advised to put in place systems that will enable them to provide Form 16A to the customers well within the time-frame prescribed under

the Income Tax Rules.

5.9 Acceptance of cash over the counter

Some banks have introduced certain products whereby the customers are not allowed to deposit cash over the counters and also have incorporated a clause in the terms and conditions that cash

deposits, if any, are required to be done through ATMs.

Banking, by definition, means acceptance of deposits of money from the public for the purpose of lending and investment. As such, banks cannot design any product which is not in tune with the

basic tenets of banking. Further, incorporating such clauses in the terms and conditions which restrict deposit of cash over the counters also amounts to an unfair practice.

Banks are, therefore, advised to ensure that their branches invariably accept cash over the counters from all their customers who desire to deposit cash at the counters. Further, they are

also advised to refrain from incorporating clauses in the terms and conditions which restrict deposit of cash over the counters.

5.10 Opening accounts in the name of minors with Mothers as guardians

Considerable difficulty was experienced by women customers in opening bank accounts in the names of minors, with mothers as their guardians. Presumably, the banks were reluctant to accept the

mother as a guardian of a minor, while father is alive in view of section 6 of the Hindu Minority and Guardianship Act, 1956, which stipulates that the father alone should be deemed to be the

guardian in such case. To overcome this legal difficulty and to enable the banks to open freely such accounts in the name of minors

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under the guardianship of their mothers, it was suggested in some quarters that the above provisions should be suitably amended. While it is true that an amendment of the above Act may

overcome the difficulty in the case of Hindus, it would not solve the problem for other communities as minors belonging to Muslim, Christian, Parsi communities would still be left out unless

the laws governing these communities are also likewise amended.

The legal and practical aspects of the above problem were, therefore, examined in consultation with the Government of India and it was advised that if the idea underlining the demand for

allowing mothers to be treated as guardians relates only to the opening of fixed and savings bank accounts, there would seem to be no difficulty in meeting the requirements as,

notwithstanding the legal provisions, such accounts could be opened by banks provided they take adequate safeguards in allowing operations in the accounts by ensuring that the minors'

accounts opened with mothers as guardians are not allowed to be overdrawn and that they always remain in credit. In this way, the minors' capacity to enter into contract would not be a

subject matter of dispute. If this precaution is taken, the banks' interests would be adequately protected.

Banks are advised to instruct their branches to allow minors' accounts (fixed and savings only) with mothers as guardians to be opened, whenever such requests are received by them, subject to

the safeguards mentioned above.

The facility of allowing opening of minor’s accounts with mothers as guardians may be extended to Recurring Deposit Accounts also subject to precautions mentioned above.

5.10.1 Opening of Bank Accounts in the Names of Minors

With a view to promote the objective of financial inclusion and also to bring uniformity among banks in opening and operating minors’ accounts, banks are advised as under:

a. A savings /fixed / recurring bank deposit account can be opened by a minor of any age through his/her natural or legally appointed guardian.

b. Minors above the age of 10 years may be allowed to open and operate savings bank accounts independently, if they so desire. Banks may, however, keeping in view their risk management

systems, fix limits in terms of age and amount up to which minors may be allowed to operate the deposit accounts independently.

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They can also decide, in their own discretion, as to what minimum documents are required for opening of accounts by minors.

c. On attaining majority, the erstwhile minor should confirm the balance in his/her account and if the account is operated by the natural guardian / legal guardian, fresh operating

instructions and specimen signature of erstwhile minor should be obtained and kept on record for all operational purposes.

2. Banks are free to offer additional banking facilities like internet banking, ATM/ debit card, cheque book facility etc., subject to the safeguards that minor accounts are not allowed to be

overdrawn and that these always remain in credit.

5.11 Opening of Current Accounts – Need for discipline

(i) Keeping in view the importance of credit discipline for reduction in NPA level of banks, banks should, at the time of opening current accounts, insist on a declaration to the effect that

the account holder is not enjoying any credit facility with any other bank. Banks should scrupulously ensure that their branches do not open current accounts of entities which enjoy credit

facilities (fund based or non-fund based) from the banking system without specifically obtaining a No-Objection Certificate from the lending bank(s). Banks should note that non-adherence to

the above discipline could be perceived to be abetting the siphoning of funds and such violations which are either reported to RBI or noticed during our inspection would make the concerned

banks liable for penalty under Banking Regulation Act, 1949.

(ii) Banks may open current accounts of prospective customers in case no response is received from the existing bankers after a minimum waiting period of a fortnight. If a response is

received within a fortnight, banks should assess the situation with reference to information provided on the prospective customer by the bank concerned and are not required to solicit a

formal no objection, consistent with true freedom to the customer of banks as well as needed due diligence on the customer by the bank.

(iii) In case of a prospective customer who is a corporate or large borrower enjoying credit facilities from more than one bank, the banks should exercise due diligence and inform the

consortium leader, if under consortium, and the concerned banks, if under multiple banking arrangement.

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5.12 Reconciliation of transactions at ATMs failure - Time limit

Reserve Bank has been receiving a number of complaints from bank customers, regarding debit of accounts even though the ATMs have not disbursed cash for various reasons. More importantly,

banks take considerable time in reimbursing the amounts involved in such failed transactions to card holders. In many cases, the time taken is as much as 50 days. The delay of the magnitude

indicated above is not justified, as it results in customers being out of funds for a long time for no fault of theirs. Moreover, this delay can discourage customers from using ATMs.

Based on a review of the developments and with a view to further improve the efficiency of operations, it has been decided as under:-

a. The time limit for resolution of customer complaints by the issuing banks shall stand reduced from 12 working days to 7 working days from the date of receipt of customer complaint.

Accordingly, failure to recredit the customer’s account within 7 working days of receipt of the complaint shall entail payment of compensation to the customer @ ` 100/- per day by the issuing

bank. This compensation shall be credited to the customer’s account automatically without any claim from the customer, on the same day when the bank affords the credit for the failed ATM

transaction.

b. Any customer is entitled to receive such compensation for delay, only if a claim is lodged with the issuing bank within 30 days of the date of the transaction.

c. The number of free transactions permitted per month at other bank ATMs to Savings Bank account holders shall be inclusive of all types of transactions, financial or non-financial.

d. All disputes regarding ATM failed transactions shall be settled by the issuing bank and the acquiring bank through the ATM System Provider only. No bilateral settlement arrangement outside

the dispute resolution mechanism available with the system provider is permissible. This measure is intended to bring down the instances of disputes in payment of compensation between the

issuing and acquiring banks.

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Non-adherence to the provisions contained in para 5.12 (a) to (d) shall attract penalty as prescribed under the Payment and Settlement Systems Act 2007 (Act 51 of 2007).

5.13 Lodging of ATM related Complaints

The following information should be displayed prominently at the ATM locations:-

(i) ATM ID may be displayed clearly in the premises to make use of it while making a complaint / suggestion

(ii) Information that complaints should be lodged at the branches where customers maintain accounts to which ATM card is linked

(iii) Telephone numbers of help desk / contact persons of the ATM owning bank to lodge complaint / seek assistance

(iv) Uniform Template (as given in Annexure V) for lodging of complaints relating to ATM transactions.

To improve the customer service through enhancement of efficiency in ATM operations, banks are advised to initiate following action:

(i) Message regarding non-availability of cash in ATMs should be displayed before the transaction is initiated by customer

(ii) Make available forms for lodging the complaints with name and phone number of the officials with whom they have to be lodged

(iii) Make available sufficient toll-free phone numbers for lodging complaints / reporting and blocking lost cards and also attend the requests on priority

(iv) Mobile numbers / e-mail IDs of the customers may be registered to send alerts

In case of complaints pertaining to a failed ATM transaction at other bank ATMs, the customer should lodge a complaint with the card issuing bank even if the transaction was carried out at

another bank’s ATM.

5.14 Transactions at ATM-Procedural Amendment - Pin Validation for Every Successive Transaction

The process flow followed for ATM transactions varies from bank to bank. The type of card readers installed by each ATM vendor also contributes to the variation in the

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process flow. Security concerns arise in the case of certain type of card readers which facilitate multiple transactions without the need for pin validation for every successive transaction.

The possibility of frauds / misuse of cards is very high in a scenario where the card is inserted in such reader slots, the card holder fails to collect the card after the transaction is

completed and the card is misused. This risk can be eliminated to a great extent if, for every transaction, the process flow demands pin validation. Hence each bank may ensure that the

process flow is modified to provide for the pin validation for every transaction, including balance enquiry facilitated through ATM. Further, as an additional safety measure, banks are

advised that the time-out of sessions should be enabled for all screens / stages of ATM transaction keeping in view the time required for such functions in normal course.

Non-adherence to the above provisions shall attract penalty as prescribed under the Payment and Settlement Systems Act 2007 (Act 51 of 2007).

5.15 Security Issues and Risk mitigation measures- Online alerts to the cardholder for usage of credit/debit cards

Banks were mandated to send online alerts to the cardholders for all Card Not Present (CNP) transactions for the value of ` 5000/- and above. In view of the incidents of unauthorized /

fraudulent withdrawals at ATMs that came to the notice of RBI, banks were advised to put in place, latest by June 30, 2011, a system of online alerts for all types of transactions

irrespective of the amount, involving usage of cards at various channels. This measure is expected to encourage further usage of cards at various delivery channels. Banks should provide

easier methods (like SMS) for the customer to block his card and get a confirmation to that effect after blocking the card.

5.16 Security Issues and Risk mitigation measures related to Card Not Present (CNP) transactions

Banks have been mandated to necessarily put in place additional factor of authentication/validation based on information not visible on the cards for all on-line Card not Present (CNP)

transactions in a phased manner, starting with online transactions followed by Interactive Voice Response (IVR), Mail Order Telephone Order(MOTO) and Standing Instructions (SI). In the case

of MOTO and SI transactions, it has been stated that in case of customer complaint regarding issues, if any, arising

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out of transactions effected without the additional factor of authentication after the stipulated date, the issuer bank has to reimburse the loss to the customer further without demur.

5.17 Securing Electronic Payment Transactions

The electronic modes of payment like RTGS, NEFT and IMPS have emerged as channel agnostic modes of funds transfer. These have picked up to a large extent through the internet banking channel

and hence it is imperative that such delivery channels are also safe and secure. Some of the additional measures that need to be introduced by the banks could be as follows :

(i) Customer induced options may be provided for fixing a cap on the value / mode of transactions / beneficiaries. In the event of customer wanting to exceed the cap, an additional

authorization may be insisted upon.

(ii) Limit on the number of beneficiaries that may be added in a day per account could be considered.

(iii) A system of alert may be introduced when a beneficiary is added.

(iv) Banks may put in place mechanism for velocity check on the number of transactions effected per day / per beneficiary and any suspicious operations should be subjected to alert within the

bank and to the customer.

(v) Introduction of additional factor of authentication (preferably dynamic in nature) for such payment transactions should be considered.

(vi) The banks may consider implementation of digital signature for large value payments for all customers, to start with for RTGS transactions.

(vii) Capturing of Internet Protocol (IP) address as an additional validation check should be considered.

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6. Levy of Service Charges

6.1 Fixing service charges by banks

The practice of IBA fixing the benchmark service charges on behalf of member banks has been done away with and the decision to prescribe service charges has been left to individual banks.

While fixing service charges for various types of services like charges for cheque collection, etc., banks should ensure that the charges are reasonable and are not out of line with the

average cost of providing these services. Banks should also take care to ensure that customers with low volume of activities are not penalised.

Banks should make arrangements for working out charges with prior approval of their Boards of Directors as recommended above and operationalise them in their branches as early as possible.

6.2 Ensuring Reasonableness of Bank Charges

In order to ensure fair practices in banking services, Reserve Bank of India had constituted a Working Group to formulate a scheme for ensuring reasonableness of bank charges and to

incorporate the same in the Fair Practices Code, the compliance of which would be monitored by the Banking Codes and Standards Board of India (BCSBI). Based on the recommendations of the

Group, action required to be taken by banks is indicated under the column 'action points for banks' in the Annex I to this circular.

6.3 Home Loans-Levy of fore-closure charges/pre-payment penalty

6.3.1 The Committee on Customer Service in Banks (Chairman: M. Damodaran) had observed that foreclosure charges levied by banks on prepayment of home loans are resented upon by home loan

borrowers across the board especially since banks were found to be hesitant in passing on the benefits of lower interest rates to the existing borrowers in a falling interest rate scenario.

As such, foreclosure charges are seen as a restrictive practice deterring the borrowers from switching over to cheaper available source.

6.3.2 The removal of foreclosure charges/prepayment penalty on home loans will lead to reduction in the discrimination between existing and new borrowers and competition among banks will

result in finer pricing of the floating rate home loans. Though many

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banks have in the recent past voluntarily abolished pre-payment penalties on floating rate home loans, there is a need to ensure uniformity across the banking system. It has, therefore, been

decided that banks will not be permitted to charge foreclosure charges/pre-payment penalties on home loans on floating interest rate basis, with immediate effect.

6.3.3 As per extant guidelines a fixed rate loan is one where the rate is fixed for entire duration of the loan. Hence, the Dual Rate/Special Rate home loans sanctioned by banks cannot be

treated as fixed rate loans. In case of Dual Rate/ Special Rate home loans, the provisions of paragraph 6.3.1 above will be applicable from the date the rate of interest on the loan becomes

floating.

6.4 Levy of Foreclosure Charges / Pre-payment Penalty on Floating Rate Term Loans

Banks will not be permitted to charge foreclosure charges / pre-payment penalties on all floating rate term loans sanctioned to individual borrowers.

6.5 RTGS charges for customers

Consequent to the levy of service charges for members under RTGS, banks cannot charge their customers for outward RTGS remittances beyond the amounts stipulated below:

RTGS Transaction Maximum customer charges

Inward Transactions Free

Outward transactions

` 2 lakh to ` 5 lakh ` 25 + applicable time varying tariff subject to a maximum of ` 30

Above ` 5 lakh ` 50 + applicable time varying tariff subject to a maximum of ` 55

6.6 Uniformity in Intersol Charges

With the introduction of Core Banking Solution (CBS), it is expected that customers of banks would be treated uniformly at any sales or service delivery point. It is, however, observed that

some banks are discriminating against their own customers on the basis

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of one branch being designated as the 'home' or 'base' branch where charges are not levied for products / services and other branches of the same bank being referred to as 'non-home' branches

where charges are levied for the same products / services. The charges generally referred to as 'Intersol' charges, are also not uniform across home / non-home branches. This practice

followed by some banks is contrary to the spirit of the Reserve Bank's guidelines on reasonableness of bank charges. As 'Intersol' charges are charges levied by the bank to cover the cost of

extending services to customers by using the CBS / Internet / Intranet platform, the cost should be branch / customer agnostic in-principle. It is clarified that cash handling charges may not

be included under intersol charges.

Banks are advised to follow a uniform, fair and transparent pricing policy and not discriminate between their customers at home branch and non-home branches. Accordingly, if a particular

service is provided free at home branch, the same should be available free at non home branches also. There should be no discrimination as regards intersol charges between similar

transactions done by customers at home branch and those done at non-home branches.

6.7 Charges for Sending SMS Alerts

Banks are required to put in place a system of online alerts for all types of transactions irrespective of the amounts involving usage of cards at various channels.

Accordingly, with a view to ensuring reasonableness and equity in the charges levied by banks for sending SMS alerts to customers, banks are advised to leverage the technology available with

them and the telecom service providers to ensure that such charges are levied on all customers on actual usage basis.

7. Service at the counters

7.1 Banking hours / working days of bank branches

Banks should normally function for public transactions at least for 4 hours on week days and 2 hours on Saturdays in the larger interest of public and trading community. Extension counters,

Satellite Offices, one man offices or other special class of branches may remain open for such shorter hours as may be considered necessary.

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7.2 Changes in banking hours

No particular banking hours have been prescribed by law and a bank may fix, after due notice to its customers, whatever business hours are convenient to it i.e., to work in double shifts, to

observe weekly holiday on a day other than Sunday or to function on Sundays in addition to the normal working days, subject to observing normal working hours for public transactions referred

to in paragraph above.

In order to safeguard banks' own interest, a bank closing any of its offices on a day other than a public holiday, will have to give due and sufficient notice to all the parties concerned who

are or are likely to be affected by such closure. Thus, in all the above cases, it is necessary for a bank to give sufficient notice to the public/its customers of its intention. What is

sufficient or due notice is a question of fact, depending on the circumstances of each case. It is also necessary to avoid any infringement of any other relevant local laws such as Shops and

Establishment Act, etc.

Further, the provisions, if any, in regard to the banks' obligations, to the staff under the Industrial Awards / Settlements, should be complied with. Clearing House authority of the place

should also be consulted in this regard.

The banks' branches in rural areas can fix the business hours (i.e. number of hours, as well as timings) and the weekly holidays to suit local requirements. This may, however, be done subject

to the guidelines given above.

7.3 Commencement / Extension of working hours

Commencement of employees’ working hours 15 minutes before commencement of business hours could be made operative by banks at branches in metropolitan and urban centres. The banks should

implement the recommendation taking into account the provisions of the local Shops and Establishments Act.

The branch managers and other supervising officials should, however, ensure that the members of the staff are available at their respective counters right from the commencement of banking

hours and throughout the prescribed business hours so that there may not be any grounds for customers to make complaints.

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Banks should ensure that no counter remains unattended during the business hours and uninterrupted service is rendered to the customers. Further, the banks should allocate the work in such a

way that no Teller counter is closed during the banking hours at their branches.

All the customers entering the banking hall before the close of business hours should be attended to.

7.4 Extended business hours for non-cash banking transactions

Banks should extend business hours for banking transactions other than cash, up till one hour before close of the working hours.

The following non-cash transactions should be undertaken by banks during the extended hours, i.e., up to one hour before the close of working hours:

(a) Non-voucher generating transactions :

(i) Issue of pass books/statement of accounts;

(ii) Issue of cheque books ;

(iii) Delivery of term deposit receipts/drafts;

(iv) Acceptance of share application forms;

(v) Acceptance of clearing cheques;

(vi) Acceptance of bills for collection.

(b) Voucher generating transactions:

(i) Issue of term deposit receipts;

(ii) Acceptance of cheques for locker rent due;

(iii) Issue of travellers cheques;

(iv) Issue of gift cheques;

(v) Acceptance of individual cheques for transfer credit.

Such non-cash transactions to be done during the extended business hours should be notified adequately for information of the customers.

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Banks can have evening counters at the premises of existing branches in urban/metropolitan centres for providing facilities to the public beyond the normal hours of business so as to bring

about improvement in customer service. It is necessary that in such cases the transactions conducted during such extended hours of business are merged with the main accounts of the branch

where it is decided to provide the aforesaid facilities.

The concerned banks should give to their constituents due notice about the functions to be undertaken during the extended banking hours through local newspapers, as also by displaying a

notice on the notice board at the branch(es) concerned. Further, as and when the hours of business of any of the branches are extended, the concerned clearing house should be informed.

8. Guidance to customers and Disclosure of Information

8.1 Assistance/guidance to customers

All branches, except very small branches should have “Enquiry” or “May I Help You” counters either exclusively or combined with other duties, located near the entry point of the banking hall.

8.2 Display of time norms

Time norms for specialised business transactions should be displayed predominantly in the banking hall.

8.3 Display of information by banks –

Comprehensive Notice Board

The display of information by banks in their branches is one of the modes of imparting financial education. This display enables customers to take informed decision regarding products and

services of the bank and be aware of their rights as also the obligations of the banks to provide certain essential services. It also disseminates information on public grievance redressal

mechanism and enhances the quality of customer service in banks and improves the level of customer satisfaction.

Further, in order to promote transparency in the operations of banks, various instructions have been given by RBI to banks towards display of various key aspects

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such as service charges, interest rates, services offered, product information, time norms for various banking transactions and grievance redressal mechanism. However, during the course of

inspection/visits to bank branches by RBI, it was observed that many banks were not displaying the required information due to space constraints, lack of standardization of the instructions,

etc.

Keeping in view the need for maintaining a good ambience at the branches as also space constraints, an Internal Working Group in RBI revisited all the existing instructions relating to

display boards by commercial banks so as to rationalize them. Based on the recommendations of the Working Group, the following instructions were issued to banks:

8.3.1 Notice Boards

The Group felt that rationalization of the existing instructions could be best achieved if the instructions were clubbed on certain categories such as ‘customer service information', 'service

charges', 'grievance redressal' and 'others'. At the same time, the Group felt that there may not be any need to place detailed information in the Notice Board and only the important aspects

or 'indicators' to the information be placed.

Accordingly, the existing mandatory instructions have been broadly grouped into four categories mentioned above and given in a Comprehensive Notice Board which has been formulated by the

above Group. The format of the Comprehensive Notice Board is given in the Annex - II. The minimum size of the Board may be 2 feet by 2 feet as Board of such a size would facilitate

comfortable viewing from a distance of 3 to 5 meters. Banks are advised to display the information in the Notice Boards of their Branches as per the format given for the Comprehensive Notice

Board.

While displaying the information in the notice board, banks may also adhere to the following principles:

(a) The notice board may be updated on a periodical basis and the board should indicate the date up to which the board was updated (incorporated in the display board)

(b) Though the pattern, colour and design of the board is left to the discretion of the banks, yet the display must be simple and readable.

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(c) The language requirements (i.e., bilingual in Hindi speaking states and trilingual in other states) may be taken into account.

(d) The notice board shall specifically indicate wherever recent changes have been done. For instance, if there is a recent change in the SSI loan products offered by the bank, the

information on the SSI loan products may be displayed as 'We offer SSI loans/products ( changed on ……….)’.

(e) The notice board may also indicate a list of items on which detailed information is available in booklet form.

Further, in addition to the above Board, the banks should also display details such as ‘Name of the bank / branch, Working Days, Working Hours and Weekly Off-days' outside the branch

premises.

8.3.2 Booklets/Brochures:

The detailed information as indicated in Para (E) of Annex II may be made available in various booklets / brochures as decided by the bank. These booklets / brochures may be kept in a

separate file / folder in the form of ‘replaceable pages’ so as to facilitate copying and updation. In this connection, banks may also adhere to the following broad guidelines:

 The file / folder may be kept at the customer lobby in the branch or at the ‘May I Help You’ counter or at a place that is frequented by most of the customers.

 The language requirements (i.e. bilingual in Hindi speaking states and trilingual in other states) may be taken into account.

 While printing the booklets it may be ensured that the font size is minimum Arial 10 so that the customers are able to easily read the same.

 Copies of booklets may be made available to the customers on request.

8.3.3 Website

The detailed information as indicated in Para (E) of Annex II may also be made available on the bank’s web-site. Banks should adhere to the broad guidelines relating to dating of material,

legibility, etc., while placing the same on their websites. In this context, banks are also advised to ensure that the customers are able to easily access

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the relevant information from the Home Page of the bank’s web-sites. Further, there are certain information relating to service charges and fee and grievance redressal that are to be posted

compulsorily on the websites of the bank. Reserve Bank is providing a link to the websites of banks so that customers can also have access to the information through RBI’s website.

8.3.4 Other modes of display

Banks may also consider displaying all the information that has to be given in the booklet form in the touch screen by placing them in the information kiosks. Scroll Bars, Tag Boards are

other options available. The above broad guidelines may be adhered to while displaying information using these modes.

8.3.5 Other issues

Banks are free to decide on their promotional and product information displays. However, the mandatory displays may not be obstructed in anyway. As customer interest and financial education

are sought to be achieved by the mandatory display requirements, they should also be given priority over the other display boards. Information relating to Government sponsored schemes as

applicable location-wise may be displayed according to their applicability.

8.4 Display of information relating to

Interest Rates and Service Charges –

Rates at a quick glance

A format has been devised by Reserve Bank for display of information relating to interest rates and service charges which would enable the customer to obtain the desired information at a

quick glance. The format is given in Annex III. Banks are advised to display the information as per the format given in Annex III on their web-sites. Banks are however free to modify the

format to suit their requirements, without impairing the basic structure or curtailing the scope of disclosures.

Banks may also ensure that only latest updated information in the above format is placed on their web-sites and the same is easily accessible from the Home Page of their web-sites.

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8.5 Display of information by banks

In order to enhance transparency in pricing of credit, based on the recommendations of Working Group on Pricing of Credit, banks are advised to adhere to the following additional instructions

with effect from April 1, 2015:

(a) Website:

i. Banks should display on their website the interest rate range of contracted loans for the past quarter for different categories of advances granted to individual borrowers along with mean

interest rates for such loans.

ii. The total fees and charges applicable on various types of loans to individual borrower should be disclosed at the time of processing of loan as well as displayed on the website of banks

for transparency and comparability and to facilitate informed decision making by customers.

iii. Banks should publish Annual Percentage Rate (APR) or such similar other arrangement of representing the total cost of credit on a loan to an individual borrower on their websites so as

to allow customers to compare the costs associated with borrowing across products and/ or lenders.

(b) Key Statement/ Fact Sheet:

Banks should provide a clear, concise, one page key fact statement/fact sheet, as per prescribed format in Annex IX, to all individual borrowers at every stage of the loan processing as well

as in case of any change in any terms and conditions. The same may also be included as a summary box to be displayed in the credit agreement.

8.6 Disclosure of Information by banks in the public domain

Disclosure of information on products and services on websites is found to be an effective channel for reaching out to customers and the public at large. Such disclosures increase

transparency in operations and also help to create awareness among customers about the products and services offered by banks. Some of the details, which could be at the minimum, be made

available for public viewing through websites of banks are listed below:-

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I. Policy / Guidelines

(i) Citizen's Charter

(ii) Deposit Policy

(iii) Deceased Depositors Policy along with Nomination Rules

(iv) Cheque Collection Policy

(v) Fair Practices Code for Lenders

(vi) Fair Practices Code for Self- Regulation of Credit Card

Business

(vii) Code of Conduct for Direct Selling Agents

(viii) Code for Collection of Dues and Repossession of Security

II. Complaints

(i) Grievance Redressal Mechanism

(ii) Information relating to Banking Ombudsmen

(iii) Information relating to Customer Service Centres (for Public Sector Banks)

III. Opening of Accounts

(i) Account Opening Forms

(ii) Terms and Conditions

(iii) Service Charges for various types of services – Should cover

typical common services including courier charges – What

services are available without any charges.

(iv) Interest rates on Deposits

(v) Minimum balances – along with corresponding facilities

offered.

IV. Loans and Advances

(i) Application forms relating to loans and advances

(ii) Copy of blank agreement to be executed by the borrower

(iii) Terms and Conditions

(iv) Processing fee and other charges

(v) Interest rates on Loans and Advances

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V. Branches

(i) Details of branches along with addresses and telephone numbers

(with search engine for queries relating to branch location)

(ii) Details of ATMs along with addresses

8.7 Display of Timelines for Credit Decisions

Banks should clearly delineate the procedure for disposal of loan proposals, with appropriate timelines, and institute a suitable monitoring mechanism for reviewing applications pending

beyond the specified period. There should not, however, be any compromise on due diligence requirements. Banks may also make suitable disclosures on the timelines for conveying credit

decisions through their websites, notice-boards, product literature, etc.

9. Operation of Accounts by Old & Incapacitated Persons

9.1 Facility to sick/old/incapacitated non-pension account holders

The facilities offered to pension account holders should be extended to the non-pension account holders also who are sick / old / incapacitated and are not willing to open and operate joint

accounts.

9.2 Types of sick / old / incapacitated account holders

The cases of sick / old / incapacitated account holders fall into following categories:

(a) An account holder who is too ill to sign a cheque / cannot be physically present in the bank to withdraw money from his bank account but can put his/her thumb impression on the

cheque/withdrawal form;

(b) An account holder who is not only unable to be physically present in the bank but is also not even able to put his/her thumb impression on the cheque/withdrawal form due to certain

physical incapacity.

9.3 Operational Procedure

With a view to enabling the old / sick account holders operate their bank accounts, banks may follow the procedure as under:-

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(a) Wherever thumb or toe impression of the sick/old/incapacitated account holder is obtained, it should be identified by two independent witnesses known to the bank, one of whom should be a

responsible bank official.

(b) Where the customer cannot even put his / her thumb impression and also would not be able to be physically present in the bank, a mark can be obtained on the cheque / withdrawal form which

should be identified by two independent witnesses, one of whom should be a responsible bank official.

(c) The customer may also be asked to indicate to the bank as to who would withdraw the amount from the bank on the basis of cheque / withdrawal form as obtained above and that person should

be identified by two independent witnesses. The person who would be actually drawing the money from the bank should be asked to furnish his signature to the bank.

9.4 Opinion of IBA in case of a person who can not sign due to loss of both hands

Opinion obtained by the Indian Banks’ Association from their consultant on the question of opening of a bank account of a person who has lost both his hands and could not sign the cheque /

withdrawal form is as under :

“In terms of the General Clauses Act, the term “Sign” with its grammatical variations and cognate expressions, shall with reference to a person who is unable to write his name, include “mark”

with its grammatical variations and cognate expressions. The Supreme Court has held in AIR 1950 – Supreme Court, 265 that there must be physical contact between the person who is to sign and

the signature can be by means of a mark. This mark can be placed by the person in any manner. It could be the toe impression, as suggested. It can be by means of mark which anybody can put on

behalf of the person who has to sign, the mark being put by an instrument which has had a physical contact with the person who has to sign”.

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10. Providing bank facilities to persons with disabilities

10.1 Guidelines framed by IBA based on the judgment of

Chief Commissioner for Persons with Disabilities

Indian Banks' Association has framed operational guidelines for implementation of its member banks on providing banking facilities to persons with disabilities. Banks should adopt / follow

the operational guidelines meticulously.

10.2 Need for Bank Branches / ATMs to be made

accessible to persons with disabilities

Banks are advised to take necessary steps to provide all existing ATMs / future ATMs with ramps so that wheel chair users / persons with disabilities can easily access them. Care may also be

taken to make arrangements in such a way that the height of the ATMs does not create an impediment in their use by wheelchair users. However, in cases where it is impracticable to provide

such ramp facilities, whether permanently fixed to earth or otherwise, this requirement may be dispensed with, for reasons recorded and displayed in branches or ATMs concerned.

Banks are also to take appropriate steps, including providing of ramps at the entrance of the bank branches, wherever feasible, so that the persons with disabilities/wheel chair users can

enter bank branches and conduct business without difficulty. Banks are advised to report the progress made in this regard periodically to their respective Customer Service Committee of the

Board and ensure compliance.

10.3 Providing banking facilities to Visually Impaired Persons

In order to facilitate access to banking facilities by visually challenged persons, banks are advised to offer banking facilities including cheque book facility / operation of ATM / locker,

etc., to the visually challenged as they are legally competent to contract.

In the Case No. 2791/2003, the Honourable Court of Chief Commissioner for Persons with Disabilities had passed Orders dated September 5, 2005 which was forwarded by IBA to all the member

banks vide their circular letter dated October 20, 2005. In the above Order, the Honorable Court has instructed that banks should offer all the banking

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facilities including cheque book facility, ATM facility and locker facility to the visually challenged and also assist them in withdrawal of cash.

Further, in Paragraph 14 of the above Order, the Honorable Court has observed that visually impaired persons cannot be denied the facility of cheque book, locker and ATM on the possibility of

risk in operating / using the said facility, as the element of risk is involved in case of other customers as well.

Banks should therefore ensure that all the banking facilities such as cheque book facility including third party cheques, ATM facility, Net banking facility, locker facility, retail loans,

credit cards etc., are invariably offered to the visually challenged without any discrimination.

Banks may also advise their branches to render all possible assistance to the visually challenged for availing the various banking facilities.

10.3.1 Talking ATMs with Braille keypads to facilitate

use by persons with visual impairment

Banks should make all new ATMs installed from July 1, 2014 as talking ATMs with Braille keypads. Banks should lay down a road map for converting all existing ATMs as talking ATMs with Braille

keypads and the same may be reviewed from time to time by the Customer Service Committee of the Board.

In addition to the above, magnifying glasses should also be provided in all bank branches for the use of persons with low vision, wherever they require for carrying out banking transactions

with ease. The branches should display at a prominent place notice about the availability of magnifying glasses and other facilities available for persons with disabilities.

11. Guidelines for the purpose of opening/ operating bank accounts of Persons with Autism, Cerebral Palsy, Mental Retardation, Mental Illness and Mental Disabilities

The following guidelines would be applicable for the purpose of opening / operating bank accounts of the above persons:

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i. The Mental Health Act, 1987 provides a law relating to the treatment and care of mentally ill persons and to make better provision with respect to their property and affairs. According to

the said Act, “mentally ill person” means a person who is in need of treatment by reason of any mental disorder other than mental retardation. Sections 53 and 54 of this Act provide for the

appointment of guardians for mentally ill persons and in certain cases, managers in respect of their property. The prescribed appointing authorities are the district courts and collectors of

districts under the Mental Health Act, 1987.

ii. The National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple Disabilities Act, 1999 provides a law relating to certain specified disabilities.

Clause (j) of Section 2 of that Act defines a “person with disability” to mean a person suffering from any of the conditions relating to autism, cerebral palsy, mental retardation or a

combination of any two or more of such conditions and includes a person suffering from severe multiple disabilities. This Act empowers a Local Level Committee to appoint a guardian, to a

person with disabilities, who shall have the care of the person and property of the disabled person.

iii. Banks are advised to take note of the legal position stated above and may rely on and be guided by the orders/certificates issued by the competent authority, under the respective Acts,

appointing guardians/managers for the purposes of opening/operating bank accounts. In case of doubt, care may be taken to obtain proper legal advice.

Banks may also ensure that their branches give proper guidance to their customers so that the guardians/managers of the disabled persons do not face any difficulties in this regard.

11.1 Display of information regarding Local Level Committees set up

under the National Trust for the Welfare of Persons with Autism,

Cerebral Palsy, Mental Retardation and Multiple Disabilities Act,

1999

In a case which came up before the High Court of Delhi, the Honorable Court had directed that all banks should ensure that their branches display in a conspicuous place (i) essential details

about the facilities under the enactment (Mental Disabilities Act); (ii)

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the fact that the parties can approach the Local Level Committees, for the purpose of issuance of the certificate and that the certificate issued under the Mental Disabilities Act is

acceptable; and (iii) the details of the Local Level Committees in that area. The Court had further directed that the information shall be displayed in the local language and English / Hindi

(or both). Banks are advised to strictly comply with the above orders of the Court.

12. Remittance

12.1 Remittance of Funds for Value ` 50,000/- and above

Banks should ensure that any remittance of funds by way of demand drafts/mail transfers / telegraphic transfers or any other mode and issue of travellers cheques for value of ₹ 50,000/- and

above is effected only by debit to the customer’s account or against cheques or other instruments tendered by the purchaser and not against cash payment . These instructions are extended to

retail sale of gold/silver/platinum. In the current scenario, where the integrity of the financial system in general and the banking channels in particular is of paramount importance, breach

of these guidelines is a matter of serious regulatory concern in view of the wide ranging ramifications. Any violation of these instructions will be viewed seriously.

12.2 Demand Drafts

12.2.1 Issue of Demand Drafts

Measures seeking to bring down the incidence of frauds perpetrated through bank drafts should be built into the draft form itself. Necessary changes in system and procedures to speed up issue

and payment of drafts should be taken.

Banks should ensure that demand drafts of ` 20,000/- and above are issued invariably with account payee crossing.

All superscriptions about validity of the demand draft should be provided at the top of the draft form. A draft should be uniformly valid for a period of three months and procedure for

revalidation after three months should be simplified.

Banks should ensure that drafts of small amounts are issued by their branches against cash to all customers irrespective of the fact whether they are having accounts with the

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banks or not. Bank's counter staff should not refuse to accept small denomination notes from the customers (or non customers for issuance of the drafts).

12.2.2 Encashment of drafts

The banks should ensure that drafts drawn on their branches are paid immediately. Payment of draft should not be refused for the only reason that relative advice has not been received.

12.2.3 Issue of Duplicate Demand Draft

Duplicate draft, in lieu of lost draft, up to and including ` 5,000/- may be issued to the purchaser on the basis of adequate indemnity and without insistence on seeking non payment advice

from drawee office irrespective of the legal position obtaining in this regard.

Banks should issue duplicate Demand Draft to the customer within a fortnight from the receipt of such request. Further, for the delay beyond this stipulated period, banks were advised to pay

interest at the rate applicable for fixed deposit of corresponding maturity in order to compensate the customer for such delay. The period of fortnight prescribed would be applicable only in

cases where the request for duplicate demand draft is made by the purchaser or the beneficiary and would not be applicable in the case of third party endorsements.

Some doubts were raised regarding the term "customer" used above and whether it would include only purchaser / beneficiary or also include any holder of the instrument other than the

purchaser or the beneficiary. It is clarified that the above instructions would be applicable only in cases where the request for duplicate demand draft is made by the purchaser or the

beneficiary and would not be applicable in the case of draft endorsed to third parties.

12.3 Remittance through electronic mode

In case of remittance through electronic funds transfer, originating banks should provide the option to the customer to choose between RTGS system and NEFT system at the time of initiation of

the funds transfer. The option should be made available to all the

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customers who may originate remittance either at the branch or through internet or any other means. The funds are to be transferred necessarily through the option chosen by the customer.

Further, banks should allow the customers to choose NEFT also as one of the electronic modes of making payment towards loan EMIs / repayments, etc.

12.3.1 Providing Positive Confirmation to the Originator

All banks should put in place appropriate mechanism to ensure positive confirmation is sent to the remittance originator confirming the successful credit of funds to the beneficiary’s account

when funds are transferred through NEFT. While it is expected that such confirmation messages are sent as soon as the beneficiary account is credited, it should not exceed beyond end-of –

the-day under any circumstance.

12.3.2 Payment of penal interest for delayed credit /refunds of NEFT transactions

In case of delay in crediting the beneficiary customer’s account or in returning the uncredited amount to the remitter in case of NEFT, banks should pay penal interest. Under the extant

guidelines, banks are required to pay penal interest at the current RBI LAF Repo Rate plus two percent for the period of delay / till the date of refund as the case may be to the affected

customers suo moto, without waiting for claim from customers.

Under the NEFT Procedural Guidelines, banks are required to establish dedicated Customer Facilitation Centres (CFCs) to handle customer queries/complaints regarding NEFT transactions. The

contact details of CFCs are available on websites of banks as well as the website of RBI for easy availability to the customers. Further, banks have to keep the contact details of their CFCs,

set up to handle customer queries / complaints regarding NEFT transactions, updated at all times. Changes, if any, should be advised by banks immediately to the National Clearing Cell,

Nariman Point, RBI for updating the central directory placed on RBI website. Banks should also ensure that calls made / e-mails sent to CFCs are promptly attended to and sufficient resources

are dedicated for the same.

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12.3.3 National / Regional Electronic Clearing Service (NECS / RECS) – Extension of service to remaining branches

With a view to extend both NECS and RECS facility to the customers of all bank branches, the participating banks are advised to make efforts in bringing all their branches under NECS/RECS.

12.3.4. National Electronic Funds Transfer (NEFT) – Requirement of Indian Financial System Code (IFSC) in transactions

To facilitate electronic modes of remittance and enhancing customer service at branches for NEFT transactions, the participating banks are advised that staff should provide customers with

necessary assistance in filling out the details as required in the NEFT application form, including ensuring that beneficiary account details etc. are duly filled in.

12.3.5 National Electronic Funds Transfer (NEFT) System - Rationalisation of customer charges

Maximum Customer charges that can be levied by the banks for NEFT transactions are as under:

12.3.6 NEFT - Customer Service and Charges - Adherence to Procedural Guidelines and Circulars

With a view to minimizing instances of customer complaints, all participant banks (both direct as well as sub-members), are advised to ensure adherence to extant instructions as under:

Value Band

Maximum Charges (exclusive of service tax)

Amounts up to `10,000/-

` 2.50/-

Amounts from ` 10,001/- to ` 1 lakh

` 5/-

Amounts above ` 1 lakh up to ` 2 lakh

` 15/-

Amounts above ` 2 lakh

` 25/-

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 NEFT application forms with proper instructions are made available at all branches.

 The charges levied on customers for inter-bank NEFT transactions at both branch locations and Customer Service Point (CSP)/Business Correspondent (BC) /agent locations are at par.

 The extant charges applicable on NEFT transactions should be displayed at all branches / locations of the bank where NEFT transactions can be conducted.

 A printed “charges card” in appropriate vernacular language should invariably be carried by agents / business correspondents of the banks.

 Positive confirmation of credit to beneficiary account is invariably sent for all inward transactions received by the bank.

 Banks originating the NEFT transactions should ensure that the positive confirmation is relayed to all remitting customers, including walk-in customers who provide their mobile number / e-

mail id.

 Intimation of failed / returned transactions should also be brought to the notice of the remitting customer and funds credited to the account immediately / returned to the remitter at the

earliest.

 In case of delayed credits or delayed returns, the penal interest as applicable is paid suo-moto to the customer. Even in the case of back-dating or value-dating such delayed transactions,

banks should pay the penal interest for the delayed period.

12.4 Mobile banking transaction limits

The transaction limit of ` 50,000/- per customer per day has been done away with for mobile banking transactions. However, banks may place per transaction limits based on their own risk

perception with the approval of its Board.

12.5 Domestic Money Transfer – relaxations

In order to enable migrant population, who do not have access to formal banking channel for want of proof of identity/address and to give impetus to the process of

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financial inclusion, banks have been permitted to put in place three schemes for person to person (P2P) fund transfers –

(a) Cash Pay-out scheme which facilitates transfer of funds from the accounts of their customers to beneficiaries not having bank accounts through the use of ATMs, BCs etc. upto ` 10,000 per

transaction subject to a monthly cap of ` 25,000 with full details of the beneficiary.

(b) Cash Pay-in scheme where a walk-in / non-account holding customer can transfer funds to a bank account of a beneficiary etc. upto ` 5000 per transaction with a monthly cap of ` 25,000

with minimum details of the remitter.

(c) Card-to-Card transfers upto ` 5000 per transaction subject to a monthly cap of

` 25,000.

13. Cheque Drop Box Facility

Both the drop box facility and the facility for acknowledgement of the cheques at regular collection counters should be available to the customers and no branch should refuse to give an

acknowledgement if the customer tenders the cheques at the counters.

Banks should ensure that customers are not compelled to drop the cheques in the drop-box. Further, in the context of customer awareness in this regard, banks should invariably display on the

cheque drop-box itself that "Customers can also tender the cheques at the counter and obtain acknowledgment on the pay-in-slips". The above message is required to be displayed in English,

Hindi and the concerned regional language of the State.

Banks are also advised to make absolutely fool proof arrangements accounting for the number of instruments each time the box is opened so that there are no disputes and the customer’s

interests are not compromised.

14. Collection of instruments

14.1 Formulating Cheque Collection Policies

In most countries banks are obliged to develop their own individual policy / procedures relating to collection of cheques and also provide due disclosures to the customers on the bank's

obligations and the customers' rights. Due to the technological progress in

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payment and settlement systems and the qualitative changes in operational systems and processes that have been undertaken by a number of banks, it is observed that prescription of a single

set of rules may not be appropriate. Hence, efficiencies in collection of proceeds and providing funds to customers in time are best achieved through a spirit of competition among the banks

rather than through issuance of guidelines by RBI.

Keeping in view the above, earlier instructions issued regarding immediate credit of local /outstation cheques, time frame for collection of local/outstation instruments and interest payment

for delayed collection have been withdrawn by Reserve Bank leaving it to the individual banks to formulate policies in this regard.

Broadly, the policy should include instructions on the following:

 Immediate Credit for Local / Outstation cheques

 Time frame for Collection of Local / Outstation Instruments

 Interest payment for delayed collection

Banks have been advised to reframe their Cheque Collection Policies to include compensation payable for the delay in the collection of local cheques as well. In case, no rate is specified in

the CCP for delay in realisation of local cheques, compensation at savings bank interest rate should be paid for the corresponding period of delay.

With a view to encouraging faster migration to CTS-2010 standard cheques, banks are advised that non CTS-2010 standard instruments will be cleared at less frequent intervals in the CTS

clearing centres. Banks may educate and notify their customers of the likely delay in realisation of non-CTS-2010 standard instruments in view of the arrangement for clearing of such

instruments at less frequent intervals. Banks’ Cheque Collection Policies (CCPs) may also be modified suitably to reflect this change. They may also put in place appropriate arrangement for

handling customer complaints, if any, arising out of this new arrangement.

14.1.1 Broad Principles

(i) Banks should formulate a comprehensive and transparent policy covering all the above three aspects, taking into account their technological capabilities, systems and

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processes adopted for clearing arrangements and other internal arrangements for collection through correspondents.

(ii) Further, they may also review their existing arrangements and capabilities and work out a scheme for reduction in collection period.

(iii) Adequate care also may be taken to ensure that the interests of the small depositors are fully protected.

(iv) The policy framed in this regard should be integrated with the deposit policy formulated by the bank in line with the IBA's model deposit policy.

(v) The policy should clearly lay down the liability of the banks by way of interest payments due to delays for non-compliance with the standards set by the banks themselves.

(vi) Compensation by way of interest payment, where necessary, should be made without any claim from the customer.

The policy should be placed before the Board of the Bank along with Reserve Bank's earlier instructions as indicated in paragraph 3.2 and the Board's specific approval should be obtained on

the reasonableness of the policy and the compliance with the spirit of our guidelines.

14.1.2 Delays in Cheque Clearing - Case No. 82 of 2006 before

National Consumer Disputes Redressal Commission

Banks are advised to comply with the final order on 'timeframe for collection of outstation cheques' passed by the National Consumer Disputes Redressal Commission in case no. 82 of 2006.

Further, banks are advised as under:

(i) Banks shall reframe their Cheque Collection Policies (CCPs) covering local and outstation cheque collection as per the timeframe prescribed by the Commission.

(ii) For local cheques, credit and debit shall be given on the same day or at the most the next day of their presentation in clearing. Ideally, in respect of local clearing, banks shall

permit usage of the shadow credit afforded to the customer accounts immediately after

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closure of relative return clearing and in any case withdrawal shall be allowed on the same day or maximum within an hour of commencement of business on the next working day, subject to usual

safeguards.

(iii) Timeframe for collection of cheques drawn on State Capitals / major cities / other locations to be 7/10/14 days respectively. If there is any delay in collection beyond this period,

interest at the rate specified in the CCP of the bank, shall be paid. In case the rate is not specified in the CCP, the applicable rate shall be the interest rate on Fixed Deposits for the

corresponding maturity. The timeframe for collection specified by the Commission shall be treated as outer limit and credit shall be afforded if the process gets completed earlier.

(iv) Banks shall not decline to accept outstation cheques deposited by its customers for collection.

(v) Banks shall give wide publicity to the CCP by prominently displaying salient features thereof in bold and visible letters on the notice board at their branches.

(vi) A copy of the complete CCP shall be made available by the branch manager, if the customers require so.

14.1.3 Collection of Account Payee Cheque - Prohibition on Crediting Proceeds to Third Party Account

a) In consonance with the legal requirements and in particular, the intent of the Negotiable Instruments Act, 1881 and with a view to protect the banks being burdened with liabilities arising

out of unauthorized collections, and in the interest of the integrity and soundness of the payment and banking systems, and in order to prevent recurrence of deviations observed in the recent

past, the Reserve Bank has considered it necessary to prohibit the banks from crediting 'account payee' cheque to the account of any person other than the payee named therein. Accordingly,

banks were directed that they should not collect account payee cheques for any person other than the payee constituent.

Where the drawer / payee instructs the bank to credit the proceeds of collection to any account other than that of the payee, the instruction being contrary to the intended

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inherent character of the 'account payee' cheque, bank should ask the drawer / payee to have the cheque or the account payee mandate thereon withdrawn by the drawer. This instruction would

also apply with respect to the cheque drawn by a bank payable to another bank.

b) In order to facilitate collection of cheques from a payment system angle, account payee cheques deposited with the sub-member for credit to their customers' account can be collected by the

member bank (referred to as the sponsor member) of the Clearing House. Under such arrangements, there should be clear undertaking to the effect that the proceeds of the account payee cheque

will be credited to the payee's account only, upon realization.

c) With a view to mitigate the difficulties faced by the members of co-operative credit societies in collection of account payee cheques, it is further clarified that collecting banks may

consider collecting account payee cheques drawn for an amount not exceeding ` 50,000/- to the account of their customers who are co-operative credit societies, if the payees of such cheques

are the constituents of such co-operative credit societies. While collecting the cheques as aforesaid, banks should have a clear representation in writing given by the co-operative credit

societies concerned that, upon realization, the proceeds of the cheques will be credited only to the account of the member of the co-operative credit society who is the payee named in the

cheque. This shall, however, be subject to the fulfillment of the requirements of the provisions of Negotiable Instruments Act, 1881, including Section 131 thereof.

d) Banks may note that the above instructions shall also extend to drafts, pay orders and bankers’ cheque.

14.1.4 Payment of Cheques/Drafts/Pay Orders/Banker’s Cheques

With effect from April 1, 2012, banks should not make payment of cheques/drafts/pay orders/banker’s cheques bearing that date or any subsequent date, if they are presented beyond the period

of three months from the date of such instrument. Banks should ensure strict compliance of these directions and notify the holders of such instruments of the change in practice by printing or

stamping on the cheque leaves, drafts, pay orders and banker’s cheques issued on or after April 1, 2012, by issuing

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suitable instruction for presentment within the period of three months from the date of the instrument.

14.2 Cheques / Instruments lost in transit / in clearing process /

at paying bank's branch

Banks are advised to follow the following guidelines regarding cheques lost in transit : -

(i) In respect of cheques lost in transit or in the clearing process or at the paying bank's branch, the bank should immediately bring the same to the notice of the accountholder so that

accountholder can inform the drawer to record stop payment and can also take care that other cheques issued by him are not dishonoured due to non-credit of the amount of the lost cheques /

instruments.

(ii) The onus of such loss lies with the collecting banker and not the accountholder.

(iii) The banks should reimburse the accountholder related expenses for obtaining duplicate instruments and also interest for reasonable delays occurred in obtaining the same.

(iv) If the cheque / instrument has been lost at the paying bank's branch, the collecting banker should have a right to recover the amount reimbursed to the customer for the loss of the

cheque / instrument from the paying banker.

Banks are advised to incorporate the above guidelines in their Cheque Collection Policies.

14.3 Bills for collection

Bills for collection including bills discounted required to be collected through another bank at the realising centre should be forwarded directly by the forwarding office to the realising

office.

14.3.1 Payment of interest for Delays in collection of bills

The lodger's bank should pay interest to the lodger for the delayed period in respect of collection of bills at the rate of 2% p.a. above the rate of interest payable on balances of Savings

Bank accounts. The delayed period should be reckoned after making allowance for normal transit period based upon a time frame of 2 days each for (i)

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Despatch of bills; (ii) Presentation of bills of drawees (iii) Remittance of proceeds to the lodger's bank (iv) Crediting the proceeds to drawer's account.

To the extent the delay is attributing to the drawee's bank, the lodger's bank may recover interest for such delay from that bank. The banks may suitably revise the format of their payment

advices to incorporate the above information.

14.3.2 Delay in Re-presentation of Technical Return Cheques and Levy of Charges for such Returns:

Banks have been advised to levy cheque return charges only in cases where the customer is at fault and is responsible for such returns. The illustrative, but not exhaustive, list of returns,

where the customers are not at fault are indicated in the Annex VI. In cases where the cheques need to be re-presented without any recourse to the payee, such re-presentation should be made

in the immediate next presentation clearing not later than 24 hours(excluding holidays) with due notification to the customers of such representation through SMS alert, email etc.

15. Dishonour of Cheques – Procedure thereof

15.1 Returning dishonoured cheques

(i) Banks are required to implement the recommendation of the Goiporia Committee that dishonoured instruments are returned / despatched to the customer promptly without delay, in any case

within 24 hours.

(ii) Pursuant to the investigation by the Joint Parliamentary Committee (JPC) into the Stock Market Scam, the JPC has recommended (in paragraph 5.214 of its report) that "specific guidelines

need to be issued by the Reserve Bank to all banks regarding the procedure to be followed by them in respect of dishonoured cheques from Stock Exchanges." In the light of aforesaid

recommendations of the JPC, the extant instructions relating to return of all dishonoured cheques have been reviewed.

(iii) It is understood that banks are already following the appropriate procedure keeping in view the above instructions to deal with the dishonour of cheques. However, it is considered

necessary to streamline the procedure to be followed by all banks in this behalf. It is therefore suggested that in addition to the existing instruction in respect of

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dishonoured instruments for want of funds, banks may follow the additional instructions laid down in paragraph 15.2 below which could cover all cheques dishonoured on account of insufficient

funds and not only those relating to settlement transactions of Stock Exchanges.

15.2 Procedure for return/ despatch of dishonoured cheques

(i) The paying bank should return dishonoured cheques presented through clearing houses strictly as per the return discipline prescribed for respective clearing house in terms of Uniform

Regulations And Rules for Bankers' Clearing Houses. The collecting bank on receipt of such dishonoured cheques should despatch it immediately to the payees / holders.

(ii) In relation to cheques presented direct to the paying bank for settlement of transaction by way of transfer between two accounts with that bank, it should return such dishonoured cheques

to payees/ holders immediately.

(iii) In case of dishonor / return of cheques, the paying banks should clearly indicate the return reason code on the return memo / objection slip which should also bear the signature /

initial of the bank officials as prescribed in Rule 6 of the Uniform Regulations and Rules for Bankers’ Clearing Houses (URRBCH).

15.3 Information on dishonoured cheques

Data in respect of each dishonoured cheque for amount of ` 1 crore and above should be made part of bank's MIS on constituents and concerned branches should report such data to their

respective controlling office / Head Office.

Data in respect of cheques drawn in favour of stock exchanges and dishonoured should be consolidated separately by banks irrespective of the value of such cheques as a part of their MIS

relating to broker entities, and be reported to their respective Head Offices / Central Offices.

15.4 Dealing with incidents of frequent dishonour of

cheques of value ` 1 crore and above

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(i) With a view to enforce financial discipline among the customers, banks should introduce a condition for operation of accounts with cheque facility that in the event of dishonour of a

cheque valuing rupees one crore and above drawn on a particular account of the drawer on four occasions during the financial year for want of sufficient funds in the account, no fresh cheque

book would be issued. Also, the bank may consider closing current account at its discretion. However, in respect of advances accounts such as cash credit account, overdraft account, the need

for continuance or otherwise of these credit facilities and the cheque facility relating to these accounts should be reviewed by appropriate authority higher than the sanctioning authority.

(ii) For the purposes of introduction of the condition mentioned at (i) above in relation to operation of the existing accounts, banks may, at the time of issuing new cheque book, issue a

letter advising the constituents of the new condition.

(iii) If a cheque is dishonoured for a third time on a particular account of the drawer during the financial year, banks should issue a cautionary advice to the concerned constituent drawing

his attention to aforesaid condition and consequential stoppage of cheque facility in the event of cheque being dishonoured on fourth occasion on the same account during the financial year.

Similar cautionary advice may be issued if a bank intends to close the account.

15.5 Dealing with frequent dishonour of cheques of value of less than ` 1 crore

Since frequent dishonour of cheques of value of less than ` 1 crore is also a matter of concern, it is felt that banks need to take appropriate action in those accounts where such dishonour

of cheques occur. Further, it is also felt that though it may not be necessary to extend all the steps laid down in our earlier circular to smaller cheques, banks should have their own

approach to deal with recalcitrant customers.

Banks are therefore advised to have a Board approved policy for dealing with frequent dishonour of cheques of value of less than ` 1 crore. The policy should also deal with matters relating

to frequent dishonour of ECS mandates.

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15.6 General

(i) For the purpose of adducing evidence to prove the fact of dishonour of cheque on behalf of a complainant (i.e., payee / holder of a dishonoured cheque) in any proceeding relating to

dishonoured cheque before a court, consumer forum or any other competent authority, banks should extend full co-operation, and should furnish him/her documentary proof of fact of dishonour of

cheques.

(ii) Banks should place before their Audit/ Management Committee, every quarter, consolidated data in respect of the matters referred to above.

15.7 Framing appropriate procedure for dealing with dishonoured cheques

Banks are also advised to adopt, with the approval of their respective Boards, appropriate procedure for dealing with dishonoured cheques with inherent preventive measures and checks to

prevent any scope for collusion of the staff of the bank or any other person, with the drawer of the cheque for causing delay in or withholding the communication of the fact of dishonour of

the cheque to the payee/ holder or the return of such dishonoured cheque to him.

Banks should also lay down requisite internal guidelines for their officers and staff and advise them to adhere to such guidelines and ensure strict compliance thereof to achieve aforesaid

object of effective communication and delivery of dishonoured cheque to the payee.

16. Dealing with Complaints and Improving Customer Relations

16.1 Complaints/suggestions box

Complaints/suggestions box should be provided at each office of the bank. Further, at every office of the bank a notice requesting the customers to meet the branch manager may be displayed

regarding grievances, if the grievances remain unredressed.

16.2 Complaint Book /Register

Complaint book with perforated copies in each set may be introduced, so designed as to instantly provide an acknowledgement to the customers and anintimation to the Controlling Office.

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IBA has, for the sake of uniformity, prepared a format of the complaint book with adequate number of perforated copies, which are so designed that the complainant could be given an

acknowledged copy instantly. A copy of the complaint is required to be forwarded to the concerned Controlling Office of the bank along with the remark of the Branch Manager within a time

frame. Bank should introduce the complaint book as per the above format for uniformity.

All bank's branches should maintain a separate complaints register in the prescribed format given for entering all the complaints/grievances received by them directly or through their Head

Office/Govt. These registers should be maintained irrespective of the fact whether a complaint is received or not in the past.

The complaints registers maintained by branches should be scrutinised by the concerned Regional Manager during his periodical visit to the branches and his observations/comments recorded in

the relative visit reports.

Banks having computerized operations may adopt the afore-said format and generate copies electronically.

16.3 Complaint Form

Further, a complaint form, along with the name of the Nodal Officer for complaint redressal, may be provided in the homepage itself to facilitate complaint submission by customers. The

complaint form should also indicate that the first point for redressal of complaints is the bank itself and that complainants may approach the Banking Ombudsman only if the complaint is not

resolved at the bank level within a month. Similar information may be displayed in the boards put up in all the bank branches to indicate the name and address of the Banking Ombudsman. In

addition, the name, address and telephone numbers of the Controlling Authority of the bank to whom complaints can be addressed may also be given prominently.

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16.4 Analysis and Disclosure of complaints -

Disclosure of complaints / unimplemented awards of

Banking Ombudsmen along with Financial Results

The Committee on Procedures and Performance Audit on Public Services (CPPAPS) had recommended that banks should place a statement before their Boards analyzing the complaints received. CPPAPS

had further recommended that the Statement of complaints and its analysis should also be disclosed by banks along with their financial results. Further, a suggestion has been received that

unimplemented awards of the Banking Ombudsman should also be disclosed along with financial results.

Banks should place a statement of complaints before their Boards / Customer Service Committees along with an analysis of the complaints received. The complaints should be analyzed (i) to

identify customer service areas in which the complaints are frequently received; (ii) to identify frequent sources of complaint; (iii) to identify systemic deficiencies; and (iv) for

initiating appropriate action to make the grievance redressal mechanism more effective.

Further, banks are also advised to disclose the following brief details along with their financial results:

A. Customer Complaints

(a) No. of complaints pending at the beginning of the year

(b) No. of complaints received during the year

(c) No. of complaints redressed during the year

(d) No. of complaints pending at the end of the year

B. Awards passed by the Banking Ombudsman

(a) No. of unimplemented Awards at the beginning of the year

(b) No. of Awards passed by the Banking Ombudsmen during the

year

(c) No. of Awards implemented during the year

(d) No. of unimplemented Awards at the end of the year

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Further, banks are also advised to place the detailed statement of complaints and its analysis on their web-site for information of the general public at the end of each financial year. Banks

should include all complaints pertaining to ATM cards issued by them in their disclosures.

16.5 Grievance Redressal Mechanism

Banks should ensure that a suitable mechanism exists for receiving and addressing complaints from its customers / constituents with specific emphasis on resolving such complaints fairly and

expeditiously regardless of source of the complaints.

Banks are also advised to:

(i) Ensure that the complaint registers are kept at prominent place in their branches which would make it possible for the customers to enter their complaints.

(ii) Have a system of acknowledging the complaints, where the complaints are received through letters / forms.

(iii) Fix a time frame for resolving the complaints received at different levels.

(iv) Ensure that redressal of complaints emanating from rural areas and those relating to financial assistance to Priority Sector and Government’s Poverty Alleviation Programmes also form

part of the above process.

(v) Prominently display at the branches, the names of the officials who can be

contacted for redressal of complaints, together with their direct telephonenumber, fax number, complete address (not Post Box No.) and e-mail address, etc., for proper and timely contact by

the customers and for enhancing the effectiveness of the redressal machinery.

(vi) The names of the officials displayed at the branches who can be contacted for redressal of complaints should also include the name and other details of the concerned Nodal Officer

appointed under the Banking Ombudsman Scheme, 2006.

(vii) Banks should display on their web-sites, the names and other details of the officials at their Head Office / Regional Offices / Zonal Offices who can be contacted for redressal of

complaints including the names of the Nodal Officers / Principal Nodal Officers.

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(viii) Further, banks should also display on their web-sites, the names and other details of their CMD / CEO and also Line Functioning Heads for various operations to enable their customers

to approach them in case of need, if necessary.

Further, as stated above in Paragraph 16.4, banks are required to disclose the brief details regarding the number of complaints along with their financial results. This statement should

include all the complaints received at the Head Office / Controlling Office level as also the complaints received at the branch level. However, where the complaints are redressed within the

next working day, banks need not include the same in the statement of complaints. This is expected to serve as an incentive to the banks and their branches to redress the complaints within

the next working day.

Where the complaints are not redressed within one month, the concerned branch / Controlling Office should forward a copy of the same to the concerned Nodal Officer under the Banking Ombudsman

Scheme and keep him updated regarding the status of the complaint. This would enable the Nodal Officer to deal with any reference received from the Banking Ombudsman regarding the complaint

more effectively. Further, it is also necessary that the customer is made aware of his rights to approach the concerned Banking Ombudsman in case he is not satisfied with the bank’s response.

As such, in the final letter sent to the customer regarding redressal of the complaint, banks should indicate that the complainant can also approach the concerned Banking Ombudsman. The

details of the concerned Banking Ombudsman should also be included in the letter.

Banks should give wide publicity to the grievance redressal machinery through advertisements and also by placing them on their web sites.

16.5.1 Display of Names of Nodal Officers

With a view to making the Grievance Redressal Mechanism more effective, in addition to the instructions mentioned above, banks are further advised as under:

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i) Ensure that the Principal Nodal Officer appointed under the Banking Ombudsman Scheme is of a sufficiently senior level, not below the rank of a General Manager.

ii) Contact details including name, complete address, telephone / fax number, email address, etc., of the Principal Nodal Officer needs to be prominently displayed in the portal of the bank

preferably on the first page of the web-site so that the aggrieved customer can approach the bank with a sense of satisfaction that she / he has been attended at a senior level.

iii) Grievance Redressal Mechanism (GRM) should be made simpler even if it is linked to call centre of customer care unit without customers facing hassles of proving identity, account

details, etc.

iv) Adequate and wider publicity are also required to be given by the respective financial services provider.

The name and address of the Principal Nodal Officer may also be forwarded to the Chief General Manager, Customer Education and Protection Department, Reserve Bank of India, Central Office,

1st Floor, Amar Building, Sir P.M.Road, Mumbai-400 001 (email).

16.6 Review of grievances redressal machinery in Public Sector Banks

Banks should critically examine on an on-going basis as to how Grievances Redressal Machinery is working and whether the same has been found to be effective in achieving improvement in

customer service in different areas.

Banks should identify areas in which the number of complaints is large or on the increase and consider constituting special squads to look into complaints on the spot in branches against

which there are frequent complaints.

Banks may consider shifting the managers/officers of branches having large number of complaints to other branches/regional offices/departments at Head Offices where contacts with public may

be relatively infrequent.

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At larger branches and at such of the branches where there are a large number of complaints, the banks may consider appointing Public Relations Officers /Liaison Officers for looking

into/mitigating the complaints/grievances of customers expeditiously.

The banks may arrange to include one or two sessions on customer service, public relations etc., in training programmes conducted in their training establishments.

In cases where the contention of the complainant has not been accepted, a complete reply should be given to him to the extent possible.

Grievances/complaints relating to congestions in the banking premises should be examined by the bank’s internal inspectors/auditors on a continuing basis and action taken for augmentation of

space, whenever necessary, keeping in view the availability of larger accommodation in the same locality at a reasonable rent and other commercial considerations.

16.7 Select Banks to appoint Chief Customer Service Officer

With a view to further boosting the quality of customer service and ensuring that there is undivided attention to resolution of customer complaints in banks, all public sector banks, and some

private sector and foreign banks (Annex X) have been advised to appoint an internal ombudsman designated as Chief Customer Service Officer (CCSO). These banks have been selected on the basis

of their asset size, business mix, etc. The CCSO should not have worked in the bank in which he/she is appointed as CCSO. The bank’s internal ombudsman will be a forum available to bank

customers for grievance redressal before they can even approach the Banking Ombudsman.

17. Erroneous Debits arising on fraudulent or other transactions

17.1 Vigilance by banks

Banks have been advised to adhere to the guidelines and procedures for opening and operating deposit accounts to safeguard against unscrupulous persons opening accounts mainly to use them as

conduit for fraudulently encashing payment instruments. However, in view of receipt of continuous complaints of fraudulent encashment by unscrupulous persons opening deposit accounts in the

name/s similar

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to already established concern/s resulting in erroneous and unwanted debit of drawers’ accounts, banks should remain vigilant to avoid such lapses and issue necessary instructions to the

branches / staff.

17.2 Compensating the customer

Besides in cases of the above kind, banks also do not restore funds promptly to customers even in bona-fide cases but defer action till completion of either departmental action or police

interrogation. Therefore, (i) In case of any fraud, if the branch is convinced that an irregularity / fraud has been committed by its staff towards any constituent, the branch should at once

acknowledge its liability and pay the just claim, (ii) in cases where banks are at fault, the banks should compensate customers without demur, and (iii) in cases where neither the bank is at

fault nor the customer is at fault but the fault lies elsewhere in the system, then also the banks should compensate the customers (up to a limit) as part of a Board approved customer

relations policy.

18. Extension of Safe Deposit Locker / Safe Custody Article Facility

The Committee on Procedures and Performance Audit on Public Services (CPPAPS) had made some recommendations for easy operation of lockers. Reserve Bank has reviewed all the guidelines issued

by the Bank on various issues relating to safe deposit lockers / safe custody articles. The following guidelines supersede all the guidelines issued earlier in this regard.

18.1 Allotment of Lockers

18.1.1 Linking of Allotment of Lockers to placement of Fixed Deposits

The Committee on Procedures and Performance Audit of Public Services (CPPAPS) observed that linking the lockers facility with placement of fixed or any other deposit beyond what is

specifically permitted is a restrictive practice and should be prohibited forthwith. RBI concurs with the Committee's observations and banks are advised to refrain from such restrictive

practices.

18.1.2 Fixed Deposit as Security for Lockers

Banks may face situations where the locker-hirer neither operates the locker nor pays rent. To ensure prompt payment of locker rent, banks may at the time of allotment,

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obtain a Fixed Deposit which would cover 3 years rent and the charges for breaking open the locker in case of an eventuality. However, banks should not insist on such Fixed Deposit from the

existing locker-hirers.

18.1.3 Wait List of Lockers

Branches should maintain a wait list for the purpose of allotment of lockers and ensure transparency in allotment of lockers. All applications received for allotment of locker should be

acknowledged and given a wait list number.

18.1.4 Providing a copy of the agreement

Banks should give a copy of the agreement regarding operation of the locker to the locker-hirer at the time of allotment of the locker.

18.2 Security aspects relating to Safe Deposit Lockers

18.2.1 Operations of Safe Deposit Vaults/Lockers

Banks should exercise due care and necessary precaution for the protection of the lockers provided to the customer. Banks should review the systems in force for operation of safe deposit

vaults / locker at their branches on an on-going basis and take necessary steps. The security procedures should be well-documented and the concerned staff should be properly trained in the

procedure. The internal auditors should ensure that the procedures are strictly adhered to.

18.2.2 Customer due diligence for allotment of lockers /

Measures relating to lockers which have remained unoperated

In a recent incident, explosives and weapons were found in a locker in a bank branch. This emphasizes that banks should be aware of the risks involved in renting safe deposit lockers. In this

connection, banks should take following measures:

(i) Banks should carry out customer due diligence for both new and existing customers at least to the levels prescribed for customers classified as medium risk. If the customer is classified

in a higher risk category, customer due diligence as per KYC norms applicable to such higher risk category should be carried out.

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(ii) Where the lockers have remained unoperated for more than three years for medium risk category or one year for a higher risk category, banks should immediately contact the locker-hirer

and advise him to either operate the locker or surrender it. This exercise should be carried out even if the locker hirer is paying the rent regularly. Further, banks should ask the locker

hirer to give in writing, the reasons why he / she did not operate the locker. In case the locker-hirer has some genuine reasons as in the case of NRIs or persons who are out of town due to a

transferable job etc., banks may allow the locker hirer to continue with the locker. In case the locker-hirer does not respond nor operate the locker, banks should consider opening the

lockers after giving due notice to him. In this context, banks should incorporate a clause in the locker agreement that in case the locker remains unoperated for more than one year, the bank

would have the right to cancel the allotment of the locker and open the locker, even if the rent is paid regularly.

(iii) Banks should have clear procedure drawn up in consultation with their legal advisers for breaking open the lockers and taking stock of inventory.

18.3 Embossing identification code

Banks should ensure that identification Code of the bank / branch is embossed on all the locker keys with a view to facilitate Authorities in identifying the ownership of the locker keys.

19. Nomination Facility

19.1 Legal Provisions

19.1.1 Provisions in the Banking Regulation Act, 1949

The Banking Regulation Act, 1949 was amended by Banking Laws (Amendment) Act, 1983 by introducing new Sections 45ZA to 45ZF, which provide, inter alia, for the following matters:

a. To enable a banking company to make payment to the nominee of a deceased depositor, the amount standing to the credit of the depositor.

b. To enable a banking company to return the articles left by a deceased person in its safe custody to his nominee, after making an inventory of the articles in the manner directed by the

Reserve Bank.

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c. To enable a banking company to release the contents of a safety locker to the nominee of the hirer of such locker, in the event of the death of the hirer, after making an inventory of the

contents of the safety locker in the manner directed by the Reserve Bank.

19.1.2 The Banking Companies (Nomination) Rules, 1985

Since such nomination has to be made in the prescribed manner, the Central Government framed, in consultation with the Reserve Bank of India, the Banking Companies (Nomination) Rules, 1985.

These Rules, together with the provision of new Sections 45ZA to 45ZF of the Banking Regulation Act, 1949 regarding nomination facilities were brought into force with effect from 1985.

The Banking Companies (Nomination) Rules, 1985 which are self-explanatory, provide for:-

(i) Nomination Forms for deposit accounts, articles kept in safe custody and contents of safety lockers.

(ii) Forms for cancellation and variation of the nominations.

(iii) Registration of Nominations and cancellation and variation of nominations, and

(iv) matters related to the above.

19.1.3 Nomination facilities in respect of safe deposit locker / safe custody articles

Sections 45ZC to 45ZF of the Banking Regulation Act, 1949 provide for nomination and release of contents of safety lockers / safe custody article to the nominee and protection against notice

of claims of other persons. Banks should be guided by the provisions of Sections 45 ZC to 45 ZF of the Banking Regulation Act, 1949 and the Banking Companies (Nomination) Rules, 1985 and the

relevant provisions of Indian Contract Act and Indian Succession Act.

In the matter of returning articles left in safe custody by the deceased depositor to the nominee or allowing the nominee/s to have access to the locker and permitting him/them to remove the

contents of the locker, the Reserve Bank of India, in pursuance

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of Sections 45ZC (3) and 45ZE (4) of the Banking Regulation Act, 1949 has specified the formats for the purpose.

In order to ensure that the amount of deposits, articles left in safe custody and contents of lockers are returned to the genuine nominee, as also to verify the proof of death, banks may

devise their own claim formats or follow the procedure, if any, suggested by the Indian Banks' Association for the purpose.

19.1.4 Nomination Facility – Sole Proprietary Concern

Banks may extend the nomination facility also in respect of deposits held in the name of a sole proprietary concern.

19.2 Nomination Facility in Single Deposit Accounts

Banks should give wide publicity and provide guidance to deposit account holders on the benefits of nomination facility and the survivorship clause. Despite the best efforts in this regard,

banks might still be opening single deposit accounts without nomination.

In a case which came up before the Allahabad High Court, the Honourable Court has observed that "it will be most appropriate that the Reserve Bank of India issues guidelines to the effect

that no Savings Account or Fixed Deposit in single name be accepted unless name of the nominee is given by the depositors. It will go a long way to serve the purpose of the innocent widows

and children, who are dragged on long drawn proceedings in the Court for claiming the amount, which lawfully belongs to them".

Keeping in view the above, banks should generally insist that the person opening a deposit account makes a nomination. In case the person opening an account declines to fill in nomination,

the bank should explain the advantages of nomination facility. If the person opening the account still does not want to nominate, the bank should ask him to give a specific letter to the

effect that he does not want to make a nomination. In case the person opening the account declines to give such a letter, the bank should record the fact on the account opening form and

proceed with opening of the account if otherwise found eligible. Under no circumstances, a bank should refuse to open an account solely on the ground that the person opening the account

refused to nominate.

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19.3 Acknowledgement of Nomination

It was observed that some banks do not have the system of acknowledging the receipt of the duly completed form of nomination, cancellation and / or variation of the nomination. Further, in

some banks, although there is a system of acknowledgement of nomination as provided in the Savings Bank account opening form, such acknowledgements are actually not given to the customers. In

this connection, banks are aware that in terms of Rules 2 (9), 3 (8) and 4 (9) of the Banking Companies Nomination (Rules), 1985, they are required to acknowledge in writing to the depositor

(s) / locker hirers (s) the filing of the relevant duly completed Form of nomination, cancellation and / or variation of the nomination.

Banks should therefore strictly comply with the provisions of Banking Regulation Act, 1949 and Banking Companies (Nomination) Rules, 1985 and devise a proper system of acknowledging the

receipt of the duly completed form of nomination, cancellation and / or variation of the nomination. Such acknowledgement should be given to all the customers irrespective of whether the same

is demanded by the customers.

19.4 Registering the nomination

In terms of Rules 2 (10), 3 (9) and 4 (10) of the Banking Companies (Nomination) Rules, 1985 banks are required to register in its books the nomination, cancellation and / or variation of the

nomination. The banks should accordingly take action to register nominations or changes therein, if any, made by their depositor(s) / hirers.

19.5 Incorporation of the legend “Nomination Registered”

in pass book, deposit receipt etc. and indicating the

Name of the Nominee in Pass Books / Fixed Deposit Receipts

When a bank account holder has availed himself of nomination facility, the same may be indicated on the passbook so that, in case of death of the account holder, his relatives can know from

the pass book that the nomination facility has been availed of by the deceased depositor and take suitable action. Banks may, therefore, introduce the practice of recording on the face of the

passbook the position regarding availment of nomination facility with the legend "Nomination Registered". This may be done in the case of term deposit receipts also.

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Further, banks are advised that in addition to the legend “Nomination Registered”, they should also indicate the name of the Nominee in the Pass Books / Statement of Accounts / FDRs, in case

the customer is agreeable to the same.

19.6 Separate nomination for savings bank account and pension account

Nomination facility is available for Savings Bank Account opened for credit of pension. Banking Companies (Nomination) Rules, 1985 are distinct from the Arrears of Pension (Nomination) Rules,

1983 and nomination exercised by the pensioner under the latter rules for receipt of arrears of pension will not be valid for the purpose of deposit accounts held by the pensioners with banks

for which a separate nomination is necessary in terms of the Banking Companies (Nomination) Rules, 1985 in case a pensioner desires to avail of nomination facility.

19.7 Nomination Facility – Certain Clarifications

19.7.1 Nomination facility in respect of deposits

(i) Nomination facility is intended for individuals including a sole proprietary concern.

(ii) Rules stipulate that nomination shall be made only in favour of individuals. As such, a nominee cannot be an Association, Trust, Society or any other Organisation or any office-bearer

thereof in his official capacity. In view thereof any nomination other than in favour of an individual will not be valid.

(iii) There cannot be more than one nominee in respect of a joint deposit account.

(iv) Banks may allow variation/cancellation of a subsisting nomination by all the surviving depositor(s) acting together. This is also applicable to deposits having operating instructions

"either or survivor".

(v) In the case of a joint deposit account the nominee's right arises only after the death of all the depositors.

(vi) Witness in Nomination Forms: The Banking Companies (Nomination) Rules, 1985 have been framed in exercise of powers conferred by Section 52 read

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with Sections 45ZA, 45ZC and 45ZE of the Banking Regulation Act, 1949. In this connection, we clarify that for the various Forms (DA1, DA2 and DA3 for Bank Deposits, Forms SC1, SC2 and SC3

for Articles left in Safe Custody, Forms SL1, SL1A, SL2, SL3 and SL3A for Safety Lockers) prescribed under Banking Companies (Nomination) Rules, 1985 only Thumb-impression(s) shall be

attested by two witnesses. Signatures of the account holders need not be attested by witnesses.

(vii) Nomination in case of Joint Deposit Accounts: It is understood that sometimes the customers opening joint accounts with or without "Either or Survivor" mandate, are dissuaded from

exercising the nomination facility. It is clarified that nomination facility is available for joint deposit accounts also. Banks are, therefore, advised to ensure that their branches offer

nomination facility to all deposit accounts including joint accounts opened by the customers.

19.7.2 Nomination in Safe Deposit Lockers / Safe Custody Articles

(i) Nomination facilities are available only in the case of individual depositors and not in respect of persons jointly depositing articles for safe custody.

(ii) Section 45ZE of the Banking Regulation Act, 1949 does not preclude a minor from being a nominee for obtaining delivery of the contents of a locker. However, the responsibility of the

banks in such cases is to ensure that when the contents of a locker were sought to be removed on behalf of the minor nominee, the articles were handed over to a person who, in law, was

competent to receive the articles on behalf of the minor.

(iii) As regards lockers hired jointly, on the death of any one of the joint hirers, the contents of the locker are only allowed to be removed jointly by the nominees and the survivor(s)

after an inventory was taken in the prescribed manner. In such a case, after such removal preceded by an inventory, the nominee and surviving hirer(s) may still keep the entire contents with

the same bank, if they so desire, by entering into a fresh contract of hiring a locker.

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19.8 Customer Guidance and Publicity Educating Customers

on the Benefits of nomination / survivorship clause

(i) The nomination facility is intended to facilitate expeditious settlement of claims in the accounts of deceased depositors and to minimise hardship caused to the family members on the

death of the depositors. The banks should endeavour to drive home to their constituents the benefit of nomination facilities and ensure that the message reaches all the constituents by taking

all necessary measures for popularising the nomination facility among their constituents.

(ii) Banks should give wide publicity and provide guidance to deposit account holders on the benefits of the nomination facility and the survivorship clause. Illustratively, it should be

highlighted in the publicity material that in the event of the death of one of the joint account holders, the right to the deposit proceeds does not automatically devolve on the surviving

joint deposit account holder, unless there is a survivorship clause.

(iii) In addition to obtaining nomination forms, banks should ensure that account opening form should contain space for nomination also so that the customers could be educated about

availability of such facilities.

(iv) Unless the customers prefer not to nominate (this may be recorded without giving scope for conjecture of non-compliance), nomination should be a rule, to cover all other existing and new

accounts.

(v) To popularise the nomination facility, publicity may be launched, including printing compatible message on cheque books, pass-book and any other literature reaching the customers as well

as launching periodical drives. The methodology which the banks may like to adopt for this purpose may vary. However, one of the banks has devised a small slip indicating the availability of

nomination facility and the slip is inserted in the cheque books and pass books and in current account statements. A specimen format of the slip is given below :-

"Nomination facility available for -

- Deposits

- Safe Custody

- Safe Deposit Vault

Please make use of it.

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For details, please enquire at the Branch"

The availability of the above facility may also be indicated on the cheque/pass books.

20. Settlement of claims in respect of deceased depositors –

Simplification of procedure

Provisions of the Banking Regulation Act, 1949

Banks should adhere to the provisions of Sections 45 ZA to 45 ZF of the Banking Regulation Act, 1949 and the Banking Companies (Nomination) Rules, 1985.

20.1 Accounts with survivor/nominee clause

20.1.1 In the case of deposit accounts where the depositor had utilized the nomination facility and made a valid nomination or where the account was opened with the survivorship clause

("either or survivor", or "anyone or survivor", or "former or survivor" or "latter or survivor"), the payment of the balance in the deposit account to the survivor(s)/nominee of a deceased

deposit account holder represents a valid discharge of the bank's liability provided :

(a) the bank has exercised due care and caution in establishing the identity of the survivor(s) / nominee and the fact of death of the account holder, through appropriate documentary

evidence;

(b) there is no order from the competent court restraining the bank from making the payment from the account of the deceased; and

(c) it has been made clear to the survivor(s) / nominee that he would be receiving the payment from the bank as a trustee of the legal heirs of the deceased depositor, i.e., such payment to

him shall not affect the right or claim which any person may have against the survivor(s) / nominee to whom the payment is made.

20.1.2 It may be noted that since payment made to the survivor(s) / nominee, subject to the foregoing conditions, would constitute a full discharge of the bank's liability, insistence on

production of legal representation is superfluous and unwarranted and only serves to cause entirely avoidable inconvenience to the survivor(s) / nominee and would, therefore, invite serious

supervisory disapproval. In such case, therefore, while

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making payment to the survivor(s) / nominee of the deceased depositor, the banks should desist from insisting on production of succession certificate, letter of administration or probate,

etc., or obtain any bond of indemnity or surety from the survivor(s)/nominee, irrespective of the amount standing to the credit of the deceased account holder.

20.2 Accounts without the survivor / nominee clause

In case where the deceased depositor had not made any nomination or for the accounts other than those styled as "either or survivor" (such as single or jointly operated accounts), banks are

required to adopt a simplified procedure for repayment to legal heir(s) of the depositor keeping in view the imperative need to avoid inconvenience and undue hardship to the common person. In

this context, banks may, keeping in view their risk management systems, fix a minimum threshold limit, for the balance in the account of the deceased depositors, up to which claims in respect

of the deceased depositors could be settled without insisting on production of any documentation other than a letter of indemnity.

20.3 Premature Termination of term deposit accounts

In the case of term deposits, banks are required to incorporate a clause in the account opening form itself to the effect that in the event of the death of the depositor, premature

termination of term deposits would be allowed. The conditions subject to which such premature withdrawal would be permitted may also be specified in the account opening form. Such premature

withdrawal would not attract any penal charge.

20.4 Treatment of flows in the name of the deceased depositor

In order to avoid hardship to the survivor(s) / nominee of a deposit account, banks should obtain appropriate agreement / authorization from the survivor(s) / nominee with regard to the

treatment of pipeline flows in the name of the deceased account holder. In this regard, banks could consider adopting either of the following two approaches:

The bank could be authorized by the survivor(s) / nominee of a deceased account holder to open an account styled as 'Estate of Shri ________________, the Deceased'

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where all the pipeline flows in the name of the deceased account holder could be allowed to be credited, provided no withdrawals are made.

OR

The bank could be authorized by the survivor(s) / nominee to return the pipeline flows to the remitter with the remark "Account holder deceased" and to intimate the survivor(s) / nominee

accordingly. The survivor(s) / nominee / legal heir(s) could then approach the remitter to effect payment through a negotiable instrument or through ECS transfer in the name of the

appropriate beneficiary.

20.5 Interest payable on the deposit account of deceased depositor

In the case of a term deposit standing in the name/s of

(i) a deceased individual depositor, or

(ii) two or more joint depositors, where one of the depositors has died,

the criterion for payment of interest on matured deposits in the event of death of the depositor in the above cases has been left to the discretion of individual banks subject to their Board

laying down a transparent policy in this regard.

In the case of balances lying in current account standing in the name of a deceased individual depositor/sole proprietorship concern, interest should be paid only from 1st May, 1983, or from

the date of death of the depositor, whichever is later, till the date of repayment to the claimant/s at the rate of interest applicable to savings deposit as on the date of payment.

20.6 Time limit for settlement of claims

Banks should settle the claims in respect of deceased depositors and release payments to survivor(s) / nominee(s) within a period not exceeding 15 days from the date of receipt of the claim

subject to the production of proof of death of the depositor and suitable identification of the claim(s), to the bank's satisfaction.

Banks should report to the Customer Service Committee of the Board, at appropriate intervals, on an ongoing basis, the details of the number of claims received pertaining to deceased

depositors / locker-hirers / depositors of safe custody article accounts and those pending beyond the stipulated period, giving reasons therefor.

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20.7 Claim Forms to be made available

With a view to facilitate timely settlement of claims on the death of a depositor, banks are advised to provide claim forms for settlement of claims of the deceased accounts, to any person/s

who is/are approaching the bank / branches for forms. Claim forms may also be put on the bank’s website prominently so that claimants of the deceased depositor can access and download the

forms without having to visit the concerned bank/branch for obtaining such forms for filing claim with the bank.

21. Access to the safe deposit lockers / Return of safe custody articles to Survivor(s) / Nominee(s) / Legal heir(s)

For dealing with the requests from the nominee(s) of the deceased locker-hirer / depositors of the safe-custody articles (where such a nomination had been made) or by the survivor(s) of the

deceased (where the locker / safe custody article was accessible under the survivorship clause), for access to the contents of the locker / safe custody article on the death of a locker hirer

/ depositor of the article, the banks are advised to adopt generally the foregoing approach, mutatis mutandis, as indicated for the deposit accounts. Detailed guidelines in this regard are,

however, as follows:

21.1 Access to the safe deposit lockers / return of safe custody articles (with survivor/nominee clause)

21.1.1 If the sole locker hirer nominates a person, banks should give to such nominee access of the locker and liberty to remove the contents of the locker in the event of the death of the

sole locker hirer. In case the locker was hired jointly with the instructions to operate it under joint signatures, and the locker hirer(s) nominates person(s), in the event of death of any

of the locker hirers, the bank should give access of the locker and the liberty to remove the contents jointly to the survivor(s) and the nominee(s). In case the locker was hired jointly with

survivorship clause and the hirers instructed that the access of the locker should be given over to "either or survivor", "anyone or survivor" or "former or survivor" or according to any

other survivorship clause, banks should follow the mandate in the event of the death of one or more of the locker-hirers.

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21.1.2 However, banks should take the following precautions before handing over the contents:

(a) Banks should exercise due care and caution in establishing the identity of the survivor(s) / nominee(s) and the fact of death of the locker hirer by obtaining appropriate documentary

evidence;

(b) Banks should make diligent effort to find out if there is any order from a competent court restraining the bank from giving access to the locker of the deceased; and

(c) Banks should make it clear to the survivor(s) / nominee(s) that access to locker / safe custody articles is given to them only as a trustee of the legal heirs of the deceased locker hirer

i.e., such access given to him shall not affect the right or claim which any person may have against the survivor(s) / nominee(s) to whom the access is given. Similar procedure should be

followed for return of articles placed in the safe custody of the bank. Banks should note that the facility of nomination is not available in case of deposit of safe custody articles by more

than one person.

21.1.3 Banks should note that since the access given to the survivor(s) / nominee(s), subject to the foregoing conditions, would constitute a full discharge of the bank's liability,

insistence on production of legal representation is superfluous and unwarranted and only serves to cause entirely avoidable inconvenience to the survivor(s) / nominee(s) and would, therefore,

invite serious supervisory disapproval. In such case, therefore, while giving access to the survivor(s) / nominee(s) of the deceased locker hirer / depositor of the safe custody articles, the

banks should desist from insisting on production of succession certificate, letter of administration or probate, etc., or obtain any bond of indemnity or surety from the survivor(s)/nominee

(s).

21.2 Access to the safe deposit lockers / return of safe custody articles (without survivor/nominee clause)

There is an imperative need to avoid inconvenience and undue hardship to legal heir(s) of the locker hirer(s). In case where the deceased locker hirer had not made any nomination or where the

joint hirers had not given any mandate that the access may be

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given to one or more of the survivors by a clear survivorship clause, banks are advised to adopt a customer-friendly procedure drawn up in consultation with their legal advisers for giving

access to legal heir(s) / legal representative of the deceased locker hirer. Similar procedure should be followed for the articles under safe custody of the bank.

21.3 Preparing Inventory

21.3.1 Banks should prepare an inventory before returning articles left in safe custody / before permitting removal of the contents of a safe deposit locker as advised in terms of

Notification DBOD.NO.Leg.BC.38/ C.233A-85 dated March 29, 1985. The inventory shall be in the appropriate Forms set out as enclosed to the above Notification or as near thereto as

circumstances require. A copy of the above Notification is shown as Annex IV of this Circular.

21.3.2 Banks are not required to open sealed/closed packets left with them for safe custody or found in locker while releasing them to the nominee(s) and surviving locker hirers / depositor

of safe custody article.

21.3.3. Further, in case the nominee(s) / survivor(s) / legal heir(s) wishes to continue with the locker, banks may enter into a fresh contract with nominee(s) / survivor(s) / legal heir(s)

and also adhere to KYC norms in respect of the nominee(s) / legal heir(s).

21.4 Simplified operational systems / procedures

As per the direction of Reserve Bank, the Indian Banks' Association (IBA) has formulated a Model Operational Procedure (MOP) for settlement of claims of the deceased constituents, under

various circumstances, consistent with the instructions contained in this circular, for adoption by the banks. The banks should, therefore, undertake a comprehensive review of their extant

systems and procedures relating to settlement of claims of their deceased constituents (i.e., depositors / locker-hirers / depositors of safe-custody articles) with a view to evolving a

simplified policy / procedures for the purpose, with the approval of their Board, taking into account the applicable statutory provisions, foregoing instructions as also the MOP formulated by

the IBA.

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21.5 Customer guidance and publicity

Banks should place on their websites the instructions along with the policies / procedures put in place for giving access of the locker / safe custody articles to the nominee(s) / survivor(s)

/ Legal Heir(s) of the deceased locker hirer / depositor of the safe custody articles. Further, a printed copy of the same should also be given to the nominee(s) / survivor(s) / Legal Heir(s)

whenever a claim is received from them.

Banks should view these instructions as very critical element for bringing about significant improvement in the quality of customer service provided to survivor(s) / nominee(s) of deceased

depositors / locker hirer / depositor of safe custody articles.

22. Settlement of claims in respect of missing persons

22.1 Settlement of claims in respect of missing persons

Banks are advised to follow the following system in case a claim is received from a nominee / legal heirs for settlement of claim in respect of missing persons :-

The settlement of claims in respect of missing persons would be governed by the provisions of Section 107 / 108 of the Indian Evidence Act, 1872. Section 107 deals with presumption of

continuance and Section 108 deals with presumption of death. As per the provisions of Section 108 of the Indian Evidence Act, presumption of death can be raised only after a lapse of seven

years from the date of his/her being reported missing. As such, the nominee / legal heirs have to raise an express presumption of death of the subscriber under Section 107/108 of the Indian

Evidence Act before a competent court. If the court presumes that he/she is dead, then the claim in respect of a missing person can be settled on the basis of the same.

Banks are advised to formulate a policy which would enable them to settle the claims of a missing person after considering the legal opinion and taking into account the facts and

circumstances of each case. Further, keeping in view the imperative need to avoid inconvenience and undue hardship to the common person, banks are advised that keeping in view their risk

management systems, they may fix a threshold limit, up to which claims in respect of missing persons could be settled without insisting on production of any documentation other than (i) FIR

and the non-traceable report issued by police authorities and (ii) letter of indemnity.

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22.2 Settlement of Claims in respect of Missing Persons in Uttarakhand Disaster

In the aftermath of Uttarakhand Natural Disaster during June 14-20, 2013 the Office of the Registrar General of India, Ministry of Home Affairs, Government of India has devised a procedure

for Registration of Death of Missing persons in Natural Calamities affected areas in Uttarakhand vide its circular F.No.1/2/(Uttarakhand)/2011-VS-CRS dated August 16, 2013 (MHA Circular). A

copy of MHA Circular is furnished at Annex VIII for reference. The MHA Circular has devised detailed procedure for registration and issue of ‘Death Certificate’ of a person reportedly missing

since his/her visit to the site of disaster in Uttarakhand in June 2013.

In view of the above, banks are advised to settle the claims in respect of missing persons, covered by MHA Circular, without insisting on production of any documentation other than (i) the

‘Death Certificate’ issued by the Designated Officer under MHA Circular and (ii) letter of indemnity.

Banks are further advised that the provisions detailed in Para 22.1 above on ‘Settlement of claims in respect of missing persons’ would be applicable in other cases which are not covered by

MHA Circular.

23. Release of other assets of the deceased

borrowers to their legal heirs

Banks had represented that the principle of not obtaining succession certificates etc., could be extended for settlement of claims in respect of other assets of deceased customers including

securities held against advances after adjustment thereof. Banks are advised not to insist upon legal representation for release of other assets of deceased customers irrespective of the

amount involved.

Banks may, however, call for succession certificates from legal heirs of deceased borrowers in cases where there are disputes and all legal heirs do not join in indemnifying the bank or in

certain other exceptional cases where the bank has a reasonable doubt about the genuineness of the claimant/s being the only legal heir/s of the borrower.

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24. Unclaimed Deposits / Inoperative Accounts in banks

24.1 Section 26 of the Banking Regulation Act, 1949 provides, inter alia, that every banking company shall, within 30 days after close of each calendar year submit a return in the prescribed

form and manner to the Reserve Bank of India as at the end of each calendar year (i.e., 31st December) of all accounts in India which have not been operated upon for 10 years.

24.2 In view of the increase in the amount of the unclaimed deposits with banks year after year and the inherent risk associated with such deposits, banks should play a more pro-active role

in finding the whereabouts of the account holders whose accounts have remained inoperative. Further several complaints were received in respect of difficulties faced by the customers on

account of their accounts having been classified as inoperative. Moreover, there is a feeling that banks are undeservedly enjoying the unclaimed deposits, while paying no interest on it.

Keeping these factors in view, the instructions issued by RBI have been reviewed and banks are advised to follow the instructions detailed below while dealing with inoperative accounts:

(i) Banks should make an annual review of accounts in which there are no operations (i.e., no credit or debit other than crediting of periodic interest or debiting of service charges) for

more than one year. The banks may approach the customers and inform them in writing that there has been no operation in their accounts and ascertain the reasons for the same. In case the non-

operation in the account is due to shifting of the customers from the locality, they may be asked to provide the details of the new bank accounts to which the balance in the existing account

could be transferred.

(ii) If the letters are returned undelivered, they may immediately be put on enquiry to find out the whereabouts of customers or their legal heirs in case they are deceased.

(iii) In case the whereabouts of the customers are not traceable, banks should consider contacting the persons who had introduced the account holder. They could also consider contacting the

employer / or any other person whose details are available with them. They could also consider contacting the account holder telephonically in case his Telephone number / Cell number has been

furnished to the bank. In case of Non

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Resident accounts, the bank may also contact the account holders through e-mail and obtain their confirmation of the details of the account.

(iv) A savings as well as current account should be treated as inoperative / dormant if there are no transactions in the account for over a period of two years.

(v) In case any reply is given by the account holder giving the reasons for not operating the account, banks should continue classifying the same as an operative account for one more year

within which period the account holder may be requested to operate the account. However, in case the account holder still does not operate the same during the extended period, banks should

classify the same as inoperative account after the expiry of the extended period.

(vi) For the purpose of classifying an account as ‘inoperative’ both the type of transactions i.e., debit as well as credit transactions induced at the instance of customers as well as third

party should be considered. However, the service charges levied by the bank or interest credited by the bank should not be considered.

(vii) There may be instances where the customer has given a mandate for crediting the interest on Fixed Deposit account and/or crediting dividend on shares to the Savings Bank account and

there are no other operations in the Savings Bank account. Since the interest on Fixed Deposit account and/or dividend on shares is credited to the Savings Bank accounts as per the mandate of

the customer, the same should be treated as a customer induced transaction. As such, the account should be treated as operative account as long as the interest on Fixed Deposit account and/or

dividend on shares is credited to the Savings Bank account. The Savings Bank account can be treated as inoperative account only after two years from the date of the last credit entry of the

interest on Fixed Deposit account and/or dividend on shares, whichever is later, provided there is no other customer induced transaction.

(viii) Further, the segregation of the inoperative accounts is from the point of view of reducing risk of frauds etc. However, the customer should not be inconvenienced in any way, just

because his account has been rendered inoperative. The classification is there only to bring to the attention of dealing staff, the increased risk in the account. The transaction may be

monitored at a higher level both from the point of view of preventing

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fraud and making a Suspicious Transactions Report. However, the entire process should remain un-noticeable by the customer.

(ix) Operation in such accounts may be allowed after due diligence as per risk category of the customer. Due diligence would mean ensuring genuineness of the transaction, verification of the

signature and identity etc. However, it has to be ensured that the customer is not inconvenienced as a result of extra care taken by the bank.

(x) There should not be any charge for activation of inoperative account.

(xi) Banks are also advised to ensure that the amounts lying in inoperative accounts ledger are properly audited by the internal auditors / statutory auditors of the bank.

(xii) Interest on savings bank accounts should be credited on regular basis whether the account is operative or not. If a Fixed Deposit Receipt matures and proceeds are unpaid, the amount

left unclaimed with the bank will attract savings bank rate of interest.

24.3 Banks may also consider launching a special drive for finding the whereabouts of the customers / legal heirs in respect of existing accounts which have already been transferred to the

separate ledger of ‘inoperative accounts’.

24.4 Display list of Inoperative Accounts: Banks should, in addition to the instructions contained above, play a more pro-active role in finding the whereabouts of the accountholders of

unclaimed deposits/ inoperative accounts. Banks are, therefore, advised that they should display the list of unclaimed deposits/inoperative accounts which are inactive / inoperative for ten

years or more on their respective websites. The list so displayed on the websites must contain only the names of the account holder(s) and his/her address in respect of unclaimed

deposits/inoperative accounts. In case such accounts are not in the name of individuals, the names of individuals authorized to operate the accounts should also be indicated. However, the

account number, its type and the name of the branch shall not be disclosed on the bank’s website. The list so published by the banks should also provide a “Find” option to enable the public

to search the list of accounts by name of the account holder.

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Banks should also give on the same website, the information on the process of claiming the unclaimed deposit/activating the inoperative account and the necessary forms and documents for

claiming the same. Banks are required to have adequate operational safeguards to ensure that the claimants are genuine.

24.5 Strengthening the Regulatory Framework for Unclaimed Deposits

With a view to further strengthen the regulatory framework for inoperative accounts and unclaimed deposits, banks are advised to put in place a Board approved policy on classification of

unclaimed deposits; grievance redressal mechanism for quick resolution of complaints; record keeping; and periodic review of such accounts. The first periodic review of unclaimed

deposits/inoperative accounts should be put up to their respective bank Boards by September 30, 2012.

24.6 Treatment of certain savings bank accounts opened for credit of Scholarship amounts and credit of Direct Benefit Transfer under Government Schemes

State and Central Governments have expressed difficulties in crediting cheques/Direct Benefit Transfer/Electronic Benefit Transfer/Scholarships for students, etc. into accounts/Accounts with

zero balance opened for the beneficiaries under various Central/State Government schemes but had been classified as dormant/inoperative due to non-operation of the account for over two years.

Keeping the above in view, banks are advised that they may allot a different “product code” in their CBS to all such accounts opened by banks so that the stipulation of inoperative/dormant

account due to non-operation does not apply while crediting proceeds as mentioned above.

In order to reduce the risk of fraud etc., in such accounts, while allowing operations in these accounts, due diligence should be exercised by ensuring the genuineness of transactions,

verification of signature and identity, etc. However, it has to be ensured that the customer is not inconvenienced in any manner.

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24.7 Treatment of accounts opened for credit of Scholarship Amounts under Government Schemes

Bombay High Court has brought to our notice that banks fix a limit on total credits in zero balance accounts opened for students studying in primary, secondary / higher secondary schools and

technical institutions. Resultantly, in cases where scholarship amounts exceed the credit limit, banks do not allow the credit and return the amount to the disbursement account of the

Government. Further, in some cases banks are reported to have closed zero balance accounts unilaterally without intimating student beneficiaries concerned. Instances of banks refusing to open

zero balance account for students have also been brought to our notice.

As directed by the Bombay High Court, banks are advised to ensure that accounts of all student beneficiaries under the various Central/State Government Scholarship Schemes are free from

restrictions of ‘minimum balance’ and ‘total credit limit’.

25. Customer Confidentiality Obligations

The scope of the secrecy law in India has generally followed the common law principles based on implied contract. The bankers' obligation to maintain secrecy arises out of the contractual

relationship between the banker and customer, and as such no information should be divulged to third parties except under circumstances which are well defined. The following exceptions to the

said rule are normally accepted:

(i) Where disclosure is under compulsion of law

(ii) Where there is duty to the public to disclose

(iii) Where interest of bank requires disclosure and

(iv) Where the disclosure is made with the express or implied consent of the customer.

25.1 Collecting Information from customers for cross-selling purposes

At the time of opening of accounts of the customers, banks collect certain information. While complying with the above requirements, banks also collect a lot of additional personal

information.

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In this connection, the Committee on Procedures and Performances Audit on Public Services (CPPAPS) observed that the information collected from the customer was being used for cross selling

of services of various products by banks, their subsidiaries and affiliates. Sometimes, such information was also provided to other agencies. As banks are aware, the information provided by

the customer for KYC compliance while opening an account is confidential and divulging any details thereof for cross selling or any other purpose would be in breach of customer

confidentiality obligations. Banks should treat the information collected from the customer for the purpose of opening of account as confidential and not divulge any details thereof for cross

selling or any other purposes. Banks may, therefore, ensure that information sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity with the

guidelines issued in this regard.

Wherever banks desire to collect any information about the customer for a purpose other than KYC requirements, it should not form part of the account opening form. Such information may be

collected separately, purely on a voluntary basis, after explaining the objectives to the customer and taking his express approval for the specific uses to which such information could be

put. Banks should therefore, instruct all the branches to strictly ensure compliance with their obligations to the customer in this regard.

26. Transfer of account from one branch to another

26.1 Instructions of a customer for transfer of his account to another office should be carried out immediately on receipt of, and in accordance with, his instructions. It should be ensured

that along with the balance of the account, the relative account opening form, specimen signatures, standing instructions, etc., or the master sheets wherever obtained, are also

simultaneously transferred, under advice to the customer.

26.2 The account transfer form with the enclosures may be handed over to the customer in a sealed cover if he so desires for delivery at the transferee office / branch. However, the

transferee office should also be separately supplied with a copy of the account transfer letter.

26.3 When an office receives an enquiry from a customer regarding the receipt of his account on transfer from another office it should take up the matter with the transferor

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office by electronic means, in case it has not received the balance of the account and/or other related papers even after a reasonable transit time.

27. Switching banks by customers

Banks should ensure that depositors dissatisfied with customer service have the facility to switch banks and thwarting depositors from such switches would invite serious adverse action.

28. Co-ordination with officers of Central Board of Direct Taxes

There is a need for greater co-ordination between the income-tax department and the banking system. As such banks should extend necessary help/co-ordination to tax officials whenever

required. Further, banks will have to view with serious concern cases where their staff connive/assist in any manner with offences punishable under the Income Tax Act. In such cases in

addition to the normal criminal action, such staff member should also be proceeded against departmentally.

29. Declaration of Holiday under the Negotiable Instruments Act, 1881

In terms of Section 25 of the Negotiable Instruments Act, 1881, the expression "public holiday" includes Sunday and any other day declared by the Central Government by notification in the

Official Gazette to be a public holiday. However, this power has been delegated by the Central Government to State Governments vide the Government of India, Ministry of Home Affairs'

Notification No. 20-25-56-Pub-I dated 8 June, 1957. While delegating the power to declare public holidays within concerned States under Section 25 of the Negotiable Instruments Act, 1881, the

Central Government has stipulated that the delegation is subject to the condition that the Central Government may itself exercise the said function, should it deem fit to do so. This implies

that when Central Government itself has notified a day as "public holiday" under Section 25 of the Negotiable Instruments Act, 1881, there is no need for banks to wait for the State

Government notification.

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30. Miscellaneous

30.1 Sunday banking

In predominantly residential areas banks may keep their branches open for business on Sundays by suitably adjusting the holidays.

Banks should keep rural branches open on weekly market day.

30.2 Accepting standing instructions of customers

Standing instructions should be freely accepted on all current and savings bank accounts. The scope of standing instructions service should be enlarged to include payments on account of

taxes, rents, bills, school / college fees, licences, etc.

30.3 Clean Overdrafts for small amounts

Clean overdrafts for small amounts may be permitted at the discretion of branch manager to customers whose dealings have been satisfactory. Banks may work out schemes in this regard.

30.4 Rounding off of transactions

All transactions, including payment of interest on deposits/charging of interest on advances, should be rounded off to the nearest rupee i.e., fractions of 50 paise and above shall be rounded

off to the next higher rupee and fraction of less than 50 paise shall be ignored. Issue prices of cash certificates should also be rounded off in the same manner. However, banks should ensure

that cheques/drafts issued by clients containing fractions of a rupee are not rejected or dishonoured by them.

31. Various Working Groups / Committees on Customer Service in Banks - Implementation of the Recommendations

In order to keep a watch on the progress achieved by the bank in the implementation of the recommendations of various working groups/Committees on customer service, banks may examine the

recommendations which have relevance in the present day banking and continue to implement them. Banks may consider submitting periodically to their Customer Service Committee of the Board a

progress report on the steps/ measures taken in that regard.

.

32. Code of Bank’s Commitment to Customers

Banks should follow various provisions of the Code of Bank’s Commitment to Customers, implementation of which is monitored by the Banking Codes and Standards Board of India (BCSBI).

Type of Customers

Type of Customers

INTRODUCTION

In course of their usual banking activities, Banks come across with various type of customers. The customers of a Bank may be Individuals, Partnership Firms, Hindu Undivided Family, Companies and the other Corporate Entities.

TYPE OF CUSTOMERS

In this Chapter, for the convenience of study, types of Borrowers have been classified as under:

1. Individual

2. Partnership firm.

3. Hindu Undivided Family

4. Companies

5. Statutory Corporations

6. Trusts and Co-op Societies

One of the essential elements of a contract is “capacity of the parties to Contract”.

The Bank while dealing with an individual should ensure that he is competent to enter into contract. An individual is not competent to contract and money lent to him cannot be recovered in the following circumstances:

a) If an individual is a minor:

A person is minor in the eyes of the law if has not attained the age of 18 years under Indian Majority Act and the age of 21 years, if he/she is a ward, under the Guardians and Wards Act. The money lent to a minor cannot be recovered, if the minor fails to repay. Exception to this is a contract with a minor for supply of necessaries to the minor. If a Bank lends money to a minor to meet expenses for purchasing necessaries of life, then bank can recover the money from the estate of the minor.

b) If an individual is not of sound mind:

According to the Contract Act, if a person is not of sound mind, then he is incompetent to enter into a contract. The Act says that a person at the time when he makes the contract, he is not capable of understanding it and of forming a rational judgment as to its effect upon his interests, will be considered that he is ‘not of sound mind’. Hence, a contract would be invalid if it is proved that the time of entering into contract, the person was not in sound state of mind and could not understand what he was doing and could not understand the implications of entering into the contract.

c) Disqualified persons:

If a person is disqualified by the law in respect of his capacity to contract, then the contract entered into by such a person cannot be enforced. For example, a person might have been declared as insolvent under the Insolvency law. As long as the person continues to be undischarged insolvent, he cannot enter into contract.

2. PARTNERSHIP FIRM

‘Partnership Firm’ is another entity with which a Banker deals with in the course of his business. Partnership firm is governed by Indian Partnership Act 1932. A partnership is the relation between persons who have agreed to share the profits of a business, carried on by all or any of them acting for all. The relationship between partners is governed by partnership deed which can be written or unwritten.

Legal Position of a partnership:

A partnership is not distinct from its partners. The liability is joint and several. It means that they responsible for the act of the partnership firm in their capacity as partner as well as individual. The Indian Partnership Act 1932, provides for registration of the partnership and it is necessary that a Banker dealing with partnership firm, should verify as to whether the firm is registered or not. This would help him to know all the names of the partners and their relationship.

Authority of the Partners:

Section 19 of the Indian Partnership Act 1932 deals with the implied authority of a partner as an agent of the firm; and Section 22 deals with the mode of doing act to bind the firm. In view of the provisions of Section 19 and 22, it should be noted that the act of a partner shall be binding on the firm if done:

a) in the usual business of the partnership;

b) in the usual way of the business; and

c) as a partner, i.e. on behalf of the firm and not solely on his own behalf.

Business of partnership firm: Mode of Operation

Rights and duties of the partners are determined by Partnership Deed. It provides for opening of bank accounts, borrowing powers, signing of cheques etc. Generally there may be a managing partner, who conducts business on behalf of other partners. While dealing with partnership firms it should be ensured that business is conducted as per partnership deed. If the Managing Partner does not have power to conduct certain transaction, then it should be ensured that consent of all partners is obtained.

Partnership firm and transaction in immovable property:

Section 19 of the Indian Partnership Act 1932 states that a partner cannot effect transfer of immovable property of the firm unless expressly authorized. While taking mortgage security of firm’s immovable property, it should be ensured that the partner creating mortgage is expressly authorized to create mortgage. If the partner has no authority to create mortgage, then the banker should ensure that all the partners jointly create the mortgage.

Insolvency of the firm:

The banker on receiving notice of insolvency of the firm must immediately stop further transaction in the account irrespective of the fact that the account is in credit or debit. In case there is a credit balance, and the banker does not intend to set off the same against the dues in any other account, then the balance has to be handed over to the official receiver appointed by the Court or as directed by the Court. In case the account is in debit then the banker would be required to prove his debt before the Court and thereafter will be entitled to receive the same from the Official Receiver either in full or as per the dividend declared by the Court.

Insolvency of the Partner:

If at the time of insolvency of one of the partners the firms account is in credit then the same can be operated by the other partners, but the banker should obtain a fresh mandate and all previous cheques issued by the insolvent partner may be paid provided the other partners confirm the same. In case the account is in debit then further transactions in the account should be stopped.

Death of a partner:

In case of death, the principles, as stated* in the case of Insolvency of a partner, applies.

3. JOINT HINDU FAMILY (JHF) or HINDU UNDIVIDED FAMILY (HUF)

Joint Hindu Family is an entity of customary law among Hindus. This is governed by personal laws. In Bengal and other parts of erstwhile Bangal province, a Hindu Undivided Family is governed by Dayabhaga Law. In other parts of India, it is governed by Mitakshara Law.

Constitution of a Joint Hindu Family:

A Joint Hindu Family consists of male members descended lineally from a common male ancestor, together with their mothers, wives or widows and unmarried daughters bound together by fundamental principle of family relationship. The Joint Hindu Family is purely a creature of Law and cannot be created by act of parties.

Management of Business of Joint Hindu Family (JHF):

In a JHF the senior member of the family is entitled to manage the family properties. He is called “Manager” or “Karta. The Karta or Manager occupies a position superior to that of the other members

n so far as he manages the family property or business or looks after the family interests on behalf of the other members. The Managership of the JHF property comes to a person by birth and he does not owe his position as Manager on consent of the other co-parceners. The liability of the Karta is unlimited, whereas the liability of the co-parceners is limited to their shares in the Joint Family Estate.

Powers and Duties of the Manager

A Manager or Karta of a Joint Hindu Family has the following powers and duties:

Powers:

i. Right to possession and management of the joint family property.

ii. Right to income from the joint family property

iii. Right to represent the joint family

iv. Right to sell the joint family property for family purpose.

Duties:

v. Duty to run the family business and manage the property for the benefit of the family

vi. Duty to account the income from the joint family business and property.

Banker and his dealings with Joint Hindu Family

i. A banker dealing with JHF, should know the Karta of the family.

ii. Banker should ensure that Karta of the Joint Hindu Family deals with the Bank and borrows only for the benefit of Joint Family Business.

iii. The application to open the account must be signed by all the members and all adult members should be made jointly and severally liable for any borrowings or if the account gets overdrawn.

4. COMPANIES

A Company is another type of customer, which a banker deals with. A company is a juristic person created by law, having a perpetual succession and Common Seal distinct from its members. A Company depending upon its constitution is governed by various laws.

Basic Law Governing Company:

In India Companies are governed by Companies Act, 1956. All the companies are required to be registered under Companies Act, 1956.

The Business and objectives of a company are known by two important documents called Memorandum of Association and Article of Association. Therefore for the formation of company these documents are essential.

Memorandum of Association

The Memorandum of Association is charter of a company. Its purpose is to enable the shareholders, creditors and those dealing with the company to know its permitted range of business.

Memorandum of Association of a company contains the following details among others:

i. Name of the company

ii. Place of the business of the company

iii. Objects of the Company

iv. Name of the first Directors of the company

v. Share capital of the company

Articles of Association

Articles of Association are rules and regulations governing the internal management of the company. They define the powers of the officers of the company. Articles of Association are subordinate to Memorandum of Association and it contains the following details among other things:

i. Number of Directors of the company

ii. Procedure for conducting meeting of shareholders, Board of Directors etc.

iii. Procedure for transfer and transmission of shares.

iv. Borrowing powers of the company

v. Officers of the company and other details

Types of Companies:

A. Private Company:

According to Section 3 (1) (iii), a Private Company is one which contains following provisions in its Articles of Association:

i. Restriction on the right to transfer its shares.

ii. Limitation on number of members to fifty excluding the people, who are employees and ex-employees of the company.

iii. Prohibition as to participation by General public in its capital requirements.

B. Public Company:

A Public Company is one which is not a Private Company i.e. a Public Company does not have any restrictions of the Private Company and its main features are as follows:

i. Shares are freely transferable.

ii. No restriction on number of members

iii. Public at large can participate in its share capital.

The Public Company can be further classified as

(a) Limited Liability Company – Liability is limited to the share in capital.

(b) Unlimited Liability Company – Liability of the members is unlimited

(c) Limited by Guarantee - liability is limited to the amount guaranteed

C. Government Company:

A company in which Central Government or State Government or both has not less than 51 % of share capital.

D. Statutory Companies:

There are some companies established by an act of Parliament. These are called Statutory Corporations. For example, State Bank of India is established under State Bank of India Act, 1955. Nationalised Banks are established under Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970.

E. Other Companies:

Besides the above, Companies Act, 1956 classifies companies on the basis of time, place of incorporation and nature of working into the following categories:

i.Existing Company:A company existing already before the coming into force of Companies Act, 1956.

ii.Foreign Company: A company registered in a Foreign Country.

iii.Holding Company: A company owning more than 50 % of share capital in another company or a company which can appoint majority of Directors in another company.

iv. Subsidiary Company: it can be seen that when there is a holding company the other company is called Subsidiary Company.

5. OTHER TYPE OF CUSTOMERS

(i) Clubs, Societies, Schools:

These bodies are usually governed by Companies Act or co-operative Societies Act and function within the ambit of those laws. For example clubs can be registered either under the Companies Act, 1956 or under Societies Registration Act or Co- operative Societies Act. In the case of lending to these bodies a Banker should study the bye-laws, rules and regulations applicable to them and ascertain the legality of lending to them.

(ii) Trusts:

These are governed by Indian Trusts Act, 1882, if they are Private Trusts and if they are public trust, they are governed by Public Trusts Act or Religious and Charitable Endowments Act, if they are Trusts of Hindus and in the case of Muslims they are governed by Wakf Act.

A Banker dealing with Trusts should acquaint himself with the respective laws applicable to them and shall ensure that his lending is within the ambit of those laws.

(iii) Trustee:

The Trusts are managed by Trustees. The powers and duties of the Trustees are either provided in Trust deed or regulated by the respective laws applicable to such Trusts. For example in the case of Public Trusts, Charity Commissioners, or Commissioner of Endowments appointed by Government has power to supervise the activities of the Trusts. The Trustee of Muslim Wakf is called Mutawali and his conduct and function is regulated by Wakf Board. Therefore a Banker dealing with a Trust should ensure that all the permissions required for taking a loan is obtained from the respective Government authorities.

Know Your Customer (KYC) Guidelines

The objective of KYC guidelines is to prevent banks from being used, intentionally or unintentionally, by criminal elements for money laundering activities. KYC procedures also enable banks to know/understand their customers and their financial dealings better which in turn help them manage their risks prudently. KYC, the principal means of identifying the customer, is the platform on which banking system operates to control financial frauds, identify money laundering and suspicious activities, and for scrutiny and monitoring of large value transactions. The guidelines are also applicable to foreign currency accounts/transactions.

Banks should frame their KYC policies incorporating the following four key elements:

i. Customer Acceptance Policy

ii. Customer Identification Procedures

iii. Monitoring of Transactions and

iv. Risk Management.

Objectives:

•To establish procedures to verify the bonafide identification of individuals/corporates opening and account

•To establish processes and procedures to monitor high value transactions and transactions of suspicious nature in accounts

• To establish systems for conducting due diligence and reporting of such transactions.

KYC Policy

“Know Your Customer” (KYC) procedure should be the key principle for identification of an individual/corporate opening an account with regard to their photo identity and address proof. Regarding this the prospective customers have to submit necessary prescribed documents. If any customer finds it difficult in providing the said documents, accounts can be opened in genuine cases subject to fixing the ceilings on the maximum amount of balances to be kept in all his accounts at any point of time and total credits into all accounts put together in a year. This applies to accounts to be opened basing on verification through an introductory reference from an existing account holder/a person known to the bank. For existing accounts thorough KYC should have been fulfilled. And the banks should have in place policies that establish processes and procedures to monitor transactions of suspicious nature in accounts and have systems of conducting due diligence and reporting of such transactions.

Ceiling and Monitoring of Transactions

• The banks are required to keep a close watch of cash withdrawals and deposits for Rs 10 lakhs and above in deposit, cash credit or overdraft accounts and keep record of details of these large cash transactions in a separate register.

• Issuance of travellers cheques, demand drafts and telegraphic transfers for Rs 50,000 and above only by debit to customers’ accounts or against cheques and not against cash. The applicants for these transactions for amount exceeding Rs 50,000 should affix their PAN on the application forms.

• Repayment of deposits of Rs 20,000 and above should be through the accounts or crossed DD/cheques.

• In case of foreign organizations, among other documents, a certificate to the effect that the organization is registered with the GOI to adhere to Foreign Contributions Regulation Act (FCRA, 1976) has to be obtained at the time of opening of accounts.

• In some cases, those belonging to low income group both in urban and rural areas are not able to produce such documents to satisfy the bank about their identity and address and address. This would lead to their inability to access the banking services and result in their financial exclusion. Accordingly, the KYC procedure also provides for opening accounts for those persons who intend to keep balances not exceeding Rs 50,000/- in all their accounts taken together and the total credit in all the accounts taken together is not expected to exceed Rs.1,00,000/- in a year. In such cases, if a person who wants to open an account and is not able to produce necessary mandated documents, banks should open an account for them, subject to introduction from another account holder who has been subjected to full KYC procedure. The introducer’s account with the bank should be at least six months old and should show satisfactory transactions. Photograph of the customer who proposes to open the account and also this address need to be certified by the introducer. Or any other evidence as to the identity and address of the customer to the satisfaction of the bank. As a measure of good customer service we can alert the customer when he crosses the limit of Rs.40,000/- balance in all accounts put together or Rs.80,000/- credit summations in all accounts put together to comply with the full KYC norms by submitting the necessary documents or otherwise the operations in the account shall have to be stopped.

Transactions of Suspicious Nature and Reporting

Branches of banks are required to report all cash transactions of Rs 10 lakhs and above as well as transactions of suspicious nature with full details in fortnightly statements to their controlling offices. Besides, controlling offices are also required to appraise their Head Offices regarding transactions of suspicious nature. The guidelines apart from laying emphasis on record keeping, training of staff and

management for strict adherence to KYC norms also stipulates banks to lay down a policy for adherence to the above requirements comprising:

a. Internal Control Systems

b. Terrorism Finance

c. Internal Audit/Inspection

d. Identification and Reporting of Suspicious Transactions

e. Adherence to Foreign Contribution Regulation Act (FCRA), 1976

Threshold Limit

At the time of opening the account based on customer’s profile, a threshold limit of transactions is to be determined. As it is proposed to report all the transactions of Rs. 10 lakhs and above to the controlling authorities under no circumstances, their threshold limit should exceed the limit of Rs.10 lakhs. The threshold limit should be 25% of the annual income in case of individuals and one month turnover in the case

of business enterprise.

Record Keeping

All financial records, which have been reported to the controlling authorities under suspicious transactions list, should be retained for at least 10 years after the date of transaction.

Internal Control System

• Ensure to train all the staff of KYC norms

• Strengthening the internal audit system

• Controllers should periodically monitor the implementation of KYC norms.

Closure of accounts

Where the bank is unable to apply appropriate KYC measures due to non-furnishing of information and/or non-cooperation by the customer, the bank should consider closing the account or terminating the banking/business relationship after issuing due notice to the customer explaining the reasons for taking such a decision. Such decisions need to be taken at a reasonably senior level.

Conclusion

The KYC guidelines impose greater responsibility on different functionaries in the bank. Money laundering done through bank would not only affect its image but also the officials who were used as instruments in the process. Properly followed, KYC guidelines would provide sufficient protection to banks against financial frauds and money laundering. However, we need to ensure adherence to KYC guidelines without inconveniencing the customer and by convincing them that these are well intended in their long-term interests

Current affairs on 24.03.2019

Today's Headlines from www:

*Economic Times*

📝 Karnataka Bank reports Rs 13 cr fraud to RBI

📝 PM-Kisan scheme: About 4.74 crore farmers to get second installment from next month

📝 India launching electronic intelligence satellite on April 1

📝 5G field trials likely by year-end, deployments by mid-2020: Panel chief

📝 Generating companies may get to invite bids from discoms to sell power

📝 Uttam Value Steels & Galva Metallics get new bids from CarVal consortium

📝 Central Bank sells 4% stake in Clearing Corp for Rs 118 cr

📝 Grasim gets interim relief on Rs 5,872 crore dividend tax claim

*Business Standard*

📝 Lenders to cash-strapped Jet Airways weigh open auction process

📝 CUMI mulls options of relocating South African subsidiary plant

📝 Automobile production, domestic sales decline marginally in February

📝 Wall Street tumbles as bond market flashes a recession warning

📝 Banks flag 'tardy' work, piling-up of cases at debt recovery tribunals

📝 Warehousing watchdog halts physical receipts by regulated players from June

📝 Rs 8,100 cr bank fraud case: ED to send LRs to 21 countries for assistance

📝 Hinduja family richest Asians in Britain, worth 25 billion pounds: Report

*Financial Express*

📝 Brexit crisis deepens, thousands gather to demand new referendum

📝 Xiaomi bets Rs 2,000 crore more in India arm to retain market lead over Samsung, Oppo, Vivo

📝 Consumer sentiment remains weak despite India’s stellar growth, shows data

📝 China's Xi Jinping seeks France's cooperation for Belt and Road project

*Mint*

📝 Tata Motors to hike passenger vehicle prices by up to ₹25,000 from April

📝 RBI again defers Indian Accounting Standards implementation by banks

📝 Royal Enfield sets up Thailand assembly unit

📝 IndiGo to add 25 Airbus A321neo planes to fleet over next one year

📝 GVK hikes MIAL stake in bid to block rivals

📝 Karnataka government open for talks with Ola over ban.

Letter of credit problems steps

Letter of credit problems steps



For Assessing LC Limit we have to take care of following thing .



1.what will be annual purchases.

2.Wht is EOQ-economic order quantity which is calculated by source of supply,means of transport and any discount.

3.Lead time- the time taken in recving the goods after LC opened

4.Transit time if any

5.Usance time- the time to make the payment at any future date accepted by buyer.

Nw he we calculate we hv to convert annual purchases in to months

Then decide whether LC is DA or DP

Da Lc- the LC for which payment is made by the buyer at any future date after its acceptance by him .this is also called usance LC

dP Lc- LC for which the payment is made on production of documents no further time is given.this is also called sight Lc

So It's clear if we talk about dP Lc- we don't count usance time while calcuting total time/LC cycle so it will be Lead time+transit time

If talk Da Lc- it will be Lead time+transit time +usance time

Hw LC limit is calculated on that basis

Monthly purchases*total timing

Total timing will depend on what LC is opened whether do or da

We assume that

-annual consumption of material to b purchased under LC .........C RS.

-Lead time ...L(months)

-transit time...T(months)

-usance period....U(minths/)



Purchase cycle=L+t+u ie.P(months)

LC limit=P*C/12

Why C/12 bcz C is annual purchasing we hv to convert it in months basis while calculating LC limit

CERSAI

CERSAI

Central Registry of Securitisation Asset
Reconstruction and Security Interest (CERSAI) is a
central online security interest registry of India.
 It was primarily created to check frauds in lending
against equitable mortgages, in which people would
take multiple loans on the same asset from different
banks.
 A Government company licensed under section 25 of
the Companies Act, 1956 having its Registered Office
at New Delhi.
 According to the government's directives, financial
institutions must register details of security interests
created by them with CERSAI within 30 days of its