Banker's Digest 2014

BANKER`S
DIGEST-2014

Bankers Digest-2014 nsn6507@yahoo.com Mobile 9490213002

In todays environment, hoarding knowledge ultimately erodes
your power. If you know something very important, the way to
get power is by actually sharing it Joseph Badaracco

Employees play vital role in service organizations and they need
to be transformed into Knowledge Assets to remain competitive
in the dynamic environment and it is more so with Banks as they
are very service sensitive. Thus it is imperative for the bank staff
to serve the clientele with updated information of banks
products & services to accomplish corporate objectives.

In this endeavor, I have been compiling and releasing the
Bankers Digest every year for the benefit of Andhra Bank
staff since 2007. Eighth edition of Bankers Digest is released
duly covering the important guidelines issued by RBI and Bank
from time to time.

For the benefit of the readers, the present edition is divided into
two parts. The first part covers contemporary banking topics and
Andhra Bank - Products & Services. The second part deals with
Computer Awareness, Staff Welfare Schemes (Serving as well as
retired staff) and Question Bank. The Computer Awareness is
meant for Senior Officers appearing promotion tests.

All possible care is taken to provide error free information,
however, readers may note that the information given herein is
merely for guidance/reference and they need to refer the
relevant circulars for full details.

I express my sincere thanks to friends/colleagues for their
support in encouraging the idea and contributing the required
resources for release of Bankers Digest on time. I solicit your
views on the content and quality of the topics for further
improvement.

Email - nsn6507@yahoo.com / Mobile 09490213002
Wish you all the Success
Date: 09.03.2014 N S N Reddy



Bankers Digest - Index
No Topic Page
I Banking & Finance
1 Deposits - Guidelines 1-7
2 NRIs Products & Services 8-13
3 Know Your Customer (KYC) 14-17
4 Alternate Delivery Channels 18-20
5 Electronic Payments 21-24
6 Financial Inclusion 25-30
7 Priority Sector Revised Guidelines 31-38
8 Micro Credit / SHG 39-40
9 Micro, Small and Medium Enterprises 41-43
10 Model Education Loan Policy 44-45
11 Housing Loans 46-47
12 Interest Subvention Schemes 48-49
13 Ratio Analysis 50-52
14 Non Fund Business (BG/LC) 53-57
15 Charges (Hypothecation/Pledge/Mortgage) 58-59
16 Joint Lending Agreement 60-61
17 Takeover of Accounts - Guidelines 62
18 Credit Management 63
19 NPA - Prudential Norms 64-67
20 Restructure of Advances 68-69
21 Risk Management (Basel-I, II & III) 70-73
22 SARFAESI / CIBIL / CERSAI 74-75
23 Clean Note Policy & Cash Management 76-78
24 Customer Service & BCSBI 79-81
25 Compensation Policy 82
26 Current Topics - Banking & Finance
i) Union Budget (Interim) 2014-15 83
ii) Monetary Policy 84-86
iii) Financial Sector Legislative Reforms 87-88
iv) New Private Sector Banks - Guidelines 89-90
v) Gold Deposit Scheme 91
vi) Inflation Indexed National Saving Securities 92
vii) Floating Rate Deposits / Bharatiya Mahila Bank 93
viii) Corporate Governance 94
ix) Retail Banking 95
x) Treasury - Concepts 96-97
xi) Rupee Dollar Dynamics 98-100
xii) External Borrowings 101-102
xiii) Fed Tapering / Volcker Rule / Bitcoins 103-104
xiv) NI Act & Other Acts 105-106
xv) Other concepts 107-112
xvi) Banking at Glance 113


II Andhra Bank Products & Services
1 Andhra Bank Mile Stones 114
2 Logo, Vision, Mission & Corporate Slogan 115
3 Performance Highlights March 2012 & 2013 116
4 Deposit Schemes 117-120
5 Insurance Linked Deposit Schemes 121-122
6 E-Products 123-126
7 Credit Cards 127-131
8 Fee Based Products 132-136
9 Loan Policy Guidelines 137-148
10 Agriculture - Loan Products 149-155
11 Retail Loans 156-167
12 Impaired Asset Study 168
13 One Time Settlement Schemes (OTS) 169-172
14 AB Products Service Charges 173-176
III Question Bank 178-204
IV Computer Awareness 205-232
V Staff Welfare Schemes
i) Serving Employees 233-235
ii) Retired / Resigned 236
iii) Dependants of Deceased Employees 237-240

1

Deposits General Guidelines

One of the important functions of the Banks is to accept deposits from the public for
the purpose of lending. In fact, depositors are the major stakeholders of the Banking
System. The depositors and their interests form the key area of the regulatory
framework for banking in India and Reserve Bank of India has been issuing broad
guidelines to the banks from time to time. Various deposit products offered by the
Bank are assigned different names. The deposit products are categorized broadly
into the following types.

a) Demand Deposits means a deposit received by the Bank, which is withdrawable
on demand;
b) Current Deposit means a form of demand deposit wherefrom withdrawals are
allowed any number of times depending upon the balance in the account or up to a
particular agreed amount. These accounts are meant purely to meet the business
needs of customers. Hence, no interest is paid on balances in Current accounts. RBI
prohibits banks from paying interest in Current accounts. While opening of current
accounts for business entities, banks should make reference to CIBIL to ensure that
the entity does not have borrowing arrangement and it is not on the list of
defaulters. In either case a reference should be made to the lending banks before
the current account is opened to ensure credit discipline among the borrowers.
c) Savings Deposits means a form of demand deposit which is subject to
restrictions as to the number of withdrawals as also the amounts of withdrawals
permitted by the Bank during any specified period. Banks have discretion to
introduce special schemes with insurance coverage and other benefits to the
specified group of customers with or without additional charges depending on the
scheme terms and conditions.
d) Term Deposit means a deposit received by the Bank for a fixed period
withdrawable only after expiry of the fixed period and includes deposits such as
Recurring / Cumulative / Annuity / Reinvestment deposits / Cash Certificates, etc.
The minimum period of Term Deposit is 15 days. However, branches can accept term
deposit for 7 days also provided the amount of deposit should be `1 lakh & above.
The maximum period should not exceed 10 years except in case court/minor
deposits as special case.
e) Notice Deposit means term deposit for specific period but withdrawable on
giving at least one complete banking days notice;

Bank may, from time to time design/come out with new deposit products, with
certain additional benefits with or without payment of certain charges to cater to
needs of specified categories of depositors and the same may not be made available
to other customers.

Joint Account Deposit accounts can be opened by an individual in his own name
or by more than one individual known as Joint Account. The account can be operated
by single individual or by more than one individual jointly as per the mandate. The
mandate for operations can be viz., Individual; or Jointly; or Either or Survivor; or
Former or Survivor; or Any one or Survivor. If the account is held by two individuals
Either or Survivor, the final balance with interest, if applicable, will be paid to
survivor on death of anyone of the account holders. If the account is held on former
or survivor basis, the final balance along with interest, if applicable, will be paid to
survivor on the death of Former. The bank may at the request of all the joint account
holders allow 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 the name of the first joint account holder
cannot be replaced.

2

Accounts of Firms / Companies / Trusts / Associations, etc The above
constituents can open domestic deposit accounts i.e. current, term deposits by
producing necessary documents as specified in the application. All the members of
the organization like partners, directors, trustees, etc. are subject to compliance of
KYC norms. Only certain types of institutions are eligible to open Savings accounts.
Branches should adhere to the following guidelines while opening of Government /
Quasi Government / Public Sector Undertakings / Other Institutional Accounts.

Obtain Government order or notification authorizing the concerned officer to
open and operate the account
Verify the identity of the officer authorized to operate the account
Obtain photographs of the persons authorized to operate the account
Address letter to next higher authority after opening of the account
Not to make payment of maturity proceeds of term deposits in cash
Obtain balance confirmation letter for operative and term deposits every
quarter from the said accounts

Minors Accounts Savings Bank/Recurring Deposit Account can also be opened by
a minor jointly with natural guardian or with mother as the guardian. Minors above
the age of 10 will also be allowed to open and operate saving bank account
independently. However, no overdrafts will be granted to these minors. On
attaining majority, the erstwhile minor should confirm the balance in his / her
account and if the account is operated by the natural guardian / guardian, fresh
specimen signature of erstwhile minor duly verified by the natural guardian would be
obtained and kept on record for all operational purposes.

Illiterate Accounts The Bank may at its discretion open deposit accounts in the
name of illiterate individuals. However, opening of Current Deposit Account requires
prior permission from higher authorities. While opening of the account, the depositor
needs to call on the Bank personally along with a witness who is known to both the
depositor and the Bank. The Bank official shall explain the terms and conditions
governing the account including safe keeping of Passbook, Cheque Book, Debit Card
etc., to the illiterate person. At the time of withdrawal/repayment of deposit amount
and/or interest, the account holder should affix thumb impression in the presence of
the authorized officer who should verify the identity of the person.

Visually Impaired Persons Visually Impaired Persons may be allowed to open all
types of deposit accounts, except current accounts, either singly or jointly with other
persons. Opening of Current Accounts for visually impaired persons at the branch
level requires prior permission from higher authorities. The terms and conditions
governing the accounts including special conditions, if any, should be read and
explained to the visually impaired person by the bank official in the presence of a
witness in view of his physical infirmity. Branch should obtain witness signature
(known to the bank) on Personal Data Form and the Account Opening Form along
with specimen signature of the depositor at the time of opening of the account.

Basic Savings Bank Deposit Account: With a view to achieving greater financial
inclusion, RBI directed the banks to make available basic banking services to the
needy people with Nil balance account without any service charges. However, the
restrictions on transactions and amount are to be made known to the depositors
transparently. In order to ensure that persons belonging to low income group both in
urban and rural areas do not face difficulty in opening the bank accounts due to the
procedural hassles, the KYC procedure for opening accounts for those persons who
intend to keep balances not exceeding `50000/- in all their accounts taken together
and the total credit in all the accounts taken together is not expected to exceed
`100000/- in a year has been simplified to enable those belonging to low income
groups without documents of identity and proof of residence to open banks accounts.

3

However, these accounts need to be introduced by the existing KYC compliant
customer who had satisfactory dealings with the bank for at least six months.
Photograph of the customer who proposes to open the account and his address need
to be certified by the introducer. It is also known as No Frills Accounts.

Pension Accounts are opened on receipt of advice from pension disbursing
authorities with all the relevant documents sent to the Bank at identified places /
branches. Payment of pension will be made as directed by the pension disbursing
authority. The terms and conditions for opening of accounts in the name of
pensioners are available at these selected branches of the Bank. The other terms
and conditions will be informed by the Bank from time to time.

Senior Citizens: Senior citizens who have completed 60 years of age and residing
in India are given certain privileges such as 0.50% additional interest rate over and
above the card rate. The depositor is required to furnish Proof of age to the bank.
Joint accounts with another senior citizen or with person who is not a senior citizen
is permitted. In the latter case, only if the senior citizen is the first named depositor,
the privileges are applicable.

Staff Accounts Banks can offer additional interest of 1% on the deposits placed
by the staff members either working or retired subject to conditions laid down by the
respective banks. The spouse of the deceased also can also avail this facility. In case
of Joint accounts, the first name in the deposit should be the staff or ex-staff or
spouse of the staff. However, staff rate of interest is not applicable for
NRE/NRO/FCNR deposits.

Mandate At the request of the depositor, the Bank register mandate/power of
attorney authorizing another person to operate the account on his behalf.

Interest on Term Deposits The interest shall be calculated at quarterly rests on
term deposits. However, banks are allowed to pay monthly interest at discounted
value. For the purpose of calculation of interest on domestic term 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 at 366 days
in a leap year and 365 days in other years. Whenever interest rates are revised, the
revised rates are applicable to fresh deposits as well as renewed deposits. The
interest rates offered are non-discretionary and non-discriminatory and are
applicable uniformly to all depositors at all branches of the Bank. The rate of interest
on deposits should be prominently displayed in the branch premises and Banks
website. Government of India advised the Banks not to pay any preferential interest
on the deposits of Central Public Sector Enterprises.

Premature Renewal of Term Deposit In case the depositor desires to renew the
deposit by seeking premature closure of an existing term deposit account, the bank
will permit the renewal at the applicable rate on the date of renewal, provided the
deposit is renewed for a period longer than the balance period of the original deposit.
While prematurely closing a deposit for the purpose of renewal, interest on the
deposit for the period it has remained with the bank will be paid at the rate
applicable to the period for which the deposit remained with the bank reckoning from
the date of deposit and not at the contracted rate. Banks are allowed to open
Pension account jointly with spouse. In case pensioner expires, the spouse can
continue the same account for family pension/other pension benefits.

Premature withdrawal of Term Deposit The Bank on request from the
depositor, at its discretion may allow withdrawal of term deposit before completion of
the period of the deposit agreed upon at the time of placing the deposit. The Bank
shall declare its policy on penalty which will be levied by way of interest reduction for

4

premature withdrawal of term deposit. The Bank shall make depositors aware of the
applicable rate along with the deposit rate. Normally, the premature cancellation of
term deposit attracts a penalty of 1%. However, at present, deposits of Individuals
up to `5 lakh contracted for any maturity period and deposits of Govt / Corporates /
firms / institutions / associations etc up to `100 lakh contracted up to 90 days are
exempted from levying penalty. (Cir no.292 Ref 27/27 dated 17.10.2012)

Overdue Term Deposits Payment of Interest Overdue deposits will be
renewed with effect from the date of maturity at interest rate applicable as on the
due date, provided such request is received within 14 days from the date of
maturity. Where the overdue period exceeds 14 days and where the deposit or part
thereof is renewed, the rate of interest payable on the deposit so renewed shall be
the lower of i) the rate of interest applicable for the renewed period prevailing on the
date of maturity or ii) the rate of interest applicable for the renewed period and
prevailing on the date of renewal (Cir.no.97 Ref 44/6 dated 30.05.2005). In case
where the depositor is not interested to renew the overdue deposit and would like to
withdraw the amount, in such cases, the depositor is eligible for applicable Savings
Bank interest for the overdue period.

Tax Deduction at Source (TDS) The Bank has statutory obligation to deduct tax
at source (at present 10%) if the total interest paid/payable on all term deposits
held by Resident person exceeds the amount specified, presently `10000 in a
financial year under the Income Tax Act. However, TDS is exempted to the individual
depositors who submits 15G (whose age is below 65 years) and 15H (whose age is
above 65 years) stating that their total income from all sources including the interest
on bank deposits is well within the taxable income limit. Branch should obtain
15G/15H in triplicate and return one copy to the customer as acknowledgement and
it should bear round seal of the branch. As per extant Income Tax guidelines, all
depositors invariably submit PAN failing which the interest income on such term
deposits attracts TDS @20% with effective from 01.04.2010. It is the responsibility
of the branches to download Form 16A from TIN website and also generate single
interest certificate for a customer. Branches should ensure that TDS certificate
(Form 16A) as well as Interest certificate should be sent to the depositor without
waiting for or seeking any written request from the depositor. The Bank will issue a
tax deduction certificate for the amount of tax deducted. Further, if any depositor
requests for TDS certificate, the same should be issued again even though the TDS
certificate was already issued. Interest received on NRE/FCNR/Recurring deposits,
irrespective of amount is exempted from TDS.

Inoperative / Dormant Accounts: 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. For the purpose of classifying as above, both the type of
transactions (Debit/Credit) induced at the instance of customers as well as third
party should be considered. However, charges levied or interest credited should not
be treated as transaction for the said purpose. Operations in such accounts may be
allowed after due diligence i.e. ensuring genuineness of the transaction, identify
verification and signature verification. Before converting the account in to
Inoperative, notice is to be issued to the depositor. The conversion may be
postponed to another one year, in case depositor requests in writing that he
undertakes to route the transactions in to the account.

Unclaimed Deposits: Accounts (CA/SB) where there are no customer transactions
for the last 10 years are treated as unclaimed deposits. With regard to term
deposits, which remained unpaid even after 10 years of maturity are treated as
unclaimed deposits. As per Banking Regulation Act 1969, Branches to submit details
of unclaimed deposits to Head Office on 31
st
Dec of every year for onward
submission to RBI. In case of deceased accounts, the claim shall be settled in favour

5

of the nominee where the nomination is available and where there is no nomination,
claim settlement shall be as per applicable norms. Banks are required to disclose the
list of unclaimed and inoperative deposit account holders, in a bid to help the
claimants trace their deposits and the names of the depositors shall be displayed on
the Website. The list of unclaimed deposits shall be updated on a monthly basis.

Frozen Accounts With regard to the savings bank accounts frozen by the
enforcement authorities, Bank will continue to credit the interest to the account on a
regular basis. However, withdrawal/debits can be allowed only when the accounts
are released by the Enforcement Authorities. In the case of Term Deposit Accounts of
Customers frozen by the orders of the enforcement authorities, Banks are required
to obtain a request letter from the customer for renewal for a term equal to the
original term, on maturity. No new receipt will be issued. However, suitable note will
be made regarding renewal in the deposit ledger. Renewal of deposit shall be advised
by registered letter / speed post / courier service to the concerned Govt. department
under advice to the depositor. In the advice to the depositor, the rate of interest at
which the deposit is renewed will also be mentioned. If overdue period does not
exceed 14 days on the date of receipt of the request letter, renewal shall be done
from the date of maturity. If it exceeds 14 days, interest for the overdue period shall
be paid as per Banks extant guidelines that are referred in this policy.

Nomination facility: As per section 45 ZA to 45 ZF of the Banking Regulation Act,
1949, account holder can nominate any individual of his choice as nominee to
receive money from the bank in case of death of the depositor. Nomination facility is
available to all types of deposit accounts (including joint accounts E or S), safe
deposit lockers and safe custody articles, which are in the name of individuals. The
nominee can be any individual including illiterates, minors. However, nominations
cannot be made in favour of joint names / Bodies (institutions / trusts etc). The only
exception is safe deposit lockers hired jointly; there can be more than one person as
nominee. In case of illiterate account holders, branch to obtain two witnesses while
accepting nomination. Consent of nominee is not mandatory. Nomination made in
respect of a term deposit will continue to be in force even on renewal of such deposit
unless the nomination is specifically cancelled or changed. The customer has option
to change nomination any number of times during the currency of the deposit. The
rights of nominee arise only after the death of the depositor. As per the recent
guidelines, the name of the nominee is to be printed on the Passbook / Term Deposit
Receipt at the specific request of the depositor. Branch should take witness of
Magistrate / Judicial Officer or an Officer of Central Govt. or State Government or an
Officer of a Bank or two persons acceptable to the Bank for settlement of claims
under nomination.

Passbook/Account Statement The Bank will provide either a statement of
account or a Pass Book to Savings Bank as well as Current Deposit Account Holders
periodically as per terms and conditions of opening of the account. However, in case
a customer holds a pass book and still requests for a statement of account and vice
versa, the same will not be denied and will be provided on payment of charges as
specified by the Bank from time to time.

Transfer of Accounts The deposit accounts may be transferred to any other
branch of the Bank at the request of the depositor subject to fulfillment of KYC
norms at transferee branch. However, if any deposit scheme is devised with a
precondition that it cannot be transferred to other places/ branches, the account will
continue to be maintained at the branch where it is opened.

Standing Instructions Standing instructions can be given to the Bank for
transfer/remittance of funds from one account to other account(s) maintained in the
same branch, or any other branch of the bank or any other bank or any other third

6

party. Applicable charges will be levied by the bank for rendering the said services.
Revision in service charges, if any, will be communicated one month in advance to
the customers before effecting the revision, through Banks website.

Deposits maturing on a holiday In respect of a term deposit maturing for
payment on a Sunday or a holiday or a non-business working day, bank would pay
interest at the originally contracted rate on the deposit amount for the Sunday /
holiday / non-business working day also, intervening between the date of the expiry
of the specified term of the deposit and the date of payment of the proceeds of the
deposit on the succeeding working day.

Form 60/61 It is the declaration by the customer who deposit high value cash
(`50000 & above) and who do not have PAN Card. Form-60 is meant for general
public declaring that he is not a income tax assessee and Form-61 is for the persons
who have agriculture income.

Payment of Term deposits by cash Section 269 of Income Tax Act, 1961
prohibits payment of term deposits or notice deposits in cash if the amount involved,
principal plus interest is `20,000/- or more. Hence, the payment of such deposits is
to be made by way of credit to the account of the party (or) by way of A/c Payee
crossed demand draft or pay order only.

Advances against Deposits The Bank may consider request of the depositor/s
for loan / overdraft facility against term deposits duly discharged by the depositor/s
on execution of necessary security documents. Whenever loan is granted, a lien on
the deposit is marked and bank shall have the right to appropriate the deposit
proceeds to the loan account on the date of maturity, in case the loan remains
unpaid. The interest rates applicable, margins to be maintained etc. will be made
known to the customers at the time of availing the Deposit Loan and also will be
placed in Banks website from time to time.

Insurance Cover for Deposits All bank deposits are covered under the insurance
scheme offered by Deposit Insurance and Credit Guarantee Corporation of India
(DICGC) subject to certain limits and conditions. At present, the insurance premium
is being paid by the Bank. Each depositor in a Bank is insured up to a maximum of
`100000/- for both principal and interest amount held by him in the same capacity
and same right as on the date of liquidation/cancellation of bank's licence or the date
on which the scheme of amalgamation/merger/reconstruction comes into force.

Rounding-off transactions: All transactions including payment of interest on
deposits will be rounded off to the nearest rupee; i.e., fractions of fifty paise and
above shall be rounded off to the next higher rupee and fraction of less than fifty
paise shall be ignored.

Settlement of Deceased Deposit account In case where the depositor
exercised nomination, the balance outstanding in the account of the deceased
depositor will be transferred to the account of/paid to the nominee after the Bank is
satisfied about the identity of the nominee. In a joint deposit account, when one of
the joint account holders dies, the Bank is required to make payment jointly to the
legal heirs of the deceased person and the surviving depositor(s). However, if the
joint account holders had given mandate for disposal of the balance in the account in
the forms such as either or survivor, former / latter or survivor, anyone of survivors
or survivor, etc., the payment will be made as per the mandate to avoid delays in
production of legal papers by the legal heirs of the deceased. In the absence of
nomination and when there are no disputes among the claimants, the Bank will pay
the amount outstanding in the account of deceased person against joint application
and indemnity by all legal heirs or the person mandated by the legal heirs to receive

7

the payment on their behalf without insisting on legal documents up to the limit
approved by the banks board. This is to ensure that the depositors are not put to
hardship on account of delays in completing legal formalities.

Interest payable on term deposit in deceased account In the event of death
of the depositor before the date of maturity of deposit and amount of the deposit is
claimed after the date of maturity, the Bank shall pay interest at the contracted rate
till the date of maturity. Again from the date of maturity to the date of payment, the
Bank shall pay simple interest at the applicable rate prevailing on the date of
maturity, for the period for which the deposit remained with the Bank beyond the
date of maturity, as per the Banks policy in this regard. However, in the case of
death of the depositor after the date of maturity of the deposit, the bank shall pay
interest at savings bank rate operative on the date of maturity (at present 4.00%
p.a.) from the date of maturity till the date of payment. In the case of balances lying
in current account standing in the name of a deceased individual depositor/sole
proprietorship concern, interest shall be paid only from 1
st
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.

Service Charges The terms and conditions for opening a deposit account and the
charges that will be levied on the account will be provided to the customer at the
time of opening of the account. The revised charges, if any, are to be informed to the
customers well in advance either through press releases or advertisement in print
media and or by displaying in Banks web site.

Customer information & Secrecy The information collected from the customers
shall not be used for cross selling of services or products by the Bank, their
subsidiaries and affiliates. If the Bank proposes to use such information, it will be
strictly with the consent of the account holder. Bank should prepare a profile for each
customer based on risk categorization. This profile contains the information relating
to customers identity, social/financial status, nature of business activity etc. The
customer profile is a confidential document and details contained therein will not be
divulged for cross selling or for any other purposes. The Bank shall not disclose
details / particulars of the customers account to a third person or party without the
express or implied consent from the customer. However, there are some exceptions,
viz. disclosure of information when the interest of our Nation is at stake and
compulsion of law, where there is a duty to public to disclose and where interest of
the Bank requires disclosure.

Redressal of complaints and grievances Depositors having any complaint /
grievance with regard to services rendered by the Bank have a right to approach
authorities designated by the Bank for handling customer complaint / grievances.
The details of the internal set up for redressal of complaints / grievances will be
displayed in the branch premises. The branch officials shall provide all required
information regarding procedure for lodging the complaint. In case the depositor
does not get response from the Bank within one month from the date of complaint or
he is not satisfied with the response received from the Bank, he has a right to
approach Banking Ombudsman appointed by the Reserve Bank of India.

Term Deposits Purchase of Cheques/Drafts: Hitherto, Banks were permitted
to purchase cheques/drafts at par provided the entire proceeds are placed as Term
Deposits for a minimum period of 6 months. Now, RBI has advised all Banks to stop
the purchase of cheques/drafts at par for placing the proceeds as Term Deposits with
effect from 27.01.2014. (Cir.no.430 Ref 27/47 dated 25.01.2014)

8

Non Resident Indians Products
Non-Resident Accounts can be opened and maintained by Person Resident outside
India, Non-Resident Indians (NRI) and Persons of Indian Origin (PIO). Person
Resident outside India means a person who is not resident in India. It also defined as
a person who has gone out of India, or who stays outside India for the purpose of
employment, carrying on business or vocation or for any other purpose under the
circumstances indicating an uncertain period of stay. Person includes Individual,
HUF, Firm, Company and Association.

Non-Resident Indian means a person resident outside India, who is a citizen of
India or is a person of Indian Origin. Persons who visit India for temporary visit are
treated as Non-Resident Indian. Students going abroad for studies are treated as
Non-Resident Indians.

Person of Indian Origin: A Foreign Citizen (Other than citizen of Pakistan or
Bangladesh) is deemed to be a person of Indian Origin if, he/she at any time held an
Indian Passport or he/she or either of their Parents or Grand Parents was citizen of
India by virtue of the constitution of India or Indian Citizen Act 1955 or he/she is a
spouse of Indian Citizen or a person referred as above.

N R O Non Resident Ordinary Account
Who Can Open
Any NRI can open NRO account Singly or Jointly with
Residents. However, individuals / entities of Bangladesh and
Pakistan nationals require prior approval of RBI.
Nomination
Nominee can be a Resident or a Non Resident.
Claim Settlement Resident Nominees In INR, NRI
Nominee Repatriable to that Country as per RBI Norms.
Repatriation
Remittances of Balances held in NRO accounts can be allowed
up to USD one million per financial year, for all bona fide
purposes to the satisfaction of Authorized Dealer(AD)
Foreign Tourists visiting India the balance amount in the
account (other than local credits) can be repatriated at the
time of departure from India provided the account has been
maintained for a period not exceeding six months.
Type of account Current, Savings, Recurring, Term Deposits.
Period of Deposits As applicable to Domestic Deposits.
Rate of Interest As applicable to Domestic Deposits.
Deposit Loans As applicable to Domestic Deposits.
Foreign Currency Loans Not Permitted.
Margin As applicable to Domestic Deposits.
Interest on Dep. Loans Dep. Rate + 2 %.
Applicability of Local
Taxes
TDS on Int. earned @ 30% + Edn. Cess + Service Tax.,
including Interest on SB Deposits, irrespective of the amount
of Interest. Wealth Tax, as applicable.
Transfer of funds
Permitted to NRE account within the overall ceiling of USD one
million per financial year
Premature Cancellation
of Deposits
As applicable to Domestic Deposits.

9


N R E Non Resident External Rupee account
Who Can Open
NRI can open NRE account Singly or Jointly with their resident
close relatives. With regard to joint account with resident, the
operation of the account should invariably be Former or
Survivor and the former should be NRI. However, individuals /
entities of Bangladesh and Pakistan nationals require prior
approval of RBI.
Nomination
Nominee can be a resident or a Non Resident.
Claim Settlement Resident Nominees In Indian Rupee
Non Resident Nominee Repatriable as per RBI Norms.
Repatriation Balances in the account are Fully Repatriable.
Type of account Current, Savings, Recurring, Term Deposits.
Period of Deposits Term Deposits Minimum one year and Maximum 10 years.
Rate of Interest
Saving Deposits Deregulated At present 4.0 %
Term Deposit As applicable to Domestic Deposits
Deposit Loans
Rupee loans to be allowed to depositor / third party without
any ceiling.
Margin 15%
Interest on Loans Dep. Rate + 2 %.
Applicability of Local
Taxes
No TDS on Int. earned.
No Wealth Tax. Free from all Taxes
Transfer of amount
to other types
Permitted to NRO / FCNR
Premature
Cancellation
Penalty 1% on premature cancellation is applicable. No Interest
is payable, in case of cancellation before 1 year. Conversion
from NRE to FCNR or vice versa, before maturity is subject to
Penalty. No penalty in case the amount is placed in RFC.

Foreign Currency Non Resident account F C N R (B)
Who Can Open
Any Non Resident Indian (Individuals of Bangladesh /
Pakistan Nationality require approval from RBI) Singly or
jointly with another Non Resident only.
Nomination
Claim Settlement Resident Nominees In Indian rupees
Designated Currency Account can be opened in any freely convertible currency.
Repatriation Fully Repatriable without any limits.
Foreign Currency
Exchange Risk
No Exchange Risk to the customer, in case of repatriation,
as account is maintained in Foreign Currency only.
Type of account Term Deposits only (FDR / Reinvestment)
Period of Deposits Minimum one year and Maximum 5 years
Rate of Interest
Linked to LIBOR. Not exceeding LIBOR + 125 basis points.
360 days is taken for a year for the purpose of interest
calculation. Simple interest is paid for one year deposit.
However, compound interest (half-yearly, 180 days) is paid
for deposits beyond one year.
Deposit Loans
Foreign Currency loans to be allowed to depositor / third
party without any ceiling.
Applicability of Taxes No TDS on Interest earned and No Wealth Tax.
Amount Transfer Permitted to NRO and NRE accounts
A/c can be opened at Designated branches. (C Category Branches)
Premature Cancellation
No interest payable and no SWAP cost to be recovered for
the deposits up to USD 10000 or equivalent, where the
deposit is cancelled before the expiry of one year. However,
SWAP cost to be recovered in case of deposits above USD

10

10000 or its equivalent. Cancellation of the deposit for the
purpose of renewal in the same currency, same type of
deposit/RFC, no SWAP cost is to be recovered. If the
deposit is cancelled after one year, applicable rate is to be
paid without Penalty. If the withdrawal for any other reason
applicable interest with 1% penalty is to be levied.
Note: All branches are authorized to accept FCNR (B) deposits. Since the exchange
risk is borne by the bank, branches are required to report all FCNR transactions
(openings, closures, interest payments, transfers etc.,) to Investment & International
Banking Division (IIB), Mumbai on the same day.

R F C Resident Foreign Currency Accounts
Who Can Open
Non Resident Indians (NRI) returning to India who have
been NRIs for a continuous period of not less than one year.
NRIs returning to India for permanent stay in India.
Sources of funds
Foreign Exchange received as pension / superannuation /
other benefits from employers abroad. Realization of assets
held abroad. Foreign Exchange acquired as gift or inheritance
from person who was a NRI. Foreign Exchange acquired or
received or any income arising or accruing there on which is
held outside India by any person in terms of general or
specific permission granted by RBI.
Joint Accounts
Allowed with another eligible person/s or with resident close
relative (Former or Survivor)
Types of accounts Savings, Current, Term Deposits.
Period of Term Dep. As applicable to FCNR B Accounts. Min 1 year Max 5 years
Currency
Pound Sterling, US Dollar, Euro, Australian Dollar, Canadian
Dollar
Nomination
Claim Settlement Resident Nominees In Indian rupees

RFC Domestic Account
Who Can Open Any person resident in India
Sources of funds
Foreign Exchange acquired in the form of currency
notes, bank notes, cheques, drafts, and 10ttest10ed
cheques.
Payment / honorarium / gift for services rendered in
India / abroad.
Unspent amount of foreign exchange acquired by him
from an authorized person for travel abroad.
Gift from close relatives as defined in sec. 6 of the
company act 1956.
Proceeds of Insurance policy claims / maturity /
surrender values settled in foreign currencies.
Joint Accounts Not permitted
Types of accounts Current Account / Savings Bank
Period of Term Dep. Term Deposits are not permitted to be opened
Currency
Pound Sterling, US Dollar, Euro, Australian Dollar, Canadian
Dollar
Interest
No Interest on Current Account. Banks have discretion to fix their
own interest rates on Savings Deposits
Loan & Over drafts Not permitted.

11

Exchange Earners Foreign Currency Accounts (EEFC)
Who Can Open
All Categories of Foreign Exchange Earners such as Individuals,
Companies etc., who are resident in India, may open EEFC account
with 100% of their Forex earnings. Resident Individuals are permitted
to include his close relative as a joint holder, however, the joint holder
is not allowed to operate the account during the life time of
Purpose
Authorized Dealers (AD) are allowed to open, hold and maintain
foreign currency denominated accounts for the purpose of transacting
foreign exchange business and other matters of the account holder.
The accounts can be maintained with one or more Ads.
Currency
The account may be maintained in the currency of the remittance or
any other permitted currency at the option of the depositor.
Credit facility
No credit facility, either fund or non-fund based should be permitted
against the security of the balances held in the EEFC accounts.
Type of
account
EEFC accounts should be in the form of non-interest bearing current
accounts only. Cheque book facility is permitted.
Interest No Interest is payable
Nomination
Nomination facility is permitted like any domestic account. Nominee
can be Resident Indian only
Limit up to
which foreign
currency may
be credited
A person resident in India may credit to the EEFC account 100% from
out of the foreign exchange earnings
Permissible
credits to
EEFC accounts
Inward remittance through normal banking channels, other than the
remittance received pursuant to any undertaking given to the Reserve
Bank or which represents foreign currency loan raised or investment
received from outside India, or those received for meeting specific
obligations by the account holder.
Payment received in foreign exchange by a unit in Domestic Tariff
Area (DTA) for supplying goods to a unit in Special Economic Zone out
of its foreign currency account.
Payment received by an exporter from an account maintained with AD
for the purpose of counter trade, in accordance with the approval
granted in terms of regulation 14 of FEMA (Export of goods &
Services) Regulations 2000.
Advance remittances received towards export of goods / services.
Payments received towards export of goods/ services from India, out
of funds representing repayment of state credit in USD held in the
account of Bank for foreign economic affairs, Moscow with an AD in
India.
Professional Earnings including Directors fees, consultancy fees,
lecture fees, honorarium and similar other earnings received by a
professional by rendering services in his individual capacity.
Interest earned on the funds in the account.
Re credit of unutilized foreign currency earlier withdrawn. However,
the amount withdrawn in rupees shall not be eligible for conversion
into foreign currency and for re-credit to the account.
Amount representing repayment of loans/ advances granted to the
account holders importer customer.

12

Representing the disinvestments proceeds received by the resident
account holder on conversion of shares held by him to ADRs / GDRs
under the sponsored ADR / GDR scheme approved by the Foreign
Investment Promotion Board of Govt. of India.
Permissible
debits to EEFC
account
Payment outside India towards any current account transactions in
terms of FEMA Current Account Transaction Rules 2000 and towards a
capital account transaction Permissible under FEMA (Permissible
Capital Account Transactions) Regulations 2000.
Payment in foreign exchange towards cost of goods purchased from
100% EOU or a Unit in EPZ/STP/Electronic Hardware Technology Park.
Payment of Customs Duty in accordance within the provisions of
Export Import Policy of Central Government.
Trade related loans/ advances, by an exporter holding such account to
his importer customer outside India subject to compliance with FEMA
(Borrowing & Lending in Foreign Exchange) Regulations 2000.
Payment in foreign exchange to resident Indian for supply of goods /
services including payment for airfare and hotel expenditure.
Branches may permit their export constituents to extend trade related
loans / advances to overseas importers out of their EEFC balance
without any ceiling subject to compliance of provisions of Notification
no. FEMA 3 / 2000 as amended from time to time.
Branches may permit exporters to repay packing credit advances
whether availed in rupee or in foreign currency from balances in their
EEFC accounts and / or rupee resources to the extent exports have
actually taken place.
The balances in EEFC accounts may be allowed to be credited to NRE /
FCNR B account at the option / request of the account holders
consequent upon change of their residential status to Non Resident.
Conversion
into Rupee
Funds
There is no restriction on withdrawal in rupees of funds held in EEFC
account. Branches should send the request to Investment &
International Banking (IIB), Mumbai by e-mail / fax, for conversion of
rupee funds and can take the conversion rate along with reference no.

Loans to NRIs Against Deposits: Advances against FCNR/NRE deposit to the
depositor himself should be granted only under his specific request for any purpose,
except for the purpose of relending or carrying on agriculture/plantation activities or
for investment in real estate business including direct investment by way of capital
contribution to Indian firm/companies and for acquisition of residential flats/houses
on non-repatriable basis. In case of loans to third parties against NRI deposits,
normally the relative documentation should be done at the branch from where the
loan is being sought by the NRI depositor. The loan should be granted only when the
depositor himself executes the loan documents in the presence of the bank officials
and witness acceptable to the bank. Advances to third parties against such deposits
should not be granted on the basis of Power of Attorney. The maximum
loans/advances that can be sanctioned / renewed either to the depositors or to third
parties is restricted to `100 lakhs against NRI deposits. The loan amount is to be
credited only to NRO account of the depositor but not to any other account.
Advances granted can be repaid by foreign inward remittances, or transfer from
NRE/FCNR accounts, or maturity proceeds of the deposit, or local rupee sources held
in NRO account. The interest rates to be levied on such loans are as under:

13


No Category Interest Rate
1
Loan to depositor and repayment through
inward remittance or adjustment of deposit or
transfer of funds from NRE/FCNR deposits
Deposit Rate + 2%
2
Loans to depositor Repayment by rupee
funds in NRO accounts
Deposit Rate + 3%
3
Loans to third parties Repayment by rupee
funds (less than one year)
Base Rate + 5%
4
Loans to third parties Repayment by rupee
funds (one year & above and up to 3 years)
Base Rate + 5.75%

In case the rate of interest payable on NRE/FCNR deposit held as security is Nil due
to premature closure before the expiry of minimum period i.e. one year, the rate of
interest on the loans against such deposit is Base Rate + 7%.

Diamond Dollar Account Scheme in terms of which firms and companies dealing
in purchase/sale of rough or cut and polished diamonds/precious metal jewellery
plain, minakari and/or studded with/without diamond and/or other stones, with a
track record of at least 2 years in import/export of diamonds/coloured gemstones/
diamond and coloured gemstones studded jewellery/plain gold jewellery, and having
an average annual turnover of `3 crore & above during preceding three licensing
years, are allowed to open Diamond Dollar Accounts (DDA). RBI issue DDA on a
case-to-case basis, subject to the following terms and conditions:
Opened in the name of the exporter and maintained in US Dollars only.
It should be in the form of current account and no interest should be paid on the
balance held in the account.
No intra-account transfer should be allowed between the DDAs.
Not permitted to open and maintain more than 5 DDAs.
The balances held in the accounts shall be subject to CRR SLR requirements.
Exporter firms and companies maintaining foreign currency accounts (excluding
EEFC accounts) are not eligible to open Diamond Dollar Accounts.

The permissible credits in the accounts are amount of pre-shipment and post-
shipment finance availed in US Dollars; Realisation of export proceeds from
shipments of rough, cut, polished diamonds and diamond studded jewellery; and
Realisation in US Dollars from local sale of rough, cut and polished diamonds. The
permissible debits in the accounts are Payment for import/purchase of rough
diamonds from overseas/local sources; Payment for purchase of cut and polished
diamonds, coloured gemstones and plain gold jewellery from local sources; Payment
for import/purchase of gold from overseas / nominated agencies and repayment of
USD loans availed from the bank. Transfer to rupee account of the exporter.

Investment opportunities to NRIs: The permitted investment opportunities to
NRIs in India are Government Securities, Company Deposits, Units of Mutual Funds,
Company Shares/Debentures, Immovable property and Loans to residents. The
investment can be under repatriation or non-repatriation basis. However, NRIs are
prohibited from making investments in any entity, which is engaged in the activities
such as Chit funds, Nidhis, Agricultural or Plantation activities, Real Estate business,
Construction of Farm Houses without RBI`s permission. Whenever the investments
are allowed with repatriation benefits, the funds for the purpose should be received
by inward remittances from abroad or from investors NRE/FCNR accounts. While
funds in NRO accounts could be used in respect of investments on non-repatriation
basis.

14

Know Your Customer (KYC)

As per RBI guidelines, it is mandatory for the banks to ensure KYC norms for all the
customers duly collecting full information of the account holder, type of transactions
to be conducted, sources of funds and other relevant matters at the entry level itself.
The policy guidelines are to be adhered not only to new accounts but also to the
existing accounts. The guidelines are applicable to all types of deposit and advance
accounts as well as new technology products such as Credit, Debit, Smart, Add-on
cards. The objective of KYC is to insulate banking from unscrupulous participants and
to avert misuse/undue advantage of system. The key elements of the policy are

i) Customer Acceptance Policy (CAP): Bank should obtain prescribed application
from the applicant along with the documents/information that is required as per
constitution, risk perception, banking practices, legal requirements and RBI
guidelines. Banks should not open accounts in the name of Anonymous or
fictitious/benami names and Terrorist organizations notified under POTA.

ii) Customer Identification Procedure (CIP): It means collecting information
relating to identity, activity, location of the person desiring to open an account in
single name or in joint names and verifying the information collected using reliable,
independent source documents, data or information. Banks are advised to accept
any of the document mentioned in the list can take as valid identification. In case of
a married woman, her identity proof with maiden name, if supported with marriage
certificate could be considered a valid ID proof. With regard to opening of
Partnership, Company, Trust, Club, Association, or any other legal body accounts,
branch should obtain required information/documents to verify the legal status of the
applicant. In case of proprietary concerns, copy of registration/licensed document
issued by government agencies shall be accepted as valid identification document.

Address proof: Banks are advised to obtain any one of the documents mentioned in
the list can be accepted as valid address proof.

Documents - Identity Proof Documents Residence Proof
1 Passport or PAN Card or Voters
Identity Card or Driving license
2 Job card issued by NREGA duly signed
by an officer of the State
Government(For Small Accounts)
3 The letter issued by UIDAI containing
details of name, address and Aadhaar
number
4 Identity card (subject to the banks
satisfaction)
5 Letter from a recognized public
authority or public servant verifying
the identity and residence of the
customer to the satisfaction of bank.
6 Government/Defence ID card
7 ID cards of reputed Public Sector
employers
8 Pension Payment Orders issued to the
retired employees by Central/State
Government Departments, Public
Sector Undertakings

1 Ration Card or Electricity Bill or
Telephone Bill
2 Bank account statement
3 Letter from employer (to the
satisfaction of the Bank)
4 Letter from any recognized public
authority (to the satisfaction of the
Bank)
5 Credit Card Statement- not more than
3 months old
6 Income/Wealth Tax Assessment Order
7 Letter from Public Sector employer
8 Letter from any recognized public
authority having proper and verifiable
record of issuance of such certificates.
9 Voter ID Card (only if it contains the
current address)
10 Pension Payment Orders issued to
retired employees by Government
Departments/Public Sector
Undertakings, if they contain current
address.

15

Documents - Identity Proof Documents Residence Proof

9 Photo ID cards issued by Post
Offices
10 Photo identity cards issued to
bonafide students by a University,
approved by the University Grants
Commission (UGC) and/or an
Institute approved by All India
Council for Technical Education
(AICTE).
11 Photo identity issued by any public
authority having proper record of
issuance of identity proof which is
verifiable from records
12 Ex-Servicemen Card with
photograph
13 Bar Council/Medical Association /
ICAI /ICWAI/ICSI Card with
photograph
14 Student Identity Card with photo
issued by reputed colleges with
validity during the course period.
15 Defense Dependents Card with
photograph
16 Married woman identity proof with
maiden name, if supported with a
verified true copy of marriage
certificate
17 Credit card with photo together
with statement of such card, not
more than three months old.
18 Registered Property document with
photo identity
19 Arms License issued by State /
Central Government of India.
20 Freedom fighters pass issued by
Ministry of Home Affairs,
Government of India with
photograph of applicant.
21 Employee State Insurance Card
(ESIC) with photograph supported
by latest months pay slip.
22 Talati/Patwari (a local govt. official)
attestation by way of putting
rubber stamp and signature. Gram
Sarpanch / Mukhiya attestation by
way of putting rubber stamp and
signature (For Small Accounts)

Note: If passport having current
address is given as proof of identity,
there is no need to give separate proof
for address.

11 Copies of Registered Leave & License
agreement /Sale Deed / Lease Agreement.
12 Certificate and also proof of residence,
incorporating local address as well as
permanent address, issued by the Hostel
Warden of the University / Institute, where
the student resides, duly countersigned by
the Registrar / Principal / Dean of Student
Welfare. Such accounts shall however, be
required to be closed on completion of
education/leaving the University / Institute
provided the constituent does not give any
other acceptable proof of residence to the
Bank.
13 For students residing with relatives,
address proof of relatives, along with their
identity proof, can also be accepted
provided declaration is given by the relative
that the student is related to him/her and is
staying with him/her.
14 In respect of officials of Central/State
Governments and Public Sector
undertakings, who are low risk customers
for Bank, Branch Heads may verify the
photo/identity and confirm residential
address of such officials from independently
verifiable sources, to their satisfaction, and
permit opening of accounts. This facility is
extended only to the Gazetted officers of
Central / State Government and Senior
Management and above functionaries of
Public Sector Undertakings.
15 Latest telephone bills from any telephone
service providers and mobile service
providers not more than 2 month old,
postpaid.
16 Consumer gas connection card / book /
Pipe gas bill
17 Certificate from ward/equivalent rank
officer, maintaining election roll certifying
address of the applicant
18 Post Office Savings Pass Book
19 Domicile Certificate with communication
address and photograph
20 Certificate by Village Extension Officer
(VEO) / Village Head or equal or higher
rank officer. Branch to confirm the
authenticity of the certificate and that it has
been issued by the person who is holding
the said office.
21 Court divorce order Marriage annulment
order issued by Court

16

KYC verification of all the members of SHGs need not be done while opening the SB
account of SHG and KYC verification of all the office bearers would suffice. With
regard to opening of accounts in the name of proprietary concern, they are
required to submit complete income tax return of the sole proprietor where the firms
income is reflected along with copy of any of the utility bills such as electricity,
water, telephone bills in the name proprietary concern.

Foreign Students: Banks are permitted to open resident accounts in the name
foreign students studying in India with ATM card facility by obtaining documents viz.,
Pass Port, Valid Visa with photograph, Proof of Admission Letter from
University/College, Address Proof A letter from College/Hostel or certificate from
embassy or any certification of registration issued by Foreigner Registration Regional
Office (FRRO).
Common man is facing hardships while opening Bank account on account of
adherence of stringent KYC norms. To address the associate issues, RBI advised
banks to accept utility bill (Telephone/Electricity Bill) or any other document
acceptable to establish address proof. However, banks to obtain declaration from the
person (Father/Mother/Spouse/Son/Daughter) with whom the prospective customer
is staying. In case of small value accounts branches are allowed to open accounts
without insisting for proof of identification/address on proper introduction of another
bank customer. With regard to the migratory workers, branches to open accounts by
obtaining photo and permanent residential address with introduction.
Banks are advised to accept Aadhaar number issued by the Unique Identification
authority of India (UIDAI) as a proof of identity but not of address for opening of
accounts. According to the new guidelines, if the address on the document submitted
for identity proof by the prospective customer is the same as that declared in the
account opening form, the document may be accepted as a valid proof for identity
and address.

KYC once done by one branch of the bank should be valid for transfer of the account
within the bank provided the customer submits his address proof at new place. This
is causing inconvenience to many customers. To address the issue, RBI permitted
the banks to obtain self declaration from the account holder about his/her current
address, however, the address proof is to be submitted within 6 months.

iii) Due Diligence: All the forms and documents submitted by the applicant while
opening of the account are to be verified by the officer with the originals to ensure
that the identification and address of the applicant is correct. Further, the officer
should satisfy with the identity and legal existence of the applicant and note the
same in the interview cum due diligence form. Further, the guidelines also stipulate
sending a letter to the customer in the prescribed format on the same day of opening
of the account.

iv) Risk Categorization: RBI advised the banks to classify the accounts into Low,
Medium and High Risk categories based on the risk perception while opening of
accounts and further reviewed once in 6 months. As per the existing guidelines,
customer identification data (including photos) is to be updated once in 5 years in
case of Low Risk Category Customers and once in 2 years in case of Medium and
High Risk category customers.

Monitoring of transactions: Banks are expected to fix threshold limit and monitor
the transactions closely and ongoing basis. It covers monitoring of high risk
accounts, NRE accounts, accounts with high turnover, large amount of cash
transactions and Periodical review and reporting of the transactions to appropriate
law enforcing authority.

17

Non face to face customers: With the introduction of telephone and electronic
banking, increasingly accounts are being opened by banks for customers without the
need for the customer to visit the bank branch. In such cases, apart from applying
the usual customer identification procedures, there must be specific and adequate
procedures to mitigate the higher risk involved. Certification of all the documents
presented may be insisted upon and, if necessary, additional documents may be
called for. In such cases, banks may also require the first payment to be effected
through the customers account with another bank which, in turn, adheres to similar
KYC standards. In the case of cross-border customers, the bank may have to rely on
third party certification/introduction.
Money Laundering: It is the process of transferring illegitimate money into
legitimate money. In other words, the source of illegally obtained funds is obscured
through a succession of transfers and deals in order that those same funds can
eventually be made to reappear as legitimate income. It normally follows from such
activities as human trafficking, sale of narcotic drugs, illegal dealings in arms and
ammunition etc. It is a threat to the national security and economic activity as it
often associates with the financing of terrorism and also evasion of taxes.
Government of India introduced Prevention of Money Laundering Act, 2002 and the
objectives are To prevent, combat and control money laundering; To confiscate
and seize the property obtained from the laundered money and to deal with any
other issue connected with money laundering in India. Banks are required to report
the following type of transactions to the Financial Intelligence Unit (FIU), New Delhi.

Report Nature of Transactions
Cash
Transaction
Reports (CTR)
a) All cash transactions of the value of more than `10 lakhs.
ii) Series of cash transactions integrally connected to each other,
which have been valued below `10 lakhs where such series of
transactions have taken place within a month and aggregating
`10 lakhs.
iii) All cash transactions where forged or counterfeit notes or
bank notes have been used as genuine and where any forgery of
a valuable security has taken place.
Suspicious
Transaction
Report (STR)
b) Large cash transactions
ii) Multiple accounts under same name
iii) Frequent conversion of currency from small to large
denomination notes
iv) Placing funds in FD and using them as security for more loans
v) Large deposits immediately followed by wire transfers
Counterfeit
Currency
Report (CCR)
As and when counterfeit currency is found at branch/currency
chest, the same is to be informed to FIU and Reserve Bank of
India immediately.

Preservation of Records: As per Prevention of Money Laundering (Amendment)
Act 2009, branches are required to preserve all the transactions for at least 10 years
from the date of transaction between the Bank and the client along with the
necessary records. Similarly, they need to preserve all the KYC documents obtained
at the time of opening and during the course of business relationship for a period of
10 years after the business relationship ended. Reserve Bank of India directed all
banks to implement KYC guidelines for new accounts in 2002 and subsequently made
it mandatory for all accounts including retail investors with effective from 1
st
January
2011. It is used by financial institutions and other regulated companies to identify
clients and acquire relevant information in order to prevent identity theft, identity
fraud, money laundering, terrorist financing, etc. Thus KYC has quickly become an
important global due diligence list.

18

Alternate Delivery Channels & E-products

Hitherto, Branches were only the strategic outfits (Delivery Channels) and invariably
the customers are required to visit the branches at the specified timings to complete
their transactions. Extending service to the customers round the clock without
presence of physical branch is called as Alternate Delivery Channels. Adoption of
new delivery channels (ATM, Mobile and Internet Banking) has become order of the
day for banks to survive in the competitive environment to meet the emergent
expectations of the customers besides achieving the optimum utilization of scarce
resources. At present, banks are issuing ATM/Debit cards to the customers on
opening of the account itself. The convenience coupled with cost effectiveness has
enabled the cardholders to use the card extensively for all their retail payments.

ATM/Debit Card will be issued to Account holder based on his request. ATM Card is
used for withdrawal of cash from Automated Teller Machines. Debit Card is a
payment card used to with draw cash from ATM, purchase of goods and payment for
services automatically debiting to the card holders bank account instantly, to the
extent the credit balance exists. In ATM / Debit card the customer can draw cash
from ATM up to the balance available in his account subject to daily caps prescribed
by Bank from time to time. While providing ATM / Debit card, a customer is provided
a PIN number to facilitate withdrawal of amount. Debits to the account using ATM /
Debit Card through PIN Number are treated as mandate for withdrawal of the cash
by the customer from the account.
ATM is an electronic device, which acts as an independent banker without any
human intervention. ATM provides round the clock service throughout the year
(24X7X365) to the customers. ATMs extend services such as Cash Withdrawal,
Balance Enquiry, Cash/Cheque Deposit, Funds Transfer, Bill Payments, Payment of
Direct Taxes, Mobile Recharge, Mobile Banking Registration etc. Cardholder needs to
enter password for each financial transaction on ATM.
In order to facilitate the cardholders RBI has issued guidelines to all banks not to
levy service charges on ATM transactions of Savings Bank Cardholders. However,
Other Bank Cardholders are allowed to withdraw cash on our ATMs up to `10000/-
per transaction and the maximum number of transactions allowed are 5 per month
at free of charge. The number of free transactions shall be inclusive of all types of
transactions, financial or non-financial. With this, the customer of a Bank has
become customer of all Banks, which has paved the way for Any Bank Banking.
White Label ATMs are purely managed by third party service providers and have
their label. These are branded non bank ATM machines. Cash handling, management
and logistics are provided by third party. Debit cards of all banks can be operated
through these machines. The role of the concerned bank is only limited to provide
account information and back end money transfers to the third parties managing
these ATM machines. This initiative will enable the excluded segments to avail ATM
services as at present majority ATMs are confined to Urban/Metro areas only.
However, service provider levy charges which are to be either bear by the Bank or
the customer. RBI has allowed white label ATMs in India to have more penetration of
ATM machines. Tata Communications Payment Solutions has become the first
company to launch this service in India under the brand name Indicash. It has a
tie up with majority commercial banks and now you will soon see branded non bank
third party white label ATM machines in your vicinity.

19

Brown Label ATM We always think that the bank branded ATM machines
operated by the bank concerned, but this is not the case. Banks only handle part of
the process that is cash handling and back-end server connectivity. The ATM
machine is owned by the third party service provider along with the physical
infrastructure. This type ATM is called as Brown Label ATM and acts as
intermediate between Bank owned ATM and White Label ATM.

Complaint Resolution: The revised guidelines has led to increased volume on ATM
Network leading to deficiency in service on account of technology issues and the
resolution is taking undue long time, which is causing concern to the customers and
regulators. In the above backdrop, RBI issued the following directives to all banks:

ATM failed transactions are to be resolved within a maximum period of 7
working days from the date of receipt of the customer complaint.
In case of delay in resolution of the complaint within 7 working days, the
bank shall pay compensation of `100/- per day, to the aggrieved customer
and shall be credited to the customers account automatically on the same
day when the bank affords the credit for the failed ATM transaction.
However, the cardholder (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.

As per recent guidelines, Banks are advised to issue debit cards with photographs
with a view to reducing the instances of misuse of lost / stolen cards. Further, banks
are asked to ensure full security of the cards and any loss incurred by the cardholder
on account of breach of security or the failure of the security mechanism would be
borne by the banks. Through ATMs, Bank can penetrate into new areas without
opening physical bank branches and provide value added service to its customers. It
is most cost effective since the investment and operational cost are low when
compared to traditional Branch Banking.

Internet Banking is leveraging the potential of Internet to facilitate customer
access to his account from any place at any time. Apart from viewing the
transactions in his account for any period, the customer is able to effect transfer of
funds and request for various services. Internet is one of the cost effective channel
for delivery of banking services.

Internet Banking is provided to Individual/Joint/Sole proprietary concerns, Corporate
etc. at their request. The terms and conditions governing Internet banking are
displayed on the Banks website. Any change in the terms and conditions of Internet
Banking will be displayed on the website only and not by any means of
communication directly to the user of internet banking. The opening and
maintenance of the account is subject to rules and regulations introduced or
amended from time to time by Reserve Bank of India. Bank can, at its sole
discretion, withdraw any of the services / facilities given for the account either wholly
or partially at any time without giving any notice. The services available through
Internet banking are:

View account balances and download statements
Transfer of funds within Bank and across the Banks
Request for Cheque Book / Fixed Deposit
Payment of Utility bills viz., Electricity, Telephone, Income Tax etc.
Booking of Train/Bus/Airline tickets
Recharge of Moble / Online shopping
Online Equity Trading Primary and Secondary market

20

Internet Banking system interfaces between the customer computer and the Banks
Core Banking system (CBS). Customer access is controlled through Customer ID
and Password. However, the customer is not allowed to access the CBS directly to
ensure safety. It is protected with firewalls to prevent unauthorized access,
hacking and virus infection. Advanced encryption technology is used to ensure that
messages from/to the customers are not intercepted and misused by others. With
regard to financial transactions, banks are providing another layer of security i.e.
Online Transaction Password (OTP) to the customers on their mobile or through e-
mail. Though it is convenient and cost effective delivery channel for customers and
banks, there is an imperative need on the part of the banks to educate the
customers with the importance of Password to protect them from hacking/fishing.

Mobile Banking: The mobile-phone revolution that is transforming the world could
also turn into a banking revolution. Banks have been exploring the feasibility of using
mobile phones as an alternative channel of delivery of banking services. The swift
growth in number of Mobile users and wider coverage of mobile phone networks has
made this channel an important platform for extending banking services to
customers. Today, the number of Mobiles in India crossed 1000 million of which
1/3
rd
mobiles are in Rural India alone. At present, Mobile Banking is providing the Bill
payment and Funds Transfer facility besides information services to the customers.
The recent guidelines issued by RBI on Mobile Banking are as under:

RBI approval is required to extend mobile banking services.
All the transactions/services should be in Indian currency only. Cross-border
transfers through mobile banking are strictly prohibited and the operating
banks have to be based, licensed and supervised in India.
Registered customers can only avail this facility from banks. For financial
services one time registration should be done through a signed document.
Hitherto, RBI stipulated a transaction limit `50000/- per customer per day
(which includes purchase of goods and services). However, RBI has removed
the cap and now banks may place per transaction limits based on their own
risk perception with the approval of its Board.
Banks are allowed to provide cash-out through ATMs or BCs subject to cap of
`10000/- per transaction and maximum of `25000/- per month per customer.
Banks may put in place end-to-end encryption of the mobile PIN number
(mPIN) for better security.
Banks should file Suspected Transaction Report (STR) to Financial Intelligence
Unit-India (FID-IND) for mobile banking transactions, similar to normal
banking transactions.

The regulatory environment has helped mobile banking take off in India. In 2010,
the National Payment Corporation of India (NCPI) launched the intermediate
payment service i.e. Inter Bank Mobile Payment Service (IMPS), a 24/7 real-time
electronic Interbank fund transfer on a Person-to-Person (P2P) or Person-to-
Merchant (P2M) basis, which has boosted mobile banking. Mobile banking is very
advantageous compared to other delivery channels as it is easy to use and affordable
to customers besides providing real time information to customers. Mobile Banking
gives the banks an opportunity to expand their customer base without incurring
additional infrastructure costs. It would also help in financial inclusion as it would
provide a large number of un-banked people access to banking services. Banks could
save a huge amount of money on card issuance and merchant acquiring with zero
point of sale cost. Mobile Banking is the hottest area of development in the banking
sector and is expected to replace the credit/debit card system in future. The
increased phase of mobile usage is going to place our country on the top in the Asia
Pacific region in the ensuing years.

21

Electronic Payments

RBI has been playing an important role in the area of national payment system,
which is the backbone of economic activity and has taken several initiatives for a
safe, secure, sound and efficient payment system in India. Last one decade
witnessed spurt in electronic payments due to increased adoption of technology and
regulatory guidelines. The evolution of e-payment systems in India are:

i) Speed clearing: Banks as part of their normal banking operations undertake
collection of cheques/drafts deposited by their customers drawn on other banks and
the collection process is taking 7 to 14 days since cheques need to move physically
from presentation centre to drawee centre. In order to reduce the collection time,
RBI has introduced Speed Clearing where in cheques/drafts drawn on outstation are
treated on par with local cheques and presented in the local clearing provided the
presentment location is MICR/ECCS centre and the destination bank branch is under
CBS platform. However, Government cheques are not eligible for collection under
Speed Clearing. Drawee bank debits the account online without movement of cheque
and sends the proceeds to the collecting bank. Under Speed Clearing, it would be
working on T+1 or 2 basis. No charges for cheques up to `1 lakh. For above one lakh
the maximum amount that can be levied is `150/-. In case of return of cheques, the
charges ranges from `50 to `500 depending on the value of the instrument. The
facility of immediate credit would not be applicable to cheques collected under speed
clearing arrangements.

ii) Cheque Truncation System (CTS) is a new system of clearing implemented in
the National Capital Region (NCR) New Delhi and Chennai. It is the process in which
the physical movement of cheque within a bank or between banks and the clearing
house is curtailed, being replaced in a whole or part, by electronic records (images)
for further processing and transmission. It improves faster reconciliation of
inter/intra bank accounts besides saving considerable man-hours and enables the
banks to improve operational efficiency. However, domestic instruments, where both
presenting and drawee banks are the same are not allowed in the CTS. All
Government cheques and all instruments which fail in Image Quality Assessment
(IQA) test will have to be physically handed over to the Paying Bank. To facilitate the
transformation to an image based processing scenario, cheque leaves are required to
be image friendly and uniform. RBI directed all banks to issue cheques confronting to
CTS-2010 standard with uniform features in terms of size, paper quality and fields
such as the MICR band, signature and date details w.e.f. 1
st
August 2013. Besides
security features such as watermarks, and the banks logo are also standardized in
the new cheque leaves. Now, CTS is being extended to all the MICR centres in a
phased manner with the introduction of Grid Based Cheque Truncation clearing.

iii) Electronic Clearing System (ECS): The introduction of ECS Credit i.e. Single
Debit Multiple credits, helped large corporate bodies to pay their dividend, interest
and refunds electronically on the due date, which is very cost effective to Bank and
its customers. Similarly, the utility bodies are now in a position to collect their bills
through ECS Debit (Multiple Debits Single Credit) right on the due date. The entire
process including passing the credits to the beneficiaries accounts take only one
day, which is convenient and cost effective to both banks and customers.

iv) Any Branch Banking (ABB): Under CBS, Branch customer has become Bank
customer and they are allowed to approach any branch across the country for
deposit of cheque or cash and withdrawal of cash or transfer of money. No cash
payment will be made to third party (bearer). However, payment to third party up to
`20000/- is allowed to NRE / NRO accounts and branch should ensure identity of the
bearer while making payments. With regard to deposit of cash / transfer of funds
among the bank branches is allowed at par for any amount.

22

v) Real Time Gross settlement (RTGS): RBI launched RTGS for instant transfer of
funds across the banks (`200000/- & above) across the banks within India. It offers
a powerful mechanism for limiting settlement and systemic risks in the inter-bank
settlement process. It enables in expediting the settlement, control and governance
mechanism in the banking system. Funds will be transferred electronically and
credited to the beneficiary accounts instantaneously. It saves lot of time and paper
work and cost effective (Not exceeding `55/-). The timings for customer payments
are 9 AM to 4.30 PM on Monday to Friday; and 9 AM to 2 PM on Saturday. Similarly,
for interbank payments; the timings are 9 AM to 6 PM on Monday to Friday and 9 AM
to 3 PM on Saturday. Transfer of funds below `200000/- are not allowed under
RTGS.

vi) National Electronic Funds Transfer (NEFT): For the benefit of retail
customers, RBI introduced NEFT scheme. Under this, funds can be transferred across
the banks instantaneously. There is no cap on minimum and maximum amount for
NEFT. RBI has given discretion to the banks to levy charges, however, the service
charge should not exceed 25/- per transaction. The timings of NEFT are 8 AM to 7
PM (12 batches) from Monday to Friday and it is 8 AM to 1 PM (6 batches) on
Saturday. Customer is required to furnish IFSC Code number of the Bank Branch and
correct account number of the beneficiary for smooth transfer of funds under
RTGS/NEFT.

vii) Applications Supported by Blocked Amount (ASBA): ASBA is an alternative
payment method (optional) for IPO application where the IPO bidding amount
remains in investors account, but blocked by the bank until allotment is done. It
enables the listing process faster. It is made mandatory for non-retail investors also
to apply only through ASBA. The investors have option to bid IPO either through
designated branches or Internet Banking. Revision and cancellation of bids are
permitted till the issue closure date and time. The investor continues to earn interest
on the application money. Registrar transfers the allocated shares to investors
Demat Accounts. No charges will be levied to the investors for this service. It is an
opportunity to branches to improve low cost deposits and non-interest income since
bank earns commission on each application received under ASBA.

viii) Credit cards: The concept of credit card was used in 1950 with the launch of
charge cards in USA by Diners Club and American Express. Credit card became more
popular with use of magnetic strip in 1970. The first Credit Card was issued in 1981
and Gold Card in 1986 by VISA. Credit cardholder need not carry cash and purchase
goods and services at any approved Merchant Establishments/Point of sale Terminals
by tendering the card duly signing the charge slip. Further, cardholders can make
online purchases through internet using the card and PIN. Added to this, cardholder
can withdraw cash at any ATM across the globe. However, cash advance attracts
charge i.e. transaction fee as well as service fee/interest charge.

ix) Debit cards known as check cards. It operates like cash or a personal check.
Debit cards are different from credit cards. Credit card is a way to Pay Later
whereas debit card is a way to Pay Now. In case of debit card, bank account of
the customer will be debited immediately on completion of transaction. Debit cards
are accepted at many locations, including retail stores, petrol pumps, and
restaurants. The liberalized norms coupled with ease of usage have led to increase
debit card base over the years. Of late, banks are consciously driving the customers
to alternate delivery channels by issuing debit cards on the day of opening of the
account itself to reduce the work load and to enable them to pay focused attention
on core banking activities. In order to make Credit/Debit Card transactions more
secure, RBI mandated the card holders to enter PIN while transacting at POS
terminals with effect from 1
st
December 2013.

23


x) Charge Card: Charge card is like any Credit or Debit Card. These cards neither
offer revolving credit like the Credit Card nor debit the account instantaneously like
Debit Card. However, the cardholder is required to settle the bill in full by the due
date each month. Charge cards make a good option to develop financial discipline
which likely to enable the cardholders to improve their credit history. Further, charge
card offers a dynamic limit, while rewarding good payment 23ttest23e.

xi) Prepaid Card: A prepaid card looks like a credit card and works like a debit
card. These cards resemble credit and debit cards in appearance and allow users to
load any amount up to `50000/- and can be used at any ATM/Point of Sale Terminal.
On use of card, funds are directly debited from the card. Cardholders preload the
cards with funds via a cash deposit or wire transfer. There are no finance fees or
interest payments as charges are deducted from the prepaid balance. It is an
opportunity for people who have had little or no access to the mainstream financial
system by loading funds onto a prepaid card. It is a secure and convenient
alternative to cash. Various types of Prepaid Cards are Re-loadable Cards (value
is replenished once it is used), Disposable Cards (discarded once the value is
used), Closed Cards can be used for a specific purpose (Phone Cards) and Open
Cards (multi-purpose). Re-loadable cards are most popular among under-banked
individuals, or those who tend not to possess conventional bank accounts.

xii) RuPay Cards: It is a domestic card payment network established by National
Payment Corporation of India (NPCI) having more than 100 Banks in India as
members with its ATM network spread across the country. These cards can be used
in all the ATMs of NPCI network and POS terminals & e-com transactions (Internet)
enabled for RuPay acquiring. The various types of RuPay cards are as under:

Card Type Meant for
RuPay Kisan Farmers availing Agriculture production loans (Crop Loans)
RuPay Aadhaar Beneficiaries of Electronic Benefit Transfer (EBT) scheme
RuPay Debit Beneficiaries under Financial Inclusion schemes

The existing identification modes used in new delivery channels has a major
drawback as it recognize the PIN but not the person. Sometimes, it leads to
impersonation and may cause financial loss. To overcome the problem, biometric
technologies such as Fingerprint Recognition, Face Recognition, Voice Authentication,
Hand Geometry, Retinal Scanning, Iris Scanning and Signature Verification have
come in to force. Whenever the user access to delivery channel, it verifies with the
server and deliver the service if found correct.

Electronic Payments Recent developments: Government of India urged the
banks to take appropriate effective measures for promotion of transactions through
electronic mode, such as:

Popularizing NEFT/RTGS platforms for transfer of funds among public and at
par NEFT for transactions upto `1 lac.

Issuance of Debit cards to all eligible accounts.

Any Branch Banking is allowed without any charges.

Encouraging institutions and organizations to pay wages and salaries of their
employees through banking channels preferably e-mode.

24


It is directed that all payments handled by banks to their customers, vendors,
suppliers will be done electronically from 1
st
July 2012 onwards.

The validity period of cheques/demand drafts is reduced from 6 months to 3
months with effect from 1
st
April 2012 to discourage discounting of negotiable
instruments.

NPCI initiated steps to popularize RuPay where Debit/Credit card payments
are being routed through Indian e-service intermediaries which bring down
the costs and improve their acceptability.

Merchant Discount Rate (MDR) is the fee that merchant establishment pays to
the terminal deploying bank (Acquiring Bank), which play vital role in Point of
Sale (POS) transactions. Recently, RBI advised banks to cap MDR at 0.75
percent for transactions up to `2000/- and 1 percent for transactions above
`2000/- to popularize POS transactions using Debit Cards.

Banks are advised to promote Credit/Debit cards to pave the way for cashless
economy. Further, card based transactions leave adequate audit trails and
hence disincentives black money generation.

The practice of taking Post-dated Cheques (PDCs) from the borrowers is
stopped forthwith and advised banks to obtain ECS (Debit) mandate from
borrowers.

25

Financial Inclusion
Financial Inclusion is the delivery of banking services at an affordable cost to the
vast sections of disadvantaged and low income group. As banking services are in the
nature of public good, it is essential that availability of banking and payment services
to the entire population without discrimination is the prime objective of the public
policy. It means not only to extending banking facilities to rural people but also to
provide at their convenient time and location. Availability of banking services means
to provide Basic Savings Bank Deposit Account (formerly known as No-Frills account)
with Overdraft facility; Remittance product for Electronic Benefit Transfer (EBT) and
other remittances; Variable Recurring Deposit and General Credit Card or Kisan
Credit Card etc.
Evolution of Financial Inclusion: Social Banking is an instrument for Financial
Inclusion. Though, social banking initiatives were introduced in India long back
through measures such as co-operative banking movement, nationalization of banks
(in 1969 & 1980), creation of Regional Rural Banks etc., their success was largely
constrained by the size and population of the country (1.21 billion) and non-
availability of banking services. In the above backdrop financial inclusion has
received a big boost and greater efforts have been laid on inclusive banking. The
following are the steps initiated for enhancing financial inclusion in India.
Introduction of Basic Saving Bank Deposit account (known as No-Frill
account) for all individuals with simplified KYC norms.
Information and Communication Technology (ICT) based Business
Correspondent model for delivery of low cost door step banking services in
remote villages is being implemented.
All villages with population above 2000 are already covered under FIP.
Process of covering the remaining villages with population below 2000 is
underway.
Opening of 25% of new branches by banks in unbanked rural centers is made
as mandatory.
Mobile and network companies have been allowed to partner with banks in
offering services collaboratively.
Government has encouraged a multi-channel approach including mobiles,
handheld devices, smart cards, micro ATMs, kiosks etc., for providing financial
services to the target group.
A village is considered to be covered by banking service if either a Brick &
Mortar Branch or Ultra Small Branch or Business Correspondent.
Opening a Basic Savings Bank Deposit account is only the first step in building the
relationship which would require sustained efforts on the part of Banks as well as
Customers to achieve the objective of Financial Inclusion. However, in rural areas
customers cannot be expected to come to branches in view of opportunity cost
and Time and hence banks will have to reach out through a variety of technology
driven delivery channels such as ATMs, Bio-metric ATMs, Mobile ATMs, Smart Cards
and use of Post offices.
i)Low Cost ATMs: The presence of ATMs mostly found in Metro/Urban centers and
banks are not keen to install at Rural/Semi Urban centers in view of high investment
and low transaction volume. Deployment of low cost ATMs at Rural/SU centers with
basic features (cash withdrawal, balance enquiry etc.,) enables the customers to
have access to cost effective convenient banking.

26


ii) Biometric ATMs: The penetration of ATMs into Rural / Semi-urban areas may
not serve the purpose unless it is put to use by both Literate and Illiterates. The
existing ATMs are not being used optimally by rural folk on account of PIN and
Password related issues. Introduction of Biometric ATMs enables the illiterate and
semi-literate customers to avail ATM facilities on par with literate customers. Under
this, Thumb impression of the cardholder will be scanned and transfer the same to
central server as one time measure. While swapping the card customer is required to
keep thumb on the slot, system verifies the finger print and allows access to his
account/s.
iii) Mobile ATMs are designed for providing ATM facility to the rural folk as well as
other customers. The Van would move at the pre-determined places and also
accessible to Biometric card holders. It can also be used for opening of accounts
during the visits to the rural areas.

All the above initiatives warrant the banks to invest substantial amount on
infrastructure besides recurring expenditure. There is an urgent need to bank on
alternatives to overcome the said constraints and to extend branch less banking to
achieve desired goal.

Business Correspondent (BC): The BC model allows the bank to use third parties
(Individuals/associations/institutions/26ttest26ed) to extend the basic banking
services. Normally the operations of BC should be within 30 KMs of base branch
located in Rural/Semi-Urban/Urban areas and it is 5 KMs in case of Metro areas.
However, the distance criteria may be relaxed with prior approval from DCC/SLBC.
BCs are provided with laptop with connectivity to have seamless operations with the
respective banks central server. BCs use biometric smart cards, in which customer
data including finger prints are stored and works on PoS machines with key
management.

Business Facilitators (BF) Model envisages the use of intermediaries by the
banks to provide Non Financial Services to the public such as creating awareness
about banks products/services, identification of borrowers/processing of
applications, post sanction monitoring and follow-up etc.
Ultra Small Branches: Recently, the Government has directed banks to set up
Ultra Small branches in all villages under financial inclusion scheme by March 2012,
typically in a premises spread 100 to 200 sft. It aims to provide a wide range of
banking services, including credit transactions, in villages where only cash
transactions are being provided by BCs. A designated officer will visit the village on a
prefixed date and time every week with laptop and will be connected to Banks
central server (CBS).
Grama Kranthi General Credit Card (GK-GCC) Scheme: It is an Entrepreneurial
credit scheme for covering the general credit needs of the Banks customers in FI
villages. The nature of the loan is by way of overdraft/ cash credit with no end use
stipulation. All Savings Bank Account holders having active Smart card with
satisfactory transactions at least for a period of 3 to 6 months are eligible to avail
General Credit Card. Account is in the nature of cash credit. Quantum of limit will be
based on the assessment of income and cash flow of the entire household. The
maximum limit per household shall be `25,000/-. No collateral security should be
insisted upon. The card holder is entitled to draw cash from the Point of Sale
Terminals deployed at the custody of the CSP stationed at the particular village
through authentication of fingerprints using smart card. Account will be reviewed
every year and renewed after 3 years.

27

Financial Inclusion Progress: Government/RBI has adopted a structured and
planned approach towards FI by not just focusing on improving access to financial
services but also encouraging demand for financial services through financial literacy
initiatives. Adopted a bank-led model for FI, but have permitted non-bank entities to
partner banks in their FI initiatives. Banks are advised to adopt innovative business
models and delivery channels to expand FI efforts. There is a need for banks to
develop new products and design new delivery models that are customized to the
unique needs of the financially excluded population, both in the rural and urban
areas. The progress made so far in quantitative terms is as under:

Financial Inclusion Progress Report
No Particulars 2010 2011 2012 2013
I Branches / BCs
i) Rural Branches 33378 34811 37471 40845
ii) Business Correspondents Rural 34174 80802 141136 221341
-
Urban
447 3771 5891 27124
iii) Other Modes 142 595 3146 8424
Total 68141 119979 187644 297734

II Deposit Accounts
i) Basic Savings Bank Deposit
Accounts (No. in lakh)
735 1048 1385 1833
ii) BC-ICT Accounts (No. in lakh) 133 316 573 810
Total 868 1364 1958 2643

III Loan Accounts
i) Kisan Credit Cards (No. in lakh) 243 271 302 338
ii) General Credit Cards (No. in
lakh)
14 17 21 36
iii) Basic Savings Bank Accounts with
OD facility (No. in lakh)
2 6 27 39

IV ICT Transactions (No. in lakh) 265 842 1411 2547

SLBCs are advised to prepare a road map for provision of banking services in all
unbanked villages with population below 2000 in a time bound manner. About
485000 unbanked villages are identified and allotted to banks. Banks have been
advised to Prepare Board approved FIPs for the period 2013-2016 and to put
structured, comprehensive monitoring mechanism in place for evaluating banks
performance against their FIP plans. Further, banks are advised to open 25% of all
new branches in unbanked rural centres. It is also emphasized to open accounts of
all eligible individuals in camp mode with the support of local Government authorities
and seed the existing and new accounts with Aadhaar numbers to ensure smooth roll
out of the Governments Direct Benefit Transfer (DBT) initiative.

Common Service Centers: Under the National e-Governance Plan (NeGP), the
Common Services Centers (CSCs) have been established with front end service
delivery points at the village level, for delivery of Government, Social and Private
Sector services in the areas of agriculture, health, education, entertainment, FMCG
products, banking and financial services, utility payments, etc. The infrastructure at
the CSC includes a fixed place of business say 100 to 150 sq. ft, specified working
hours, a Personal Computer/Lap top with internet connectivity web-cam, printer,
power backup, biometric scanner. CSC acts as BC and providing ICT based banking
services in unbanked villages. The Service Provider would be required to appoint BC.
The Identified BC should not have been defaulters to any financial institution and

28

should not have been blacklisted by any bank in the last two years for deficiency of
service. The BC must be responsible to receive and pay money, to transfer money
from one to another. BC may also be used for deposit mobilization and recovery of
loans. The BC is responsible for routing all transactions of all villages in the assigned
villages so that effective marketing and follow up, can take place.

Indicative charges to be paid to the Service Provider
Activity Remuneration
Savings Bank Account opening `20/- per account
Recurring Deposit account opening `5/- per account
Fixed Deposit `5/- per account
Overdraft/Retail Loans/KCC/GCC
0.5% of loan amount sanctioned subject
to a minimum of `25/- and maximum of
`5,000/-; 50% of the amount payable
shall be paid after the first disbursement
of the loan and the rest 50% shall be
paid one year thereafter if the account
continues to be standard asset till then.
3
rd
Party financial products like Life
& non-life Insurance, Pension etc.
with prior approval of the concerned
Bank
25% of the commission bank earns
SHG & JLG: For formation and
promotion including credit linkage
Not exceeding `1000/- per SHG/ JLG
formed and credit linked with the Bank in
stages as under.
Stationary and overhead expenses
after saving linkage of SHG
`300/-
4 months after saving linkage `300/-
After credit linkage of SHG `400/-
Non cash transactions
Remittance/Fund transfer `10/- per transaction
Balance Enquiry Nil

In addition to these charges, the Service Provider will be paid fixed charges @ 2,500
per month for each outlet for a period of six months from the date of activation of
each outlet, at least 80% or more of which must be passed on by the BC to BCA. The
date of activation would be the date of first transaction. The fixed charges will be
paid subject to the condition that the BC records at least 25 transactions (enrolment
of new accounts or transactions in existing accounts) during each month.

Direct Benefit Transfer (DBT): The Central and State Governments have been
earmarking substantial budgetary allocations towards social security and welfare
schemes through various subsidies with an aim to improve the standard of living of
vast majority of people who require social assistance. The fundamental challenge for
any subsidy framework is to ensure effective targeting of beneficiaries which is a
complex task and fraught with two types of errors viz., errors of Inclusion and errors
of Exclusion. The former involves the wrongful inclusion of beneficiaries ineligible for
subsidy, while the later concerns the exclusion of eligible beneficiaries. In the
process, the lion share of subsidies has not been reaching the target group defeating
the very purpose of the schemes. In order to ensure electronic transfer of subsidies
directly into the accounts of the beneficiaries, they need to have bank account.
Accordingly, banks have been advised that the service area bank in rural areas and
banks assigned the responsibility in specific wards in urban area ensure that every
household has at least one bank account. In this direction, the Government has
taken the following initiatives:

29

All Banks are advised to provide basic banking services at all villages having
population of above 2000 either opening a bank branch or appointing a
Business Correspondent Agent in each of the FI village.
All banks must complete the mapping of their respective service area to
ensure that one BC is available in each Gram Panchayat. The collection of
account opening data including Aadhar number is to be done by BC.
Banks are advised to establish a regular Brick and Mortar or Ultra Small
Branch in all habitations with population of 5000 and above in under-banked
districts and 10000 and above in other districts. Further, Banks are advised to
provide onsite ATMs at all branches across the country.
Further, it is stipulated that a BCA has to be made available within a radial
distance of 2 KM and a branch within a radial distance of 5 KM. Banks should
issue Debit Cards to all eligible account holders.

Schemes covered under Direct Benefit Transfer
1 Post Matric Scholarship for SC Students
2 Pre-Matric Scholarship for SC Students
3 Pre-Matric Scholarship for Children of those engaged in unclean occupations
4 Upgradation of merit of SC Students
5 National Overseas Scholarship Schemes for SC Students
6 Post Matric Scholarship for OBCs
7 National Overseas Scholarship for OBCs
8 Post Matric Scholarship for economically backward class students
9 Post Matric Scholarship for students with disabilities
10 National Overseas Scholarship for persons with disabilities
11 Scholarship for top class education for students with disabilities
12 Top Class Education Scheme
13 Scholarship to Universities/College Students
14 Fellowship Schemes of UGC.
15 Fellowship Schemes of AICTE
16 Subsidy on Fee to Students
17 National Means cum Merit Scholarship
18 National Scheme for Incentive for the girl child for secondary education
19 National Overseas Scholarship for ST students
20 Post Matric Scholarship Scheme
21 Upgradation of Merit Scheme
22 Top Class Education System
23 Rajiv Gandhi National Fellowship
24 Matric Scholarship Scheme
25 Maulana Azad National Fellowship
26 Merit cum Means Scholarship Scheme
27 Indira Gandhi Matritva Sahyog Yojana (IGMSY)
28 Dhanalakshmi Scheme
29 Janani Suraksha Yojana
30 Scholarship to the Children of beedi workers
31 Housing subsidy to beedi workers
32 Stipend to children in the special schools under the Child Labour Project
33
Permanent Disability Benefits, Dependent benefits, Sickness State Insurance
Corp. to the insured persons and their families
34
Pension withdrawal of PF, Premature withdrawal of pension, payment related
to Employees Deposit Linked Insurance
35 Domestic LPG Subsidy Scheme
36 PDS Kerosene
37 Targeted Public Distribution System (in Uts)

30


DBT Scheme is a Game Changer for Banks as it would enable large number of
retail customers into the banking fold. This scheme has potential to bring about a
second revolution in the banking industry in the post nationalization era.

Financial Inclusion Challenges: The goal of universal financial access is yet
to receive the complete conviction/ commitment of the Board/top management of
banks. This is often due to a lack of genuine belief that this can be pursued as a
profitable business activity. The expenses incurred on FI initiatives need to be
viewed as an investment instead of being considered as expenses, and the same
should be weighed against present/future benefits likely to accrue from the same.
Another major challenge is that banks are yet to develop sustainable and scalable
business and delivery models to guide their FI initiatives. While several alternate
models have been tried out, the time has come for banks to zero in on the models
that they find most suited to their goals and to focus on scaling up the same.
While access to financial services has improved, the usage of the financial
infrastructure continues to be tardy. While more than 2.70 lakh banking outlets
are available across the country, the number of transactions in these accounts
remains unimpressive. For instance, nearly half of the Basic Savings Bank Deposit
accounts are not seeing transactions. This not only restricts the potential benefits
that could accrue from increased financial access but also reduces the viability of
FI activities for banks and BCs. The reduced viability, in turn, impacts the
scalability of the model, thereby hampering FI efforts.
While banks have innovated on technology, the same has not resulted in
significant reduction in the cost of providing financial services. Beneficiaries/
stakeholders often complain of constraints in digital/ physical connectivity. The
process of seeding the bank accounts with Aadhaar numbers is faced with various
constraints which could impact the roll out of the Governments DBT initiatives.
Financial Inclusion and Financial Literacy are two sides of the equation. Financial
Inclusion acts from supply side by providing financial market/services that people
demand whereas Financial Literacy stimulates the demand side by making people
aware of what they can demand. Therefore, access to financial services and
Financial Education must happen simultaneously. It must be continuous, an
ongoing process and must target all sections of the population.

Financial inclusion has a critical role to play in Indias growth story. Capital
formation through credit and financial services is necessary for inclusive and
sustainable growth and a well-functioning financial system is important for socially
inclusive growth. Banks, especially public sector banks, have played a lead role in
financial inclusion and will be the main drivers in making financial services
available to the grass-root level.

Considering the enormity of the task, the combined will power of the society is
required to ensure success in this challenging objective. All stakeholders, including
policy makers, regulators, state and district administration, IT solution providers,
software and hardware vendors, civic society, media and public at large have to
come together and pool their collective might if we have to ensure that the goal of
meaningful financial inclusion and leveraging financial access as a means for
economic empowerment of the excluded masses, is successfully achieved.

31

Priority Sector Revised Guidelines

The need for commercial banks to improve Priority Sector advances was emphasized
since 1968 with special focus on Agriculture and Small Scale industries. Initially there
was no specific target fixed in respect of priority sector lending but in the year 1974
banks were advised to raise the share of these sectors to 1/3
rd
of their aggregate
advances by March 1979. Subsequently, on the basis of the recommendations of the
Working Group on the Modalities of Implementation of Priority Sector Lending and
the Twenty Point Economic Programme by Banks under the chairmanship of Dr. K. S.
Krishnaswamy, all commercial banks were advised to achieve the target of priority
sector lending at 40 percent of aggregate bank advances. Sub-targets were also
specified for lending to agriculture and the weaker sections within the priority sector.
The Internal Working Group of the RBI headed by Shri C. S. Murthy and the Shri
Y.H.Malegam committee constituted to study issues and concerns in the Micro
Finance institutions (MFI) sector, inter alia, had recommended review of the
guidelines on priority sector lending. Subsequently, RBI has setup a Committee
headed by Shri M V Nair to re-examine the existing classification and suggest
revised guidelines with regard to Priority Sector lending classification and related
issues. Accordingly, revised guidelines on Priority Sector are issued in July 2012.
1. Agriculture
i) Direct Finance to Agriculture: Loans to individual farmers including SHGs/JLGs
engaged in agriculture and allied activities viz., dairy, fishery, animal husbandry and
sericulture are treated as direct lending to agriculture irrespective of the amount.
However, loans to 31ttest31ed including farmers producer companies of individual
farmers, partnership firms and co-operatives of farmers for the said activities up to
an aggregate limit of `2 crore per borrower is treated as direct lending to agriculture.
The various activities that come under direct lending to agriculture are:
Short-term loans for raising crops, i.e. for crop loans, which include
traditional/non-traditional plantations, horticulture and allied activities.
Medium & long term loans for agriculture and allied activities (purchase of
agricultural implements and machinery, loans for irrigation and other
developmental activities undertaken in the farm, and development loans for
allied activities).
Loans granted for pre-harvest and post-harvest activities such as spraying,
weeding, harvesting, grading, sorting, processing and transporting
undertaken by individuals, SHGs and cooperatives in rural areas.
Loans to farmers up to `25 lakh against pledge/hypothecation of agriculture
produce for a period not exceeding 12 months.
Export credit to farmers for exporting their own farm produce.
If the aggregate loan limit per borrower is more than `2 crore for the above said
purposes, the entire loan should be treated as indirect finance to agriculture.
ii) Indirect finance to agriculture: Lending to the following activities is treated as
indirect finance to agriculture:

Corporates / partnership firms / institutions engaged in Agriculture and Allied
Activities (dairy, fishery, animal husbandry, poultry, sericulture etc.)
Primary Agricultural Credit Societies (PACS), Farmers Service Societies (FSS)
and Large-sized Adivasi Multi Purpose Societies (LAMPS)
MFIs for on-lending to farmers for agricultural and allied activities
NGOs for on-lending to members of SHGs under SHG-Bank Linkage
Programme for agricultural and allied activities.

32

RRBs for on-lending to agriculture and allied activities.
Dealers/sellers of fertilizers, pesticides, seeds, cattle feed, poultry feed,
agricultural implements and other inputs up to `100 lakh per borrower.
Setting up of Agri clinics and Agribusiness Centres.
Custom Service Units managed by individuals, institutions or organizations
who maintain a fleet of tractors, bulldozers, well-boring equipment, threshers,
combines, etc., and undertake farm work for farmers on contract basis.
Construction and running of storage facilities.

2. Micro and Small Enterprises: Bank loans to Micro and Small Enterprises (MSE)
engaged in providing or rendering of services will be eligible for classification to MSE
sector under priority sector up to an aggregate limit of `10 crore per borrower/unit,
provided they satisfy the investment criteria for equipment as defined under MSMED
Act, 2006.
3. Medium Enterprises: Units which are engaged in manufacture/production/
preservation of goods and whose investment in plant and machinery should be as
per the guidelines are treated as Medium Enterprises.
i) Manufacturing Enterprises are those engaged in manufacturing or production of
goods. These are defined in terms of investment in Plant & Machinery. Loans
extended to Medium Manufacturing Enterprises shall be classified as Priority Sector
advances.
ii) Service Enterprises are the enterprises engaged in providing or rendering of
services. These are defined in terms of investment in Equipment. Loans extended to
Medium Service Enterprises up to `10 crore shall be classified as Priority Sector
advances. The modified definitions of MSM Enterprises are as under:

No Category
Investment in Plant & Machinery / Equipment
Manufacturing Service
1 Micro Enterprise Up to `25 lakhs Up to `10 lakhs
2 Small Enterprise `25 to `500 lakhs `10 to 200 lakhs
3 Medium Enterprise `500 to `1000 lakhs `200 to 500 lakhs

Indirect finance to the small (manufacturing as well as service) enterprises sector
include credit to Persons/co-operatives involved in assisting the decentralized sector
(Artisans, village and cottage industries) in supply of inputs and marketing of output.
All advances granted to units in the Khadi and Village Industries Sector, irrespective
of their size of operations, location and amount of original investment in plant and
machinery. Such advances will be eligible for consideration under the sub-target (60
per cent) of the small enterprises segment within the priority sector.

4. Housing Loans: Loans up to `25 lakh to individuals for purchase/construction of
dwelling unit per family in Metro centers with population above ten lakh and `15
lakh in other centers excluding loans granted by banks to their own employees are
treated as priority sector. Further, loans given to individuals for repairs to the
damaged dwelling units of families up to `2 lakh in rural and semi-urban areas and
up to `5 lakh in urban and metropolitan areas are treated as priority sector. Further,
housing loans to the following are also treated as priority sector:

Bank loans to any governmental agency for construction of dwelling units or
for slum clearance and rehabilitation of slum dwellers subject to a ceiling of
`10 lakh per dwelling unit.
Loans sanctioned for housing projects exclusively for the purpose of
construction of houses only to economically weaker sections and low income
groups, the total cost of which does not exceed `10 lakh per dwelling unit, will

33

qualify for priority sector status. However, the family income of the borrower
should not exceed `1.2 lakh per annum irrespective of location.
Loans to Housing Finance Companies (HFC), for on-lending for the purpose of
purchase/construction/reconstruction of individual dwelling units or for slum
clearance and rehabilitation of slum dwellers, subject to an aggregate loan
limit of `10 lakh per borrower, provided the all inclusive interest rate (Interest
rate, processing fee and service charges) charged to the ultimate borrower is
not exceeding lowest lending rate of the lending bank for housing loans plus
2% per annum. However, this segment should not exceed five percent of the
individual banks total priority sector, on an ongoing basis.

5. Education Loans: Education loans include loans and advances granted to only
individuals for educational purposes up to `10 lakh for studies in India and `20 lakh
for studies abroad, and do not include those granted to institutions.

6. Retail Trade shall include retail traders/private retail traders dealing in essential
commodities (fair price shops), and consumer co-operative stores etc with credit
limits not exceeding `20 lakhs.

7. Micro Credit: Provision of credit and other financial services and products of very
small amounts not exceeding `50000 per borrower, either directly or indirectly
through a SHG/JLG mechanism or to NBFC/MFI for on-lending up to `50000 per
borrower, will constitute micro credit.

8. Lending to Micro Finance Institutions (MFI): Bank credit to MFIs for on-
lending is eligible for categorization as priority sector advance if aggregate amount of
loan, extended for income generating activity, is not less than 70% of the total loans
given by MFIs.

Weaker Sections: Loans to Small and marginal farmers with land holding of 5
acres and less, and landless labourers, tenant farmers and share croppers, Artisans,
village and cottage industries where individual credit limits do not exceed `50000/-,
Beneficiaries under SGSY/ SC&ST/ DRI / SJSRY / Liberation and Rehabilitation of
Scavengers (SLRS) / SHG schemes and loans granted to persons from minority
communities for the said purposes are treated as weaker section.

Differential Rate of Interest Scheme (DRI): The target stipulated for lending
under DRI scheme is 1% of previous year total advances of the Bank. The existing
loan limit is increased from `6500/- to `15000/- and the housing loan limit is also
increased from `5000/- to `20000/-. The borrowers family income eligibility criteria
is revised to `18000/- & `24000/- p.a. for Rural & Semi-Urban/Urban areas
respectively. At least two third of DRI advances should be granted through
rural/semi-urban branches. 40% of DRI advances should go to SC/ST. 2/3
rd
of total
DRI lending is to be routed through Rural and Semi Urban branches. Branches can
assist the handicapped/disabled persons for acquiring aids, appliances and
equipment needed especially by students for pursuing studies and vocational training
example Braille Typewriters for blind etc.

Classification of Farmers
Category Irrigated Land Holding Un-irrigated Land Holding
Marginal 1.25 Acres Or 2.5 Acres
Small 2.50 Acres Or 5.0 Acres
Others Above 2.50 Acres Or Above 5 Acres

34

Credit flow to SC/ST
Scheme Reservation / Relaxation
DRI 40% of Advances. Land holding criteria is not applicable
SGSY 50% of the families assisted
SJSRY Credit to be extended to the extent of their strength in the local population
PMEGP 22.50% of Advances. Age relaxation 10 Years

Priority Sector Targets & Sub-targets
Category Domestic commercial banks
Priority
Sector
40 per cent of Adjusted Net Bank Credit (ANBC) or credit equivalent
amount of Off-Balance Sheet Exposure, whichever is higher.
Agricultural
advances
18 per cent of ANBC or credit equivalent amount of Off-Balance Sheet
Exposure, whichever is higher.
Of this, indirect lending in excess of 4.5% of ANBC or credit equivalent
amount of Off-Balance Sheet Exposure, whichever is higher, will not be
reckoned for computing performance under 18 per cent target. However,
all agricultural advances under the categories direct & indirect will be
reckoned in computing performance under the overall priority sector
target of 40 per cent of ANBC or credit equivalent amount of Off-Balance
Sheet Exposure, whichever is higher.
Small
Enterprise
advances
Advances to small enterprises sector will be reckoned in computing
performance under the overall priority sector target of 40 per cent of
ANBC or credit equivalent amount of Off-Balance Sheet Exposure,
whichever is higher.
Micro
enterprises
within Small
Enterprises
sector
40 per cent of total advances to small enterprises sector should go to
micro (manufacturing) enterprises with investment in plant & machinery
up to `10 lakh and micro (service) enterprises having investment in
equipment up to `4 lakh; 20 per cent of total advances to small
enterprises sector should go to micro (manufacturing) enterprises with
investment in plant & machinery above `10 lakh and up to `25 lakh, and
micro (service) enterprises with investment in equipment above `4 lakh
and up to `10 lakh. (60% small enterprises advances should go to the
micro enterpr).
Export credit
Export credit is not a separate category. Export credit to eligible
activities under agriculture and MSE will be reckoned for priority sector
lending under respective categories.
Weaker
sections
10 per cent of ANBC or credit equivalent amount of Off-Balance Sheet
Exposure, whichever is higher.
Differential
Rate of
Interest
Scheme
1 per cent of total advances outstanding as at the end of the previous
year. It should be ensured that not less than 40 per cent of the total
advances granted under DRI scheme go to SC/ST. At least two third of
DRI advances should be granted through rural and semi-urban branches.
Foreign Banks with 20 and more branches are brought on par with domestic banks
(40% advances to priority sector) in a phased manner of five years starting from 1
st

April 2013. With regard to foreign banks with below 20 branches, the target is
stipulated 32% of ANBC or credit equivalent amount of Off-Balance Sheet Exposure,
whichever is higher. In case of Small Enterprises and export credit the target is set
as 10% & 12% respectively.

35

Government Sponsored Programs

Prime Minister Employment Generation Programme (PMEGP): Prime Ministers
Employment Generation Programme (PMEGP) by merging the two schemes that were
in operation till 31.03.2008 namely Prime Ministers Rojgar Yojana (PMRY) and Rural
Employment Generation Programme (REGP) for generation of employment
opportunities through establishment of micro enterprises in rural as well as urban
areas. The Scheme will be implemented by Khadi and Village Industries Commission
(KVIC) and the details are as under:

Category

Project Cost
Borrower
contribution
Subsidy
Urban Rural
General 10% 15% 25%
Special (SC/ ST/OBC/Minorities/Women/ Ex-
servicemen / Physically handicapped/ NER /
Hill and Border areas etc.)

05%

25%

35%

The maximum cost of the project/unit admissible under manufacturing sector
is `25 lakh.
The maximum cost of the project/unit admissible under business/service
sector is `10 lakh.
The balance amount (excluding MM/subsidy) of the total project cost will be
provided by Banks as term loan

Eligibility Conditions of Beneficiaries

Any individual, above 18 years of age
There will be no income ceiling for assistance for projects under PMEGP.
For setting up of project costing above `10 lakhs in the manufacturing sector
and above `5 lakhs in the business/service sector, the beneficiaries should
possess at least VIII standard pass educational qualification.
Assistance is available only for new projects under the PMEGP.
Self Help Groups (including those belonging to BPL provided that they have
not availed benefits under any other Scheme) are also eligible for assistance
under PMEGP.
Institutions registered under Societies Registration Act 1860; Production Co-
operative Societies, and Charitable Trusts. Existing Units (PMRY / REGP or any
other scheme of Central / State Government) and the units that have already
availed Government Subsidy (including units registered & certified khadi
institutions who have availed subsidy from central/state government) are not
eligible.

To claim Margin Money (Subsidy), the borrower is required to submit
caste/community certificate or relevant document issued by the competent authority.
In case of institutions, a certified copy of the bye-laws is required.

Project cost will include Capital Expenditure and one cycle of Working Capital. Cost of
the land should not be included in the Project cost. Projects costing more than `5
lakh, which do not require working capital, need clearance from controlling office.
PMEGP is applicable to all new viable micro enterprises, including Village Industries
projects except activities indicated in the negative list of Village Industries.
Existing/old units are not eligible. Only one person from one family is eligible for
obtaining financial assistance for setting up of projects under PMEGP. The family
includes self and spouse.

36

No collateral security will be insisted upon by Banks in line with the guidelines of RBI
for projects involving loan upto `10 lakhs in respect of the projects cleared by the
Task Force. The borrower is required to undergo EDP training at least 2 weeks
duration. Thereafter, the bank will release first installment of the Bank Finance to the
beneficiary. The margin money (subsidy) is to be kept in Term Deposit for three
years at branch level in the name of the beneficiary/Institution. No interest will be
paid on the TDR and no interest will be charged on loan to the corresponding
amount. Repayment schedule may range between 3 to 7 years after an initial
moratorium as may be prescribed by the concerned bank/financial institution.

Swarnajayanti Gram Swarojgar Yojana (SGSY): It is a Scheme which is a
restructure of the erstwhile schemes like IRDP, TRYSEM, DOWCRA, SITRA, GKY &
MWS etc., with the objective to bring the assisted poor rural families above poverty
line. The scheme aims at establishing a large number of micro enterprises in the
rural area. The identification of the borrowers will be done by Grama Sabha.
Productive and viable activities under Agriculture & ISB are eligible under this
scheme with 50% coverage by SC/ST, 40% coverage by women and 3% to
Physically Handicapped borrowers. The size of the loan under the scheme would
depend on the nature of the project. The loans under the scheme would be
composite loan comprising of Term Loan and Working Capital. Subsidy admissible is
@ 30% or maximum `7500/- (For SC/ST- 50% or maximum `10000) & for groups
50% or maximum `1.25 lac (no ceiling for minor irrigation projects).

For all individual loans exceeding one lakh and group loans exceeding `10 lakh, in
addition to primary security such as hypothecation/mortgage of land or third party
Guarantee as the case may be, suitable margin money/other collateral security in
the form of insurance policy; marketable security/deeds of other property etc. may
be obtained. The upper ceiling of ` 10 lakh is irrespective of the size of the group or
prorate per capita loan to the group while deciding the limit for collateral security,
the total project cost. The repayment period minimum of 5 years and branches
should ensure that repayment not to exceed 50% of incremental income. In the
event of unfortunate/untimely death of the borrower, LIC make payment of `6000/-
for natural death and `12000/- for accidental death to the legal heirs of the
borrower. (Cir no. 189 Ref 28/3 dated 2.8.2012)

Self Employment scheme for rehabilitation of Manual Scavengers (SRMS):
The objective of the National Scheme for Liberation and Rehabilitation of Scavengers
and their dependents is to liberate them from their existing hereditary and
obnoxious occupation of manually removing night soil and filth and to provide for
and engage them in alternative and dignified occupations. The Scheme would cover
primarily all scavengers belonging to Scheduled Castes community. Scavengers
belonging to other communities would also be covered. The scheme covers rural
and urban areas and the identification will be done by Ministry of Social Welfare &
National SC/ST financial development corporation. The beneficiaries are eligible for
term loan up to ` 5 lakh and Micro finance up to `25000/- is allowed without any
margin. The loans sanctioned under this scheme are eligible for subsidy @ 50% for
the projects where the unit cost is up to `25000/- and 25% for projects above
`25000/- with minimum of `12500 and maximum of `20000/-. Rate of Interest For
loans up to `25000 @ 4% for women; others 5%. For loans above `25000/-, the
interest rate is @ 6% p.a.

Swarna Jayanti Shahari Rojgar Yojana (SJSRY): The objective of the scheme is
to address Urban poverty alleviation, the scheme seeks to provide gainful self-
employment to the urban poor (living below the urban poverty line) either
unemployed or under employed, through setting up of self-employment ventures or
provision of wage employment. The scheme has components such as Urban self
Employment Programme (USEP), Urban Women Self-help Programme (UWSP), Skill

37

Training for Employment promotion amongst Urban Poor (STEP-UP), Urban Wage
Employment programme (UWEP), Urban Community Development Network (UCDN).
The defaulter to any nationalized bank / financial institution / cooperative bank is not
eligible to avail loan under SJSRY. The loans granted under this scheme should be
treated as advances under priority sector. The scheme is meant for Urban Poor who
are under below poverty line and aims to cover 30% Women & 3% physically
handicapped and SC & ST borrowers as per proportion to their population. Urban Self
Employment Programme (USEP) Operational details in regard to Self-Employment
Individual through setting up of Micro-Enterprises

Urban Women Self-Help Programme (UWSP) Operational details in regard
to self-employment (group) through setting up of Micro-Enterprises
1 Identification
Survey by ULB

2
Eligibility

Urban poor (unemployed / under employed) living below the
poverty line, in any city/town. Minimum 18 years at the time
of applying for Bank Loan. Residing in the town for at least
three years. No minimum and maximum educational
qualification.

3
Nature of
Activities
Town services requiring no special skills / Micro-
manufacturing units requiring skills. Assistance should also
be made available under agricultural and allied activities /
small scale services/small business activities
4 Project Cost
The maximum unit project cost for individual cases can be `2
lakh. If two or more eligible persons join together in a
partnership, the project with higher costs would also be
considered provided share of each person in the project cost
is ` 2 lakh or less.
5 Subsidy
Subsidy would be provided at the rate of 25% of the project
cost subject to a ceiling of `50,000/- per beneficiary. In case
more than one beneficiary join together and set a project
under partnership, subsidy would be calculated for each
partner separately.
6
Margin
Money
Each beneficiary is required to contribute 5% of the project
cost as margin money in cash.
7 Interest Interest applicable to priority sector.
8 Collateral
No collateral is required.
9 Repayment
Repayment schedule ranges from 3 to 7 years after initial
moratorium of 6 to 18 months as decided by Bank.
1 Identification Survey by ULB
2
Eligibility

Urban poor women living below the poverty line, in any
city/town with preference performing urban women SHGs.
Minimum number of women in a group is five. 18 years at
the time of the group applying for Bank Loan. No minimum
and maximum educational qualification.
3 Activity
Any group activity/enterprise development for income
generation by the urban poor women
4 Subsidy
Subsidy would be provided at the rate of 35% of the project
cost subject to a ceiling of `3 lakh or `60,000/- per
beneficiary.
5 Margin Money 5% of the project cost
6 Interest Interest applicable to priority sector.
7 Collateral No collateral is required.
8 Repayment
Repayment schedule ranges from 3 to 7 years after initial
moratorium of 6 to 18 months as decided by Bank.

38

STEP-UP, UWEP & UDCN Inputs under the scheme would be delivered both
through the medium of community structures to be set up along with Urban Local
Bodies (ULBs) like Community Development Society-CDS/ town-Urban Poverty
Alleviation-UPA Cell.

Differential Rate of Interest (DRI): The income criteria to eligible for DRI loan is
`18,000/- pa in Rural areas and `24000/- in Urban areas. With regard to farmers,
the land holding should not exceed one acre wet land or 2.5 acres dry land.
However, it is not applicable to SC/ST borrowers. The unit cost is `15000/- for
general purposes but it is `20000/- for Housing Loans to SC/ST borrowers. The
repayment of the loan ranges from 3 to 5 years. These loans attract interest @ 4%
p.a. The target for the banks is 1% of previous year advances, of which 40% should
go to SC/STs & 2/3
rd
through Rural/Semi-urban branches.

Rajiv Gruha Kalpa Scheme
EWS house in urban areas.
Income range is minimum `2,000/- per month and maximum `36, 000/- per
annum
Unit Cost of `75,000/- with 10% margin from borrower with Bank loan of
`67,500 per house. 10% increase in unit cost is permitted.
Site will be allotted by Govt. of A.P. at free of cost.
Interest Rate 8% fixed

Valmiki Ambedkar Awas Yojana (VAMBAY): Housing Finance Scheme was
launched in Andhra Pradesh on 01.11.2002 with an objective to provide shelter or
upgrade the existing shelter for people below the poverty line and EWS in urban
slums. The ultimate objective of the Scheme is to have Slum Less Cities. The
funding pattern is 50% Government, 40% bank Loan and 10% Borrower Margin.
These loans attract interest @ 10% p.a. Tripartite agreement between Beneficiary
Bank & APSHCL.

***

39

Micro Credit / SHG
Micro Credit is defined as provision of thrift, credit and other financial services and
products of very small amount to the poor in rural, semi-urban and urban areas for
enabling them to raise their income levels and improve living standards. Banks have
discretion to devise appropriate loan and savings products and the related terms and
conditions including size of the loan, unit cost, unit size, maturity period, grace
period, margins, etc. Such credit covers not only consumption and production loans
for various farm and non-farm activities of the poor but also include their other credit
needs such as housing and shelter improvements. Banks, NBFCs, NGOs and other
institutions/organizations are allowed to undertake activities relating to Micro Credit
in India. The introduction of the Self Help Groups (SHG) format and the nationalized
banks lending system helped accentuate the importance of the same.
SHG is a registered or unregistered group of micro entrepreneurs having
homogenous social and economic background voluntarily, coming together to save
small amounts regularly, to mutually agree to contribute to a common fund and to
meet their emergency needs on mutual help basis. The group members use
collective wisdom and peer pressure to ensure proper end-use of credit and timely
repayment thereof. It is aimed to inculcate saving habit and encourage thrift to
undertake lending among the members. In the process, it boost the confidence to
carry out the activities with ease and paves the way for self-reliance. The
membership of the group could be between 10 to 25 members. If more than 20
members are there, the group should be registered.
Pre-requisites for financing: Groups with 6 months of savings, regular meetings,
regular thrift habit and habituated internal lending and A or B rating as per Critical
Rating Index are eligible for bank finance.

Dose Period Regular loan Debt Swapping Housing

First
Having regular
savings at least for
6 Months
4 times of savings /
corpus or `50000/-
whichever is higher
Minimum `25000/- or
50% regular loan
limit whichever is
higher subject to
extent of debt.
`20000/-
per
member
subject to
maximum
of
`100000/-
per group

Second
Minimum of 12
Months from the
date of availment
of first dose of
finance.
Rural SHGs: 10 times
of savings / corpus or
`100000/- whichever
is higher. In case of
Urban SHGs, the
eligibility is 1.50 lakh.
Minimum `50000/-
for rural SHGs and
`75000/- for urban
SHGs or 50% regular
loan limit whichever
is higher subject to
extent of debt.
Third &
onwards
Minimum of 18
months from the
date of availment
of Second dose of
finance.
Eligibility as per Micro
Credit Plan (MCP)
40% of MCP or to the
extent of debt
whichever is lower
subject to maximum
of `200000/-
Note: Minimum savings of the group should not be less than 10% of the loan amount.

Corpus includes Balance amount in SB account, Amount held as cash with
authorized persons, Amount lent internally among members, Amount received as
interest on loans from members, any other contribution received by the group like
Grants, Donations and fund provided by Government

Debt Swapping: Financing to the group members for repayment of loans availed by
them from non-institutional lenders i.e. Private Money lenders. It is only one time
measure.

40

However, for Rural SHGs the maximum amount allowed to each SHG Group is
`1.75 lakhs, `2.50 lakhs and `5 lakhs under First, Second and third dose
respectively; and for Urban SHGs, the maximum amount allowed to each SHG Group
is `1.75 lakhs, `3.25 lakhs and `5 lakhs under First, Second and third dose
respectively. Recently, the upper ceiling limit is increased from `5 lakh to `10 lakh
without collateral security for the groups undertaking income generation activities
under agriculture/allied activities. Credit facility to SHGs up to `7.50 lakhs (with less
than 36 months) and up to `10 lakh (Above 60 months) in other cases are classified
under SME category. (Cir no.453 Ref 19/46 dated 06.02.2013)

In order to mitigate the hardships faced by SHGs with regard to documentation,
Banks are advised to extend finance (renewals/fresh) by way of Cash Credit facility
only. Further, they advised to convert all outstanding term loan accounts into Cash
Credit immediately. The validity period of the limit is 5 years subject to annual
review. No cheque book is issued to this account. No excess drawals and adhoc limits
are allowed in these accounts.

Interest Rate: The applicable interest rate for SHGs is Base Rate + 3.25%
irrespective of the amount of finance. AP State Government has introduced Vaddi
Leni Runalu (VLR) scheme where the state Government reimburse the full
interest for the SHG loans who repay the loans promptly and the reimbursement will
be done to the group at half yearly intervals. However, this facility is limited to the
loans upto `5 lakh only. The reimbursement is to be credited to groups savings bank
account, but not to the SHG loan account.

Mandal Mahila Samakhyas consists of maximum 500 SHGs as members covering
20 to 30 Village Organisations (VOs) operating in a mandal. Vos/SHG
Federation/MMS are to be registered under AP Mutually Aided Cooperative Societies
Act 1995 to avail finance from Banks subject to Minimum two years of existence with
audited balance sheet; A rating by External Agency i.e. Chartered Accountant; The
maximum eligible amount is 10 times of the Networth of VOs (savings contributed by
each SHG to VOs on monthly basis, interest earned on savings and internal lending,
revolving fund if any) or 80% of Micro Credit Plan (MCP) whichever is lower subject
to borrowing clause incorporated in the byelaws.

Society for Elimination of Rural Poverty (SERP): The introduction of SERP is
aimed at strengthening of SHG Bank Linkage program and to augment credit flow in
orderly manner in the State of Andhra Pradesh. Our Bank entered MOU with SERP to
undertake initiatives such as capacity building, rating of SHGs, preparation of Micro
Credit Plan, activating community based recovery mechanism, imparting training to
improve book keeping etc. (Cir.no.268 Ref 19/15 dated 25.10.2010)

41

Micro, Small and Medium Enterprises (MSME)
The Small enterprises contribute nearly 40% of the countrys industrial output and
offer the largest employment after agriculture. Therefore, this sector presents an
opportunity to the country to harness its local competitive advantages for achieving
global dominance. In recognition of these aspects, Government of India enacted the
MSMED Act in the year 2006. In accordance with the provisions of the act, the
activities of MSME are broadly classified into Manufacturing Enterprises and Service
Enterprises.

Manufacturing Enterprises are those which are engaged in manufacturing or
production of goods. These are defined in terms of investment in Plant &
Machinery. Recently, activities such as Seed Processing (for genetic enhancement)
involving collection of germplasm, cleaning, gravity separation, chemical treatment
etc., and Composite unit in Poultry with Chicken (Meat) Processing are treated as
Manufacturing units under MSME.

Service Enterprises are the enterprises engaged in providing or rendering of
services. These are defined in terms of investment in Equipment. Recently activities
such as Medical Transcription Service, Production of TV serials / program, Ripening of
Raw Fruits under controlled conditions and Service Rating Agency are treated as
Service Enterprises under MSME. The modified definitions of Micro, Small and
Medium Enterprises are as under:

No Category
Investment in Plant & Machinery/Equipment (`lakh)
Manufacturing Service
1 Micro Enterprise Up to 25 Up to 10
2 Small Enterprise above 25 & up to 500 above 10 & up to 200
3 Medium Enterprise above 500 & up to 1000 above 200 & up to 500

Small Enterprises: It includes all loans given to micro and small (manufacturing)
enterprises engaged in manufacture / production / processing / preservation of
goods, and micro and small (service) enterprises engaged in providing or rendering
of services which include small road & water transport operators, small business,
Professional & Self-employed persons and other service enterprises. Indirect finance
to small enterprises shall include finance to any person providing inputs to or
marketing the output of artisans, village and cottage industries, handlooms and co-
operatives of producers in this sector.

As per recent RBI guidelines Loans granted to private retail traders with credit
limits not exceeding `20 lakh and loans to retail traders dealing in essential
commodities (fair price shops) and consumer co-operative stores without any ceiling
in credit limit are eligible for classification under Micro (service) or small (service)
depending on investment in equipment criteria as mentioned above.

Medium Enterprises: Enterprises engaged in manufacture/production/ preservation
of goods and whose investment in plant and machinery should be as per above said
guidelines. Bank`s lending to medium enterprises will not be included for the
purpose of reckoning under priority sector. Interest rates are charged as per rates
prevailing at the time and are subject to change from time to Time. Rate of Interest
is determined as per credit rating system for loans above `10 lakhs as per Internal
Credit Risk Assessment Model. No collateral security or third party guarantee is
insisted for loan up to `5 lakh and for Tiny Sector up to `25 lakh based on the good
track record and financial position of the borrowing unit.

42


Banks may fix self set target for growth in advances to SME Sector in order to
achieve a minimum 20% year on year growth in credit to SMEs with the objective to
double the flow of credit to the SME sector within a period of 5 years. Further, banks
should ensure that

i)40% of the total advances to micro and small enterprises sector should go to micro
(manufacturing) enterprises having investment in plant and machinery up to `10
Lakh and micro (service) enterprises having investment in equipment up to `4 Lakh.

ii) 20% of the total advances to micro and small enterprises sector should go to
micro (manufacturing) enterprises with investment in plant and machinery above `10
Lakh & up to `25 lakh, and micro (service) enterprises with investment in equipment
above `4 Lakh & up to `10 Lakh. Thus 60% of MSE advances should go to the Micro
Enterprises.

Further, banks are advised to

Achieve a 20 percent year-on-year growth in credit to Micro and Small
enterprises to ensure enhanced credit flow.
Allocate 60% of MSE advances to the Micro Enterprises.
Achieve minimum 10% growth in number of Micro Enterprise accounts.
Pay focused attention in opening of more MSE branch offices at different MSE
clusters and each lead bank of a district may adopt atleast one MSE cluster.
Banks are mandated not to accept collateral security in case of loans up to `10 lakhs
extended to units in the Micro and Small Enterprises sector and all such loans are to
be covered under Credit Guarantee Scheme. Banks may, on the basis of good track
record and the financial position of the MSE units, increase the limit of dispensation
of collateral requirement for loans up to 25 lakh (with the approval of the appropriate
authority). Women entrepreneurs will be given further interest rebate of 0.50%
irrespective of credit rating and size of the unit. Composite loan (Term Loan and
Working Capital) up to `100 lakhs should be processed under single window concept.

Units undergoing technology up-gradation are eligible for 15% Credit Linked
Capital Subsidy Scheme (CLCSS). Units engaged in food processing are eligible for
subsidy 25% of unit cost with maximum of `50 lakhs and units are located at difficult
areas (J&K, HP, Sikkim, Andaman, NE States and tribal development project areas)
are eligible for 33.33% with maximum of `75 lakhs.
Communication of the banks decision regarding the credit assistance is done
promptly. As per Ministry of Finance, Government of India, all credit proposals for
additional limit, rescheduling for loan or any other facility should be disposed in 15
days from the date of receipt of application at the branch. With regard to new cases
for sanction, the time norm stipulated is 30 days from the date of receipt of
application at the branch. No loan application is rejected without approval of the next
higher authority.

43

Credit Guarantee Fund Scheme for Micro and Small Enterprises

Salient features: It provides guarantee coverage in respect of credit facilities
sanctioned to the accounts up to `100 lakhs to new/existing MSE units without any
collateral security and/or third party guarantees. All Micro enterprises up to ` 10 lakh
except Retail Trade are to be covered under this scheme.
Eligible Accounts: All MSE units classified under Manufacturing, RTO, Business
Enterprises, and Professional & Self Employed are eligible for coverage.
i)Micro Enterprises: Manufacturing units with investment in Plant & machinery up
to `25 lakh and servicing units with investment in equipment up to `10 lakh are
eligible for the coverage.
ii) Small Enterprises: Manufacturing units with investment in Plant & machinery
above `25 lakhs and up to `5 crore and servicing units with investment in equipment
above `10 lakhs and up to `2 crore are covered under this scheme.

The trust shall provide guarantee as under (Cir.no. 405 Ref 52/16 dt. 7.1.14):

Category
Maximum extent of guarantee where credit facility
is
Up to `5
lakhs
Above `5 & up
to `50 lakhs
Above `50 to `100
lakhs
MSME
85% of
amount
default or
subject to
maximum of
`4.25 lakhs
75% of amount
default or
subject to
maximum of
`37.50 lakhs
50% of loan irrespective
of the borrower,
location of the unit /
credit facility w.e.f 16
th

December 2013

Women Entrepreneurs
/ Units located in NE
region (Other than
credit facility up to `5
lakh to micro
enterprises)
80% of the amount in default
subject to maximum of `40
lakhs
Others
75% of the amount in default
subject to maximum of `37.50
lakhs

Any credit facility which has been sanctioned by Banks, under CGS, to an eligible
borrower with interest rate more than 4% over its Base Rate will not be eligible for
coverage under CGS.

Composite all-in Guarantee Fee
Credit Facility
Annual Guarantee fee (% p.a.)
Women, Micro Enterprises
and units in NE region
Others
Up to `5 lakh 0.75%
1.00%
Above `5 lakh & up to `100 lakh 0.85%

The lending institution may invoke the guarantee in respect of credit facility within a
maximum period of two years from the date of NPA. The initiation of legal
proceedings as a pre-condition for invoking of guarantees shall be waived for credit
facilities upto `50000/-. The trust shall pay 75% of the guaranteed amount on
preferring of eligible claim within 30 days. The trust shall pay interest at prevailing
Bank Rate to lending institute for the period of delay beyond 30 days.

44

Model Educational Loan Scheme (IBA)
Education is central to the human resources development and empowerment in any
country. Knowledge and information would be the driving force for economic growth
in the coming years. The current rate of economic growth of the country demands
technically and professionally trained man power in large numbers. Though
government intends to provide education to all through public funding, it is not
feasible in view budgetary constraints. At the same time the cost of education has
been going up in recent times and it has become financial burden to the parents of
the students. Hence, there is a clear case for institutional funding in this area. As the
focus is on development of human capital, repayment of the loan is expected to
come from future earnings of the student after completion of education. Hence the
assessment of the loan will be based on employability and earning potential of the
student upon completion of the course and not the parental income/family wealth.
Eligibility Criteria: The student should be an Indian National and should have
secured admission to a higher education course in recognized institutions in India or
Abroad through Entrance Test/Merit Based Selection process. However, entrance test
or selection purely based on marks obtained in qualifying examination may not be
the criterion for admission to some of the post graduate courses or research
programs. In such cases, banks will have to adopt appropriate criteria based on
employability and reputation of the institution concerned.
Minimum Age: There is no specific restriction with regard to the age of the student
to be eligible for education loan. However, if the student was a minor while the
parent executed documents for the loan, the bank will obtain a letter of ratification
from him/her upon attaining majority.
Courses Eligible: Approved courses leading to graduate/post graduate degree and
PG diplomas conducted by recognized colleges/universities recognized by UGC/Govt./
AICTE / AIBMS / ICMR etc; Courses like ICWA, CA, CFA etc; Courses conducted by
IIMs, IITs, IISc, XLRI. NIFT, NID etc; Regular Degree/Diploma courses like
Aeronautical, pilot training, shipping etc., approved by Director General of Civil
Aviation/Shipping, if the course is pursued in India. Approved courses offered in
India by reputed foreign universities. However, banks may approve other job
oriented courses leading to technical/professional degrees, post graduate degrees /
diplomas offered by recognized institutions under this scheme. Courses other than
the above offered by reputed institutions may also be considered on the basis of
employability.
Expenses considered for loan: Tuition, Hostel, Library, Laboratory and
Examination fee; Caution deposit, Building fund/refundable deposit; Purchase of
books, uniforms, equipments & instruments including computer/Laptop and study
tour & project work costs etc., are to be considered as cost of education for the
purpose of loan. It is to be noted that reasonable lodging and boarding charges will
be considered in case the student chooses / is required to opt for outside
accommodation. In case of studies abroad, Travel expenses/passage money and
Insurance charges should also be considered as cost of education. However, the
maximum expenses other than Tuition fee may be capped at 20% of the total tuition
fees payable for completion of the course. The scholarship / assistantship, if any, is
to be excluded from the total cost while arriving eligible loan amount.
Quantum of finance: Banks may consider sanction of maximum up to `10 lakh for
studies in India and `20 lakh for studies abroad. It may also be noted that even
loans in excess of `10 lakhs qualify for interest subsidy under Central Sector Interest
Subsidy Scheme for loans up to `10 lakhs.

45

Top up loans: Banks may consider top up loans to students pursuing further studies
within the overall eligibility limit, if such further studies are commenced during the
moratorium period of the first loan. The repayment of the loan will commence after
the completion of the second course and further moratorium period, as provided
under the scheme.

Margin: No margin is required to bring in by the borrower for the loans up to 4 lakh
and for loans above 4 lakh, 5% margin is stipulated. In case of studies abroad the
margin stipulated is 15%. Margin may be brought-in on year-to-year basis as and
when disbursements are made on a pro-rata basis.

Security: The loan documents should be executed by the student and the parent /
guardian as joint-borrower.

Loan Security / Co-obligation
Up to `4 lakhs
Parent as Joint borrower. In case of a married person, joint
borrower can be spouse or the parent(s)/parents-in-law.
Above `4 lakh & up to
`7.5 lakh
Beside the parent as joint borrower, suitable third part
guarantee.
Above `7.5 lakh
Parent/spouse as joint borrower and suitable tangible
collateral security
The security can be in the form of land/ building/ Govt. securities/ Public Sector
Bonds/Units of UTI, NSC, KVP, life policy, gold, and shares/mutual fund
units/debentures, bank deposit in the name of student / parent / guardian / any
other third party or any other tangible security acceptable to the bank with suitable
margin. Wherever the land/ building is already mortgaged, the unencumbered
portion can be taken as security on second charge basis provided it covers the
required loan amount.
Rate of Interest: Interest to be charged at rates linked to the Base rate as decided
by individual banks. The loan attracts simple interest during the study period.
Servicing of interest during study period and the moratorium period till
commencement of repayment is optional for students. Accrued interest will be added
to the principal amount borrowed while fixing EMI for repayment. 1% interest
concession may be provided by the bank, if interest is serviced during the study
period and subsequent moratorium period prior to commencement of
repayment. No processing / upfront charges may be levied on loans sanctioned
under the scheme.
Repayment: Repayment of the loan starts after one year from the date of
completion of course or 6 months after getting the job whichever is earlier. The
repayment should be in Equated Monthly Installments (EMI) and maximum
repayment period allowed for loans up to `7.5 lakhs & above `7.5 lakhs 10 & 15
years respectively. If the student is not able to complete the course within the
scheduled time, extension of time for completion of course may be permitted for a
maximum period of 2 years.

Educational loans can be sanctioned either at the Bank branch near to the residents
of the parents or to the educational institution. Existence of an earlier education loan
to the brother(s) and/or sister(s) will not affect the eligibility of another meritorious
student from the same family obtaining education loan as per this scheme from the
bank. Loan applications have to be disposed of in the normal course within a period
of 15 days to one month, but not exceeding the time norms stipulated for disposing
of loan applications under priority sector lending. Branches should not reject any
eligible loan proposal for the reason that the applicants residence does not fall under
service area of the Bank/Branch.

46

Housing Loans

In pursuance of National Housing Policy of Central Government, Reserve Bank of
India has been facilitating the flow of credit to housing sector. Since housing has
emerged as one of the sectors attracting a large quantum of bank finance, the
current focus of RBIs regulation is to ensure orderly growth of housing loan
portfolios of banks. Banks with their vast branch network throughout the length and
breadth of the country occupy a very strategic position in the financial system and
were required to play an important role in providing credit to the housing sector in
consonance with the National Housing Policy.

Eligibility Criteria: The following are the eligible categories to avail housing loans
under Direct Housing Finance:

Bank finance extended to a person who already owns a house in town/village
where he resides, for buying/constructing a second house in the same or
other town/village for the purpose of self occupation.
Bank finance extended for purchase of a house by a borrower who proposes
to let it out on rental basis on account of his posting outside the headquarters
or because he has been provided accommodation by his employer.
Bank finance extended to a person who proposes to buy an old house where
he is presently residing as a tenant.
Bank finance granted only for purchase of a plot, provided a declaration is
obtained from the borrower that he intends to construct a house on the said
plot, with the help of bank finance or otherwise, within such period as may be
laid down by the banks themselves.
Banks may consider requests for additional finance within the overall ceiling
for carrying out alterations/additions/repairs to the house/flat already
financed by them.
In the case of individuals who might have raised funds for construction/
acquisition of accommodation from other sources and need supplementary
finance, banks may extend such finance after obtaining paripassu or second
mortgage charge over the property mortgaged in favour of other lenders
and/or against such other security, as they may deem appropriate.
Age Criteria The age of the borrower should be between 21 to 65 years at the
time sanction of the loan.
Assessment of Loan The quantum of loan will be arrived based on the gross &
net income of the borrower and other factors like spouse income, assets, liabilities,
stability of income etc. Further, the loan amount also depends on the tenure of the
loan and interest rate of the loan as these variables determine outflow which in turn
depends on disposal income of the borrower/spouse.
Loan To Value (LTV) Ratio In order to prevent excessive leveraging, the LTV
ratio in respect of housing loans should not exceed 80 per cent. However, for small
value housing loans i.e. housing loans up to `25 lakh (which get categorized as
priority sector advances), the LTV ratio should not exceed 90 per cent. In order to
ensure proper LTV, banks should not include charges such as stamp duty,
registration/document charges in the cost of the asset.
Interest Rate It is the discretion of the banks to levy their own interest rates.
Gestation Period Normally, the gestation period allowed is 12 to 18 months.
However, it can be extended maximum period of 30 months from the date of first
disbursement.

47

Repayment The maximum period allowed for repayment of home loan is 30 years
or up to the age of 75 years of the borrower whichever is earlier.
Equated Monthly Installment Normally, banks fix EMI which covers Principal as
well as Interest. Some banks offer Floating and Fixed Interest Rates and it is up to
the borrower to choose. Under Floating Interest, the interest rate is subject to
changes from time to time by the Bank with reference to Bench Mark rate (Base
Rate) where as Fixed Interest Rate is a rate which continues to be the same
during the entire tenor of the loan. Banks are also offering flexible repayment
options viz., Step-up and Step-down, depending on the future cash flows of the
borrower. Under Step-up option, the lower EMI in the initial years and EMI increases
as years roll by. It is convenient for borrowers who are in the beginning of their
careers. In case of Step-down option, EMI is high initially and decreases in the
subsequent years, which is useful who are close to their retirement.
Other conditions:
i)In cases where the applicant owns a plot/land and approaches the banks/Fis for a
credit facility to construct a house, a copy of the sanctioned plan by competent
authority in the name of a person applying for such credit facility must be obtained
by the Banks/Fis before sanctioning the home loan.
ii) An affidavit-cum-undertaking must be obtained from the person applying for such
credit facility that he shall not violate the sanctioned plan, construction shall be
strictly as per the sanctioned plan and it shall be the sole responsibility of the
executants to obtain completion certificate within 3 months of completion of
construction, failing which the bank shall have the power and the authority to recall
the entire loan with interest, costs and other usual bank charges.
iii) An Architect appointed by the bank must also certify at various stages of
construction of building that the construction of the building is strictly as per
sanctioned plan and shall also certify at a particular point of time that the completion
certificate of the building issued by the competent authority has been obtained.
iv) In cases where the applicant approaches the bank/Fis for a credit facility to
purchase the built up house/flat, it should be mandatory for him to declare by way of
an affidavit-cum-undertaking that the built up property has been constructed as per
the sanctioned plan and/or building bye-laws and as far as possible has a completion
certificate also.
v) An Architect appointed by the bank must also certify before disbursement of the
loan that the built up property is strictly as per sanctioned plan and/or building bye-
laws.
vi) No loan should be given in respect of those properties which fall in the category
of unauthorized colonies unless and until they have been regularized and
development and other charges paid.
vii) No loan should also be given in respect of properties meant for residential use
but which the applicant intends to use for commercial purposes and declares so while
applying for loan.
***

48

Interest Subvention Schemes
1. Short Term Agricultural Credit: In order to provide short term credit (Crop
Loans, PAGCC, Kisan Vikas Cards, Rythu Mitra Groups, Joint Liability Groups,
Agricultural Gold Loans and Working Capital Loans financed to Fisheries) to the
farmers at reasonable interest rate, Government of India announced a scheme of
Interest Subvention in the year 2006. Under this, farmer receives short term credit
at 7% p.a. from the date of disbursement to the end of the respective season with
an upper limit of `3 lakh on the amount. However, Agricultural Medium Term Loans
are not covered under this scheme. Government will provide Interest Subvention to
the banks viz., PSBs, RRBs, and Farmers Service Co-operative Societies, on the
amounts financed to farmers (short term) at the following rates:
Banks lending to short term agricultural credit are eligible to claim 2% Interest
Subvention from Government of India for loans disbursed in year 2012-13. Further,
farmers are eligible for another 3% interest subvention who repays the loan
promptly. This additional subvention is available to Public Sector Banks on the
condition that the effective rate of interest on short term production credit up to `3
lakh for such farmers will be 4% p.a. Branches are required to submit claim half-
yearly (September & March) for reimbursement of interest subvention amount from
RBI. For crop loans up to one lakh disbursed in AP State attracts zero interest rate
as state government is reimbursing the entire interest to the banks for prompt
payment. Further, RBI has advised the Banks to ensure that all crop loans against
which they are claiming interest subvention should satisfy, inter alia, the following
criteria:
The borrower should be an agriculturist
The rate of interest charged should not exceed the rate stipulated by the Govt
of India
The amount of loan is fixed according to the prescribed scale of finance for
agricultural loans and the loan is used for stated purpose
Seasonality is observed in regard to both disbursement and recovery
2. Export Credit: Government is providing interest subvention at 3% p.a. to all
Scheduled Commercial Banks in respect of rupee export credit (Pre & Post shipment)
extended to employment oriented export sectors such as Handicrafts, Handlooms,
Carpets, Readymade garments, processed agriculture products, Sports goods, Toys,
Engineering items, ITC and Textile goods. However, the interest rate charged by the
banks on export credit should not fall below 7% p.a. after taking the said Interest
Subvention in to account. The above subvention is valid up to 31.03.2014. Branches
should submit the interest claim to Head Office every quarter along with External
Auditor Certificate.
3. Micro & Small Enterprises: Paavala Vaddi Scheme was introduced for the
benefit of Micro & Small Enterprises set up in AP State except in the Municipal
Corporation limits of Hyderabad, Vijayawada and Visakhapatnam. The scheme is
applicable to the term loans availed on fixed capital investment by the eligible new
Micro and Small Enterprises on or after 01.04.2008. More than 75% of the plant and
machinery should be new and not second hand. Under the scheme, interest charged
over and above 3% p.a. (i.e. 10% - 3% = 7%) will be reimbursed to the group at
half yearly intervals. However, the maximum reimbursement is restricted to 9% p.a.
The benefit is available for a period of 5 years i.e. up to the first half of 6
th
year or till
the closure of term loan, whichever is earlier. However, this benefit is available to
only those accounts, which in regular in payment of principal and interest. It is
applicable to one-time payment accounts also.

49

4. Housing Loans: The objective of the scheme is to provide interest subsidy on
housing loan as a measure to generate additional demand for credit and to improve
affordability of housing to eligible borrowers in the middle and lower income groups.
The scheme is expected to provide relief to prospective home owners and improve
home ownership in the specified target segment. Interest subvention of 1% will be
available on housing loans up to `15 lakh to individuals for construction/purchase of
a new house or extension of an existing house, provided the cost of construction /
price of the new house/extension does not exceed `25 lakh. All loans sanctioned and
disbursed on or after 01.10.2009 are eligible for the said interest subsidy. It will
applicable to the first 12 installments of all such loans sanctioned and disbursed
during the currency of the scheme and will be computed for 12 months on the
disbursed amount. The subsidy amount will be adjusted upfront in the principal
outstanding, irrespective whether the loan is on fixed or floating rate basis. The
interest subvention is applicable for the eligible borrowers for one housing unit only.
The scheme will be implemented through Scheduled Commercial Banks. However,
Non Resident Indians for construction of farm houses and staff members of the
banks are not eligible for interest subsidy under this scheme.
5. Educational Loans Interest Subsidy: India is one of the few countries having
large pool of young people, which is an opportunity to the country provided these
Human Assets are converted into Knowledge Assets. Providing proper education to
the students is a prerequisite to achieve the desired goal. The poor financial
background of the students is one of the major constraints for the students aspiring
for higher studies. In the recent budget, it is envisaged to ensure
technical/professional education to all the deserving students by providing required
financial support by way of Interest subsidy. In the above backdrop, Government of
India has launched a scheme Central Scheme to provide Interest Subsidy (CSIS) to
provide interest subsidy during the period of moratorium i.e. course period plus one
year or six months after getting job, whichever is earlier, on loans taken by students
belonging to Economically Weaker Sections (EWS) from scheduled banks under
Educational Loan scheme of the Indian Banks Association, for pursuing any of the
approved course of studies in technical and professional streams, from recognized
institution in India. The benefits of the scheme would be applicable to those students
belonging to EWS with annual gross parental/family income upper limit of `4.5 lakhs
per year from all sources. The interest subsidy shall be available to the eligible
students only once, either for the first graduate degree course or post graduate
degree/diplomas in India. Interest subsidy shall however be admissible for integrated
courses (graduation plus post graduate). The scheme shall be applicable from the
academic year 2009-10 starting 01.04.2009. However, in the budget-2014, the
benefit of interest subsidy is also extended to loans sanctioned/disbursed prior to
31
st
March 2009 and still outstanding are eligible for interest subsidy and need to
submit claims on a ONE TIME basis for all outstanding cases and the process of
interest claims should be completed on or before 30
th
April 2014. In order to claim
the interest subsidy from Nodal agency, bank branches are required to obtain income
proof certificate from appropriate authority as decided by state government and
agreement with borrower/parents.

6. SHG Loans: AP State Government introduced Vaddi Leni Runalu scheme with
effective from 01.01.2012 for all repayments made after that date for the
outstanding SHG Bank loans, including any fresh loans given thereafter. The interest
incentive will be available only to those accounts who repay the loans regularly. The
incentive will be released directly to the credit of SHG account once in Half-year.

***

50


Ratio Analysis

Financial statements: The statement which provides us the financial position of a
Balance Sheet are called Finance Statements, which includes Trading Account (in
case of Manufacturing concerns), Profit & Loss Account, Balance Sheet, Cash Flow
Statement and Funds Flow Statement. The analysis of Balance Sheet is a process of
bringing down the difficult matter into a simple and easily understandable one. To
have a clear understanding of the financial position of the Business concern, at least
three years financial statements are to be ascertained. They provide us treasure of
information. Balance Sheet of a business concern shows the strength of the concern
on a given date but not reveal the current state of affairs of the concerns. Balance
Sheet is having certain limitations, because it does not disclose the critical factors,
such as Managerial Efficiency, Technical competence, Marketing capabilities and
Competition in the market.

Ratio means a comparison of two items which are having cause and relationship.
Ratios can be expressed in percentage or in number of times. Depending upon the
nature, the ratios are broadly classified in to four categories viz., Liquidity Ratios,
Leverage Or Solvency Ratios, Activity Ratios and Profitability Ratios.

I. LIQUIDITY RATIOS: These Ratios helps to find out the ability of the business
concern to pay the short term liability of its liquidity. Any adverse position in liquidity
leads to sudden fall of the unit.

Current Ratio: Current Ratio denotes the capacity of the business concern to meet
its current obligation out of the 50ttest50ed50 value of the Current Assets. Current
Ratio = Current Assets / Current Liabilities. Term Loan installments falling due for
payment in next 12 months are to be taken as Term Liability for the purpose of
calculation of Current Ratio /MPBF. Inter-corporate deposits are to be treated as
Non-Current Assets. Ideal Current Ratio is 2:1. Acceptable Ratio as per our Loan
Policy guidelines is 1.33:1 for the limits enjoying above `6.00 crores and 1.15:1 for
the business concerns availing limits of below `6.00 crores. Any deviation below the
required ratio requires ratification of Higher Authority.

Quick Ratio Or Acid Test Ratio: This ratio is a comparison of Quick Assets to
Current Liabilities. Quick Assets mean the assets which have instant liquidity of the
business concern. Though the Inventory and Prepaid expenses are part of Current
Assets, it may be difficult to sell and realize the inventory. Hence, Inventory and
Prepaid expenses are to be excluded for arriving the Quick Asset Ratio.
Current Assets (Inventory+Prepaid Exp) Quick
Ratio or Acid Test Ratio = ----------------------------------------------
Current Liabilities

Ideal Quick Ratio is 1:1. Current Ratio is always to be read along with Quick Ratio. A
fall in the Quick Ratio in comparison to the Current Ratio indicates high inventory
holdings.

II. LEVERAGE AND SOLVENCY RATIOS: These Ratios helps to find out the Long
Term Financial stability of the business concern

i)Debt Equity Ratio: Long Term Debt / Equity Here, Equity refers Tangible Net
worth. The Ideal ratio is 2:1 and the higher may also be considered as safe.

ii) Debt Service Coverage Ratio: It helps to know the capacity of the firm to
repay the Long Term Loan Instalment and Interest. Ideal DSCR is 2:1. The higher

51

the DSCR, we may fix the lower repayment period. However, banks may also
consider DSCR 1.20:1 where fixed income generation is assured, such as Rent
Receivables etc.
Net Profit After Tax + Depreciation +Int. on TL
DSCR = -------------------------------------------------------------
Int. on TL + Instalment on TL

iii) Fixed Assets Coverage Ratio (FACR): This ratio indicates the extent of Fixed
assets met out of long term borrowed funds. Ideal Ratio is 2:1
Net Block
FACR = --------------------------- (Net Block means Total Assets Depreciation)
Long Term Debt
iv) Interest Coverage Ratio:
EBIDT
Interest Coverage Ratio = ---------------
Interest
Where EBIDT is Earning Before Interest, Depreciation and Tax. This ratio indicates
the interest servicing capacity of the unit. Higher the ratio has probability of non-
servicing of interest and hence avoidance of slippage of asset.

III. ACTIVITY RATIOS:

Inventory Turnover Ratio: Inventory constitutes raw material, work in process,
finished goods etc. The ratio is arrived by dividing Inventory by average monthly Net
sales to arrive at inventory levels in number of months. Lower the ratio, the faster
the movement of inventories and Higher the ratio slower the movement of
inventories. It also indicates the time taken to replenish the inventories. Separate
parameters are laid down for fabrication units & seasonal industries (maintaining
peak level inventories as at March) where operating cycle is longer compared to
other businesses and others
Inventory x (RM+WIP+FG) x 12 (OR ) Cost of Goods Sold
Net Sales = Average Stock ((Opening Stock+Closing stock)/2)

ii) Debtors Velocity Ratio: Debtors
------------ x period
Credit sales
Lower the collection period indicates efficiency in realization of receivables and vice-
versa.
iii) Creditors Velocity Ratio: Trade Creditors
---------------------- x period
Credit Purchase
Higher velocity denotes that the company is enjoying credit from its suppliers and it
has bearing on Maximum Permissible Bank Finance (MPBF)

iv) Assets Turnover Ratio:
Net Sales
ASSET TURNOVER RATIO=-----------------------------
Total Operating Assets
Total Operating Assets= Total Assets Intangible Assets. Higher the ratio indicates
favorable situation of optimum utilization of all the fixed assets.

IV. PROFITABILITY RATIOS:

c) Gross Profit Ratio -> Gross Profit/Net Sales*100 Gross Profit Ratio
indicates the manufacturing efficiency and Pricing policy of the concern. Higher
percentage indicates higher sales volume, better pricing of the product or lesser
cost of production.

52

ii) Net Profit Ratio: Net Profit After Tax
----------------------------------- X 100
Net Sales
A decline trend is a pointer to some unhealthy development unless the company had
made usurious profits in the past and has consciously decided to reduce its profits by
lowering the prices of its product.

iii) Return on Equity: Net Profit After Tax
----------------------------------- X 100
Tangible Networth
Working Capital Assessment

i) Turnover Method: (for WC limits up to & inclusive of `6.00 Crore)
A. Accepted Projected Sales Turnover
B. 25% of Sales Turnover
C. Margin @ 5 % of Sales Turnover
D. Actual NWC available as per latest Audited Balance Sheet
E. B-C
F. B-D
G. M.P.B.F = E or F, whichever is less.

ii) Inventory Method For WC limits up to & inclusive of `6.00 Crore

A. Total Current Assets
B. Current Liabilities (other than Bank Borrowings)
C. Working Capital Gap = A B
D. Margin @ 13% of Projected Current Assets
E. Actual NWC available as per latest Audited Balance Sheet
F. C-D
G. C-E
H. M.P.B.F = F or G, whichever is less.

Maximum Working Capital credit limit up to which Turn Over method can be
extended is `6 Crores. Where the limits of above `6.00 Crore, the margin is to be
taken as 25% projected current assets. If actual NWC is less than required
margin, the borrower has to bring in the short fall.
The minimum acceptable Current Ratio for working capital credit facility up to `6
crore & above `6 crore is 1.15 & 1.33 respectively.
Maximum acceptable level of Total Debt- Equity Ratio is 4.
Maximum permissible Gearing Ratio while assessing the eligibility for non-
funded limits is 10.
Standard average DSCR specified for all Term Loans is 1.50 to 2.00. However,
in case of assured source of income, it can be taken as 1.20. Lower DSCR can be
accepted for Rural Godowns.
***

53


Non Fund Business

Bank Guarantee: As a part of Banking Business, Bank Guarantee (BG) Limits are
sanctioned and guarantees are issued on behalf of our customers for various
purposes. Broadly, the BGs are classified into two categories:

Financial Guarantees are direct credit substitutes wherein a bank irrevocably
undertakes to guarantee the payment of a contractual financial obligation. These
guarantees essentially carry the same credit risk as a direct extension of credit i.e.
the risk of loss is directly linked to the creditworthiness of the counter-party against
whom a potential claim is acquired. Example Guarantees in lieu of repayment of
financial securities/margin requirements of exchanges, Mobilization advance,
Guarantees towards revenue dues, taxes, duties in favour of tax/customs/port/excise
authorities, liquidity facilities for securitization transactions and Deferred payment
guarantees.

Performance Guarantees are essentially transaction-related contingencies that
involve an irrevocable undertaking to pay a third party in the event the counterparty
fails to fulfill or perform a contractual obligation. In such transactions, the risk of loss
depends on the event which need not necessarily be related to the creditworthiness
of the counterparty involved. Example Bid bonds, performance bonds, export
performance guarantees, Guarantees in lieu of security deposits/EMD for
participating in tenders, Warranties, indemnities and standby letters of credit related
to particular transaction.

Though, BG facility is a Non-fund Facility, it is a firm commitment on the part of the
Bank to meet the obligation in case of invocation of BG. Hence, monitoring of Bank
Guarantee portfolio has attained utmost importance. The purpose of the guarantee is
to be examined and it is to be spelt out clearly if it is Performance Guarantee or
Financial Guarantee. Due diligence of client shall be done, regarding their experience
in that line of activity, their rating/grading by the departments, where they are
registered. In case of Performance Guarantees, banks shall exercise due caution to
satisfy that the customer has the necessary experience, capacity and means to
perform the obligations under the contract and is not likely to commit default. The
Financial Indicators/Ratios as per Banks Loan Policy guidelines are to be satisfactory.
The position of receivables and delays if any, are to be examined critically, to
understand the payments position of that particular activity. The financial position of
counter party, type of Project, value of Project, likely date of completion of Project as
per agreement are also to be examined. The Maturity period, Security Position,
Margin etc. are also to be as per Policy prescriptions and are important to take a
view on charging BG Commissions.

Branches shall use Model Form of Bank Guarantee Bond, while issuing Bank
Guarantees in favour of Central Govt. Departments/Public Sector Undertakings. Any
deviation is to be approved by Zonal Office. It is essential to have the information
relating to each contract/project, for which BG has been issued, to know the present
stage of work/project and to assess the risk of invocation and to exercise proper
control on the performance of the Borrower. It is to be ensured that the operating
accounts of borrowers enjoying BG facilities route all operations through our Bank
accounts. To safeguard the interest of the bank, Branches need to follow up with the
Borrowers and obtain information and analyze the same to notice the present stage
of work/project, position of Receivables, Litigations/Problems if any leading to
temporary cessation of work etc.

54

Letter of Credit: A Letter of Credit is an arrangement by means of which a Bank
(Issuing Bank) acting at the request of a customer (Applicant), undertakes to pay to
a third party (Beneficiary) a predetermined amount by a given date according to
agreed stipulations and against presentation of stipulated documents. The
documentary Credit are akin to Bank Guarantees except that normally Bank
Guarantees are issued on behalf of Banks clients to cover situations of their non
performance whereas, documentary credits are issued on behalf of clients to cover
situation of performance. However, there are certain documentary credits like
standby Letter of Credit which are issued to cover the situations of non performance.
All documentary credits have to be issued by Banks subject to rules of Uniform
Customs and Practice for Documentary Credits (UCPDC). It is a set of standard rules
governing LCs and their implications and practical effects on handling credits in
various capacities must be possessed by all bankers. A documentary credit has the
seven parties viz., Applicant (Opener), Issuing Bank (Opening of LC Bank),
Beneficiary, Advising Bank (advises the credit to beneficiary), Confirming Bank
Bank which adds guarantee to the credit opened by another Bank thereby
undertaking the responsibility of payment/negotiation/acceptance under the credit in
addition to Issuing Bank), Nominated Bank Bank which is nominated by Issuing
Bank to pay/to accept draft or to negotiate, Reimbursing Bank Bank which is
authorized by the Issuing Bank to pay to honour the reimbursement claim in
settlement of negotiation/acceptance/payment lodged with it by the paying /
negotiating or accepting Bank. The various types of LCs are as under:

i) Revocable Letter of Credit is a credit which can be revoked or cancelled or
amended by the Bank issuing the credit, without notice to the beneficiary. If a credit
does not indicate specifically it is a revocable credit the credit will be deemed as
irrevocable in terms of provisions of UCPDC terms.
ii) Irrevocable Letter of credit is a firm undertaking on the part of the Issuing
Bank and cannot be cancelled or amended without the consent of the parties to letter
of credit, particularly the beneficiary.
iii)Payment Credit is a sight credit which will be paid at sight basis against
presentation of requisite documents as per LC terms to the designated paying Bank.
iv) Deferred Payment Credit is a usance credit where payment will be made by
designated Bank on respective due dates determined in accordance with stipulations
of the credit without the drawing of drafts.
v) Acceptance Credit is similar to deferred credit except for the fact that in this
credit drawing of a usance draft is a must.
vi) Negotiation Credit can be a sight or a usance credit. A draft is usually drawn in
negotiation credit. Under this, the negotiation can be restricted to a specific Bank or
it may allow free negotiation whereby any Bank who is willing to negotiate can do so.
However, the responsibility of the issuing Bank is to pay and it cannot say that it is
of the negotiating Bank.
vii) Confirmed Letter of Credit is a letter of credit to which another Bank (Bank
other than Issuing Bank) has added its confirmation or guarantee. Under this, the
beneficiary will have the firm undertaking of not only the Bank issuing the LC, but
also of another Bank. Confirmation can be added only to irrevocable and not
revocable Credits.
viii) Revolving Credit is one where, under the terms and conditions of the credit,
the amount is revived or reinstated without requiring specific amendment to the
credit. The basic principle of a revolving credit is that after a drawing is made, the
credit reverts to its original amount for re-use by beneficiary. There are two types of

55

revolving credit viz., credit gets reinstated immediately after a drawing is made and
credit reverts to original amount only after it is confirmed by the Issuing Bank.
ix) Installment Credit calls for full value of goods to be shipped but stipulates that
the shipment be made in specific quantities at stated periods or intervals.
x) Transit Credit When the issuing Bank has no correspondent relations in
beneficiary country the services of a Bank in third country would be utilized. This
type of LC may also be opened by small countries where credits may not be readily
acceptable in another country.
xi) Reimbursement Credit Generally credits opened are denominated in the
currency of the applicant or beneficiary. But when a credit is opened in the currency
of a third country, it is referred to as reimbursement credit.
xii) Transferable Credit Credit which can be transferred by the original
beneficiary in favour of second or several second beneficiaries. The purpose of these
credits is that the first beneficiary who is a middleman can earn his commission and
can hide the name of supplier.
xiii) Back to Back Credit/Countervailing credit Under this the credit is opened
with security of another credit. Thus, it is basically a credit opened by middlemen in
favour of the actual manufacturer/supplier.
xiv) Red Clause Credit It contains a clause providing for payment in advance for
purchasing raw materials, etc.
xv) Anticipatory Credit Under this payment is made to beneficiary at pre-
shipment stage in anticipation of his actual shipment and submission of bills at a
future date. But if no presentation is made the recovery will be made from the
opening Bank.
xvi) Green Clause Credit is an extended version of Red Clause Credit in the sense
that it not only provides for advance towards purchase, processing and packaging
but also for warehousing & insurance charges. Generally money under this credit is
advanced after the goods are put in bonded warehouses etc., up to the period of
shipment.
Other concepts

i)Bill of Lading: It should be in complete set and be clean and should generally be
to order and blank endorsed. It must also specify that the goods have been shipped
on board and whether the freight is prepaid or is payable at destination. The name of
the opening bank and applicant should be indicated in the B/L.
ii) Airway Bill: Airway bills/Air Consignment notes should always be made out to
the order of Issuing Bank duly mentioning the name of the applicant.
iii)Insurance Policy or Certificate: Where the terms of sale are CIF the insurance
is to be arranged by the supplier and they are required to submit insurance policy
along with the documents.
iv) Invoice: Detailed invoices duly signed by the supplier made out in the name of
the applicant should be called for and the invoice should contain full description of
goods, quantity, price, terms of shipment, licence number and LC number and date.
v) Certificate of Origin: Certificate of origin of the goods is to be called for. Method
of payment is determined basing on the country of origin.
vi) Inspection Certificate: Inspection certificate is to be called for from an
independent inspecting agency (name should be stipulated) to ensure quality and
quantity of goods. Inspection certificate from the supplier is not acceptable.
vii) Lloyds Certificate: Shipments should be made only by Conference Vessels,
which are in the approved list of Lloyds Register of Shipping and classified as Lloyds

56

100 A1 or its equivalent classification. Age of the vessel should not be more than 25
years and it should be seaworthy. Any other documents required by the applicant,
such as weight certificate, packing list, quality certificates should be mentioned in
the application.
LoC/LoU is issued for making payment of Import Bills received either under FLC or
on collection basis for imports made into India in favour of Overseas Bank or
Financial Institution outside India to the extent of US $ 20 million or its equivalent
per transaction. The period of such LoC / LoU / Guarantee has to be co-terminus with
the period of credit, reckoned from the date of shipment. No roll-over/extension will
be permitted beyond the permissible period. The precautions & Conditions for
issuance of LOC/LOU are:
The facility may be considered in cases where there is mismatch between cash
flows to meet the FLC commitment on the due date.
At any point of time the liability under FLC, FIBC and LoC/LoU/Guarantee put
together shall not exceed the sanctioned FLC limit.
The stocks procured under FLC/Letter of Comfort are to be deducted to ensure
Working Capital limits are fully secured by adequate Drawing Power.
Multi currency option is not available to the importer.
In case the import is made on collection basis, branch should ensure strict
compliance of KYC/AML regulations.
Commission to be collected upfront @ 0.50% per quarter or part thereof for the
specified period of liability i.e. actual validity period of LOC / LOU / Guarantee.
Importer is required to pay all-in-cost (with a ceiling over 6 months LIBOR
minus 200 basis points) to the Overseas Bank / FI outside India. All-in-cost
includes arranger fee, upfront fee and management fee.
General Guidelines: LC is to be opened for our own customers known to be
participating in the trade. The importer should have Import Export (IE) code number
allotted by Director General of Foreign Trade. The importer should have adequate
sanctioned limits and/or funds provision for clearance of goods. Exchange control
copy of license to be obtained in case of the item of import falls under negative list.
If the import is freely permissible obtain a declaration from the importer to that
effect. Import LCs is to be advised through our Foreign Correspondents. Date of
dispatch of goods should be after the date of opening of the LC. When the LC is
opened against third party licence, the applicant should hold a proper letter of
authority issued by the import licence holder along with the exchange control copy of
the licence. The description of goods, validity for shipment, country of shipment and
origin are as per the provisions of Policy/Licence etc. Branch is required to obtain
confidential report on the overseas seller at the time of opening of LC in case where
the value of LC is $25000 and above, however, in case of borrowers with credit
rating of A+ the limit is above USD 1 lac. Confidential report is a must in case where
the importer dealings with the branch are less than 1 year irrespective of the value.
LC should be opened only in favour of overseas supplier/manufacturer or shipper of
goods and not in favour of the applicant himself or his nominee. Terms of shipment
such as FOB/C&F/CIF etc are to be clearly mentioned. For C&F and FOB, applicant
should hold insurance cover note/policy in the joint names of the Bank and the
Opener. The policy should cover at least 110% of the CIF value, and is valid for
entire shipment period. Usance period should not exceed 180 days. LC should not be
opened for import of goods from banned countries. LC should be signed by two
officers, where the value of LC is `10000 and above, where it is not issued through
SWIFT. LC should invariably contain a clause that the credit is subject to the
provisions of UCPDC 600 and URR 725.

LC should stipulate a condition that the shipments should be made only by
conference vessels, which are on the approved list of Lloyds or any certificate to
show that the vessel is seaworthy & not more than 25 years old. LC should insist for

57

an inspection certificate issued by a well known international Inspection Agencies.
Last date of shipment should be within the validity of Licence.
Goods are to be consigned only in the name of LC opening bank and never directly to
the buyer. Similarly Documents of title to goods should be required to be sent only
to the LC opening Bank but not to the importer directly. The origin of the goods is to
be specifically mentioned in the application. No onerous clause is incorporated in the
LC, which is detrimental to the interest of the Bank. Payment to be claimed only
against presentation of full set of documents. Currency in which payment for import
is to be made is in accordance with the permitted methods of payment.
LC Operational Guidelines: LC covering letter should be addressed to the bank
to whom LC is being forwarded and signed by authorized officer of the branch duly
mentioning Full name of the signatory of the letter, His/her Designation, Signature
number/Power of Attorney number allotted by the bank, Authorized Email ID of the
branch and Clearly mentioning that the any information relating to the said Letter of
credit can be obtained by email id as provided in the letter by quoting the LC no and
date. On receipt of LC, advising bank to send e-mail through its authorized mail ID
seeking confirmation from LC opening bank in having issued the said LC. LC opening
bank is required to give confirmation by email on the same email id of the LC
advising bank, through its authorized e-mail ID only. The confirmation should
normally be under the signature of signatories other than those to LCs. Effort may be
made to verify the same through search engines such as google whether the firm
exists, if so its addresses and other information positive or negative against the firm.
Certain information is available on the internet in public domain such as sales tax
defaulter or whether registration with sales tax still valid or not. Information is
available state wise and within the state circle wise. The same may be confirmed by
LC opening and advising banks.
LC discounting/negotiating bank to send confirmation by an email on the authorized
email ID of the LC opening bank informing that the name of the courier, its docket
no and list of documents dispatched. It has been ascertained that all the necessary
details such as name of the beneficiary, date of last shipment, details of goods to be
purchased under LC, name of LC advising bank etc is captured in CBS system while
opening LC. Even all amendments such as amendment in last date of shipment, date
of expiry and even change in usance and the amount of LC are also captured in CBS.
Therefore LC confirmation work can also be centralized within the bank.
Confirmation needs to be sent though the authorized email of the LC opening bank to
the authorized email ID of LC negotiating bank.
The recent development in issuance of Inland Letter of Credit is implementation of
Structured Financial Messaging System (SFMS) with effect from 1
st
January 2013. It
is aimed at establishing a safe and secure environment in banking industry for
conducting trade finance business and for sending and receiving messages for LC
instruments. This serves as the basic platform for transmitting messages of Inland
Letter of Credits by all banks in India.

58

Charges

Banks do business with depositors funds. The Banks have to honor their
commitment to return the deposits whenever demanded by the depositors. The
primary source of funds for repayment is the business itself; hence banks take
considerable care to evaluate the profitability and sustainability of the business
financed by them. Despite all care and due diligence some of the businesses could
fail. The cause of failure may be changes in the external environment or
mismanagement. Banks have to ensure that even if the business fails, their funds
are recoverable by invoking the Security offered by the borrowers. Security is an
asset like land, building and machinery, stocks (raw materials / finished goods),
receivables and other securities which are charged to the bank. Charge is the legal
right given by the borrower to the bank to take possession of dispose of the security
in the event of default. The types of charges are:

Pledge is a charge where the borrower hands over possession of asset to the bank.
For example loans against gold jewellery, warehouse receipts, key loan etc. The
relationship between borrower and the bank is Pledgor and Pledgee. Under this,
the ownership of the goods remains with the borrower but the possession of the
goods is in the hands of the bank. The bank enjoys Right of Sale in case the loan is
not repaid and the bank can sell the pledged goods after giving adequate notice of
sale to the borrower. It is the responsibility of the bank to take as much care of the
goods pledged as a man of ordinary prudence would under similar circumstances.
When the loan is fully paid, it is the responsibility of the bank to handover the
possession of the goods back to the borrower.

Hypothecation Normally banks lend funds to the borrowers to acquire raw
material / assets to undertake their business activities and these assets continues to
be in the possession of the borrower. It is as if the borrower holds the asset on
behalf of the Bank. Hypothecation gives the Bank right to take possession and sell
the asset, in case of default. However, bank need to initiate action either under
SARFEASI or Court/DRT to take possession of the asset.

Pledge Vs Hypothecation Thus, while under pledge the ownership remains with
the borrower but the possession passes on to the bank, under hypothecation, both
ownership and possession remains with the borrower. While under pledge the bank
can sell the asset without going to court, under hypothecation it can be done only
through the legal process. Hypothecation creates floating charge on assets created
out of bank funds. Though hypothecation is the most prevalent form of charge for
bank finance, it is inferior to pledge. To protect their assets, banks need to inspect
the hypothecated assets periodically.

Mortgage While movable assets can be pledged or hypothecated, immovable
assets (land and buildings) can only be mortgaged. It is similar to hypothecation
both ownership and possession remain with the borrower (mortgagor) and the bank
(mortgagee) gets the right to take possession and sell the mortgaged property by of
SARFEASI or legal action. During the subsistence of the mortgage, the borrower
cant sell the mortgaged property without the consent of the bank.

Simple Mortgage: A simple mortgage does not involve giving the possession of the
mortgagors property to the mortgagee. It is under mutual agreement that in case of
non-payment by the mortgagee to the mortgagor within the specified time, the
mortgagee can cause the mortgaged property to be sold in accordance with law and
have the sale proceeds adjusted towards the payment of the mortgage money.
ii) Mortgage by Conditional Sale: This type of mortgage entails the apparent sale
of property by the mortgagor to the mortgagee on a conditional basis, that on

59

default by mortgagor, the sale shall become absolute and complete. If the mortgagor
repays his loan, the sale shall become null and void.
Usufructuary Mortgage: It is a mortgage, by an express or implied term gives
possession to the lender and gives him rights to accrue the rents or income coming
from that property as repayment for interest and mortgage money till the time
repayment is complete. There is no time limit for payment of the mortgage money.
English Mortgage: The mortgagor transfers the mortgaged property to the
mortgagee in entirety. However there is a condition that on complete repayment of
the repayment money, he will re-transfer the property back to himself.
Anomalous Mortgage: A mortgage that does not fall under the purview of any of
the mortgage types is called an anomalous mortgage.
Conditions attached with mortgage: While mortgaging property, only legal rights
are transferred to the mortgagee but not the possession. An instrument of mortgage
deed is mandatory. On sale of a mortgaged property, the mortgage flows along with
the property.
Assignment of Debt While tangible assets are pledged or hypothecated or
mortgaged, actionable claims are charged to a lender by executing a deed of
assignment. Actionable claims cover debts, receivables, subsidy or duty drawback
receivable from Government, amount receivable under Insurance Policy, valid
contract like guarantee or indemnity. The person who assigns the debt is called the
assignor and the person in whose favor the debt is assigned is called assignee. It is
similar to hypothecation of a movable asset. The ownership and possession, in terms
of the right to recover the debt, remain with the borrower. There are two types of
assignments viz., Legal assignment and equitable assignment. Legal assignment is
done by the assignor executing a deed of assignment. For example Granting loan
against LIC policy. Under equitable assignment, the assignor executes an irrevocable
power of attorney in favor of the bank to collect payment. Advances against Supply
Bills falls under this category.

Lien It means the right to hold anothers property till his debt is repaid. Section
171 of the Indian Contract Act 1872 confers the right of general lien on bankers. In
the absence of any specific document or charge, Banks can exercise the right of lien
on any asset of the borrower which has come into their possession. Thus, bankers
line is considered as an implied pledge. Bank can recover the dues by selling the
asset only after giving the notice to the owner.

Negative Lien It is an undertaking by the borrower not to create any charge on
his assets without the consent of the bank. It does not confer any right on the bank.

Banker Customer Relationship
Service
Relationship
Bank Customer
Deposit Debtor Creditor
Loan Creditor Debtor
Pledge Pledgee Pledgor
Cheque/Bill Collection Agent Principal
DD/NEFT/RTGS/ECS Fiduciary Agent Principal
Safe Deposit Locker Lessor Lessee
Advisory services Advisor Recipient

60

Joint Lending Agreement

Large banks do have the capability to meet the credit needs of most of their business
clients. However, when the amount involved is huge, the bank may ask the borrower
to approach other banks for the part of the credit requirements as they may not wish
to take up the risk of lending the entire amount. Multiple banks may finance the
borrower under two arrangements viz., Consortium arrangement and multiple
banking arrangements.

Consortium of Banks Under this the banks come together and collaborate with
each other in assessing the credit requirements of the borrower duly sharing the
credit facilities as well as sharing securities with Pari Pasu charge. Normally, the
bank which has larger exposure act as leader who conduct meetings, assess the
credit requirements of the borrower and share all the information with member
banks from time to time. However, the decisions taken at the consortium meetings
are not binding on the individual banks and the management of each bank has to
approve in its respective boards.

Multiple Banking Under this, the borrower approaches various banks and avails
credit facilities across banks. Each bank undertakes their own assessment of risk,
decide the mix of credit facilities and stipulate their own terms and conditions. Each
of the banks takes the security and gets the charges registered with the ROC in their
favour. Practically there is no co-ordination between the banks and they compete
with each other to protect their business and interests. This is giving scope to the
borrowers to take undue advantage from the banking system i.e. excess borrowings
and interest concessions. In order to ensure financial discipline RBI issued guidelines
on sharing of information between banks and making the lead bank responsible for
ensuring proper assessment of credit requirements of the borrower so that over
financing can be averted.

Joint Lending Arrangement (JLA) Under the existing system of Credit Delivery,
credit requirements of large borrowers are being met under Consortium or Multiple
Banking arrangement systems. It is observed that high value borrowers have been
availing credit limits through Multiple Banking over the years which has led to
dilution of asset quality as well as control on the borrowers. In order to address the
challenges associated with Multiple Lending, Govt. of India has introduced ground
rules governing Joint Lending Arrangements. The scheme shall be applicable to all
lending arrangements, with a single borrower with aggregate credit limits (both fund
and non-fund based) of `150 crore and above involving more than one Public Sector
Bank. Further, all borrowers with external rating of below BBB or equivalent to be
brought under JLA irrespective of the amount of exposure. Borrowers having multiple
banking arrangements below `150 crore may also be encouraged to come under
joint lending arrangement, so that the wholesome view of the assessment of credit
requirement as well as the entire operations of the customers can be taken by
banks.

New Borrowers Lending under joint arrangement shall be mandatory for Public
Sector Banks for borrowers seeking credit limits of `150 crore and above by way of
term loan, working capital and non-fund based facilities, from multiple banks. The
Bank from which the borrower has sought the maximum credit will be the designated
Lead Bank for the JLA.

Existing Borrowers In case of borrowers presently enjoying aggregate limits in
excess of `150 crore under multiple banking arrangement the Bank which has
extended the highest credit, or any other Bank as mutually agreed by Member
Banks, would become the leader of the JLA and take initiative for holding the
meeting of all financing banks. In case of borrowers enjoying aggregate credit limits

61

below `150 crore from more than one bank, where further enhancement would take
the aggregate limits to `150 crore or more, should be considered jointly by the
financing banks concerned and the bank, which takes up the largest share of the
limits, shall be deemed to be the leader of the formalized JLA.

For working capital exposure under `1000 crore, minimum share of 10% of the
aggregated working capital limits is stipulated. For above `1000 crore, minimum
share of 100 crore is stipulated. In the cases of existing JLA, if a member-bank is
unable to take up its enhanced share, such enhanced share in full or in part could be
reallocated among the other existing willing members. In case other existing
member-banks are also unable to take up such enhanced share of an existing
member-bank, a new bank willing to take up the enhanced share may be inducted
into the JLA. In case of any contentious issue, the decision will be taken by member
banks having more than 50% share in the exposure to the borrower.

An existing member-bank may be permitted to withdraw from the JLA after two
years provided other existing member-banks and/or a new bank is willing to take its
share by joining the JLA. In case, where the other existing member-banks or a new
bank are unwilling to take over the entire outstanding of an existing member
desirous of moving out of the JLA after the expiry of above-mentioned period of two
years, such bank may be permitted to leave the JLA by selling its debt.

It is necessary that lead bank and member bank(s)/institution(s) ensure that formal
joint lending arrangement does not result in delay in credit delivery. The Lead Lender
will make all efforts to tie up the Joint Lending Arrangement within 90 days of taking
a credit decision regarding the proposal. Lead bank will be responsible for
preparation of appraisal note, its circulation, and arrangements for convening
meetings, documentation, etc. In case of any contentious issue, the decision will be
taken by the member banks having more than 50% share in the exposure to the
borrower. (Cir.no.24 Ref 26/04 dated 15.04.2013)

62


Takeover of accounts from other Banks

Corporates seeking better facilities/higher credit from Banks often approach different
lenders for sanction of credit facilities. Central Vigilance Commissioner observed that
sometimes existing accounts with one bank already showing signs of sickness are
taken over by another bank and such accounts predictably turn NPA within a short
time. To arrest unethical/unjustified practice of takeover of accounts, Department of
Financial Services, Govt. of India has issued the following guidelines to all Banks.

For taking over of any accounts, Banks must put in place, a Board approved
Policy with regard to take over of accounts from another Bank and the same
should be incorporated in the credit policy of the Bank.
Normally, the accounts having ratings above the level approved by the Board
should only be taken over and the concessionary facilities should be extended
only in extremely deserving cases with specific reasons recorded in writing.
In all cases of takeover of accounts, it is necessary to do proper due diligence
including visit to the premises of the customer, if needed, before the account
is considered for takeover by the bank.
The guidelines of joint lending should be strictly applied in all cases where the
borrower seeks to have additional exposure from the bank after taking over
the account.
No cases should be taken over by a Bank from any Bank where any of its ED
or CMD had worked earlier. In case, any such cases need to be taken over,
the proposal will need to be put up to the Board with specific reasons
justifying the need for taking over the accounts.

The operational guidelines with regard to Take over of accounts are as under:

The account should be a Standard Asset with Positive Net Worth & profit
record. P & C Report is mandatory preferably before sanction, if not, at least
before disbursement.
Obtain credit information in prescribed format, which enables the transferee
bank to be fully aware of irregularities, if any, existing in the borrowers
account with the transferor bank.
Account Statement The account copies of all the borrowal accounts with
the present bankers/financial institution shall be obtained at least for the last
12 months and ensure that the conduct of the a/c is satisfactory and no
adverse features are noticed.
Existence & Previous profit track record - i) In existence for a minimum
of 3 years with Audited B/S ii) Profit making in preceding 2 years & iii)
Availing Credit facilities with the previous Banker at least for 3 years.
Enhancement on Existing Limits with the present Banker: i)
Enhancement not beyond 50% ii) No further Enhancement/ Additional Limits
till one year or next ABS, whichever is earlier.
TOL/TNW should not exceed 4:1 in case of takeover accounts.
Group Accounts In case of having Sister / Associate concerns, Groups
consolidated position has to be examined.

Branches should ensure that Assessment is to be made independently as per our
Loan Policy guidelines. Administrative clearance is to be obtained from Zonal Office /
Head Office. To take all existing securities and to complete the documentation
expeditiously duly complying with our loan policy guidelines on takeover norms,
compliance, legal audit, permission for release of limit etc. While other bank is taking
over our borrowal account, Branches are advised to inform adverse features if any,
in the conduct of the accounts to the transferee bank duly obtaining permission from
competent authority for issuing P & C Report.

63

Credit Management/Delinquency Management

The success of a bank crucially depends how it manages its Asset Portfolio as it is the
major source of income to the Bank. Managing credit risk plays an important role
and its effectiveness lies in an efficient recovery and exit strategy. Timely follow up is
the key to keep the quality of assets intact and enables the banks to recover the
interest/installments in time. To have better control on the assets created out of
borrowings, banks need to watch the functioning of the units by paying frequent
visits and this is to be done to all the units irrespective whether the account is
performing or non-performing one. Thus, Banks should focus attention on:

Awareness Calling When the first payment is due, a call is initiated to make him
aware of the date of payment of installments/dues. This can be done either by the
branch or by call centre.

Reminder Call When the demand is not paid, a reminder call may be made with a
request to make payment of the dues and note the response or commitment. Repeat
calls are made if the borrower fails to honor his promises.

Demand Notice In case where there is n response to the calls, a written
communication is issued to the borrower informing him the status of the account and
advising him to pay the dues. Banks can also make use of technology and notice
may be sent through SMS or E-mail.

Field Visits It involves paying visits to borrowers office or residence either by
bank staff or its agents to appraise the position of the dues and need for repayment.
Continuous persuasion definitely yields positive results. These visits also enable the
banks to assess the functioning of the activity and quality of the assets. If they found
that the financial position of the borrower is deteriorated, bank may strike a
compromise deal to recover the dues.

Disposal of Assets In the event of failure of the borrower to repay the dues
despite the said initiatives, the bank need to proceed to take possession of the
assets including collateral duly invoking SARFEASI or through approaching Court /
DRT. Repossession and sale of assets can be done by issuing Recall Notice, Pre-
possession intimation, Letter of peaceful surrender of the asset, Record of inventory
and notarization, Pre-sale notice to borrower and Auction of the asset.

Outsourcing of Banking Services Of late, banks have been availing the third
party services for recovery of dues. RBI has issued code of conduct to ensure that
the customers are not harassed, their privacy is protected and the banks code of
commitment to customers is not violated. Outsourcing agencies should be appointed
only after proper due diligence with approved Board policy. Banks should publish the
names of outsourcing agencies and the details are to be kept on Banks website for
the benefit of the customers and general public. The agents appointed by the
outsourcing agency are to be provided with authorization letters / identify cards. All
agents should undergo a mandatory 100 hours training conducted by the Indian
Institute of Banking and Finance (IIBF) and get themselves certified before sending
them into field. Customers are to be contacted ordinarily at the place of his choice,
whether office or residence at appropriate time. In appropriate occasions such as
bereavement in the family or such other calamitous occasions are to be avoided for
making calls or visits. Professional and formal language is to be used in all
interactions with customers. Each bank should have a mechanism whereby the
borrowers grievances with regard to the recovery process can be addressed. The
details of the mechanism should also be furnished to the borrower while advising the
details of the recovery agency. The Fair Practices Code for Lenders and the Code of
Commitment to Customers must be adhered to strictly.

64

Non Performing Assets/Prudential Norms

A strong banking sector is important for flourishing economy. The failure of the
banking sector may have an adverse impact on other sectors. High level of Non
Performing Assets (NPA) suggests low credit quality and warrants high provisioning,
which has direct bearing on profitability and net-worth of banks and value of
shareholders. The increased incidence of NPA is one of the major concerns of Indian
Banks in the recent years. An asset is classified as NPA, if due in the form of
principal and interest are not paid by the borrower for a period of 90 days. If any
advance or credit facility granted by banks to a borrower becomes non-performing,
then the bank will have to treat all the advances/credit facilities granted to that
borrower as non-performing without having any regard to the fact that there may
still exists certain advances / credit facilities having performing status.

Category Treated as NPA if:
Term Loan
Interest and/or installment of principal remain overdue for a period
of more than 90 days
Overdraft/
Cash Credit
(OD/CC)
accounts
1) The account remains out of order i.e., if the liability exceed
limit/DP continuously for 90 days. If liability is within limit/DP, but
there are no credits continuously for 90 days or credits are not
enough to cover interest debited during the same period.
2) Drawings are allowed on DP calculated on stock statement older
than three months continuously for a period of 90 days
3) Regular/adhoc credit limits have not been reviewed/renewed
within 180 days from due date/date of adhoc sanction.
Agricultural
Loans
A Loan is granted for short duration crops will be treated as NPA, if
the installment of principal or interest thereon remains overdue for
two crop seasons. A loan granted for long duration crops will be
treated as NPA, if the installment of principal or interest thereon
remains overdue for one crop season. Long duration crops would
be crops with crop season longer than one year and crops which are
not long duration crops would be treated as short duration
crops. The crop season for each crop, which means the period up to
harvesting of the crops raised would be determined by the SLBC in
each state. In respect of agricultural loans which are not linked to
harvesting season, term loans given to non agriculturists,
identifications of NPAs would be done on the same basis as non
agricultural advances i.e. 90 days delinquency norm.
Bills
Purchased /
Discounted
Bill remains overdue for a period of more than 90 days.
Other a/cs Any amount to be received remains overdue > 90 days.

Potential NPA (PNPA): are those accounts showing overdues and irregularities
persist beyond 30 days. These are also known as Border line Performing Assets.

Date of NPA: It is the date on which the overdues or the irregularities cross 90
days or the date on which the account comes under Income Recognition norms.

Overdue: Any amount due to the bank under any credit facility is overdue if it not
paid on the due date fixed by the bank.

Net NPA=Gross NPA (provisions held towards NPAs + Balances in Interest Sundry
Suspense A/c + part payments received in suit filed accounts and kept in Sundry
Suspense.+ claims received from ECGC/CGC and kept in Sundry Suspense a/c).

65

Income recognition: The policy of income recognition has to be objective and
based on the record of recovery. Income from nonperforming assets (NPA) is not
recognized on accrual basis but is booked as income only when it is actually
received. However, interest on advances against term deposits, NSCs, IVPs, KVPs
and Life policies may be taken to income account on the due date, provided
adequate margin is available in the accounts.

Reversal of Income: If an account becomes NPA for first time during the year the
unrealized interest that was taken to P&L account on accrual basis pertaining to the
current year as well as pertaining to the preceding year, if any, shall also be
reversed. This will apply to Government guaranteed accounts also.
Valuation of Security for provisioning purposes: In cases of NPAs with balance
of Rs.5 crore and above stock audit at annual intervals by external agencies and
collaterals such as immovable properties charged in favour of the bank should be
got valued once in two years by valuers approved by the Board.
Asset classification: Banks are required to classify non-performing assets further
into the following three categories based on the period for which the asset has
remained nonperforming and the reliability of the dues:

Substandard Assets: A substandard asset would be one, which has remained NPA
for a period less than or equal to 12 months. It indicates credit weakness and scope
for loss if deficiencies are not corrected.

Doubtful Assets: An asset would be classified as doubtful if it has remained in the
substandard category for a period of 12 months.

Loss Assets: A loss asset is one where loss has been identified by the bank or
internal or external auditors or the RBI inspection but the amount has not been
written off wholly. It is considered as uncollectible and it is not warranted to continue
as bankable asset since there is little scope for salvage or recovery value.

Multiple Limits/Branches: Facilities granted by a bank to a borrower will have to
be treated as NPA (except bills discounted under LC) if any one facility of the
borrower becomes NPA. Uniform lowest classification shall be accorded to all
facilities. In case of credit facilities for a borrower at more than branch, the principal
branch shall decide the NPA status.

Advances under consortium arrangements: Asset classification of accounts
under consortium should be based on the record of recovery of the individual
member banks.

Accounts where there is erosion in the value of security: Where there are
potential threats for recovery on account of erosion in the value of security or non-
availability of security, asset should be straightaway classified as doubtful or loss
asset as appropriate.
Advances against Term Deposits, NSCs, KVPs, IVPs and LIC policies need not
be treated as NPAs. Advances against gold ornaments, government securities and all
other securities are not covered by this exemption.
Loans with moratorium for payment of interest: In the case of bank finance
given for industrial projects or for agricultural plantations etc. where moratorium is
available for payment of interest, payment of interest becomes due only after the
moratorium or gestation period is over.

66

Agricultural Advances: In cases of conversion or reschedulement short term
production loan as a relief measure, the term loan as well as fresh short-term loan
may be treated as current dues and need not be classified as NPA.

Government guaranteed advances: Advances under this category, though
overdue may be treated as NPA only when the Government repudiates its guarantee
when invoked. However, interest can be recognized only on recovery basis not on
accrual basis. State Government guaranteed advances would attract asset
classification and provisioning norms if interest and/or principal or any other amount
due to the bank remains overdue for more than 90 days.

Availability of security/Net worth of borrower/Guarantor: The availability of
security or net worth of borrower/ guarantor should not be taken into account for the
purpose of treating an advance as NPA or otherwise, as income recognition is based
on record of recovery.

Post-shipment Suppliers Credit: To the extent Export Credit Guaranteed amount
is received from the EXIM Bank, the advance may not be treated as a nonperforming
asset for asset classification and provisioning purposes.

Ever greening: Rescheduling of a loan without assessing the viability of the activity
for the purpose of avoiding an account becoming NPA.

Provisioning Norms
Status Provision to be made
Standard
0.25% on Direct advances to agriculture and SME sectors.
1.00% on Commercial Real Estate
0.40% on all advances other than stated above
The provisioning norms in respect of new Restructured Standard Accounts
are increased from existing 2.75% to 5% in a phased manner i.e. 3.50% by 31
st

March 2014; 4.25% by 31
st
March 2015 and 5% by 31
st
March 2016.
Sub-Standard
25% on unsecured exposures (20% in case of infra loans)
15% on other loans
Doubtful
Unsecured portion: 100%
Secured portion: if asset remained in doubtful <= 1 year 25%
If asset remained in doubtful - 1 to 3 years 40%
If asset remained in doubtful > 3 year 100%
Loss At 100% on the outstanding
Unsecured Exposure is one where realizable value of tangible security, as assessed
by the bank/approved valuers/RBI inspecting officers, is not more than 10 percent,
abinitio, of the outstanding exposure (funded and non-funded). However, the
following are the exempted categories from provisioning norms:
Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs and
life policies.
Advances granted under rehabilitation packages approved by BIFR / Term
lending institutions.
Advances covered by CGTSI guarantee No provision need be made towards
the guaranteed portion. The outstanding in excess of the guaranteed portion
should be provided.
Advances covered by ECGC /DICGC guarantee provision should be made
only for the balance in excess of the amount guaranteed by the Corporation.

67

Asset Quality RBI Initiatives:

Deteriorating asset quality in the banking system has prompted RBI to initiate the
following proactive steps to prevent slippages:

Banks are required to carry out independent and objective credit appraisal
instead depending on credit appraisal reports prepared by outside
consultants.
It is the responsibility of the banks to ascertain the source and quality of
equity capital brought in by the promoters and ensures that debt of the
parent company is not infused as equity.
If any of the directors names appears in the list of defaulters / willful
defaulters, they are to be classified as Non-co-operative borrowers.
Banks need to classify a new sub asset category called SMA Special
Mentioned Account and which are further categorized into SMA-NF, SMA-1
and SMA-2 depending on the operations of the accounts. SMA-NF deals with
non submission of mandatory information. SMA-1 represents a category
where the principle or interest payment is overdue between 31 and 60 days,
and SMA-2 where the overdue remain between 61 and 90 days.
RBI proposes to set up a Central Repository of Information on Large Credits
(CRILC) that will collect, store and disseminate credit data of the borrowers
having aggregate exposure (fund ad non-fund) of Rs.5 crore and above. This
applies to both Banks and Non Banking companies.
Banks will also have to furnish details of all Current accounts of their
customers with outstanding balances, both debit and credit, of Rs.1 crore and
above.
Banks will be required to submit SMA status of the borrowers to CRILC. If an
account is slipped in to SMA-2 at any time or SMA-1 for any two quarters or
SMA-NF for three quarters in a year, then the bank would be required to
initiate corrective action.
The proposals are in right direction, however, the challenge lies in their
implementation. Let us hope the best in the ensuing years.

68

Restructure of Advance Accounts

Restructuring would normally involve modification of terms of the advances /
securities, which would generally include, among others, alteration of repayment
period / repayable amount / the amount of installments / rate of interest (due to
reasons other than competitive reasons). It is applicable to all type of credit facilities
including working capital limits extended to Industrial Units, provided they are fully
covered by Tangible Securities. No account will be taken up for restructuring by
the banks unless the financial viability is established and there is a reasonable
certainty of repayment from the borrower, as per the terms of restructuring package.
The viability should be determined by the banks based on Return on Capital
Employed, Debt Service Coverage Ratio, Gap between the Internal Rate of Return
and Cost of Funds etc., on case-by-case depending merits of the account. Any
restructuring done without looking into cash flows of the borrower and assessing the
viability of the projects/activity financed by banks would be treated as an attempt at
ever greening a weak credit facility and would invite supervisory concerns/action.
The accounts not considered viable should not be restructured and banks should
accelerate the recovery measures in respect of such accounts.

Restructuring of advances could take place either before commencement of
commercial production/operation; or after commencement of commercial production
/ operation but before the asset has been classified as Sub-standard or Doubtful.
Accounts that are restructured for the second time or more on account of natural
calamities would retain in the same asset classification category on restructuring.
Hence, restructured accounts on account of natural calamities would not be treated
as second restructuring.

Corporate Debt Restructuring (CDR): The objective of the CDR framework is to
preserve viable 68ttest68ed that are affected by certain internal and external factors
and minimize the losses to the creditors and other stakeholders through an orderly
and coordinated restructuring programme, outside the purview of BIFR/DRT and
other legal proceedings, for the benefit of all concerned. The scheme will not apply to
accounts involving only one financial institution or one bank. The CDR mechanism
will cover only multiple banking accounts/syndication/consortium accounts of
corporate borrowers with outstanding fund-based and non-fund based exposure of
`10 crore and above by banks/financial institutions. However, there is no
requirement of the account/company being sick, NPA or being in default for a specific
period before reference to the CDR system. CDR is a non-statutory mechanism which
is a voluntary system based on Debtor-Creditor Agreement (DCA) and Inter-Creditor
Agreement (ICA). Three-tier structure is in place for CDR system.

CDR Standing Forum provide an official platform for both the creditors and
borrowers (by consultation) to amicably and collectively evolve policies and
guidelines for working out debt restructuring plans in the interests of all concerned.

CDR Empowered Group considers the preliminary report of all cases of requests of
restructuring, submitted by the CDR Cell. After the Empowered Group decides that
restructuring of the company is prima-facie feasible and the enterprise is potentially
viable in terms of the policies and guidelines evolved by Standing Forum, the
detailed restructuring package will be worked out by the CDR Cell in conjunction with
the Lead Institution.

CDR Cell undertakes the initial scrutiny of the proposals received from borrowers /
creditors to decide whether rehabilitation is prima facie feasible. If found feasible,
proceed to prepare detailed Rehabilitation Plan with the help of creditors and, if
necessary, experts to be engaged from outside. If not found prima facie feasible, the
creditors may start action for recovery of their dues.

69


CDR-1 system is applicable only to accounts classified as standard and sub-
standard. CDR-2 system is applicable to the accounts where the projects have been
found to be viable but classified under doubtful category provided minimum of 75%
of creditors (by value) and 60% creditors (by number) satisfy themselves of the
viability of the account and consent for such restructuring.

Reference to Corporate Debt Restructuring System could be triggered by any one or
more of the creditors who have minimum 20% share in either working capital or
term finance, or by the concerned corporate, if supported by a bank or financial
institution. However, in case of suit filed accounts at least 75% of the creditors (by
value) and 60% of creditors (by number) shall consent for the proposal. Under CDR,
banks extend the repayment period or moratorium on repayment or reduction of
interest rate on loans or combination of any of the above.

As per recent RBI guidelines, the promoters are required to bring minimum of 20%
of banks sacrifice or 2% of restructured debt, whichever is higher. The promoters
sacrifice should invariably bring upfront while extending the restructuring benefits to
the borrowers. It is mandatory to obtain promoters personal guarantee while
extending restructuring benefits to the borrowers.

Existing guidelines allow regulatory forbearance on asset classification of
restructured accounts subject to certain conditions i.e. standard accounts are allowed
to retain their asset classification and NPA accounts are allowed not to deteriorate
further in asset classification on restructuring. The asset classification benefit is also
available on change of date of commencement of operation for projects under
infrastructure sector as well for projects under non-infrastructure sector. The
accounts classified as NPA on restructuring should be upgraded only when all the
outstanding loans/facilities in the account perform satisfactorily during the specified
period i.e. one year.

Take-out Finance The scheme has been designed to enable lenders to address
the concern of the hitting the sectoral limit, asset-liability mismatch and liquidity
issues that may arise by the long-term debt financing to core projects. Under the
scheme, banks and lenders can enter in an arrangement with financial institutions for
transferring the loan outstanding in their books to those of the financial institution
which is taking out long-term debt. The tenor of the take-out finance is up to 15
years. The sectors eligible for Take-out finance are Road and bridges, Railways,
Seaports, Airports, Inland waterways and other transportation projects; Power,
Urban transport, water supply, sewage, solid waste management and other physical
infrastructure in urban areas; Gas pipelines Infrastructure projects in SEZs,
International convention centers and other tourism infrastructure projects. It is one
of the emerging products in the context of funding of long-term infrastructure
projects. Under this arrangement, the Banks financing infrastructure projects will
have an arrangement with other financial institutions for transferring to the latter the
outstanding in respect of such financing in their books on a pre-determined basis.
The norms of asset will have to be followed by the concerned banks in whose books
the account stands as balance sheet item as on the relevant date. The lending
institution should also make provisions against any asset turning into NPA pending
its takeover by the taking over institution. As and when the asset is taken over by
the taking over institution, the corresponding provision could be reversed. At present
IIFCL is providing a Take-out finance window to the banks in India.

***

70

Risk Management Basel-I, II & III

The growing sophistication in banking operations, online electronic banking,
improvements in information technology etc, have led to increased diversity and
complexity of risks being encountered by banks. These risks can be broadly grouped
into Credit Risk, Market Risk and Operational Risk. These risks are
interdependent and events that affect one area of risk can have ramifications for a
range of other risk categories.

Basel-I Accord: It was introduced in the year 2002-03, which covered capital
requirements for Credit Risk. The Accord prescribed CRAR of 8%, however, RBI
stipulated 9% CRAR. Subsequently, Banks were advised to maintain capital charge
for Market Risk also.

Basel-II New Capital Accord: Under this, banks have to maintain capital for Credit
Risk, Market Risk and Operational Risk w.e.f 31.03.2007. The New Capital Accord
rests on three pillars viz., Minimum Capital Requirements, Supervisory Review
Process & Market Discipline. The implementation of the capital charge for various risk
categories are Credit Risk, Market Risk and Operational Risk. Analysis of the banks
CRAR under both Basel-I & Basel-II guidelines should be reported to the Board at
quarterly intervals.
Internal Ratings Based (IRB) Approach: Under this approach, banks must
categorise the exposures into broad classes of assets as Corporate, Sovereign, Bank,
Retail and Equity. The risk components include the measures of the Probability of
Default (PD), Loss Given Default (LGD), Exposure at Default (EAD) and Effective
Maturity (M). There are two variants i.e Foundation IRB (FIRB) and Advanced IRB.
Under FIRB, banks have to provide their own estimates of PD and to rely on
supervisory estimates for other risk components (like LGD, EAD) while under
Advanced IRB; banks have to provide their own estimates of all the risk components.
It is based on the measures of Expected Losses (EL) and Unexpected Losses (UL).
Expected Losses are to be taken care of by way of pricing and provisioning while the
risk weight function produces the capital requirements for Unexpected Losses.
Market Risk: It is a risk pertaining to the interest rate related instruments and
equities in the Trading Book i.e AFS (Available For Sale) and HFT (Held for Trading)
positions and Foreign Exchange Risk throughout the bank (both banking & trading
books). There are two approaches for measuring market risk viz., Standardized
Duration Approach & Internal Models Approach.
Operational Risk: Banks have to maintain capital charge for operational risk under
the new framework and the approaches suggested for calculation of the same are
Basic Indicator Approach and The Standardized Approach. Under the first approach,
banks must hold capital equal to 15% of the previous three years average positive
gross annual income as a point of entry for capital calculation. The second approach
suggests dividing the banks business into eight lines and separate weights are
assigned to each segment. The total capital charge is calculated as the three year
average of the simple summation of the regulatory capital charges across each of the
business lines in each year.

Advanced Measurement Approach (AMA): Under this, the regulatory capital
requirement will equal the risk measure generated by the banks internal operational
risk measurement system using certain quantitative and qualitative criteria. Tracking
of internal loss event data is essential for adopting this approach. When a bank first
moves to AMA, a three-year historical loss data window is acceptable.

71

Pillar 2 Internal Capital Adequacy Assessment Process (ICAAP): Under this,
the regulator is cast with the responsibility of ensuring that banks maintain sufficient
capital to meet all the risks and operate above the minimum regulatory capital
ratios. RBI also has to ensure that the banks maintain adequate capital to withstand
the risks such as Interest Rate Risk in Banking Book, Business Cycles Risk, and
Credit Concentration Risk etc. For Interest Rate Risk in Banking Book, the regulator
may ensure that the banks are holding sufficient capital to withstand a standardized
Interest Rate shock of 2%. Banks whose capital funds would decline by 20% when
the shock is applied are treated as Outlier Banks. The assessment is reviewed at
quarterly intervals.
Pillar 3 Disclosure Requirements: It is aimed to encourage market discipline by
developing a set of disclosure requirements which will allow market participants to
assess the key pieces of information on the capital, risk exposures, risk assessment
processes and hence the capital adequacy of the institution. Banks may make their
annual disclosures both in their Annual Reports as well as their respective websites.
Banks with capital funds of `500 crore or more, and their significant bank
subsidiaries, must disclose their Tier-I Capital, Total Capital, total required capital
and Tier-I ratio and total capital adequacy ratio, on a quarterly basis on their
respective websites. The disclosures are broadly classified into Quantitative
disclosures and Qualitative disclosures and classified into the following areas:

Area Coverage
Capital Capital structure & Capital adequacy
Risk Exposures &
Assessments
Qualitative disclosures for Credit, Market, Operational,
Banking Book interest rate risk, equity risk etc.
Credit Risk
General disclosures for all banks.
Disclosures for Standardised & IRB approaches.
Credit Risk Mitigation Disclosures for Standardised and IRB approaches.
Securitisation Disclosures for Standardised and IRB approaches.
Market Risk
Disclosures for the Standardised & Internal Models
Approaches.
Operational Risk The approach followed for capital assessment.
Equities Disclosures for banking book positions
Interest Rate Risk in
the Banking Book
(IRRBB)
Nature of IRRBB with key assumptions. The increase /
decrease in earnings / economic value for upward /
downward rate shocks.

Time lines for implementation of Advanced Approaches are set as 31
st
March 2014.
The Basel-II norms are much better than Basel-I since it coveres operational risk.
However, risks such as Reputation Risk, Systemic Risk and Strategic Risk (the risk of
losses or reduced earnings due to failures in implementing strategy) are not covered
and exposing the banks to financial shocks.

As per Basel all corporate loans attracts 8 percent capital allocation where as it is in
the range of 1 to 30 percent in case of individuals depending on the estimated risk.
Further, group loans attract very low internal capital charge and the bank has a
strong incentive to undertake regulatory capital arbitrage to structure the risk
position to lower regulatory risk category. Regulatory capital arbitrage acts as a
safety valve for attenuating the adverse effects of those regulatory capital
requirements that activitys underlying economic risk. Absence of such arbitrage, a
regulatory capital requirement that is inappropriately high for the economic risk of a
particular activity could cause a bank to exit that relatively low-risk business by
preventing the bank from earning an acceptable rate of return on its capital.

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Nominally high regulatory capital ratios can be used to mask the true level of
insolvency probability. For example Bank maintains 12% capital as per the norms
risk analysis calls for 15% capital. In a regulatory sense the bank is well capitalized
but it is to be treated as undercapitalized from risk perspective.

Basel-III is a comprehensive set of reform measures developed to strengthen the
regulation, supervision and risk management of the banking sector. The new
standards will considerably strengthen the reserve requirements, both by increasing
the reserve ratios and by tightening the definition of what constitutes capital. The
new norms will be made effective in a phased manner from 1
st
July 2013 and
implemented fully by 31
st
March 2018. The broad guidelines are:

Banks to maintain a minimum 5.5% in common equity (as against 3.6%
now) by 31
st
March 2015.
Banks must create a Capital Conservation Buffer of 2.5% by 31
st
March
2018.
Banks should maintain a minimum overall capital adequacy of 11.5%
(against the current 9%) by 31
st
March 2018.
Banks must supplement risk based capital ratios by maintaining a
leverage ratio of 4.5%
The guidelines will ensure that banks are well capitalized to manage all kinds of
risks. The existing norms stipulate that banks should maintain Tier-I Capital and
Tier-II Capital that comprises instruments with debt like features. Basel-III rules
propose to bring in more clarity and eliminate grey areas in the current rules by
clearly defining different kinds of capital.
Tier I & II capital consists of Paid up Equity Capital + Free Reserves + Balance in
Share Premium Account + Capital Reserves (surplus) arising out of sale proceeds of
assets but not created by revaluation of assets MINUS Accumulated loss + Book
value of Intangible Assets + Equity Investment in Subsidiaries+ Innovative Perpetual
Debt instruments. Tier II consists of Cumulative perpetual preferential shares &
other Hybrid debt capital instruments + Revaluation reserves + General Provisions +
Loss Reserves (up to maximum 1.25% of weighted risk assets) + Undisclosed
Reserves + Subordinated Debt + Upper Tier-II instruments. Subordinated Debts are
unsecured and subordinated to the claims of all the creditors. To be eligible for Tier-
II capital the instruments should be fully paid, free from restrictive clauses and
should not be redeemable at the instance of holder or without the consent of the
Bank supervisory authorities. Subordinated debt usually carries a fixed maturity.
They will have to be limited to 50% of Tier-I capital.

Economic Capital (EC) is a measure of risk expressed in terms of capital. A bank
may, for instance, wonder what level of capital is needed in order to remain solvent
at a certain level of confidence and time horizon. In other words, EC may be
considered as the amount of risk capital from the banks perspective; therefore,
it differs from Regulatory Capital (RC) requirement measures. It primarily aims to
support business decisions, while RC aims to set minimum capital requirements
against all risks in a bank under a range of regulatory rules and guidance. So far,
since economic capital is rather a bank-specific or internal measure of available
capital, there is no common domestic or global definition of EC. Moreover, there are
some elements that many banks have in common when defining EC. EC estimates
can be covered by elements of Tier-1, 2 & 3, or definitions used by rating agencies
and/or other types of capital, such as planned earning, unrealized profit or implicit
government guarantee. EC is highly relevant because it can provide key answers to
specific business decisions or for evaluating the different business units of a bank.

***

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Risk Weighted Assets
(Standardized approach under Basel-II)

No Category Risk Weight
1 Credit exposure to Central / State Government 0%
2 Claims on RBI/DICGC/CGTSI 0%
3 State Govt. guaranteed claims / ECGC 20%
4 Corporates based on External Rating
a) Long Term
i) AAA rated 20%
ii) AA rated 30%
iii) A rated 50%
iv) BBB rated 100%
v) BB & below rated 150%
vi) Unrated 100%
b) Short Term
i) A1+ 20%
ii) A1 30%
iii) A2 50%
iv) A3 100%
v) A4 & below 150%
vi) Unrated 100%
5 Retail Portfolio 75%
6 Claims secured by Residential Property
i) Where LTV Ratio up to 75%
a) Loan up to 20 lakh 50%
b) Above 20 lakh & up to 75 lakh 50%
ii) Loan above 75 lakhs 75%
iii) Restructured Housing Loans (+25% RW)
iv) Loans above 75 lakh 125%
7 Commercial Real Estate 100%
8 Consumer Credit (Clean/Personal/Credit cards) 125%
9 Venture Capital 150%
10 Capital Market Exposure 125%
11 Loans and advances to staff fully secured 20%
12 Non Performing Assets based on % of provisions
a) Unsecured
i) Below 20% 150%
ii) 20% to < 50% 100%
iii) 50% & above 50%
b) Secured by Residential Property 100%
i) Provision is 20% to < 50% 75%
ii) Provision 50% & above 50%

74

SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND
ENFORCEMENT OF SECURITY INTEREST ACT 2002 (SARFAESI)

SARFAESI enables the banks to seize and sell the properties secured to the bank
without the intervention of courts resulting in realization of the amount due in NPA
accounts and reduction of NPAs. As per the act, officers with a rank of Chief Manager
and above are empowered to act as Authorized Officer to initiate proceedings which
includes issue of notices, taking possession of the property and sale of property
except the following:

Where the outstanding liability in the account does not exceed Rs 1.00 lakhs
Any security interest created in agriculture land
Pledge of movables / Lien on any goods
Amount due is less than 20% of the principal amount and interest
Creation of Security Interest in any Air Craft / Vessel
Any conditional sale, hire purchase or lease or any other contract in which no
security interest is created
Any right of unpaid seller / Any properties not liable for attachment /sale
under section 60 Civil Procedure Code.

The prerequisite should be that notice be issued one month after identification of
NPA advising the borrower/mortgagor to pay the entire amount due within 60 days
from the date of receipt of the notice. In case, more than one borrower, notice shall
be sent to each one of them. If the borrower avoids notice, the same may be served
by publishing in two leading Newspapers (English and Vernacular language). On
expiry of 60 days notice period and on default of the payment, possession shall be
taken of the property mentioned in Sec.13 (2) notice and the notice of the same
shall be give to the borrower and general public in two newspapers English and
vernacular Language. The time prescribed for considering the representation /
objections by the borrower on receipt of the notice is fixed as 15 days. The
Possession of moveable property may be taken by taking inventory in the presence
of two witnesses. Authorized Officer shall keep the property either in his own custody
or in the custody of any person authorized or appointed by him who shall take as
much care of the property in his custody as an owner of the property. Insurance of
secured assets and their valuations are to be done before sale of seizure of secured
assets. Security agents can be engaged while seizing the secured assets. Authorized
Officer may sell the secured assets of which the possession is taken by obtaining
quotations from the parties; by inviting tenders from the public; by holding public
auction; by private sale. Auction notice is to be kept on the banks website. If sale is
by inviting tenders from the public or public auction the same has to be published in
two news papers viz., English and another in Vernacular language. Sale can be
affected only after issuing 30 days notice to the borrower / mortgagor. If the
property is subject to speedy decay the Authorized Officer may sell it immediately.
The authorized Officer cannot sell the property less than the reserve price. If the
entire liability of the bank is not cleared after affecting the measures under the Act,
the bank is to file a suit or application before the court or DRT for recovery of the
balance amount of loan. In the accounts where the borrower failed to honour his
commitment under the compromise/OTS, then compromise/OTS permitted should be
withdrawn before initiating action under the Ordinance. In case of resistance from
the borrower to hand over the possession of assets, such resistance should be
recorded in the presence of two witnesses and application should be made under
Sec.14 of the act to Chief Metropolitan Magistrate/Dist. Magistrate seeking their
assistance for taking possession of secured assets.

Recent Developments: The Enforcement of Security Interest and Recovery of Debt
Laws (Amendment) Bill, 2011 was passed in the Loksabha which allows the banks to
acquire immovable properties from the borrower so that they can sell the assets at a

75

later date. Sometimes there are no buyers for a property or there is a cartelization
from bidders, who deliberately quote lower price thus undervaluing it. The
amendment will ensure that banks do not get into the situation of distress sale and
get the right pricing for the assets on sale. The amendment states that banks will be
heard in Debt Recovery Tribunals before granting any stay on recovery of loans from
borrowers. This will ensure that the law is not misused by the borrowers to delay the
settlements and payment of dues. Further, the amendment allows Asset
Reconstruction Companies (ARC) to convert a part of the debt into equity. This could
be a win-win situation for the borrower as well as the ARC. The borrower stand to
gain because his outstanding liability decreases to the extent of equity conversion
and the ARC will also become part of the management so as to aid in the turnaround
of the stressed company.

Credit Information Bureau India Limited (CIBIL): It is a repository of
information, which contains credit history of commercial and consumer borrowers.
The members of CIBIL are banks, NBFCs and Housing Finance Companies who
provide borrower data to CIBIL. It collects and maintains records of an individuals
payments pertaining to borrowal accounts including credit cards from the member
institutions on a monthly basis. Members are provided access to CIBIL to generate
CIR and CIBIL levy charges for the same. The CIBIL score is an objective numeric
summary of the credit report generated on an individual. It takes a snapshot of a
consumers CIR and with the use of advanced analytics moulds the information into a
3-digit number representing the probability that a consumer will default on a credit
facility over the next 12 months. The possible score ranges 300 to 900. Obtaining
CIR from CIBIL is mandatory before sanctioning credit limits to borrowers. The
payment history has a significant impact on the score. High utilization of credit limits
also play a vital role in arriving credit score of an individual. A higher concentration
of home loans or secured loans is likely to be more favourable for the score than a
large number of unsecured loans. More the number of unsecured loans with high
utilization, larger are the payments resulting from its high rate of interest and
consequently lower would be the score despite satisfactory payment track. Credit
Hungry behavior many applications for loans, indicates that the debt burden is
likely to, or has increased and one is less capable of honoring any additional debt
and is likely to negatively impact the score. CIBIL enables the lending institutions to
take informed decisions while according credit sanctions. With CIBILs help, banks
have caught many frauds like individuals trying to avail multiple loans on the same
house, vehicle etc. It is a powerful tool to protect the interest of the Banks.

Central Registry of Securitization Asset Reconstruction and Security
Interest of India (CERSAI): It is a government company licensed under section 25
of the Companies Act 1956, has been incorporated to operate and maintain the
Central Registry under the provisions of SARFAESI Act 2002. The objective of
CERSAI is to prevent frauds in loan cases involving multiple lending from different
banks on the same immovable property. The Central Registry is also an important for
the development of the home loan market as lenders can now be sure that the
property offered as a security has a clear title. Unlike CIBIL, where borrower
information is accessible only by lenders, the records maintained by the Central
Registry will be available for search by any lender or any other person. The scheme
is operational w.e.f. 31.03.2011 where central database will contain details of all
properties against which loans have been advanced by Banks/Financial Institutions.
The lending institutions are required to make a payment of `250/- & `500/- for
creation and modification of security interest to CERSAI for the loans up to `5 lakh &
above `5 lakh respectively. Under this, the lenders should file details of the charge
over any property with CERSAI within 30 days from the date of creation. However,
the delay up to 30 days can be condoned with a penalty of `2500/- and `5000/- for
loans upto `5 lakh and above `5 lakh respectively. If the delay is beyond 30 days,
the penalty will be `5000/- per day during which the default continues.

76

Cash Management Clean Note Policy

Clean Note Policy: The usage of stapling is causing mutilation of notes and
shortening the life of the currency. RBI prohibited the banks from stapling currency
notes under section 35A BR Act with an objective to provide clean notes to public. As
per policy, Banks should

Issue clean notes to the public and accept small denominations such as `1/,
`2/- & `5/-.
Not issue number cut notes to public. Any deviation in this regard attracts
penalty.
Desist from writing anything whatsoever on the Bank Notes.
Educate the customers and members of the public in this regard.
Ensure sorting all notes by branches and only Clean Notes/issuable notes are
put into circulation amongst general public.
Ensure that branches are not hoarding any Fresh Notes and coins and to be
distributed to the customers.

RBI has issued following plan of action with regard to withdrawal of all old series of
Banknotes issued prior to 2005:

All older series of bank notes issued prior to 2005 would be acceptable for all
kinds of monetary transactions only till March 31, 2014
Thereafter, the public will be required to approach branches which would
provide them exchange facilities on an ongoing basis
These notes will continue to be legal tender
From July 01, 2014, to exchange more than 10 pieces of Rs. 500 and Rs.
1000 notes, branches should obtain proof of identity and residence from non-
customers.
All branches are advised to provide exchange facilities to stop re-issue of older series
banknotes issued prior to 2005. The notes so accepted are deposited to Currency
Chests.

Counterfeit Notes: In order to combat the menace, RBI has issued guidelines to all
Banks/Financial Institutions on detection and impounding of counterfeit notes. It is
necessary that

Currency notes received are carefully examined and impound counterfeit
notes wherever detected to curb circulation of such notes to public.
Counterfeit Notes detected shall be branded with a stamp (size of 5 cm x 5
cm) Counterfeit Bank Note with branch/office name, date and signature.
Branch/Office is required to issue acknowledgement to the tenderer of
counterfeit note and it should be signed by the tenderer of counterfeit notes
and counter cashier with details such as serial number, denomination and
number of pieces.
FIR is required to be filed in case where the counterfeit notes found are five
pieces and above in a single transaction and acknowledgement is to be
obtained from the concerned police authorities. However, in other cases, a
consolidated report is to be sent to Police once in a month.
RBI reimburses to the extent of 25% of the notional value of the counterfeit
notes of `100 denomination & above, detected and reported to RBI/Police.
All Counterfeit Notes received back from police authorities are to be preserved
in the safe custody of the branch / office for a period of 3 years. Thereafter,
these notes are to be sent to the concerned issue office of RBI with full
details.

77


In no case, the Counterfeit Notes should be returned to the tenderer or
destroyed by the bank branches / treasuries.
Banks should put in place adequate safeguards / checks before loading
currency notes in ATMs.

Cash Remittances: Cash movement takes place from one branch to another branch
and branch to currency chest and vice versa on a regular basis. Branches / Offices
are required to be adhered the following guidelines since it is an important and
sensitive one. The guidelines are as under:

Remittance Staff / Security Personnel to be accompanied
Below `50 lakh
One Clerk / Officer with 1 Sub-staff and 1 Security
Guard (if available at the branch)
> `50 lakh & < `100 lakh One Officer, 1 Sub-staff and 2 Armed Guards
` 100 lakh & above One Officer, 1 Sub-staff and Armed Police Escort
Security Escort for cash remittances by Cash Vans
Up to `200 lakh To be escorted by 2 Bank Guards
> `200 lakh & up to `1000 lakh To be escorted by 3 Bank Guards

General Precaution in Remittances:
Remittance is to be done in Cash Van or Four Wheeler Vehicles. Cash Van
must have Alarm system and Fire Extinguishers.
Avoid Three Wheeler Vehicles. Two Wheeler Vehicles should not be used.
Cash Remittance may be done on foot provided the distance is short (within
the complex) and the remittance must not be over `2 lakhs.
Cash must be carried in Steel Boxes only.
Armed Guard must sit in front.
Remittance is to be done during Day time only.
Probationary Officers are not to be detailed for cash remittance.
In case of non availability staff, a clerk can be substituted for sub-staff and an
offer for a clerk.

Surprise Verification of Cash at Branches: All Branch Heads should carry out
verification of cash of their respective branches every month, at different dates of
the month with total confidentiality. The verification should also be rotated every
month i.e. once before commencement of office hours, another time at the middle of
the day and sometimes at the close of the office hours. Besides the above, branches
are subject to surprise verification of cash by controlling offices once in a quarter.
Surprise verification report shall cover the aspects such as maintenance of Cash
Movement / Key Movement / Cash Discrepancy Registers, maintenance of cash
beyond retention limit, maintenance of Bait Money and shortage/excess of cash, if
any. Wherever cash position is in excess of Cash Retention Limit, the entire cash on
hand should invariably be verified by the Branch Manager and necessary
endorsement should be recorded thereof.

Surprise Verification of Cash at Currency Chests: The balances of each currency
chest should be verified at least once in a month by an officer not connected with the
custody of the chest. A record of such verification should be maintained in a register
at each chest. Two percent of balances in each denomination of Rs. 100/-, Rs. 500/-
and Rs. 1000/- may be verified through Note Sorting Machines. The balances may be
verified once in six months by the officials from the Controlling Office of the bank by
packets and bundles and five percent of the balances in all denominations should be
verified through Note Sorting Machines. The officials from Controlling Office after
verifying the balances may send the original balance certificate to the Nodal Officer

78

for Currency Management at Head Office, Operations Department. Non-conformity to
the above would attract penalty.

Incentives & Penalties: RBI introduced scheme in the month of September 2008
for providing incentives to banks for extending enhanced services in the area of
mutilated/soiled notes & coin distribution and levying penalties for deficiency in
providing services to members of the public. (Cir no. 158 Ref 55/13 dt.19.07.12)

No Activity Incentives
1 Adjudication of Mutilated Bank Notes `2/- per piece
2 Exchange of Soiled Notes
One rupee per packet in `5/- `10/-
`20/- and `50/- denomination
3 Distribution of Coins over the counter `25/- per bag.
4
Establishment of coin vending
machines
Capital Cost-Urban/Metro Centers
50% - Rural & SU centers 75%
Operational cost @ `25 per bag.

Scheme on Penalties
Activity Penalties

Shortage in soiled note remittances and
currency chest balances
`50/- per piece in addition to the loss
(shortage) in case of notes in
denomination up to `50/-. However, for
notes in denomination of `100/- and
above, the penalty is equal to the value
of the denomination per piece in
addition to the loss.
Counterfeit notes detected in soiled note
remittances and currency chest balances
Equal to the value of the counterfeit
note in addition to the loss.
Mutilated notes detected in soiled note
remittances and currency chest balances
`50/- per piece irrespective of the
denomination.
Non compliance of operational guidelines such
as non-functioning of CCTV, non utilization of
NSMs and keeping branch cash / documents in
strong room.
`5000/- for each irregularity. Penalty
will be enhanced to `10000/- in case of
repetition.
Violation of norms during RBI inspection viz.,
i) Non issue of coins over the counter to any
member of public, despite having stock.
ii) Refusal to exchange soiled notes/
adjudicate mutilated notes tendered by any
member of public.
iii) Not conducting surprise verification of
chest balances, at least at bimonthly intervals
by officials unconnected with the custody
thereof.
iv) Denial of facilities/services to linked
branches of other banks.
v) Non acceptance of lower denomination
notes (`10/- `20/- and `50/-) tendered by
members of public and linked bank branches.
vi) Detection of mutilated / counterfeit notes
in reissuable packers prepared by the chest.
`10,000/- for any violation of
agreement in this regard/deficiency of
service

`5.00 lakhs in case there are more than
5 instances of violation by the branch.
The same will be placed in public
domain.

RBI during their Incognito visits to Branches may levy penalty with regard to non
adherence of above guidelines and the same will be recovered from the officials
responsible for such lapses. Hence all branches have to follow the laid down norms
scrupulously without any deviation.

79

Customer Service & BCSBI

The Government and the regulator (RBI) have been emphasizing the importance and
the need to extend speedy, efficient, fair and courteous customer service in banking
industry. In this direction, the following committees were set up:

1975 Talwar Committee
1990 Goiporia Committee
2004 Tarapore Committee
2006 Working group under chairmanship of Sri N Sadasivan

In addition to the guidelines framed based on the recommendations of the
committees, RBI had been giving instructions to banks as and when required. Over
the years, the customer service in banks has improved considerably with the
introduction of technology based products. Further, the Government of India
introduced the concept of Citizens Charter at all bank branches with an objective to
exercise in setting benchmarks for prompt delivery of banking services, including the
pricing thereof. In the year 2010, RBI constituted a committee under the
chairmanship of Sri.M.Damodaran to look into the customer service aspects in
Banks. The recommendations of the committee are as under:

Bank should offer a basic bank account with privileges such as certain number
of transactions, cheque facility, ATM/Debit Card etc., without any prescription
of minimum balance.

The Passbook/Statement of accounts should indicate the account number,
name, address and ID of the customer, MICR Code, IFSC Code, Toll free
customer care number, Ombudsman contract details, instrument number and
payee name on all debit entries and the full details of TDS (Gross Interest
credited and TDS debited).

Before marking the account as inoperative, the banks must intimate the
account holder by SMS. Banks should introduce Uniform Account Opening
forms and Account Number Portability across the banks.

Banks should take Unique Identification Number (issued under Aadhar
project) as KYC compliance for opening of accounts.

The term deposit renewal notices should be sent to customers preferably in
electronic form. A single Form 15G/H linked to a customer ID across the
branches in a bank should be issued.

Service charges should be reasonable. No charges are to be levied on Non-
Home Branch transactions.

The users of electronic bank platforms for making collections may offer small
discounts to their customers to favour electronic payments.

Cheque Drop Box should provide receipt/acknowledgement along with the
image of the cheque.

Reason for penal interest on loan accounts, rate of interest charged should be
mentioned in Passbook/Statement of Account.

80

Banks must ensure that loan statements are issued to the borrowers
periodically giving full details including demand, repayments, interest
component and charges.

The title deeds should be returned to the customers within a period of 15
days after the loan closure.

Bank should provide Most Important Terms and Conditions (MITC) of the
product explicitly in Arial font and size 12 for better readability.

All home loans should permit a switchover between fixed to floating or vice-
versa at least once during the loan tenure at an appropriate and reasonable
fee. Home loans backed by insurance products, the procedure should be
explained upfront to the customers.

Banks should provide prioritized service to the senior citizens/physically
handicapped persons.

Banks should put a system in a place for Automatic updation of the customers
to the senior citizen category based on the date of birth.

Pensioner may be allowed to submit the annual life certificate at any of the
branches of the bank. Bank should make arrangements to disburse pension to
sick and disabled pensioners at their door steps.

SHG members should not be forced to take insurance products.

Banks should ensure that at least one of the staff members in Tribal / North-
East areas is conversant with local language.

The staff manning Customer Service Departments in banks should receive
specialized training so that customer complaints are professionally handled.

With regard to one-man branches Banks should place Proper systems for
safety of cash and also continuity of services in case of leave etc.

In case of frauds in the accounts of the customers, bank is required to credit
the amount to their accounts after obtaining due affidavit.

Banks should put in place secure systems like Multi-factor Authentication to
minimize the fraud instances.

Frauds involving cloned cards, unauthorized online transactions, ATM
transactions not done by the customers etc., cannot be valid transactions as
they are not authorized by the customers. The onus should be on the bank to
prove that the customer has done the transaction.

Banks to install CCTV at all ATMs. For Debit/Credit cards at POS, PIN based
authorization should be made mandatory.

Banks should ensure that ECS Mandate Management System is working
effectively to comply with the mandate given by the customer.

For transaction deficiencies, there should be in-built mechanism to pay
compensation to the customers.

Bank should provide for online registration of grievance in its website.

81

Banking Codes and Standards Board of India (BCSBI)

RBI has set up BCSBI with an objective of evolving standards for bank services to
depositors, borrowers and common persons at affordable and reasonable price and
monitoring the same in effective manner. It covers Deposit Accounts
(Current/Savings/Recurring/Term/PPF), Collection of cheques, Lockers, Safe custody
services, Remittances (DD/PO/TT/NEFT/RTGS), Government transactions and
Pension payments, Demat Accounts, Equity and Government Bonds, Loans and
Advances / Foreign Exchange / Money Changing and Card products (Credit / ATM /
Debit / Smart / Pre-paid / Travel). It is an independent and autonomous watchdog to
monitor and ensure that the services are delivered as promised. Banks are required
to register themselves with BCSBI as members and have the code of commitment to
customers adopted by their respective Boards. BCSBI has revised The Code of
Banks Commitment to Customers and the important changes are as under:

Advise the customer about change in minimum balance to be maintained in
Savings/Current accounts 30 days in advance during which period, no charges
will be levied for non-maintenance of the higher minimum balance prescribed.
Provide an option to customer for giving nomination at the time of account
opening itself with due acknowledgement. On request from the depositor name of
the nominee will also be indicated on the Passbook/Term Deposit Receipt.
Acknowledge receipt of loan applications and convey in writing the reasons for
rejection of loan. Return all documents/securities title deeds to mortgaged
property to the borrower within 15 days from the full payment of the dues,
without waiting for request from the borrower.
Compensate the customers for delayed collection of cheques without waiting for a
request from customer.
No charges will be levied for activation of inoperative account.
In case a credit facility/credit card is issued without customers consent and
charges levied for the same would be reversed along with compensation.

Banks are advised to disclose the commission/fee details to the customers while
selling third party products viz., Mutual Funds / Insurance policies.

Fair Practices code for Lenders liability: Loan application forms should be
comprehensive to include information about rate of interest, interest application
intervals, penal interest, processing charges, up-front fee, prepayment charges etc.
Loan applications are to be processed within reasonable time and communicate the
terms and conditions in writing to the borrowers. Banks should give notice to the
borrower about the subsequent changes in interest rate / charges, if any.

Credit Card Fair practices: All credit card issuers should provide Most Important
Terms and Conditions (MITC) to customers and prospective customers. MITC should
include information such as admission fee; cash advance charges, default charges,
annualized percentage rate and grace period. Further, card issuers should maintain
Do Not Call Registries and should not provide unsolicited calls/SMS/Cards/Credit
facilities unilaterally. Card issuing banks are responsible for any omission or
commissions of their agents (Sales/Marketing/Recovery agents).

As per revised code, banks are advised to introduce simplified process for opening of
Basic Savings bank accounts and extend Doorstep service to the disabled customers
and senior citizens. In case of electronic frauds, if the customer incurs any direct loss
due to a security breach of the internet banking system that is not contributed or
caused by the customer, the bank will bear the loss, unless it is able to establish that
the customer is guilty. However, the onus of responsibility lies on the bank that the
customer compromised the passwords, leading to the fraud.
The revised code is expected to come into force shortly.

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Compensation Policy

Providing better and timely service to the customers is a prerequisite for banks to
remain stay in the competitive market. Despite best efforts, sometimes, omissions
and commissions may creep in which may lead to inconvenience to the customers. In
order to protect the interest of the customers, banks formulated compensation policy
based on the principles of transparency and fairness in the treatment of customers.
The expected action and compensation payable to the customers, in the event of
deficiency of service, are as under:

Category Compensation payable
Unauthorized /
Erroneous debits

Bank should reverse the amount immediately and
compensate the customer to the extent of financial loss
incurred such as interest or service charges. In case the
unauthorized debit is on account of third party, customer
should be compensated up to `50000/- or actual debit
amount whichever is less.
ECS Debits
Execution failure
Bank should compensate the customer to the extent of
financial loss incurred along with service charges, if any.
Stop payment
Payment of cheques
Where the cheque is paid despite stop payment instructions,
bank should reverse cheque amount along with charges, if
any, with value date within 2 days of the intimation.
Unsolicited Credit
Cards Levy of
charges
Bank should reverse the charges immediately and also pay a
penalty without demur amounting to twice the value of the
charges reversed.
Collection of foreign
cheques / currencies
Undue delay
Delay up to 14 days SB Interest + 0.25% simple interest
Delay 15 to 45 days SB Interest + 0.50% simple interest
Beyond 45 days SB Interest + 0.75% simple interest
Payment of interest on
delayed collection

Outstation Cheques Local Cheques
Delay < 14 days SB Interest
Delay > 45 days Applicable TD Rate
Delay > 90 days TD Rate + 2%

SB Interest
However, in case of loan/ODCC credits, the interest
payable is applicable interest rate on loan/ODCC plus 2%
Cheques/instruments
lost in transit / in
clearing or paying
bank branches
Bank should provide the required assistance to obtain
duplicate instrument from the drawer of the instrument. The
compensation policy that is applicable to Collection of
outstation cheques is equally applicable to this category of
customers.
RTGS/NEFT/ECS Applicable Repo Rate plus 2% to be paid for delayed period.
Delay in settlement of
wrong ATM Debits
In case where the compliant is not resolved within 12
working days from the date of complaint made by the
cardholder, bank should pay `100/- per day.
Violation of the code
by Banks` Agent
Appropriate steps to investigate the complaint and to
compensate the customer for financial loss, if any.
Delay in payment of
Relief / Savings Bonds

SB Rate
Delay in credit of
pension payments
8% p.a.

The above initiatives will definitely paves the way for better service and the instances
of referring the customer grievances to Ombudsman or any other forum will come
down to a greater extent.

83


Union Budget (Interim) - 2014
Finance Minister P. Chidambaram presented Interim Union Budget to parliament on
17
th
February 2014 for the fiscal year 2014-15. Though, there is no perceptible
improvement in GDP growth rate, the fiscal deficit is declining, the current account
deficit has been constrained, inflation has moderated, the exchange rate is stable,
exports have increased and hundreds of projects have been unblocked during the
year 2013-14. The salient features Interim Union Budget for the year 2014-15 are:
GDP growth for the year 2013-14 expected at 4.9%.
Fiscal deficit stood at 4.6% of GDP in 2013-14 and projected at 4.1% for the
year 2014-15.
Current account deficit for 2013-14 estimated at $45 billion from last fiscal
year's $88 billion.
Plan and Non plan expenditure is expected for 2014-15 at 5.55 trillion 12.08
trillion rupees respectively.
Total spending on food, fertilizers and fuel at 2.5 trillion rupees in 2014-15.
Food subsidy estimated at 1.15 trillion rupees, fertiliser subsidy at 679.71
billion rupees and Petroleum subsidy at 634.27 billion rupees.
10% increase in defence spending is proposed with total outlay of 2.24 trillion
rupees in 2014-15.
Merchandise exports seen at $326 billion in 2013-14, up 6.3% year on year.
Agriculture exports expected to touch $45 billion in 2013-14, up from $41
billion in 2012-13
Govt. to provide 112 billion capital infusion in state run banks in 2014-15
Propose to set up Public Debt Management office to start work from 2014-15
No major change in income tax rates/slabs.
Excise duty slashed by 2% on capital goods.
Cut excise duty by 6% on Sports Utility Vehicles and 4% on small/midsized
cars and commercial vehicles.
Waiver of interest on education loans who availed prior to March 2009.
Introduction one demat account for all financial assets (shares, bonds, funds,
insurance and deposits)

84

Monetary Policy

Monetary Policy refers to the use of instruments under the control of the central bank
to regulate the availability, cost and use of money and credit. The main objectives of
monetary policy are Maintaining price stability, ensure adequate flow of credit to
the productive sectors to support economic growth and financial stability. However,
the relative emphasis among the objectives varies from time to time, depending on
evolving macroeconomic developments. The various instruments available to the
regulator are as under:

Direct Instruments:

Cash Reserve Ratio (CRR): The share of net demand and time liabilities that banks
must maintain as cash balance with the Reserve Bank. The Reserve Bank requires
banks to maintain a certain amount of cash in reserve as a percentage of their
deposits to ensure that banks have sufficient cash to cover customer withdrawals. At
present the stipulated CRR is 4%. Regulator uses CRR for dual purpose as liquidity
reserve and as a monetary policy tool. On weekly basis, Banks have to report their
daily deposit position and balances with RBI to enable them to monitor maintenance
of CRR.

Statutory Liquidity Ratio (SLR): The share of net demand and time liabilities that
banks must maintain in safe and liquid assets, such as government securities, cash
and gold. Banks are advised to invest in securities issued and guaranteed by
government known as Statutory Liquidity Ratio (SLR). At present SLR requirement is
23% of demand and time liabilities of bank. It is another liquidity cushion. The SLR
securities are part of the investment portfolio of the bank. The HTM book primarily
consists of SLR investments which have to be held permanently.

Refinance facilities: Sector-specific refinance facilities (e.g., against lending to
export sector) provided to banks.

Indirect Instruments:

Liquidity Adjustment Facility (LAF): It is a mechanism for liquidity management
through combination of repo operations, export credit refinance facilities and
collateralized lending facilities, supported by open market operations of the RBI at
set interest rates. RBI manages its liquidity in the market through the operation of
LAF as part of its monetary policy and money supply targets. It undertakes reverse
repo transactions to mop up liquidity and repos to supply liquidity in the market. The
LAF transactions are currently being conducted on overnight basis. Consists of daily
infusion or absorption of liquidity on a repurchase basis, through repo (liquidity
injection) and reverse repo (liquidity absorption) auction operations, using
government securities as collateral.

Repo/Reverse Repo Rate: These rates under the Liquidity Adjustment Facility
(LAF) determine the corridor for short-term money market interest rates. In turn,
this is expected to trigger movement in other segments of the financial market and
the real economy. Repo is a money market instrument, which enables collateralized
short term borrowing through sale operations in debt instruments. It is also called a
ready forward transaction as it is a means of funding by selling a security held on a
spot (ready) basis and repurchasing the same on a forward basis. Generally, repos
are done for a period not exceeding 14 days. Repo rate is the rate at which banks
borrow rupees from RBI and a reduction in Repo rate helps the banks to get funds at
a cheaper rate and increase in Repo rate makes the borrowing more expensive. The
present rate is 8%. Reverse Repo is the mirror image of a repo. Under reverse
repo, securities are acquired with a simultaneous commitment to resell. Hence

85

whether a transaction is a repo or a reverse repo is determined only in terms of who
initiated the first leg of the transaction. When the reverse repurchase transaction
matures, the counter-party returns the security to the entity concerned and receives
its cash along with a profit spread. Reverse Repo rate is the rate at which RBI
borrows money from banks. An increase in Reverse Repo rate can cause the banks
to transfer more funds to RBI and similarly reduction of rate may dampen the
interest of the banks to lend to RBI. The present rate is 7%

Open Market Operations (OMO): Outright sales/purchases of government
securities, in addition to LAF, as a tool to determine the level of liquidity over the
medium term.

Marginal Standing Facility (MSF): was instituted under which scheduled
commercial banks can borrow over night at their discretion up to one per cent of
their respective NDTL at 100 basis points above the repo rate to provide a safety
valve against unanticipated liquidity shocks.

Bank Rate: It is the rate at which the Reserve Bank is ready to buy or rediscount
bills of exchange or other commercial papers. It also signals the medium-term
stance of monetary policy. The present rate is 9%.

Market Stabilization Scheme (MSS): This instrument for monetary management
was introduced in 2004. Liquidity of a more enduring nature arising from large
capital flows is absorbed through sale of short-dated government securities and
treasury bills.

In an expansionary monetary policy, money supply increases causing an expansion
in aggregate demand through lower interest rates. This stimulates interest sensitive
spending on investment for manufacture of goods, housing, export, business etc.
and in turn, acting through multiplier leads to a rise in gross domestic product. The
reverse process takes place when monetary policy is tightened. However, in a fully
employed economy monetary expansion would primarily raise prices and nominal
gross domestic product with little effect on real GDP as the higher stock of money
would be chasing the same amount of output.
Withdrawal of old series Bank Notes: In a move that is likely to hit currency
hoarders and counterfeiters, the Reserve Bank of India (RBI) has decided to
withdraw from circulation all currency notes issued prior to 2005. This move is a well
thought out exercise by RBI to capture the money flows into the system and also
help flush out counterfeit notes as well as black money. RBI Notes issued after 2005
have added security features that make counterfeiting difficult. Money has value as
long as it is a medium of exchange and store of value. It loses its value when it
ceases to be a medium of exchange. As per the guidelines, the holders of currency
notes prior to 2005 need approach banks for exchange from 1
st
April 2014 and they
continue to be legal tender. However, from 1
st
July 2014, those wanting to exchange
more than 10 pieces of 500 and 1000 rupee notes in a bank where they do not have
an account will have to provide proof of residence and identity. With the RBI setting
terms for exchange of these notes and income-tax authorities scrutinizing big
spends, it will now become that much simpler for the authorities to track these
transactions. Banks are advised to stop reissue of older series and these notes are to
be sorted and deposited in the Currency Chests under the Linkage scheme or
forwarded to the nearest Issue Office of RBI for disposal.

86

Other concepts:

Hot Money: Money held in one currency that is liable to switch to another currency, in a
flash, in response to better returns or in apprehension of adverse circumstances. Such a
flight of money might cause the currencys exchange rate to plunge.

Reserve Money (M0): Currency in circulation + Bankers deposits with the RBI +
Other deposits with the RBI = Net RBI credit to the Government + RBI credit to the
commercial sector + RBIs claims on banks + RBIs net foreign assets + Governments
currency liabilities to the public RBIs net non-monetary liabilities. M1 Currency with
the public + Demand deposits with the banking system + Other deposits with the RBI.
M2 M1 + Savings deposits with Post offices. M3 M1+ Time deposits with the
banking system = Net bank credit to the Government + Bank credit to the commercial
sector + Net foreign exchange assets of the banking sector + Governments currency
liabilities to the public Net non-monetary liabilities of the banking sector. M4 M3 +
Deposits with post office (excluding NSCs).

Inflation: It is termed as the continual rise in the general level of prices. It is commonly
expressed as an annual percentage rate of change on an index number.

Hyper Inflation: An express growth in the rate of inflation whereby, money loses its
value to the extent where other mediums of exchange like barter or foreign currency
come into vogue.

Stagflation: A condition in the economy that is characterized by the twin economic
problems viz., slow economic growth and rising prices.

Deflation: A sustained fall in the general price level of goods and services, usually
accompanied by fall in output and jobs.

Recession: A phase of dismal economic activity, usually accompanied by rising
unemployment. It is defined by two successive quarters of negative GDP growth and is
considered to have a cyclic character. An imminent global recession is likely as signs of
dismal economic performance are being witnessed.

Stagnation: It is a period during which economy does not grow or grows very slowly.
As a result, unemployment increases and consumer spending slows down.

Devaluation: A fall in the fixed official rate at which one currency is exchanged for
another in a fixed exchange rate system. While it is mostly by a deliberate act of
government policy, in recent years, financial speculation has also been identified as a
responsible factor.

Demonetization: Withdrawal of currency from circulation with an aim to strike at
counterfeiting of currency and unaccounted money. In 1978, currency notes of
denomination of `1000/-, `5000/- and `10000/- were demonetized.

Arthakranthi is a suggestion which is being widely debated to address the important
issues such as rampant corruption and fiscal deficit that are being confronting the
country. It suggests abolition of taxes except for Customs and Import duties and
introduction of bank transaction tax on receipts. It also suggests currency compression
by ensuring that the highest currency denomination is `50/-, which paves the way to
adopt banking system extensively and also enables to phase-out fake currency from the
system which is the need of the hour. Though, the suggestion appears simple and
attractive but needs political will and revamping of entire eco system.

87

Financial Sector Legislative Reforms Commission (FSLRC)
Financial sector being a catalyst for the real sector growth has to be dynamic enough
to support the growth aspirations. The institutional framework i.e. laws, policies and
organizations, governing the financial sector should enable its orderly growth in tune
with such aspirations. The existing framework governing the financial sector in the
country has been built up over 60 Acts and multiple rules and regulations and many
of the financial sector laws date back several decades, when the financial landscape
was very different from that of today.

At present, India has a legacy financial regulatory architecture viz., RBI, SEBI, IRDA,
PFRDA and FMC. While the objective of RBI is to manage the monetary and credit
system of the country, SEBI works towards promotion of orderly and healthy growth
of the securities market duly protecting the interests of the investors. Similarly, IRDA
promotes and regulates insurance industry and PFRDA deals with pensions and old
age income security among all citizens of the country. The Forward Markets
Commission (FMC) is the chief regulator of forwards and future markets in India. The
regulatory architecture evolved over the years, with a sequence of piecemeal
decisions responding to immediate pressures from time to time. The weaknesses in
the existing structure are:

The present arrangement has gaps where no regulator is in-charge.
Conflicts between regulators / laws.
An approach of multiple sectoral regulators that construct silos induces
economic inefficiency.
Fragmentation of financial firms, which responds to fragmentation of financial
regulation, leads to a reduced ability to understand risk.
Problems are likely to exacerbate.

The Commission was set up at a time when the global economy was recovering from
the 2008 financial crisis. At the time, lessons from what went wrong and the possible
options were being debated. The Commission could, therefore, assimilate the lessons
from the crisis, and at the same time, think and construct a model relevant to the
Indian context in a calm and detached manner supported by quality research,
extensive deliberations and detailed interaction with a host of experts and stake-
holders. The FSLRCs report proposes a sweeping reorganization of the countrys
financial architecture. Indeed, the Act draws from some of the notable features of
the US Dodd-Frank Act, the UKs Financial Services and Markets Act of 2000,
financial liberalization in South Korea and recent Indian government committee
reports. The report is significant both for its composition and mandate. The FSLRC
proposes the following structure:

1.Reserve Bank of India: It is proposed that RBI will perform three functions viz.,
Monetary policy, Regulation and Supervision of banking in enforcing the proposed
consumer protection law and the proposed micro-prudential law, and regulation and
supervision of payment systems in enforcing these two laws. It is proposed to create
a separate agency to manage public debt, removing these functions from the RBI.
Central Government would promulgate rules governing inbound capital flows while
the RBI would promulgate regulations governing outbound flows.

2. Unified Financial Agency: Consolidation of regulation of securities, pensions and
insurance into a single, UK Financial Services Authority-style regulator. The current
work of the Securities and Exchange Board of India (SEBI), the Pension Fund
Regulatory and Development Authority (PFRDA) and the Forward Markets
Commission (FMC) would be rolled into a new Unified Financial Authority (UFA).

88

The unified financial regulatory agency would implement the consumer protection
law and micro-prudential law for all financial firms other than banking and payments.
This would yield benefits in terms of economies of scope and scale in the financial
system; it would reduce the identification of the regulatory agency with one sector; it
would help address the difficulties of finding the appropriate talent in Government
agencies. This proposed unified financial regulatory agency would also take over the
work on organized financial trading from RBI in the areas connected with the Bond-
Currency-Derivatives Nexus, and from FMC for commodity futures, thus giving a
unification of all organized financial trading including equities, government bonds,
currencies, commodity futures and corporate bonds. The unification of regulation and
supervision of financial firms such as mutual funds, insurance companies, and a
diverse array of firms which are not banks or payment providers, would yield
consistent treatment in consumer protection and micro-prudential regulation across
all of them.

3.Financial Sector Appellate Tribunal (FSAT): The present SAT will be subsumed
in FSAT, which will hear appeals against RBI for its regulatory functions, the unified
financial agency, decisions of the FRA and some elements of the work of the
resolution corporation.

4.Resolution Corporation: The present DICGC will be subsumed into the
Resolution Corporation which will work across the financial system.

5. Financial Redressal Agency (FRA): The FRA is a new agency which will have to
be created in implementing this financial regulatory architecture. It will setup a
nationwide machinery to become a one stop shop where consumers can carry
complaints against all financial firms.

6. Public Debt Management Agency: An independent debt management office is
envisioned.

7. Financial Stability and Development Council (FSDC): The existing FSDC will
become a statutory agency, and have modified functions in the fields of systemic risk
and development.

Advantages of new structure:

Non-sectoral approach enables the entities to focus attention on the core
objectives i.e. Innovation and Consumer protection.
It envisages that there will not be any room for conflicts of interests.
One supervisor has a micro view of the risks in the system.

The Independent regulators have become an important part of the policy landscape
and the efficacy of the regulators depends on the following factors:

The regulator is able to setup a specialized workforce that has superior
technical knowledge.
This is assisted by modified human resource and other processes, when
compared with the functioning of mainstream Government departments.
With such knowledge, and close observation of the industry, an independent
regulator is able to move rapidly in modifying regulations, thus giving
malleability to laws.

The unification of regulation and supervision of financial firms would yield consistent
treatment in consumer protection and micro-prudential regulation.

89


New Private Sector Banks

The guidelines for Licensing of New Banks in the Private Sector have now been
released by RBI and the salient features are:
Eligible Promoters: Entities/groups in the private sector, entities in public sector
and Non-Banking Financial Companies (NBFCs) shall be eligible to set up a bank
through a wholly-owned Non-Operative Financial Holding Company (NOFHC).
ii) Fit and Proper criteria: Entities/groups should have a past record of sound
credentials and integrity, be financially sound with a successful track record of 10
years. For this purpose, RBI may seek feedback from other regulators and
enforcement and investigative agencies.
Corporate structure of the NOFHC: The NOFHC shall be wholly owned by the
Promoter/Promoter Group. The NOFHC shall hold the bank as well as all the other
financial services entities of the group.
iv) Minimum Voting Equity capital requirements for banks and shareholding
by NOFHC: The initial minimum paid-up voting equity capital for a bank shall be `5
billion. The NOFHC shall initially hold a minimum of 40 per cent of the paid-up voting
equity capital of the bank which shall be locked in for a period of five years and
which shall be brought down to 15 per cent within 12 years. The bank shall get its
shares listed on the stock exchanges within 3 years of the commencement of
business by the bank.
v) Regulatory framework: The bank will be governed by the provisions of the
relevant Acts, Statutes, Directives, Prudential regulations and other Guidelines /
Instructions issued by RBI and other regulators. The NOFHC shall be registered as a
non-banking finance company (NBFC) with the RBI and will be governed by a
separate set of directions issued by RBI.
vi) Foreign shareholding in the bank: The aggregate non-resident shareholding
in the new bank shall not exceed 49% for the first 5 years after which it will be as
per the extant policy.
vii) Corporate governance of NOFHC: At least 50% of the Directors of the NOFHC
should be independent directors. The corporate structure should not impede effective
supervision of the bank and the NOFHC on a consolidated basis by RBI.
viii) Prudential norms for the NOFHC: The prudential norms will be applied to
NOFHC both on stand-alone as well as on a consolidated basis and the norms would
be on similar lines as that of the bank.
ix) Exposure norms: The NOFHC and the bank shall not have any exposure to the
Promoter Group. The bank shall not invest in the equity/debt capital instruments of
any financial entities held by the NOFHC.
x) Business Plan for the bank: The business plan should be realistic and viable
and should address how the bank proposes to achieve financial inclusion.

90

xi) Other conditions for the bank:
The bank shall open at least 25 per cent of its branches in unbanked rural
centres (population up to 9,999 as per the latest census)
The bank shall comply with the priority sector lending targets and sub-targets
as applicable to the existing domestic banks.
Banks promoted by groups having 40 per cent or more assets/income from
non-financial business will require RBIs prior approval for raising paid-up
voting equity capital beyond `10 billion for every block of `5 billion.
Any non-compliance of terms and conditions will attract penal measures
including cancellation of licence of the bank.
xii) Additional conditions for NBFCs promoting/converting into a bank:
Existing NBFCs, if considered eligible, may be permitted to promote a new bank or
convert themselves into banks.
Procedure for RBI decisions: At the first stage, the applications will be screened
by RBI and thereafter, the applications will be referred to a High Level Advisory
Committee. Based on committee recommendations RBI issues in-principle approvals.
The validity of the in-principle approval will be one year. In order to ensure
transparency, the names of the applicants will be placed on the Reserve Bank
website after the last date of receipt of applications.
Banking Laws (Amendment) Act 2012 has been passed in the Lok Sabha on 18
th

December 2012 and the salient features of the bill are as under:

Forward Markets Contract: The passage of the bill was facilitated by the removal
of a controversial Forward Markets Contract clause that would have allowed banks to
enter into future trading of commodities. Very few banks were keen on trading in
commodities and some felt that the clause had been incorporated to provide banks a
level playing field with corporate giants.

Control: The amendments empower RBI to inspect books of conglomerates, make
board and top management appointments in banks and control transfer of large
chunks of shares.

Voting Rights: The bill also allows investors to have voting rights with a higher cap
of to 26% from the existing 10% in case of private sector banks and 10% from 1%
at present in case of public sector banks. Existing banks will gain as their strategic
shareholders will be encouraged by the move to increase voting rights.

Issuance of Rights/Bonus shares: The amendment will facilitate issuance of
Rights/Bonus shares making nationalized banks on par with private sector banks in
serving the shareholders.

v) Mergers & Acquisitions (M&A): The increased voting rights to investors,
commensurate with their shareholding in existing banks, would help both private and
public sector banks to get more foreign investors and help in expanding their capital
base. The bill also seeks to exempt certain M&As, such as peer group mergers, from
the purview of the Competition Commission of India (CCI). However, it was clarified
that the banking sector will not be outside the CCIs purview.

91

Gold Deposit Scheme

With a view to bring privately held stock of gold into circulation, Govt. Of India / RBI
advised banks to introduce Gold Deposit Scheme (GDS). The operational guidelines
of the scheme are as under:

Purpose: Mobilization of Domestic idle Gold for more productive uses. Provide
customers an opportunity to earn interest on physical assets.
Types of Depositors: Individuals (single/joint); HUFs; Trusts (including Mutual
Funds/ Exchange Traded Funds registered under SEBI); Companies.
Minimum Quantity: 500 grams (No upper limit).
Period of Deposit: six months to 7 years (in multiples of three months).
Rate of Interest: 0.50% for deposit up to 3 years; 0.75% for deposit of more than
3 years up to 7 years. Interest is calculated in terms of Gold Currency (XAU) based
on principal quantity of deposit and applicable rate of interest. The customers can
opt for cumulative as well as non cumulative calculation if interest. The interest shall
be calculated in terms of Gold Currency (XAU) but paid in Rupees only.
Forms of Subscription: Gold Bars/Coins/Jewellery will be accepted in scrap form
only. Provisional receipt will be issued at the time of acceptance. A provisional
receipt will be issued by the branch on accepting gold from the customer.
Loss in weight of Gold: Gold deposited by the customer will be melted after
removing the base metal and non-gold elements, if any, to identify the pure gold
content of uniform fineness. The weight of gold after melting and refining to pure
fineness shall be different from the weight of gold tendered.
Gold Deposit Certificate (GDC): GDC will be issued by our Nodal Branch after the
Gold is melted, assayed and minted at India Government Mint (IGM). GDC will be
issued for pure gold content (995 fineness). Multiple certificates (up to 5) may be
issued. GDC will be sent to the depositor within 90 days from deposit.
Transferability: Transferable by Endorsement and Delivery. In case of certificates
issued in dematerialized form, the depository rules for transfer would apply. Transfer
to be noted with Nodal Branch.
Repayment: Repayment of Principal either in Gold or equivalent Rupee as on the
date of maturity. The gold deposited by the customer will be melted and converted
into bars, and it is not possible to return gold in the same form (e.g. jewellery) as at
the time of deposit.
Premature Payment: Permitted after a lock in period of six months with penalty of
0.25% on applicable interest rate.
Redemption Procedure: The customer will be required to submit the original
certificate, duly discharged on the reverse, to reach the Nodal Branch one month
before maturity (15 days in case of cash repayment). The principal quantity of
deposit will be paid in cash or gold (.995 fitness) as specified by the customer in the
Application Form. Any fraction quantity (below 10 grams) will be paid in equivalent
Rupees. The customer has option to renew the deposit at any time after maturity as
per the term and interest rate available on maturity.
Loan facility: Rupee Loan available at select Branches of our Bank for up to 75% of
notional value of Gold Deposited.
Tax Benefits: Exempt from Income Tax, Wealth Tax and Capital Gains available.

The customers would have to fulfil all KYC requirements as applicable to other
deposit products. In addition, customers will be required to submit Inventory Form
(giving description of gold, number of pieces and weight of gold after preliminary
checking of purity). The mobilised gold with the bank will constitute an eligible asset
under SLR if the banks hold such gold with themselves in physical form. Banks are
required to convert the liabilities and assets denominated in terms of gold into
rupees for the purpose of compliance with reserve requirements/capital prescription
requirements/balance sheet translation requirements.

92


Inflation Indexed National Saving Securities (IINSS)

In order to protect the investors from inflation and to provide Real Rate of Return,
Government of India introduced a novel scheme called IINSS. The issue was opened
for retail subscription on 23
rd
December 2013 and closed on 31
st
December 2013.
Selected Bank Branches were allowed to collect subscription on behalf of GoI. The
details of the scheme are as under:

No Specification Details
1. Subscription Limit Minimum `5000 Maximum `500000
2. Interest Compounded Half yearly
3. Eligible investors
Individuals, Hindu Undivided Family (HUF),
Charitable institutions registered under section 25
of the Indian Companies Act, Universities
incorporated by Central, State or Provincial Act or
declared to be a university under section 3 of the
University Grants Commission Act, 1956 (3 of
1956).
4. Tradability No
5. Transferability To nominee(s) on death of holder (only
individuals)
6. Tenor 10 years
7. Lock in period 1 year for senior citizens (above) 65 years & 3
years for others
8. Early redemption Penalty Charges at the rate of 50% of the last coupon
payable.
9. Base rate of Interest* 1.5%
10. Inflation rate*
Based on final combined CPI with a lag of 3
months (final CPI for Sept 2013 would reference
CPI for all days in December 2013)
11. Open / Close ended Close ended
12. Collateral Yes. Collateral for loans from banks, Fis.
13. Nomination
May nominate one or more persons who shall be
entitled to the bonds and the payment thereon in
the event of his death and the nominee can be
NRI also.
14. Joint a/c allowed Yes
15. Minors allowed Yes
16. Undertaking to be obtained Yes
17. TDS As per extant taxation provision
18. Walk-in customers Yes allowed provided KYC compliance

*Interest rate would comprise two parts viz., Fixed Rate (1.5%) and Inflation rate based
on CPI compounded in the principal on half-yearly basis and paid at the time of
maturity. Rate of Interest (per annum) = Real Interest Rate (fixed rate) + inflation
rate. Final combined CPI will be used as reference CPI with a lag of three months (i.e.
final combined CPI for September 2013 would be reference CPI for all days of December
2013). In case of change in the base year, the base splicing method will be used. For
the month of December, Rate of Interest would be (1.5%) + (Final Combined CPI for
Sep13 = 9.84%) = 11.34%

93


Floating Rate Deposits Bank Term deposits are the most preferred among the
variety of investment options. However, of late the Bank depositors found
unattractive as the real rate of return is low and sometimes negative since they get
interest at contracted rate only while the interest rates are on the rise. Asset Liability
management is the greatest challenge for the Banks as majority of the banks
liabilities are of short term while the repayments of assets spread over relatively
longer tenure i.e. beyond 36 months. Further, the present term deposit interest rate
scenario is acting as disincentive for long term investors since the interest rate on
deposits of beyond 2/3 years is low compared to short term deposits. Normally, the
retail borrowing happens at floating interest rates whereas their deposits with banks
attract fixed rate exposing them to interest rate risk. In the above backdrop, Banks
have been examining the feasibility of introduction of floating rate term deposits,
wherein the rate of interest keeps changing depending on the market rates. The
interest rate is reset with reference to a benchmark/anchor rates which are directly
observable and transparent to the customer. Floating rate term deposit looks ideally
attractive for the retail investors. On the flip side, since the interest rate is floating,
the income from term deposits may be adversely impacted when the rates fall. The
floating deposit rate concept helps banks to manage their assets and liabilities
better. At present, the Floating Interest Rate Deposits are being offered select banks
only and the concept is yet to take momentum in India.
Bharatitya Mahila Bank: With the evolution of self-help groups (SHG) in the rural
areas and the financial independence of urban women, the participation of women in
economic activities has taken off in a big way. Their interaction with formal and
informal financial agencies has also increased considerably. Despite of considerable
improvement, only 26% of women have an account with formal financial institutions,
compared with 46% of men. That means an account in either a bank, a credit union,
a co-operative, post office or a microfinance institution. In the above backdrop,
Government of India established a Bank exclusively for Women to achieve the
following objectives:
To focus on the banking needs of women and to promote women economic
empowerment.
To provide financial services predominantly to women and women self-help
groups to the small businesswomen and from the working woman to the high
networth individual.
To pay special emphasis is paid on funding for skills developments to help in
economic activity.
To promote asset ownership amongst women customers this in turn reduces
their risk of suffering from domestic violence.
The first Womens Bank was established on 19
th
November 2013 on the occasion of
the 94th birth anniversary of former Indian Prime Minister Indira Gandhi.
Dr.Manmohan Singh Prime Minister of India has inaugurated the Bank. India is the
third country in the world to have bank especially for women. The Bank's initial
capital consists of Rs 1,000 crores. It is proposed to open 25 branches by the end of
March 2014 and 500 branches by 2017. Smt. Usha Ananthasubramanian is
appointed as first CMD of the Bank.

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Corporate Governance

It is the system by which companies are directed and controlled by the Management
in the best interest of all stakeholders with greater transparency and better and
timely financial reporting. It encompasses commitment to values / ethical business
conduct to maximize shareholder values on a sustainable basis, while ensuring
fairness to all stakeholders including customers, employees, investors, vendors,
Government and society at large. Sound corporate Governance is therefore critical to
enhance and retain investors` trust. Ethical leadership is need of the hour to conduct
the business on sound lines. What is ethical but not legal should not be done and at
the same time what is legal but not ethical should not be practiced. Corporate
Governance in the Public Sector cannot be avoided and for this reason it must be
embraced. Good Corporate Governance, Good Government and Good Business go
hand in hand. Openness, integrity and accountability are the key elements of
Corporate Governance for any corporate entity. Government of India constituted a
committee Ganguly Committee to look into the issues pertaining to Corporate
Governance in banks and the major recommendations are as under:

Composition Boards should be more contemporarily professional by inducting
technical and specially qualified personnel. There should be a blend of historical
skill set and new skill set, i.e. skills such as marketing, technology and systems,
risk management, strategic planning, treasury operations, credit recovery, etc.

ii) Fit and Proper Norms Directors should fulfill certain fit and proper norms
viz., formal qualification, experience and track record. To ensure this, companies
could call upon the candidates for directorship to furnish necessary information by
way of self- declaration, verification reports from market, etc. Certain criteria
adopted for public sector banks such as the age of director being between 35 to 65
years and that he/she should not be a Member of Parliament / State Legislatures,
etc. may be adopted for private sector banks also.

iii) Selection of Directors could be done by a nomination committee of the board.
The Reserve Bank of India (RBI) also might compile a list of eligible candidates. The
banks may enter into a Deed of Covenant with every non-executive director,
delineating his/her responsibilities and making him/her abide by them.

iv) Training Need-based training should be imparted to the directors to equip
them govern the banks properly.

v) Board level committees It is suggested formation of five committees of the
board viz., Nomination Committee, Audit Committee, Shareholders Redressal
Committee, Supervisory Committee and Risk Management Committee.

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Retail Banking
Retail Banking is basically a mass banking with focus on Individual customer rather
than on large Corporate Houses/Groups, both on liabilities and assets side of the
balance sheet. While Savings, Current and Fixed deposits, with certain flavors,
remain the prominent products on the liability side; the assets side includes products
like Housing, Education, Vehicle, Clean and Personal loans. Besides the above, banks
are also extending ancillary services such as Credit/Debit cards, Depository services,
Bank assurance products, Mutual funds etc. It is appropriate to call Retail Banking as
a Life Cycle Product package for individuals to meet all their banking needs right
from childhood to silver-line age. While considerable growth rate is seen under PSBs
deposits, the share of low cost deposits has come down from 39.95% to 33.45%
during the last five years i.e. 2006 to 2012. Similarly, Yield on advances is under
strain on account of offering competitive interest rates to corporate clientele besides
rise of Non Performing Assets over the years. Today, the survival and the success of
the banks crucially depend on sustainability of Net Interest Margin (NIM), which is
possible only through judicious deposit mix (CASA) besides augmenting Interest
Income through expansion of credit portfolio with quality. In the above backdrop,
banks have been focusing attention on Retail banking.
The Retail Banking segment is of heterogeneous nature as it comprises of various
sets of people like Professionals, Employees, Entrepreneurs, Labour, Farmers, and
Students etc. While the basic banking requirement i.e. Bank Account, remain the
same for all the segments, they need specific services depending on their
demographic, economic and social background. To reach the target customers the
market can be segregated based on the geographic, demographic, psychographic
and behavioral aspects. In order to penetrate in to the untapped market, there is an
imminent need to map the banking requirements of the existing/prospective
customers to the available products and channels on a priority.

The sustained GDP growth has given a fillip to a consumer boom. The rise of the
Indian middle class coupled with more liberal attitude towards spending and personal
debt is one of the major reasons for increased retail lending in India. Further, the
increased proportion of young population (70%) provides greater demand for retail
banking services. Retail lending enables the banks to improve interest spread as the
lending rates are normally higher than other segments and the credit risk tends to be
well diversified. This segment generally loyal and tend not to shift accounts very
often and facilitates cross selling.

There are seven Ps viz., Product, Price, Promotion, Place, People, Process and
Physical evidence, play a vital role for the banks in developing and designing of retail
bank products. The appropriate mix will deliver the desired results. However,
Product and People are to be very much cared in marketing strategies of retail
products by the frontline staff. Today there are many players in the market to extend
retail banking services on one hand and increased discerning demands of the
customers on the other hand, which is making the banks to walk on the tight rope
with utmost care and caution. Providing uninterrupted cost effective value added
services to the customers is another major challenge for the banks. India is
experiencing a surge in retail banking and the market has decisively got transformed
from a Sellers market to a Buyers market in the light of evolving macro-economic
environment, increased profile of Gen-Y and rapid advancement in information
technology. Retail Banking is going to play significant role in Indian Banking
landscape and banks now need to use retail banking as a growth trigger.

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Treasury Management Concepts

Banks not only lend money to customers but also invest in securities such as Bonds and
Debentures of Government as well as Corporates. These instruments are easily tradable
in the capital and money market. The tradability of securities makes investments an
attractive option for banks for deployment of their funds. Further, banks buy securities
not only to trade but also to hold them till maturity to take advantage of the attractive
returns with relatively lower risk. Banks are allowed to invest in shares of companies.
However, the volumes are low due to associated high risk besides regulatory
restrictions. The investment portfolio of the banks broadly divided into three groups viz.,

Trading Book Securities purchased with the intention of selling them within 90 days
are held in the trading book. Trading opportunities arise in the market on account of
fluctuation in interest rates and arbitrage opportunities.

Available for Sale (AFS) Securities which are bought with the intention of selling
them but not necessarily within 90 days is considered to be AFS securities. They are also
part of the trading portfolio of the bank but only the time frame is different. Both the
trading and AFS securities have to be Marked to Market every quarter while finalization
of quarterly results.

Held to Maturity (HTM) These securities are meant to be held till their date of
maturity and the purpose investing in them is to earn reasonable steady income. These
securities are carried in the books at cost or purchase price till maturity. Hence, HTM
securities need not be Marked to Market as the bank is certain of receiving the
maturity value on the specified date. Banks are not allowed to shift securities freely from
trading and AFS to the HTM book as this may lead to overstating of profit figures.
However, banks can opt for shifting only once in a year to adjust their overall portfolio.
Banks are permitted to exceed the limit of 25% of total investments under HTM category
provided (a) the excess comprises of only of SLR securities and (b) the total SLR
securities held in the HTM category is not more than 23% by March 2014.

Call Money Markets: Call and notice money market refers to the market for short term
funds ranging from overnight funds to funds for a maximum tenor of 14 days. Under Call
money market, funds are transacted on overnight basis where as in case of notice
money market; funds are transacted for the period of 2 days to 14 days.

Coupon Rate: It is a rate at which interest is paid, and is usually represented as a
percentage of the par value of a bond. It refers to the periodic interest payments that
are made by the borrower (who is also the issuer of the bond) to the lender (the
subscriber of the bond) and the coupons are stated upfront either directly specifying the
number (e.g.8%) or indirectly tying with a benchmark rate (e.g. MIBOR+0.5%).

Zero Coupon Bond / Deep Discount Bond: The bond is issued at a discount to its
face value, at which it will be redeemed. When such a bond is issued for a very long
tenor, the issue price is at a steep discount to the redemption value. The effective
interest earned by the buyer is the difference between the face value and the discounted
price at which the bond is bought. The essential feature of this type of bonds is the
absence of intermittent cash flows.

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Commercial Paper (CP): It is a short-term instrument to enable non-banking
companies to borrow short-term funds through liquid money market instruments. CPs is
therefore part of the working capital limits as set by the maximum permissible bank
finance (MPBF). CP issues are regulated by RBI Guidelines issued from time to time
stipulating term, eligibility, limits and amount and method of issuance. CP can be issued
for maturities between a minimum of 7 days and a maximum up to one year from the
date of issue. The maturity date of the CP should not go beyond the date up to which
the credit rating of the issuer is valid. CP can be issued in denominations of `5 lakh and
multiples thereof. Amount invested by a single investor should not be less than `5 lakh
(face value). It is mandatory that CPs should be rated by credit rating agencies.
However, recently RBI diluted the minimum rating norm from A-2 to A-3 to enable more
companies to tap this route to meet their short term funding requirements for their
operations. In a bid to make CPs attractive, the RBI has allowed issuers to buyback
these instruments through the secondary market before maturity. It attracts stamp
duty.

Certificates of Deposits (CDs): It is a negotiable money market instrument and
issued in dematerialized form or as a Usance Promissory Note, for funds, deposited at a
bank or other eligible financial institutions to raise short-term resources within the
umbrella limit fixed by RBI. CDs may be issued at a discount on face value. CDs differ
from term deposit as they involve the creation of paper, and hence have the facility for
transfer and multiple ownerships before maturity. Banks use the CDs for borrowing
during a credit pickup, to the extent of shortage in incremental deposits. Minimum
amount of a CD should be one lakh and in multiples thereof. The maturity period of CDs
should be not less than 7 days and not more than one year. However Fis are allowed to
issue CDs not exceeding 3 years from the date of issue. Banks have to maintain the
appropriate reserve requirements (CRR/SLR) on the issue price of the CDs. It attracts
stamp duty. Banks/Fis cannot grant loans against CDs.

Securitization is an effective tool to reduce the mismatches in the maturities of assets
and liabilities. It is a financing technique that involves pooling and re-packing of illiquid
financial assets in to marketable securities. There are six players viz., Borrowers,
Lending Banker (who becomes an originator for the Securitization transaction), Special
Purpose Vehicle (SPV), Credit Rating Agency, Investors and Service Providers. The
process of securitization involves identification of financial assets, rating of these assets
by the rating agency, creation of a SPV for handling the securitization transaction,
assignment of future receivables in favour of the SPV, issuance of marketable securities
based on these underlying financial assets and selling the same to the investors. The
service providers recover the amount periodically and remit to the SPV and who in turn
pass the benefit to the investors.

Asset and Liability Management RBI Guidelines: Of late, it is observed that PSBs
have been accepting Bulk Deposits/Certificate of Deposits route to increase balance
sheet size at very high interest rates, adversely affecting the profitability besides
exposing the banks to ALM Risk. RBI directed banks not to accept Bulk Deposits beyond
10% of the total deposits and the total of Bulk Deposits & Certificates of Deposits should
not exceed 15% of total deposits of the bank at any given point of time. An appropriate
time-bound strategy for reduction of such existing bulk deposits should be put in place
to achieve the same by March 2013.

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Rupee Dollar Dynamics

Foreign exchange reserves are extremely critical for the countries who deal with
international trade to meet the foreign currency commitments. Normally, the
international trade transactions take place in couple of major currencies of which US
Dollar plays a predominant role. Exchange rates, like any other commodity, are based
on supply and demand for particular forms of currency. Domestic currency supply
changes as a result of a countrys fiscal and monetary policies. Similarly, demand for
currency can be influenced by a large number of factors, including interest rates,
inflation, and views on impending government regulation.

A strong exchange rate (rupee appreciation) is often considered to be a sign of economic
strength and can become a symbol of national pride. On the flipside, there are
arguments that it can depress economic growth as it may tend to lead exports more
expensive, therefore less demand for exports. At the same time it ignites more demand
for imported goods on account of price competitiveness which pose threat to survival of
domestic industry.

India had chosen to adopt a fixed rate currency regime where the rupee was pegged at
4.79 against a dollar between 1948 and 1966. Two consecutive wars, one with China in
1962 and another one with Pakistan in 1965; resulted in a huge deficit on Indias
budget, forcing the government to devalue the currency to 7.57 against the dollar. The
rupees link with the British currency was broken in 1971 and it was linked directly to
the US dollar. In 1975, value of the Indian rupee was pegged at 8.39 against a dollar. In
1985, it was further devalued to 12 against a dollar.

During economic crisis in 1991, the government adopted a dual exchange rate regime
where the importers were allowed to pay for some imports with foreign exchange valued
at free-market rates and other imports could be purchased with foreign exchange
purchased at a government-mandated rate. Subsequently, Floating Exchange Rate was
introduced in the year 1993 where the exchange rate is determined ostensibly by
market forces. During the transition period (1990 to 1993) the exchange rates
witnessed sharp upward movements. However, the post floating exchange rate regime
i.e. beyond 1993, witnessed gradual depreciation of rupee against US Dollar. In the post
reforms era, the Indian rupee has been highly volatile. The rupee traded in the range of
40-50 between 2000 and 2010. The Indian currency has gradually depreciated since the
global 2008 economic crisis. The rupee touched a new low of 68 to the dollar as heavy
demand from importers along with weak domestic equities continued to weigh on
sentiment. The fall in rupee against US Dollar can be attributed primarily to the following
major factors:

The investors across the globe are considering US Dollars as a safe haven for
their investments on account of turbulence in European markets and weak
global economic outlook. This led to an increased demand for dollars vis--vis
the supply for rupee and thus the depreciation.

The Indian economic scenario over the years has been plagued by high rate of
inflation, hovering around 5% to 10%, and tardy growth in manufacturing
sector. The cumulative effect of these factors is leading to a shift in investor
sentiments towards dollar market.

Due to a sharp increase in the dollar rates, importers suddenly started
gasping for dollars to hedge their position, which led to an increased demand
for dollars. On the other hand exporters kept on holding their dollar reserves,
speculating that the rupee will fall further in future. This interplay between

99

the two forces further fuelled the demand for dollars while sequestering its
supply from the market.

There has been shift of FIIs from the Indian markets in the recent years and
this has triggered increased demand for dollars which is further leading to a
spiraling rupee.

The depreciation of rupee against US Dollar has cascading impact on the economy as
we are operating in a liberalized environment dealing with multiple countries /
currencies and this has bearing on the following sectors:

Exports Businesses that rely on exports can find their products suddenly
competitive in overseas markets as exchange rates fluctuate. The falling rupee has
substantially appreciated the revenues for the exporters especially dealing with
Information Technology, Pharma, Gems, Textile sectors as they receive more rupees
for their dollar denominated export contracts. It is a boon to IT companies as it
generates more than 80% of their revenue from overseas market and this will
enhance their revenue realizations.

Imports Companies that rely on imports can see the costs of these imports rise
and fall with the exchange rate. India has been importing crude and petrol to meet
the growing needs of the corporate sector as well as domestic consumption. Despite
drop in oil prices in international market, we are unable to take advantage due to
weakening of local currency. Further, the increased gold imports added fuel to fire
and widened the current account deficit. This has far reaching impact on increasing
inflation with rise in energy cost to transportation cost. Falling value of rupee brings
cheer to the economy only when the exports surpass imports as loss on imports is
neutralized by gain on exports. However, it is alarming situation for our country as
trade deficit is looming large over the years from 2.04 lakh crore in 2006 to 10.42
lakh crore in 2013.

Corporate sector Indian corporate have been increasingly accessing international
debt markets to raise resources to take advantage of low interest rates in
international markets. As per Bloomberg reports, Indian corporates have borrowed
more than $12 billion every year since 2010. The falling rupee has direct bearing on
the interest burden as majority of the corporate borrow funds through ECB. For
companies that have availed of foreign currency loans for implementation of
projects, the rupee depreciation will stretch their balance sheets, as the amount of
debt will increase in rupee terms. As these loans mature, the cash flows will also be
impacted. The rupee depreciation especially in economic downturn scenario is
compressing the corporate margins and creating difficulties in making repayments to
the creditors. Exchange rate movements can have a significant impact on corporate
returns. Multinational companies may see significant shifts in their profitability, as
foreign exchange rates may make locally held currency more valuable. Even local
companies can be affected, as changing forex rates may substantially alter their
material costs, or affect their ability to sell their goods in foreign countries at
competitive prices.

Foreign investments The rupees weakness may make foreign investors think
twice before investing in India whether it is Foreign Direct Investment (FDI) or
Foreign Institutional Investors (FII) or External Commercial Borrowings (ECB).
Foreign capital inflows are typically at risk when the local currency weakens. Already,
portfolio flows into both debt and equity have been gradually tapering, with investors
subscribing to the view that the local currency could depreciate further. If the rupee
touches a new low and stabilizes there, foreigners may then put in more money, as
they would get more rupees for the same amount of dollars they would have put in
earlier.

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Impact on economy The major impact of the falling rupee can be seen on the
rising import bill as around 70% of countrys fuel requirements are being met by
imports alone. The imports have severely impacted the bottom line of majority
companies as well as the subsidy bill of the government. Of late, the gold imports
have added the woes further which widening the trade deficit. Increasing imbalance
in trade has adverse impact on countrys fiscal deficit, alarmingly stood at 5.4% of
GDP, is a cause of serious concern. A falling rupee straightaway translates into an
increase in the retail prices of all products across the board on account of imported
fuel costs which also termed as Imported Inflation. The spiraling inflation is
likely to lead to stagnant growth of the economy.

In order to curb the speculative forces, recently RBI introduced key policy initiatives
such as intervening in the forward contracts policy whereby cancelled forward
contracts cannot be rebooked. Further, RBI intermittently put trading limits for the
banks in the foreign exchange market in order to tame the speculative forces and to
manage the volatility and disruption to the macro-economic situation. However, the
fact remains that India just does not have enough foreign exchange reserves to sell
in the market to support the rupee and thus intervention is very limited.

Fortunately, NRIs play an important role in bridging the current gap especially in
falling rupee environment as they are remitting substantial funds to India over the
years and the inflows during the current year stood at 78 billion US Dollars. While
NRIs emotional connection to their country of origin is part of the explanation for
this, the attractive domestic deposit interest rates also provide a powerful incentive.

FCNR SWAP Special Window: Banks raise FCNR funds in various foreign
currencies and then sell the foreign currency in exchange for Indian rupees at the
prevailing exchange rate and use the Indian rupees for domestic lending. When the
FCNR deposit becomes due for maturity, banks would need foreign currency to pay
the depositor. At present, in order to protect from forex risk, banks hedge their FCNR
commitments by entering into forward contracts which costs around 7% p.a. In the
recent years, the rupee depreciated steeply which has wide ramifications and led to
alarming Current Account Deficit. In order to bailout the country from the crisis, RBI
has introduced swap deal as a means to encourage banks to attract more US dollars
into India. The RBI has promised banks a forward rate at a premium of 3.5% per
annum for all fresh 3-year FCNR deposits raised. This acts as an incentive for banks
to raise fresh FCNR funds as it lowers the cost of hedging. This swap deal is open
until December 31, 2013 and only for deposits opened in US dollar for a period of
over 3 years. NRIs are likely to be swarmed with offers from banks to open FCNR
deposits. For an NRI, the FCNR deposit itself can be an attractive proposition
because the interest rates on US dollar deposits are in the range of 3-4% per annum
as compared with rates as low as 1% in the US. Further, this interest is tax free in
India and there is no currency risk. According to reports, what is happening is that
foreign banks are rushing to lend funds to NRIs who can invest the money into FCNR
deposits to gain interest arbitrage. For instance, the interest rate on the loan in US
would be say 1% p.a. where as they earn around 4% p.a. on FCNR deposit, thereby
a net interest gain by 3% p.a. For banks too, this is a win-win as their loan gets
covered by the FCNR deposit and they get access to funds at a lower cost.

The most potent symbol of a nations economic strength is the soundness of its
currency. If the decline in rupee continues then it will have adverse impact on all key
sectors of the economy. It is therefore high time that government should push the
second generation economic reforms so that Indian exports get the much needed
boost and also encourage import substitute industries to augment the net trade
inflows to ensure the stability and soundness of the rupee against all major
currencies in the long run.

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External Borrowings & Concepts

External Commercial Borrowings (ECB): It is the borrowings by the Corporates and
Financial Institutions from International markets. ECBs include Commercial Bank loans,
Buyers Credit, Suppliers Credit, Securitized Instruments such as Floating Rate Notes,
Fixed Rate Bonds etc. ECBs are usually available at interest rate of 100 to 400 basis
points above LIBOR (London Inter Bank Offered Rate).

American Depository Receipt (ADR): It is a negotiable certificate of ownership in the
shares of non-American Company that trades in an American Stock Exchange. ADRs
make it convenient for Americans to invest in foreign companies as ADRs carry prices
and dividends in dollars, and can be traded on the US stock exchanges like the shares of
US based companies.

Special Drawing Rights (SDR): It is the International Monetary Funds own currency.
The value of SDRs is set relative to a basket of major currencies. It is used only among
governments and IMF for balance of payments settlement.

Global Depository Receipt (GDR): These are the instruments through, which the
Indian companies raise their resources from international markets. It is a negotiable
certificate issued by a depositary company (normally an investment bank) representing
the beneficial interest in shares of another company whose shares are deposited with
the depository. It is a Dollar denominated instrument, traded on Stock Exchange in
Europe or USA or both and represents publicly traded specified number of local currency
equity shares of the issuing Company.

Foreign Direct Investment (FDI): An investment which is made directly on the
production facilities (either by buying a company or by establishing new operations of an
existing company) of a country by a foreign source, usually a foreign company. These
investments are more enduring than foreign investment in shares and bonds.

Derivatives: A credit derivative derives its value from the credit quality of the
underlying loan or bond or any other financial obligation of an underlying company. The
underlying asset can be equity, index, foreign exchange (forex), commodity or any other
asset. Derivative products initially emerged as hedging devices against fluctuations in
commodity prices and commodity-linked derivatives remained the sole form of such
products for almost three hundred years. The financial derivatives have become very
popular in the recent years. Credit Derivatives are financial instruments designed to
transfer credit risk from the person / entity exposed to that risk to a person / entity who
is willing to take on that risk.

SWAP refers to exchange of one asset or liability for a comparable asset or liability for
the purpose of lengthening or shortening maturities or raising or lowering coupon rates
to maximize revenue or minimize financing costs. This may entail selling one securities
issue and buying another in foreign currency; it may entail buying a currency on the
spot market and simultaneously selling it forward. There are various types of SWAPs
such as Equity swap, Currency swap, Credit swaps, Commodity swaps, Interest rate
swaps etc. These can be used to create unfunded exposures to an underlying asset since
counterparties can earn the profit or loss from actions in price without having to post the
notional amount in cash or collateral. Swaps can be used to hedge certain risks such as
interest rate risk or to wonder on changes in the expected direction of underlying prices.

Futures & Options: An agreement to buy or sell a fixed quantity of a particular
commodity, currency or security for delivery on a fixed date in the future at a fixed
price. Unlike an option, a futures contract involves a definite purchase or sale and not
an option to buy or sell. It may entail potential unlimited loss. However, Futures provide

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an opportunity to those who must purchase goods regularly to hedge against changes in
prices. An arrangement where the rate is fixed in advance for the purchase or sale of
foreign currency at a future date is called forward contract. Option is a contract, which
gives the holder the right but not the obligation. A call and put option is a right to buy
and sell the underlying product respectively.

Liberalized Remittance Scheme: RBI introduced the scheme as a step towards
further simplification and liberalization of the foreign exchange facilities available to
resident individuals. As per the Scheme, resident individuals may remit up to USD
200000 per financial year (April to March) for any permitted capital and current account
transactions. This limit also includes remittances towards gift (USD 5000 per
remitter/donor per annum) and donation (USD 5000 per remitter/donor per annum) by
resident individual. Under the Scheme, resident individuals can acquire and hold
immovable property or shares or debt instruments or any other assets outside India,
without prior approval of the Reserve Bank. Individuals can also open, maintain and hold
foreign currency accounts with banks outside India. In addition, the existing facility of
release of exchange by Authorized Dealer up to USD 10000 or its equivalent in a
financial year for one or more private visits to any country will continue to be available
on a self declaration basis. It is mandatory to have PAN number to make remittances
under the Scheme. Further, Resident individuals are allowed to acquire equity shares of
a foreign entity by way of/under i) qualification shares ii) professional services rendered
and iii) ESOP scheme.

Factoring and Forfeiting: Factoring is a method where by the factor undertakes to
collect the debt assigned by exporter where as international forfeiting is a method
whereby the exporter sells the export bills to the forfeiter for cash. Forfeiting is resorted
to for export of capital goods on medium terms and long-term credit, whereas the
factoring is mainly short-term trade finance. In respect of forfeiting, the guarantee by
the importers banker is normally insisted upon whereas in factoring such guarantee by
the importers banker is usually not stipulated. Forfeiting is without recourse to the
seller (exporter), while factoring is undertaken both with and without recourse to the
seller.

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Fed Tapering The US central bank (Federal Reserve) has been spending $85bn a
month to boost the US economy as part of quantitative easing (QE), a policy that began
as a response to the financial crisis that struck in 2007. Under the plan, the Fed has
been buying assets a mixture of US government debt and mortgage bonds. This has
the effect of driving down US interest rates, including the cost of mortgages, car loans
and financing for business. Quantitative easing was never intended to last forever, since
each bond purchase expands the Feds balance sheet by increasing the amount of
bonds it owns. Tapering is a term that exploded into the financial lexicon when U.S.
Federal Reserve Chairman Ben Bernanke stated in testimony before Congress that that
Fed may taper or reduce the size of the bond-buying program known as quantitative
easing (QE). The Fed announced that it was scaling back or tapering that support to
$75bn a month. The program is designed to stimulate the economy. Tapering isnt an
immediate, dramatic event instead it is likely to take place in a phased manner so as to
create minimal market disruption. Tapering is going to remain dependent on economic
conditions Fed may pull back slightly if the economy continues to strengthen, but it
could also increase the program again if the economy slowed or the financial markets
were shocked by an unforeseen crisis. Fed tapering is not only necessity for reducing
long-term inflationary pressures but it is also important from a macro-economic
standpoint as US Fed balance sheet is becoming unsustainably huge. Tapering will
definitely reflect confidence on the sustainability of economic growth and will be a long-
term positive rather than a negative.

Volcker Rule restricts deposit-taking banks from engaging in proprietary trading,
prohibiting them from engaging in more complex activities that are prone to conflicts of
interest, in order to safeguard the core of the banking system, i.e. commercial or
traditional banking (deposit taking and lending). The rule prohibits any banking entity
from engaging as principal in short-term trading in securities, derivatives, or commodity
futures, i.e. activities that may not be compatible with the risk profile of the banking
entities, but allows exemptions for market-making, hedging, trading in US government
securities, and other activities. There is a concern that it would be a challenging task to
separate proprietary trades from permissible trades. Under the Volcker Rule the
reporting and compliance regime is expected to assume greater significance. The rule
applies to all US banks and bank-holding companies and all foreign bank-holding
companies with US subsidiaries or branches. The Volcker Rule prescriptions can affect
the operations of the US banks operating in India as they are active players as market
makers in domestic foreign exchange market, Government securities market and
interest rate swap market. This will change the entire depth and breadth of the Indian
markets. An important fall-out of this rule could well be the decline in liquidity in these
markets and the resultant cost escalation for market participants.

Bitcoins: It is a virtual and digital version of cash emerging as a global payment
platform that can be used through smart phones, tablets, and other devices. Bitcoin was
introduced in 2009 by pseudonymous developer Satoshi Nakamoto, when the global
financial crisis led to distrust of Banks and Government was high. It is a peer-to-peer
payment network and digital currency based on an open source

protocol, which makes
use of a public transaction log. When paying with Bitcoin, there will be no exchange of
digital notes or tokens between buyer and seller. Instead, the buyer requests an update
to a public transaction log which shows ownership of the coins and is maintained by a
decentralized network that verifies and timestamps payments. What makes Bitcoin
unique is that there is a record as to who possesses it, and there is a network that
records transactions and there is no way to increase the number of Bitcoins in existence.

It works on Cryptography proof that allows any two willing parties to transact directly
with each other without the need for a trusted third party whether it is State or Bank
or Regulator. It is used to pay for products and services and the merchants have an
incentive to accept the currency because transaction fees are lower than the 2-3%

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typically imposed by credit card processors. Notable vendors accepting Bitcoin are
OkCupid, Reddit, WordPress, and Virgin Galactic.

Bitcoin is gaining popularity in countries with problem-plagued national currencies, as it
can be used to circumvent inflation, capital controls, and international sanctions besides
lower processing fees compared to credit cards or money transfers. It may be well
suited to facilitating cheap cross-border money transfers. However, these coins lack
intrinsic value as their value depends only on the willingness of users to accept them.

At present, the usage of virtual currency is not authorized by any central bank or
monetary authorities. Israeli is in forefront in creating tools to facilitate the Bitcoins to
be used in many ways such as buying of products, sending remittances and investments
in stock market. The United States is currently considered to be Bitcoin friendly
compared to other nations. On the flipside, there are concerns with regard to
maintenance of its value, KYC compliance, taking undue advantage of the system
(unlawful activities) by unscrupulous persons/agencies and lack of consumer protection.
Recently, the Central Banks of Europe, China and India expressed their concerns about
the usage of the unregulated currency i.e. Bitcoins.

It is estimated that around 12 million Bitcoins are in circulation at present and the worth
of Bitcoin is around $700 and the maximum potential number of Bitcoins is expected at
around 21 million with a market value of about $9 billion. Definitely, it is going to be a
game-changer in virtual currency arena provided it crosses regulatory hurdles.

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Negotiable Instrument Act Important sections
Section
Relating to
4 Promissory Note Definition
5 Bill of Exchange Definition
6 Cheque (Electronic / Truncated cheque) Definition
8 Holder Definition
9 Holder in due course
10 Payment in due course
15 & 16 Endorsement Definition
17 Ambiguous instruments
20 Inchoate stamped instruments
26 Capacity to make instruments
31 Bankers obligation to pay for wrongful dishonor
45A Holders right to obtain a duplicate of lost bill
47 Bearer instrument Negotiation by delivery
48 Order instrument Negotiation by endorsement
58 Instrument obtained by unlawful means No title passes
80 18% p.a. where interest rate is blank
85 (1) Protection to Paying Banker Order cheque
85 (2) Protection to Paying Banker Bearer cheque
85 (A) Protection to Paying Banker Bank Drafts
89 Protection to Paying Banker Materially altered instrument
123 General crossing
124 Special crossing
128 Payment in due course Crossed cheques
130 Not Negotiable Crossing
131 Protection to Collecting Banker Crossed Bank Drafts
138 Return of cheques for insufficient funds Drawers liability
As per RBI guidelines, the validity period of Cheque/Draft is limited to 3 months.

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List of Acts governing the Indian Banking Sector

1. Banking Regulation Act, 1949

2. Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970
(applicable to banks nationalized in 1970)

3. Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980
(applicable to banks nationalized in 1980)

4. Companies Act, 1956 (to a limited extent)

5. Reserve Bank of India Act, 1934, rules, guidelines, master circulars, and
regulations made there under

6. Securitization and Reconstruction of Financial Assets and Enforcement of Security
Interest Act, 2002

7. Recovery of Debts Due to Banks and Financial Institutions Act, 1993

8. Foreign Exchange Management Act, 1999 (for foreign currency dealings),
guidelines, rules, regulations and master circulars made there under

9. Banking Ombudsman Scheme, 2006 (not an Act, but governs resolution of
consumer disputes)

10. Payment and Settlement Systems Act, 2007

11. Regional Rural Banks Act, 1976 (for rural banks)

12. Deposit Insurance and Credit Guarantee Corporation Act, 1961

13. Banking Laws (Amendment) Bill, 2011

14. State Co-operative Societies Acts (for each state)

15. Multi State Co-operative Societies Act, 2002

16. State Bank of India Act, 1955

17. State Bank of India (Subsidiary Banks) Act, 1959

18. Competition Act, 2002

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Other important concepts

Base Rate: Banks are not allowed to lend below Base Rate w.e.f. 01.07.2010 except
certain categories such as Differential Rate of Interest (DRI) advances, Loans to banks
own employees, Loans to banks depositors against their own deposits, loans to
tribals/physically challenged persons, Interest Subvention Schemes viz., Crop loans,
Export credit and Restructured loans. The final lending rates include the Base Rate plus
variable or product specific operating expenses, credit risk premium and tenor premium.
However, Banks may charge interest at the rates prescribed under SHG schemes,
National Schedule Tribes Finance and Development Corporation (NSTFDC) and National
Handicapped Finance and Development Corporation (NHFDC) to the extent refinance is
available. Banks are required to fix Base Rate duly taking Cost of Deposits / Funds,
Negative carry in respect of CRR and SLR, Unallocated Overhead Costs and Average
Return on Net Worth in to consideration.

Deregulation of SB Interest Rates: As per RBI guidelines banks are free to determine
their savings bank deposit interest rate w.e.f 25.10.2011 subject to the following two
conditions viz., First, each bank will have to offer a uniform interest rate on savings
bank deposits up to `1 lakh, irrespective of the amount in the account within this limit.
Second, for savings bank deposits over 1 lakh, a bank may provide differential rates of
interest, if it so chooses. However, there should not be any discrimination from customer
to customer on interest rates for similar amount of deposit. Further, banks are free to
determine their interest rates on NRE/NRO deposits w.e.f. 16.12.11. However, interest
rates offered by banks on the said deposits should not be higher than those offered by
them on comparable domestic rupee deposits. Banks are paying interest on SB accounts
on Daily Products on half-yearly basis viz., September & March of every year. Though,
the deregulation of interest is in vogue, at present all most all Public Sector Banks are
paying 4% interest where as few Private Sector Banks are extending interest beyond 4%
p.a. RBI has given discretion to the banks with regard to frequency of payment of SB
interest. However, at present many banks are adopting interest credit to the depositor
accounts once in half-year i.e. April & October.

Dynamic Provisioning: At present, banks generally make two types of provisions viz.,
general provisions on standard assets and specific provisions on non-performing assets
(NPAs). The present provisioning framework does not have countercyclical or cycle
smoothening elements. Though the RBI has been following a policy of countercyclical
variation of standard asset provisioning rates, the methodology has been largely based
on current available data and judgment, rather than on an analysis of credit cycles and
loss history. Since the level of NPAs varies through the economic cycle, the resultant
level of specific provisions also behaves cyclically. Consequently, lower provisioning
during upturns, and higher provisioning during downturns have pro-cyclical effect on the
real economy. However, few banks have started making floating provisions without any
predetermined rules; many banks are away from the concept which has become difficult
for inter-bank comparison. In the above backdrop, RBI propose to introduce dynamic
provisioning framework for banks in India to address pro-cyclicality of capital and
provisioning, after the financial crisis, efforts at international level are being made to
introduce countercyclical capital and provisioning buffers.

Forensic Audit is defined as the application of accounting methods to the tracking and
collection of forensic evidence, usually for investigation and prosecution of criminal acts
such as embezzlement or fraud. It involves examination of legalities by blending the
techniques of propriety, regularity and investigative and financial audits. The objective is
to find out whether or not true business value has been reflected in the financial
statements and in the course of examination to find whether any fraud has taken place.
Forensic Auditors has a unique job because the responsibility involves the integration of
accounting, auditing, and investigation skills. It involves thinking beyond the numbers

108

and out of the box. It essentially presumes the existence of fake transactions. It
requires a more proactive, skeptical approach in examining the books of accounts.

Branch Authorization Policy: The opening of branches by domestic scheduled
commercial banks (other than RRBs) in Tier-1 centres (population of one lakh & above
as per Census 2001) will continue to require prior permission of the Reserve Bank. While
issuing such authorization, the Reserve Bank will continue to factor in, among others,
whether at least 25 per cent of the total number of branches to be opened during a year
is proposed to be opened in unbanked rural centres. However, domestic scheduled
commercial banks are permitted to open branches at all centres other than Tier-1
without permission from RBI, subject to reporting. Government desires to have bank
branches at all villags where the population is 10000 & above and also in the villages
having population is 5000 & above and where there is no bank branch within a radial
distance of 5 KMs by September 2012.

Rajiv Gandhi Equity Savings Scheme (RGESS) is a tax saving scheme announced in
the Union Budget 2012-13 and the scheme is designed exclusively for the first time
retail individual investors in securities market, whose gross total income for the year is
less than or equal to `10 lakh. The investor would get under Section 80CCG of the
Income Tax Act, a 50% deduction of the amount so invested, up to a maximum
investment of `50000, from his/her taxable income for that year. The objective of the
Scheme is to encourage the flow of savings and to improve the depth of domestic capital
markets. This would help in promoting an equity culture in India. The Scheme aims at
widening the retail investor base in the Indian securities markets and also furthers the
goal of financial stability and financial inclusion.

Swavalamban Scheme: The New Pension System (NPS) is aimed to inculcate the
saving habit and to provide pension benefit to the citizens through systematic savings
plan. Under this, the government has made a provision to pay an incentive of `1000 per
year (up to 2014) to every NPS account opened subject to the minimum contribution of
`1000 and maximum `12000 per annum. The age of the subscriber should be between
18 to 60 years. The subscriber is required to invest minimum 40% accumulated savings
to purchase a life annuity from any IRDA regulated insurance company, in case where
he opts for exit at the age of 60. If the subscriber prefers to exit before 60 years, he is
required to invest minimum 80% of accumulated savings in annuity policy. In an
unfortunate event, the nominee receives 100% of the NPS pension wealth in lump sum.
However, the exit would be subject to the overriding condition that the amount of
pension wealth to be annuitized should be sufficient to yield a minimum amount of
`1000 per month. If not, the percentage of pension wealth to be annuitized would be
increased so that the pension amount becomes `1000 per month, failing which the
entire pension wealth would be subject to annuitisation.

New Pension Scheme is introduced for Bank Employees in the year 2010 under which
Bank employees are eligible for Defined Contributory Pension Scheme (DCPS). It is
mandatory that all employees who have joined the service of the Bank or after 1
st
April
2010 enroll themselves as members of this scheme which entails obtaining of Permanent
Retirement Account Number (PRAN) from NSDL who are the Central Record Keeping
Agency. Under this scheme, the members shall contribute 10% of the Basic pay and
Dearness Allowance towards the DCPS and the bank shall make a matching contribution
in respect of these employees. The scheme is governed by Pension Fund Regulatory and
Development Authority (PFDRA) and the funds are managed by approved fund
managers from public and private sector with proven track record. Employees would be
free to carry their PRANS to new employments or continue as individuals after change of
employment status.

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Aadhaar Project: The Unique Identification Authority of India (UIDAI) was established
by Government of India with an objective to implement Multipurpose National Identity
Card (UID Card) in India. It is aimed to eliminate duplicate/fake identities and to put
hassle-free, cost effective verification/authentication system in place thereby to save
considerable resources of various User Departments as well as beneficiaries at large.
Central/State Governments and Public Sector Banks are acting as Registrars for
AADHAAR project. The Registrar or its agents collect details of Demographic information
and Biometric details such as Facial Image (Photo), Finger Prints (10) and iris scan of
the applicant to establish individuals uniqueness. De-duplication exercise ensures that
nobody gets more than one number and in case a person already enrolled approaches
the registrar, his biometric parameters will be run through the database and if matches
his application will be rejected right away. It is a 12 digit identity code and will remain
a permanent identifier. It gives a big push to the governments financial inclusion
agenda and provides strong foundation to deliver better services and improve the
operational efficiency of the system. It is aimed to cover 60 crore enrollments by 2014.

Money Mules: An individual with bank account is recruited to receive cheque deposits
or wire transfers and then transfer these funds to accounts held on behalf of another
person or to other individuals is called Money Mules. The fraudsters adopt variety of
methods including spam e-mails, advertisements on genuine recruitment web sites,
social networking sites, instant messaging and advertisements in newspapers. Many
times the address and contact details of such mules are found to be fake and making
difficult for enforcement agencies to locate the account holder. RBI advised the banks to
strictly adhere to the guidelines on KYC/AML/CFT to protect our customers from misuse
by such fraudsters.

Core Banking Services (CBS): It is an integrated solution where entire data of
branches is stored in a central server and all the transactions of the branches will be
done through this server. All back office activities such as Interest calculations, Levying
Service Charges, Parameter Setting / Updation, Generation of Reports / Returns,
Providing MIS, Start of Day and End of Day operations are undertaken by the central
server. The customers data can be accessed from various outlets at various
geographical centers. It enables the bank to provide triple A services (Any Branch,
Any Time, Any Where) to the customers through Multiple Delivery Channels viz.,
Branches, ATMs, Mobile, Lobby, Corporate Terminals, Kiosks and Internet Banking. It
enabled the banks to introduce technology embedded value added products besides
implementing Data Warehousing, Data Mining and Customer Relationship Management
concepts. CBS is an opportunity to banks to improve customer service as well as
operational efficiency of the banks. However, it is an imperative for banks to have a re-
look to the existing systems and procedures to suit the changed environment.

Unique Customer Identification Code (UCIC): The increasing complexity and of
financial transactions necessitate that customers do not have multiple identities within a
bank, across the banking/financial system. Government of India has proposed the
introduction of UCIC for customers across different banks/financial institutions for
setting up a Centralized KYC Registry. RBI advised the banks to initiate steps for
allotting UCICs for their customers by providing them a relationship number. This
enables the banks to identify customers, track the facilities availed, monitor the financial
transactions in a holistic manner.

Internal Capital Adequacy Assessment Process (ICAAP): This is intended to
ensure that the capital held by the Bank is commensurate with the Banks overall risk
profile. The ICAAP takes into account effectiveness of Banks risk management system in
identifying, assessing, measuring, monitoring and managing various risks. ICAAP
comprises all of the Banks procedures and measures designed to ensure appropriate
definition and measurement of risks and appropriate level of internal capital in relation
to Banks risk profile.

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International Financial Reporting Standards (IFRS): Convergence to IFRS will
require significant alterations to financial accounting and reporting processes and
systems. The potential benefits of an integrated global capital market regulated by a
single world-wide financial reporting language would be long lasting and it is a big step
towards improving the efficiency of international capital markets. Regulators will benefit
from greater consistency and quality of information. It also enhances the communication
of the Banks financial results and position together with other performance indicators to
analysts, investors, customers as well as other stakeholders. It also benchmarks the
entity against its global peer group gaining a broader and deeper understanding of its
relative strengths by looking beyond the country and regional bench marks. It is
proposed that the Corporates are to be moved to IFRS in a phased manner.

Banking Ombudsman (BO) Scheme It cover redressal of grievances against
deficiency in banking services viz., deposits, loans, debit/credit cards, remittances
(DD/PO/ECS/NEFT/RTGS) etc. BO undertakes the cases where the value of dispute does
not exceed `10 lakhs. The complaints can be made in any form including online (email)
and the same will be processed without any fee. The complainant is required to take up
the matter with the concerned branch for redressal of the grievance and wait for 30 days
and if not addressed he can approach the BO. He should not have filed a complaint
before any other forum or court or consumer forum or arbitrator on the same subject
matter and be pending when he approaches the B.O. On receipt of the complaint, notice
will be sent to the bank advising the bank to settle the grievance within fifteen days
from the date of receipt of the notice or else submit version and also attend a
conciliation meeting at the office of the BO. If the grievance is not settled by conciliation,
it will be taken up for passing an award. The complainant will have to accept award
within fifteen days of receipt of the award. The time limit for implementation of award is
30 days from the date of such receipt of acceptance letter. However, Bank can approach
Reviewing Authority (Deputy Governor RBI). Compensation for mental agony, reputation
loss etc., will not be considered as per the provisions of the Scheme.

Adjusted Net Bank Credit (ANBC) denotes Net Bank Credit plus investments made
by banks in non-SLR bonds held in HTM category. However, investments made by banks
in the Recapitalization Bonds and Inter-bank exposures will not be taken into account for
the purpose of priority sector lending targets/sub-targets.

Reverse Mortgage: The genesis of Reverse mortgage can be traced to developed
countries where Silver Line segment (people above 65 years group) constitutes major
chunk of population on account of higher standards of living, better access to health care
and higher life expectancy. The ever-rising cost of living and health care has prompted
Banks/Financial Institutions to introduce the Reverse Mortgage in the US, UK and
Australia. It works like a traditional mortgage loan, but only in reverse direction. Under
this borrower does not make regular payments to a lender; instead he receives
payments from the lender. It supplements the income of the Senior Citizens, particularly
to those whose pension or income is low. Instead of being dependent on their
children/relatives for monetary support, this would be an ideal option for elderly people
to continue with a graceful lifestyle. The borrower need not repay the loan during their
life time and can also continue to live in their house during their life time. Thereafter,
the legal heirs have the option to repay the bank loan and redeem the property.
Otherwise, the bank will sell the property and liquidate the loan. The scheme is gaining
momentum slowly.

Indian Rupee Symbol: After years of missing unique identity, India got a
distinct symbol to distinguish from Pakistan, Nepal, Srilanka and Indonesia countries
whose currencies are designated as Rupee or Rupiah which is similar to our currency i.e.
Rupee. Now Indian rupee joined the select club of currencies such as the US Dollar,
Euro, British Pound and Japanese Yen that have a clear distinguishing identity and it is

111

considered as a step towards internationalization of Indian Rupee. Though the symbol is
not be printed or embossed on currency notes or coins, it would be included in the
Unicode Standard and major scripts of the world to ensure that it is easily displayed
and printed in the electronic and print media. After incorporation in the global and
Indian codes, the symbol would be used by all individuals and entities within and outside
the country. The new symbol portrays the nations strength & stability, both politically
and economically and acts as Brand Ambassador.

Rupay is the Indian domestic card payment network set up by National Payments
Corporation of India (NPCI) at the behest of banks in India. Reserve Bank permitted to
issue RuPay cards which are accepted for payment at all ATMs. The Logo is a coinage
which indicates coming together of Rupee and Payment to announce the launch of a
new world-class retail payment system in India. The orange and green arrows indicate a
nation on the move and a service that matches its pace. The Indian colors connote that
its deeply rooted in India. The color blue stands for tranquility and peace which is
precisely the sense that people must get from the brand RuPay. The bold and unique
typeface grants solidity and symbolizes a stable entity. Currently the merchant fee is
significantly high ranging from 1 to 1.50% on account of inbuilt charges of VISA / Master
and Banks. The Rupay system lowers the cost of the transactions for shops and enables
them to adopt electronic mode of payments. In a way it reduces the overall transaction
costs for the banks, merchants and nation as a whole. The other objective of Rupay is to
develop appropriate products to meet the financial inclusion needs and to provide card
payment service option to many banks with simplified norms. In the long run, it paves
the way to migrate from cash transactions to electronic payments system in the country
which will improve the efficiency in the entire eco system.

Whistle Blower Policy: In compliance with listing agreement relating to Corporate
Governance, all banks are required to have a Whistle Blower Policy to enable the staff to
inform the unethical behavior, actual or suspected fraud or violation of law or improper
practice of the staff members of all cadres, direct to the Board of the Bank without
informing their superiors. The employee shall make a written disclosure to the Audit
Committee of the Bank in a closed/secured envelope along with supportive documents.
The identity of the complainant will not be revealed. In case where the complainant is
being victimized for filling a complaint, the complainant can approach CMD/ED for
redressal. It provides protection to the Whistle Blowers from unfair
termination/harassment from the superiors. Audit Committee of the Bank reviews the
Whistle Blower mechanism at regular intervals.

Wilful Defaulters: As per RBI guidelines, a Wilful Defaulter would be deemed to have
occurred, where the unit has defaulted in meeting its payment / repayment obligations
to the lender even when it has capacity to honour the said obligations or where the unit
has not utilized the finance for the specific purpose for which finance was availed of but
has diverted the funds for other purposes or disposed of or removed the movable fixed
assets or immovable property offered for the purpose of securing a term loan without
the knowledge of the Bank/Lender. It covers all non performing borrowal accounts with
aggregate outstanding balance (funded facilities and such non-funded facilities
converted into funded facilities) of 25 lakhs & above. The classification of the borrower
as Willful defaulter is vested with Committee at Head Office. However, the borrower will
be given reasonable time (15 days) for making submission to the committee. Bank is
required to submit the details of willful defaulters to RBI and CIBIL. RBI advised all
Banks/Financial Institutions not to extend any additional credit facilities to the Wilful
Defaulters and they are debarred from floating new ventures for a period of 5 years
from the date RBI publication and also liable for criminal proceedings for breach of trust,
cheating and wrong certification under IPC.

Right to Information Act 2005 The act has come into effect from October 12, 2005.
This Act is meant to give to the citizens of India access to information under control of

112

public authorities to promote transparency and accountability in these organizations.
However, this mechanism is meant for seeking information only and not for making
complaints. Under this Act, Citizens of India will have the right to make the request for
information in writing, clearly specifying the information sought. The application should
accompany a fee of `10/- either in cash or DD/PO. The application for request should
give the contact details (postal address, telephone number, fax number, email address)
so that the applicants can be contacted for clarifications or the information. All Public
Sector Banks are covered under this act and they are required to furnish the information
sought by the citizens of India. Branch Managers are designated as Central Assistant
Public Information Officers (CAIPO) and they have to forward the requests received to
the Zonal Managers concerned, who are designated as Central Public Information
Officers (CPIO). The ultimate responsibility lies with CPIO to get the matter expedited
within stipulated time of 30 days. While disposing off the request under RTI Act, CPIO is
required to mention clearly the time limit of 30 days and address of the Appellate
Authority to the complainant. The Appellate Authority is the Senior Central Public
Information Officer, who will be one of the General Managers at Head Office.

Permanent Account Number (PAN): As per section 139 (4A) of Income Tax Act
1961, all individuals whose income exceeds the tax free limit and in case where the
person carrying a business, the sales turnover or gross receipts exceeds 5 lakh in a year
are required to have PAN and the same is to be quoted in all returns and
correspondence with IT authorities. As per the extant guidelines, it is mandatory to
furnish PAN number for all transactions viz., purchase/sale of immovable property of `5
lakh and above, purchase/sale of motor vehicles (other than 2 wheeler), security
transactions of above `1 lakh, purchase/sale of shares/debentures/bonds of `50000/- &
more and bank transactions (cash) of `50000/- & above and payment to hotels
exceeding `25000/- at any one time.

Shadow Banking is relatively a new concept and it refers to the Non Banking Financial
Institutions that perform some banking functions. Shadow banking entities operate
outside the regular banking system and yet engage in bank-like activities such as
accepting funding with deposit-like characteristics, performing maturity and/or liquidity
transformation and using direct or indirect financial leverage. These typically include,
pension funds, investment banks, hedge funds, money market funds, finance, leasing
and factoring companies, asset management companies etc. Shadow banking
institutions are typically intermediaries between investors and borrowers. Shadow
banking activities are useful part of the financial system and they channel resources
towards specific needs more efficiently on account of increased specialization. These
activities are exposed to similar financial risks as banks. Some of these risks can be
systemic in nature due to the complexity of shadow banking entities and their cross-
jurisdictional reach and their links with the regular banking system. The regulators
across the globe are now working in tandem to look into and understand the activities of
the shadow banking system and bring them too under regulation so as to possibly
prevent another global financial crisis in future.

Doorstep Banking: Extending Banking services like pick up of cash, instruments and
delivery of cash etc., to Corporate Customers / Government Departments / PSUs /
Individual Customers at their place through Employees / Agents is called Doorstep
Banking. However, banks are not allowed to extend such services to Individual
Customers. Cash collected from the customer should be acknowledged by issuing a
receipt on behalf of the bank. Cash collected from the customer should be credited to
the customers account on the same day or next working day, depending on the time of
collection. Doorstep services should be offered only to KYC compliant customers and the
charges should be prominently indicated on brochures. It is a win-win situation for both
customers and banks.

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One Person Company (OPC): In order to encourage unorganized proprietorship
business entities to enter into organized corporate world, Companies Bill 2012 was
passed. With introduction of OPC, a company can be started with one member and it
is treated as Private Limited Company. The minimum share capital required is
Rupees One Lakh. The promoter can appoint a nominee so that perpetual succession
provision is ensured. OPC can be formed in three types viz., Company limited by
shares, Company limited by guarantee and Unlimited company. OPCs are exempted
from holding Annual General Meeting. Provisions relating to minimum board meeting,
quorum is not applicable. In case OPC has more than one director, it shall conduct
atleast one board meeting in each half-year and time gap between two meetings
should be minimum 90 days. Relaxations and exemptions granted and benefits
available will definitely encourage small and mid-size business to carryon business in
corporate form.
Banking at Glance
No. Major Indicators Number As on
1 No. of Schedule Banks 221 31.03.13
2 No. of Bank Branches (lakh) 1.01 30.09.12
3 No. of ATMs (lakh) 1.39 30.09.13
4 Aggregate Deposits (Lakh Crore) 69.43 31.03.13
5 Bank Credit (Lakh Crore) 54.30 31.03.13
6 Credit Deposit Ratio (%) 78.20 31.03.13

No Macro Rates %
1 Bank Rate (w.e.f 28.01.14) 9.00
2 Cash Reserve Ratio (w.e.f.09.02.13) 4.00
3 Statutory Liquidity Ratio (w.e.f.11.08.13) 23.00
4 Repo Rate (w.e.f.28.01.14) 8.00
5 Reverse Repo Rate (w.e.f 28.01.14) 7.00
6 Marginal Standing Facility (w.e.f.28.01.14) 9.00

No Andhra Bank Interest Rates %
1 Deposit Rate (1 year to 3 years) w.e.f. 23.10.12 9.00
2 Base Rate (w.e.f. 19.08.2013) 10.25
3 BMPLR (w.e.f. 19.08.2013) 14.50
4 Saving Bank Rate (w.e.f.03.05.11) 4.00

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Andhra Bank Milestones

Andhra Bank was founded by ardent freedom fighter and a great intellectual and
multifaceted genius, Dr.Bhogaraju Pattabhi Sitaramayya. Andhra Bank was
registered on 20
th
November 1923 and commenced business on 28
th
November
1923. The Milestones of Andhra Bank are as under:

Year Event
1923 Commenced operations at Machilipatnam
1943 Attained status of Scheduled Bank
1964 Opened 100
th
Branch and attained the status of A class Bank
1964 Amalgamation of Bharat Laxmi Bank with Andhra Bank
1969 Largest Private Sector Bank in the country
1969 Bank was entrusted with Lead Bank responsibility in five districts
1976 Bank opened its 500
th
Branch
1980 Nationalization of the Bank
1981 Sponsored the first Regional Rural Bank (Rushikulya Grameena Bank)
1981 First Bank in India to introduce Credit Cards
1983 Diamond Jubilee Celebrations & surpassed Business of ` 1750 crore
1984 Became convenor of State Level Bankers Committee in AP State
1988 Introduced Insurance Linked Savings Deposit Scheme (Abhaya)
1989 Bank opened its 1000
th
Branch
1997 Surpassed `10000 crore mark in Total Business
1998 First Bank to introduce farmer friendly Kisan Credit Card (AB Pattabhi Card)
2001 Initial Public Offer (IPO)
2002 Introduction of New Delivery Channel First Networked ATM
2003 Achieved 100% Branch Computerization
2005
Banking Technology Award for use of IT for customer service in Semi-Urban
and Rural areas by IDRBT, Hyderabad
2006 Follow-on Public Offer (FPO)
2006 First Representative Office abroad (Dubai)
2006 Banking Technology Award 2006 for Payment Initiatives from IBA
2006 Conducted BANCON 2006 Inclusive Growth A New Challenge
2007 Ranked 532 among Top 1000 Banks in the world
2008 Opened Representative Office at New Jersy, USA
2009 100% implementation of Core Banking
2009 Crossed ` 1 lakh crore Total Business
2009 Entered Joint Venture with IndiaFirst Life Insurance Company Limited
2010 Crossed ` 1000 crore Net Profit
2010 Best Bank Award for Quality of Assets, CAMEL Rating and Mid-size Bank
2010
Andhra Bank, Bank of Baroda & Indian Overseas Bank has entered into a tie
up for setting up a banking subsidiary in Malaysia India International Bank
(Malaysia) Bhd and is in the process of commencing business
2011
Best Bank and Financial Institution Awards by CNBC TV18 Editorial Board
Roll of Honour under Mid-sized Banks Category
2012 RSETI Rajahmundry adjudged as Best RSETIs in the country
2012 Special Jury Award for ATM Operations Excellence by NPCI
2012 Crossed Two Lakh Crore Business by 31
st
December 2012
2013 Introduced Strategic Business Transformation Initiatives NavShakti
2013 Best R-SETI award to ABIRD, Rajahmundry

115


LOGO TOGETHERNESS IS THE THEME

The Symbol of Infinity denotes a Bank that is prepared to do any thing, to
go to any lengths, for the customer.
The Blue pointer on the top represents the philosophy of a Bank that is
always looking for growth and newer directions.
The Key hole represents Safety and Security.
The Chain indicates togetherness.
The colours Red and Blue denote dynamism and solidity
Vision Statement To become a significant player, providing full range of
banking services through innovative customer centric products and to maximize
stake holders value

Mission Statement To work together towards delivering excellent customer
service by leveraging on technology and human resources to attain world class
performance standards

Corporate Slogan

NavShakti Bank has taken up a Strategic Business Transformation Initiative to
rejuvenate the Business Process to meet the ever growing demands of the customers
effectively and efficiently. Bank has taken aboard M/s McKinsey& Company as
Management Consultants and the Project NavShakti was started in the Month of Feb
2013. As part of the Project a thorough Business Re-engineering of the present
processes is taken up to enhance the productivity and also deliver value to the
customers. New Generation Branches were designed and two pilot Branches have
been rolled out at Hyderabad, steps are being taken to implement the same all over
India. The New generation Branches are calibrated to give a delightful business
experience for customers who visit the Branch. Besides the above SME, Retail Loan
factories have been set up to reduce the turnaround time for processing and
sanctioning of Loans to customers. Along with these infrastructural changes, staff is
being trained in new roles and new marketing systems to increase the market share
of the Bank and its products.

116


Financial Results March 2012 & 2013 Highlights (`Crore)
No Business Parameters Mar12 Mar13
1 Deposits 105851 123796
2 Advances 84684 100138
3 Total Business (1+2) 190535 223934
4 Composition of Advances
a) Corporate (Mid & Large) Advances 46419 51575
b) Agriculture Advances 12458 16451
c) Retail Credit 11301 14328
d) MSME 13132 16863
e) Other Advances 1373 921
5 Non Performing Assets
a) Gross NPA 1798 3714
b) % Gross NPA to Advances 2.12 3.71
c) Net NPA 755 2409
d) % Net NPA to Advances 0.91 2.45
6 Profit
a) Interest Income 11339 12910
b) Interest Expenses 7579 9153
c) Net Interest Income (a-b) 3760 3757
d) Other Income 890 1047
e) Operating expenses 1804 2037
f) Contribution (d-e) -944 -990
g) Operating Profit (c+f) 2815 2767
h) Provisions 1470 1478
i) Net Profit 1345 1289
7 Dividend (%) 55 50
8 No. of Branches 1712 1867
9 No. of ATMs 1056 1207

No Key Ratios (%)
1 CASA Deposits 26.38 25.65
2 CD Ratio 80.07 80.94
3 Cost of Deposits 7.94 7.87
4 Cost of Funds 6.92 7.00
5 Yield on Advances 12.33 12.02
6 Yield on Investments 7.83 7.97
7 Yield on Funds 9.95 9.88
8 Net Interest Margin (NIM) 3.67 3.21
9 Return on Assets (ROA) 1.19 0.99
10 Cost to Income Ratio 42.21 42.40
11 Standard Assets to Gross Advances 97.88 96.29
12 Provision Coverage Ratio 71.13 49.57
13 Capital to Risk weighted Assets Ratio (CRAR) 13.18 11.76
i) Tier-I 9.02 8.52
ii) Tier-II 4.16 3.24

117


Deposit Schemes
Banks have been introducing various innovative deposit schemes to provide value
added services to the customers with an objective to retain existing clientele and to
expand the base further. Besides extending existing generic deposit products such as
Current, Savings, Recurring, Fixed and Kalpataruvu deposits, Bank introduced many
new deposit schemes in the recent past and the brief details of the schemes are
furnished here under:

AB-Freedom (Flexi) Deposits: The scheme provides features of both Savings and
Term Deposits to the customers. When SB account is opened, Fixed and
Reinvestment deposit accounts also will get opened for the customer with the same
account number but without any balance. All individuals (single/joint), Clubs,
Associations, Trusts, Hospitals, Schools and colleges are eligible to open Flexi
accounts. However, special minors are not allowed to open accounts under this
scheme. Minimum balance prescribed for AB Freedom SB account is `5,000/- and the
minimum period of deposit is 15 days and maximum period is 12 months for FDs/RIP
Deposits. The customer is required to specify tenor option while opening the account.
In case where the customer does not exercise option, system takes 15 days for FD
and 6 months for RI as default tenor. The rate of interest is as applicable to domestic
term deposits. The depositor can choose either FDR or Reinvestment deposits. The
depositor can change his choice from FDR to Reinvestment Deposit or vice versa for
the future bunches of units to be opened. Whenever, the balance in the SB account
exceeds `5000/-, system transfers the balance in to Fixed or Re-investment Deposit
with a minimum deposit of `5000/- or multiples thereof. Similarly, whenever the
customer presents a cheque in excess of SB balance, system cancels the term
deposits (`1000/- or multiples thereof) to meet the requirement. No penalty for
premature withdrawal of deposit units under this scheme. After cancellation of units
in a bunch of units, the remaining units will continue to earn interest at the
contracted rate. No deposit loan is allowed against Flexi Deposits. Deposit Receipts
will not be issued for the units opened under the scheme. Statements will be issued
for SB as well as Fixed Deposit/ Reinvestment Deposit transactions. (Circular no. 159
Ref 44/20 dated 27.08.08 & Cir.no.381 Ref 27/55 dated 07.02.11)

AB Premium Current Account: In order to provide value added services to the
Business community, Bank introduced special deposit scheme in the month of
October 2008. It is meant for Current Deposit Accounts and the minimum balance
required is `100000/-. They are entitled to avail Free Cheque Book Facility (including
Multi City Cheques), No Folio and Transaction Charges, Any Branch Banking and
Instant Funds Transfer, 50% concession in Service Charges for Funds Remittance.
Balance in excess of `200000/- can be converted as Term Deposits (in units multiple
of `10000/-) subject to the guidelines as applicable to AB Freedom (Flexi) Deposit
Scheme. It helps the branches to improve the CASA Deposits. (Circular no.238 Ref
44/30 dated 16.10.2008)

AB Super Salary SB Account The existing scheme of AB Privilege Corporate
Salary SB Account is re-launched with the following features:
a) Salaried staff of any company/organization drawing salaries through our Bank.
b) The Average Minimum Balance of `5000/- should be maintained except when the
account is in debit balance.
c) No Ledger Folio / Transaction charges.
d) Free ATM/Debit Card (for first year).
e) Free Credit Card / Demat Account / Internet Banking / Online Trading
(conditions apply).
f) Free Remittance up to `25000/- per month.

118

g) Free Statement of Account Once in a month.
h) Free issue of Cheque Books (50 leaves in a year).
i) Scheme provides for conversion of balance in excess of `10000/- as Term
Deposits (units multiples of `5000/-) with Sweep and Reverse Sweep facility
as in the case of AB Freedom (Flexi) Deposit Scheme.
j) Similarly, the scheme also provides for Temporary Overdraft facility equivalent
to the latest Net salary drawn by the account holder at Base Rate + 7.50%.
These two options are mutually exclusive. In other words, where the account
holder opts for Overdraft facility, he/she cannot avail the flexi deposit option
facility. (Cir. No.351 Ref 27/21 dated 01.02.10)

AB Recurring Deposit Plus Scheme: This scheme is meant to built-up corpus fund
for individuals / firms / institutions / companies through regular monthly deposits
over a period of time to meet their future financial requirements. The salient features
of the scheme are as under:

a) Depositor has an option to choose a core installment between `100/- to
`100000/- and further he has option to deposit any amount not exceeding 10
times of core installment.
b) Minimum period of deposit is 6 months and maximum period is 60 months.
c) No penalty for late payment of installments.
d) Interest is calculated on daily products i.e. minimum balance available between
10
th
and last day of the month.
e) No penalty for premature withdrawal. However, in case of RD account closed
within 6 months, penalty @ 0.50% on the balance outstanding subject to a
minimum of `50/- and maximum of `500/-.
f) Depositor can remit monthly installment at any branch of Andhra bank without
any charges.
g) Interest accrued is exempted from Tax Deduction at Source (TDS).
h) Transfer of accounts between the branches is not allowed.

The other guidelines (Nomination, Payment of maturity amount, Claims etc.,) that
are applicable to existing RD Scheme holds good to AB RD Plus scheme also.
(Circular no.081 Ref 44/09 dated 20.06.2009)

All staff deposit accounts earns 1% extra interest while they are in service as well as
on retirement/resignation. Further, in case of senior citizens (staff) they continue to
earn applicable senior citizen deposit rate plus 1% extra. (Cir.no.4 Ref 3/1 dated
05.04.2011)

AB Grama Kranthi Savings Account: It is a new scheme with a built-in overdraft
facility aimed at to offer basic banking services to the financially excluded sections of
the society using Smart Card and Biometric authentication technologies through
Business Correspondents. No minimum balance and no service charges are
applicable. Simplified KYC norms are applicable. No cheque book and ATM/Debit
cards will be issued. It is an Entrepreneurial credit scheme for covering the general
credit needs of the Banks customers in FI villages with a maximum credit limit of
`25000/- per household at Base Rate+3.5% without any collateral security. The limit
is valid for a period of 3 years and should be reviewed every year. (Cir.no.514 Ref
19/48 dated 22.03.13).

AB Basic Savings Bank Deposit Account (ABBAS): As per RBI directions, Banks
are required to adopt simplified procedure to open SB accounts without any
stipulation on minimum balance. All individuals who are eligible to open normal SB
accounts can open No frills accounts subject to introduction from another account
holder who complied KYC norms. The introducers account with the bank should be at
least six month old and should show satisfactory transactions. Photograph of the

119

customer who proposes to open the account and also his/her address needs 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. These accounts do not attract service
charges / penal charges. No cheque book shall be issued. Drawals from account shall
be permitted only through numbered withdrawal forms accompanied by passbook.
Once the balance in the account exceeds `50000/- or total credits in the account
exceeds `100000/- in a year, no further transactions will be permitted in the
account. The customer has to close the account and open normal saving account
fulfilling the complete KYC procedure. (Circular no.444 Ref 51/31 dated 26.03.2008)

AB Tax Saver: It is a term deposit (Fixed/Reinvestment) scheme earns interest as
well as tax benefits under Section 80 C. It is meant for individuals and HUF (only
Income Tax Assesses with PAN). Deposit can be opened in single/joint accounts. In
case of joint accounts, tax benefit is available only to the first holder of the deposit.
Minimum deposit is `100/- and Maximum amount allowed is `100000/-. The
minimum period of deposit is 5 Years. It earns interest as applicable to five year
deposit. Declaration is to be obtained from the first depositor that the total deposits
under this scheme at various bank branches do not exceed `100000/- during the
year. No nomination can be made in respect of a term deposit applied for and held
by or on behalf of a minor. Deposit receipt shall bear the name, address, PAN and
signature of the depositor. No deposit loan or no lien to any other loan. No
premature cancellation. (Circular no.431 Ref 51/30 dated 13.03.08)

AB Smart Choice (Unfixed Deposit) Scheme: Bank has introduced a new Unfixed
Deposit with an objective to extend better interest rate to the coporates, institutions
and high networth individuals with a name titled AB Smart Choice with effective
from 1
st
January 2014. It is a term deposit account and the minimum period of
deposit should be minimum 7 days and maximum 179 days. The minimum amount
of deposit should be `1.00 crore and above and no premature cancellation charges if
the deposit cancelled after 7 days. No additional interest for staff/retired staff and
Senior Citizens under this Scheme. At present the interest rate is 8.25% p.a. (Cir
no.390 Ref.No.27/40 dated 31.12.2013 & Cir no. 476 Ref 27/53 dated 28.02.2014)

Capital Gains Scheme: The scheme is aimed at Income Tax Assesses to extend
relief of tax on long-term capital gains for different assets provided the assesses
purchase another specified assets within a certain time frame. The assesses are
eligible for exemption under section 54, 54B, 54D, 54F or 54G of the IT Act 1961. All
branches except Rural Branches can open SB and Term Deposit (FD/KTD) accounts
of the said category depositors. Accounts should be opened in individual names only
and no joint accounts are allowed. No cheque book is issued to SB accounts.
Depositors are required to submit withdrawal form along with form C to withdraw
amount from the account. Similarly, Term Deposit funds cannot be directly paid to
depositor and they should route through respective SB account only. To close
account, depositor has to submit application in form G along with written approval
from the assessing officer having jurisdiction of the depositor. Deposit loans are not
allowed and no lien should be allowed on the said accounts. (Circular no.453 Ref
44/25 dated 16.01.2006)

Deposit Schemes Discontinued Branches are not permitted to accept fresh
deposits under AB Excel, AB Super, AB Supreme, AB Jeevan Prakash, AB Jeevan
Prakash Plus, Sulabh, Stock Invest, Samkshema, Home Loan, Mediclaim, AB
Pattabhi, AB 400, AB Pattabhi Plus, AB Power as the schemes were discontinued.
However, the existing deposit accounts under the above schemes will continue till
maturity.

120


Public Provident Fund Scheme (PPF)-1968
Tenure 15 years.
Limit of
Subscription
Amount not less than `500/- and not more than `100000/- in a year
in one lump sum or in installments not exceeding twelve in a year.
Rate of interest
8.70% p.a. Compounded annually or as prescribed in the Official
Gazette published by the GOI from time to time. Interest is paid on
funds deposited before 5
th
of every month.
Mode of holding
Any individual on his behalf or on behalf of a minor of whom he is
Guardian or HUF or an association of persons or body of individuals.
NRIs cannot open accounts under this scheme.
Tax treatment
The entire amount deposited in to PPF during the financial year is
treated as deductible Under Sec.80C of ITR Act.
Transferability Yes. Can be transferred inter Bank and intra Bank.
Nomination Nomination facility is available.
Withdrawal facility
Any time after the expiry of five years starting from the end of the
year in which the initial subscription was made. Only one withdrawal
is permitted in a year.
Loan facility &
Repayment
Permitted with the following limits.
Period Shall not exceed
After one year 25% of the amount at credit
After four years 50% of the amount at credit
Repayable within 36 months from the first day of the month
following the month in which the loan is sanctioned.
Extension of a/c
5 years at the option of the subscriber.
Closure of account
After the expiry of 15 years from the end of the year in which the
initial subscription was made.

Senior Citizen Savings Scheme (SCSS)-2004
Tenure of the scheme 5 years which can be extended by 3 more years
Rate of interest 9.20% per annum
Frequency of computing interest Quarterly
Taxability Interest is fully taxable
Whether TDS is applicable Yes, Tax will be deducted at source
Investment to be in multiples of `1000/- Maximum investment limit ` 15 lakh
Minimum eligible age for
investment
60 years (55 years for VRS optees). However, age
limit is not applicable to Defence Service personnel.
Premature withdrawal facility
Available after one year of holding but with penalty
Transferability feature Not transferable to others
Nomination Available
Modes of holding Accounts
Can be held both in single or joint holding modes.
Joint holding is allowed but only with spouse
Applicability to NRI, PIO and HUFs
Non resident Indians, Persons of Indian Origin and
Hindu Undivided Family are not eligible to open an
account under the scheme.
Transfer of account
Transfer of account from one deposit office to
another in case of change of residence is permitted
Bank earns a commission @ `45/- per transaction on PPF and SCSS. (Cir.no.244 Ref
51/18 dated 20.10.2011)

121


Insurance Linked Deposit Schemes

Abhaya Savings Bank (ASB) The scheme is having features of Savings Bank
coupled with insurance coverage (Group Janata Personal Accidental Insurance
Cover). It is meant for all individual depositors including joint accounts, especially
those whose lives are exposed to accidental risks on account of their profession/
employment/occupation. M/s.United India Insurance Company is undertaking the
risk coverage. All Joint accountholders are compulsorily covered. Age 5 to 70
years. Accidental Insurance cover is available to all depositors. `25000/- for death /
total disability and `12500/- for partial disability. Premium `15/-; Insurance year
1
st
Sep to 31
st
Aug. Nomination holds good for deposit balance and the insurance
claim. Joint accountholders can specify their nominees separately. (Cir.no. 210 Ref
51/09 dated 17.08.2013)

Abhaya Savings Plus (ASB+) The scheme was introduced in our bank in the
year 2006. It is meant for all individual depositors, especially those whose lives are
exposed to accidental risks on account of their profession / employment /
occupation. Individuals and Joint Account holders can open. All Joint accountholders
are compulsorily covered. Age: 5 to 70 years. Cover: Group Janata Personal
Accidental Insurance Cover. `100000/- for death / total disability and `25000/- for
partial disability. Premium `36/-; Insurance year 1
st
Nov to 31
st
October. United
India Insurance Company is undertaking the risk coverage. Nomination holds good
for deposit balance and the insurance claim. Joint accountholders can specify their
nominees separately.

Abhaya Gold Savings (ABG) This scheme was introduced in the year 1996.
Individuals and joint account holders are eligible. All joint account holders are
compulsorily covered. Age 5 to 70 years. It is a Group Personal accident Insurance
Policy. M/s. United India Insurance Company is undertaking risk coverage. Death /
Total Disability `1.50 lakh. Partial disability `50000/-. Premia `70/-; Insurance
year 1
st
November to 31
st
October. Separate nomination for insurance claim. Joint
accountholders can give separate nominations for the insurance amount.

AB Jeevan Abhaya (ABJ) This scheme was launched in the year 2002. It is a
Savings Bank account that provides Life and Accidental death cover on payment
of nominal premium and simple health declaration. No medical examination is
required. Individuals in the age group of 18 to 55 years can open this account. SB
opening form can be used. The premium rates depend on the age of the insured. The
insurance period is 1
st
Dec to 30
th
November. The risk is covered by IndiaFirst Life
Insurance Corporation Limited (IFLIC) and the amount of coverage is `1 lakh in
case of normal or accidental death. Joint accountholders can be covered by opening
a joint account and by paying the applicable Premia. All accounts opened under AB
Super Salary (SB account) scheme will be covered under this scheme. (Circular no.
294 Ref 51/25 dated 16.11.2010)

AB Jeevan Abhaya Plus Bank has launched a new scheme on the eve of 90
th

year of Foundation Day celebrations w.e.f. 01.12.2013. It is meant for individuals
whose age is in between 18 to 55 years. The depositors will be covered with life
insurance coverage of Rs.2 lakhs (Life and Accidental death) in association with
M/s.India First Life Insurance Company Ltd. No medical tests required except for
declaration of Good Health. The premium depends on the age of the depositor. The
minimum deposit stipulated under this scheme is Rs.1000/- for Rural, Rs.2000/- for
Semi-urban; Rs.3000/- for Urban and Rs.5000/- Metro branches. All existing
guidelines that are applicable to SB accounts will apply to the new scheme. The
insurance year for this scheme is from 1
st
December to 30
th
November every year.
(Cir.no.353 Ref 51/19 dated 28.11.2013)

122


Insured Current Deposits (ICD) Individuals, Joint A/cs, HUF, Sole Proprietors,
Partnership Firms, Ltd Cos., having CD/ODCC/Pattabhi Agricard accounts. However,
office bearers of clubs / societies / trusts / associations and account holders of
inoperative accounts are not eligible to join in the scheme. The age of the account
holder should be in the range of 5 to 70 years. ICD covers risk against accident
(death / disability). It also includes snakebite, electrocution, food poisoning, riots
etc., United India Insurance Company covers the risk upto 1.50 lakh for
death/total disability. Insurance year 21
st
February to 20
th
February. Premia
`69/- per person per annum to be collected. (Cir no.462 Ref 51/22 dated
19.02.2013)

AB Kiddy Bank Scheme (Kids Khazana) Bank has re-launched the earlier the
earlier Kiddy Bank scheme under the new brand name AB Kiddy Bank Scheme in
the year 2007. It is meant for minors (even 1 day old minor) represented by
Guardians or by the minors themselves who have completed the age of 10 years. All
existing Kiddy bank accounts can be converted. Minimum balance to be maintained
is `100/-. Kid and parent/guardian (aged up to 70 years) both are covered under
Accidental Insurance. Accidental insurance coverage is available up to one lakh for
the kid and the parent/guardian. Insurance Premia is `54/- per annum (31
st
of
October). The risk is covered by United India Insurance Company. Free Doll.
Educational Grant of `5000/- (for age up to 10 years) / `10000 (for age of 11-18
years) as per the age of the child in case of accident risk of the parent.
Insurance Schemes at glance ( ` in lakhs)

Deposit Age Comp Accide
ntal
Insurance year Premium
ICD 5 to 70 United
India
1.50 21
st
Feb to 20
th

Feb
`69
ASB 5 to 70 -do- 0.25 1
st
Sep to 31
st
Aug `15
ASB + 5 to 70 -do- 1.00 1
st
Nov to 31
st
Oct `36
ABG 5 to 70 -do- 1.50 1
st
Nov to 31
st
Oct `70
KidsKhazanaa 1 day to
18 yr
United 1.50 1
st
Nov to 31
st
Oct `54
ABJ 18 to 55 IFLIC 1.00$ 1
st
Dec to 30
th
Nov
Depends on
age of the
depositor
ABJ Abhaya Plus 18 to 55 IFLIC 2.00$ 1
st
Dec to 30
th
Nov
$ covers both Life/Accidental death

The Insurance premium should be debited to the respective account on the date of
opening of the account itself. Claim intimation shall be sent to insurance company
within 90 days from the date of accident / death and claims forms duly filled shall be
submitted to the Insurance Company within 180 days. Claim forms may be
submitted to the insurance company either directly or through the bank.Documents
to be submitted along with the claim forms are as under:

In case of death In case of disability
Death Certificate Photograph of the disability
Postmortem report with inquest report Disablement certificate issued by doctor
FIR of police / Final Investigation Report Banks certificate of remittance of premium
Nominees name Any other relevant document
Certificate of remittance of premium Police Report

Any correspondence with Insurance Company/Claimant must be done only through
Registered Post Acknowledgement Due. All new accounts, a lien of 45 days imposed
for claims arising on account of Natural Death from the date of opening of account.
However, Lien clause is not applicable in case of claims due to Accidental Deaths.
The settlement of claim is at the sole discretion of the insurance company. The Bank
will act only as a facilitator.

123


E-Products

Non-Personalized Debit Cards (NPDC): Post CBS environment has enabled the
bank to issue NPDC to the customers on the opening day of the account itself. Bank
has taken this initiative to render faster customer service and to provide Any Time
Banking through ATM network across the country. Branch delivers the card along
with PIN. The card will be activated within 48 hours of the issue. It is a tool to
branches to attract new customers besides retaining the existing clientele for further
business development. The cards can be used on any ATM across the country to avail
the following services with free of charge. (Cir.no.341 Ref 55/25 dated 19.11.2012)

Balance Enquiry / Mini Statement.
Cardholders are allowed to withdraw cash up to `25000/- per day. However,
cash withdrawal per transaction is limited to `15000/- as the machine can
deliver maximum of 40 pieces only.
The maximum limit allowed for purchase of goods and services is fixed
`50000/- per day.
Credit Card holders having VISA/Master affiliation can avail cash advance
facility from any of our ATMs across the country.
Funds Transfer from one account to another account of the cardholder.
Cardholders can donate funds to various trust schemes of Tirumala Tirupathi
Devastanam as per their convenience using E-Hundi option.
Credit card bill payment (our bank).
Our Bank cardholders can avail Mobile Recharge facility.
Rail Ticket / Air Ticket booking.
mPAY registration for our customers.

SMS Alerts: Bank has launched Mobile Banking Services through SMS Push alerts
to the registered customers. A customer has an option to register for Mobile Banking
facility at branch or ATM or Internet. All Savings and Current Account holders who
owns mobile are eligible to avail the following services at nominal charge of `15/- per
quarter plus applicable service charges.

Savings Bank transactions (Clearing/Transfer/Cash)
CD / ODCC transactions (Clearing/Transfer/Cash)
Transactions on Alternate Delivery Channels (ATM, POS, Mobile and Internet)
RTGS/NEFT/ECS and Credit Card transactions
Cheque Returns / Cheque Book Issue
Term Deposit Due date / overdue reminders for loan accounts
Balance for any transaction at end of the day for Current/ODCC accounts.

However, the customers who do not wish to avail the said facility has option to
withdraw from the scheme at any time. A mobile registered customer has an option
to enquire Balance Enquiry, Last Five Transactions and Cheque Status Enquiry
through SMS Pull alerts. However, the service provider (Mobile Company) levies
applicable charge.

Mobile Banking (mPAY): Bank is providing SMS based mobile alerts to the
registered customers to keep them informed of various transactions that occur in
their accounts. Further, bank is also using the SMS media to send specific or
common messages/information to the customers. In order to meet the customer
expectations, Bank has introduced mPAY which provides the customers a secure and
convenient means of banking from anywhere and at anytime. Under this, customers
can check their account balances, view mini account statement, know cheque status,
note stop payment of cheques, make donations and transfer funds (Mobile to Mobile
and Mobile to Account) on press of button. All Savings Bank and Current account

124

holders having ATM/Debit card are eligible to avail this facility. Customer has an
option to link any one account (CASA group) connected to the card with the mobile
number. Customer intending to avail mPAY facility should possess mobile handset
Java enabled or Windows Mobile 5.0 & above model or Windows Mobile Professional
model with activated GPRS (General Packet Radio Service). Customer can register
for mPAY through any of our ATMs across the country. It is hassle-free paperless
process and upon registration, customer receives a registration slip which contains
the default application password and MPIN. The maximum transaction limit is fixed
as `10,000/- per day. At present, Bank is extending the said services free of cost.
(Cir.no.220 Ref 55/18 dated 10.09.10)
Internet Banking: Our bank introduced Internet Banking with AB INFI-net brand
name in the year 2008. Bank is extending the following facilities to the registered
customers (Individuals and Corporate) free of cost:
Account Balance Enquiry / Account Statement view / Printing / Downloading
Request for Cheque Book / Term Deposit
Online TAX payment (e-tax) / Online IPO ASBA
Credit Card Bill payment
Funds Transfer Registered customer has an option to transfer balances
between linked operative accounts of the same customer across the branches
and also undertake third party transfers from his/her account to any other
operative account of Andhra Bank.
Transfer of funds across the Banks through NEFT is allowed on Internet. The
default limit set for retail customers is `100000/- per day. However, branches
can recommend for higher limits to Head Office depending on the request of
the customers.

On receipt of Internet Banking application from the retail customers, branch should
enter the details such as account number, mobile number and e-mail of the
customer in the system for registration. Internet Processing Center, Koti, Head Office
directly sends Login Password to the customer and transaction password will be sent
to the branch for onward submission to the customer with due acknowledgement.
However, branches to continue to forward the Internet requests from corporate
customers to Head Office for approval. (Cir 304 Ref 55/19 dated 15.12.09, Cir 263
Ref 55/21 dated 23.10.10 & Cir 119 Ref 55/8 dated 12.07.11)

AB e-trade (Online Trading): The scheme is meant for the customers who are
interested to carry stock market operations (Buying/Selling) at his convenience. It
offers the depositor to trade from his residence or office or while on move through
Internet. The salient features are as under:

It is also called as 3-in-1 account since it integrates Bank Account, Demat
Account and Broking Account of the depositor.
Individual or Joint Account, HUF/Trusts, Corporates etc., who are eligible to
open Current / Savings accounts can open AB e-trade account. However, the
style and form of account holders in demat account should be the same as in
bank account.
The existing KYC guidelines are to be followed strictly while opening AB e-
trade account at the branch.
This facility is being offered in tie-up arrangements with M/s.Religare
Securities Limited (RSL).
Once the account is opened, account holder is required to register with RSL to
undertake online trading duly indicating the scheme viz., R-Ace, R-ACE Lite
and R-Ace Professional.
RSL sends the Login ID and Password to enable the customer to have access
to the website for trading.

125

In case of purchase of stocks, his account will be debited with the value of the
stocks purchased plus brokerage/service charges and the said stocks will be
transferred to his demat account.
Similarly, in case of sale of stocks, demat account will be debited with the
number of stocks sold and the proceeds will be credited to his bank account
after deducting brokerage/charges.
In order to protect the customers from fraudulent transfers, customers have
an option to mark lien so that no debit operations are allowed in demat
account. It is a unique feature available in our product.
Brokerage charges levied by RSL is ` 0.05% for intraday transactions and
0.50% for other transactions i.e. delivery.

It enables the bank to improve low cost deposits besides earning fee based income
through maintenance charges/transaction charges. (Cir no.70 Ref 51/3 dt.10.06.09)

Dematerialization (Demat) signifies conversion of physical form of securities in to
electronic form and the converted securities will be credited to customer account
with Depository Participant (CDSL/NSDL). This can be used for shares, bonds and
Mutual funds. Now, it is mandatory that the investor should have Demat account to
subscribe IPO/FPO. The benefits associated are Faster settlement cycle, Elimination
the risk of bad delivery, No stamp duty, Easy for the banks to lend against shares,
Eliminate delays, thefts, interceptions and fake certificates and Online credit of
Bonus/Rights/Split shares. Our Bank is offering value added service with a brand
name AB Demat to facilitate the investors to have hassle-free, fast and accurate
electronic transactions. Submission of application along with photograph, address
proof and Bank account details are the prerequisites to open demat account.
Nomination facility is available. Investor has the option to freeze/defreeze the
securities. The service charges are as under:

No Service Charges (Exclusive service tax)
1 Agreement charges Actuals as per state laws
2 Annual Membership
charges
Individuals `300/- Corporates `750/- No charges
for staff accounts.
3
Demat charges
`2/- per certificate + mailing charges `20/- in
India and `500/- for foreign address
4 Remat Charges `15/- for every 100 securities or part thereof.
5 Transaction Fee 0.04% of market value or minimum of `20/-
6 Pledge
Creation/closure
`50 /- per instruction
Branches are allowed to sanction credit limits against pledge of approved and
unencumbered shares, Debentures, Mutual Fund units, which are in demat form. The
margin required is 50% on the market price or 52 week low whichever is low.
However, the maximum limit that can be allowed is ` 20 lakhs only. (Cir. No. 70 Ref
51/3 dated 10.06.09)
Personalized Cheque Books: In order to meet the discerning expectations of the
customers, Personalized Cheque Book facility is introduced at all important centers
across the country and the indents will be processed online and delivered to
branches through courier. All cheque leaves bear branch address and name of the
customer, which provides value addition to the customers.

126

Computer Generated Cash Receipt: The most happening of customer interaction
in the bank branches are at the cash counters and customers/public likely to take
impulse decisions based on the service experience at these touch points. In order to
improve the customer service at cash counters further and to avert avoidable
complaints pertaining to cash related issues, all branches are advised to issue
computer generated receipt for all customer related cash transactions. These
receipts do not require any signature since they are system generated. It is the
responsibility of the respective branches to ensure that the Cash Receipt Printers are
kept in working condition along with required stationery. However, in the event of
absence of cash receipt printers or printers going out of order, for the reasons
beyond the control of the branches, branch may issue manual counter-
foil/acknowledgement, as an exceptional case. However, such counter-foils are to be
countersigned by another officer apart from the signature of the staff receiving such
cash. Branches are advised to display prominently near the cash cabin stating that
customers are advised to demand system generated cash receipt only and it should
also be mentioned that complaints made on pass book with manual entries and cash
receipts issued manually will not be entertained by the bank. (Cir.no.208 Ref 55/17
dated 06.09.10 & cir.no.209 Ref 55/17 dated 20.09.10)

Tele Banking Call Center: Bank has launched Tele Banking & Call Center to
provide information to the registered customers about their accounts through
Interactive Voice Response (IVR). Further, it enables the customers to have desired
information without visiting the branch personally. IVR is available round the clock
throughout the year including Sundays and Holidays where as Call Center services
are available from 8 am to 8 pm on all days except on Sundays and National
Holidays. Call center is providing the enquiry related services such as Balance
Inquiry, Interest Rates, Product features etc., pertains to deposit and advance
accounts. Caller is required to contact Toll Free Number 1800-425-1515 for the
above information. However, the caller needs to furnish Customer ID and Personal
details to know his account related information. Besides the above, Call Center
disseminate information of various products of our Bank through Customer Service
Executives to the registered customers as well as other customers/general public.
Bank is not levying any charges for the said services.

Upset service: In order to minimize the customer complaints and to match the
customer expectations, bank has launched technology embedded service Upset
proactively wherein customers can send their grievance through SMS direct to HO for
immediate resolution. The salient features of the product are:

The aggrieved customer is required to type the word Upset in his/her mobile and
forward the same through SMS to 9666606060.
On receipt of SMS, the service provider sends acknowledgment to the
complainant and routes all inbound SMS received to Customer Service
Department, HO on daily basis. In turn, Customer Service Department calls back
the customer to elicit the details of the grievance/complaint and forwards the
same to the concerned branch/office through email for doing the needful.
Branch/Office is required to initiate necessary steps to resolve the grievance duly
following the extant guidelines and furnish the information through email to
resolution@andhrabank.co.in on the same day.
The status of complaint/grievance will be informed to the complainant within 48
hours by the Customer Service Department, Head Office.

The newly introduced service Upset is an opportunity to the bank to receive the
expectations of the customers online and enables the bank to initiate necessary
steps for speedy Redressal of the Grievances. (Cir.no.275 Ref 34/03 dated
29.10.2010)

127

Credit Cards

RBI initiated steps to popularize Credit Cards to encourage alternate payment
system in the country to minimize the risks associated with traditional modes of
payments such as cash/cheque/Demand Draft etc.

Of late, credit card has become one of the means to make payments by majority of
house-holds and it is no longer a status symbol. Buy Now Pay Later concept is
attracting and popularizing the credit cards in the market. It is easy to carry with a
limit and hassle free payment system. Cardholders undertake purchase of goods and
services without carrying currency and make payment at a later date. In a way,
Banks are extending short term unsecured personal loans by issuing Credit Cards to
their customers. Card business augments other income of the banks through annual
subscription, service charges and interchange fee. The salient features of credit cards
offered by our bank are furnished here under (cir.no.92 Ref 5/1 dated 28.06.11).

Description
VISA Classic
Master Card
VISA Gold
Card
Master Card Electronic /
VISA Gold & Classic
(Against Deposit)
Eligibility:
Cards are issued to
Customers/Non Customers and
Resident Indians
Non resident Indians also

Income:
Salaried Class: Gross
Net
Others :

`15000/- p.m
`8000/- p.m
`180000/- p.a

`20000/- p.m
`10000/- p.m
`240000- p.a
Minimum Deposit:
Master Card Electronic:
`10000
VISA Gold: `67000
VISA Classic: `33500
Annual
Subscription:
Annual Subscription
for subsequent years
is waived in case the
usage in the previous
year
No Annual subscription in the First Year

`18000/-

`23000/-
Master Card Electronic /
Classic/Master:`18000/-

Gold: `23000/-
Failure of the above:
For main cards
For add on cards

`550/-
`200/-

`1000/-
`400/-
Master Card Electronic
`200/-
`150/-
(VISA Classic/Gold as
applicable to gen. category)
Validity: Globally Valid
Cash Advance
Charge
3% 3% 2%
Accidental
Insurance
`2.00 lacs `5.00 lacs Not available for Master
Card Electronic
Sanctioning
Authority
Branch Manager For customers with satisfactory track record
at least for 6 months. AGM/DGM (Second Line executive at
Zonal Office) For non customers and customers with
operations of less than 6 months.
Other conditions:
1. Two recent Passport size colour photographs
2.Residence Proof & Photo Identification Telephone /
Gas / Electricity Bill / passport / Driving License etc
3. Proof of Income: a) Salaried Class: Copies of latest
salary slip and Form 16/IT Returns b) For Others:
Copies of two years IT Returns filed with computation
sheets. 4.Copy of PAN Card 5.Rating Sheet in the
prescribed format with recommendation
1. Two recent photos
2.Copy of deposit receipt
duly marking lien on the
face of Deposit Receipt
3. System generated print
out of lien marking of
deposit.

128


Titanium Credit Card: In order to issue hassle free credit cards against Term
Deposit with simple documentation process, Bank has launched a new products
Titanium in the month of July 2013. Under this, cards are issued without insisting
on Income proof and Rating sheet to all eligible customers. The salient features of
the card are as under:

Eligibility Criteria Major, Resident & NRIs
Age Limit in years 18-79
Minimum Deposit `10000
Card Limit 75% of the Deposit amount
Cash advance 90% of the card limit
Add on cards Up to 2 cards-Spouse, children and Parents
Free credit period allowed 21 to 50 days on all merchant purchases
Validity of the card 3 years
Minimum payment on Roll over facility 5 % of the billing amount
Accident Insurance coverage
`2 lacs on payment of insurance premium of
`85 on each card
Lost card Insurance `1,50,000 (Maximum)
Reward points
One point on merchant usage of every `100
with a conversion price at `0.30 on each
point
Fee & Charges
Admission fees Nil
Annual subscription on Main and Add-on
cards
Nil
Lost card charges `200
Lost card Replacement charges `200
Hot-listing charges `200
Charge slip request charges `100
Transaction charges at Railways on the
amount of charge slip

2.50%
No Surcharge on fuel purchase per day &
Surcharge over & above prescribed limit is
`2,000
2.50%
Foreign Currency Markup 3.00%
Service Charges
i) If MPD Paid in a month 1.50%
ii) No payment made or less than the MPD 1.50%
Late Payment Fee Nil
Cash advance charges
15% p.a. for the cash amount withdrawn, on
daily products basis, with a minimum of `50
per transaction
ATM charges on cash advance
d) At our Branches/ATMs Nil
ii) At other Bank ATMs `25/-
Circular no.155 Ref 5/1 dated 17.07.2013

129


AB VISA Platinum Credit Card
Eligibility Criteria Major, Resident & NRIs
Age Limit in years 21-70
Income Eligibility `3.00 lacs per annum
Cards Against lien on Deposit with 25%
margin and without insistence of Income
Proof and Scoring model
`85,000/- Deposit amount
Minimum Card Limit `60,000
Add on cards Up to 2 cards-Spouse, children and Parents
Validity of the card 4 years
Roll over facility 5 %
Validity Global
Accident Insurance coverage
`10.00 lacs to the Main cardholder and `5.00
lacs to the Add-on Cardholder
Baggage Insurance `25,000 (Maximum)
Lost card Insurance `1,50,000 (Maximum)
Cash Advance Limit 50%
Fee & Charges
Annual subscription `1000 & `400 for cards against Deposits
Annual subscription is waived in the first
year and not levied if usage in the previous
year is
`30,000 or 18 Transactions in a year
Add on cards `300
Lost card charges `300
Lost card Replacement charges `200
Charge slip request charges `100
Transaction charges at Railways on the
amount of charge slip

2.50%
No Surcharge on fuel purchase per day &
Surcharge over & above prescribed limit is
`2,000
2.50%
Foreign Currency Markup 3.00%
Temporary enhancement Charges per
occasion
`200
Hot listing charges `200
Cash advance charges 2.00%
Service Charges
If MPD Paid 1.50%
If MPD not Paid 2.95%
Late Payment Fees
Outstanding upto `5,000 `200
Between `5001 to `15,000 `300
Between `15,001 to `25,000 `400
Above `25,001 `600
Transaction fee:
Cash withdrawals/balance enquiry from
Andhra Bank ATMs/Branches
Nil
Cash withdrawals from other Bank
ATMs/Branches
`50/- for VISA Cards
`70/- for Master Cards
Balance enquiry at other Bank ATMs `30/- per transaction
Purchase of Railway Tickets 2.5% on the charge slip amount
Lost/Broken/Hot listing charges `200/-

130


The borrowers enjoying the credit facility with our branches are eligible for cards
with simplified procedure (without submission of any income proof) and the details
are as under:

Particulars
Borrowers enjoying
credit limits `5 to `10
lakh
Borrwers enjoying
credit limits > `10 lakh
Card Gold Card Platinum Card
Card Limit
`50000/- `60000/-
However higher limits are considered on submission of
income proof.
Accidental Insurance
coverage
`5 lakh for main and add-
on cardholders
`10 lakh for main and `5
lakh for add-on
Charges
`212/- per annum per card `467/- per annum for
main card and `212/- for
add-on
The details of the cards issued are to be noted in the documents.

Credit Scoring Model: Card limit is fixed based on the rating arrived using Credit
Scoring Model, which covers six important factors pertaining to the applicant such as
Own House, Employment/Occupation, Proven income, Bank Account, Age and Risk
category (KYC norms). The minimum marks to be scored for eligibility and process
the application are 18 at the branch level. Zonal Manager may improve overall
scoring by not more than 2 points, depending on merits of individual case while
recommending. Where the score ranges 18 to 22 points, the cardholder is eligible for
Base limit. Higher limit may be considered by the sanctioning authority where the
score is above 22.

Corporate Cards: Banks are issuing Corporate Cards to the companies registered
under Companies Act 1956 and whose net worth should be minimum `25 lakhs. The
cards will be issued to the Executives / Officers / Employees of the company. No
admission fee and the annual subscription fee is `2000/-. The aggregate limits under
various cards issued to a company should not exceed 25% of its net worth subject to
a maximum of `50 lakhs in total and not exceeding `10 lacs per card. Companies
availing credit facilities with Banks/DFIs are only eligible except where 100% liquid
security is offered as guarantee by way of lien on deposits / Govt. Securities for the
Corporate Credit Card limits. In case of non-customers, they are required to produce
status reports from their Financing Banks / Development Finance Institutions etc
while submitting the application for Corporate Cards. Company is required to submit
copies of Memorandum & Articles of the company, Board Resolution, Last two years
audited balance sheet, 2 colour Photographs of the card Applicants and undertaking
letter to the branch for sanction of corporate credit cards. Zonal Managers are
empowered to sanction the Corporate Cards.

Credit Cards Highlights (Circular no.102 Ref 05/01 dated 08.07.09)

Cards are issued to our Customers generally.
Service charges at 2.50%, which is one of lowest in the Industry.
Global validity.
Accidental Insurance coverage to the Main and Add on cardholders.
Free Credit period of 21 to 51 days even under roll over facility.
Cash Advance up to 50% of the Base Limit.
No Annual subscription in the First year and shall be waived in the
subsequent years if card used for stipulated minimum amount.
Highly secured payment for Internet usage through VBV (Verified by VISA)
and Msecure (Verified by MASTER).

131


Prepaid Cards: In order to provide further value added services to the customers /
public, bank has launched two types of prepaid cards viz., Gift Card and International
Travel Card on 30.09.2011 and the salient features of the said products are as under
(Cir.no.218 Ref 5/2 dated 30.09.2011):

Gift Card
Gift cards are available for denominations starting from `250/- to `50,000/-.
All ELBs, VLBs and select Large Branches are allowed to issue Gift cards.
The Card is valid in India and valid for ONE year from the date of purchase
Cards are Non-Reloadable and not enabled for cash withdrawals
Branch issue cards with a service charge `25/- for the cards value up to
`1000/- and `50/- for cards beyond `1000/-
Wide acceptance in all Master Card affiliated merchants for transactions at
POS (Merchants), Online (Internet) and IVR (Mobile/Phone) payments
Customer will be provided with PIN for POS transactions to prevent misuse.
SMS alerts are sent for all transactions at Free of cost
Locking/Unlocking of card Account is enabled to the cardholder
No charges for Balance enquiry and Mini statement at Andhra Bank ATM
Cardholders can access the card information through Internet login
Lost/Stolen/Damaged Card Replacement at any Branch with charges
International Travel Card
The Travel cards are accepted in all countries except India, Nepal and Bhutan
Travel cards are issued under USD only
Cards are enabled for transactions at POS Merchants. POS and ATM usage
require PIN for secured transactions
Travel cards are available from USD 200 to the maximum eligibility under
FEMA guidelines
Validity period of the card is 2 years from the date of issue
Cards are re-loadable from any select Branch
The Welcome Kit contains Two cards. In case where existing card is misplaced
/ damaged, the Second card can be Activated after Blocking the Primary card.
Unique feature of Locking/unlocking the card Account through IVR or through
Website self care portal system
An exclusive Internet login provided in the Website for balance enquiry,
viewing transactions etc.
No charges for Balance enquiry and Mini statement at Andhra Bank ATM
Withdrawal of cash at ATM is permitted in the upcountry at local currency
EMV Cards: Chip technology is an evolution in our payment system to strengthen
security and to deter fraudulent transactions. This technology was developed jointly
by Europay, MasterCard and Visa Chip cards and named as EMV. These are standard
cards embedded with a micro computer chip that store and protect cardholder data.
EMV chip technology is becoming the global standard for credit card and debit card
payments. The microchip provides an additional level of authenticity for the
transaction. EMV-enabled device will communicate with the chip inside the
customers smart card to determine whether or not the card is authentic. Generally,
the terminal will prompt the customer to sign or enter a PIN to validate their identity.
This process enhances the authentication of both the card and cardholder, effectively
reducing the possibility of accepting a counterfeit card or be held liable for a fraud-
related chargeback. As per the recent RBI guidelines, all new Debit/Credit cards
issued by banks will allow usage in India only and in case the cardholder wants to
carry out international usage, the cards will have EMV chip embedded on the card
and will be pin enabled with effective from 1
st
December 2013. Another important
ruling is the liability shift where merchants who have not made the investment in
chip-enabled technology will be held financially liable for card-present fraud that
could have been prevented with the use of a chip-enabled POS system.

132

Fee Based Income Products

In the present deregulated competitive environment, Banks are facing difficulties in
retaining / improving profits since there is pressure on Net Interest Margin (NIM). In
order to cope up the demand, Banks are focusing their attention on other services to
improve the bottom line. Banks are entering into ancillary services in a big way. To
augment other income, our Bank is undertaking five activities viz., Selling of Mutual
Funds, AB Arogyadaan, Bancassurance schemes, Sale of Gold Coins and Liability
Insurance/Asset Insurance.

Mutual Funds are associations or trusts of public members who wish to make
investments in the financial instruments or assets of the business/corporate sector
for the mutual benefit of its members. Mutual Funds are launching various schemes
with different investment objectives from time to time to suit the requirement of the
investors. Mutual Funds are beneficial to their members in reducing risks and
maximizing income by proper selection of financial instruments, which will bring
income flow in the form of dividends as well as in the form of capital appreciation.
Our Bank has entered agreement with Mutual Funds viz., Principal Mutual Fund
(PNB), SBI Mutual Fund, TATA Mutual Fund, UTI Mutual Fund, Kotak Mutual Fund,
Reliance Mutual Fund, Sundaram BNP Paribas Mutual Fund, LIC Mutual Fund, Birla
Sun Life Mutual Fund and Baroda Pioneer Mutual Fund for distribution of their
products. It is a win-win situation to the Banks and customers since banks are
providing value added services to the customers and it is a source of other income to
the Banks.

AB Arogyadaan: It is a group Mediclaim Insurance Scheme, which takes care of the
hospitalization expenses, issued as a Floater Policy, in association with M/s. United
India Insurance Company Limited. There are two plans viz., Plan-I covers a policy of
four (1+3) consisting of Policy Holder, Spouse and 2 dependent children and Plan
II covers a family policy of SIX (1+5) consisting of Policy holder, Spouse, two
dependent children and parents (father & mother). Dependent mean male child
below 26 years and unmarried female child. It is a Floater Policy, any one member
or all the members put together can avail hospitalization benefits (Room, Boarding,
Nursing, Surgeon/Consultant fee, Diagnostic charges etc.) during the policy period.
M/s. Good Health Plan Limited is acting as Third Party Administrator (TPA) and
issue photo identity cards direct to the policy holders in Metro/Urban/Semi-Urban
areas and with regard to other centers the cards will be sent to the respective
branches. Policy holders are eligible to avail cash less treatment at networked
hospitals and incase of non-networked hospitals, they may pay bills first and then
claim reimbursement from TPA. The entry age is up to 60 years for fresh proposals
and on renewal coverage is up to 80 years. Risk will be covered based on sum
assured ranging from one lakh to five lakh. Policy is valid for one year, however 15
days grace period is allowed for payment of premium. The annual premium
payable by the customer is depending on the Sum Insured. The premium paid under
the Scheme is eligible for IT relief under section 80D. The first 30 days of joining the
scheme is treated as waiting period and policy holder is not entitled for
reimbursement of hospitalization charges in the said period. However, this condition
does not apply in case of accidental hospitalization. The maximum reimbursement
will be made to the policy holder is 80% of eligible claim. Bank acts as facilitator
only. Settlement of the claims is the sole responsibility of M/s.United India Insurance
Company (UIIC). The contract is between the insurer (insurance company) and the
insured (individual) and not between the Bank and insured. Further UIIC has
extended another benefit i.e. Janata Personal Accident Policy of `1.0 lakh at free of
cost, to all the policy holders whose age is 45 years & below as on date of remittance
of policy premium. (Cir. No.88 Ref 51/4 dated 28.05.12)

133

Bancassurance (Life): Andhra Bank is the Corporate Agent for M/s. IndiaFirst Life
General Insurance Company Limited and providing various insurance products to the
customers of the Bank as well as General Public w.e.f. 01.01.2010.

Bancassurance (Non-Life): Bank is undertaking marketing of non-life policies
issued by M/s.United India Insurance Co. Limited to customers as well as general
public through selected branches. The important policies are Standard Fire & Special
Perils Policy, House Holders Insurance Policy, Shop Keepers Policy, UNI Care Policy,
Electronic Equipment Insurance Policy and Contractors All Risk Insurance Policy.
Besides the above, branches can also undertake insurance of loan assets (Primary
and Collateral securities) with M/s. UII, so that branches can protect the loan assets
against risk and earn income through commission. All insurance proposals processed
should bear bank Code 920100 to receive eligible commission.

Liability Insurance: Retail loans involve huge sums and remains in existence for
longer periods as compared to the other loans. These loans being one of the
essential social needs with emotional and psychological attachment, the family need
to continue the asset even in case of any unfortunate event to the borrower. Bank is
providing cover to Housing / Vehicle / Education loan borrowers in association with
India First Life Insurance Corporation (IFLIC) under Group Mortgage Redemption
Assurance. Covering the borrowers under this policy helps the bank in reduction of
default risk in case of unfortunate event to the borrower. It is also providing a
potential avenue for earning fee-based income to the Bank. The scheme is optional
to the borrower and the intending borrower need to submit Consent-cum-
Authorization and Simple Health Declaration Form.
Features Particulars

Eligibility
Entry age should be between 18 to 69 years and the age at maturity
should not cross 75 years. Coverage is available for Joint Borrowers.
Age Proof Copy of Date of Birth Certificate / Passport / Voters ID /
PAN Card / School Certificate etc. To arrive the correct age for the
purpose of calculation of premium, Age as on last birthday should be
considered.

Maximum
Cover
Maximum coverage is available up to `50 crore. However, the policy is
covered with the sanctioned limit or the liability as on date, whichever
is lower.
Death
Benefit
The reducing the death benefit will be the loan outstanding as at
monthly loan anniversary immediately preceding the date of death of
the life assured based on loan schedule calculated at the inception
cover.
Recovery of
short fall
amount
In case the amount of claim settled by the insurance company falls
short of the liability outstanding in the loan account, the short fall
should be paid by the joint borrowers / co-obligants / guarantors /
legal heirs of the borrower.

Premium
One time Single Premium. The premium will be calculated based on
sanctioned limit / liability, age of the borrower and repayment period
of the loan. However, in case of existing borrowers, outstanding
liability and Residual Repayment Period as on the date of the policy is
to be taken into consideration while calculating premium amount.
Foreclosure
of the Loan
Member will get an option to continue the cover till the end of the term
as mentioned in certificate of insurance or member can surrender the
cover and get the surrender value.

Termination
of cover
The insurance coverage will cease at the earliest of member
attaining age of 75 years or demise of the member or termination /
discontinuation of the loan or when the policy is surrendered.
Others I
Cir.no.198 Ref 51/08 dated 12.08.2013

134


135

IndiaFirst Life Insurance Company Limited (IFLIC)

Bank has entered into Insurance joint venture with Bank of Baroda and Legal &
General Group plc with 30%, 44% and 26% stake respectively and offering the
following schemes.
No Salient Features IndiaFirst Smart Save IndiaFirst Young India
1 Target Group
It is a simple structured
Unit Linked Plan meant for
long term protection and
savings.
Customers with young
children to impart quality
education to them.
2 Entry Age 18 to 60 Years 18 to 55 Years
3 Term
15, 20 and 25 Years.
Single Premium the term
is 15 Years.
10, 15, 20 and 25 Years.
4 Minimum Invest.
i) Regular Premium `12000/- p.a. `12000/- p.a.
ii) Limited Premium `15000/- p.a. NA
iii) Single Premium `45000/- NA
5 Maximum Invest. No limit
6 Payment options Half-yearly / Yearly SIP facility is available
7 Fund options Debt, Equity, Balanced, Index and value Fund.
8 Sum Assured

i) Regular & Limited
premium
Higher of {105% (premium paying term x annualized
premium) or (10 x annualized premium)}
ii) Single Premium
For age < 45 years 125% of
premium and for age >=45 years
110% of premium

NA
9 Withdrawals Minimum withdrawal is `5000/-

Maximum withdrawal 25% of the fund value, only if the
fund is left with a minimum balance equal to 110% of
annual premium after withdrawal. In case of single
premium the fund value after the withdrawal should not
be less than `45000/-
10 Tax Benefit on
Premium invested Section 80C and Maturity benefits
received Section 10 (10D)
11 Death Benefit
The fund value or the sum assured whichever is higher is
paid to the family/nominee.

IndiaFirst Secure Save Plan: It is a traditional insurance cum savings plan which
enables the customer to build their savings systematically by paying regular
premium based on income and sum assured chosen. The minimum age at entry of
life insured is 5 years and maximum age is 65 years as on last birthday. However,
the minimum age stipulated for policy holder is 18 years, in case where the policy is
taken for minors. The minimum plan period is 10 years and maximum 30 years. The
investor has choice to choose payment mode Monthly/Half-yearly/Yearly. The plan
offers as maturity benefit, basic sum assured along with simple reversionary bonus
and terminal bonus declared by the company from time to time, will be paid to the
policy holder at the end of the plan term. However, in case of death, the sum
assured will be paid along with simple reversionary bonus accumulated till death, to
the nominee. Premium paid and benefits are eligible for tax benefits under sec 80C
up to ` 1 lakh from taxable income. (Cir.no.412 Ref 51/29 dated 01.03.2011). Bank
has entered MOU for distribution of Life Insurance products of the Joint Venture
Company as their Corporate Agents and bank earns commission on the policies
mobilized/sold. (Circular no. 214 Ref 51/15 dated 08.09.2010)

136

IndiaFirst Money Back Health Insurance Plan: The product is launched on 26
th

May 2011. It provides both a wide, comprehensive health insurance cover to the
family and also investment opportunity to systematically save, earn market returns.
The salient features of the plan are as under: (Cir.no.106 Ref 51/05 dated 06.07.11)

No Features IndiaFirst Money Back Health Insurance Plan
1 Target Group
Policy holder can opt for the scheme for self, self,
spouse, parents and children (maximum 2)
2
Entry Age &
Maximum age at
maturity
Primary Life Assured 18 to 60 years Max. 70 years
Spouse & Parents 18 to 65 years Max. 75 years
Children 90 days to 24 years Max. 25 years
3 Sum assured
Individual Minimum 1.50 lakh & Max. 5 lakh
Family Floater Minimum 1.50 lakh & Max. 10 lakh
4 Minimum Invest.
i) Regular Premium
Age Minimum Maximum
Up to 45 years `10000 `33300
46 years 60 years `14200 `47600
ii) Single Premium
Up to 45 years `30000 `100000
46 years 60 years `37500 `125000

Note In case of spouse, children and parents, the
policy holder need to pay additional premium as under

Type Minimum Maximum
Regular premium `900 `47500
Single premium `9400 `475500
5 Payment options Yearly
6 Fund options Debt, Equity, Balanced, Index Tracker and value Fund.
7 Withdrawals No withdrawal is followed before 5 years.
8 Hospital claim
Minimum 24 hours hospitalization required. 30 days
waiting period except in case of accidents.
Hospitalization of the insured upto 1% of the annual
sum assured with maximum limit of `5000/- per day.
ICU/ICCU expenses are covered up to 2% of the annual
sum assured or `10000/- per day whichever is less.
9
Maturity Benefit /
Death Benefit
The Primary Life Assured will receive the accumulated
fund value. In case of death of Primary Life Assured, the
amount will be paid to nominee and the policy
terminates for all other life assured members. However,
in case of death of other assured member, the plan will
continue to be in force for remaining members.
10 Tax Benefit on
Premium invested Section 80C and Maturity benefits
received Section 10 (10D)
11 Commission to Bank
10% of premium paid in first year and 1% thereafter in
case of Regular Premium accounts and 2% of premium
for Single Premium accounts.
12 Third Party Adminis. E-Meditek Services Limited.

Abhaya First Wealth Pack: It is a four-in-one product which provides Savings
Bank account with life insurance, recurring deposit facility, ULIP equity option and
group life term plan with life insurance coverage in case of unfortunate death of the
account holder. The first two products are of Andhra Bank and other two products
are of IFLIC. The product is available in three denominations viz., Silver (`25000),
Gold (`50000) and Platinum (`100000/-). Cir no.359 Ref 51/23 dated 12.01.2012.

137

Loan Policy Guidelines

The objective of Loan Policy is to ensure balanced growth of credit across various
sectors and to avert credit to undesirable sectors. It is aimed at to improve the credit
off-take with quality with minimum risk and maximize profits. Further, it enables the
bank to continue to maintain thrust to priority sector advances in consonance with
Govt. of India / Reserve Bank of India guidelines. The exposure norms as per the
existing policy of the Bank are as under:

No Category Norms
1 Single Borrower 15% Banks capital fund*
2 Single BorrowerInfrastructure 20% Banks capital fund
3 Group Borrowers 40% Banks capital fund
4 Group Infrastructure 50% Banks capital fund
5 Single Borrower Oil Companies 25% Banks capital fund
6 NBFC Borrower 10% Banks capital fund
7 NBFC (IFC) Borrower 15% Banks capital fund
8 NBFC (IFC) Infra 20% Banks capital fund
9 NBFC Asset Finance Company (AFC) 15% Banks capital fund
10 NBFC (AFC) Infrastructure 20% Banks capital fund
*Banks Capital Fund = Tier-I & II Capital as per audited balance sheet of the
previous year. Single Borrower threshold limit & Substantial Exposures Limit can be exceeded
by Management Committee/Board. (Circular no.108 Ref 26/14 dated 21.06.2013)

Maximum Exposure / Prudential limits:
(Crores)
No Category
Maximum prudential limit
Entity Group accounts
1 Individual / Proprietary concern 20 30
2 Partnership 30 40
3 Limited Liability Partnerships 5 10
4 HUF 10
5 Trusts / Societies / Associations 20 30
6 Private Limited Companies 80 100
7 Public Limited Companies (closely held) 100 120
8 Film Industry (Per party) Max 6 parties 4
9 Infrastructure Project (Per project) 500
10 Construction Contractors 15 times of Net owned funds
Note: The maximum limit is to be restricted to the said limits or 6 times of net worth
of the concern as per the Latest Audited Balance Sheet, which ever is less. However,
in case of Individual / Proprietary / Partnership / HUF / Trusts / Societies /
Associates the limit can be sanctioned to `60 crores by CMD/ED.

Non Funded Limits Maximum Exposure / Prudential norms:

No Category Maximum
1 BGs (including Letter of Comfort /
Letter of Undertaking)
3 times of Net Worth of the Bank
2 BGs to Banks / FIIs / Others 10% of Banks capital funds (Tier-I capital)
3 Letter of Credit 2 times of Net Worth of the Bank
4 Bills discounted (IDBI/SIDBI) 1% of Net Worth of the Bank
5 Foreign Exchange Commitments Equal to the Net worth of the Bank

Substantial Exposure Limits

Single borrower threshold limit will be `750 Crores.

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Substantial Exposure Limit The sum total outstanding of all the borrowal
accounts, where the single borrower exposures is in excess of `750 crore,
shall not exceed `20000 crore.

The following internal exposure limits are fixed to specific industries/sectors in
addition to the above exposure limits.

Industry / Sector
Exposure Ceilings
Fund Based Non Fund Based
1. Energy 22.00% 10.50%
of which Renewable energy 2.00%
2. Real Estate 20.00% 2.00%
of which Housing 15.00% -
3. Hospitals 3.00% 1.50%
4. Educational Inst. 2.00% 2.00%
5. Textiles 9.00% 4.00%
6. Petroleum products 10.00% 1.00%
7. NBFC* 10.00% 5.00%
8. Iron & Steel 10.00% 14.00%
9. Construction & Contractors 10.00% 50.00%
10. Transport 11.00% 5.00%
11. Rice Mills 6.00% 2.00%
12. Commercial Real Estate 7.00% 2.00%
13. Diamond, Gems & Jewellery 5.00% 3.00%
*Sub-ceiling of 3% for NBFCs dealing in financing against gold collateral

Administrative clearance from H.O is required for credit facilities to Trust & HUF
borrowal accounts for the first sanction. For subsequent renewals & enhancements it
is not required provided there is no change in the composition / activity of HUF /
Trust. The extent up to which Interest & Non-interest bearing Unsecured Loans (from
promoters, friends and relatives) can be treated as Quasi Capital/Net Worth for
exposure norms is 50% and 100% respectively.

Capital Market Exposure: Funded & Non-funded facility to Stock Brokers including
its associates/inter connected companies subject to

a) 20% of Net Worth of the Bank as per the last audited balance sheet (on
solo/consolidated basis) after netting exposure to Loans and advances to Individuals,
Loans & advances to 138ttest138ed for meeting promoters contribution & Loans to
individuals for investment in IPOs/ESOPs.
b) For Individuals `20.00 crore, For Partnership firms `30 crore and for Private and
Public Sector Companies it is `80 crore and `100 crore respectively subject to 6
times of Net worth of the borrower for Individual, Partnership & Private Ltd.
Companies. (Cir.47 Ref 26/9 dated 27.05.11)
Exposure ceilings Exemptions

Loans & Advances against security of banks own term deposits and LCs / BGs
covered by 100% cash margin.
Food Credit.
Rehabilitation of Sick / Weak Industrial units: Existing / additional credit facilities
(including funding of interest and irregularities) granted to weak / sick industrial
units under rehabilitation packages.
Govt. of India Guaranteed accounts where principal & interest are fully
guaranteed.

139

Bills purchased/negotiated/discounted under LC (where the payment to the
beneficiary is not made under reserve.)

Maximum repayment period allowed for the following Term Loans

No Category
Credit Rating Repayment with in
CRS/CRAS CRRM
1 Infrastructure A+++ / A++ A++ 15 Years including gestation
2 Infrastructure A+ / A&B A+,A,B++ 12 Years including gestation
3 RTO Loans A+++ / A++ A++ 6 Years including holiday
4 RTO Loans A+ / A&B A++ 5 Years including holiday
5 Other TLs A+++ / A++ A++,A+A,B++ 7 Years excluding holiday
6 Other TLs C B+, B 5 Years excluding holiday

Due Diligence Report Conducting due diligence is a prerequisite for all new
borrowal accounts (`100 lac & above) by the branch. It helps the branch to assess
the credit worthiness of the prospective borrower and risks involved in the proposal.
The report covers the details of the prospective borrower / Promoters / Partners /
Directors, details of associate and group concerns and details of market enquiries
about the new borrower and the associate/sister/group concerns. Due diligence is to
be done by Zonal Office in case of accounts of `300 lac and above. However,
branches to obtain Credit Investigation Report for all advance accounts irrespective
of the credit limits sanctioned. However, Agrl, Weaker and Govt. Sponsored accounts
upto a limit of `25 lakh are exempted from the purview of Credit Investigation.
(Cir.no. 6 Ref 26/03 dated 07.04.2010)

Audited Balance Sheet of the latest financial year shall be the basis for arriving at
the various financial parameters at the time of renewal / sanction under CRAS /
CRS/CRRM. In the absence of audited balance sheet of the latest financial year, the
least of ratings arrived based on the latest provisional balance sheet
OR last audited balance sheet shall be awarded. In such cases, the audited balance
sheet for the latest financial year is to be obtained within 6 months to finalise credit
rating and re-fix interest accordingly. If the audited balance sheet of the latest
financial year is not submitted within 6 months from the date of closure of financial
year for arriving at credit rating in case of fund based advances of `100 lakh &
above, additional interest of 1% is to be charged for the non-submission period.

Credit Rating is required for Small Loans of above `2 Lakh and below `5 Lakh
Fund and Non-Funded (SSI, RT, BE, PSE, RTO); Credit Rating System (CRS) for
Fund Based Limits of `5 Lakh & above but less than `50 Lakh; Credit Risk
Assessment System (CRAS) for both Fund Based and Non-Fund based Limits of `50
Lakh & above up to `500 lakh; Credit Rating Model for New units without Audited
Balance Sheet for Limits of `5 Lakh & above and up to `500 lakh; Credit Risk Rating
Model for credit limits of above Rs 500 lakh (fund & non-fund based) is applicable.
Risk Rating Model is to be applied for Stand alone Term Loans of `5 Lakh & above. As
per CRS/CRAS/CRRM (as applicable) at the time of half yearly / annual review basing
on latest Audited Balance Sheet and pricing shall be reset as per the credit rating
so arrived at by the sanctioning authority. CRS/CRAS is applicable for the borrowal
accounts with both working capital and term loan limits under the industry / business
/ trade / agriculture segments including import and export proposals. Rating is
required for non-fund based limits also. However, it is not applicable to Professionals.
CRS is applicable for Rice Mill accounts with limits of above `10 Lakh irrespective of
any upper limit. A+& above rated Rice Mills have a concession of 50% of the
processing. Interest Rate as per Credit Rating by the sanctioning authority is
applicable for advances of above `10 Lakh. However, interest rates of import/export
credit shall be fixed as stipulated by RBI/Bank from time to time but not as per
CRS/CRAS/CRRM rating. For agriculture segment Credit rating is required for

140

firms/corporate borrowers with above `5 lakh limit and `25 lakhs & above for
Individuals and non-corporate borrowers. However, DWCRA / SHGs / IRDP / SGSY /
SCAP / STAP / FSCS / LAMPS / Cold Storages, Rural Godowns Scheme / storages
financed under capital investment subsidy scheme of NABARD are exempted from
the above rating.

Stock Statement/Book Debts: All borrowers availing working capital limits are
required to submit stock statement as on the last Friday of the month before 10
th
of
succeeding month. Penal Interest of 1% for the period of default on working capital
outstanding. The minimum working capital limit to accept Book Debts as security is
above `5 lakh. Book Debt statement is to be certified by the borrower every month
and it should be certified by a Chartered Accountant every quarter.

MSOD: All accounts with working capital limit of `100 Lakh & above from the
Banking system is required to submit MSOD. MSOD is to be submitted on or before
15
th
of next month. Penal interest of 1% to be charged in case of accounts with fund
based working capital limits of `100 lakhs & above for the period of default.

QIS II is a Quarterly Statement showing the performance during the quarter. Time
stipulation for the submission of QIS II is within six weeks from the close of the
quarter. Cut-off limits for obtention of QIS form II.

Funded working capital limits of above `6.00crore (A & above rated)
C rated accounts, with fund based working capital limits of `1.00 crore
and above
B(CRS/CRAS)& B++(CRRM) rated accounts, with fund based working
capital limits of `2.00 crore and above

QIS III is a Half-yearly Operating and Funds-Flow statement. Time stipulation for
the submission of QIS III is within two months from the close of the half year. Cut-
off limits for obtention of QIS form III.

Funded working capital limits of `3.00 cr and above (A and above rated)
C(B+ & B under CRRM) rated accounts, where fund based working
capital limits of `1.00 crore and above
B(B+ under CRRM) rated accounts, where fund based working capital
limits of `2.00 crore and above

Penal interest @ 1% p.a for one full quarter on the working capital
outstanding will be levied for non submission of QIS II/III. However, maximum over
all penal interest chargeable in an account for any reason should not exceed 2% p.a.

Margins & Securities:

Bank Guarantees Value of Agricultural Land and/or Rural Buildings should not
exceed 30% of total collateral security requirement in case of new accounts and 50%
in case of existing accounts that too in states where there is no ban on acceptance of
agricultural land as security for non-agricultural purposes.

Loans against NSCs/KVPs 75% of the purchase value plus accrued interest of
NSCs / KVPs is eligible for bank finance. However, the loans should be extended only
where the date of maturity is less than 3 years from the date of finance except
where the facility of premature cancellation/surrender value is available.

Book Debts: The margin required for financing against book debts is 50% and in
case of MSME it is 30%. However, sanctioning authority can reduce margin to 25%
on book debts of Government departments. While arriving Drawing Power, only Book

141

Debts 90 days and below are to be taken in to consideration. With regard to MSME
advances the stipulation is 180 days & below.

Security Norms Crop Loans / Agriculture Term Loans: Hypothecation of
Crops/Assets financed is only be treated as security for loans up to `50000/- and for
loans beyond `50000/- and up to one lakh, branches to obtain co-obligation / third-
party guarantee. However, in case of loans above one lakh, 100% collateral security
in the form mortgage of land / creation of charge is required.
Third party Collateral norms: Borrowers are required to furnish the collateral
securities in the form of immovable or movable properties as per the loan policy
guidelines of the bank. In the cases where the borrowers are not having sufficient /
adequate properties, the properties of third parties who are near relatives, friends
etc. are being accepted as collateral security. However, in view of the risks involved
in accepting the collaterals from third parties, now the branches are advised to
obtain administrative clearance from the next higher sanctioning authority for all
loans except loans against Bank Deposits. Third Party means any person other than
the borrower, borrowers spouse, father, mother, son and daughter, partner of the
firm or Directors of the Company or Trustees of a Trust. While accepting third party
collateral security, a savings account has to be opened in the name of the party
depositing title deeds with due KYC compliance. An attested photo should be kept
along with RF 255. Branch Managers or authorized officer should visit independently,
unaccompanied by the borrowers or their representatives and make their own
enquiries about ownership and valuation from the neighbours/office bearers of the
residents society, if any. The first visit should be along with the borrower and a
certificate to this effect is to be kept on record along with the loan document.
(Cir.no.231 Ref 26/36 dated 13.10.2011)
Unit Inspections & Audits:

No Cash Credit Limits Periodicity
1 Below `50 lakhs Bi-monthly by branch
2 `50 lakhs & above
Once in a month by Officer & once in a quarter
by Manager / Stock Audit by Concurrent Auditor
3 `100 to `200 lakhs
Once in a month by Officer & once in a quarter
by Manager / Stock Audit by Concurrent Auditor.
Once in a year by Inspector of Branches.
4 `200 to `300 lakhs
Once in a month alternatively by Officer/Branch
Manager/Concurrent Auditor; Short Inspection
by Concurrent Auditor/IOB once in a year; Stock
& Receivable Audit once in a year.
5 Above `300 lakhs
Once in a month by ZO officials (Technical
Officer/Senior Manager-Credit) or CM/SM
heading branches.
6 Other than Cash Credit
Once in a quarter by an Officer; Once in half
year by the Manager.

Stock Audit is to be done for all Cash Credit Accounts with limits of `50 Lakh &
above by the Concurrent Auditor.

Short Inspection is applicable to Advances of `100 lakhs & above. Short Inspection
will be conducted by Concurrent Auditors/Inspectors of Branches. In case of Fresh
Advances, Short inspection is to be conducted within 3 months from the date of first
disbursement. In case of Existing Advances, the periodicity is once in a year
preferably six months after the regular inspection of the branch.

142

Stock & Receivable Audit Minimum Cash Credit Limit for conducting audit is
`2.00 Crore. Accounts for which conducting Stock & Receivable Audit is applicable:

C Rated Accounts `2 Cr. & above(with min. of 50% fund based limits)
B Rated Accounts `3 Cr. & above(with min. of 50% fund based limits)
A Rated Accounts `5 Cr. & above(with min. of 50% fund based limits)
NPA Accounts With balances of `5 Crore & above
New/Take-over
accounts < 3 years
Where Working Capital Limits enjoyed are `2 Crore &
above irrespective of Credit Rating.
To all accounts
W.C. Limits of `10 crore & above (fund based and non
fund) irrespective of rating.Cir.311 ref 26/37 dt 16.11.06

Audit is to be done by a firm of practicing Chartered / Cost Accountants once in a
year and review should be done by Zonal Office. (Cir. No.463 ref 26/83 dated
31.3.2009)

Pre-sanction Unit Inspection report is to be done preferably by Manager himself
within in one month of disbursement of loan. However, it is to be done before
sanction of Fresh / Renewal / Enhancement of the limits.

Review of Accounts:

Parameter
Periodicity
of Review
Time of review
Reviewing
Authority
Term Loans up to `5 lakh

Yearly

During III Quarter
of the financial year

Branch
Manager
Housing Loans
Education Loan
Deposit Loans
TL/DPG above `5 lakh and
below `100 lakh

Yearly
During III Quarter
of the financial year
Sanctioning
Authority
Large Borrowal A/cs of
`100 lakh & above
Half Yearly Every 6 months
Cir.no.062 Ref 26/11 dated 04.06.2011

Renewal of C rated accounts (B under CRRM) under the branch/zonal office
powers shall be considered by Zonal Manager & DGM as II level official at ZO. At HO
respective sanctioning authorities can renew the C Rated A/cs. For Enhancement
one level higher to the sanctioning authority upto GM (Credit). ED/CMD is
empowered to sanction enhancements under their delegated powers the limits. For D
rated limits renewal/review powers are with one level higher to the sanctioning
Authority.(Cir.274 ref.26/35 dt.11.11.2008).

Working Capital Term Loans for Traders & small units:
Maximum limit up to which Working Capital Term Loans can be sanctioned
to Traders and Small Units is `10 lakhs.
Permissible repayment period of Working Capital Term Loan to Traders
and Small Units is 60 equal monthly installments.
Periodicity for obtaining Stock-Statements in case of WCTL to Traders and
Small Units is once in a quarter.
Margin on Primary Security in case of WCTL to Traders and Small Units is
10% for limits up to `5 lakhs and for others it is 25%.
The units are to be inspected once in a Quarter.
Collateral Security is to be obtained minimum of 125% of the value of
Limit.

143

Credit Committees: In order to expedite sanction of credit proposals, a committee
approach is introduced for all loans over and above the branch sanctions. The
delegation of lending powers of Branch Heads will continue to exist as per the extant
guidelines. Credit Committees constituted at Zonal level and Head Office level will
consider credit proposals and all credit related matters in respect of proposals falling
under their respective delegated authority in accordance with the respective banks
Loan Policy guidelines. It is expected that this will improve the quality of decision
making also. Committees at Head Office level Credit Approval Committee headed
by CMD, Credit Committee headed by ED/CGM, Credit Committee headed by GM.
Similarly, Zonal level committees are Zonal Level Credit Committee-I headed by
Zonal Manager, Zonal Level Credit Committee-II headed by second level officials at
Zonal Offices. The committees are expected to meet once on a fixed day in a week.
Legal Audit: All new/ renewal borrowal accounts with aggregate credit limits of `25
lakh and above are covered under Legal Audit. From limits of `25 lakhs to `100 lakhs
empanelled Advocate who has not given legal opinion or Law Officer at Zonal Office.
For limits above `100 lakhs law officer at ZO has to conduct the legal audit. It covers
other aspects such as documents relating to Primary & Collateral securities. Legal
Audit is to be completed before release of loan amount. After the completion of Legal
Audit, permission from Zonal Office is required, in respect of the borrowal accounts
with aggregate credit limits of `50 lakh & above (fund based & non fund based inland
and foreign business limits) for release of sanctioned limits.

Legal Audit of Title Documents: As per RBI guidelines, the genuineness of title
deeds of all accounts with credit exposure of `500 lakhs and above, existing and new
accounts, are to be verified for every two years from the date of original sanction.
The re-verification should be entrusted to any advocate other than one who has
given the original/earlier legal opinion. The charges incurred for the above re-
verification including amount payable to advocate shall be recovered from the
concerned borrower. However, this can be entrusted to concurrent auditors for the
branches subjected to concurrent audit. As the documents to be examined during re-
verification, are original documents held by the branch for the purpose of creating
mortgage, they should be examined in the Branch premises only that too in the
presence of the Manager/Officer of the branch. In no circumstances, the documents
should be allowed to go out of the Branch premises or left unattended during
verification (Cir no.298 Ref 26/38 dated 18.10.2013 & 328 Ref 11/07 dt.5.11.13)

Loan Delivery System Borrowal accounts with fund based working capital credit
limits of `10 Crore and above from the banking system. The total disbursement for
WCDL and Cash Credit should not exceed 80% and 20% of the sanctioned limits.
However funds can be released either as Cash Credit or as Demand Loan basing on
the request of the borrower.

Trust Receipt Financing: A Trust Receipt is a bridging loan that provides a buyer
with financing to settle goods imported on sight terms. Under a Trust Receipt, the
applicant pledges the imported goods in favour of the Bank. This means that the
borrower takes possession of the imported goods, but holds them in trust for the
Bank. When the goods are sold, he has to use the proceeds of the sale to repay the
Bank. As security, the goods title will be vested with the Bank, and the borrower will
undertake to hold the documents, the goods and the sale proceeds in trust for the
Bank. Trust Receipt usually comes together with Import Letter of Credit or Import
Collection Bill Service.

Corporate Loans are sanctioned to meet margin requirement for Working Capital,
Margin for Long Term Project Finance, commitment of the Corporate or for any other
purpose related to the financial needs of the company. However, corporate loans

144

should not be extended to meet the financial commitments of sister concerns.
Maximum repayment period for a Corporate Loan is 60 Months.

Disbursement of Term Loan by way of reimbursement to the borrower: It
shall be permitted by the sanctioning authority, provided:

Such reimbursement is within 12 months from the date of purchase /
acquisition of the assets.
It should be supported by satisfactory proof of investment / source of funds
supported by Invoice/receipt/voucher followed by auditors certificate.
Such funds should have been remitted through a bank account.

External Rating Interest Rates: With a view to encourage borrowers to get
themselves externally rated and to bring more transparency in pricing process, it is
decided to introduce spreads based on External ratings of corporate exposures for
pricing purposes as below: (Cir no.165 Ref 26/21 dated 25.07.2013)

Spreads applicable to Externally Rated borrower Accounts
Rating Linked to Present Base Rate
From To
Base Rate Spread Interest Base Rate Spread Interest
AAA 10.25 Nil 10.25 10.25 0.50 10.75
AA 10.25 0.50 10.75 10.25 1.00 11.25
A 10.25 1.00 11.25 10.25 2.00 12.25
BBB 10.25 2.00 12.25 10.25 3.50 13.75
BB 10.25 3.50 13.75 10.25 4.00 14.25
B 10.25 4.00 14.25 10.25 4.75 15.00
C 10.25 4.75 15.00 10.25 5.75 16.00

Operational guidelines:
The above spreads are applicable to only those corporate accounts (existing
as well as new term loans and working capital facilities) which have a latest
external rating by accredited credit rating agencies such as CRISIL, CARE,
ICRA etc. For term loans the existing term premia of 0.25% with repayment
period of over 3 years and up to 5 years and 0.50% with repayment period of
over 5 years will continue.

The revised interest spreads as applicable to working capital limits at the time
of renewal/review shall also be applicable to term loans where both working
capital limits and term loan co-exist unless it is specially mentioned otherwise
in sanction letters.

The revised interest rates are applicable to all categories of corporate
exposures other than Rice Mills. The interest spreads communicated vide HO
Circular No.315, Ref.No.26/41, dated 31.10.2012 continue to be applicable
for rice mill borrowers.

While external rating is used for pricing, internal rating shall continue to be
done for the purpose of calculating probability of defaults.

145

Approval for internal credit rating has to be obtained from Credit Rating Cell,
IRMD, Head Office, before incorporating the same in the process note in
respect of borrowal accounts with limits of Rs.5 cr and above in terms of HO
Circular No.98, Ref.No.48/3, Dated 07.06.2012.

Penal interest on overdue limits:

First 3 months from the due date of the credit facility Penal interest of 1%
Beyond 3 months from the due date of the credit facility
till submission of renewal application with full information
Penal interest of 2%

Adhoc Limits Branch can allow adhoc limits maximum of 3 times during the
validity period of the Working Capital Limit. The maximum period for which adhoc
limit can be sanctioned is 3 months. Branch Managers (I, II & III) do not have any
powers to allow Adhoc limits for the sanctions made by higher authorities except in
case of A & above rated Micro, Small Enterprises borrowers. Up to 20% of the
Working Capital facility can be allowed as adhoc to the eligible accounts. The Adhoc
limit shall be regularized on or before due date either by adjustment or by
considering the need based regular limits where the Adhoc limit is also reckoned. The
concept of Adhoc Limit is not applicable to Non-funded limits. The details of Adhoc
limits allowed within the discretionary powers are to be reported in ADA IX along
with monthly sanctions.

Excess Drawals: The general guidelines for allowing Excess Drawals / Adhoc limits
are as under:
The account should be standard performing one and allowed to the borrowers
enjoying regular sanctioned limits.
Both adhoc and excess drawals should not be allowed simultaneously.
Branches are allowed to extend excess drawals up to 20% of regular limit or
beyond the powers of specified for the branch manager as delegated powers
the branch has to obtain prior approval from controlling office.
Excess drawals should be allowed only to meet the urgent business
requirements such as payment of wages or urgent cash purchases, etc.
The maximum period for which Excess Drawals can be sanctioned is for a
period not exceeding 15 days.
Excess Drawals shall be allowed in a Working Capital account not more than 6
times during the validity period of the working capital limit.
Branch should obtain a letter from the constituent requesting for the Excess
Drawal facility specifying the amount; purpose and the time limit.
Excess Drawals/Adhoc limits attract 2% additional interest.
No adhoc limits are allowed in case of SOD against Real Estates. ADHOC
Not permitted. However, Excess Drawls can be allowed.
Excess drawals are to be reported in ADA X along with monthly sanctions.

Temporary Overdraft (TOD) is a facility by which a constituent is permitted to
draw money from his Current Account in excess of his credit balance. TOD facility
can be allowed only six times in a year in an account. TODs can be allowed in SB
accounts with satisfactory transactions up to `1000/- per account subject to a total
amount of `10,000/-.TODs allowed at the Branch as part of specially launched
schemes like AB Super Salary, AB Gram Kranthi etc. TODs should not be allowed in
accounts of our staff members. The Current Account holder should have undoubted
reputation, integrity and satisfactory transactions in the account for a minimum
period of six months. Branch should obtain a letter from the constituent requesting
for the TOD facility specifying the amount; purpose and the period for which the
facility is required. Discretionary powers of Branch Managers for allowing TODs are
JM-I 5000, MM-II `10000, MM-III `25000, SM IV `100000 and SM V `200000. All
TODs allowed are to be reported in ADA-XI every month to ZO.

146

Channel Financing is a new approach or system supporting business by a
realignment of existing products, delivery process, procedures and organization
structures so as to provide a comprehensive solution to the working capital
requirements of an entity. It aims at extending working capital finance to authorized
suppliers / dealers, whose small businesses are connected to large companies as
suppliers/dealers in the business of the entity. Channel Finance provides credit
facility to the suppliers of the Corporate for the supplies made is called as Supplier
Finance. Similarly credit facility is provided to the dealers for the goods delivered
by the corporate called as Dealer Finance.

Supplier Finance: Bank pays amount directly to the main operative account of the
supplier as per advise of the corporate by discounting the bills with maximum of 180
days tenor and the same will be recovered from Corporate on respective due dates.
If the supplier is enjoying working capital limits with another banker, the amount
shall be credited to the account maintained with the said bank. An undertaking letter
is to be obtained from the Corporate to pay the amounts on the due dates of bills
discounted by our Bank. Alternatively, wherever feasible, Post dated cheques of the
main operative account are to be obtained from the Corporate to enable the Bank to
realize the dues on the respective due dates of the bills.

Dealer Finance: In case sanction of Bill facility to the Dealer as per referral letter of
Corporate and agreed by the dealer(s), a suitable Bill discounting limit is assessed
and post dated cheques are obtained from the dealer(s). The particulars of deliveries
of the final products to the respective dealers are provided to the Bank with
supporting documents such as invoices, bills of exchange and other documents
evidencing delivery of goods to the dealers. The payment is made by the Bank to the
credit of main operative account of the Corporate and the same will be recovered
from the dealers on the respective due dates of the bills. If the Corporate is enjoying
working capital limits with another banker, the amount shall be credited to the
account maintained with the said bank.

Type Supplier Finance / Dealer Finance
Eligibility
Criteria
Sponsoring Corporate can be a Manufacturing unit, Wholesale dealer
of goods, Distributor of Goods or Provider of services, approved by
Head Office with A and above rating under CRS/CRAS and B++
under CRRM. In case of external rating it should be minimum A2
rating (CRISIL or equilant). Corporate / Supplier in existence for
minimum 3 years with good track record.
Assessment /
Loan / Margin
Based on the quantum of supply / sales for the last 12 months and
the period of credit terms between supplier and the Corporate or
20% of total amount of transactions projected between corporate
and Supplier, whichever is less. Minimum loan `25 lakh and
maximum `500 lakh with 10% margin.
Tenor Maximum 180 days
Security
Primary DA Bills drawn by the suppliers duly accepted by the
corporate. Collateral 25% of the limit in the form of semi urban /
urban property or liquid securities.
Interest Rate
Up to 45 days Base Rate + 0.50%
> 45 & up to 90 days Base Rate + 1.75%
> 90&up to 180 days Base Rate + 2.75%
Others
The finance made would not be included for MPBF calculations
All other loan policy guidelines are applicable
Cir.no.271 Ref 26/45 dated 14.11.2011

147

Buyers credit refers to loans for payment of imports into India arranged by the
importer from a bank or financial institution outside India for maturity of less than
three years. Issue of Letter of Comfort /Letter of Undertaking/ Guarantee is
applicable for Buyers Credit.
Software Exports Export of software is undertaken in physical form (software
prepared on magnetic tapes and paper media) as well as in non-physical form (direct
transmission abroad through dedicated earth stations/satellite links). The exporter is
required to submit SOFTEX forms in triplicate to the officials of Department of
Electronics (DOE), Government of India within 30 days from the date of invoice for
the purpose of valuation. After certifying the copies, they forward the original copy
directly to the nearest office of the Exchange Control Department of Reserve Bank
the day it is received or the next day and return the duplicate to the exporter. The
triplicate will be retained by the Department of Electronics for their record. Within 21
days from the date of certification of the SOFTEX form, the exporter should submit
the duplicate copy together with a copy of each of the supporting documents to the
authorized dealer for negotiation/collection. After the documents have been
negotiated/sent for collection, authorized dealers should report the transaction to
Reserve Bank in a fortnightly statement in form ENC under the cover of appropriate
R Return. The full value of the software exported as declared on the SOFTEX form or
as certified by the officials concerned of Government of India, whichever higher
should be realized on due date of payment or within 360 days from the date of
invoice whichever is earlier.

Poultry Finance: Bank is extending term loans and cash credit for establishment /
expansion of existing poultry units. All the birds need to be insured. Of late, insurance
companies are not insuring the poultry/EMU birds especially to cover the protection
against the diseases, being the important terms of our sanction. To obviate this and to
have risk mitigation, Bank is insisting collateral of 150% in lieu of poultry birds
insurance. Where the borrowers are unable to provide collateral as above, branch
should create a Risk Mitigation Fund and the borrower need to contribute one rupee
per bird per annum and kept in a Recurring Deposit for 3 years under lien to the Bank.
On maturity, the proceeds should be kept as term deposit for 5 years and the same
has to be used for meeting the emergencies like outbreak of diseases to protect the
interest of the borrower as well as Bank. (Cir.no.288 Ref 19/37 dated 08.10.2013)

Contact Point Verification: In order to help the branches in strengthening the due
diligence process while entertaining retail credit proposals, bank has appointed
outsourcing agencies for contact point verification. These agencies undertake to verify
the authenticity of the address and the documents submitted by the prospective
borrowers. However, highly placed Government officials / institutions / organizations,
longstanding customers with above 5 years satisfactory track record, persons having
salary accounts with our bank for the last 2 years, existing borrowers enjoying credit
facilities with the bank, practicing professionals like Doctors, Chartered Accountants,
Cost Accountants, Company Secretaries; landlords of our Bank Premises etc., are
exempted Contact Point Verification Process. Nevertheless, branch managers will have
to conduct their usual due diligence while processing loan applications. (Cir no. 424
Ref 53/10 dated 30.03.2010 & Cir no 449 Ref 53/28 dated 31.03.2012)

Instant Credit of Outstation/Local Cheques: The facility of instant credit facility is
extended up to `15000/- to all individual account holders maintaining Savings Bank/
Cash Credit, including all insurance linked accounts provided the account is properly
introduced and maintained satisfactorily for a period not less than 1 year. In case of
outstation cheques, branches are to levy normal collection charges only. With regard
to local cheques, service charge at flat rate of `5/- per cheque should be levied. In the
event of dishonor of the cheque, interest at normal rate should be levied for the period
the bank is out of funds. (cir 431 Ref 34/02 dated 31.12.2003)

148

Collateral Security Norms Agriculture (cir no.31 Ref 19/10 dated 19.04.13)
Category Guideline
For loans up to and
inclusive of `50,000/-
Hypothecation of crops/assets to be financed without
insisting for any other security /guarantee
For loans above `50,000
and up to and inclusive of
`1,00,000/-
In addition to hypothecation of crop/assets, co-obligation
/ third party guarantee has to be obtained.
For limits above
`1,00,000 or aggregate
commitment per borrower
up to `1,50,000/-
No collateral security is required for aggregate limits up
to `1,50,000/- in case of existing farmers with prompt
repayment track record for the past 3 years. However,
third party guarantee besides hypothecation of crops /
assets has to be obtained.
For limits above
`1,50,000 or aggregate
commitment per borrower
up to `2,00,000
No collateral security is required for aggregate limits up
to `2,00,000/- in case of existing farmers with prompt
repayment track record for the past 5 years. However,
third party guarantee besides hypothecation of crops
/assets has to be obtained.
In case of New farmers /LEC holders : Existing guidelines will continue i.e., Loans
up to `1,00,000 on Hypothecation of crop/assets and Collateral security equivalent to
100% of the loan amount for aggregate limits above `1,00,000. In cases where the
aggregate sanctioned limit exceeds the above prescribed ceilings, Collateral Security
equivalent to 100% of the loan amount shall be obtained.
No collateral security or third party guarantee is insisted for SME loans up to Ten
lakhs and for Tiny Sector up to Twenty five lakhs based on the good track record
and financial position of the borrowing unit.

Valuation of Properties All properties mortgaged to the Bank are to be valued
before disbursement of loans. The frequency of valuation of properties by approved
engineer for fund & non funded working capital limits including Non Performing and
Suit filed accounts is 2 years. However, Branch Manager is allowed to value
Agricultural lands up to `5 lacs, Above `5 lacs should be valued by RDO and
countersigned by Manager. In case of vacant sites up to `25,000 Branch Manager is
empowered to undertake valuation. Properties of 50 crore and above, the valuation
is to be done by minimum two independent valuers (chartered engineers) and the
lower of the two valuations shall be taken into consideration. If the appreciation or
depreciation in the value of the security is more than 25% per annum, the valuer
may be advised to substantiate the reasons and branch and ZO should record the
reasons. The valuation report should bear additional details such as longitude and
latitude of the property, distress value of the property along with market value,
address of the property with photo, particulars of electricity bill payments and other
taxes paid on property as proof of ownership, nearest landmark, deviations in
construction, if any. Revaluation of properties is not required in the case of NPA
accounts where 100% provision is made. Wherever the value of the property is
more than 10 crore at the time of first valuation, it should be revalued by second
valuer. In case the difference of valuation is not more than 15%, the average value
is to be considered. Where it is more than 15%, then the third valuer shall be
appointed and the sanctioning authority shall take appropriate decision. (Cir no 189
Ref 26/23 dated 01.08.2013; 066 Ref 26/14 dated 08.06.2009 & 317 Ref 26/52
dated 14.12.2011)

Prompt repayment track record means farmer repaying the loan / installment of
loan within 3 months from the due date consistently for 3/5 years. Reschedulement
/Rephasement of loans due to natural calamity will not be treated as an irregularity
in repayment of loan. The installment of the restructured loans should have been
paid within 3 months of the due date.

149

Agriculture - Loan Products
Kisan Credit Card (KCC): The objective of the scheme is to provide adequate and
timely credit support to the farmers under single window for their short term and
long term credit requirements. The short term loans covers crop loans, post harvest
expenses, produce marketing loans and consumption loans. Investment credit
requirements for agriculture and allied activities like pump sets, sprayers, dairy
animals etc are covered under long term credit. All farmers, tenant farmers, share
croppers and SHGs and Joint Liability Groups with the above categories are eligible
to avail credit facilities under KCC. The short term component of KCC limit is in the
nature of revolving cash credit facility and the farmer allowed to draw using cheque
book, ATM/Debit Card, Mobile based transfers, Business Correspondents and Point of
Sale Terminals. The credit limits under this scheme may be fixed for first year
scale of finance plus 10% of limit towards post harvest and consumption
requirements plus 20% of limit for repairs/maintenance of farm assets, crop
insurance etc. The limit will be fixed for successive years at first year limit plus 10%
increase every year towards cost escalation. Maximum Permissible Limit will be
arrived taking into crop loan needs for the 5
th
year plus the estimated long term
loan. The validity period of the card is 5 years subject to annual review. However,
branches are advised to obtain fresh letter from the borrower for every 3 years. The
account need not come to Zero or Credit balance. The account is said to have been
repaid if the credits are equal to original principal amount, interest and other charges
during the season, within a period of one year from the date of first drawal of limit in
Kharif or Rabi. The KCC holders are eligible to avail Interest Subvention/Prompt
Repayment Incentive as per the guidelines in force. The collateral security norms are
as under:
Credit Limit Collateral requirement
Up to `100000/- No collateral
Sugar cane Tie-up
No collateral up to a limit of `3 lakh
to owner cultivators. However, co-
obligation of equal worth is required
Tobacco Tie-up
No collateral up to a limit of `10
lakh subject to `2 lakh per barn for
maximum 5 barns
For all other loans > `100000/-
Collateral equivalent to 100% of
loan amount
There should be no processing fee up to a card limit of `3 lakh. Branches are advised
to issue Rupay Kisan Card to all the KCC holders where ATMs are already been
installed. Accidental insurance coverage is available up to `1.50 lakh to the farmer
and the premium payable is 69/- per year per head. (Cir.no.209 Ref 19/29 dated
17.08.2013)
Kisan Chakra: Under the scheme, Vehicle loans are given to farmers for supporting
transport facilities. Two-wheeler loans up to `75000 and four-wheeler loans up to `5
lakh can be sanctioned under this category. Loans to the children of farmers having
2 acres of wet land or 5 acres of dry land are eligible. For Two wheeler - 85% of
onroad price of vehicle is sanctioned to small and marginal farmers where as 75% is
sanctioned to other farmers. In case of four wheeler 75% of onroad price of vehicle
is sanctioned. The loan is repayable in 5 years in monthly/bi-monthly/quarterly/half-
yearly/yearly as per option exercised by the borrower. During campaign period, the
interest rate is Base Rate + 0.50% for 4 wheeler and it is Base Rate + 1% for Two
Wheeler loans. However, loans repayable beyond 36 months attracts applicable
Transfer Premium (TP) (Cir.no.546 Ref 19/41 dated 05.03.2004 & Cir.no.25 Ref
19/07 dated 16.04.2013)

150


Gold Loans (Agriculture) - Branches are allowed to extend gold loan facility to the
farmers under two types and the salient features are furnished here below:

Particulars With Interest Subvention Without Interest
Subvention
Target group Agriculturist Agriculturist
Purpose Short term crop production
expenses
All expenses relate to
agriculture and allied
activities (poultry / dairy /
minor irrigation etc)
Maximum loan `3 lakh (including Kisan
Credit Card)
No Cap on loan
Documents needed Proof of Land Holding Declaration
Assessment of loan Based on scale of finance Declaration
Rate of Interest 7% or rate decided by RBI Base Rate + 1.75%
Appraising charges Up to 2 lakh loan - 1%; Above 2 lakh 0.50%
Repayment Demand Loan - Repayment should be fixed based on the
income generation coinciding with harvest and the
marketing time, total period not exceeding 12 months.
Term Loan - Repayment period to be fixed 3-5 years in
annual installments coinciding with the harvest and
marketing season/generation of income from the activity.
Incentive for prompt
repayment
Available Not available

Loan eligibility will be computed at the rate per gram as decided by bank (or) 75% of
market value of Gold as stated by the appraiser whichever is lower. Simple
application cum letter of pledge with provision for declaration of the applicant on the
purpose of the loan, Particulars of Land, survey number, extent of lands, nature of
crops etc may be obtained and recorded in the application. Irrespective of the
purposes, for loan amount up to `1.00 lakh documentary proof need not be insisted
as the farmers avail the facility for emergent purpose only. However, it is the
responsibility of the branches to ensure end use. For loan amount above `1.00 lakh,
proof of activity/purpose may be insisted. (Cir no 228 Ref 19/31 dated 26.08.13 & cir
no. 428 Ref 19/53 dated 25.01.14).

Kisan Sampathi (Produce Marketing loans) aims at preventing distress sale of the
farmers agricultural produce. The crops that can be financed under this scheme
include Paddy, Ground nut, Bengal gram, Turmeric, Maize, Millets, Yam, Black and
Green gram. Bank sanctions loan amount based on the 65% of average market price
or `50 lakh whichever is lower. Bank entered into an agreement with NCMSL
(National Collateral Management Service Ltd) for extending produce loans up to `10
Lakh per farmer without collateral security provided the produce is stored at Central
Ware House/State Ware House/Food Corporation of India/NCMSL approved ware
Houses and branch should obtain personal guarantee of two persons. In case where
produce stored with the cultivator, loan up to `2 lakh can be sanctioned without
collateral security, however, branch should take guarantee of two persons of
sufficient worth. For loans beyond `2 lakh branches should obtain collateral security
with value not less than 100% of bank loan component. These loans are to be repaid
within 12 months. Interest Rate for loans up to `2 lakh Base Rate and loans above
`2 lakh and up to `10 lakh Base Rate + 0.50% (Cir.no.105 Ref 19/21 dated
20.06.2013)

151

Kisan Bandhu (Finance to Tractors): Bank entered MOUs with all leading tractor
manufacturers for financing to Tractors. The borrower should have 3 acres of
wet/double cropped land or 6 acres of dry/single cropped land. No collateral security
is to be insisted for loans up to `3.5 lakh. Finance can also be extended for second
hand tractors aged up to 7 years. At present 7 companies viz., Eicher, Mahendra &
Mahendra, Bajaj Tempo, TAFE, New Holland, HMT and International Tractors, and
the dealer will offer one additional free service during the first year. Margin: For
small/Marginal farmers 15%. For others 25%. Rate of Interest Base Rate + 2 +
Term Premia. Minimum of 1000 working hrs per year on own farm/customer land
should be ensured. Under this scheme power tillers are also sanctioned to the
farmers having 1 acre of wet land or 2 acres of dry land.Minimum working hours are
600. Collateral security is not required for the loans up to `1 lakh.

Finance to Horticulture: National Horticulture Board (NHB) is providing 20% of
unit cost as subsidy subject to maximum of `25 lakhs. The activities covered under
this program are Grape, Mango, Sweet orange, Lime, Banana, Amla, Pomegranate
and other horticulture activities. The farmer is required to receive Letter of Intent
(LOI) from the NHB and avail loan from Banks within 12 months and claim subsidy.
The subsidy is to be kept as Back End subsidy. The subsidy component is 20% in
case of Medicinal plantations provided by National Aromatics Board, Hyderabad.

Rythu Mitra Groups (RMG): Optimum size is 15 farmers. Marginal, Small and
tenant farmers can become members of the group. Objective of RMG is to provide
technology transfer, market information and credit facilities to the farmers. Quantum
of eligible finance is 20 times of corpus of the group. Finance can be provided for
crop production. The maximum finance is `7.5 lakhs subject to scale of finance as
per land holdings of each member of the group and not exceeding `50000/- per
member. No collateral security up to `5 lakhs. Govt. of AP provides subsidy for term
lending taking by RMGs who undertake Dairy, Input Dealers/fertilizers and Compost
Pit/Vermi Compost activities. However, the maximum unit cost is `1 lakh and the
maximum subsidy available is `25000/-.

Joint Liability Groups (JLG): Tenant farmers with minimum 4 5 people
(members of existing RMGs or freshers) can form as group under JLG. The members
of JLB should be from the same socio economic status living in the same village and
carrying the similar activity (For example cultivation). The acreage of the members
should not be more than 2 acres in case of irrigated land and 5 acres in case of dry
land. Banks can extend maximum credit facility for crop production to each member
is `25000/- against group guarantee of the members of the group.

Kisan Vivek Finance to Agri Clinics/Agri Business Centers (ACABC):

Agri Clinics are envisaged to provide expert advice and services to farmers on
various technologies including soil health, cropping practices, plant protection, crop
insurance, post harvest technology and clinical services for animals, feed and fodder
management, prices of various crops in the market etc. which would enhance
productivity of crops/animals and ensure increased income to farmers.

Agri Business Centres are commercial units of agri ventures established by trained
agriculture professionals. Such ventures may include maintenance and custom hiring
of farm equipment, sale of inputs and other services in agriculture and allied areas,
including post harvest management and market linkages for income generation and
entrepreneurship development. The above schemes are open to Graduates / Diploma
/ Post Graduate Diploma in agriculture and allied subjects; Graduates / Post
Graduation in Biological Sciences; Degree courses recognized by UGC having more
than 60 percent of the course content in Agriculture and allied subjects;
Diploma/Post-graduate Diploma courses with more than 60 percent of course content

152

in Agriculture and allied subjects, after B.Sc. with Biological Sciences; Plus two
(Inter) Agriculture related courses with at least 55% marks. Project cost ceilings `20
lakh for individuals; `25 lakh in case of extremely successful candidate and `100 lakh
for a group project (minimum five individuals). No margin is required for loans up to
`5 lakh and 10% margin is required for loans beyond `5 lakh. No collateral is
required for loans up to `5 lakh. The repayment period will be in the range of 5 to 10
years (inclusive gestation period). The borrowers are eligible for 36% composite
subsidy which will be back-ended with 3 years lock-in period. However, it is 44% for
Women/SC/ST and candidates from NE and Hilly States. NABARD provides 100%
refinance. (Cir.no.197 Ref 19/15 dated 10.09.11)

Andhra Bank Rural Credit Card (ABRCC): A scheme to provide hassle free credit
to customers having more than 3 years banking with branches/having sizable
deposits based on the assessment of income and cash flow of households. The limit
should not exceed 20% of eligible production credit and/or 20% of annual income of
the applicant from know sources or `25000 whichever is less. It is overdraft/cash
credit limit for 3 years with no end use stipulation and every year the account is to
be brought into credit. Maximum limit is `25000. Entire credit outstanding under
ABRCC shall be treated as Indirect Finance to agriculture.

Kisan Samraksha (Rural Godowns): The objective of the scheme is creation of
scientific storage capacity with allied facilities in rural areas to meet the
requirements of the farmers for storing farm produce, processed farm produce and
agricultural inputs. This scheme is meant for construction of Godowns in Rural areas
only (not in municipal areas) with capacity ranging from 100 metric tons to 10,000
metric tons. The project can be undertaken by individuals, farmers, growers,
Partnership / proprietary firms, SHGs, NGOs, Companies, Corporations, Co-
operatives and Local Bodies. Govt. of India through Directorate of Marketing and
Inspection (DMI) and NABARD administers Capital Investment Subsidy Scheme.
Government of India provides 25% of unit cost as subsidy subject to maximum of
`2.25 crore in case of farmers & agriculture graduates and with regard to others the
eligible subsidy is 15% of unit cost subject to maximum of `1.35 crore. Subsidy of
33.33% in case of Women, SC, ST, SHG, Co-operative societies and projects located
in North Eastern states is 33.33% of unit cost with a maximum of `3.33 crore. For
Godowns up to 1000 tonnes capacity Project cost as appraised by financing Bank
or actual cost or `3500/- per MT of storage capacity whichever is lower. For Godowns
exceeding 1000 MT capacity Project cost as appraised by bank or actual cost or
`3000/- per MT of storage capacity, whichever is low. For NE region/hilly areas,
normative cost will be `4000/-per MT or as appraised by Bank/financial institution,
whichever is lower irrespective of Godown capacity. The rate of interest for units up
to 10000 MT is Base Rate + 1.25 + TP and in case of other units (> 1000 MT units),
the interest rate is Base Rate + 2.50 + TP. No collateral is required up to 200 MT
capacities. In case of above 200 MT capacities, collateral not required if Tie-Up with
FCI/SWC/CWC is there. If there is no tie-up, 100% collateral security besides
mortgage of the godown site is required if there is no tie-up. Normally, the margin
stipulated is 25% of the unit cost and 10% where tie-up with FCI/CWC/SWC is
available. The loan is repayable within 7 years with maximum gestation period of 2
years. NABARD reimbursing 1.50% interest rebate to the borrowers who repay the
loans as per schedule based on the bank certificate (Circular no.122 Ref 19/23 dated
29.06.2013)

AB Kisan Rakshak: The objective of the scheme is to provide Bank credit to the
indebted farmers to repay loans taken from non-institutional lenders i.e., private
money lenders. It covers the Existing farmer borrowers of the bank, who have been
regular in repaying loans with interest in the past, except on occasions when they
could not do so on account of factors beyond their control and non-borrower farmers
in the service area of the bank branch also. The eligible finance under this scheme

153

for the existing crop loan borrowers is 50% of Pattabhi Agri Card sanctioned limit
subject to a maximum `50,000/- (or) to the extent of debt whichever is lower. The
maximum limit allowed to new borrowers is `25000/- (or) to the extent of debt
whichever is lower. The loan amount should be released by way of Cheque/Demand
Draft/Pay Order to the creditors who lent money to the farmer against the discharge
of the financial instrument. The discharged instrument should be kept along with the
documents. The rate of interest is Base Rate + 2.50% + TP. The loan is repayable in
7 years with a gestation period of one year. The yearly installment in Term Loan
should be recovered along with Pattabhi Agri Card Loan i.e., on or before 30
th
June of
every year or marketing the produce whichever is earlier. No collateral security is
needed for the aggregate limit of `100000/- and if it exceeds, branch to obtain
collateral security with value equivalent to bank loan shall be offered.

New Schemes (Cir.no.375 Ref 19/38 dated 10.12.2012)

Purchase of Land: The scheme aims at providing term loan to small/marginal
farmers including share croppers/tenant cultivators to purchase agricultural land as
well as fallow/wasteland to develop and cultivate it with a view to increase
production/productivity. The maximum loan that can be sanctioned is `10 lakhs
subject to last 5 years average registration value available with registrar/Sub
registrar of the area (or) cost of land as per sale agreement whichever is less +
stamp duty and registration charges. Borrower has to bring 20% as margin. The
security of the loan should be mortgage of land to be purchased as well as
Hypothecation of existing and future crops. The interest rate should be Base Rate.
The loan is repayable in 7-15 years in half yearly/yearly installments including a
maximum moratorium of 24 months depending on the crops grown and income
generated.

Estate Purchase Loans: To purchase estates growing traditional plantation crops
viz. coffee, tea, rubber and cardamom, cashew, pepper, coconut and other perennial
orchard crops. In addition to the above, purchase of existing poultry units, Fish tanks
and Horticultural plantations can be considered under the scheme. The purchaser
should have yielding estates and should be in a position to rejuvenate the Estate
proposed to be purchased. The intending borrowers should have satisfactory past
dealings with the Bank. The purchaser should be experienced in the activity;
however new entrants who are financially sound and capable of bringing in margin
and service the debt can also be considered. Maximum size of the estate to be
financed should not exceed Ac.15.00. The quantum of loan shall be based on the
lowest of (i) Market value (ii) Guidance value/Circle rate fixed by the State or (iii)
purchase consideration, after retaining the necessary margin. Borrower need to bring
50% margin, however, in deserving cases it can be relaxed up to 25%. Since the
estate to be purchased shall be the primary security, collateral security of minimum
100% of loan amount to be obtained. Rate of interest is as applicable to agriculture
term loans. The loan should normally be repayable within 7 to 9 years. However,
depending on the status of the Estate and rejuvenation period required, it may be
extended up to 20 years.

Kisan All Purpose Term Loan is introduced to create a hassle free single term loan
limit to Individual farmers, Group of farmers, SHGs/JLGs engaged in agriculture and
allied activities for all term loan requirements like Farm Mechanization, Land
Development, Minor Irrigation, Water Conservation, Horticulture etc. It shall be
single transaction Term loan limit Loan repayable within 9 years. The purposes for
which the limit is granted shall not be a part of the Kisan Credit Card limit and it shall
be a separate Single transaction account. However development projects with a long
gestation period more than 3-4 years may not be considered in view of the specific
tenor of this credit product. The quantum of loan shall be subject to 5 times of
Annual income of the farmer including allied activities or 50% of the value of land

154

mortgaged whichever is lower, with a maximum of `20 Lakhs. The margin required
for Small/Marginal farmers is 15% and for other farmers is 25%. Rate of interest is
as applicable to agriculture term loans. The loan shall be repayable within 9 years.

Kisan Tatkal An instant credit for farming community to meet the emergency
requirements for Agriculture and Domestic purposes for tiding over temporary
difficulties. Individual farmers/joint borrowers (not exceeding 4 farmers) who are
existing Kisan Credit Card (KCC) holders having satisfactory track record of at least
two years are eligible for the loan. It shall be single transaction Term loan limit Loan
repayable within 3-5 years. The minimum loan is 1000 and maximum loan `50000/-
subject to ceiling at 50% of KCC limit or 25% of annual income. No additional
securities to be obtained. The loan shall be repayable in 3-5 years in half
yearly/annual installments. Rate of interest is as applicable to Kisan Credit Cards.

Financing solar Pump set Under this scheme loan will be granted for installation
of solar water pumping system. The farmers land should have adequate source of
water. In case any Public/Government source is being used, water right certificate
from the concerned authority should be produced. In case of wells they should have
sufficient recouping capacity to irrigate area proposed to be brought under irrigation.
The borrower should own an economic land holding with a minimum of 10 acres.
However, in case where the farmer is able to sell surplus water, relaxation may be
given. The loan amount shall be 75% of the cost of the equipment. These are eligible
for subsidy, which may be treated as Margin Money while disbursing the loans.
Hypothecation of equipments and mortgage of land is the security. The interest rate
shall be Base rate + 0.75 + TP. The loan should be repaid within 5 to 7 years by
annual installments.

Solar Water Heaters/Solar Home Lighting Small and marginal farmers Share
croppers/tenant farmers and agri-Entrepreneurs are eligible to avail loans to
purchase Solar Water heaters up to the cost of 75-85% of the unit. The interest rate
shall be Base rate + 0.75 + TP and repayable in 3 to 5 years by annual instalments.

National Agricultural Insurance Scheme (NAIS): It is operated by Agriculture
Insurance Company of India Limited, New Delhi. In consultation with State Level
Coordination Committee of State Government, identifies notified crops district-wise
and also premium rates. This scheme is operating on Village as unit for insurance
coverage in specified crops like paddy and mandal-wise for other crops. Coverage of
crops under crop insurance is District specific but not uniform for all districts in the
state. However, Mandal is taken as unit in case of Rabi season.

Interest Subsidy Scheme for Housing the Urban Poor (ISHUP) is introduced
by Government of India with an objective to enable the Economic Weaker Sections
(EWS) and Lower Income Group (LIG) segments in the urban areas to construct or
purchase houses by providing an interest subsidy of 5% on loan amount of
maximum `1.00 lakh. EWS and LIG are defined as households having an average
monthly income up to `5,000 and `5,001 to `10,000 respectively. The borrowers
under the scheme must have a plot of land for the construction or have identified a
purchasable house. The preference under the scheme should be given to
SC/ST/Minorities/Women/ persons with disabilities in accordance with their
population in the total population of the area as per 2001 census. The scheme will
provide a subsidized loan for 15-20 years for a maximum amount of `1 lakh for an
EWS individual for a house at least of 25 sq. mts, and `1.60 lakh for a LIG individual
for a house at least 40 sq.mts, will be admissible. However, subsidy will be given for
loan amount up to ` 1 lakh only. (Cir.no.316 Ref 28/09 dated 04.12.2010)

155

SLBC: The SLBC comprises of representatives of all Commercial Banks and Chairmen
of Regional Rural Banks operating in the state. Representatives of the state
Cooperative banks, Reserve Bank of India, NABARD shall also be invited to attend
the meetings of the committee. The level of participation is the Zonal/Regional heads
of banks stationed at the state headquarters, for expeditious decision-making. The
activities of SLBC are Take up issues raised by member banks or State
Government authorities. Liaison with the state government authorities in the
matters relating to the implementation of Lead Bank Scheme/Government sponsored
schemes; Analyze the deposits and advances of banks and review the credit
deployment position for improving it wherever, it is unsatisfactory; Consolidate all
the District Credit Plans and prepare State Credit Plan, launch and monitor the
progress of its implementation; Review the progress made under various
Government sponsored programmes of poverty alleviation through Lead Dist.
Managers; Maintains liaison with Government departments on behalf of Banks in the
State and represent problems of the member Banks to the Govt. for solution.

Lead Bank: The main object of the scheme is a planning exercise for providing
credit to develop banking in Rural and semi urban areas and extension of credit to
neglected areas for balance regional development of district as a unit. Our Bank is
having Lead Bank responsibilities in Six Districts in the country, of which four are in
Andhra Pradesh viz. Srikakulam, East Godavari, West Godavari, Guntur and the
other two districts are in Orissa (Ganjam and Gajapathi)

Service Area Approach is applicable only to implement Government sponsored
schemes. Banks are free to lend to any area under other schemes subject to
obtaining No Objection/No Due Certificate from the banks operating in the command
area. Banks should not insist for No Objection Certificate for agricultural loans up to
`50000/- to existing farmers and should obtain the self declaration of not having any
loan from other banks. Banks as per RBI guidelines should also not to charge any
such fee for giving any no objection certificate/no due certificate to farmers.

156

Retail Loans

Housing Loans
Eligibility
Individual either singly or jointly. Joint application from same
family Spouse/father/brother etc.
Purpose
Construction or Purchase of House/Flat/Plot. Purchase of open
plot is to be sanctioned in urban and metro areas only that too
approved residential lay-outs. Maximum loan can be allowed
50% cost of the plot or `25 lakh whichever lower.
Construction is to be completed within 12 months from the
date of loan.
Age of the Borrower Minimum 21 Years & Maximum age limit 65 Years.
Building age
Residual life of the asset certified by approved engineer should
be atleast 10 years over and above the repayment tenor.
Loan Amount
Salaried Maximum amount of EMI that can be permitted for
the proposed loan is to be taken as 50% of net salary. While
arriving net salary, IT deduction, VPF and any other temporary
deductions may be added back and exclude non-regular
income like bonus, arrears etc.
Non-salaried 65% of monthly average income of preceding
3 years as reflected in IT returns.
Maximum Loan
Rural - `25 Lakh, Semi Urban - `75 Lakh, Urban - `150 Lakh
and Metro - `250 Lakh
Interest Rate
i)Rated accounts*
Limit LTV 75% or Lower LTV > 75%
10 lakh to 30 lakh Base Rate Base Rate + 0.15
Above 30 lakh Base Rate + 0.25 Base Rate + 0.40
ii)Unrated accounts
& Below `10 lakh
accounts
Period Up to 25 lakh >25 to 30 lakh > 30 lakh
<= 5 Years B.R + 0.75 B.R + 1.00 B.R + 1.75
> 5-10 Years B.R + 1.00 B.R + 1.25 B.R + 2.00
> 10 Years B.R + 1.25 B.R + 1.50 B.R + 2.25
Repayment Maximum 30 Years
Gestation period
Maximum gestation period is 30 months from the date of
release of first installment or immediately after taking
possession.
Repairs/Renovation
`2 & `8 lakh for houses aged up to 5 years & above 5 years
respectively. Interest Rate Base Rate + 1%
Security Mortgage of House/Flat/Plot
Guaran/Co oblig. Co-ob/Satisfactory third party guarantee may be stipulated.
Processing Charges
0.50% of loan amount subject to maximum of `10000/-.
However, at present, Bank is not levying processing charges.
Administrative
Charges
Up to 10 Lac `100, Above 10 L& upto15 L- `150/- Above 15
Lacs `250/- Per quarter.
Pre-payment
charges
2% flat on pre-paid amount, where the repayment is fixed
beyond 36 months. However, charges may be waived, in case
the payment is from own savings / windfall gains.
* Borrower is required to get a minimum credit score of 60 out of 100. Cir.no.261
Ref 53/23 dated 27.09.2012

157

Vehicle Loans
Eligibility
Any individual having minimum gross Income of `1.0 Lac p.a for 4 W,
`60000/- p.a for 2W & `40000/- p.a for battery operated e-bikes.
Loan amount

Eligible loan amount is to be worked out based repayment capacity. For 4
wheeler the maximum permissible EMI should not be more than 60%
net salary in case of employees and 70% in case of other than salaried
class. In case of second sale, the vehicle should not be more than 3
years old and 60% of garage value or `5 lakh whichever is lower.
For 2/4 wheelers 85% of Road Price (includes invoice price,
Registration, Life Tax, Insurance & accessories) for salaried
class/SME/Corporate borrowers with credit rating B and 80% for other
borrowers. However the upper ceiling is `1.5 lakh.
Security Hypothecation of vehicle purchased
Guarantee Good third party guarantee acceptable to the Bank.
Net Pay 40% after proposed installment
Repayment
Monthly/Quarterly/Half-yearly/Annual Maximum period is 7 years for
new vehicles and 5 years for second hand vehicles.
Interest

4 W- BR+3.25%. For loans repayable beyond 3 Yrs plus TP.
2 W BR+4.25%. For loans repayable beyond 3 Yrs plus TP.
Proc. Fee
1% of loan maximum of `1000/-. However, at present, processing
charges fully waived for accounts directly mobilized by Branches, where
facilitation charges are not payable to car dealers.
Pre-payment
charges
2 % flat on pre-paid amount, where the repayment is fixed beyond 36
months. However, charges may be waived, in case the payment is from
own savings / windfall gains.
Special Campaign (Cir no. 289 Ref 53/17 dated 09.10.2013)
Interest Rate Interest Rate for car loans BR+o.50% and for Two Wheeler BR+1%
Term Premia
& Processing
fee
Waived
Facilitation
charges
Not exceeding 1% of the loan sanctioned and disbursed to be paid to car
dealers in respect of proposals which are sourced by the dealer to the
Bank.
Others
Branch Managers can continue to spend `500/- for each car loan
disbursed to entreat the borrowers with refreshments as a friendly
gesture from the Bank.

Car Loans to Corporates/Firms: Bank introduced 4 wheeler loans to corporate
clients/firms in the month of March 2012. The guidelines are as under:

Parameter
Organizations availing
credit limits with us
Organizations having
operational accounts only
Satisfactory conduct One Year Two years
Income Should be Profit making one Minimum 2 lakh profit p.a.
Exposure ceilings Within 6 times of networth Within 6 times of networth
Maximum Loan
`50 lakh subject to 3 times
of net profit
`25 lakh subject to 2 times of
net profit
Cir. No. 436 Ref 53/24 dated 24.03.2012

158


Educational Loans (Students in India)
Eligibility Secured admission through test/selection process
Age Criteria 12-30 yrs.
Course All courses including schooling
Loan Amount Need based genuine expenditure related to the course
Maximum Loan `10.00 Lac (Max.2 Loans)
Margin
Up to `4 L Above `4 Lac
Nil 5 %
Repayment
For Higher studies The maximum repayment period can be
allowed up to 10 years for loans up to `7.5 lakh and 15 years
for loans beyond `7.5 lakh.
In case of vocational courses it is 2 years for loans up to
`50000/-; 2 to 5 years for loans above `50000/- & up to one
lakh and 3 to 7 years for loans above one lakh.
Gestation period
1 Year after completion of course or 6 Months after getting
job whichever is earlier.
Security / Guarantee
Up to `4 Lac-Parents co-obligation. Above `4 & up to 7.5 Lac-
Satisfactory third party guarantees.
Above `7.5 Lac Collateral security of suitable value & Co
obligation of parents.

Rate of Interest

Up to 4 Lakh Base Rate + 2.75%
4 Lakh to 7.5 lakh Base Rate + 3.75%. However, the
interest rate will be Base Rate + 2.75% where the loan is
backed by collateral security.
Above 7.5 lakh Base Rate + 1.50%
Simple interest during course & gestation period
Exemptions Processing/Administrative/Upfront fee/Pre-payment Charges

Educational Loans (Abroad studies)
Eligibility Secured admission in overseas institution
Age Criteria 17-35 yrs
Course Graduation and above
Loan Amount Need based genuine expenditure related to the course
Maximum Loan `20 Lac
Margin
Up to `4 Lac Above `4 Lac
Nil 15%
Repayment
The maximum repayment period can be allowed up to 10
years for loans up to `7.5 lakh and 15 years for loans beyond
`7.5 lakh.
Gestation period
1 Year after completion of course or 6 Months after getting
job whichever is earlier.
Security / Guarantee
Up to `4 Lac-Parents co-obligation. Above `4 & up to 7.5 Lac-
Satisfactory third party guarantees. Above `7.5 Lac
Collateral security of suitable value & Co obligation of parents

Rate of Interest

Up to 4 Lakh Base Rate + 2.75%
4 Lakh to 7.5 lakh Base Rate + 3.75%. However, the
interest rate will be Base Rate + 2.75% where the loan is
backed by collateral security
Above 7.5 lakh Base Rate + 1.50%
Simple interest during course & gestation period
Exemptions
Processing /Administrative/ Upfront fee/ Pre-payment
Charges

159


The education loan borrowers (Inland and Abroad studies) are entitled to avail
interest concession @ 0.50% for the students who secure 90% and above marks in
10
th
or 10+2 qualifying exam for graduation courses and in case of PG courses the
student should secure 80% and above in qualifying degree exam. For female
students, a concession of 0.50% shall continue to be allowed. However, the effective
rate of interest at any point of time after all concessions should not be below the
prevailing Base Rate. (Cir no. 382 Ref 53/55 dated 11.12.2012)

Educational Loans to Indian School of Business, Hyderabad and Mohali
Students (Cir no. 417 Ref 53/39 dated 02.01.2013) Indian School of
Business (I.S.B.) is one of the premier educational institutes with which we have an
MOU for allowing educational loans to its students. Our High Tech City branch and
Mohali branches are the Nodal Branches for handling Educational Loans to students
of ISB. The concessions offered on Educational Loans to students of ISB for the
academic year 2013-14 are as follows:

Eligibility
All students admitted for the Post Graduate Programme in
Management Courses offered by ISB, Hyderabad.
Amount of Loan Need based subject to maximum of `23.00 lakhs
Margin Minimum 10%
Rate of Interest
Base Rate Floating. Presently 10.50%. No other incentives of
any sort are admissible, including female student incentive.
Co-obligation Co-obligation of earning parent / spouse
Collateral Security Collateral Security may be obtained but need not be insisted.
Holiday Period Period of study and six months after completion of course
Repayment
Recovery of Interest component only during the first two
years from commencement of repayment. However it is
optional for the borrower to remit over and above the interest
also at his/her convenience and without any prepayment
charges. Fixing EMI from the third year onwards (after
commencement of repayment) basing on the balance
outstanding and the left over tenor of the loan. The maximum
repayment period can be allowed up to 10 years for loans up
to `7.5 lakh and 15 years for loans beyond `7.5 lakh.
Liability Insurance
Liability Insurance is mandatory, but it is optional for the
student to purchase the Liability Insurance Policy from any of
the service providers.
Exclusive powers
of sanction
The Branch Managers of Hi-Tech City and Mohali Branch or
ZLCC(A) of respective zones are empowered to sanction
Education loans upto maximum of `23.00 lakhs for admissions
of 2013-14.
Role of Nodal
Branches
Hi-Tech City Br,
Hyderabad and
Mohali Br.
Nodal branches should ensure strict compliance with KYC
norms for student and parent. Nodal Branches should
maintain close liaison with the Institute to monitor the loan
account regularly and enlist their cooperation in tracking the
student for recovery of loan as well as to establish
longstanding relations. The loan accounts are usually
maintained and monitored at the nodal branch till closure.
However requests for transfer of loan account should be
considered, when any borrower, after completion of study,
prefers the loan account at a branch nearer to his place of
work/domicile.
Role of other
Branches
Should extend support and cooperation to nodal branches in
complying with KYC norms and getting the loan documents
executed. Branches can entertain any reference /proposal for

160

Educational Loan that comes from ISB student. Branches can
process such applications along with other required documents
and forward the same to the nodal branch concerned
(Hyderabad/Mohali) with their remarks / recommendations.
Branches other than the two mentioned above should not
sanction/disburse the Educational Loan for ISB students.

The loan processing and sanctioning is centralized at these
two branches for the convenience of operation, monitoring,
tracking the students and evaluation of repayment
performance in respect of these loans.

Branch Managers are advised to collect information from
Nodal Branches about ISB students who secured placements
nearer to the operational area of the branch to market our
deposit and fee based products.

Education Loans to children of Staff Members All Educational Loans to staff
children are to be sanctioned by Zonal Offices. Rate of interest is as applicable to
general public with a concession of 0.50% (for girl child additional 0.50%
concession). If the students have joined an institution with whom we are having MOU
with a lower rate of interest should be either MOU or non-MOU with concession
whichever is lower. However, the above interest rate shall not be less than Base
Rate. Wherever collateral security norms are applicable to general public depending
on the limit sanctioned, only for those loans, collateral security of suitable value shall
be obtained at the time of retirement of staff members for continuing such loans
beyond the service period. On retirement of an employee, loans outstanding in the
staff children under education loan should be reviewed and there should not be any
overdues in the account. In case of retiring employee is a pensioner, the loan should
be transferred to his pension paying branch. (Cir.no.416 Ref 26/57 dt.01.01.2013)

AB Vanitha Vahan
Eligibility
Salaried/ professional & self employed Women having min. gross Income
of `1.0 Lac pa for 4W - `60000 pa for 2W & `40000/- pa for battery
operated e-bikes. 50% of Husbands salary will be taken for computing
eligibility provided he is working and stands as Co-obligant.
Loan amount

4 Wheeler NEW Least of Road price minus margin or 3 yrs. Gross
income. USED- (Not more than 3 years old) Least of 60% of garage
value or 3yrs.gross income. Max. of `5.00 Lac. 2 Wheeler NEW- Road
price minus margin with a Max. of `60000/-
Road Price- Invoice price, Registration, Life Tax, Insurance & accessories
up to `5000 for 4 W & `1000 for 2 W. Margin: Salaried class with salary
deduction 15%; SME/Corporate with standard assets with B rating &
above 15% and other borrowers 20%
Security Hypothecation of vehicle purchased
Co obligation Father /Husband of the applicant or suitable third party guarantee.
Repayment 4 W- New-12-72 EMI 4 W- Used-60EMI - 2 W- 12-60EMI
Interest*

4 W-BR+1.50%; Term Premia (TP) for loans repayable beyond 3 Yrs. 2
W-Up to 36 months-BR+3.75%; Above 36 months- BR+4.00+0.25 (0.5%
Concession for prompt repayment as back end.)
Pre-payment
charges
2 % flat on pre-paid amount, where the repayment is fixed beyond 36
months. However, charges may be waived, incase the payment is from
own savings / windfall gains.

161


Special Campaign
Interest Rate Interest Rate for car loans BR+o.50% and for Two Wheeler BR+1%
Proc. fee Nil
Other
charges
Not exceeding 1% of the loan sanctioned/disbursed to be paid to car
dealers in respect of proposals which are sourced by the dealer.
Others
Branch Managers can continue to spend `500/- for each car loan
disbursed to entreat the borrowers with refreshments as a friendly
gesture from the Bank.

Clean Loan
Eligibility
Any individual having repayment capacity. Age not above 75 years in case
of Pensioners & 55 years in case of LIC Agents.
Loan amount

Salaried Persons: Fresh- 8 Times of gross salary or Maximum `1.00 Lac.
Renewals -10 Times or Maximum `1.50 Lac. ZO sanction 18 times
Non SalariedZO Sanction 2 Times of average annual proven income
Pensioners 8 Times of monthly Pension Maximum `2.00 Lac.
LIC Agents 2 Times of average of last 3 yrs. Annual renewal
commission for IT Assesses and 50% of average of 3Yrs. Annual renewal
Commission for Non IT Assesses. Maximum `2 Lac
Security Nil
Renewals After payment of 1/3
rd
regular installments

Guarantee/
Co obligation
Two third party guarantors acceptable to the Bank. In case of Clean loan
to Pensioners Nominee of the pensioner/family pensioner shall join as
Co-obligant / Guarantor. In case of Clean loan to LIC Agents- Spouse or
one of the family members and one LIC Agent.
Repayment Maximum 60 EMI & 36 EMI for Pensioners aged > 65 yrs. & LIC Agents
Interest
i) Salaried persons with undertaking not to shift salary accounts Base
Rate + 4% up to 36 months and Base Rate + 4% + Term Premia (TP)
for loans > 36 months.
Other than salaried segment Base Rate+7%. Term Premia (TP)
for loans repayable > 3 Yrs
Consumer Loan
Eligibility
Any individual having repayment capacity. (Non-Salaried persons-
Minimum Income `30000/- pa
Loan amount

Equal to 10 Months gross salary- 40 % on annual Income in case of
non-salaried persons or 75% of cost of articles, whichever is lower.
Security Hypothecation of goods purchased
Guarantee Good third party guarantee acceptable to the Bank.
Repayment Max.60EMI
Interest Base Rate + 7.50% + TP for loans repayable beyond 3 years
Loans against Government securities
Eligibility
Employees/ Pensioners / Professional & Self-employed holding Govt.
securities (except IVPs)
Loan amount

Equal to 75% of purchase value of security including Accrued interest /
Surrender value of LIC Policies. Securities where premature
cancellation is not available, the date of maturity should be less than 3
years from the date of finance.
Margin/ Security 25 % margin and pledge of receipts.
Guar/co-oblig Limit above `50000/- Co obligation is required
Interest Base Rate + 4% + TP Repayable in 60 months

162

AB Doctor +
Eligibility
Individuals, Partnership firms/ Ltd co. /Trusts. Key promoters
should be practicing qualified Medical practitioner and Doctors.
Minimum practicing experience should be 2 years.
Purpose
To set up clinic / diagnostic labs (x-ray/pathology/songraphic),
purchase of medical equipments, Vehicles, Ambulance, medical
software, furnishing of nursing homes, working capital
requirement for existing nursing homes.
Facility Term Loan / Overdraft or both
Loan amount Maximum 20 lakh
Margin 25% for equipments
Security
No collateral security or Third Party Guarantee. To be covered
under CGTMSE
Repayment Term Loan Maximum 84 months Gestation- 12 months
Interest Base Rate + 3.25
Processing& Upfront 0.50%
Cir.no.8 Ref 53/1 dated 05.04.2012

Rent Receivable
Eligible Borrowers
Individuals, Sole Proprietorship, Partnership Firms, Public
Limited Companies, Private Limited Companies, Trusts etc.,
owning properties including landlords of our branch premises.
Eligible Properties
Unencumbered Residential/commercial Properties at Urban /
Metro areas. In case of Semi-urban areas, premises let out to
banks may be considered.
Eligible Tenants
Reputed PSB/Multinational undertakings, Embassies/consulate
offices, Banks, National & International Airlines etc. In case of
Private Sector Organizations, the Net Worth of the organization
should be above 5 crore.
Purpose
Closure of the loan availed for development/construction of the
property. In case where the property is constructed with own
sources, limits can be considered for the expansion /
development of existing business.
Loan amount
Minimum loan ` 25 lakhs and the maximum loan is ` 5 & ` 10
crore for individual and other borrowers respectively. In case of
proposals from land lords of our bank premises, the stipulation
for minimum loan amount is relaxed to `5 lakhs. However,
limits beyond ` 10 crores falls under MC powers.
Margin
15% of rent receivable towards maintenance and 25% of
margin in collateral security of NSCs, Deposits etc.
Security
Equitable mortgage of the property of the value not less than
150% of the loan. However, in case of deficit, liquid securities
such as NSCs, Bank Deposits etc., can be accepted with 25%
margin.
Guarantee/
Co obligation
One Co-obligation / Guarantor. However, no Co-obligation /
Guarantor for our Bank premises.
Repayment
84 Months (120 months in case of leased premises of our
branches) or unexpired certain lease period whichever is less
after making adjustments for TDS, Property Tax and 15% rent
towards maintenance.
Interest Base Rate + 4.75% + TP
Pre-payment 0.50% on outstanding liability for the unexpired period
Proc & Upfront Fees 1% of the limit sanctioned plus service tax.
Cir.no.44 Ref 26/08 dated 23.05.2011

163


Mortgage Loan
Eligibility
Any individuals holding house/flat in their/spouse/Major childrens
names. Age 21-65 yrs. Above 60 yrs, jointly with spouse or major
children.
Loan amount
The maximum eligible loan amount is calculated based on the
proportion of EMI to net income. For salaried class 50% of net
salary; For non-salaried class 65% of monthly average income of
preceding 3 years as reflected by IT returns. However, the
maximum quantum of loan is restricted to `100 lakhs.
Security/Margin Mortgage of House/Flat Margin 50%
Guarantee/
Co obligation
Third party acceptable to Bank.
Repayment Maximum of 60 EMI
Interest Up to 36 months B.Rate + 5% > 36 months B.Rate+5%+TP
Processing fee 1% of the loan amount. Administrative charges as applicable
Cir.no.274 Ref 53/26 dated 04.10.2012

AB Anand Jeevan
Eligibility
Single or Jointly with spouse; Age First borrower Above 60
Years, Spouse- Above 55 Yrs.
Purpose To meet any genuine needs.
Loan amount
90% of realizable value of House/Flat i.e. 70% of Market value.
Min. `5 Lac. Maximum `100 Lac. Loan installment payable to
the borrower in Monthly, Quarterly, and Lump sum @ `198/-,
588/- & 8335/-respectively per lac for loan tenor of 15 years
(max). Lumpsum maximum `15 lac only
Margin Not Applicable.
Security
Equitable Mortgage of House/Flat, against which loan is
sanctioned. (To be registered with Sub- Registrar)
Guarat/co-obligant Borrower has to execute a Will
Repayment
Payable in Lump sum after the last surviving Borrower dies or
opt to sell the home or permanently moves out the home.
Interest BR + 1.25%
Pre-payment Allowed without any charges.
Processing& Upfront No
Cir 334 Ref 26/56 dated 28.12.11

AB Equipment Finance: Bank introduced a scheme to purchase New equipment
like JCBs, Excavators, Concrete Batch Mixing Plants, Lifts, Steel scaffolding Material
etc., to meet the needs of Service Industry including Civil Contractors/Builders. The
nature of facility is Term Loan. All the existing borrowers with 2 years satisfactory
dealings and in case of others, minimum 3 years experience in the respective field
with profit track record are eligible for the above facility. Maximum amount of loan to
be disbursed is 90% of the cost of the machinery/equipment. Interest rate for
existing borrowers is Base Rate + 2.75% and for new borrowers it is Base Rate +
3.25%. Repayment should be within 24 to 60 months. Wherever the repayment is
beyond 36 months, the loan attracts applicable Term premia. Collateral security need
not be insisted for both existing and new borrowers. However, suitable co-obligation
/ guarantee shall be obtained. Processing charges are to be collected @ 0.25% of
loan amount. Zonal Managers are authorized to sanction loans under the scheme
even for the borrowers enjoying limits under HO powers. (Cir.no.92 Ref 26/21 dated
01.07.09)

164

Financing to Traders against property: A new scheme is introduced on 1
st

January 2014 with an objective to improve the credit off take to traders by extending
timely hassle free flow of credit to the eligible applicants backed by adequate
collateral by simplifying the existing guidelines. The salient features are:

Financing to Traders against property
Eligibility
All existing traders of Individuals, proprietary concerns,
partnership firms and limited company either existing customer of
our Bank or new customers. The applicant should have minimum
of 2 years standing and profit making for the past two years.
Facility Term Loan / Secured Overdraft
Loan amount
The amount of credit facility shall be above `10 lakh and up to
`300 lakh subject fulfillment of margins and security coverage.
Method of
assessment
Not more than 25% of the assessed turnover and projected
turnover should be in line with the earlier performance and be
realistic.
In case where the credit limit applied is up to `25 lakh and the
turnover is up to `100 lakh, the applicant is required to furnish
statutory returns like sales tax, VAT etc along with declaration. In
case where the credit limit applied is above `25 lakh and turnover
is above `100 lakh, it is mandatory that the applicant should
submit audited balance sheet.
Security/Margin
Liquid security like term deposits of our bank/NSCs/LIC policies
with 10% margin. Immovable properties situated in semi-urban
and urban areas (land should be non-agriculture and building age
should not exceed 30 years) with 25% margin. Rural properties
and third party properties should not be accepted.
Guarantee/
Co obligation
The owner of the property offered as security.
Repayment
Term Loan should be repayable in 60 monthly installments without
gestation period. In case of SOD, two years from the date of
sanction provided the operations in the account reflect the
turnover.
Interest
Up to `20 lakh Base Rate + 2.50%; > `20 lakh Base Rate +
2.75% Term premia 0.25% for term loans repayable > 36 months
Processing fee
Term Loan 1% of the loan amount. SOD `300 per lakh +
service tax to be collected on yearly basis.
Stock statement Once in a six months.
Unit inspection
Below `50 lakh Once in quarter by branch
Above `50 lakh Once in two months by branch
Cir.no.396 Ref 61/02 dated 01.01.2014

Financing to Micro and Small Enterprises (MSE) against property: A new
scheme is introduced on 2
nd
January 2014 with an objective to improve the credit off
take to MSE borrowers by extending timely hassle free flow of credit to the eligible
applicants backed by adequate collateral by simplifying the existing guidelines. The
salient features are:

165


Financing to Micro and Small Enterprises against property
Eligibility
Individuals / entities engaged in manufacturing and/or service activities
eligible under MSMED Act 2006. The applicant should have minimum of 2
years standing and profit making for the past two years.
Facility Term Loan / Working Capital (Secured Overdraft)
Loan amount
The amount of credit facility shall be up to `300 lakh (both fund and non-
fund based limits) subject fulfillment of margins and security coverage.
Method of
assessment
Not more than 25% of the assessed turnover and projected turnover
should be in line with the earlier performance and be realistic.
Limit applied Turnover Requirement
Up to `10 lakh Up to `40 lakh Declaration
Above `10 lakh and
up to `25 lakh
Above`40 lakh and
up to `100 lakh
Declaration along with
Sales Tax, VAT
Above `25 lakh Above `100 lakh Audited Balance sheet
Security/Margin
For loans up to `10 lakh it is mandatory not to insist for security.
Liquid security like term deposits of our bank/NSCs/LIC policies with 10%
margin. Immovable properties situated in semi-urban and urban areas
(land should be non-agriculture and building age should not exceed 30
years) with 25% margin. Rural properties and third party properties
should not be accepted.
Guarantee/
Co obligation
The owner of the property offered as security.
Repayment
Term Loan should be repayable in 60 monthly installments without
gestation period. In case of SOD, two years from the date of sanction
provided the operations in the account reflect the turnover.
Interest
Up to `10 lakh Base Rate + 1.75%; > `10 lakh Base Rate + 2.75%
Term premia 0.25% for term loans repayable > 36 months
Processing fee
Term Loan 1% of the loan amount. SOD `300 per lakh + service tax
to be collected on yearly basis.
Stock
statement
Once in a six months.
Unit inspection Once in a Quarter
Cir.no.398 Ref 52/15 dated 02.01.2014

Liberalized Trade Finance: All existing traders (Individual, Proprietary, Partnership
and limited companies) in operational area of the branch/Trade Finance Centers
Preferably with Sales Tax Registration Certificate whether maintaining account with
the branch or not are eligible for working capital credit under Liberalized Trade
Finance scheme. Branches can sanction loans as per the eligibility of the borrower
subject to a maximum of `100 lakhs. In case of WCTL, the maximum loan is `10
lakhs only. Loans up to 50 lakhs & 100 lakhs attract a spread of 4% & 5%
respectively. Audited balance sheet need not be insisted for limits below `10 lakhs.
However, it is mandatory for the borrower whose turnover exceeds `40 lakhs per
annum. The collateral security norms for the limits up to `10 lakhs are as under:

Age of the business Collateral Security Remarks
Less than 5 years 100% However, in case where the limits
are beyond `10 lakhs, branch to
obtain 125% of limit as collateral
5 to 10 years 75%
Above 10 years NIL

Loan Amount Processing Charges (One time) Quarterly Admn. Charges
Up to 0.25 lakhs `150 `50
> 0.25 2.00 lakhs `300 `75
> 2.00 lakhs `300 per lac or part thereof `100

166

AB Priority Gold Loans A new loan product as a third variant captioned as AB
Priority Gold Loan is introduced covering various Micro / Small industries / Service
enterprises, Retail Trade, industrial / commercial purposes in addition to the existing
Agricultural and Personal needs.

Features of Product
Particulars Loans up to `1 lakh Loans > `1 lakh
Purpose Any genuine credit needs of activities falling under Micro/Small
industries or enterprises, Small Business/ Retail Trade
Tenor Maximum 12 months Maximum 6 months
Margin 25% (Loan to value should not exceed 75% of value of gold)
Rate Per Gram As applicable to agricultural gold loans
Maximum Loan `50 Lakh for advances wholly secured with Gold at the field level
for Micro and Small Enterprises- Manufacturing, Services. `15
lakh for small business and retail trade.
Purity of Gold The jewellery of purities of less than 22 ct are to be translated
into 22 ct and valued accordingly.
Rate of Interest The interest rates are same as applicable to Non-Agricultural
Gold Loans or SME whichever is lower.
Delegation of
Powers
Branch Managers JM-I `5 lakh; MM-II `10 lakh; MM-III `15
lakhs; SM-IV & above `50 lakh
a) Copy of any document which evidences existence of the unit.
b) Declaration on Turnover and purpose of the loan
c) Declaration on proper end use of loan proceeds.
d) Application for Gold Loan suitably amended. An additional clause to be
incorporated enabling bank to demand accelerated repayment/additional security in
case the market price of the gold falls down.
Cir.no.431 Ref 53/27 dated 27.01.2014

Rate Per Gram
Purity Up to 1 lakh (for tenor
up to 1 year)
> 1 lakh (for tenor up
to six months)
I. With Hall marking
22 Carat `1900/- per gram `1900/- per gram
II. Without Hall marking
III. Gold Coins
999.9purity `1950/- per gram `1950/- per gram
916 purity `1900/- per gram `1900/- per gram
Other guidelines Gold loans should not be extended for speculative purposes.
Ornaments subjected to domestic wear and tear only should be accepted. New
ornaments should not be accepted unless branch is satisfied with the trustworthiness
of the customer. Ornaments with large percentage of stones or other extraneous
material should be avoided. As a rule, ornaments like Kante, Addiga, Nagaram,
Ragidi should not be accepted. Very small ornaments also should not be accepted.
Right relinquishing letter is to be obtained from owner of the ornaments if any names
are there on the ornaments. Gold coins of our Bank with tamper proof Assay
certificate intact need not be appraised. Re-appraisal of gold pledged with limits of `5
lakh & above is to be done once in every six months. Further, all gold loans
outstanding beyond 18 months from the date of loan (including renewals) should be
re-appraised. Gold jewels pledged with the branches should be kept in transparent
and tamper proof seal packets and the cover should bear the signatures of the joint
custodians.

167


AB Professional Loan: In order to provide simple and hassle free credit facilities to
the professionals, Bank introduced a new scheme i.e. AB Professional on 30.01.2012
and the salient features of the scheme are as under:

Features of Product
Eligibility All Practicing Chartered Accountants, Architects, Engineers, Valuers,
Management/Financial Consultants, Company Secretaries, Cost
Accountants etc., are eligible under this scheme. Individuals, Firms,
Limited Liability Firms, Companies or Societies engaged in rendering
professional services should be an assessee under income tax at least
for the last two years and be a registered member with their respective
professional Association/Board/Body.
Purpose To establish/renovate the office premises, Furnishing of office
premises, purchase of Tools, Equipments & Books, Expenses relating to
travel for professional purposes, Working Capital for carrying out day
to day operations. Branches can sanction Term Loan, Overdraft or
combination of both depending on the purpose of the loan. The
maximum amount allowed under this scheme is `10 lakhs.
Assessment Term Loan 75% of the cost of asset proposed to be purchased.
Working Capital Limit 75% of the revenue expenditure of the
previous year as per Profit and Loss account. Total exposure should not
exceed 2 times of average annual income of preceding two years.
Security Hypothecation of existing movable assets and asset/s purchased out of
loan and also obtain post dated cheques for initial 18 months. The
loans are to be covered under CGTMSE compulsorily. However,
CGTMSE premium to be borne by the borrower.
Interest Rate Base Rate + 3.25. Loan attracts 0.50% processing / upfront charges.
Repayment Not exceeding 60 monthly installments with a maximum repayment
holiday of 1 year for principal & interest for term loans and one year
for working capital limits.
Cir 377 Ref 53/18 dated 30.01.2012

Term Premia (TP): For the loans falling under MSME/CPCD/CIFD/CRE, attracts TP
@ 0.25% besides Base Rate + Spread where the repayment period over 36 months
and up to 60 months and 0.50% where repayment period is beyond 60 months
(including gestation / holiday period) Cir.no.315 Ref 26/43 dated 31.10.2012.

Credit Rating for Personal Banking Schemes: In order to have better credit risk
management system, Bank introduced credit rating for Clean / Personal Loans,
Vehicle Loans, Housing Loans and Mortgage Loans. For all new loans the rating is
based on important parameters such as Age, Qualifications, Residence, Stay,
Transferability, Employment/Profession, Gross Income, Spouse employment, No. of
dependants, dealings with the bank, Net Take Home Pay, Loan recovery mechanism,
Repayment History, Margin contribution and Networth. The prospective borrower is
expected to score minimum of 40 marks out of 100 marks to entertain the credit
proposal. All existing personal banking schemes of the branches are subjected for
annual review during the month of December every year. (Cir.no.163 Ref 26/34
dated 06.08.2010)

168

Impaired Asset Study

Lending is an integral part of bank business. Borrower is expected to use the funds
for the purpose for which availed and pay interest and installments regularly.
However, default may arise due to business cycles, changed environment,
mismanagement and other external factors. Whenever a borrowal account slips to
Non-Performing Category, the account needs to be examined closely for analyzing
the systematic deficiencies if any, which has resulted in the failure of account. The
Objective of IAS will be to identify the causative factors for failure of the account and
to take appropriate corrective action for minimizing, if not eliminating systemic or
human failures. The exercise of Impaired Asset Study (IAS) would be primarily to
look into reasons for the failure of an advance account and to look into Staff
accountability aspects to know the acts of Commission and Omission of the staff that
might have contributed to such failure.

Branch Managers (other than the Branch Manager who sanctioned the loan) will
conduct IAS study for all NPA accounts of the branch with Real Account balance up to
`2 lakh. The IAS study should be initiated after 90 days from the close of the
respective quarter and completed within 6 months from the date of NPA. However,
for above `25 lakh & up to `100 lakh, the study should be completed within 120 days
and with regard to above `100 lakh loans it should be completed within 90 days. In
all the cases where accountability is ascribed shall be referred to Vigilance
Department, HO to examine vigilance angle. (Cir no. 51 Ref 26/9 dated 04.05.2012)

NPA Real Account Competent Authority
I. Sanctioned by Scale-IV & below
Upto `2 lakh Zonal Committee consisting of ZM, second
line official & vigilance official.
> `2 lakh and up to `25 lakh
II. Sanctions by AGM
> `25 lakh and up to `100 lakh GM(CMRD) at Head Office
> `100 lakh
GMs committee at HO consisting of GM
(CMRD), GM (Inspection), GM (RMD) & GM
(Oper). Minimum quorum shall be three.
Cir.no.095 Ref 26/15 dated 29.06.11

169

One Time Settlement Schemes (OTS)

Prompt recovery of loans and advances not only increases liquidity and profitability
but also keeps funds cycle moving by continuous lending for the development of the
economy. Compromise Policy is a step in this direction. The compromise should be a
negotiated settlement under which it should be ensured to recover its dues to the
maximum extent possible with a minimum sacrifice. The important aspect in
connection with settlement proposals is the concept of opportunity cost of funds.
The opportunity cost of funds in hand vis--vis that of funds, which could come in
hand at a later period should be calculated to establish a comparative advantage of
now or later. The guiding factors for a compromise settlement are:

Balance outstanding in the account (real account) as on date of NPA.
Provision held in the account.
Market value of the securities and time taken for realizing it.
Reasons for failure i.e. factors beyond borrowers control like natural
calamities.
Present status of the account and the amount that can be recoverable.

Our Bank introduced a Comprehensive Corporate Compromise Policy (CCCP)
and the salient features of the policy are furnished here under:

These guidelines are applicable to NPAs and Technically Written-off
accounts including Credit Card dues.
The account should have been classified as Substandard asset as at the end
of previous quarter for settlement. All the limits enjoyed by the borrower
either with the same branch or with different branches are also settled
simultaneously.
It also covers dues of employees/officers who cease to be in service on
account of retirement/death/resignation/dismissal/discharge/compulsory
retirement may be treated on par with general public.
Compromise settlement may be entered with willful defaulters/fraudulent
borrowers without prejudice to the criminal case against the borrower and
those cases of compromise settlement should be vetted by Management
Committee/Board of the Bank.
Bank may also entertain compromise proposal from the borrowers (in
justifiable cases) on whom SARFAESI notices are served for taking possession
of securities, provided the borrower comes forward for a compromise
proposal.
Committee approach is to be adopted while according compromise approvals.
The committee should give justifying reasons for consideration of the
compromise while referring the proposal to the competent authority for
consideration. An official who has sanctioned a particular loan, which has
become NPA shall not participate in the compromise committee meeting
where the proposal relating to that loan is under consideration for settlement.
To impart further transparency especially with regard to high value
compromise accounts, the proposals need to be vetted by Settlement
Advisory Committee constituted by three independent members viz., Retired
Judge, Retired ED/CMD of a Bank and Retired General Manager of a Bank.

Administrative clearance is required from Head Office, where the write-off
exceeds 25% of real account balance in case of Sub-standard NPA accounts.
However, this is not applicable with regard to Doubtful / Loss category
accounts.

170


Formula to rework out Shadow Account
Category Calculation
Non Suit-filed
Accounts
Real account balance + Interest at prevailing BMPLR or
contracted rate whichever is lower on simple basis from the date
of cessation of interest / NPA date whichever is earlier, until the
preceding month + any other charges.
Suit-filed
accounts not
decreed
preceding month + Suit expenses + any other charges.

Suit-filed
accounts decreed
preceding month + Law charges incurred after date of suit +
any other charges.
Note: As and when BMPLR is phased out, from the date of such phase out, notional
interest shall be calculated at prevailing Base Rate + 4%.

The Net Present Value (NPV) of the compromise amount as well as realizable value of
securities may be arrived as under:

A Fair Market value of the security
B Less Costs / Expenses for realization of securities
C Total value (A-B)
D Net Present value of I discounted at existing Base Rate+4% for 3 Years
E Total amount of compromise Payment of compromise amount due on (where
payable in installments)
F Net Present Value of the compromise amount discounted at existing Base
Rate+4% Simple for the period of payment

It should be ensured that NPV of the compromise amount discounted at existing
Base Rate + 4% simple i.e. F should generally be not less than the NPV of the
realizable value of securities i.e. D.
Mode of Payment: As far as possible, before entertaining the proposal, it should be
ensured that the borrower makes upfront payment of at least 10% of compromise
amount. Payment of compromise amount within 30 days is desirable. If not a
reasonable 90 days time may be given to the borrower for full payment in 2 to 3
installments. Depending on the case, borrower request for making payment within
12 months may be considered on the condition that 25% of compromise amount
(including upfront amount) and the balance amount along with interest @ Base Rate
+ 4% (simple) from the date communication of compromise till the date of final
payment. However, in any case the repayment period of compromise amount should
not exceed 18 months. In case of delay in payment of compromise amount, interest
is to be collected at current Base Rate + 4% + 2% spread on reducing balances from
the date of sanction communication until the closure of the account. Branches are
required to communicate in writing to the borrower the terms and conditions of the
compromise approved and the date on which the compromise gets lapsed in case of
failure of the borrower to pay the compromise amount in full. Proportionate release
of securities could be considered on case-to-case basis. Branch should obtain
commitment letter from the borrower that the sale proceeds are to be credited to the
compromise account. (Circular No.351 Ref 45/07 dated 26.11.2012).

171

OTS for Small Loans: All NPA accounts including suit filed accounts but not decreed
with real account balance of `2.00 Lakh & below and classified as Doubtful/Loss
Assets as on 31.03.2013 are eligible under the scheme. Accounts technically written-
off on or before 31.03.2010 are also eligible under the scheme. Further, the scheme
shall not cover cases of fraud and decreed accounts. It shall also not cover accounts
backed by liquid securities or salary undertaking letters. The scheme is now made non-
discretionary and non-discriminatory. Settlement amount is linked to the date of NPA
as under:

Age of NPA
Settlement amount formula
Real a/c balance of
below `1 lakh
Real a/c balance of `1 lakh
& above and up to `2 lakh
01.04.11 to 31.03.12 75% amount in default 80% amount in default
On or before 31.03.07 60% amount in default 65% amount in default
Technical w/off a/cs 45% amount in default 45% amount in default
Amount in default = Real account balance as on date of NPA + CGTMSE/ECGC
claim received and appropriated Minus recoveries after date of NPA

Cash Discount of 10% on the settlement amount is available where the borrower pays
the amount in full at a time within 10 days of receipt of OTS offer letter from the
Branch/Bank. Sanctioning authority of OTS proposal is Branch Manager and reviewing
authority is Zonal Manager. The settlement amount arrived at as above, should be
paid in one lump sum amount without interest within 30 days of sanction or in
installments within 60 days, by collecting at least 25% of the settlement amount as
down payment on case to case basis. This scheme is operative up to 31.12.2013.
(Cir.no.270 Ref 45/09 dated 01.10.2013)

OTS for MSME Loans: The important features of the modified scheme are furnished
hereunder (Cir. No. 269 Ref 45/8 dated 01.10.2013):

Sub-Standard Accounts are not eligible under the present scheme
NPA accounts, including Suit Filed accounts but not decreed, under
Micro, Small & Medium Enterprises, with real balance of above `2 lakh
and up to `10 crore as on 31.03.2012 and classified as Doubtful and
Loss Assets, are eligible under the Scheme
Accounts Technically Written Off on or before 31.03.2010 are eligible
under the Scheme
Small loans up to `2 lakh under MSME shall be considered under Small
Loans OTS scheme

The Settlement formula, based on the date of NPA, is as under:

Real account balance> `2 lakh and < `10 lakh
Date of NPA Settlement amount
01.04.11 to 31.03.12 90% of Amt. in default
On or before 31.03.07 65% of Amt. in default
Tech. Written off on or before 31.03.10 65% of Amt. in default

172


Date of NPA
Real account Balance
=> `10 lakh and < `1
crore
Real account Balance
=> `1 crore & up to
`10 crore
01.04.10 to 31.03.12 95% of Amt. in default Amt. in default
01.04.08 to 31.03.10 85% of Amt. in default 90% of Amt. in default
On or before 31.03.08 80% of Amt. in default 85% of Amt. in default
Tech. Written off on or
before 31.03.10
80% of Amt. in default 85% of Amt. in default
Amt. in default = Real account balance as on date of NPA + CGTMSE/ECGC
claim received and appropriated Minus recoveries after date of NPA

In case of loan accounts with real liability of `10 lakh and above as on the date of
NPA, the settlement formula will be as above or Net Present Value (NPV) of available
securities Primary as well as Collateral and Securities Attached by the court Before
Judgement (ABJ), whichever is higher. NPV will be calculated with 3 years realization
period at prevailing Base Rate + 4%. Cash Discount of 10% on the settlement
amount is available where the borrower pays the amount in full immediately or
within 10 days of receipt of OTS offer letter from the Branch/Bank.

Recovery Agents: All NPA accounts (including technical written-off accounts) with
Real Account outstanding of `5 lakh and above and which are more than 2 years old
will be entrusted to the Recovery Agents. However, in exceptional cases the
mandatory period of 2 years can be waived. The agency should be either Partnership
or Corporate entity with required expertise to handle NPA accounts. The agents
appointed under this scheme are required to be complied BCSBI code and Banks
Model Code of conduct for collection of dues and repossession of secured assets.
However, the agency shall not have any right to sub-delegate or appoint any sub-
agent. The engagement of agent is account specific and for a specified period only.
Bank also engaging the services of Investigation Agents for the purpose of locating the
whereabouts of borrowers/guarantors or details of assets other than charged /
mortgaged to the bank to expedite the process of recovery of suit filed accounts. (Cir.
No.343 Ref 45/09 dated 27.01.10 & Cir.no.244 Ref 45/11 dated 01.10.10)

***

173

AB Products Service Charges

Bank is levying the following service charges w.e.f. 01.10.2009 (Cir.no.369 Ref
27/39 dated 11.12.2013)

No

Category / Type
Service Charges
Non-
Individuals
Individuals
Pensioners/
Sen.Citi./Indiv.
In Rural Areas
1 Cheque Issue / Return
Cheque Book SB `2.50 per leaf (25 leaves free in a year)
Cheque Book CD `3/- per leaf (No free cheque leaves)
Cheque Stop payment Per leaf `60/-
Max.`250/-
`55/-
Max.`225/-
`50/-
Max.`200/-
Cheque Return Inward
CD cheque Up to `20000/- `100/- `75/- `50/-
SB cheque Up to `20000/- `75/- `60/- `40/-
CD cheque Above `20000/- `200/- `150/- `100/-
SB Cheque Above `20000/- `100/- `80/- `60/-
100 lakh & above `500/- for all SB and Current accounts.
Cheque Return Outward `150/-+out of pocket expenses for financial
reasons and `150/- for other reasons.
2 Balance Enquiry >12 months `115/- `110/- `100/-
3 Account closure
SB (closed within 12 months) `200/- `150/- `100/-
SB (closed after 12 months) `100/- `80/- `60/-
CD (closed within 12 months) `500/- `350/- `250/-
CD (closed after 12 months) Nil Nil Nile
No account closure charges for AB Easy accounts (No frills account)
4 Signature verification (per 173ttest) `125/- `110/- `100/-
5 No Due Certificate (Weak sec nil) `150/- `125/- `100/-
6 Passbook / Statement charges
Issue of Balance Certificate `100/- per certificate
Duplicate Passbook / Statement
with latest balance only
`15/- per Passbook/Statement
Duplicate Passbook / Statement
with previous entries only
Passbook - `75/- plus additional `50/- per bunch
of every 40 entries. For statement `25/- for each
40 entries.
7 Collection of local cheques (Other than clearing cheques)
SB Group Accounts `50/- `35/- `30/-
CD Group Accounts `100/- `80/- `60/-
8 Collection of Cheques - Others No out of pocket expenses should be levied
Up to `5000/- SB accounts `25/- - Other accounts `50/-
`5001 to 10000/- `50/- for all accounts.
`10001 to `100000/- `100/- for all accounts.
Above `100000/- Maximum of `200/-
9 Safe Custody Charges
Scrips `500/- per scrip per annum
Sealed cover `500/- per sealed cover per annum
Sealed Boxes

20x20x20 c.m. `500/- per annum
30x30x30 c.m. `600/- per annum

174


No Category / Type
Service Charges
Non-
Individuals
Individuals
Pensioners/
Sen.Citi./Indiv.
in Rural Areas
10 Inward/Outward Bills
Up to 1000/- `60/- plus out of pocket expenses
Above 1000/- up to 5000/- `80/- plus out of pocket expenses
Above 5000/- up to 10000/- `100/- plus out of pocket expenses
Above 10000/- up to 1.0 lakh `9/- per thousand plus out of pocket expenses
Above 1.0 lakh up to 10 lakh `8/- per thousand plus out of pocket expenses
Above 10 lakh `7/- per thousand plus out of pocket expenses
11 Issuance of DD/PO
Up to 5000/- `20/- `20/- `15/-
>5000/- to 10000/- `25/ `25/- `20/-
>10000/- to<1 lakh per thousand `2.50 `2.25 `1.75/-
>1lakh to<10 lakhs per thousand `2.25 `2.00 `1.50/-
>10 lakhs and above `2 `1.50 `1.25
Maximum commission `20000/- `18000/- `15000/-
Cancellation/Duplicate/Revalidation
of DD/PO
Up to & inclusive 10000/- `25 per instrument;
> 10000/- - `100/- per instrument
12 Standing instructions (SI)
Noting charges `25/-
Transfer between accounts No charges
Other standing instructions Remittance charges plus out of pocket expenses
Non execution of SI (Insufficient) `100/-
13 Folio charges CD & ODCC
accounts (Quarterly)
`80/- for every 40 entries after availing free
entries referred as below
Free entries are allowed per
quarter for the accounts where the
average credit balance in the
account is above
Balance up to `25000/- Nil
>`25000/- up to `50000/- 60
>`50000/- up to `1 lakh 100
>`1 lakh up to `2 lakhs 400
Above `2 lakhs No charges
Note: No free entries to C & IFD accounts.
14 Inoperative Accounts Service Charges (Yearly)

SB Group Accounts
`50/- per quarter in Rural areas and `100/- per
quarter at all other places.
Current Accounts `200/- per quarter
Note: No charges if stipulated minimum balance requirement is adhered.
15 Cash handling charges Cash receipts under CD and ODCC accounts
Up to one bundle No charge
> one bundle `100/- per bundle maximum of `10000/-
Note: ODCC/retired staff accounts are exempted from cash handling charges
16 Addition/Deletion of names `100/-
17 Change in Operation instructions `100/-
18 Record copy of cheque/DD/PO `100/- per item

175

Minimum Balance violation charges: The minimum balances stipulated for
deposit accounts (Current and SB group accounts) are as under:
(`)
No Category Rural SU Urban Metro
1 CD & ICD 1000 2000 3000 5000
2 SB with Cheque Book 250 250 500 500
3 SB without Cheque Book 100 250 250 500
4 ASB with Cheque Book 300 500 500 500
5 ASB without Cheque Book 150 250 250 300
6 Abhaya Gold / Abhaya Jeevan 1000
7 ASB plus- Cheque book 400 500 500 500
8 ASB plus - without cheque book 200 300 300 300
9 AB Jeevan Abhaya Plus 1000 2000 3000 5000
10 Kids Khazana 100
11 Personalised Cheque facility CD 10000
12 Personalised Cheque facility CD 2000

The mode of calculation of minimum balance is based on Quarterly Average
Balance (QAB) in the account. Non maintenance of QAB attracts the following penal
charges as per circular no.169 Ref 44/19 dated 09.09.2009.

Category Charges
Current Accounts `200/- per quarter
AB Premium Current Account `400/- per quarter
Savings Bank Accounts
`100/- quarter - Metro/Urban/SU areas
`50/- per quarter - Rural areas
AB Privilege SB Accounts `150/- per quarter

Safe Deposit Lockers: The rents on lockers have been revised as under w.e.f
01.10.2009 (Cir.no.170 Ref 44/20 dated 09.09.2009)

Locker Type Metro Urban S.Urban / Rural
A & A1 1000 900 750
B 1100 950 800
C 1150 1000 900
D 1250 1100 1000
E & H1 2000 1500 1300
F 2200 1800 1600
G 2500 2000 1800
H 5000 4000 3000
L 6000 5000 4000

Other conditions: Rentals for built-in lockers shall be 25% more than the rents
noted above. The locker operations are restricted to 10 in a quarter. Any operation
beyond 10 in a quarter attracts a charge of `50/- per transaction. A concession of
20% in rent is allowed to our existing and retired staff members.
Note: All the above service charges attract tax @ 12.36% with effective from
01.04.2012.

Purchase of Local cheques against clearing: At par for salaries cheques of
employees of Central/State government and Public Sector Units maintaining SB
accounts with our Bank. Cheques presented by Rice Millers Applicable cash credit
interest rate to the respective Rice Mill accounts. With regard to others Interest @
15.50% p.a. With regard to other cheques, the charges are 40 paise for every `100/-
besides applicable collection charges. If the cheque is returned unpaid, Base Rate +
Spread @6.50% is to be collected. (Cir.no.109 Ref 26/27 dt. 30.06.10)

176


E-Products Service charges (Cir no.412 Ref 27/45 dated 13.01.2014)
No Category Service charges
1 RTGS Outward
Transaction Time `2 to `5 lakh Above `5 lakh
9 AM to 12 Noon `25 `50
Above 12 Noon to 3.30 PM `30 `55
After 3.30 PM `30 `55
2 NEFT Outward (AB Xpress)
Up to `10000/- `2.50 per transaction
> `10000/- and up to one lakh `5 per transaction
> one lakh and up to `2 lakh `15 per transaction
Above `2 lakh `25 per transaction
3 Electronic Clearing Services (ECS)
Registration of ECS `100/-
Cheque Return charges (ECS Debits) `100/- per debit
4 Speed Clearing (Cir 293 Ref 27/28 dated 17.10.2012)
Up to & inclusive of `1.00 lakh No charge
Above `1.00 lakh Maximum of `150/-
Cheque return charges
Up to `10000/- - `50/-; Up to `10000/- to
`1.0 lakh `100/-; Above `1 lakh - `200/-;
One crore & above `500/-
5 Any Branch Banking (ABB)
Cash withdrawals by self No charges up to `50000/-
Cash deposit by self No charges
Cash deposited by third party
i) Up to `1000/- `10/-
ii) `1001/- to `50000/- `2/- per thousand
Non cash transactions
i) Up to `1.00 lakh No charges
ii) Above `1.00 lakh `50/- per transaction

6
Deposit of clearing instruments at
non-home branch drawn on non-
CBS branch / other banks
SB Accounts No charge
CD Accounts No charge up to `1.00 lakh
and `50/- per instrument for `1.00 lakh &
above.
7 Multi City Cheques (MCC) `5/- per leaf
8 ATM / Debit Card

Annual Maintenance Charges
(AMC)
`100/- per annum at the start of second
year. However, Senior Citizens,
Handicapped and Basic Saving Bank
account holders are exempted from AMC
Transactions on our ATMs No charges
Transactions on other Bank ATMs
`20/- per transaction. However, no charge
will be levied for 5 transactions in a month
for SB accounts
Re-issue of card `200/- w.e.f. 01.07.11
Re-issue of PIN mailer `50/- + Service charges
9 SMS Alerts
Push `15/- per quarter + Service tax
Pull Push Free. Pull `3/- per request*
10 Internet Banking No charges
* Service provider levy charges

177

Processing Charges: The processing charges are as follows:

I. Working Capital Limits (Fund & Non-Fund Based)
Up to `25000/- `150/-
> `25000/- & up to `2 lac `300/-
Above `2 lac
`300 per lac or part thereof with a
maximum of `30 lac.
However, Rice Mills with credit rating of A+ are exempted from processing charges
II. Loans against Shares & Securities `300/- per lac
III. Mortgage Loans 1% of the loan amount
IV. Rent Receivables Minimum `5000/- or 1% of the loan
whichever is higher.

Branches have to collect 25% of the normal processing/upfront fee in advance for
new accounts involving fund/non fund based credit limits of more than `2 lacs. If the
loan is sanctioned, this amount will be adjusted against processing charges/upfront
fee to be collected at the time of disbursement of limits. However, no charges will be
collected upfront before sanction of loan to Micro & Small Enterprises for the loans
up to `5 lakh. However, in the cases where borrowers come into our fold through
Loan Syndicate or on taking a share under consortium arrangement, processing
charges/upfront fee shall be collected on the share allocated to our Bank at the time
of documentation or at the time of disbursement of limits in line with other member
banks. (Cir no.163 Ref 26/26 dated 20.07.2012)
Upfront Fees: 1% of the term loan amount is to be collected for all categories of
borrowers and no ceiling is prescribed for collection of upfront fee on term loans.
Powers are delegated for permitting concession/waiver up to 50% of processing
charges/upfront fee to ED. Powers for permitting concession/waiver up to 100% of
processing charges/upfront fees are vested with CMD for all accounts including MC
sanctions. (Cir.no.5 Ref 26/02 dated 07.04.2010)

Commitment charges are to be levied for term loans of above `5 crores at 1% p.a.
for delay in draw down schedule beyond one month. Similarly, working capital limits
of `1 crore and above to all corporate borrowers shall be levied @ 0.50% p.a.
commitment charges (exclusive of overall ceiling of 2% penal/additional interest) on
the unavailed portion of fund based working capital limits subject to a tolerance level
of 20% i.e. the utilization of the limit shall not be less than 80% of the sanctioned
limit. However, limits sanctioned to Sick/weak units, export credit, banks, public
sector undertakings and seasonal industries are exempted from commitment
charges. (Cir. no.143 Ref 26/29 dated 25.07.2007)

Pre-closure charges are to be levied on Term Loans (repayable beyond 36
months) @ 2% flat on the pre-paid loan amount. However, Education, Housing, SHG,
Govt. sponsored scheme loans are exempted from levy of the said charges (Circular
no.5 Ref 26/3 dated 08.04.2008).

Agency Commission payable on Government transactions: Government is
paying the following charges to the banks (Cir no. 151 Ref 51/05 dated 15.07.2013).

No Type of transaction Unit Rate
1 Receipts Physical Mode Per transaction `50
2 Receipts e-mode Per transaction `12
3 Pension Payments Per transaction `65
4 Payments other than Pension Per `100 turnover `5.5 paise

178

Question Bank

1. No Frills account is also known as

a) Savings Bank Account b) Simple Recurring Deposit Account c) Basic Savings Bank
Account d) None

2. PIN stands for

a) Personal Index Number b) Permanent Index Number c) Personal Identification
Number
d) Permanent Index Number e) None

3. EEFC Account can be opened by

a) Non Resident Indian (NRI) b) NRI who returned to India permanently c) Any
Resident with local source of income d) Residents who have forex earnings e) None

4. Failure of internal systems, processes and people lead to

a) Credit Risk b) Market Risk c) Liquidity Risk d) Operational Risk e) Technology Risk

5. As per IBA Model Education Loan Scheme, the minimum & maximum age criteria
for the borrower (student) is

a) 10 & 35 years b) 18 & 35 years c) 18 & 45 years d) All majors e) None

6. As per extant guidelines, advance against book debts should not exceed . % of
working capital limits.

a) 10% b) 50% c) 25% d) 100% e) no such ceiling

7. Government pays agency commission to the banks @ . for Pension payments

a) `50 per credit b) `12 per credit c) `65 per credit d) `60 per credit e) None

8. PCFC advance generally allowed for a maximum period of

a) 360 days b) 270 days c) 180 days d) 90 days e) no such limit

9. TDS deducted by bank, is to be remitted to Income Tax authorities within..

a) 15 days from the date of deduction b) 7 days from the date of deduction c) 15
days in the succeeding month d) 10 days in the succeeding month e) 7 days in the
succeeding month

10. All the systems in Office building are inter-connected is called as

a) Wide Area Network b) Intra departmental network c) Satellite link
d) Local Area Network

11. Companies look for Commercial Paper since they need

a) Long Term Low Cost funds b) Short Term High Cost funds c) Long Term High
Cost funds d) Short Term Low Cost funds e) None

179

12. Customer of your branch aged above 65 years placed a term deposit and
requests TDS exemption as his total income including interest income falls below the
taxable income, which form he need to submit to the branch?

a) Form G b) Form H c) a or b d) No form is required e) None

13. Borrowers availing crop loans up to 3 lakh in the current year are eligible for
interest subvention at .. besides incentive of . for prompt repayment.

a) 1% & 3% b) 2% & 1% c) 3% & 1% d) 2% & 3% e) None

14. Validity period of a cheque is defined as 3 months under .Act

a) Indian Contract Act b) B R Act c) Negotiable Instruments Act d) RBI Act
e) Not defined in any Act

15. To consider housing loan, the age of building shall not be more than

a) 15 years b) 20 years c) 15 years in Rural/Semi Urban & 20 years in
Urban/Metro areas d) Residual life of the building should be at least 10 years over
and above repayment tenor e) Residual life of the building should be at least 15
years over and above repayment tenor

16. Bank is required to submit XOS statement to RBI, in respect of

a) Foreign exchange transactions b) Import transactions c) Overdue export bills
d) Overdue import bills e) FCNR accounts

17. Zero Coupon Bonds refers to

a) Bond issued at face value b) Bond issued with face value & interest c) Bond issued
at discount from its face value with interest d) Bond issued at discount from its face
value without interest e) None

18. ATMs that are owned and managed by non-banking entities are called as..

a) Onsite ATM b) Offsite ATM c) Third Party ATM d) Red label ATM e) White label
ATM

19. CDR-1 system is applicable only to accounts which are under

a) Standard b) Sub-standard c) Doubtful d) a & b e) All

20. As per recent guidelines, 40% of the total advances to micro and small
enterprises sector should go to micro (manufacturing) enterprises having investment
in plant and machinery up to .. Lakh and micro (service) enterprises having
investment in equipment up to .. Lakh.

a) `10 & `4 b) `5 & `2 c) `10 & `5 d) `2 & `5 e) `15 & `10

21. For transfer of funds through NEFT (National Electronic Fund Transfer) and
minimum and maximum amount that can be transferred are

a) `1,000 and maximum `5 lacs b) `1,000 and maximum no limit c) `5,000 and
maximum `1 lacs d) No minimum & maximum amount e) None of the above.

22. Term deposit of ONR can be accepted for a minimum period of

180


a) 1 year b) 2 years c) 6 months d) 7 days e) 3 years

23. In case of restructured loans, the payment of installments should commence
within months from the date of restructure of loan.

a) one month b) 3 months c) 6 months d) 9 months e) 12 months

24. It is mandatory for banks to obtain Joint Lending Agreement where the
aggregate credit limits availed by the borrower from multiple banks exceeds.

a) `100 crore b) `150 crore c) `300 crore d) `500 crore e) None

25. USB means

a) Urban Savings Bank account b) Ultra Small Branch c) Uniform Savings Bank
account
d) Unique Small Bank e) None

26. Whether borrower has any option to go forduring the currency of the loan?

a) Fixed Interest Rate to Floating Interest Rate b) Floating Interest Rate to Fixed
Interest Rate c) a & b d) Continue with sanctioned terms & conditions only e) None

27. Cash kept in the currency chest is owned by

a) Currency Chest Branch Bank b) Central Government c) Reserve Bank of India
d) State Bank of India e) None of the above

28. Bank cant proceed against the borrower under SARFAESI Act where

a) Security is agril land b) Liability is less than `1 lac c) Liability is less than 20%
of the principal d) Pledge of movables e) All of the above

29. State which one of the following statement not true with regard to Disclosure
norms to be made at the footnote of Balance sheet as per RBI guidelines.

a) Movement of NPAs b) Large exposure Deposit & advances c) Capital structure &
Capital adequacy d) Industry wise exposure e) Market Risk in Trading Book

30. Under Direct Benefit Transfer (Subsidy) scheme every beneficiary should have

a) Basic Savings Bank Account b) Savings Bank account with Cheque Book
c) Basic Savings Bank Deposit Account linked with Aadhaar number d) KYC complaint
Account e) None

31. A cheque is received by the branch for payment issued by one of the customers.
Meanwhile a request is received by a public prosecutor informing that the person
issued the cheque is imprisoned for criminal activity and directs the branch not to
make payment of the said cheque. What is expected by the branch?

a) Branch should not make the payment b) Branch should ask for court order
regarding imprisonment of the customer c) Branch should insist written request from
the public prosecutor d) Branch can make the payment.

181

32. With regard to lockers, which of the following guideline is not issued by the RBI?

a) Branches are to link the allotment of lockers to placement of fixed deposits
b) To ensure prompt payment of locker rent, branch are to obtain a Fixed Deposit
which would cover 3 years rent and charges for breaking open the locker
c) Branch Manager can allot the 1/3rd of vacant lockers
d) Wait list of lockers need not be maintained.

33. Within the bank's aggregate capital market exposure of of its net worth the
bank's direct investment in shares/convertible bonds/debentures, units of equity
oriented mutual funds/Venture Capital funds should not exceed ..of its net worth.

a) 40% & 15% b) 30% & 15% c) 40% & 20% d) 80% & 50% e) No ceiling

34. As per the compensation policy of the bank with regard to collection of foreign
cheques, bank shall pay compensation @ .. to the customer if the delay is beyond
45 days.

a) SB Interest b) Term Deposit Rate c) Base Rate d) SB Interest + 0.75% e) None

35. Official Language Implementation Committee meetings are to be held once in.

a) Two months b) Three months c) Six months d) Twelve months e) None

36. In terms of direction of RBI & IBA on simplified procedure for settlement of
claims preferred by the legal heirs of the deceased constituents, bank has to settle
the death claims involving amount up to Rs

a) `10000 b) `50000 c) `100000 d) `25000 e) None

37. The minimum capital required to start a new private sector bank is

a) `100 crore b) `200 crore c) `300 crore d) `400 crore e) `500 crore

38. CDR mechanism, which of the following is not correct.

a) Multiple Bank Accounts b) `10 crores & above c) Fund & Non-fund based
d) Preserving viable corporates e) Account should be NPA
39. Branches can negotiate bills drawn under LC for non-constituents, if

a) LC is restricted to our bank only, subject to the condition that the Proceeds will be
remitted to the regular banker of the beneficiary b) LC is not restricted and proceeds
will be remitted to the beneficiary c) LC bearing the clause without recourse d) None

40. X depositor approached the branch with term deposit receipt of `2 lakhs which
was due in the year 2008 and not interested for renewal of the matured deposit and
requesting for payment of interest for overdue period. How do you act?

a) No interest will be paid since the deposit is not renewed b) Term Deposit
applicable interest at the time of maturity will be paid for the overdue period
c) Interest rate at the time of maturity or at the time of renewal whichever is lower
will be paid for overdue period d) SB interest will be paid for the overdue period

41. What are the interest rates that are still regulated by RBI?

a) SB Deposits b) Commercial Loans c) DRI Loans d) b & c e) all

182

42. Which of the following scheme is launched to provide pension to the members of
unorganized sectors in India?

a) Swabhiman b) Swavalamban c) Jeevan Dhara d) Jeevan Kalyan e) Asha

43. To be eligible for classification under priority sector, the ceiling prescribed for
dealers in irrigation equipment is.

a) `10 lakhs b) `20 lakhs c) `30 lakhs d) `40 lakhs e) `100 lakhs

44. Right of Set-off refers to

a) Marking of lien in deposit account of the borrower b) Transfer of term deposit
balance, which is due for maturity in the next year to borrower account for
adjustment of overdues c) Transfer of Savings Bank balances to borrower account
for adjustment of overdues in loan account of the depositor d) b & c e) None

45. A term deposit of `500000/- in the name of individual with one year tenor is
cancelled prematurely. The penalty for premature closure is.

a) 0.50% b) 1.00% c) 1.50% d) 2.00% e) No charges

46. In case of Gold Loans by Scheduled Commercial Banks, the LTV ratio should not
be more than

a) 50% b) 60% c) 70% d) 75% e) 80%

47. The Banking Laws (Amendment) 2012 has facilitated the Public Sector Banks in
increase of voting rights from.to..

a) 10% to 26% b) 5% to 26% c) 1% to 5% d) 1% to 10% e) None

48. Maximum Project cost under USEP of SJSRY for individual borrower

a) 1 lakh b) 2 lakh c) 5 lakh d) 10 lakh e) 50000

49. A bank can prefer appeal on the award passed by Banking Ombudsman within
30 days from the date on which the bank receives

a) Passing Award b) letter of acceptance of Award by complainant c) the copy of the
Award d) None of the above

50. Current Account is treated Inoperative/Dormant where there are no transactions
in the account for the last

a) 6 months b) 12 months c) 18 months d) 24 months e) 36 months

51. Which of the following is treated as indirect finance to agriculture?
a) Purchase and distribution of inputs for the allied activities such as cattle feed,
poultry feed etc., with loan amount up to `100 lakh per borrower b) Loans for
setting up of Agriclinics and Agri business centres c) Loans for construction and
running of storage facilities d) a & b e) all

183

52. What is the standard provision on the assets other than SME, Agriculture and
Commercial loans?

a) 0.40% b) 0.25% c) 0.50% d) 1.00% e) Nil

53. A customer's cheque realized for `2 lakh is credited to his account by mistake as
`2000. Subsequently cheque presented for `20000 returned unpaid by the bank.
What is the responsibility of the banker?

a) Bank to pay damages to the customer b) Not responsible c) Customer to ensure
balance before issuing the cheque d) None of the above
54. Which of the following statement is not correct with regard to RTGS?

a) Meant for Two lakh & above remittances only b) Remittance should be through
account transfer only c) Maximum charges should not be more than `50 per
remittance d) Charges to be collected from the Beneficiary only

55. Power of Attorney was granted by a customer for a period of 12 months to X.
The customer wants to revoke it after 6 months. What are the options available to
the Branch?

a) It should be revoked only after 12 months b) Yes he can revoke at any time
c) Revoked with the consent of the power of attorney holder d) Yes he can revoke
with the consent of the Banker e) None

56. Which of the following is not Money Market Instrument?.

a) Treasury Bills b) Commercial Paper (CP) c) Certificate of Deposits (CD) d) Fixed
Deposit
e) Equity Shares

57. As per recent RBI guidelines, the Banks are advised to bring down
Bulk/Certificate of Deposits to below of total deposits during the current year.

a) 5% b) 10% c) 15% d) 20% e) 25%

58. Revised guidelines on Priority Sector have come into force based on the
recommendations of Committee.

a) Sri Y H Malegam b) Dr K S Krishna Swamy c) Dr C Rangarajan
d) Dr K C Chakraborty e) Sri M V Nair

59. The minimum deposit required to open No Frill / Basic Saving Account

a) No minimum b) `5 c) `100 d) `500 e) `1000

60. With regard to nomination to Illiterate account, which of the following statement
is correct?

a) Can extend in favour of literate only b) Nomination facility is not available
c) Consent from Nominee is required d) Witness is a must e) None

61. SARFAESI sale notice to debtor by creditor within how many days?

a) 30 Days b) 60 Days c) 45 Days d) 90 Days e) None

184

62. The company has its registered office in Mumbai and its factory is at Kolkatta.
The Company has availed credit facilities from banks branch in Hyderabad. The
equitable mortgage of company's immovable property is to be created at

a) Mumbai b) Kolkata c) Hyderabad d) Any notified place in India e) None

63. A cheque signed by the director as authorized signatory of a company is
presented for payment but at the same time branch received information about the
death of the director. Branch to

a) Pay the cheque as he signed in fiduciary capacity b) Stop payment c) Pay the
cheque on receipt of confirmation from the company d) None

64. PMEGP cost of project for loans under manufacturing and for
Business/Service sectors.

a) `15 lakhs & 10 lakhs b) `20 lakhs & 15 lakhs c) `25 lakhs & 15 lakhs
d) `25 lakhs & 10 lakhs e) None

65. Under Cheque Truncation System, the instrument deposited by the customer for
collection remain with..

a) Collecting Branch b) Service Branch of Collecting Branch c) Paying Branch
d) Service Branch of Paying Branch e) Clearing House

66. In case where the instrument is obtained by unlawful means, the holder of the
instrument will not get any title as per ..

a) Section 58 of NI Act b) Section 48 of NI Act c) Section 89 of NI Act d) Section
128 of NI Act e) None

67. Banks are required to pay DICGC fee on

a) Monthly basis b) Quarterly basis c) Half-yearly d) Yearly e) None

68. Exposure to single/group borrower up to 5% is to be provided after-

a) Borrower consent to disclose the same in notes to account in Banks annual report
b)Approval of Board c) Charging additional interest @2% d) a & b e) a, b & c

69. Composite loan limit of .. can be sanctioned by banks to enable the MSME
enterprises to avail of their working capital limit requirements through single window

a) `25 lakhs b) `50 lakhs c) `100 lakhs d) `150 lakhs e) None

70. Amount allowed to be transferred abroad by any resident without RBI permission
for purchase of fixed assets in a financial year.

a) One million US Dollors b) Two million US Dollors c) Three Million US Dollors
d) Two lakh US Dollors e) None

71. Family Income criteria (per annum) for DRI loans in Rural & Urban areas.

a) `18000/- & `24000/- b) `15000/- & `24000/- c) `18000/- & `36000/- d) `24000/-
& `36000/- e) None

185

72. What is the floor limit (Min & Max) in case of CRR?

a) 3% & 10% b) 3% & 15% c) 5% & 10% d) No limit e) None

73. Fiscal Policy refers to

a) Balance of Payments b)Govt. taxes, expenditure and borrowings c) Govt.
borrowings from Equity Market d) Sale and purchase of securities by RBI e) None

74. Subordinated debt instruments are to be limited to .. of Tier I together with
other components of Tier II should not exceeds . of Tier I capital

a) 100% & 50% b) 50% & 50% c) 50% & 100% d) No limit e) None

75. DICGC covers

a) Credit balance in cash credit account b) Overdue term deposit c) Deposits of
central / state govts. d) a & b e) a, b & c
76. Photographs / signatures can be converted into electronic form through

a) Printer b) Pen Drive c) CPU d) Scanner e) Web Camera
77. Bank stakeholders include

a) Shareholders b) Customers c) Employees d) a & b only e) all

78. Crossed cheque, presented over the counter through the authorized agent of
collecting banker for his valued customer for cash payment. Will you pay?

a) Bank can pay b) Payment cant be made since it is a crossed cheque c) Payment
can be made on cancellation of crossing duly signed by the drawer d) None

79. Proprietor of a firm executed Power of Attorney to B. Cheque signed by Power of
Attorney Holder for payment after the death of the proprietor. Will you pay?

a) Yes b) No c) Will be paid with the consent of legal heirs of the deceased d) None

80. Banks are required to submit return Unclaimed Deposit every year in the
month of . within days from the close of the reporting month.

a) March & 30 days b) December & 30 days c) December & 15 days d) March & 15
days e) None

81. Banks to maintain SLR as per

a) Section 24 of BR Act b) Section 42 of BR Act c) Section 42(1) of RBI Act d)
Section 24 of RBI Act e) None

82. Competent authority to write-off loans given to Directors is

a) Board b) Management Committee c) Chairman & Managing Director
d) Reserve Bank of India e) None

83. Under Financial Inclusion Plan of the bank, the agents appointed by the bank to
collect money and make payments to the depositors are called as

a) Branch Managers b) Business Correspondents c) Business Facilitators d) b & c
e) None

186


84. Floating Provisions can be added to Tier-II capital up to __% of RWA

a) 1% b) 1.25% c) 1.50% d) 1.75% e) None

85. What is the maximum loan amount to EWS & LIG under ISHUP scheme?

a) 1 lakh & 1.60 lakh b) 0.50 lakh & 1 lakh c) 1 lakh & 2 lakh d) No limits e) None

86. In case where counterfeit note is found at the branch, FIR is to be filed by

a) Remitter b) Cashier c) Beneficiary whose account the amount is to be credited
d) Bank Branch where no. of notes exceeds 4 in a single transaction e) None

87. Relationship between Customer & Banker in case of Safe custody of articles

a) Lessor&Lessee b) Prinicpal&Agent c) Bailor&Bailee d) Assignor&Assingee e) None
88. Which of the following is not an Operational Risk?

a) People Risk b) Technology Risk c) System Risk d) Liquidity risk e) None

89. Truncated Cheque means

a) Shared Clearing b) Cheques presented will be processed by the depositing branch
itself c) Physical movement of instruments from branch to clearing house d)
Movement of electronic image instead of physical movement of instruments e) None

90. Provision on Standard Advances to be shown under which head of Balance sheet
of the bank

a) Advances & Other Assets b) Provisions & Other Assets c) Liabilities d) Provisions
& Other Liabilities e) None

91. As per RBI guidelines, if Bill discounted became NPA, the income already booked
but not realized is to be

a) Reversed b) Need not be reversed but 50% provision is to be made c) Need not
be reversed but 100% provision is to be provided d) None

92. What is the maximum loan amount that can be given under Small Manufacturing
Units under MSME?

a) 100 lakh b) 200 lakh c) 300 lakh d) 500 lakh e) No limit

93. Banks are focusing attention on Retail Banking since it facilitates

a) Improved NIM b) Stable Business growth c) Diversified Risk d) a & b e) All

94. What is the age criterion for individuals to open New Pension System (NPS)?

a) No age limit b) 10 to 60 years c) 18 to 60 years d) above 60 years e) None

95. Innovative Perpetual Debt Instrument should not exceed . of Tier-I Capital and
the investments by FIIs should not exceed .

a) 10% & 49% b) 15% & 55% c) 15% & 49% d) 20% & 49% e) None

187

96. The settlement formula under Comprehensive Corporate Compromise Policy
(CCCP) for accounts other than suit-filed accounts is..

a) Real Account + BMPLR + 2% b) Real Account + BMPLR + 4% c) Real Account
only d) Real Account + BMPLR or contracted rate

97. Your customer approached with Fixed Deposit of other Bank with a value of `5.50
lakh (including accrued interest) and due for payment in next 24 months and
requested for a loan against the deposit. As Branch Manager how you deal with it?
a) Loan can be allowed up to 75% value of the deposit b) Loan can be allowed up
to 80% value of the deposit c) Loan can be allowed only on receipt of confirmation
from other Bank having noted the lien d) No loan can be allowed against other bank
deposits e) None
98. As per AML norms, banks are required to preserve records

a) 3 years from the date of cessation of transaction b) 5 years from the date of
cessation of transaction c) 10 years from the date of cessation of transaction d) No
time limit

99. Interest subsidy is available to all eligible Educational Loan Borrowers for a
period of..

a) First one Year b) First Two Years c) During Study Period d) Till closure of
the loan e) None

100. What is the maximum loan and repayment period is allowed for farmers to avail
loans against pledge of agricultural produce?

a) `5 lakhs & 6 months b) `25 lakhs & 12 months c) `10 lakhs & 6 months
d) No limit on amount but should be repaid within 12 months e) None

101. A customer with a bearer cheque came for withdrawing the amount of cheque
for `4000/-. The counter clerk expressed that the amount is not sufficient to pass the
cheque as the balance is short by `700/-. The bearer of the cheque deposited `700/-
and withdrawn the amount. Further account holder objected for revealing the
balance in the account. In such a situation what is his liability?

a) It is the responsibility of the customer to maintain sufficient balance in the
account while issuing cheque and hence bank is not liable b) Anybody can deposit
amount in any account and bank has no right to stop such credits c) Bank paid the
cheque amount to the bearer since the instrument is in order in all respects d) Bank
is not in order in disclosing the account balance to the bearer of the instrument and
hence liable for damages e) None

102. LC states about in case of amount, what does it indicate?

a) 5% b) 10% c) 20% d) 25% e) None

103. Unspent foreign currency should be submitted with in how many days after
returning to India?

a) Retain any amount of foreign currency b) Returned to AD within 90 days
c) Allowed to retain $5000 US Dollars d) Need to return unspent foreign currency
within 180 days, if the amount exceeds $2000 US Dollars e) None of the above

188

104. The minimum education qualification stipulated for borrower availing credit limit
of `15 lakhs under PMEGP.

a) Intermediate (10+2) b) 10
th
Standard c) 8
th
Class d) None

105. The risk involved in Business Correspondent Model is

a) Credit Risk b) Operational Risk c) Reputation Risk d) Default Risk
e) No Risk is involved

106. As per RBI guidelines, the exposure norms for Single and Group borrowers
including infrastructure projects are stipulated at & of Banks Capital Funds
respectively
a) 10% & 20% b) 15% & 40% c) 20% and 50% d) 20% & 40% e) None
107. Under Basic Indicator Approach, Banks are required to provide provision
towards operational risk

a) 10% of Gross Income b) 15% of Gross Income of the last 2 years c) 15% of
Gross Income (average of last 3 years) d) 15% of Net profit e) None

108. As per AML/KYC norms, review of accounts, customer identification of data is to
be updated once in .. years & .. years for Low and Risk and High Risk Category
accounts.

a) 2 yr & 1 yr b) Once in two years c) 5 yr & 2 yr d) 2 yr & 5 yr e) None

109. Joint account operated either or survivor, the number of nominees can be

a) Joint depositors are allowed to nominate one each b) Only one nominee is allowed
c) No nomination facility is available for Joint Accounts d) None

110. Premium payable on pre-shipment and post shipment whole turnover post
shipment packing credit.

a) 5 & 10 ps per month b) 5.50 & 6.00 ps per month c) 6.00 ps per month
d) 6.00 & 5.50 ps per month e) None

111. Short term crop loan treated as NPA if it remains unrecovered for

a) One Crop Season b) Two Crop Seasons c) One Crop Season + 90 days
d) Existing NPA norms that are applicable for Term Loans e) None

112. For appealing to DRT, the borrower need to deposit

a) 25% of suit amount b) 10% of suit amount c) 15% of suit amount
d) No deposit required e) None

113. Women granted a loan of `80 lakhs under CGTMSE, what is the amount of claim
in case of default?

a) `40 lakhs b) `52.50 lakhs c) `60 lakhs d) `64 lakhs e) None

114. Banks can extend Education loans to the students to pursue studies in India
and Abroad with a maximum amount of

a) `5 & `10 lakhs b) `10 & `20 lakhs c) There is no cap on maximum amount
d) 80% of education cost without any cap on maximum loan e) None

189


115. As per RBI guidelines, Branch to issue to SB account holders

a) Pass Book b) Account Statement c) a & b d) None

116. Post dated cheque presented in clearing paid by the bank and at the same time
another cheque presented was returned as there is no sufficient balance in the
account. Customer claimed for damages. What is the liability of the bank?
a) Bank can make payment of post dated cheque, if the instrument is otherwise in
order
b) Bank is not in order in making payment of post dated cheque c) It is the
responsibility of the depositor to mention correct date while issuing cheque and
hence banker is not liable d) Issuing cheque without adequate balance is the
responsibility of the customer and hence banker is not liable e) None

117. At present, Banks are required to maintain SLR at

a) 20% b) 23% c) 24.50% d) 25% e) None

118. The minimum CRR should be maintained on daily basis.

a) 50% of eligible CRR b) 70% of eligible CRR c) 80% of eligible CRR
d) 100% of eligible CRR e) None

119. Nominee obtains payment in the capacity of

a) Owner b) Beneficiary c) Agent d) Trustee e) None

120. Staff should present in the branch 15 minutes before commencement of
business hours, this is applicable to

a) All Branches b) Rural Branches only c) Urban & Metro Branches
d) No such stipulation e) None

121. Once the guarantor repays the loan and he attains the status of

a) Debtor b) Creditor c) Agent d) Right of subrogation e) None

122. The present rate of service tax including cess is

a) 12.36% b) 12% c) 10.30% d) 10% e) None of the above

123. Banks obtain photograph at the time of opening of the account with a view to

a) Avoid benami accounts b) Verify the identity of the customer c) Verify with police
records d) a & b e) a to c

124. Service charges levied are to be displayed by the bank in

a) Banks own Website b) RBI Website c) Branch Premises d) IBA Website e) a to c

125. The form SDF is used for exports where

a) Custom office is not computerized b) Custom office is computerized c) Software d)
Sent by Post e) None of the above

190

126. Banks to submit Wilful Defaulters list to
a) RBI with all accounts irrespective of liability b) CIBIL c) RBI where the liability is
`25 lacs & above d) Banking Division, New Delhi e) None of the above

127. Banks are required to submit CTR (Cash Transaction Report) to ------- within --
--- of succeeding month.

a) FIU, 30 days b) FIU, 15 days c) FIU, 7 days d) RBI, 7 days e) RBI, 15 days

128. Premium payable on deposit insurance on every `100 per annum is

a) 10 paise b) 5 paise c) 25 paise d) 50 paise e) None of the above

129. Floating charge is a charge created on

a) Immovable Assets b) Movable Assets c) Assignment d) Deposits e) Assets created
out of Bank finance

130. Who is not eligible to convert general crossing to special crossing?

a) Holder b) Drawer c) Payee d) a & b e) None of the above

131. Banks can create assignment on

a) Book Debts b) Stocks c) Land & building d) Deposits e) Immovable

132. Banks are required to preserve old records as per

a) BR Act b) RBI Act c) Indian Contract Act d) NI Act e) Evidence Act

133. Deposits which are exempted from Tax Deduction at Source (TDS) are

a) Fixed b) Savings c) NRE/FCNR d) Recurring e) b, c & d

134. Which statement is not correct with regard to advances against shares?

a) Maximum loan allowed is `10 lacs against physical shares b) Maximum loan
allowed is `20 lacs against demat shares c) Margin requirement is 50% for physical
shares & demat shares d) None of the above

135. Garnishee order is not applicable

a) Credit balance in SB b) Credit balance in CD c) Credit balance in Cash Credit
account d) Term Deposits in the Joint names e) None of the above

136. As per RBI guidelines, banks need to register the charge over the property with
CERSAI within . days from the date of creation of charge.

a) 15 days b) 30 days c) 60 days d) 90 days e) None

137. The method of interest booking on agriculture advances is

a) Monthly b) Quarterly c) Half-yearly d) Yearly e) None

191

138. RBI injects liquidity through

a) Increase Bank Rate b) Reduction of Repo Rate c) Reduction of Reverse Repo
d) Increase CRR e) Increase SLR
139. Provisioning norms are not applicable to loans sanctioned to

a) Agriculture b) Exports c) DRI d) Govt. Sponsored Schemes e) Against Deposits

140. As per Basel-III, the banks are required to maintain minimum capital adequacy
at ..

a) 12% b) 11.5% c) 11% d) 10% e) 9%

141. Fixed Deposit is maturing on Sunday. It shall be deemed to be payable on

a) Monday b) Immediate succeeding working day c) Preceding Day i.e. Saturday
d) a & b e) None of the above

142. What is the maximum amount that can be allowed to Software Development
under priority sector?

a) `10 lacs b) `20 lacs c) `100 lacs d) Not eligible to cover under priority

143. Exporter avail pre-shipment credit at the request of the issuing bank on the
basis of

a) Green Clause Credit LC b) Revocable LC c) Red Clause LC d) Back to Back LC

144. A person appointed by the court to look after the properties of the insolvent
person is called

a) Administrator b) Liquidator c) Assignee d) Attorney e) None of the above

145. Claytons rule applies to

a) Deposit Accounts b) Demand Loans c) Term Loans d) Overdrafts / Cash credits
e) None of the above

146. Percentage of DRI advances should go to Rural/Semi Urban Branches.

a) 50% b) 25% c) 66.66% d) 75% e) None of the above

147. What is the maximum amount Branch can extend instant credit to the
customers against outstation cheques?
a) `15000 at all Branches b) `25000 in Urban/Metro Branches c) `10000 at all
Branches d) Discretion of the Branch Manager e) None

148. Which of the following statements are not correct with regard to MSME?

a) Investments in Plant & Machinery is to be taken as criteria for Manufacturing
Enterprises b) Investment in Equipment is to be taken as criteria for Service
Enterprises c) No collateral security or third party guarantee is required for loans up
to `5 lakhs d) No collateral security or third party guarantee is required for loans up
to `25 lakhs in case of Tiny Sector e) None of the above

192

149. UCPD guidelines are issued by

a) FEDAI b) RBI c) Ministry of Finance d) IBA e) ICC Paris
150. Your customer requested to include his wife and daughter as nominees after
one year of opening of the account. Will it be accepted?

a) It can be accepted since the nominees are the family members of the depositor b)
Cannot be considered since the request is not received at the time of opening of
account c) Can be considered with 50% share each d) Nomination should be made
only in favour of single name. Hence cant be considered e) None of the above

151. What is the relationship between the Bank and Overdraft Customer where the
account is showing credit balance?

a) Creditor & Debtor b) Principle & Agent c) Trustee & Beneficiary
d) Debtor & Creditor e) None of the above

152. What is the maximum period for which FCNR deposit can be opened?

a) One Year b) Two Years c) Three Years d) Five Years e) Ten Years

153. Which of the following cant be a nominee?

a) Illiterate Person b) Minor c) NRI d) HUF e) None of the above
154. In case of dishonour of cheques on financial grounds, the holder is required to
issue notice to the drawer within days to claim remedy under section 138 of NI Act

a) 7 Days b) 30 Days c) One Year d) Three Years e) None of the above

155. Bank has right to cancel the allotment of locker, if the customer does not
operate or surrender within . despite notice sent to the locker holder.

a) Three Years b) Five Years c) Ten Years d) Banks discretion e) None

156. Borrowers who are having satisfactory dealings with bank for a minimum period
of . Years are allowed to avail LUCC facility.

a) 5 Years b) 3 Years c) 2 Years d) 1 Year e) None of the above

157. National Payment Corporation of India (NCPI) has setup payment network to
enable the member banks to issue Domestic Payment Cards with a brand

a) Visa Card b) Master Card c) Prepaid Card d) Rupay e) Travel Card

158. Permanent Account Number (PAN) is mandatory for

a) Bank transactions (cash) of `50000/- & above b) Purchase and sale of shares /
debentures / bonds of `50000/- & above c) Purchase and sale of immovable
property where the value of the property is `5 lakh & above d) a & c e) All

159. High Debt Service Coverage Ratio (DSCR) indicates

a) Unable to meet the installment obligations b) Able to meet payment of
installments comfortably c) Liquidity problem d) a & c e) None of the above

193

160. X Company approached the Bank for sanction of working capital limit of `800
lakhs and the Current Ratio of the company is 1.15:1. What is the course available to
the branch?

a) Proposal can be considered as the current ratio is acceptable b) Proposal can be
declined since current ratio is below 1.33:1 c) Advise the company to increase capital
to bring the current ratio to 1.33:1 d) Proposal is to be referred to next Higher
Authority for sanction e) None of the above.

161. Which of the following statement is not true with regard to Capital Gains
Deposit Scheme?

a) Income Tax Assesses who are eligible for exemption under section 54 of the IT
Act are alone can open account with Banks b) Accounts can be opened under
Savings, Fixed and Term Deposits c) Cheque book can be issued to eligible accounts.
d) No lien or deposit loan is allowed against such deposits e) None of the above

162. Which of the following statement is not correct with regard to Tax Saver
Scheme of Banks?

a) Tax exemption is available for the deposit amount under section 80C of IT Act b)
Period of deposit is allowed up to 5 Years c) TDS is applicable, if interest payment is
above `10000/- in a financial year d) Maximum amount of deposit allowed is `5 lakhs
e) c & d

163. A fall in Quick Ratio in comparison with Current Ratio indicates

a) High Inventory Holdings b) Low Inventory Holdings c) Decrease in Current
Liabilities d) None of the above

164. Financial statements includes

a) Balance Sheet b) P & L c) Cash & Funds Flow d) a & b e) a, b & c

165. Banks are permitted to take over borrowal accounts from other Banks &
Financial institutions provided

a) Account should be Standard Asset with positive net worth b) Copy of the borrowal
account for preceding 12 months is to be obtained c) P&C report is to be obtained
from other bank before disbursement d) Branch to take approval from next
sanctioning authority e) All above

166. The guidelines on extending Adhoc Limits to the borrowers are

a) Allowed in fund and non-fund based limits b) Can be allowed maximum of 3 times
during the validity of limit and the maximum period allowed is 3 months for each
adhoc limit c) Adhoc Limit can be allowed up to 20% of the sanctioned working
capital limits to all eligible borrowers d) a & b e) b, c & d

167. Which of the following statement is not true with regard to Temporary
Overdrafts?

a) Can be allowed in Savings Bank Account b) Can be allowed in Current Deposit
Account c) Can be allowed only 3 times in a account in a year d) Should not be
allowed in staff accounts e) None of the above

194

168. The eligible criteria for sanction of Tractor Loan to farmer is

a) 3 Acres of Wet / Double cropped land b) 6 Acres of Dry / Single cropped land c)
Minimum of 2000 working hours per year on borrower land d) a & b e) b & c

169. The applicable net interest rate on loans sanctioned under Surya Shakthi
Scheme is..

a) 2% for individuals b) 4% for institutions c) BMPLR for industrial & commercial
organizations d) a & b e) None of the above

170. With regard to lending to farm sector, the guidelines on obtention of No Due /
No Objection certificate are

a) Banks should not insist for the above certificate for loans up to `50000/- b) No
charges are to be levied for issuance of certificate c) Self declaration from the farmer
is to be obtained d) All above e) None of the above

171. Unsecured exposure is one where realizable value of tangible security is not
more than . of the outstanding exposure.

a) 5% b) 10% c) 25% d) 40% e) None

172. RBI extending incentives to Banks for the following services

a) Adjudication of Mutilated Bank Notes b) Exchange of Soiled Notes c) Distribution
of Coins over the counter d) Establishment of Coin vending Machines e) All above

173. As per RBI guidelines, the banks can levy charges to the Current accounts for
not maintenance of minimum balances provided.

a) Charges should not exceed `100 in a year b) Charges should not exceed `500 in a
year c) Bank has discretion to levy any amount of charges d) No charges should be
levied as Bank is not paying any interest to the customer on Current Account deposit
e) Banks are allowed to levy reasonable charges but should be known to the
customers through proper communication

174. Scheme of payment of ex-gratia in lieu of appointment of dependents on
compassionate grounds for officers (Public Sector Banks) is

a) Minimum `5 lakh b) Maximum `8 lakh c) Maximum `7 lakh d) Maximum `6 lakh

175. Statements which is not true with regard to Locker operations?

a) The rent for A type locker is `1000/- p.a. at all branches b) Rentals for in-built
lockers shall be 25% more than the approved rents c) Levy additional charge of
`50/- per transaction where the operations are beyond 10 in a quarter d) Staff
/Retired staff hiring the lockers eligible for 20% concession in rent e) None

176. Under the liberalized norms, a NRI can remit abroad money from his NRO
account, up to
a) One Million US Dollar Per Year b) US Dollar of Two Million Per Year c) US Dollar of
5000 per year without any declaration or certificate d) US Dollar of One Million per
year on the basis of undertaking and certificate e) None of these

195

177. Branch sanctioned OCC limit of `10 lakhs against hypothecation of stocks worth
`15 lakhs with 30% margin. What would be the notional drawing power when the
present value of stocks is `20 lakhs?

a) `10 lakhs b) `14 lakhs c) `20 lakhs d) `10.50 lakhs e) None

178. Which of the following documents do not attract stamp duty?

a) Promissory Note b) Mandate c) Power of Attorney d) Form-A e) None

179. The funds available under short term sources is greater than short term uses,
which indicates

a) Low Current Ratio b) High Debt Equity Ratio c) Higher Current Ratio d)
Low Debt Equity Ratio e) None

180. What would be the applicable interest rate payable to the legal heirs of the
deceased on overdue period of matured Term deposit, if not renewed?

a) SB Interest Rate b) Contracted Interest rate of matured deposit c) Simple
interest applicable to FD for the period the deposit remained with bank after maturity
d) Applicable FD interest will be paid if renewed for further period e) No interest

181. Stamped receipt is to be obtained for all cash transactions of above

a) `100/- b) `500/- c) `1000/- d) `2000/- e) `5000/-

182. The net of Exports & Imports and the services including foreign inward
remittances forms part of

a) Balance of Payments b) Capital Account c) Current Account d) Trade Surplus
e) Invisibles

183. Banks are empowered to take possession of securities (other than rural
properties) under provisions ofAct, when the borrower fails to repay the loan
as per the agreement.

a) Indian Contract Act b) Revenue Recovery Act c) DRT Act d) SARFAESI Act e)
Banking Regulation Act

184. What is the net interest rate (Interest Rate minus Interest Subvention)
applicable for short term agriculture production loans (Crop Loans) up to `3 lacs?

a) Base Rate b) Base Rate 1% c) 10% d) 8% e) 7%

185. Base Rate of the Banks will be fixed by

a) Indian Banks Association b) Reserve Bank of India c) Planning Department of
the Bank d) Asset Liability Committee (ALCO) e) Discretion of the Bank

186. While renewing the credit limits of the company, you find that the Debt Equity
Ratio is 3 compared to that of 2.5 in the previous year. It indicates

a) Increase of Profit enabled the Company to add to Reserves b) Decrease of Debt
Burden on the Company c) Adverse Impact on Profit on account of increased
interest burden d) None of the above

196

187. Banking Codes and Standards Board of India (BCSBI) deals with

a) Inspection & Audit of Banks b) Funds & Investments in Banks c) Sanctioning of
Loans d) Customer Service e) Banking Ombudsman

188. Banks can issue draft against accepting cash up to

a) `50000/- b) `20000/- c) `100000/- d) `49999/- e) Any amount

189. How long the counterfeit notes can be kept with the bank after having reported
to police.

a) 30 days b) 1 Year c) 2 Years d) 3 Years e) None

190. RBI advised banks that a Business Correspondent Agent has to be made
available within a radial distance of and a branch within a radial distance of ..

a) 2 KM & 5 KM b) 5 KM & 2 KM c) 3 KM & 5 KM d) 5 KM & 10 KM e) No limit

191. What is the insurance coverage available to the borrowers for natural death and
death due to accident under SGSY scheme?

a) `6000 & `12000 b) `5000 & `10000 c) `6000/- only d) `10000/- e) None

192. Having furnished PAN, NRO Term deposit attracts TDS on interest income at

a) 10% b) 20% c) 30% d) 10.30% e) 30.90%

193. Which of the following component is not required to be taken in to consideration
while arriving Base Rate?

a) Cost of deposits/funds b) Negative carry cost of CRR/SLR c) Unallocated
overheads d) Average return on Networth e) Base Rate of Peer Banks

194. Branches should keep the PMEGP backend received in and should be
adjusted to the loan account only after completion of months.

a) Fixed Deposit & 36 months b) Savings Deposit & 36 months c) Savings Deposit
& 24 months d) Fixed Deposit & 24 months e) None

195. Garnishee order is by _____ and the customer and bank relation_____to it.

a) Income Tax Authorities & Debtor and Creditor b) Police & Debtor and Creditor
c) Court & Judgment Debtor and Judgment Creditor d) Court & Judgment Creditor
and Judgment Debtor e) None

196. Which agency is enabling the transfer of subsides directly to beneficiary
accounts through Aadhaar Enabled Payment Bridge (AEPB)?

a) RBI b) SEBI c) IDRBT d) NPCI e) SBI

197. Call Money Market interest are linked to

a) Bank Rate b) Repo Rate c) Reverse Repo Rate d) Market forces e) None

197

198. Interest rate charged by the banks to exporters should not fall below. after
taking applicable interest subvention.

a) Base Rate b) Base Rate 1% c) Base Rate 2% c) 7% d) 10% e) None

199. Firm X and Y are having accounts with Bank and the both the firms are
represented by A, B and C as partners. Firm X showing a debit balance of 2.20 lakh
and there is a credit balance of 3 lakh in Firm Y. Bank adjusted the debit balance of
X account with available balance in Y account.

a) Branch can exercise right of set-off b) Right of set-off cant be exercised as the
accounts are different c) Right of set-off can be exercised by issuing a notice d)
None

200. Transaction Password relates to

a) Core Banking b) ATM operations c) Internet Banking d) Tele banking e) None

201. Nomination in respect of the following is to be witnessed by two persons.

a) All deposit accounts b) Deposit accounts where the nominee is a minor
c) Physically challenged accounts d) Thumb impression accounts (illiterate)
e) None

202. Actionable Claims deals with
a) Debt b) Receivables c) Subsidy or Duty Draw Back d) a & b e) all
203. When the contents of the Negotiable Instrument are modified by the drawer, it
is treated as

a) Forgery b) Fraud c) Material alteration d) suppression of facts e) None
204. Loans to repairs to dwelling units up to . Lakh is treated as priority sector.

a) 1 lakh for Rural/Semi urban & 2 lakh for Urban/Metro centres b) 2 lakh for
Rural/Semi urban & 5 lakh for Urban/Metro centres Housing Loans c) 2 lakh at all
places d) Not more than 10% cost of the dwelling unit e) None

205. Housing Loan of `80 lakh where the LTV is below 75%, it attracts Risk weight @

a) 75% b) 100% c) 125% d) 150% e) 175%

206. A cheque was issued for `8000/- leaving blank space both at figures and words
column, and the bearer of cheque made it `80000/- and withdrew amount. Customer
made a claim for `72000/- against the bank.

a) Bank to reimburse the amount since the cheque was issued for `8000/-only
b) Customer is liable since he is negligent having left blank space at figures and
words column c) Bank and Customer equally responsible d) Bank to file case against
the bearer for making alternations of cheque e) None

207. The least discussed aspect by a financial analyst while appraising proposal

a) Ratio Analysis b) Economic conditions c) Technical aspects d) Managerial
aspects e) Marketing aspects

198

208. Which of the following is part of Tier-I capital?

a) Cumulative Perpetual Preferential Shares (CPPS) b) Subordinate Debt c) a & b
d) Perpetual Non-cumulative Preferential Shares (PNCPS) e) Revaluation Reserves

209. Exercise of nomination by the depositor

a) Optional to the depositor b) Mandatory in case of single named accounts
c) Mandatory in case of joint accounts d) Mandatory for locker accounts e) None

210. Which of the following is exempted from NPA provisioning?

a) Loans against Deposits b) Loans guaranteed by State Govt. c) Loans guaranteed
by Central Govt. d) Loans against NSCs e) Loans against Govt. Securities

211. In case of deceased borrower, what is the extent of liability of the legal heirs?

a) Limited to the extent of property inherited b) Not liable at all c) Unlimited and
unconditional d) 50% of liability e) None

212. X introduced for opening the account of Y. What is the responsibility of X in
case of fraud committed by Y?

a) To be reimbursed fully b) No responsibility c) 50% of loss d) Assist the bank
in identifying the account holder e) None

213. Under Whistle Blower the information can be directly submitted to
a) Board b) Audit Committee of the Board c) Management Committee
d) Central vigilance Commission e) Reserve Bank of India
214. The maximum loan can be sanctioned under DRI (including Housing)

a) `12500/- b) `25000/- c) `15000/- d) `20000/- for SC/ST e) c & d

215. Preservation time for applications of closed accounts

a) 3 years b) 5 years c) 10 years d) Permanent e) None

216. Foreign tourist who visits India can hold US dollars (currency) maximum of

a) $1000 b) $2000 c) $3000 d) $5000 e) None

217. Why Banks prefer to reverse the contra entry immediately on expiry of Bank
Guarantees?

a) To avert claim from beneficiary b) To avert maintenance of CRAR c) To avert
provisioning d) To improve profit e) None

218. Prepayment charges are exempted for

a) Housing Loans b) Education Loans c) Agr. Loans d) Corporate Loans e) a, b & c

219. IFSC code consists of .. digits.

a) 9 b) 10 c) 11 d) 15 e) None

199

220. Loans sanctioned to, are exempted from exposure ceilings.

a) Priority Sector b) Export c) State/Central Government d) Real Estate e) None

221. Right of General Lien can be exercised on

a) Securities outstanding in the name of the borrower b) Existing and Future
liabilities c) Future liabilities only d) a & b e) None

222. Delay in collection of cheque > 90 days, bank to pay Interest at applicable

a) SB Interest b) Term Deposit Interest c) Term Deposit Interest + 2%
d) BMPLR e) No interest

223. Payment of FD beyond `20000/- in cash is violation of IT rules and attracts

a) Penalty & Imprisonment b) Penalty Double the amount c) Penalty
Not more than deposit amount d) No penalty

224. On receipt of possession notice (SARFASEI) issued by the Bank, if the borrower
raises objection, the same should be replied within


225. Can a Private Limited company join as a partner in a partnership firm?

a) Yes b) No c) Yes with limited liability d) None

226. What is the limitation period for public to approach Consumer forum for
redressal of their grievances against Bank?

a) No limitation period b) One year from cause of action c) Two years from
cause of action d) Ten Years from cause of action e) None

227. When PMEGP subsidy can be adjusted to loan account?

a) At the request of the borrower before closure of the account b) After 3 years
provided if there are no recoveries in the account c) Discretion of the Bank
d) A & B e) None

228. Account opened in the name of A&B jointly and nomination is given in favour of
C . Branch received request from the nominee for payment of deposit as A expired.
What is the course of action?

a) 50% of deposit can be paid to the nominee b) Nominee has no right since other
joint depositor is alive c) Amount will be paid to nominee with the consent of legal
heirs of A d) Nomination facility is not available to Joint accounts e) None

229. Cheque signed by the drawer as R N Das instead full signature and paid in
due course. Drawer demands for return the amount as signature differs.

a) Bank is liable to pay the amount to the customer since the payment made is not
in due course as signature on the cheque differs from specimen signature on record.
b) Bank is not liable on the ground that the amount was paid to the customer and
the contention of the customer is not tenable since it is not a forgery. C) Bank to
share 50% of the amount since there is negligence on the part of the official passed
the cheque. d) None of the above

200


230. What is the discount for inclusion of Subordinate Debt under Tier-II capital
where the Sub-ordinate Debt maturity is less than18 months?

a) 50% b) 60% c) 70% d) 80% e) None

231. One Bank account per family is mandatory to avail

a) Credit facility from bank b) Direct Benefit Transfer benefit (subsidy) c) Interest
subvention Housing Loan d) None
232. To avert fraudulent encashment of cheques presented for collection, branches
are required to

a) Present in clearing immediately b) Introduce Drop Box c) Affix the Special
Crossing Stamp immediately on receipt of instrument d) None

233. Loans for Commercial Real Estate include.

a) Plantations b) Housing c) Special Economic Zones
d) Construction of Malls e) Hotels & Restaurants

234. What is the time limit to furnish the requested information under Right to
Information Act (RTI) and what is the penalty for non-compliance of the said norm?

a) 30 days & `100 per day b) 60 days & `100 per day c) 30 days & `250 per day
maximum of `25000/- d) 60 days & `250 per day e) None

235. Received request from your borrower for a loan of `300 lakhs for purchase of
equipment @ 12% interest repayable in 60 months. The estimated Net Profit and
depreciation is `100 and `20 lakhs respectively. What is the DSCR?

a) 1.20 b) 1.30 c) 1.50 d) 1.62 e) 1.75

236. The recent changes in issuance of Commercial Paper (CP) are

a) Dilution of credit rating norms for the Issuers b) Allowing the Issuers to buyback
CPs before maturity c) Relaxation in minimum amount d) a & b e) All

237. The primary business of Asset Reconstruction Companies is to

a) Buy stressed assets from banks b) Buy stressed assets from banks and sell it to
others for profit c) Buy the stressed assets from banks at discount and share the
recoveries with the banks d) Act as Recovery Agent for the Banks e) None

238. Loans to food and agro-based processing units with investments in plant and
machinery up to ------ is treated as priority sector advance.

a) 1 crore b) 5 crore c) 10 crore d) 50 crore e) None

239. The documents to be insisted from a NRI for opening an account is

a) Copies of Passport and VISA b) Local and Overseas addresses c) Compliance of
KYC norms d) Latest Passport size photographs e) All of the above

201

240. After taking possession of the immovable property, copy of the possession
notice is to be published in two local newspaper not later than ----- days


241. Interest Subsidy on Housing Loans (1%) for the first year is available provided
the loan amount does not exceed ------ and the cost of house should be within ------

a) 10 lakhs & 15 lakhs b) 10 lakhs & 20 lakhs c) 15 lakhs & 25 lakhs
d) 10 lakhs & No cap e) None

242. Commission on receipts (physical) relating to Govt. Business

a) 25 per transaction b) 30 per transaction c) 50 per transaction
d) 60 per transaction e) 0.50% of the transaction or 45 whichever is higher

243. Minimum and Maximum period of Certificate of Deposits

a) 15 days&1 year b) 30 days&1 year c) 7 days&1 year d) 7 days & no limit e) None
244. Customer not kept Cheque book under lock and key and one cheque leaf was
stolen. Bank made payment of the said cheque which was forged.

a) Customer is liable since he is negligent b) Bank is not liable as the cheque was
stolen c) Bank is liable since the payment is made on forged signature d) None

245. Loans not exempted from Base Rate Purview?

a) Consortium Advance b) Deposit Loans c) Export Credit
d) Loans to staff members e) None

246. Under UCP 600, bank can accept/reject documents within maximum of --- days.

a) 5 Banking days b) 7 days c) 10 days d) 15 days e) None

247. Margin on loan against FCNR (B) --- if the maturity period is less than one year
and ---- the maturity period is more than one year

a) 15% & 25% b) 10% & 20% c) 5% & 10% d) 25% irrespective of tenor of
the deposit e) Discretion of the Bank

248. Visually challenged persons are allowed to avail the following banking facilities?

a) Cheque Book b) Debit Card c) ATM Card d) Locker e) All

249. Customer Service Standing Committee Meeting does not cover

a) Customer Grievances b) Staff matters c) Credit d) New Products e) B,C & D

250. In case of payment of Fake DD, who has to lodge complaint with police, when it
is identified as fake upon presentation as per recent IBA guidelines?

a) Issuing Bank b) Collecting Bank c) Purchaser of the Draft d) Beneficiary
e) Paying Bank

202

251. When Current Liabilities are more than Current Assets .

a) Interest burden is less b) Company can meet its obligations c) Company may not
meet its obligations d) Increased Networth e) None

252. Why A/c Payee cheques are to be credited the payees account only.

a) To get protection under section 131 of NI Act b) To comply KYC guidelines
c) To comply RBI guidelines d) To avert fraudulent conversions e) C & D

253. Cap on Rate of Interest on FCNR deposits

a) LIBOR+1.25% b) LIBOR+1% c) LIBOR+2% d) LIBOR 0.50% e) LIBOR 0.75%

254. In case of Paripasu what charge the subsequent creditor enjoys?

a) Equal charge b) First charge c) No charge d) Second charge e) None

255. Current Assets 48 lakh, Networking Capital 12 lakh. What is the Current Ratio?

a) 1.20 b) 1.10 c) 1.33 d) 1.45 e) None

256. Mr Sandeep left India on 1
st
August 2003 for taking up employment in a
software company in USA. In this context, which of the following statement is true?

a) He would be treated as NRI from 1
st
August 2003 onwards b) However, till that
date, he would be treated as a Resident c) His existing account will continue as a
resident account d) All the above e) (a) and (b) are correct

257. X & Y opened SB account operated by Either or Survivor and exercised
nomination in favor of Z. Who is empowered to modify or cancel the nomination?

a) X b) Y c) Z d) Jointly with the consent of Z e) None

258. What is the Annual Guarantee Fee (CGTMSE) payable for accounts with credit
limits of above `5 lakh to women for the units located in North Eastern region?

a) 0.75% b) 0.85% c) 1.25% d) 1.50% e) 1.00%

259. Break Even Point means

a) Sales equal to Fixed Costs b) Sale proceeds matches to Variable Costs
c) The sale proceeds will take care of fixed as well as variable costs
d) Sales equal to Fixed costs + Variable costs + Minimum profit e) None

260. Housing Loan up to is treated as Priority Sector.

a) `10 lakh b) `15 lakh c) `25 lakh in Metro with population above 10 lakh &
`15 lakh in other centres d) `25 lakh at all places e) None

261. Nominee can exercise his right

a) During the tenure of deposit b) On maturity of deposit c) Any time since he
will be treated as joint depositor d) He has no right on deposit since it is in the
name of the depositor e) On the death of the depositor

203

262. As RBI guidelines, bank notes (500 & 1000 denomination) issued prior to 2005
are

a) accepted for monetary transactions up to 31
st
March 2014 b) exchanged at bank
branches on an ongoing basis c) not accepted for exchange after 31
st
March 2014
d) a & b e) None

263. Provision to be maintained on substandard assets which are fully secured.

a) 15% b) 20% c) 30% d) 5% e) 10%

264. Loans to Bank staff backed by terminal benefits attracts Risk Weights @

a) 0% b) 5% c) 10% d) 20% e) 50%

265. Balances under Cash Reserve Ratio (CRR) earn interest @....

a) 3% p.a. b) Applicable SB Interest Rate c) 5% p.a. d) No interest e) None

266. Under Rajiv Gandhi Equity Savings Scheme, the investor is entitled to claim tax
relief under section 80 CCG of IT Act up to of investments with maximum of ..

a) 100% & one lakh b) 20% & One lakh c) 50% & `50000/- d) 50% & One lakh
e) 50% of investments without any cap

267. In the recent years, Indias GDP growth rate shows signs of

a) Upward growth b) Downward growth c) Stable growth d) Stagnant e) None

268. The entities willing to start new banks should be under

a) Partnership b) Company c) Trust d) Non-Operative Financial Holding
Company (NOFHC) e) None

269. Banks are allowed to accept deposits under Capital Gains Scheme in .

a) Savings b) Fixed c) Current d) a & b e) Any scheme

270. X, a pensioner is maintaining joint account (Either or Survivor) with his wife.
Branch received the request from wife of the pensioner to furnish the same account
for family pension as the main account holder expired. Branch may

a) advise the customer to close the existing account b) open another account
exclusively for pension purpose c) a & b d) allow the existing account for family
pension payments e) None

271. Loans extended to Medium Manufacturing Enterprises shall be classified as
Priority Sector provided the loan amount should be within

a) 2 crore b) 5 crore c) 10 crore d) Not eligible e) Entire amount

272. Which of the following is an example of Financial Assets?

a) National Saving Certificate b) Infrastructure Bonds c) Indira Vikas Patra d)
Krishi Vikas Patra e) All

204


Question Bank - Key
No No No No No No No
1. c 41. c 81. a 121. d 161. c 201. d 241. c
2. c 42. b 82. d 122. a 162. d 202. e 242. c
3. d 43. e 83. b 123. d 163. a 203. c 243. c
4. d 44. c 84. b 124. e 164. e 204. b 244. c
5. e 45. e 85. a 125. b 165. e 205. c 245. a
6. b 46. d 86. d 126. c 166. e 206. b 246. a
7. c 47. d 87. c 127. b 167. c 207. b 247. a
8. c 48. b 88. d 128. a 168. d 208. d 248. e
9. e 49. b 89. d 129. e 169. a 209. a 249. a
10. d 50. d 90. b 130. e 170. d 210. a 250. e
11. d 51. e 91. a 131. a 171. b 211. a 251. c
12. b 52. a 92. e 132. a 172. e 212. d 252. a
13. d 53. a 93. e 133. e 173. e 213. b 253. b
14. d 54. d 94. c 134. c 174. b 214. e 254. a
15. d 55. b 95. c 135. d 175. a 215. c 255. c
16. c 56. d 96. e 136. b 176. d 216. d 256. d
17. d 57. c 97. d 137. a 177. a 217. b 257. e
18. e 58. e 98. c 138. b 178. b 218. e 258. b
19. d 59. a 99. c 139. e 179. a 219. c 259. c
20. a 60. d 100. b 140. b 180. a 220. c 260. c
21. d 61. a 101. d 141. b 181. e 221. a 261. e
22. d 62. c 102. a 142. d 182. c 222. c 262. d
23. e 63. a 103. d 143. a 183. d 223. c 263. a
24. b 64. d 104. c 144. b 184. e 224. c 264. d
25. b 65. a 105. b 145. d 185. d 225. c 265. d
26. d 66. a 106. c 146. c 186. c 226. b 266. c
27. c 67. c 107. c 147. a 187. d 227. b 267. b
28. e 68. b 108. c 148. e 188. d 228. b 268. d
29. b 69. c 109. b 149. e 189. d 229. b 269. d
30. a 70. d 110. c 150. d 190. a 230. a 270. d
31. d 71. a 111. b 151. d 191. a 231. b 271. e
32. a 72. d 112. a 152. d 192. e 232. c 272. e
33. c 73. b 113. a 153. d 193. e 233. d
34. d 74. c 114. c 154. b 194. a 234. a
35. b 75. a 115. c 155. a 195. d 235. c
36. c 76. d 116. b 156. c 196. d 236. d
37. e 77. e 117. b 157. d 197. d 237. c
38. e 78. a 118. b 158. e 198. c 238. c
39. a 79. b 119. d 159. b 199. b 239. e
40. d 80. b 120. a 160. d 200. c 240. c

205

COMPUTER AWARENESS

Computer is an electronic device. Computer is a data processing tool. It takes Data
and commands as input. Computer processes the data according to the commands
and provides the resulting information as an output. A computer is a machine, which
calculates and solves problems at very fast speed and has memory to store
instructions and informations. Computer can also calculate the figures. It has the
storage place called memory to store the informations. This memory is in the form
of small boxes called chips.

Basically any computer is supposed to carry out four functions viz., accepting the
data as input, storing the data and instructions in its memory and recalling the same
as and when required (Retrieving), processing the data as per instructions to convert
it into useful information and communicating the information as output.

Computers can be used for many other interesting works like drawing different
shapes/pictures, listen music, play games, quiz, puzzles, preparation of greeting
cards etc. Computers are used in Education, Hospitals, Business, Science and
Engineering, Entertainment, Communication and Telecommunication, Desk Top
Publishing, Libraries, Railways, Airports, Offices, Defence, Private and public sectors
etc. The other thing which computer can do is to control functioning of very
complicated intelligent machines like robots satellites etc.

Evolution of Computers

The first calculating device developed and used for calculations is known to be the
Abacus. An abacus made calculations using beads and rods. Moving beads up and
down does addition and subtraction of numbers. The Abacus is a simple and an
effective manual calculating device.

Blaise Pascal, a young Frenchman, invented an Adding Machine in 1642.This was a
mechanical calculating device made from gears, wheels and dials. It was used for
adding numbers quickly. Adding machine based on this principle is still in use.

Joseph Jacquard, a French weaver, invented an Automated Loom in 1804. This
Loom used punch cards to produce patterns and designs on cloth. The weaving
action of this machine depended on the absence or presence of holes in the card.

Charles Babbage, an English man born in 1833, is known as the father of
computers. He designed and built a machine called Difference Engine". This
machine could take in the information and sort it out in the form of tables.
Difference Engine was used to calculate the logarithm tables accurately. Lady Ada
Lovelace, an associate of Charles Babbage, developed procedures for solving
problems on the Difference Engine. She is known to be the first lady programmer of
the world. Charles Babbage also gave the complete design of a more advanced
calculating machine called the Analytical Engine". Computers have mainly four
categories viz., Digital, Analog, Hybrid and Optical.

I. Digital Computers operate by numerical counting (adding) of discrete data,
using the method of controlled arithmetic operations. Digital computer represents
the data into digits and then all operations are done on these digits at extremely fast
rates. Digital computer basically knows how to count the digits. Digital computers
employ many interchangeable arithmetic devices in usually sequential operation.
Hence, cost is relatively high and programming is complex. Digital computers have
been grouped into four viz., Micro Computers, Mini Computers, Mainframe Computers,
Super Computers

206

(a) Micro computers: A microcomputer is a computer whos CPU is a microprocessor.
A microprocessor is a processor all of whose components are on a single integrated-
circuit chip. Home computers, personal office computers are examples of
microcomputers, which have proliferated, bringing computing power and literacy to
more and more people. In terms of number of units, microcomputers are those of all
other types of computers combined. Microcomputers can be sub-divided into two types:

(i) Home Computer: Home computers are meant for hobbyists rather than
professionals. These consist of a keyboard integrated with CPU in one box type thing
and interfaced with ordinary television and audiocassettes. They are meant for
entertainment, and training. Vendors supply cassette tapes containing programs for
computer games and for entertainment.

(ii) Personal Computers: Personal computers are called so because they are
designed for personal use of individual or individual small business. They are meant for
professionals, small business units and office automation systems. PC can be used for a
variety of applications like: Computer literacy, BASIC Programming, Fun and Games,
Home and School applications, Business and Professional applications, Electronic spread
sheets, Telecommunications, Data Base Management, Accounting, Word Processing.

(b) Minicomputers: By early 1960, economic and technical factors combined to make
small, inexpensive computers attractive for many applications. Many computing tasks
could be accomplished with less power than was then available on the contemporary
mainframe computers. Speed of execution, memory size, and other characteristics of
minicomputers increased with advances in technology. The availability of low cost
memory allowed a dramatic increase on the size of main memory attached to the
minicomputers.

(c) Main Frame Computers: Although there has been some blurring of the
boundaries between minicomputers and mainframe computers, the mainframe remain
a distinct class of computers. There are some key differences between the mainframe
class computers and the mini class computers. One of the most dramatic differences is
in the speed of the two classes. Another dramatic difference is in price. The primary
function of mainframes today is to support large databases. Large business and
government organizations need a central repository of data that can be managed and
controlled centrally. Only the mainframe has the processing power to handle large
database systems. Moreover mainframes have more that kept up with other classes of
computer in terms of price and performance.

(d) Supercomputers: There is a need for computers to solve multi various
mathematical problems of real physical processes, such as problems that occur in
aerodynamics, seismology, metrology, and atomic, nuclear and plasma physics. The
Super computer has limited use because of its price tag, a limited market. Only these
machines are used, mostly at research centers and some government agencies with
scientific or engineering functions. As with other areas of computer technology, there is
a content demand to increase the performance of the supercomputer. In some current
applications in aero dynamics and nuclear physics, as many as arithmetic operations,
requiring more than two days of computing time on a contemporary supercomputer,
are needed for a single problem.

II. Analogue Computer - Mostly used in engineering and scientific calculations.
Analogue computers employee relatively few distinct, single-purpose devices in
parallel-channel operation. Hence, cost is relatively low and programming is easy.
The accuracy of analogue computers is limited as compared to the accuracy of digital
computers, which is essentially unlimited. Analogue computers are best suited for
simulating the response of physical systems, while digital computers are best suited
for handling numerical problems, statistical data, and discrete random process.

207

Digital computers can be set up, however, to serve as mathematical models of
physical systems.

III. Hybrid Computers: There is another category of computers, which should be
mentioned in passing. These are the hybrid computers, which make use of both
analogue and digital components and techniques. They employ analogue-to-digital
and digital-to-analogue converters for transforming the data into suitable form for
either type of computation.

IV. Optical computer: Optical computers will be super high speed computer yet to
be developed which shall work on quadra system logic.

Components of computer

Input devices, Output devices, processing unit [CPU], Memory. A device whose
purpose is to allow the user to provide input or information to a computer system is
called an Input device. Input devices are those devices that we use to send
information into the computer. Input devices are - Keyboard, Mouse, Scanner, Joy
stick, Bar Code Reader, Micro phone, Digital camera. Output devices are those
devices that a computer uses to give information to us. The device used to get
information from the computer. Output devices are Monitor [Visual Display unit],
Speaker, Printer, Plotter etc.

CPU is responsible for receiving the instructions, processing them and supplying the
results to the output units. Central Processing Unit (CPU) of a computer resides in
the system box. Physically, there are processor chips, which are plugged on a circuit
board called the motherboard. The most important processor chip is the
microprocessor chip. Processing includes mathematical operations like addition,
subtraction, multiplication and division. Processing also include logical functions like
comparison and sorting. The components of CPU are:

i) Arithmetic and Logic Unit [ALU] consists of high-speed memory locations
directly built into the CPU. It is responsible for the arithmetic [+, -, *, /] and logical
operators [<, >, <=, >=, <>] on the data entered.

ii) Control Unit [CU] does not process or store data but maintains the flow of data
between the ALU, Memory and the Input/Output devices. Sometimes, it just
transfers the data from the memory to the output devices or to the storage devices.
But if it finds the instructions for the arithmetic or logical operations, it transfers
them to ALU for further processing.

iii) Memory Unit or the primary storage stores the data before processing, and the
final results obtained after processing, in different storage sections. The programs or
instructions given to the processor are also stored here.

The functions of CPU are - (a) To access and store relevant data and instructions during
processing (b) To control the sequence of operations (c) To give commands to, and
coordinate the actions of all parts of the computer system (d) To carry out-processing.

How is the data input classified?

The data input may be in form of - (a) Numerical with different symbols (b)
Alphabetic. (c) Alphanumeric (Combination with letters, numbers and symbols)
Examples: a1, b2, d/, 1* etc. Then this is coded into data acceptable to computer in
its language. It may be audible, visual or audiovisual analogic data. In this case, an
inter-facing device is required to convert it into signals, which are acceptable to
computers.

208


Types of memories

i) Primary memory devices are in the form of a computer chip and they are
plugged on the motherboard. In a PC, there are four types of primary memory chips
viz., Random Access Memory (RAM) b) Read Only Memory (ROM), Cache Memory
[store or to reserve] and Registers. The Hard Disk is basically a mass storage device,
which is used for storing data permanently in the computer. Its storage capacity is
many times more than that of a floppy and pen drive.

ii) Secondary memory consists of different storage devices in which you can store
the work done on the computer. The popular storage devices are floppy disks, Pen
drives, external hard disks and CD ROMs. Although all of these are storage devices,
they differ from each other in many ways. Data can be written on floppy disk. Its
capacity is however less but it has the advantage of being portable. It is very easy to
write and rewrite data on the hard disks and floppy disks.

CD-ROM stands for Compact Disk Read Only Memory. It is an input device that has
been exclusively designed to perform read operations. It reads data with the help of
laser beam, which is directed with the help of lenses, prism and mirrors.

CD-RW: In a CD-RW, it is possible to write many times on the disk, overwriting the
previously recorded data.

DVD: A DVD or Digital Versatile/video Disc is a high-density medium, capable of
storing a full-length movie on a single disc.
RAM & ROM

RAM is the main memory of the computer. This is the working memory. Any program
or data first gets transferred to this memory and then only user can use it. Anything
that is typed on the keyboard goes on to the RAM. Similarly, the output displayed on
the screen comes from the RAM. It is called volatile memory (temporary). RAM
becomes blank as and when the system is switched-off.

The ROM is built into the system box. It contains the basic instructions to start the
computer and display the system configuration. We can read from this chip and
cannot write or change anything on it. The name of this memory suggests that you
can only read from this chip and cannot write or change anything on it. It is similar
to a printed book that you buy from the market. You only read from the book and do
not write anything on it yourself. This chip contains important information and
instruction to enable a computer to startup and identify various components within
the computer. ROM is non-volatile memory (permanent). That is, even in the
absence of electricity, content of this memory is not lost.
Cache is a component that transparently stores data so that future requests for that
data can be served faster. The data that is stored within a cache might be values
that have been computed earlier or duplicates of original values that are stored
elsewhere. If requested data is contained in the cache, this request can be served by
simply reading the cache, which is comparatively faster. Otherwise, the data has to
be recomputed or fetched from its original storage location, which is comparatively
slower. Hardware implements cache as a block of memory for temporary storage of
data likely to be used again. CPUs and hard drives frequently use a cache, as do web
browsers and web servers.

209

Units of Memory

This is a system consisting of two digits. The computer converts all the information
including numbers and letters into binary system. In the electronic chip the
transmission of electricity represents the digit 1 and no transmission of electricity
represents the digit 0. 1 or 0 is known as a binary digit or bit. Bit is a binary digit.
In computer all the characters including letters, punctuation marks, numbers and
special characters are stored in bytes. One byte consists of 8 bits and stores one
character. 4 Bits are called Nibble. The units of memory are as under:

8 Bits 1 Byte
1024 Bytes 1 Kilobyte [KB]
1024 Kilobytes 1 Megabyte [MB] (One Million)
1024 Megabytes 1 Gigabyte [GB] (One Billion)
1024 Gigabytes 1 Terabyte [TB] (One Trillion)

Computer languages

1. Machine Language: Machine language is considered to be the first generation
language. All instructions/data that are fed to the computer are converted into a
sequence of bits [0 and 1] as a computer understands only the binary numbers,
which consists of only 2 digits [0 and 1]. As clear from the name, machine language
is directly accepted and executed by the computer. Note: Machine language is the
elementary language of a computer, which consists of binary digits [0 and 1] only.
It is directly executable by the computer and no further translation is required and
the execution of the program is very fast. However, portability is an issue as the
internal designs of computers are different which warrants conversion of program.
You need to rewrite the program.

2. Assembly Language: In assembly language, binary operation codes were
replaced by the Mnemonics i.e. like two or three letter abbreviations. For example,
in machine language, if the operation code for add, is 0010; its equivalent in
assembly language is ADD. An assembler is used to further translate it into the
machine code so that it can be executed by the computer. Since mnemonics are
abbreviations or symbols, they need to be translated into machine language to get
executed. Assembly language is considered to be second-generation language.
Machine and assembly languages are also called low level language as they are
linked with the hardware. Since assembly language differs from the machine
language in the way of mnemonics mainly, most of the shortcomings of machine
language like machine dependence, difficulty in writing and debugging the programs
etc., are applicable to the assembly language.

3. High Level Languages: Machine language and assembly language were used
because initially computers came with very small memory and limited resources.
Thus program efficiency could be achieved only by using hardware-oriented
languages. As speed, power and capacity of computer increased, a need was felt to
develop the programs which can make use of this wonderful machine in many other
fields and can be developed by people who are not experts in computer architecture
and hardware. So high level languages came into existence. High-level languages
(HLL) are the languages with simple English like syntax, which is easy to understand
Basic, Fortran, Pascal, Cobol, C, and C++ are a few such languages. We need
compilers or interpreters to change the HLL code to machine code so that it could be
understood and executed by the computer. High-level languages are considered to
be third generation languages.

210

(1) BASIC stands for Beginner's All-purpose Symbolic Instruction Code. It is a
comparatively easy language for beginners in the sense that it uses phraseology similar
to conventional ENGLISH. BASIC is the most commonly used language on
microcomputers. lt was designed by two American professors JG Kemeny and Thomas
Curtz of Dartmouth College USA in 1964. Most microcomputers use a BASIC devised by
a company called Microsoft. Because of its simplicity, BASIC was used in the first PC to
gain commercial success.

(2) FORTRAN stands for FORMULA TRANSLATION. It was the first computer language
developed by IBM in 1957. It has been modified since then many times and these
versions were given the names like FORTRAN II. FORTRAN-IV is the most popular
version, which was developed in 1966. Latest addition to this is FORTRAN 77, on which
even file handling and word processing is possible. FORTRAN'S syntax is very rigid. It is
used in engineering and scientific applications.

(3) PASCAL is sometimes used on small computers and is better structured than
BASIC. PASCAL was designed and developed by Nicolaus Work for teaching computer
science.

(4) COBOL: It stands for Common Business Oriented Language and is the most
popular business language today for data processing. It was designed around 1959-60
with a purpose to provide a common language for business applications.

(5) C: Its mid level general-purpose language more versatile than BASIC or FORTRAN.
It is used both with Unix and DOS operating systems. The C language was developed at
Bell Laboratories in the early 1970s. It was subsequently used to write the UNIX
operating system. AT&T (Bell Labs' parent) markets a C compiler and UNIX operating
system tools as a single software package. There are many other versions of C that run
on pc's and larger machines.

(6) LOGO: It allows even children to program a microcomputer quickly for drawing
pictures etc.

(7) Fourth Generation Languages: These languages are under stage of
development. Efforts are being made to see that no elaborate programming is required
and languages become user friendly. One such language SQL was developed by IBM
around 1976. SQL is an acronym for "Structured query language". Commercial
relational DBMS packages such as Oracle 7, Ingress 6.4, and Sybase use SQL.
Remember when the input program (called as Source Code) is processed by a
language translator, output is the machine language program called as Object
program. High-level languages have lots of advantages over Machine language and
Assembly language. These programs developed on one type of computer can run or
get executed on other type of computer with no change or little change. Hence lot of
effort was saved. It is really easy to write a program in a high level language. The
programmer is more concerned about logic and program development without
worrying about the hardware aspect.

Computer language is a medium to communicate with each other. Similarly a
computer language, which is needed to interact with computer, has its own set up
rules and syntaxes. While making programs it is essential to follow these syntax,
otherwise computer will not be able to understand anything. Computer languages
can be classified in to three categories based on complexity of the language viz.,
Machine Language Assembly Language / High Level Language.

Software means a set of instructions/programs given to the computer system, which
enables the hardware to function. Computer software is the intelligence of the
computer and can be broadly classified into:

211


i) System software: A software program coordinates the operations of the various
hardware components of the computer. The system software or operating system
program helps the user to actually operate the computer system. Without the
operating system, we cannot use the applications software. The operating system
controls computer system resources and coordinates the flow of data to and from the
microprocessor and to and from input devices and output devices such as the
keyboard and the monitor. It helps the computer to supervise and manage its
resources. The most popular operating systems are DOS, UNIX, LINUX, Windows 98,
Windows 2000, Windows XP and the Windows 8.

ii) Application software makes the computer useful for the people and can be
used for different purposes. These help the user to work more efficiently, faster and
more productively. There are general purpose application softwares such as Word
processing software, Spread sheets, Database management software, Desk Top
Publishing software etc. Software developed to suit the specific requests of the
customers is called Customized software. Example - Accounting, Library
management, Fees collection, Hotel management etc.

In computer networking, topology refers to the layout of connected devices. Broadly
they are categorized as under:

Bus Topology: Bus networks use a common backbone to connect all devices i.e.
Single cable. A device wanting to communicate with another device on the network
sends a broadcast message onto the wire that all other devices see, but only the
intended recipient actually accepts and processes the message. Bus networks work
best with a limited number of devices. In case where the number of computers are
more, performance problems will likely result. If the backbone cable fails, the entire
network effectively becomes unusable.

Ring Topology: In a ring network, every device has exactly two neighbors for
communication purposes. All messages travel through a ring in the same direction
(either "clockwise" or "counterclockwise"). A failure in any cable or device breaks the
loop and can take down the entire network. To implement a ring network, one
typically uses FDDI, SONET, or Token Ring technology.

Star Topology: A star network features a central connection point called a "hub
node" that may be a network hub, switch or router. Devices typically connect to the
hub with Unshielded Twisted Pair (UTP) Ethernet. Compared to the bus topology, a
star network generally requires more cable, but a failure in any star network cable
will only take down one computer's network access and not the entire LAN.

Tree Topology: Tree topologies integrate multiple star topologies together onto a
bus. In its simplest form, only hub devices connect directly to the tree bus, and each
hub functions as the root of a tree of devices. This bus/star hybrid approach supports
future expandability of the network much better than a bus (limited in the number of
devices due to the broadcast traffic it generates) or a star (limited by the number of
hub connection points) alone.

Mesh Topology: Mesh topologies involve the concept of routes. Unlike each of the
previous topologies, messages sent on a mesh network can take any of several
possible paths from source to destination. (Recall that even in a ring, although two
cable paths exist, messages can only travel in one direction.) Some WANs, most
notably the Internet, employ mesh routing. A mesh network in which every device
connects to every other is called a full mesh. Partial mesh networks also exist in
which some devices connect only indirectly to others.

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Topologies remain an important part of network design theory. You can probably
build a home or small business computer network without understanding the
difference between a bus design and a star design, but becoming familiar with the
standard topologies gives you a better understanding of important networking
concepts like hubs, broadcasts, and routes.

Computer Networks

A computer network is a group of computers that are connected to each other for the
purpose of communication. Networks may be classified according to a wide variety of
characteristics. A computer network allows computers to communicate with many
other computers and to share resources and information. The Advanced Research
Projects Agency (ARPA) funded the design of the "Advanced Research Projects
Agency Network" (ARPANET) for the United States Department of Defense. It was
the first operational computer network in the world.

LAN stands for local area network and WAN stands for wide area network. There are
obvious differences between the two network types. LANs are smaller networks,
usually within an office base. Connections between the workstations are physical,
with cables, and all the office resources are shared and distributed between the
network workstations. The most common type of LAN is that of Ethernet. This is a
family of frame-based computer networking technologies for LANs.

WANs are broader geographic networks, like one city to another. They are more of a
collection of interconnected LAN networks. Other WANs, provided by service
providers, connect local networks to the Internet. In actual fact the Internet is more
a specific Internetwork, not a straight WAN. While LANs are smaller, collectively they
can be linked to create the WAN. This really is done using a series of routers, and
bridges, which are basically network hardware devices which enable interconnectivity
between separate LANs with the option of expanding into small-scale WANs.

LANs are faster with 10 GB data transfer rates encompass a smaller geographical
area. WANs also rely on common carriers, while LANs do not. Aside from these
differences users of a LAN will more likely need password validation as it will have
specific user rights. While smaller WANs might also have this, it is less likely. LAN
networks will generally be more private than WAN networks, and will have some sort
of networking software and probably a network administrator. Hardware resources
are shared on a LAN, while with a WAN the focus is more on communications.

The network topology of LANs is often peer-to-peer. That is to say, each client
shares is resources with other workstations in the network. WAN networks will
operate on a more client-to-server basis with interconnected LANs. Really, all this
means is that the resources are requested from a central server.

A single LAN network will be cheaper to set up than that of a larger WAN, with more
workstations and more hardware connection requirements with the need for a leased
line. So, the differences between Lans and Wans are indeed greater than just that
of size. There are differences in network topology, hardware requirements, software
requirements as well as technical specifications and cost.

Windows & Desktop

Windows is a commercial, multi user, multi tasking operating system with a graphical
user interface (GUI). It presents the information to the user in rectangular boxes
called windows. In windows every user can have personal settings and a user can
open any number of applications depending upon the system resources.

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Windows will get started when you switch on the CPU. After loading Windows the
first screen that appears is called Desktop. All the further activities that you start in
Windows would then start from the Desktop. It is comprised of many components
like Icons, Start menu and Task bar.

Icons: Several small pictures along with their name remain present on the desktop.
These pictures are called icons. Icons are basically, small graphical symbols, which
represent a program. Each icon represents a different program and its name is
written below the icon. Example - My computer, Recycle Bin, My Documents etc.
When you double click on any icon the program will be opened. It is a multi user and
multi tasking operating system and user friendly. However, it requires more
memory. There are three types of icons viz., Program icons, Shortcut icons and Tool
bar icons. Example - My Documents, My Computer and Recycle bin.

To shut down the windows, Click on START, in the menu that appears click on
Shutdown / Turn Off Computer, then in the dialogue box that appears with options
like STANDBY / SHUTDOWN / RESTART etc.

There are three main reasons for working in the Windows environment viz., to
reduce memory load and make working easier, to run multiple applications at the
same time, and share information between them and to use standardized
applications.

i) Program Window: A computer program is a set of instructions that perform a
specific task, such as word processing or data management. Each time you open a
program, Window opens a program through which we can enter commands for the
program. The more programs you start, the more windows you open. As a result,
you may have several program windows open on your Desktop at the same time. A
program window might contain several document windows.

ii) Document Window: A document is any information you create with a program,
such as a letter, spreadsheet, or database file. When you open or create a document
in a program, you open a document window. Each document window contains a
single document and always appears in the program window's work area. This type
of window is sometimes referred to as a child window.

The elements of window are - Title bar, Left side of the title bar there is control menu
bar, Below the title bar there is menu bar, Scroll bar, Edit field and Status bar.

A dialog box is a window that appears temporarily on the top of your application
window, which would require information from you to complete the task. It usually
contain an option called OK/Apply/Cancel. OK executes the task, Apply
provides an opportunity to make changes before closing and Cancel closes the dialog
box ignoring all the changes you may have made.

A message box is a simple box that displays a message or a warning to you.
Generally they require you to acknowledge the window and click on OK to continue
working. In the case of dialog boxes and Message boxes, you cannot continue
working until you have closed this box.

A list box contains a list of options. Usually, you can only select one option in a list
box. It contains a V at the right corner of the field and when you click on the V,
various selectable options are displayed. Then click on an appropriate option and
select it. The list box closes now.

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Combo boxes are a combination of an edit box and a list box. A combo box is a
rectangular box with one option along with a downward facing arrow next to the
rectangular box. However, when you press the Down Arrow key a list of additional
options descends from the box. You can only select one option from the list. Once
you come to the entry of your choice, press the tab key to move to the next field.
Since it is a combo box one can also type directly into it and use it like edit field.

Menu: Menu means containing list of different options. Each option itself will have
special feature, which is used for the purpose of the document.

a. Windows Menu: By clicking on the START button, we can activate windows menu.
Using the mouse, we can select different Windows Menu options and activate them.
Alternately we can press the Windows Key to Activate the Windows Menu and use up
or down arrow keys to select a particular menu.

b. Other application menus: The application Menu options are available below the
title bar of the window. (File, Edit, View, Insert, Format, Toolsetc). By clicking on
the required menu option, the sub menu options available under the selected menu
option are displayed. By clicking on the appropriate sub menu option, the desired
operation can be performed.

Menus are very important, because without menus we can not complete the task for
any application window. By using menus only we can complete the task with the
help of dialogue box. So the menu options are very useful for making the work easy.

Key Board

Escape key - It means to remove any type of dialogue boxes and message boxes
from desk top or from any application windows etc. It also cancels the menu from
different application windows.

TAB Key - Pressing Tab one time, gives 5 spaces. Press TAB to go to next option in
a dialogue box. TAB combines with SHIFT key. Then press SHIFT and TAB to go to
previous option. TAB combines with INSERT key. Then press INSERT and TAB to read
same option repeatedly in any dialogue box. TAB combines with CONTROL key.
Then press Control and Tab to move between the pages in some dialogue boxes. TAB
combines with ALT key. Then press Alt and TAB to move between opened application
windows. At the time of working in columns and rows, press TAB one time to go to
next cell and press Shift Tab to go to previous cell.

Shift Key - Shift is used to change the small letters into the capital letters. Pressing
the shift key we can edit different symbols placed on number keys and other symbol
keys. Shift is used for selecting the text with arrow keys. Shift also combines with
Control key, Home key, End key, Page up key and Page down key for selecting the
text.

Control Key: Control key is used to combine with other keys as commands while
working with different applications. Examples: Control A, Control Z etc.

ALT Key - Alt is used to activate or to deactivate the menu bar. Alt is used to
combine with other keys as commands. ALT combines with TAB key, to move
between opened application windows.

Application Key: When we activate application button, some menu options will take
place.

Insert Key: Insert is one of the combination key.

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Enter Key - Activates the menu which allows change the line, open the files/folders
and give extra space between the lines.

Arrow Keys: To go to previous character, press left arrow. To go to next character,
press right arrow. To go to previous line, press up arrow. To go to next line, press
down arrow.

Delete Key: It is used delete the text in a document. It is used to delete blank lines.
It is used to delete forward characters. Delete key combines with some keys, as
keyboard commands. Examples: Control and delete, Alt and delete, Insert and
delete.

Home Key: It brings the cursor to the starting of the same line. Home key combines
with other keys as keyboard commands. Examples: Control and Home, Shift and
Home etc.

End Key: It takes the cursor to the last character of the same line. End key
combines with some keys, as keyboard commands. Examples: Control and End,
Shift and End etc.

Page Up Key: It scrolls the screen towards upward direction. It combines with
Control key, to go to previous page.

Page Down Key: It scrolls the screen towards downward direction. It combines
with Control key, to go to next page.

Spacebar Key: Spacebar is used to give spaces between the words. Press Spacebar
one time selects the list views where files are placed in folders and different drives in
my computer. Spacebar is the combination to some keys, as keyboard commands.
Examples: Alt Spacebar and X, Alt Spacebar and R, Alt Spacebar and N, Alt Spacebar
and C, Control Spacebar etc.

Back Space: Back Space is used to delete the characters backward direction. Back
Space is also used to move between the drives and to my documents. To come out
from the folders or from sub folders we use back space key.

Character User Interface Graphical User Interface
The commands are typed in a series of
characters
The commands are given by clicking icons
Does not support pictures Supports pictures
Mostly single user operating systems Multi user operating systems
Does not support multi tasking Supports multi tasking
User must learn all commands in order
to use a Character User Interface
People with no/little computer knowledge
can operate
Requires less memory Requires more memory
Popular during the beginning days of
computers
Popular with the evolution of the computer
technology
Character User Interfaces are useful
for giving complex commands
Not useful for giving complex commands.
It contain command shell for giving
complex commands

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Microsoft Word

MS Word is a word processing programme involves the information of written text
into a form that gives it a formatted systematic looks that facilities easy reading. It
allows add/change fonts, characters, Headers and Footers. It also generates
personalized letters through Mail Merge, allow you to share resource available to all
office programme, such as clipart, drawing tools etc. This module can be used to
create and maintain documents, like letters, reports, circulars etc. The documents
are stored in .doc or docx format. MS Word is a word processor through which we
can format our text in the required format. The Word has nine menus viz., File, Edit,
View, Insert, Format, Table, Tools, Windows and Help.
FILE MENU (Keyboard shortcut: ALT + F)
1. New: This is used to create a new document. The shortcut key is Ctrl N. If
already there is a open document 1, then document 2 is created. If document 2 is
also already open, then document 3 is created.

2. Open: This is used to open an existing document. The shortcut key is Ctrl O.
This will ask for file name. Type the file name and press enter.

3. Close: This is used to close the current document. The shortcut key is Ctrl W. This
will not close the word.

4. Save: This is used to make the changes permanent. The shortcut key is Ctrl S.
This will ask for file name for the first time. After that it will make the changes
permanent.

5. Save as: This is used to make a copy of that file. The shortcut key is F12. This
will ask for file every time.

6. Page setup: This is used to set the paper properties such as margins, size etc.

7. Print: This is used to print the current document. The shortcut key is Ctrl P. This
will ask for printer name, number of pages, number of copies.

8. Send to: This is used to save the file in floppy or to send the file to E-mail.

9. Exit: This is used to quit the Ms word. Shortcut key is Alt F4.

EDIT MENU - ALT E

Edit menu has the following commands:

1. Undo: This is used to cancel the last operation performed, like delete or typing
etc. the shortcut key is Ctrl Z.

2. Redo: This is used to perform the cancelled operation by undo. The shortcut key
is Ctrl Y.

3. Cut: this is used to remove the selected text from the document, a copy is placed
in the clipboard. The shortcut key is Ctrl X.

4. Copy: this is used to copy the selected text in the clipboard. The shortcut key is
Ctrl C.

5. Paste: This is used to place the text from clipboard to the cursor position. The

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shortcut key is ctrl V.

6. Clear: This is used to remove selected text from the document. Shortcut key is
delete key.

7. Select all: This is used to select the whole document. Shortcut key is Ctrl A.

8. Line up: This is used to move the cursor to previous line. The shortcut key is up
arrow.

9. Find: This is used to find the required text. The shortcut key is Ctrl F. It will ask
for find what: type the required text and press enter. Use arrow keys to read the
text.

10. Find and Replace: This is used to replace the required text. The shortcut key
Ctrl H. It will ask for find what, type the required text to be found. Then press tab.
It will ask for replace with: type the word to be replaced. Click on Replace to replace
the text at the current occurrence, Click on Replace All to replace the text at all the
occurances. A dialogue will say about the total no of replacements. Press escape and
use arrow keys to read the text.

11. GO TO: This is used to move the cursor to required position. Shortcut key is
Ctrl G.
INSERT MENU - ALT I

Insert menu has the following commands:

1. Break: this is used to create section, page breaks. The shortcut key for page
break is Ctrl enter. The shortcut key for Column break is Ctrl Shift enter.

2. Page Number: Page number dialogue will appear The position for page number
should be selected by using up/down arrows. Use tabs and select the alignment
using arrow keys then press enter page numbers will automatically displayed.

3. Date and Time: This is used to insert the current date or time. The dialogue will
ask for the required format, use arrow keys to select the appropriate format and
press enter.

4. Auto Text: the auto text can be used to insert the frequently occurring text.
Type the required text. Select the typed text. Use alt F3 to open the auto text
dialogue. It will ask for auto text name. Type the name and press enter. To insert
auto text: Select the required position to insert the auto text. Select auto text from
insert menu. Type the auto text name and press enter.

5. Symbol: The keyboard does not have special symbols like alpha beta etc. In
order to type these symbols, symbol command can be used.

6. Picture: This is a submenu which consists of the following: Clipart: Clipart is the
preloaded picture which can be used by inserting in the document. FromFile: This
is used to insert required picture file. Auto Shapes: This is used to insert shapes like
oval, rectangle etc.

7. File: This command can be used to insert another file into the current document.
This will ask for file name, type the file name and press enter.

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8. Bookmark: To insert bookmark, first select the required word by using the Ctrl
and arrow keys. Then select the command, it will ask for bookmark name, type a
name without special characters. Press enter, the bookmark will be created.

FORMAT MENU - ALT O

1. Font: Shortcut key for dialogue is Ctrl D. the font dialogue consists of the
following: Font name: this is used to give different styles for text. Attributes: This is
used to give the attributes like bold, italics, regular. Size: This is used to increase or
decrease font size. Colour: This is used to change font colour. There are some other
attributes like strike out, superscript, subscript, shadow, outline etc.

2. Paragraphs: The paragraph dialogue have the following: Indentation: This is
used for setting the paragraph intendation. Spacing: the spacing is used for
specifying the line spacing. There are single, double, 1.5, multiple line spacings.
The shortcut key for single line spacing is Ctrl 1, the shortcut key for double line
spacing is Ctrl 2, the shortcut key for 1.5 line spacing is Ctrl 5. Bullets and
Numberings: this is used for generating automatic numbers, bullets. The dialogue
has separates tabs for bullets and numberings. Using arrow keys the required
formats can be created. Alt B is used to select the bullets tab. Alt N is used to select
the numbers tab.

3. Borders and Shadings: The borders and shadings have the paragraph borders,
page borders and shading tabs. The shortcut key for page border is alt P. the
shortcut key for paragraph border is alt B. The shortcut key for shadings is alt S.
Using tab key appropriate format can be selected.

4. Columns: the column is the format which is used for preparing news format.
The column dialogue have 2,3,4,left, right check boxes. These boxes can be selected
for required number of columns. There is one more check box for a separator line .
there are options for specifying the columns width.

5. Tabs: The tabs can be used to create statements, invoices etc. The tab dialogue
will ask for tab stop positions. Type the required tab position, use alt S to set the
tab. The tab stops can be divided among the 6 inches. This tab stops can be cleared
by using alt A. Before setting the tab, select the required position by using Shift and
arrow keys.

6. Drop cap: Normally the newspapers have paragraph starting with a big capital
letters. To use such kind of characters in the document we can use this. There are
two options: in margin and dropped.

7. Text Direction: The text in the document is normally from left to right. This
direction can be changed to top to bottom by using this command.

8. Change Case: The letters typed in lower case can be changed to upper case or
vice versa. For this typed text should be selected, Shift F3 can be used to change the
case. The available options are lower, upper, sentence case.

TABLES - ALT A

1. Insert: Insert have the following submenus: Table: This will ask for number of
rows and columns. Select auto contents check box and press enter to create a table.
Columns: this command can be used to insert columns in the table. The available
options are columns to right and columns to left. Rows: This command is used to
insert rows in the table. Available options are rows above and rows below. Cells:

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This command is used to insert cells in the table. The available options are left,
right, above, below.

2. Delete: the delete can be used to remove the cells from the table. This have the
following options: Table: This is used to delete the current table. Columns: this is
used to delete the current column. Rows: This is used to delete the current row.
Cells: This is used to delete the selected cells.

3. Select: This command can be used to select the rows, columns, cells in the table.

4. Merge Cells: This command is used to merge more than one cells. This is done
by selecting the required cells by using shift and arrow keys.

5. Split Cells: this command is used to split the cells. This dialogue will ask for
number of columns and rows. By giving required number of columns and rows, the
cells can be splitted.

6. Split Table: This is used to divide the table. Before using this command, select
the table.

7. Table auto format: This command is used to format the table in the available
format. This is done by selecting the table and giving appropriate format.

8. Auto Fit: the table should be auto fit to contents. In other case the alignment
would be improper. To set the auto fit to contents table can be selected and this
command can be applied.

9. Heading Row Repeat: tables can be sometimes big so that it cannot be fit into
single page. In that case in order to repeat heading of the table this command can
be used.

10. Sort: This is used to arrange the tables in ascending/descending order. For
this, first select the required column and apply this command.

11. Formula: This command can be used to apply formula in the table. This
formula can be used to sum the columns above or sum the rows towards left.
12. Show Grid Lines: This is used to show the lines between the cells.

TOOLS MENU - ALT T

1. Spelling and Grammar: Shortcut key is F7. Move the cursor to start of the
document. Press F7 to open the spelling and grammar dialogue. If we feel that the
word is wrong, we can use alt C to change the word. In other cases alt I can be
used to ignore the choice. Alt G can be used to ignore all such spelled words.

2. Language: Set language: this is used to change the language from USA to
British format etc. Thesaurus: This is used to find an appropriate synonym for a
selected word. To find thesaurus, first select the required word and use shift F7. the
thesaurus dialogue will be opened. Use tab and arrow keys to select the appropriate
synonym. Use alt R to replace the word with the synonym.

3. Word Count: This is used to find out the following in the current document.
Pages, words, characters (without space) characters (with space), paragraphs, lines.

4. Auto Summarise: This command can be used to give the summary about
current document.

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5. Auto Correct: Typing errors can be corrected by using the auto correct. This
dialogue will ask for replace with colon edit. Type the abbreviation or the required
word, use tab key it will ask for with colon edit. Type the words to be replaced.
Press enter to add this to dictionary. In case of removing already existing word,
type the word and press alt D. It ask for confirmation of deleting press enter.

6. Protect Document: This is used to protect the document from accidental use of
the document. This is done by giving password. The protect document dialogue will
ask for password. Type the password and press enter, it will ask for confirmation,
repeat the password and press enter. Unprotect document: the protected document
cannot be modified. In order to modify, unprotect the document. This is done by
selecting the unprotect document from Tools Menu. It will ask for the password -
type it and enter.

The table of contents is a very useful feature of MS-Word. This not only provides
an overview of the contents of the full documents but also allows jumping to the
section indicated by an entry in the table of contents. Before creating table of
contents in the document, we should put heading styles for main headings, side
headings and sub-headings.

Format List Box: There are several formats of displaying Table of Contents entries
"From Template" option is almost similar to what we see in the books. Select the
desired format from this list. Show page numbers and right align page numbers:
Both of these are check boxes. Show Levels: It is an edit spin box. Specify the
number of levels, which you wish to include in the Table of Contents.

Tab Leader: It is a combo box. Select the character, which would fill up the blank
space in the line between the heading and page number of the Table of Contents
entry. Press enter on the OK button. This would create the Table of Contents at the
location of the insertion pointer. If the Table of Contents needed to be created at the
beginning of the document make sure to go to the beginning of the document before
activating the Index and Table command.

Mail merge: In case of sending a same letter to more than person the mail merge
can be used. It requires three files to be created. 1. To hold the format of the
letter. 2. To hold the address of receivers. 3. A document where the merged letter
is saved.

Microsoft Excel

Excel is a spreadsheet program, and is used present financial data such as budget or
sales report. Excel allows to enter and Edit data in a Worksheet. To use Functions
and Formulas to calculate and analyze data. To create colorful Charts and Grafics. To
save time by combining a series of commands into a single command by using
MACROS. To change and analyze a large amount of data in to a list.

Adding, subtraction, multiplication, division, square root, average, future value (fv),
EMI (pmt), current date and time (now), maximum (max), minimum (min), insert
date (control & semi colon), insert time (control shift semi colon), text length (len)

Wizard - Highlight the cell where you want your new formula to appear. Start the
Function Wizard. Follow the Function Wizard through its two dialog boxes.

Pivot table creates an interactive summary from many records. For example, you
may have hundreds of invoice entries in a list on your worksheet. A pivot table can
total the invoices by customer, product or date. You create the pivot table by using a
wizard. You can quickly rearrange the information in the pivot table by dragging the

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buttons to a new position. Organize data in a table that Excel can understand. The
first row must have headings. Use a different heading for each column. Keep all the
data together -- don't include any blank rows or columns in the table. Leave at least
one blank row and one blank column between the data table and any other
information on the worksheet.

PowerPoint

Power Point is a program that helps you to plan, organize and design professional
presentations. The computer screen can be used for 35mm slides or overhead
projectors to deliver a presentation. Power Point allows you to edit and organize text
in a Presentation. To add objects to the slides in a presentation (Shapes, Pictures,
Clip Arts and Charts. To change the color schemes in presentation.*To Animate the
presentation.To add slide Transition.

Presentation Graphics are application software available to design charts. The
package allows the user to, Design charts, Arrange the matter in a readable format,
Add pictures in the chart to make them more meaningful and attractive, Change the
appearance of the alphabets on the charts and Print these charts. Another way of
doing presentation is, the computer can be attached to a device called a LCD(Liquid
crystal display). This device is attached in place of monitor. Instead of displaying the
contents on the monitor, using LCD you can display directly on the screen to a large
group of audience without printing them, straight from the computer.

Presentation Graphics add an interesting aspect to your thoughts and ideas. They
make your ideas look nice on the transparencies. The combination of your voice and
the visual appeal created via the graphics, help in capturing and sustaining the
audiences attention.

Procedure to create power point presentation: Ctrl+N will also help to open a
new presentation. A blank slide is opened automatically with the name as
presentation1. Now you can enter the data in the slide. Types of slide layouts -

Title Slide: It contains two parts, one for title and one for subtitle. You can only
enter the title and sub titles in this slide.

Title only: In this type of slide you have only one section for adding titles ie you can
add only title to this slide.

Title and text: In this slide you can enter both title and text ie you can type a
heading and describe about that topic in detail.

Title and 2-column text: In this slide you can give both title and text but its layout
is little different from the earlier one. Text can be typed in column format. But it
will provide you only 2 columns.

Title, text and clipart: This slide allows you to enter title, text and also allow you to
insert picture from clipart. Clipart is a tool which contains varieties of pictures
arranged in different categories. You must have used clipart in ms-word also, it
functions same way in PowerPoint. In this slide you will have title at the top, text at
the left side and clipart at the right side.

Title, clipart and text: This functions same way as the previous slide the only
difference is that the text will be at the right side and clipart will be at the left side.

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Title, text and chart: This slide contains title part, text part and chart also. Chart is
the graph which you can insert in your slide. It is the graphical representation of
data. Here text is placed at the left side and chart at the right side.

Title, chart and text: This chart functions same as the previous one, the only
difference is that text will be placed at right side and chart at the left side.

Title and Table: This slide provides two options one for title and another for table.
You can enter data in the form of table. You can also specify the no of rows and
columns. For more details refer to session 18.

Title and chart: It provides two options one for giving title and another for
inserting chart. You cant enter text in this slide.

Title and Organization chart: It has two objects one for giving titles and other for
inserting organization chart. Organization chart is used to represent hierarchical
relationships.

Layout of PowerPoint is divided into different sections. These include:

1. Task panes: - Task panes are the window within an office application that
provides commonly used commands. Task panes are located on the right hand side
of the screen. To access it you have to press F6 from the keyboard.

2. Slide: The slide which you have inserted from the blank presentation option will
be placed at the centre of the screen. Layout of the slide: The screen of the slide is
divided into different placeholders. The placeholders can contain text, title, picture,
or a chart. Placeholders are nothing but the different objects like title, clipart, chart
etc inside the screen.

3. Thumbnails: Thumbnails are located at the left side of the screen. It contains
two tabs, outline and slide. Slide tab displays the full view of the slide. From here
you can change the slide design, layout, insert new slide, delete a slide, change the
slide transition, you can cut, copy & paste the slides and you can hide any slide.
Outline tab displays the contents (text) of the slide. From here you can format the
text, insert hyperlink, cut copy & paste the text.

4. Speaker notes: It is located at the bottom of your slide. The person making the
presentation may have made notes while developing the presentation to make sure
that the points are not forgotten or missed. PowerPoint provides a space called notes
page at the bottom of your slide to type such notes. It can be viewed while running
your presentation. Pressing the function key F6 moves us between each of these
sections.

In Microsoft PowerPoint, a hyperlink is a connection from a slide to another slide, a
custom show, a Web page, or a file. The hyperlink itself can be text or an object such
as a picture, graph, shape, or WordArt. An action button is a ready-made button that
you can insert into your presentation and define hyperlinks for. If the link is to
another slide, the destination slide is displayed in the PowerPoint presentation. If the
link is to a Web page, network location, or different type of file, the destination page
or file is displayed in the appropriate application or in a Web browser. In PowerPoint,
hyperlinks become active when you run your presentation, not when you are
creating it. Use action buttons when you want to include buttons with commonly
understood symbols for going to the next, previous, first, and last slides. PowerPoint
also has action buttons for playing movies or sounds.

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INTERNET & E-MAIL

WORLD WIDE WEB (WWW): An Internet client-server hypertext distributed
information retrieval system." The Web is not a network. The Web is not the Internet
itself. The Web is not a proprietary system like AOL. Instead the Web is a system of
clients (Web browsers) and servers that uses the Internet for its data exchange. The
Web allows rich and diverse communication by enabling you to access and interact
with text, graphics, animation, photos, audio and video. Web browser is the software
program you use to access the World Wide Web, the graphical portion of the
Internet. The first browser, called NCSA Mosaic, was developed at the National
Center for Supercomputing Applications in the early 1990s. The easy-to-use point-
and-click interface helped popularize the Web, although few could then imagine the
explosive growth that would soon occur.

Email is now an essential communication tools in business. It is also excellent for
keeping in touch with family and friends. The advantages to email are that it is free
(no charge per use) when compared to telephone, fax and postal services.

Information: There is a huge amount of information available on the internet for
just about every subject known to man, ranging from government law and services,
trade fairs and conferences, market information, new ideas and technical support.

Services: Many services are now provided on the Internet such as online banking,
job seeking and applications, and hotel reservations. Often these services are not
available off-line or cost more.

Buy or sell products: The Internet is a very effective way to buy and sell products
all over the world.

Communities - Communities of all types have sprung up on the Internet. Its a
great way to meet up. With people of similar interest and discuss common issues.

The Toolbar - The row of buttons at the top of your browser, known as the toolbar,
helps you travel through the web of possibilities, keeping track of where you've
been. Since the toolbars for Navigator and Internet Explorer differ slightly.
Bookmarks or Favorites lets you can record the addresses of websites you want to
revisit. Once you add a URL to your list, you can return to that web page simply by
clicking on the link in your list, instead of retyping the entire address.

The Address Bar - Just under the toolbar, you will see a box labeled "Location," "Go
To," or "Address." This is where you type the address or URL of a website you want
to visit. After you enter it, press the Return or Enter key to access the site or click on
the "Go" button to the right of the address box. By clicking the small triangle to the
right of the Location box, you will get a drop-down list of the most recent websites
you've visited. To revisit a site, just click on the address.

The Menu Bar - Located along the top of the browser window, the menu bar offers
a selection of things you can do with a web page, such as saving it to your hard drive
or increasing the size of the text on a page. Many of the choices are the same, as the
buttons on the toolbar below, so don't try to learn everything now. Click once on a
word to access the drop-down menu, and then click on the selection you want to
make.

224

Electronic mail or e-mail, allows computer users locally and worldwide to exchange
messages. Each user of e-mail has a mailbox address to which messages are sent.
Messages sent through e-mail can arrive within a matter of seconds. A powerful
aspect of e-mail is the option to send electronic files to a person's e-mail address.
Non-ASCII files, known as binary files, may be attached to e-mail messages. These
files are referred to as MIME attachments. MIME stands for Multimedia. Internet Mail
Extension, and was developed to help e-mail software handle a variety of file types.
For example, a document created in Microsoft Word can be attached to an e-mail
message and retrieved by the recipient with the appropriate e-mail program. Many
e-mail programs, including Eudora, Netscape Messenger, and Microsoft Outlook, offer
the ability to read files written in HTML, which is a MIME type.

There are Web servers, FTP servers, telnet servers and e-mail servers running on
millions of machines on the Internet right now. These applications run all the time on
the server machine and they listen to specific ports, waiting for people or programs
to attach to the port.

FTP stands for File Transfer Protocol, and is a way of copying files between
networked computers. . Anonymous FTP is an option that allows users to transfer
files from thousands of host computers on the Internet to their personal computer
account. FTP sites contain books, articles, software, games, images, sounds,
multimedia, course work, data sets, and more. FTP transfers can be performed on
the World Wide Web without the need for special software. In this case, the Web
browser will suffice.

Telnet is a program that allows you to log into computers on the Internet and use
online databases, library catalogs, chat services, and more. There are no graphics in
Telnet sessions, just text. To Telnet to a computer, you must know its address. This
can consist of words (locis.loc.gov) or numbers (140.147.254.3). Some services
require you to connect to a specific port on the remote computer. In this case, type
the port number after the Internet address. Example: telnet nri.reston.va.us 185.
Telnet is available on the World Wide Web. A link to a Telnet resource may look like
any other link, but it will launch a Telnet session to make the connection. A Telnet
program must be installed on your local computer and configured to your Web
browser in order to work. With the increasing popularity of the Web, Telnet has
become less frequently used as a means of access to information on the Internet.

NETFIND is an Internet user directory tool. It provides a simple Internet white
pages directory facility. Given the name of a person on the Internet and a rough
description of where the person works, Netfind attempts to locate telephone /
electronic mailbox information about the person. It does so using a seed database of
domains and hosts in the network. Netfind finds information about people through
the Internet protocols

IRC (Internet Relay Chat) is a multi-user, multi-channel chatting system. Imagine
sitting in front of your computer and "talking" through typed messages with either
one person or many other people from all over the Internet, all in real time!

MUD (Multiple User Dimension, Multiple User Dungeon, or Multiple User
Dialogue) is a computer program which users can log into and explore. Each user
takes control of a computerized persona/avatar/incarnation/character. You can walk
around, chat with other characters, explore dangerous monster-infested areas, solve
puzzles, and even create your very own rooms, descriptions and items.

225

Net lag - The Internet (the network which connects your computer to mine) is made
up of thousands of interconnected networks. Between your computer and the
computer which houses the MUD, there may be up to 30 gateways and links
connecting them over serial lines, high-speed modems, leased lines, satellite uplinks,
etc. If one of these gateways or lines crashes, is suddenly overloaded, or gets
routing confused, you may notice a long time of lag time between your input and the
MUD's reception of that input. Computers which are nearer to the computer running
the MUD are less susceptible to netlag. Another source of lag is if the computer
which hosts the MUD is overloaded. When netlag happens, it is best to just patiently
wait for it to pass.

Spamming, derived from a famous Monty Python sketch, is the flooding of
appropriate media with information (such as repeated very long say commands).
Unintentional spamming, such as what happens when you walk away from your
computer screen for a few minutes, then return to find several screenfuls of text
waiting to scroll by, is just a source of irritation. Intentional spamming, such as when
you repeat very long say commands many times, or quote /usr/dict/words at
someone, is usually frowned on, and can get you in trouble with the MUD
administration.

Client program - A client program is simply another program you use instead of
telnet to connect to a mud. Clients also provide useful things such as macros and the
ability to gag or highlight certain mud output. Clients are available for anonymous ftp
from several sites.

Internet Intranet
The Internet is available to the
public (everyone).
Intranet is a private network only available to
select users. E.g. a school may use an intranet
so that its pupils can work from home.
It has slow access speeds It has higher access speeds when compare to
Internet.
The information in internet is less
secured when compared with that
of Intranet
In Intranet the information is more secured
with that of Internet.
Different types of web browsers are
used to view the website in
Internet. e.g. Netscape, IE, Opera
Standardized type of browser is used to view
the website in Intranet.
Different types of operating
systems are used to view the
website (e.g. Windows, Mac)
Standardized type of operating systems are
used to view the website in intranet.
It accessible to Global audience
(e.g. multilingual, different
cultures)
It is Primarily accessible to local audience.

Phishing is an e-mail fraud method in which the perpetrator sends out legitimate-
looking email in an attempt to gather personal and financial information from
recipients. Typically, the messages appear to come from well known and trustworthy
Web sites. A phishing expedition, like the fishing expedition its named for, is a
speculative venture the phisher puts the lure hoping to fool at least a few of the
prey that encounter the bait. Phisher use a number of different social engineering
and e-mail spoofing ploys to try to trick their victims. The perpetrators e-mail used
AOL logos and contained legitimate links. If recipients clicked on the link, they were
taken to a spoofed Web page that asks for personal information, including credit card
numbers, personal identification numbers (PINs), social security numbers, banking
numbers, and passwords. This information was used for identity theft.

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Vishing is an activity where fraudsters trick unsuspecting customers into providing
their personal and financial details over the phone. Usually fraudsters pose as
representatives of large companies, banks or public authorities like Reserve Bank of
India. The details are used to carry out fraudulent transactions in the customers
account.

Objective Questions

1. Window is a ___________ user interface.
a) Character b) Graphical c) Both a and b d) None

2. Expand DOS
a) Disk Operating System b) Disk Open System c) Dynamic Operating System
d) None

3. Directory can be deleted by using ______ DOS command.
a) CD b) MD c) RMDIR d) Del

4. Which of the following is the DOS external command?
a) Format b) CLS c) SYS d) DISKCOPY d) a & b

5. Operating system is a type of software _________.
a) Application software b) System software c) Both a and b d) None

6. LAN stands for __________.
a) Local Area Network b) Local and Network c) None

7. New Directory is created by using _____DOS command.
a) MKDIR b) MD c) Both a and b d) None

8. Which of the following is not an operating system?
a) DOS b) UNIX c) LINUX d) Windows e) None

9. Which of the following is an input device?
a) MS- DOS b) CPU c) Input data d) Keyboard

10. The _______ shortcut key is redo the last undone action.
a) Ctrl and Y b) Ctrl and Z c) Ctrl and U d) Ctrl and V

11. The _______ shortcut key is cut the selected text or word.
a) Alt and E, T b) Ctrl and X c) Both a and b d) None

12. The ______ shortcut key does the central alignment.
a) Ctrl and L b) Ctrl and R c) Ctrl and E d) Ctrl and J

13. To open a document, which of the following commands are True?
a) Ctrl and O b) Select file on menu bar and open c) Alt and O d) Alt and F

14. The Repeat on Edit menu repeats which of the following actions?
a) The last action b) The second last action c) All previous change d) None

15. What is the keyboard shortcut to display the symbol dialogue box?
a) Alt + I + S b) Alt + S + I c) Ctrl + I + S d) Ctrl + S + I

16. The _______ shortcut key is zooming a page.
a) Alt + F + V b) Alt + V + Z c) Alt + F4 d) Alt + F + C

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17. The ______ shortcut key is to select the entire document.
a) Ctrl + Z b) Ctrl + C c) Ctrl + V d) Ctrl + A

18. Excel is a ________ program.
a) Spread sheet b) Application c) Software d) Hardware

19. Which of the following is an Excel Component?
a) Title bar b) Caption button c) Menu bar d) All of the above

20. A ___ is an electronic ledger having a set of cells arranged in rows and columns.
a) Workbook b) Cell c) Worksheet d) All of the above

21. The worksheet option is available on the _______ menu.
a) Insert b) Format c) View d) Edit

22. Which one is an Excel function name?
a) MAX b) MIN c) SUM d) All of the above

23. The ______ Excel function returns a positive square root of a number.
a) PRODUCT b) FACT c) MOD d) SQRT

24. The ______ Chart component represents a data series.
a) Legends b) Axes c) Category d) Labels

25. The Picture option is available on the ______ Menu.
a) Insert b) Edit c) Format d) Data

26. Keyboard shortcut for opening the format cells dialog box.
a) Ctrl + I b) Alt + 1 c) Ctrl + 1 d) Shift + 1

27. Excel chart is used __________.
a) Analyze values b) Analyze numerical value c) Both a and b d) None

28. What is the valid font size in power point?
a) 10 b) 12 c) 14 d) 8

29. If the ruler is hidden choose the ruler from the _____ menu.
a) File b) Edit c) View d) Tools

Question Bank

1. I/O in respect of computers stands for
a) Intake/ Output b) Import/ non-import c) Input/Output d) All.

2. A peripheral device
a) May be used for input b) May be used for output c) May be used for storage
d) All.

3. UNIX is a
a) Multi-user operating system b) Single user operating system
c) Language d) None.

4. A new directory is created using the command:
a) CHDIR b) RMDIR c) MKDIR d) MAKE

5. Use the _______ command to change the name of a file:
a) REN b) COPY c) RENUM d) None.

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6. The symbol that shows you where the mouse is on the screen is:
a) icon b) mouse pointer c) arrow d) director e) Cursor

7. The FIND option in the start menu in Windows is for:
a) search files only b) search folders only c) both a and b d) none

8. Selection of text can be of:
a) single word b) single line c) paragraph d) all

9. Which of the following menus has the spelling and grammar tool?
a) Insert menu b) Format menu c) Tools menu d) Edit menu

10. Address of the first cell in the worksheet.
a) 1 b) A c) A1 d) 1A

11. Which of the following is an Internet Service Provider.
a) VSNL b) Satyam Online c) Both a and b d) None

12. Which one is the presentation software?
a) MS Word b) MS Power point c) MS Excel d) MS Access

13. Advantage of Email is
a) Low speed b) High cost c) High speed d) None

14. Which one of the following is used to convert digital signals to analog signals and
vice-versa?
a) Modem b) Phone c) Printer d) none

15. What is the intersection of a column and a row on a worksheet called?
a) Column b) Value c) Cell d) Address

16. Which of the following is a peripheral device?
a) Dot matrix printer b) MS- DOS c) Control unit of CPU d) Input data

17. Which of the following is the DOS external command?
a) Format b) SYS c) DISKCOPY d) All

18. An operating system is which type of software?
a) Application software b) System software c) Both a and b d) None

19. Save as on file menu is used for which of the following?
a) Save changes b) Save to file first time c) Copies the file into another d) None

20. A table is a grid of rows and columns containing boxes of:
a) Text or graphics b) Only text c) Only graphics d) None

21. What is the default width of the cell in the worksheet?
a) 8.45 b) 8.43 c) 8.4 d) 8.44

22. How many default worksheets are available in a work book?
a) 4 b) 5 c) 2 d) 3

23. Default order in excel when you select the sort option from the menu?
a) Descending b) Ascending c) both a and b d) None

229

24. What is the name of the last column in the worksheet?
a) V b) VI c) IV d) VII e) Depends on system resource

25. What is the valid font size in power point?
a) X b) 12 c) IX d) XI

26. Symbol option is available in which menu in word?
a) View b) Edit c) Insert d) Tools

27. View slide option is available in which menu?
a) Edit b) Format c) Tools d) Slide show

28. How many steps are available in auto content wizard?
a) 3 b) 5 c) 4 d) 2

29. What is the default font in word?
a) Arial b) Times New Roman c) Verdana d) None

30. What is the default representation (transfer type) for FTP?
a) Binary b) ASCII c) Both a and b d) None

31. Which chart component is to represent a data series? Answer: labels.

32. What is the key board short cut for opening format cells dialogue box?
Answer: Control and 1

33. Excel chart is used for Analyses values and numerical values.

34. To plot profit and loss over a seven years period which chart is best suited? Line

35. If the ruler is hidden, chooses the ruler combined from the view menu.

36. The shortcut key to redo the last undone action is Control + Y

37. =sum(a2:a10) is an example of a
a) Function b) Formula c) Cell address d) Value

38. All the following terms are associated with spreadsheet software except
a) Worksheet b) Cell c) Formula d) Virus detection

39. Name which is not a removable media
a) ROM b) Diskette c) DVD d) Pen Drive e) None of the above

40. when a file contains instructions that can be carried out by the computer, it is
often called
a) Data b) Information c) Application d) Executable e) Assembly

41. Which is not a computer programming language?
a) C++ b) Java c) Visual Basic d) Machine language e) None

Question Bank

1. The fastest computer is called Super Computer

2. Scanner is an Input device.

3. Magnetic tape is an example of Secondary memory.

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4. A memory which cannot be altered is called ROM

5. All mathematical, logical operations are done by ALU

6. Which is not a feature of UNIX GUI

7. The commands readily available on disk are Bootstrap

8. The page in windows that comes after full loading is Desk top

9. The bottom portion of desktop on active window shown is called Taskbar

10.To close an existing window the shortcut key is Alt F4

11. Ctrl+ Alt+ Del results in restart

12. Spell check is present in Tools

13. A ready-made example is called Wizard

14. The default saving folder in word is My documents

15. Ctrl + C is a short cut for Copy

16. To select all the short cut is Control + A

17. To switch between open windows we can use Alt + Tab

18. The feature with big size first letter is called Drop cap

19. To send a document of the same content, to different we can use mail merge

20. A group of commands to act as a single command is Macro

21. The files with .dot extension are called Template

22. Excel files have default extension of XLS

23. To find sum of values from b4 to b10 the symbol is colon

24. Formulas in excel begin with which symbol Equals (=)

25. Function to obtain the absolute value of a numeric is ABS

26. To select desired data we can use Filter

27. The extension of power point file is PPT

28. The shortcut to insert a new slide is Control + M

29. Order and timing of parts of a slide can be done in Preview

30. The protocol to operate the internet is FTP

31. Internet explorer is an example of Browser

231

32. Google is an example of Search engine

33. The incoming mails are stored in Inbox

34. Password is always appearing as Special characters

35. Yahoo is an example of Client server

36. To connect a computer telephone line we need Modem

37. The global monitoring body for internet is WWW

38. Every system on the net is identified with unique IP address

39. The message part of an E-mail is called Compose

40. _____ computer is the fastest computer. Super

41. Windows NT is an _________ Operating system

42. To delete all files in a directory the ______ command can be used. Del

43. GUI .. Graphical User Interface

44. Mail merge involves merging of the ____with a data source. Document

45. The worksheets contain _____ columns. 256

46. Give one slide layout name that you know in power point ___ Table

47. Name one web browser software. Internet Explorer

48. WAN stands for _____________ Wide Area Network

49. ------is used to login remote computer. Internet explorer

50. The Web is a series of interconnected documents stored on a computer
somewhere called a _____. Server

51. MUD stands for ____________. Multi User Domain

State whether True or False from the following statements.

1. MS- DOS is a multi user operating system. True
2. To quit MS-Word click on the file menu and then click on the exit option. True
3. Scrolling means moving the text view. True
4. The ruler can be used to set indents, tabs, column widths and margins. True
5. BACKSPACE to insert a character to the left of the insertion point. False
6. Format-> row-> hide is selected to hide the selected row. True
7. Protocol is a set of rules and procedures that enables computers to communicate
over a network. True
8. URL stands for Uniform Resource Language. False
9. A mailbox is a location on an email server where incoming messages are stored
for a user. True
10. Network is a collection of networks. True
11. Hard Disk is a storage device. True
12. MS- DOS is a GUI operating system. False

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13. FORMAT is a Dos Internal command. False
14. Double click mouse on a word in MS word, it selects that word. True
15. To display the current time, the TIME function can be used in MS- Excel. True
16. .Com is the extension of the power point file. Answer: False
17. The internet and www are two names for the same thing. False
18. The talk program allows you to connect your computer to someone elses
computer and the type a message back and forth. True
19. USENET is a large collection of discussion groups. True
20. IRC stands for Internet Relay Communication. True

I. Fill in the blanks:

1. Expand ROM__ Read only memory
2. Directory can be deleted by using ____dos command. RD <name>
3. Name any two dos internal commands. Copy, Ren, Type and Cls
4. What does MS DOS stand for? Micro Soft Disk Operating System
5. Shortcut key to close an application in windows______ Alt F4
6. LAN stands for__ Local Area Network
7. Short cut key to copy files or data __ Control + C
8. How to find the address of the cell ___ Insert + C
9. How to find the maximum value of numbers entered from c20 to c50____
=max (c20:c50) and press enter
10.______is a collection of computers or computer like devices that can
communicate across a common transmission media. Internet
11. Expand HTTP_____ Hyper Text Transfer Protocol
12. Modem is used to convert digital signals into analog signals and vice versa.
13. Power point is a ___programme Presentation
14. Main purpose of slide sorter view is ___ To view all slides at one time
15. Headers and footers are edited in ____________ view Print preview

Question Answer
CLS DOS command
Windows 98 Multi task operating system
ppt Extension of power point file
Mail merge Send same letter to different addresses
Primary key Record can be identified uniquely
Email Sending and receiving electronic composed letters
Internet Network of networks
Keyboard Input device
Floppy Storage device
Internet Explorer Web browser
FTP Protocol
Cell Basic unit on the worksheet.
Hard disk Storage device
Windows 95 Operating system.
Net scape navigator Web browser
Plotter Output device
Computer network Collection of computers
TREE Directory structure
Windows help F1 Key
Compiler System software
Header Displayed in top margin
Auto filter Creates a series
Slide Each individual page in presentation
URL Uniform Resource Locator

233


Guide to Staff Welfare/Other Schemes

Bank has been extending various facilities/financial assistance under different
schemes from time to time for the benefit of staff members and the gist of such
schemes is furnished here under:

1) Reimbursement of Expenses incurred towards Food and Beverages: All
employees on the rolls of the Bank including Part Time Sweepers on graded scale
wages are covered under the scheme. Bank reimburses `300/- per month to
employees, who attends office for more than 10 days in a month, towards Food and
Beverages expenses. The amount is to be claimed before the end of succeeding
month to which it relates and no arrears will be paid. (Cir.no.555 Ref 20/100 dated
29.03.08)

2) Subsidized Canteen: Bank is providing subsidized canteen facility to the
employees where the staff strength exceeds 50. The subsidy is being paid to the
canteen contractor @ `30/- per employee per month at Hyderabad and `25/- per
employee per month at other centers.

3) Incentives for Excellence in Education to the Children of Employees: Bank
is providing cash incentive every year to the children of employees (maximum of
two) to encourage them for further studies. It covers all children who are studying
First Standard to Post Graduation. However, this scheme is applicable to only those
children who are wholly dependent and whose age is below 25 years. The quantum
of incentive per annum per child is as under:

No Standard Incentive amount
1 First Standard to SSC (X or equivalent) 2000
2 Intermediate (XI & XII classes) 2000
3 Graduation / Post Graduation 3000

To claim the incentive, eligible employees are required to submit application (April to
December) along with proof of pass and continuation of studies to the branch/office
for onward submission to controlling office for sanction. Courses pursued under
Distant Education mode or in a Foreign Country are not covered under the
scheme. (Cir.no.193 Ref 03/36 dated 07.08.13)

4) Merit Awards to the Children of Employees: To encourage meritorious
students among the children of staff, Bank introduced Zone-wise Merit Award
Scheme. Head office is also considered as a separate zone for this purpose. Merit
Awards will be given for Boys and Girls separately for four categories viz., Officers,
Clerks, Sub-staff and PTS. Zonal office will call applications every year. Students who
have passed the examinations conducted during March to August are eligible to apply
for awards. The toppers of each group will be given the following cash incentives.

Rank VII Class SSC/SSLC/HSC
Intermediate
MPC/BZC Comm./Arts
First 800 900 1000 1000
Second 700 800 900 900
Third 600 700 800 800
Fourth 500 600 700 700
(Cir.no.555 Ref 20/100 dated 29.03.08)
5) Mentally retarded children Financial Relief: An amount of `10000/- per
annum will be paid to the staff whose children are mentally retarded till the child
attain the age of 25 years. (Cir.no.413 Ref 20/72 dated 29.02.2008)

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6) Andhra Bank Employees Group Insurance Scheme Payment of
Premium: Bank entered agreement with LIC of India to cover the life risk of all the
employees and the relevant premium is being born by the Bank. The premium
calculated for all employees who are on rolls as on the last working day of February
every year and paid to LIC. The amount of coverage is as under:

No Cadre Risk coverage
1 JM-I to General Manager 375000
2 Clerks 200000
3 Sub-staff / Part Time Sweeper (Full wages) 100000
4 Part Time Sweeper (3/4 wages) 75000

7) Holiday Homes: All employees (including retired employees) of the bank, who
are proceeding on holiday or leave, can avail Holiday Home facility with nominal rate
at 14 centers viz., Bangalore, Bhubaneshwar, Chennai, Goa, Haridwar, Ooty, Manali,
Mysore, New Delhi, Shirdi, Tirupathi, Tirumala, Varanasi and Gagtok. At present the
tariff for the room is `10/- per day in case of Officer Staff and `5/- per day in case
of Award Staff. The maximum stay allowed is 4 days only. However, it is restricted to
maximum of 3 days with regard to stay at centres like Bangalore, Chennai, Mysore,
Shirdi and Varanasi. Employees desirous of availing the facility are required to send
an application through Branch/Office to Staff Welfare Department, Head Office for
allotment of room. Cancellation should be intimated to Staff Welfare Department at
least 2 days prior to the date for which the reservation is booked, otherwise bank
imposes a penalty of `200/- per day. (Cir.no.16 Ref 03/1 dated 11.04.12)

8) General Health Check-up: All staff members/spouse who are on the rolls of the
Bank and who have completed 40 years of age are eligible to claim for
reimbursement of expenses for general health check-up subject to maximum of
`2500/- in Metros and `2000/- at other places. However, additional reimbursement
of expenses for Mammography test subject to maximum of `600/- is available to all
eligible women employees / spouse of employees (who have completed 40 years)
w.e.f.24.03.2006. The reimbursement of expenses is subject to production of
relevant receipts/bills of approved Hospitals/Diagnostic centers. This scheme is
applicable to spouse of the staff members also. This facility can be availed by the
eligible staff once in 2 years. (Cir.no.346 Ref 3/45 dated 26.12.2008)

9) Eye Check-up & Spectacles: All staff members who are on the rolls of the Bank
are eligible to claim reimbursement of expenses for Eye Check-up and purchase of
spectacles subject to maximum of `1000/-. This is a onetime reimbursement in the
entire service. (Cir.no.555 Ref 20/100 dated 29.03.2006)

10) Hospitalization Expenses Major ailments: Reimbursement of
hospitalization expenses for major ailments (By-pass surgery, Angio-plasty, Kidney
transplantation, Cancer, Gastro enterology, Brain Surgery and Orthopedic surgery
and other rare and costly ailments approved by HO) over and above IBA package will
be reimbursed subject to maximum of `100000/- under Staff Welfare Schemes.
However, the difference in sanctioned amount and the amount claimed by the
employee should be above `25000/-. All staff members and their dependants are
covered under this scheme. (Cir.no.191 Ref 3/29 dated 23.09.09)

11) Furniture Maintenance Charges: Officers who have availed the residential
furniture facility are eligible to claim reimbursement of maintenance charges incurred
on declaration basis after 3 years of purchase @ 5% of the original cost of the items

235

every year. However, items like mattresses and pillows are not covered under the
scheme. (Cir no.20 Ref 3/06 dated 21.04.2010)
12) Physically Challenged Employees / Children: All staff members who submit
disability certificate are eligible to avail this facility. Under this scheme bank
reimburse an amount not exceeding `10000/- and `15000/- for purchase of Wheel
chair/Crutches and Artificial Limb/Hearing Aid respectively. Bank reimburses the
amount once in 5 years in case of Wheel Chair/Crutches and once in 2 years in case
of Artificial Limb / Hearing Aid. The above reimbursement is also available to the
spouse / children of staff who are physically challenged. (Cir.no.413 Ref 20/72 dated
29.02.08 & Cir.no.191 Ref 3/29 dated 23.09.09)
13) Group Personal Accident Insurance (GPA): Bank has taken Group Accident
policy from M/s.United India Insurance Company Limited to cover the employees
against risks round the clock. It covers death, permanent disablement and partial
disablement. The risk coverage of various categories is as follows:
No Category Coverage (` in lakhs)
1 CMD 10.00
2 Executive Director 8.00
3 General Managers 7.00
4 Deputy General Managers 6.00
5 Asst. General Managers 5.00
6 Chief Managers 4.00
7 Senior Managers 3.00
8 Deputy Managers 2.00
9 Asst. Managers 1.50
10 Clerks / Pilots / Drivers 1.00
11 Sub-staff (including PTS/Security guards) 0.50
14) Group Savings Linked Insurance Scheme (GSLI): All permanent Employees
who are in service including PTS are eligible to join the scheme. It is optional to the
existing employees where as for the new entrants it is mandatory. No employee after
giving consent/joining the scheme shall be allowed to withdraw from the scheme.
Bank collects monthly contributions and remits to LIC of India. The monthly premium
payable and risk coverage of various categories is furnished here under:
No Category
Monthly Premium
(Savings plus Risk)
Sum assured
1 Scale IV & above 531.25 500000
2 JM-I to MM-III 425.00 400000
3 Clerks 212.50 200000
4 Sub-staff (including PTS) 106.25 100000
The monthly contribution includes two components viz., Savings & Risk premium in
the ratio of 65:35. The saving component earns interest @ 8% p.a. and will be paid
to the employee/legal heirs when the scheme comes to an end due to
retirement/resignation/demise of the employee. In case of expiry of an employee
due to accident, double the sum assured will be paid by LIC of India. (Circular
no.103 Ref 3/21 dated 18.06.2013)
15) Silver Jubilee Awards: Employees who have completed 25 years of service are
honoured by presentation of an award with a cost not exceeding to `2000/- and the
same is to be presented in a staff meeting at branch/office.

236


16) Liability Insurance: It covers the lives of the employees to the extent of
liabilities outstanding in Housing / Vehicle Loan as on 31
st
March every year and also
on fresh disbursal by IFLIC of India. Premium is payable by the employee to the
debit of respective loan accounts and the details of the coverage is as under:
Category Coverage Insurance Premia
Housing
Loans
Liability as on 31
st
March every
year subject to maximum of `20
lakhs (inclusive of addl.HL).
`4.70 per thousand per annum
or maximum of `9400/-
Vehicle
Loans
Liability as on 31
st
March every
year subject to maximum of `4.50
lakhs & `0.60 lakh for four & two
wheeler loans respectively.
`3.86 per thousand per annum
or maximum `1351/- for 4
wheeler & `232/- for 2 wheeler
(Cir.no.426 Ref 3/77 dated 19.03.2011)

Facilities to Retired (Superannuation) Employees:

Besides terminal benefits (Pension/PF/Gratuity/Leave encashment etc.,) the retired
employees are entitled to avail the following benefits / facilities from the Bank:

1. Memento/Gift on the day of Retirement on superannuation: In recognition
of the service rendered by the employees (including PTS) Bank is presenting a
Memento/Gift worth `12500/- on the eve of retirement from service. (Cir.no.177
Ref 03/31 dated 19.08.2011)

2. Reimbursement of Transport Charges: Employees who retire on
superannuation are eligible to claim reimbursement of transport charges (luggage)
incurred on account of shifting of luggage from the office where he took retirement
to the place of permanent settlement in India by submitting TA Bill. Employee is
eligible to claim all expenses on par with normal transfer TA Bill except DA.

3. Retention of Residential Furniture: Officers who availed residential furniture
can retain the items on retirement by paying the following amounts to the Bank. The
scheme is also available to officers who voluntarily retire from Banks service / resign
after completion of 28 years service. (Cir.no.45 Ref 3/4 dated 02.05.2012)

Age of the furniture Amount to be recovered
Below 5 Years
Book Value if original cost is above `5000/-.
For items with Book Value with less than 5000/-, 50%
of original cost
5 Years & < 7 Years 40% of original cost or Book Value whichever is higher.
7 Years & above 25% of original cost or Book Value whichever is higher.

4. Holiday Homes: Bank is extending Holiday Home facility to the retired
employees also. Retired employees can avail this facility at select centers with
nominal rate. At present the tariff for the room is `10/- per day in case of Officer
Staff and `5/- per day in case of Award Staff. The maximum stay allowed is 4 days
only. However, the maximum stay is restricted to 2 days at important locations. For
allotment of rooms they need to submit application to Staff Welfare Department,
Head Office. (Cir.no.555 Ref 20/100 dated 29.03.08)

5. Hospitalization Scheme for retired employees on superannuation: Bank is
reimbursing medical expenditure incurred on surgery of major ailments (including
Cataract surgery, Prostrate surgery, Hysterectomy operation) to the tune of `2.5

237

lakhs for self and `1.5 lakhs for spouse with a margin of 10% and 25% for self and
spouse respectively. However, in case of cancer treatment (without surgery) the
reimbursement is allowed up to `100000/- per year. (Cir.no.413 Ref 20/72 dated
29.02.2008 & Cir no. 16 Ref 3/1 dated 11.04.2012). It is desirable that the medical
claim is to be routed through the pension paying branch for operational convenience.

6. Additional Interest Rate: All retired/resigned employees are eligible for 1%
additional interest on the deposits made by them under Savings/Term Deposits.
Further, they are also eligible for Senior Citizen interest rate (0.50% extra) besides
staff interest rate. (Cir.no.04 Ref 3/1 dated 05.04.2011)

Guide to Bereaved Families

Taking care of family members is the sacred responsibility of the family head and he
is expected to take all possible care so that the spouse/children should not to face
financial problems even in his absence i.e. untimely demise. Bank has been
extending various facilities/benefits to the bereaved families through different
schemes. Hence, staff and their family members are necessarily to have an idea of
these schemes and the associated benefits thereon. The nominees/legal heirs are
entitled to avail the following financial benefits/facilities from Bank and other
organizations:

1) Family Pension: In case of an employee who opts for pension and expired after
completion of 7 years of service, higher family pension equal to 50% of pay last
drawn by the deceased employee or twice the ordinary rate of family pension
whichever is less is payable.

2) Provident Fund: The actual contribution made by the employee/bank, and
interest thereon, which includes Voluntary Provident Fund. However, PF Loan, if any,
will be adjusted from the above contributions.

3) Gratuity: Employee is eligible for 15 days for every completed 26 working days
and accordingly the eligible amount will be paid subject to the ceiling, if any. This
amount will be paid immediately.

4) Future Service Gratuity Insurance: Bank has taken master policy for the said
purpose. In case of death of any employee, Bank submits the claim to LIC and the
same will be paid to the nominees of the deceased on receipt of claim amount from
LIC. Normally, the settlement of claim takes 3 to 6 months. (Cir.no.360 Ref 20/62
dated 01.01.2008)

5) Leave Encashment: Bank pays the amount for the unavailed Privileged Leave, if
any, subject to maximum of 240 days. The last drawn salary is the basis for
calculation and payment.

6) Exgratia: Bank pays an amount of `1.50 lakh towards exgratia to the families
(Nominees/Legal heirs) of the employee who die in harness. Advance amount of
`25000/- will be paid immediately to meet the funeral related expenses and the
same will be adjusted from the exgratia amount. (Cir.no.413 Ref 20/72 dt.29.02.08)

7) Financial Aid to Bereaved Families of the Employees who die in harness
(FABF): It is a voluntary contributory scheme and the interested employees can
become member of the scheme by submitting option-cum-nomination letter to Head
Office. The members are required to contribute `10/-, `6/- and `4/- for officers,
clerks and sub-staff respectively for each death. The average amount payable under
the scheme is around `100000/-. (Cir.no.560 Ref 20/112 dated 09.03.2004 & Cir.no.
143 Ref 3/28 dated 23.07.2010)

238


8) Educational Grant to the children: The children of the deceased are entitled to
claim reimbursement of `2000/- for X class, `2000/- for Intermediate and `3000/-
for Graduation/Post Graduation for each child every year subject to maximum of two
children. However, they are eligible to avail this facility only up to the age of 25
years or superannuation date of the deceased whichever occurs earlier. The
application is to be forwarded through the branch where the deceased employee
worked. (Cir. no.193 Ref 3/36 dated 07.08.2013)

9) Residential Furniture: Family of the deceased is allowed to retain the furniture
provided by the bank under Officers Residential Furniture Scheme without payment
of any amount/charges to the bank. (Cir.no.131 Ref 4/1 dated 20.06.2005)

10) Leased Accommodation: Family members of the deceased employee are
entitled to retain the quarters till completion of the succeeding month or current
academic year whichever occurs later.

11) Reimbursement of Transport Charges: Family members are eligible to claim
reimbursement of transport charges (luggage) incurred on account of shifting of
luggage from the place of work of the deceased to the place of permanent settlement
in India by submitting TA Bill and they are entitled to claim all expenses and the TA
Bill is treated on par with normal transfer TA Bill except Dearness Allowance.
12) Group Savings Linked Insurance Scheme (GSLI): All permanent Employees
who are in service including PTS are eligible to join the scheme. It is optional to the
existing employees where as for the new entrants it is mandatory. No employee after
giving consent/joining the scheme shall be allowed to withdraw from the scheme.
Bank collects monthly contributions and remits to LIC of India. The monthly premium
payable and risk coverage of various categories is furnished here under:
No Category
Monthly Premium
(Savings plus Risk)
Sum assured
1 Scale IV & above 531.25 500000
2 JM-I to MM-III 425.00 400000
3 Clerks 212.50 200000
4 Sub-staff (including PTS) 106.25 100000
The monthly contribution includes two components viz., Savings & Risk premium in
the ratio of 65:35. The saving component earns interest @ 8% p.a. and will be paid
to the employee/legal heirs when the scheme comes to an end due to
retirement/resignation/demise of the employee. In case of expiry of an employee
due to accident, double the sum assured will be paid by LIC of India. (Circular
no.103 Ref 3/21 dated 18.06.2013)
13) Compensation & Reward for resisting crime against Bank: To protect the
interest of the family members of the employee who dies on account of resisting
crime against bank, the following amounts will be paid to the bereaved family.

No Facility Remarks
1 Compensation Officers - ` 20 lakh; Clerical/Sub-staff - ` 10 lakh
2
Pay &
Allowances
Bank continues to pay last pay drawn by the deceased
officer, till one of the children attains age of 21 years or
normal retirement age of the deceased whichever is earlier.
3 Education Exp. Up to Degree for children.
4 Employment This is applicable only to those deceased employees who
have completed 5 years of service or before reaching the

239

age of 30 years, whichever is later. The appointment shall
be made only in the clerical and sub-staff cadre. (cir no.
227 Ref 3/18 dated 27.09.2007)
In case of survival Cash reward of ` 2 lakh will be paid besides eligible for out
of turn promotion or advance increment. (Cir no. 223 Ref 3/50 dated 27.08.12)

14) Liability Insurance: All liabilities of staff members under Housing and Vehicle
loans are insured and bank claims the amount from LIC of India in case of death of
the employee and adjust the same to the respective loan accounts. The maximum
coverage for Housing and Vehicle loans is `20 lakhs and `4.50 lakhs respectively.
However, in case of two wheeler the maximum coverage available is `60000/- only.
(Cir.no.438 Ref 3/67 dated 15.03.09)

15) Other reimbursements: The family members of the deceased are entitled to
claim the reimbursement of News Paper, Conveyance and Refreshments of the
current month/quarter and arrears if any from the branch.

16) Group Insurance Scheme (CODST): This is a Group Policy taken by the Bank
with LIC to cover the lives of the employees of the Bank with the following coverage.

No Category Coverage
1 Officers (JM-I to SM-VII) 375000
2 Clerks 200000
3 Sub-staff 100000
4 PTS wages 75000
5 PTS wages 50000
6 PTS 1/3 wages 33000

17) Group Personal Accident Insurance (GPA): Bank has taken Group Accident
policy from M/s.United India Insurance Company Limited to cover the employees
against risks round the clock. It covers death, permanent disablement and partial
disablement. The risk coverage of various categories is as follows:
No Category Coverage (`lakhs)
1 CMD 10.00
2 Executive Director 8.00
3 General Managers 7.00
4 Deputy General Managers 6.00
5 Asst. General Managers 5.00
6 Chief Managers 4.00
7 Senior Managers 3.00
8 Deputy Managers 2.00
9 Asst. Managers 1.50
10 Clerks / Pilots / Drivers 1.00
11 Sub-staff / PTS/Security guards 0.50

18) Scheme of payment of ex-gratia in lieu of appointment of dependants on
compassionate grounds: This scheme is applicable to employees who die in
harness and employees who seek premature retirement due to incapacitation before
reaching the age of 55 years. Bank grants ex-gratia to the family of the eligible
employee (Officers - `8 lakhs, Clerks - `7 lakhs and Sub-staff - `6 lakhs), provided
the monthly income of the family from all sources is less than 60% of last drawn
salary (net of the taxes) of the employee. The dependents should make an
application within 6 months from the date of the death of the employee. The ex-
gratia amount in eligible cases will be paid within 3 months of receipt of application,
if the same is complete in all respects. (Cir.no.227 Ref 3/18 dated 27.09.2007)

240


Other Institutions / Organizations

1) Surety Loan: In case where the deceased employee availed loan from Andhra
Bank Employees Co-operative Bank Limited, the balance under Thrift and MMBF
contributions are adjusted to surety loan and the remaining balance will be written-
off through insurance cover. The family members need not to pay liability under
surety loan of Andhra Bank Employees Co-operative Bank. In case where there are
no outstanding dues by the member, a sum of `20000/- will be paid to the nominee
or dependants.

2) Funeral Expenses: In case where the deceased is a member of Andhra Bank
Employees Co-operative Bank, `2500/- will be paid by the bank to the family
members of the deceased towards funeral expenses.

2) Andhra Bank Officers` Federation is extending exgratia of `50000/- to the
family members of the deceased officer. However, this scheme is meant for those
officers who are members of the federation only. (Federation cir.no.4/SW/2007
dated 17.01.2007)

3) Insurance Claims: The family members of the deceased are entitled for the sum
assured mentioned below provided the deceased maintains/avails the
accounts/facilities.

No Account / Product Coverage Remarks
1 AB Visa Platinum 1000000 Accidental Death
2 AB Gold Card 500000 Accidental Death
3 AB Classic Card 200000 Accidental Death
4 Abhaya Gold 100000 Accidental Death
5 AB Jeevan Abhaya 100000 Natural / Accidental Death
6 Abhaya Savings Plus 50000 Accidental Death
7 Abhaya 25000 Accidental Death
Note: Claims will be settled by the respective insurance companies as per the
eligibility and Bank acts as facilitator only.

Important Points:

All staff members should ensure that nomination is submitted for Pension,
PF, Gratuity, FABF, GSLI, Credit card, Andhra Bank Employees Co-operative
Bank, Insurance Linked Accounts etc., to avoid delay in settlement of claims.
Branch/Office to communicate the demise of the employee to Welfare
Department, Head Office, Andhra Bank Employees Co-operative Bank, Credit
Card Department etc., immediately.
Branch/Office to submit the death certificate of the deceased to Head Office to
settle terminal benefits (Pension, PF, Gratuity etc.,) immediately. In case of
accidental death, branch to should send death certificate along with copy of
FIR/Post Mortem Report.
Wherever the deceased staff member has not submitted nomination, the
branch/office has to obtain claim forms from the legal heirs as per the
procedure laid down for payment of amounts by Bank. However, in such
cases, the claims will be settled only at HO.
With regard to Abhaya, Abhaya Plus, Abhaya Gold and Abhaya Jeevan, the
claim is to be submitted at the respective branches where the deceased
maintained said accounts.
Any expenditure under staff welfare has to be claimed before the expiry of
the following financial year failing which the same stands lapsed.
***

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