Why do customers do Time/Term Deposits?

Ans – The main reason of doing a term deposit (in the form of FD/RD) in a Bank is to earn higher interest
than saving account. A Term deposit can be done by both individual and business customers for a fixed
time period. Each bank is free to decide deposit rates for Time/Term Deposits.

What is a Fixed Deposit Account?

Ans- A Fixed Deposit Account is a type of Term Deposit Account in which a customer will place a certain
amount with the Bank for a Fixed Time Period, earning a Fixed Rate of Interest. The minimum time period
of a FD in a Bank is 7 days and the maximum time period of a FD in a Bank is 10 years.

The FD rates offered by a Bank are dependent on the time period and not on the amount. For example if a
Bank offers 7% FD rate for 1 year, then if a customer does FD for 1 Lac or 10 Lac, he will receive 7% only for
1 year FD.
Fixed Deposit Features

 The FD is a contract between the Bank and the customer, which a bank cannot break. This means
that the bank will offer the agreed FD interest rate, till the time the customer has kept deposit with
it.

 Banks do not offer FD beyond 10 years because it is difficult for a Bank to predict FD rates beyond
10 years. Also it is more difficult for the Bank to offer a contract rate for such a long period and
then honor the contract. If FD rates come down in future, Banks cannot ask customers to close
their existing FD’s and open FD’s again at lower rates.

 The Customer has 3 options for getting the FD interest credited in his account. The customer can
request for Monthly Payout, Quarterly Payout or Interest Payout at Maturity.

 The Banks offer Compound Interest on FD’s. However the compounding effect on FD interest is
offered on quarterly basis.

 If a customer does a single FD in a Bank for more than 1 crore, then that deposit is called as Bulk
Deposit. A Bank usually offers more interest on Bulk Deposit in comparison to normal deposit
for same time period.

Can a FD be closed prematurely (before the maturity date)?

Ans - A FD is a contract between the Bank and the Customer, which a Bank cannot break. The Bank will
have to honor the FD commitment, till the maturity date.

However, the customer is given the option to prematurely close the FD, in-case he wants his funds back,
before the maturity date. If a customer does so, then he will have to give a penalty in the form of interest
of 1-2%.

What is a Recurring Deposit?

Ans - A recurring deposit is the type of time deposit, in which, customer places the money in the bank in
fixed intervals like monthly, quarterly installments. The customer will select the monthly/quarterly amount
and the time period of the Recurring Deposit. The minimum time period for a RD is 6 months and
maximum time period is 10 years.

The interest rate offered by the Bank in FD and RD is the same.

RD is normally done by those customers who do not have enough funds to deposit in bank as one time in
the form of FD.
What is the difference between a FD and RD?

Ans - The Differences between a FD and RD are:-

i) In case of a FD the amount is placed one time whereas in case of RD the amount is placed in
installments.

ii) In case of FD the minimum time period is 7 days whereas minimum time period of a RD is 6 months.

iii) A FD can be made for any number of days like 50 days, 100 days, 200 days, 300, 500 days etc whereas a
RD will always have to be in multiples of 3.

Can A Bank deduct TDS (Tax Deducted at Source) on Interest earned by customer?

Ans - Yes, if the total interest earned by a customer in a bank (including interest on Savings + Interest on
FD/RD) crosses INR 10,000 for a year, then the Bank will deduct 10% of the interest amount as TDS.

For Senior Citizens, the TDS is deducted if the total interest earned is more than INR 50,000 in a year.

If customer’s account does not have PAN card updated in account then 20% TDS is deducted by the bank.

What is form 15G?

Ans - Banks are required to deduct TDS of the depositors (non-senior citizens), when their interest income
in a bank is more than Rs.10,000 in a year.

If a person, who is less than 60 years, is sure that he will not be required to pay any tax in a particular year,
since he does not have any income or his total income of the year is less than 2.5 lacs, then he can submit
Form 15G in the Bank to avoid deduction of TDS from his interest income.

What is form 15H?

Ans - Banks are required to deduct TDS of the senior citizens, when their interest income in a bank is more
than Rs.50,000 in a year. If a person, who is more than 60 years, is sure that he will not be required to pay
any tax in a particular year, since he does not have any income or his total income of the year is less than 3
lacs, then he can submit Form 15H in the Bank to avoid deduction of TDS from his interest income.

Conditions to Fill Form 15G/15H

Ans - Conditions you must fulfil to submit Form 15G/15H:

1. Customer should be an individual

2. Customer should be less than 60 years to fill Form 15G and more than 60 years to fill Form 15H.

3. Tax calculated on Total Income of the Customer is nil

Which Account is better for a Bank, Current Account or Savings Account or a FD Account?

Ans – For a Bank all Deposits are important, but among the 3 types, Current Account Deposits are most
beneficial, as bank need not pay any interest on the current account balances maintained by the customer.

A Cash Deposit Beyond what limit requires a PAN Card?

Ans – Any Cash Deposit of INR 50000 and above requires PAN Card to be provided by the customer or
Form 60/Form 61 should be updated in the system.

Can Nomination be made in the favor of Minor?

Ans – Yes, a nomination can be made in favour of a minor, but details of the guardian of the minor also
need to be mentioned in the nomination form. The guardian should be an adult who will get the amount in
the account on behalf of the minor in case of death of the account holder till the nominee attains
majority.

Can we send NEFT Payment outside India?

Ans - Yes, there is a Indo-Nepal Remittance scheme, which allows customers to send one-way payment to
NEPAL via NEFT. The maximum funds that can be sent via NEFT under this scheme, is INR 50,000 per
transaction and in total 12 transactions are allowed in a year.

What is Financial Inclusion?

Ans - Financial inclusion means including all citizens of the country in the financial system. This is an
initiative by RBI and Govt of India to provide banking services to all Indians, whether they are living in
urban areas or rural areas.

The various steps taken by RBI and Govt of India for financial inclusion are:-

 PMJDY – Pradhan Mantri Jan Dhan Yojana

 Introduction of white-labelled ATM’s

 Introduction of Rupay Debit Cards

 Introduction of Small Banks and Payment Banks

 Small Account Service

What is Pradhan Mantri Jan Dhan Yojana?

Ans -Pradhan Mantri Jan Dhan Yojana (PMJDY) is a nationwide scheme launched by Indian government in
August 2014. In this scheme every individual who does not have a bank account and he/she belongs to
weaker section of society was offered a zero-balance account. This account (called Jan-dhan account) can
be opened with any Bank in India.

This scheme is very beneficial for the rural population who were not using banking services till now.

The various features of Jan Dhan Yojna are:-

 Facility to open a Zero-balance account

 Bank will pay interest on amount kept in Jan-dhan accounts

 All government benefits will be directly credited in this account

 A free debit/ATM card is offered with this account

 The scheme also provides accidental death insurance cover up to rupees one lac to the depositor
without any charge.

 The account holder can take loan benefit of up to Rs 10,000 from the bank after six months from
opening the account. This facility will be offered to only 1 member of the family and preferably to
the women of the house.

What is a White Labeled ATM?

Ans - A White labeled ATM refers to an ATM which is owned and operated by non-banking companies.
White labeled ATM’s were introduced by RBI to increase the network of ATM’s in the country for achieving
financial inclusion. Such ATM's are called White Labeled ATM’s because they do not have logo of any Bank.

Examples of White Labeled ATM’s are the ATM's Operated by Muthoot Finance or ATM Operated by Tata
Communications Payments Solution, ATM’s by Vakrangee limited.

Most of the White Labeled ATM’s are operated in semi-urban and rural areas.

What is a RuPay Card?

Ans - RuPay is a combination of two words – Rupee and Payment. RuPay Card is an Indian version of debit
card. It is very similar to international cards such as Visa/Master. RuPay cards were introduced by National
Payments Corporation of India (NPCI) which is a subsidiary of RBI.
These cards were introduced to be given along with Jan-Dhan Accounts.

What is Small Bank?

Ans -The purpose of the small banks is to provide basic banking products such as deposits, loans, credit
cards/debit cards, lockers etc mainly in semi-urban and rural areas.

The objective of these Small Banks is to help in financial inclusion by opening their most branches in semi-
urban and rural areas, where the Banking services have still not properly reached.

The examples of small Banks are Ujjivan Bank, AU Small Bank, Equitas Bank, Uthkarsh Bank, Jana Bank,
Capital Local Area Bank.

What is Payments Bank?

Ans -Payments bank were introduced with the aim to provide payments services, over mobile devices.
These banks allow customers to open bank account online.

The main aim of Payment Banks is to help customers both in urban and rural areas to do payment
transactions easily.

The various features of Payment Banks are:-

 Payment Banks can offer only Demand Deposits i.e. saving account and current account

 Payment Banks cannot offer FD and RD

 The maximum balance that a customer can keep in his payment bank account cannot be more
than 1 Lac.

 Payment Banks can offer debit cards

 Payment Banks cannot offer Loans

 Payment Banks cannot offer credit cards

 Payment banks can offer third party products like mutual funds and insurance products to earn fee
income

Examples of Payments Banks are:-

 Airtel Payments Bank

 Paytm Payments Bank

  Fino Payments Bank

 India Post Payments Bank

What is a Small Account?

RBI has allowed opening of a “Small Account” in any bank in India, by all those individuals, who do not
have any ID/Address Proof.

This account can be opened with just a photograph and self declaration attested by customer’s signature
or by his thumb impression.

The small account can be opened for a period of 1 year, within 1 year the customer needs to provide a
valid ID and Address proof.

After providing proofs, the small account shall be converted to a basic account offered by the bank.

The various limitations of a small account are:-

 The total credit that can come in this account in a year cannot be more than 1 lakh.

 The maximum amount that can be withdrawn from this account in a month is INR 10,000.

 The balance at any point of time in a small account cannot exceed INR 50,000.

What are the types of Banks in India?

The various types of Banks operating in India are:-

 Public Sector Banks

 Private Sector Banks
 Foreign Banks
 Regional Rural Banks
 Cooperative Banks
  Small Banks
 Payment Banks

What is a Public Sector Bank?

Ans – A Public Sector Bank is a Bank in which the major stake is held by Government of India. The
Chairman, Managing Director and other Senior Officials of the Bank are answerable to the Government.
The main aim of Public Sector Banks is to provide banking services to all sections of the society.

The various Public Sector Banks in India are- State Bank of India, Punjab National Bank, Bank of Baroda,
Syndicate Bank, Canara Bank, Bank of India, Allahabad Bank, Union Bank, UCO Bank, Central Bank, Indian
Bank, Oriental Bank of Commerce, Bank of Maharashtra.

What is a Private Sector Bank?

Ans - Private Sector Banks are those Banks in which majority stakeholders are Individuals and Corporate.

The Government of India has no say in the operations of Private Sector Banks.

Private Sector Banks are known for better customer services in comparison to public sector banks.

The various Private Sector Banks in India are:- HDFC Bank, ICICI Bank, AXIS Bank, Kotak Mahindra Bank, YES
Bank, RBL Bank, IndusInd Bank, DCB Bank, Dhanlakshmi Bank, Karnataka Bank, City Union Bank, Bandhan
Bank, IDFC Bank.

What is a Foreign Bank?

Ans - Foreign Banks as the name suggest have their Head Offices in foreign countries.

Foreign Banks are allowed to open and operate their branches in India, although these Banks have limited
branches and operations in India.

The primary activity of most Foreign Banks in India has been into the Corporate/Business Banking. Foreign
Banks in India are required to follow all Indian Banking Regulations.

The various Foreign Banks operating in India are HSBC, Standard Chartered Bank, Citibank, Bank of
America, JPMorgan Chase, Commonwealth Bank of Australia, Mashreq Bank, Woori Bank.
What is a Regional Rural Bank?

Ans - Regional Rural Banks were established to develop Rural Economy and to achieve financial inclusion.
Each RRB is owned jointly by the Central Government, Concerned State Government and a sponsoring
Public Sector Bank. RRB’s provide credit/banking to small farmers, craftsman, small entrepreneur and
agricultural laborers.

The area of operation of RRBs is normally limited to a State.

*What is a Cooperative Bank?

Ans - A co-operative bank is a financial entity which belongs to its members, who are at the same time the
owners and the customers of their bank.

Co-operative banks are often created by persons belonging to the same local or professional community or
sharing a common interest.

Co-operative banks are deeply rooted inside local areas and communities. Co-operative Banks work on the
principal of No-Profit-No Loss and Service its members and society.

Co-operative Banks has limited funds at their disposal and provide basic banking services to its customers.

Co-operative Banks lends to small businessmen, traders and individuals.

What is an Equity/Share/Stock?

Ans – Stocks/equity (or shares) represent ownership interest in a corporation. Shareholders collectively
are the owners of the company.

The shareholders of a company enjoy voting rights to elect the board of directors and have claim to the
distributed profits, in the form of dividends.

The main reason of buying a stock or shares in a company is to achieve capital appreciation over a longer
term, which helps in growing the amount invested in a company. The capital appreciation is based on the
growth of the company itself.

What is a Bond?

Ans - A Bond is just like a loan. Companies/Government raises funds by issuing Bonds for a fixed maturity.
The issuer of the bond pays interest on Bonds and have obligation to return the principal at the time of
maturity.
A shareholder is an owner, or investor in a firm, while a bondholder/bond-investor is a creditor to the
firm. Bonds are known as “Fixed Income Securities” because the income in bonds for the investor is
limited to the interest that was initially offered.

In the event of closing the company, Bond Holders will be paid off first and whatever is left over after that
will go to the equity/share holders.

What type of returns an Equity Investments offer?

Ans – Equity/ stocks is an investment made on a firm’s future earnings and growth. This carries a lot of risk,
as the firm always has a chance of failing. Due to this high risk, an equity investor expects higher return.

The return in an equity/stock investment can come in 2 forms:-

1) Dividends – the portion of the profits distributed to shareholders

2) Capital Appreciation - means that the stock’s price rose in value over the duration that the
investor owned the stock. The simplest way of understanding how stocks can make returns, goes
by the old saying “buy low and sell high”. The value of the stock of a company will only rise, if the
company is doing well and growing in its business.

Give an Example of Bond?

Ans - For example, you buy a bond with a value of $1,000, with offered rate of 8%, and a maturity of 10
years. This means that:-

You'll receive a total of $80 ($1,000*8%) of interest per year for the next 10 years. When the bond
matures after a decade, you'll get your $1,000 back.

Owning Bonds is less risky than in owning Stocks, but this comes at the cost of a lower return.

Only risk associated with bonds is Default Risk.

What are Government Bonds?

Ans - Government Bonds are securities issued by the Government of a Country. In India, Govt bonds are
issued by RBI on behalf of Government of India. G-Sec or Government Bonds carry absolutely Zero Default
Risk. Generally the maximum Tenure of Govt Borrowing via Bonds can be 30 years and the minimum
borrowing is for 1 year.

What are Corporate Bonds?

Ans - A Bond issued by a corporation and sold to investors in called Corporate Bond.
Corporate bonds are also issued for fixed time period allowing companies to raise funds from investors.
Just like Govt bonds, Corporate Bonds also offer fixed annual interest to investors, till maturity.

Corporate bonds are considered risky than government bonds. As a result, interest rates are almost always
higher in case of corporate bond in comparison to government bond.

Over a Long term, which is the best asset class – Equity or Bonds or FD?

Ans – Over a long term, means minimum 3-5 years or more, equity is the best asset class. In the past,
equity has outclassed all other asset classes, if the investment is kept for a long term. Over a long term,
equity/stock investment gives average return of 12-15% per year.

How do Stocks are bought and sold?

Ans - Stocks are traded on Exchanges. The two major exchanges in India are BSE & NSE. Exchange is simply
a place where buyers and suppliers meet and decide price of a stock.

The price of a stock changes based on the supply and demand principals. If more people want to buy stock
(demand) than sell it (supply), the price of the stock will go up and vice-versa.

How Prices of a Stock moves?

Ans - The price of stocks trading in the share Market may fluctuate for a number of reasons.

For example, if the supply of a stock is greater than the demand from investors, the market price for that
stock will likely to drop.

Financial news and world events can also affect the prices of shares.

Other reasons include Financial Results of the Organization or other company specific factors like Strikes,
Plant Shutdown, Court orders, Patent issues etc.

What is a Bull Market?

Ans - A prolonged period when stock prices as a whole are moving upward. Bull markets are characterized
by optimism, investor confidence, and high expectations for a strong future.

Everything in economy is great. People are finding jobs. GDP is growing. Picking stocks in a bull market is
easier, since everything is going up.

A person who is always optimistic that markets will go up and stock prices will rise is called a “Bull”.
What is a Bear Market?

Ans - A period when stock prices as a whole are moving down. Bear markets are characterized by
pessimism, lack in investor confidence and uncertain future.

A person who is always believes that markets will go down is called a “Bear”.

Which are the 2 major Stock Exchanges in India?

Ans - The 2 Important/Popular Stock Exchanges in India are:-

A) Bombay Stock Exchange (BSE)

B) National Stock Exchange (NSE)

Q106 - What is a Demat Account?

Ans - Demat Account is an account of an investor in which shares of that investor are held in electronic
form. A buy transaction will result in a credit entry while a sell transaction leads to debit entry in a demat
account. A Demat account can be opened with a Bank or a stock broker.

What is a Mutual Fund?

Ans – Mutual Fund is an investment option that pools money from Investors and invests their money in
instruments like Stocks, Bonds, there-by generating returns for the investors. A Mutual Fund is managed
by a Fund Manager.

The advantages of a Mutual Fund are:-

• Professional Management – There is a Dedicated Fund Manager who makes investment decisions
on behalf of the investors.

• Diversification – The entire pool is invested in large number of companies instead of a single
company, thereby achieving diversification.

• Liquidity – An investor can withdraw his investment from Mutual Fund on need basis, there is no
lock-in period in mutual fund.

• Convenience– Investor can start investment with minimum one time amount of 5000 or minimum
monthly amount of 500 or 1000.

What is difference between Mutual Fund and Equity/Stock?

Direct Equity/Stock
 • Equity Shares or stocks are bought and sold by investors themselves on stock Exchanges (BSE and
NSE).

• An investor will have to select a stock on his own to invest in Equities. This is very risky as his
investment decision may go wrong without proper research.

• Investors normally do not have time to do proper research and they lack investment knowledge

• Diversification is usually not achieved when one invests directly in stocks.

Mutual Funds

• Investors give money to a Fund Manager, whose job is to only do proper research and invest
money of the investor.

• The fund Manager has vast experience of the finance field and he has a big team of people
supporting him in research of various companies.

• Giving funds in the hand of a professional manager makes more sense and is less risky.

• One of the key benefits of investing in a Mutual Fund is diversification.

In how many ways an Investor can invest in a Mutual Fund?

Ans – An Investor can invest in a Mutual Find either one time (lump sum amount) or via SIP mode (regular
investment) called Systematic Investment Plan.

What is a Systematic Investment in Mutual Fund?

Ans - SIP is just like a recurring deposit, where you invest in a Mutual Fund on regular intervals. The
investor decide monthly amount to invest in mutual fund, specify a date on which his money will be
invested in Mutual Fund regularly and decide on the time period of investment.

What are the types of Mutual Funds?

The various types of Mutual Funds are:-

1) Growth /Equity Funds

2) Income/Debt Funds
3) Balanced Funds
4) ELSS Funds

Q83 –What is a Growth/Equity Fund?

Ans – Growth/Equity Funds are the Mutual Funds which invest all the investor money in equities/stocks.

The funds are invested in stock of various companies to achieve diversification.

Such Mutual Funds normally have high risk. These Funds aim to provide Growth of investment value over
the long term.

Q84 – What is an Income/Debt Fund?

Ans - The aim of Income/Debt Funds is to provide regular and steady income to investors. Income Funds
are less risky than Equity Funds. Such funds generally invest in fixed income securities such as Government
Bonds and Corporate Bonds. Income fund is mainly recommended for senior citizens.

Q85 – What is a Balanced Fund?

Ans - Balanced Funds are mix of both Equity and Bonds. The aim of these Funds is to provide both growth
and regular income to investors. Normally such funds invest in stocks and Bonds in proportion of 50:50.
Balanced funds are usually for investors who are willing to take moderate risk.

Q 91 - What are Tax Saving Mutual Funds?

Ans – Tax Saving funds are also known as ELSS (Equity Linked Savings Scheme). Investment is such schemes
are for a lock-in period of minimum 3 years. Investors can claim tax benefit up-to INR 1,50,000 by investing
in ELSS Mutual Funds.

What are the types of Life Insurance?

There are 3 types of Life Insurance:

 Term Plan

 Endowment Plan

 ULIP Plan

What is a Term Plan?

A term plan is a pure insurance plan, in which there is no maturity benefit if the insured person survives till
the maturity of the policy.

The minimum maturity of these plans is 10 years and the maximum maturity can be 40-45 years. However
most insurance companies provide term insurance till the age of 70.
If a person dies during the term of policy then only his beneficiary will get money assured by the policy
otherwise at maturity, there is no benefit.

The premium of the policy is dependent on various factors like Age of the insured, medical history, policy
term and the sum assured required (in event of death).

Usually younger the person is, less will be the premium. Similarly a medically fit person will also need to
pay lower premium.

The premium of the policy required to be paid annually till the maturity of the policy.

What is Endowment Plan?

An Endowment Plan is a combination of both insurance and investment. In this plan if during the term of
policy the insured dies, then his beneficiary will receive the sum assured by the insurance company.

However if the person survives throughout the term of policy, then at the time of maturity the insured will
himself get the sum assured.

The premium of endowment plans are higher than Term plans because in Endowment Plan, a part of
premium is invested and another part is used to provide life-cover.

The investment portion of the premium is invested in debt instruments like Govt Bonds and Corporate
Bonds.

What is a ULIP Plan?

ULIP stands for unit linked insurance plan, this insurance plan combine the benefits of life insurance
policies with investment, similar to endowment plan This type of insurance plans serve the purpose of
insurance of the insured during the term of the policy and offers returns at the end of the policy term.

But in case of ULIP returns at maturity are not fixed, because in ULIP the investment portion of the
premium will be invested in stocks of various companies, similar to a Mutual Fund.

A ULIP is similar to a Mutual Fund with an insurance benefit.

What is KYC?

Ans - KYC Stand for Know Your Customer

The objective of KYC is to ensure that black money does not enter Banking system. So KYC is necessary to
stop money laundering.

There are 4 guidelines of KYC:-

• Customer Acceptance Policy

• Customer Identification Procedures
 • Monitoring of Transactions
• Risk Management

What is Objective of KYC?

Ans - The objective of KYC is to ensure that Banks are not used by criminal elements to do money
laundering.

What are Guidelines of KYC?

Ans - There are 4 guidelines of KYC:-

• Customer Acceptance Policy

• Customer Identification Procedures
• Monitoring of Transactions
• Risk Management

Customer Acceptance Policy

Customer Acceptance means, as a Bank, first we shall decide whether we will accept a potential
individual/ corporate as a customer or not. For that we should keep in mind the following:-
• No account should be opened in fictitious/ benami name(s);
• Do not open an account where proper proofs are not provided by the customer.
• Do not open accounts of known criminals
• For each customer who is being accepted, create his risk profile, by categorizing the customer into
Low Risk/Medium Risk/High Risk Categories.

Customer Identification Procedures

Customer identification means identifying the customer and matching his documents with the details
provided in the account opening form.

Customer Identification is second step after Customer Acceptance and is only done for customers who
are being accepted by the Bank

As part of Customer identification, the Bank should also check the original documents of the customer, in
addition to taking their photocopies.
Further, the communication address of the customer should be verified by doing home/office visit by a
Bank staff.

Monitoring of Transactions

Once a customer’s account is opened and is in use, the Bank should ensure that the transactions done
by the customer are monitored, to check if they are matching with his Profile or not.
A transaction which is not matching with the customer’s profile is called suspicious transaction.

Risk Management

Risk Management is an activity done at the Bank’s end to ensure that its staff is properly
traied on KYC policies and Guidelines.
Bank should also ensure that regular audit is done in its branches, to check if the KYC
Guidelines are properly followed or not.

Who are Low Risk Customers?

Ans - The Examples of Low Risk Customers are:
• Individuals, especially Salaried Accounts holders
• Minor, Senior Citizen, Women Account Holders
• Account Government Departments, Account of Government owned Companies( LIC, ONGC, NTPC,
BHEL), Account of Regulatory bodies( SEBI, IRDA)
• Account of Large Corporate like Tata Group companies, Bajaj Group companies, Mahindra Group
Companies

Who are Medium Risk Customers?

Ans - The Examples of Medium Risk Customers are:-
• Non Residents
• High Net worth Individuals ( HNI’s)

Who are High Risk Customers?

Ans - The Examples of High Risk Customers are:-
• Account of Trusts, Charities, NGOs and Organizations receiving donations
• Account of Companies having close family share holding
• Account of Partnership Firms/Small Companies
• Account of Politically Exposed Persons(PEP)

What is Money Laundering?

Ans - Money Laundering is an activity done by criminals to make their black money look white.

What are the sources of Crime/Black Money?

Ans - The various sources of Crime Money are:-

• Drugs Trafficking
• Terrorism including Naxal Activity
• Kidnapping/Extortion
• Tax Evasion and hiding income
• Corruption
• Other Crimes like Betting, human trafficking , gambling

What is a Shell Company?

Ans - A shell company is a company which does not have any real business. Such a company is opened
with an aim to do money laundering.
What are the steps of Money Laundering?

Ans - There are 3 Steps of Money Laundering:-

i) Placement - In Placement, the money is taken from the source and then put into the
financial system, via Cash deposits or demand drafts, RTGS/NEFT. Placement is a slow process in which
more than 1 account may be used. Also criminals may take help of shell companies to do placement in
bank.

ii) Layering – In Layering, the placed funds are moved among number of accounts, across several
banks, across different locations. Numerous layers of transactions are created to hide the
original source of money.

iii) Integration - In Integration, the money collected in destination account is used to buy real assets like
property, land, house, gold etc. By this way the black money is integrated into the financial system.

What is a Suspicious Transaction?

Ans - A Suspicious Transaction is a Transaction done by a customer in a bank, which is not matching with
his profile.
A Suspicious Transaction actually does not have any economic or logical purpose.

For Example:-
i) Large Cash Deposits in Account of an Individual, in which, normally only minimum balance is maintained.

ii)Sudden Increase of deposit balance in an account, which became active recently from dormant category.

iii)Funds received in an account from abroad, although the account holder does not have any foreign
collaboration.

iv) Large sum of money deposited in accounts via various modes like RTGS/NEFT/Cheque and the funds
being transferred out in a day or two.

What is a Suspicious Transaction Report

Ans - All Transactions of a customer, which do not match his risk profile, are reported in
the form of a Suspicious Transaction Report(STR) to FIU-IND.

The Suspicious Transaction Report (STR) should be furnished within 7 days of arriving at conclusion that
a transaction is of suspicious nature.

While sending STR to FIU, the Bank should not inform the customer and this reporting should be done
secretly to FIU.
What is a Cash Transaction Report?

Ans - Each Bank needs to submit a report of its customers to FIU-IND, who have done a
Single Cash Transaction of INR 10 Lacs or more
OR
The customer has done series of cash transactions in a month, amounting to INR 10
Lacs or more.
The cash transaction report (CTR) for each month should be submitted to FIU-IND
by 15th of the succeeding/subsequent month.

What is FIU-IND

Ans - Financial Intelligence Unit - India (FIU-IND) is the national agency responsible for receiving
information related to suspected financial transactions from various Banks. FIU analyzes this information,
processes it and come to the conclusion that whether the reported transaction is a case of money
laundering or not. In India, FIU comes under Finance Ministry.

What is Anti Money Laundering?

Ans - AML refers to the steps taken by a Bank to ensure Money Laundering does not
Happen in financial system.

Following are the steps followed by the Bank for AML:-

• Proper KYC should be done during account opening.
• Timely Reporting of CTR should be done to FIU-IND, every month.
• Timely Reporting of STR should be done to FIU-IND
• Further, banks should maintain ten years data of customer transactions in its system. This data
should be made available to the FIU upon request.

What is a Vault?

Ans – A vault is a strong room inside a bank branch where the cash of the branch, customer’s valuables
and any other important document of the bank are kept. A vault cannot be outside a bank branch.

There are many security features associated with a vault like:

1) Main Iron Gate

2) Grill Gate

3) Double lock system at each level of the vault

4) Emergency Alarm

5) CCTV Cameras
Only teller and his senior are allowed to access the vault in the branch. Vault is only opened when the cash
needs to be brought out or kept back, otherwise the vault is kept locked.

What is RBI's Clean Note Policy?

Ans - RBI's clean note policy says that clean and good quality notes should be made available to the
general public. For this RBI has issued some guidelines:-

i) Do not staple the notes

ii) Do not write anything on the currency note
iii) Do not put rubber stamp on the note
iv) Do not use the notes to make garlands and use them in social events like marriages.

RBI has also instructed the Banks to exchange the soiled notes of customers with clean notes and give
them full value.

What is Bait Money?

Ans - Bait Money is a security feature used in the Bank. It is a bundle of notes which are kept at the cash
counter, whose serial numbers are already noted in a separate register or the photocopies of such notes
are taken. In case there is a robbery in the Bank then teller should mix the bait money with other cash and
handover the cash to the robber. After that the detail of those notes are forwarded to the police, for
tracking the robbers.

The teller needs to ensure that the bait money is not given to the normal public, as this would defeat the
purpose of the bait money and in-case this is done by mistake then new bundle of notes needs to be kept
as bait money.

What is a Counterfeit Note?

Ans - A Counterfeit note is a note which appears to be real but actually it is a fake note.

What is Fake Note Impounding?

Ans - Fake Note Impounding refers to the steps taken by a Teller, in case a fake note is detected at the
Bank. The various steps are:-

i) Do not return the fake note to the customer

ii) Do not give the credit of the fake note to the customer
iii) Put a "Fake Note" stamp on that note
iv) Make the entry of that note in a Fake Note Register
v) Give an Acknowledgement Receipt to the customer, specifying that a fake note has been detected from
him.
In case 5 or more Fake Notes are detected from a single customer in a day, then a FIR needs to be lodged
with the nearest Police Station.

What is Cash Retention Limit?

Ans – A Cash Retention Limit is the Limit up to which a Branch can keep the cash in the vault for starting
next day operations.

Cash Retention Limit depends upon location of the branch( urban/rural), its area( commercial/ residential),
size of the branch & its business & also average daily cash receipts & payments.

The cash retention limit of each branch is decided by the Bank.

Any amount above the Cash Retention Limit is sent to the Currency Chest at End of the Day.

The amount kept in Branch up to Cash Retention Limit is insured by the Bank.

What is a Currency Chest?

Ans – A Currency Chest is a non-banking branch of the Bank, which acts as an intermediary between the
RBI and various branches of a Bank in a particular area.

Each bank has its own currency chest.

Currency Chest distributes notes and coins to branches after receiving them from RBI.

Any amount above the Cash Retention Limit is sent to Currency Chest by the Bank branch during end of
the day.

A Bank Branch also exchanges soiled notes from currency chest, which provide clean notes to the branches
in exchange of soiled notes and further exchange these notes with RBI

What is Petty Cash?

Ans –Petty cash is a small amount of cash given by the Bank to its branches for day to day branch expenses
(like Stationary expenses, printer expenses). Petty cash account is maintained by the Teller in the Branch.
For debiting a Petty cash account the teller needs to make a voucher of the expense and get it approved
from the Branch Manager.

After that the teller needs to properly file the voucher, for future reference.
What are duties of a Teller?

Ans - A Teller performs the following duties in a Bank

1) Teller is the custodian of Cash Keys

2) Teller withdraws Cash in the morning from Vault

3) Teller receives Cash from Customers

4) Teller makes Cash Payments to Customers

5) He sends cash above Cash Retention Limit to the Currency Chest

6) Teller maintains Bait Money

7) Teller maintains Petty Cash

8) Teller maintains Fresh Currency

9) Teller does Sorting and Bundling of Cash

10) Teller does cross-selling of third party products

What all details a Teller needs to see in a Cheque before making a Payment at the Cash Counter?

Ans – A Teller should see the following details in a cheque, before making payment at the cash counter:

1) The cheque should be of our bank.

2) There should be payee name written on the cheque.

3) The cheque should be signed by the drawer and his sign should match with our records.

4) There should be sufficient balance in the account of the drawer to pay the cheque.

5) The cheque should not be mutilated.

6) The cheque should not be post dated or stale.

7) The amount written on the cheque in words and figures should match.

8) The cheque should not be crossed.