Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
Compiled by
Hrishikesh Mishra
Staff College, Bengaluru
Disclaimer: This is our voluntary effort and every care has been taken to give up-to-date information based on the RBI & Banks
guidelines. However users are advised to go through banks circulars & guidelines for details.
SBI
8.04
7.53
0.51
6.34
1.24
4.68
NA
NA
NA
0.65
32.51
NA
NA
NA
7.17
34.18
27.38
24.50
43.84
8816
6036
7147
-3974
-5396
-6089
-2813
5370
-3665
43258
9951
10.56
11.28
13.17
12.01
11.08
11.67
13.12
ROAA
0.35
-ve
-ve
-ve
-0.52
-1.98
0.46
R OE
6.84
-ve
-ve
-ve
-10.69
-ve
7.57
COD
7.00
5.85
5.00
4.98
6.94
NA
6.22
YOA
9.63
9.10
6.90
8.20
9.92
NA
10.00
NI M
2.32
2.60
2.05
2.06
2.19
1.88
2.96
24171
55818
40521
49879
31638
24875
98173
8.70
12.90
9.99
13.07
9.40
10. 98
6.50
14026
35423
19407
27996
20833
14643
55807
5.25
8.61
5.06
7.79
6.42
50.98
51.06
60.09
51.14
50.11
6. 78
57.24
3.81
60.69
44.94
50.30
61.76
50.65
43.47
49.13
Union Bank
PNB
BOB
BOI
Canara
Bank
6.20
5.87
0.33
5.32
1.11
9.65
8.53
1.12
11.60
2.06
9.58
6.58
3.00
31.31
1.51
8.95
6.45
2.50
27.93
1.74
CASA %
32.30
41.63
33.68
5722
12216
1352
CRAR
GNPA
GNPA %
NNPA
NNPA %
PCR
Table of Contents
1. Reserve Bank of India Act, 1934 .................................................................... 6
2. Banking Regulation Act, 1949 ....................................................................... 6
3. Banker Customer Relationship ...................................................................... 7
4. Know Your Customer ................................................................................. 10
5. Negotiable Instrument Act ......................................................................... 31
6. Banking Ombudsman - BO ........................................................................... 36
7. Consumer Protection Act & Banking Business................................................... 37
8. Right to Information (RTI) .......................................................................... 38
9. BCSBI ................................................................................................... 39
10. Public Provident Fund Scheme .................................................................... 43
11. Senior Citizens Savings Scheme - 2004 (SCSS).................................................. 44
12. Sukanya Samriddhi Account (SSA) ................................................................ 45
13. Atal Pension Yojana (APY) ........................................................................ 46
14. Priority Sector Guidelines .......................................................................... 46
15. Government sponsored schemes .................................................................. 59
16. Balance Sheet Analysis .............................................................................. 66
17. IRAC Guidelines ....................................................................................... 69
18. Recovery Measures .................................................................................. 73
19. SARFAESIA ............................................................................................. 73
20. Recovery through DRT & Court .................................................................... 76
21. Lok Adalat ............................................................................................. 78
22. Revenue Recovery Act .............................................................................. 79
23. Foreign Exchange .................................................................................... 80
24. BASEL III & Risk Management ....................................................................... 95
25. Marginal Cost of Funds based Lending Rate (MCLR) ......................................... 101
26. Acronym ............................................................................................. 104
Bank Rate
MSF
Cash Reserve Ratio
Statutory Liquidity Ratio
Repo Rate
Reverse Repo Rate
Base rate of our bank
BPLR of our Bank
SB Rate
MCLR w.e.f.01.06.2016
Important Rates
7.00 % w.e.f.05.04.2016
7.00 % w.e.f.05.04.2016
4.00 %
21.25 % (02.04.2016)
6.50 % w.e.f.05.04.2016
6.00 % w.e.f.05.04.2016
9.65 % w.e.f.05.10.2015
14.25 % w.e.f.01.03.2016
4 % w.e.f.03.05.2011
9.20, 9.25, 9.30, 9.40, 9.45, 9.50, 9.55
1D, 1M, 3M, 6M, 1Y, 2Y, 3Y
w.e.f.01-04-1935.
Established as per recommendations of Hilton Young Commission
Sec 31 of RBI Act: Prohibits drawing, accepting, making or issue of any bill of exchange,
hundi, promissory note payable to Bearer on demand, except by Central Government or
RBI.
Sec 33 of RBI Act: Assets of issue department of RBI shall consist of gold coin, gold
bullion, foreign securities, rupee coins and rupee securities. The aggregate value of gold
coin, gold bullion and foreign securities held shall not any time be less than Rs. 200 crore
of which gold coin and gold bullion not less than Rs. 115 crores.
Sec 42 of RBI Act: CRR: Banks are required to maintain certain percentage of Net Demand
and Time Liabilities as CASH with RBI.
No Floor or Ceiling rate for CRR w.e.f.01-04-2007. RBI will fix CRR rate. At present: 4%
RBI will not pay any interest to Banks on CRR balances w.e.f.31-03-2007.
Banks are required to maintain minimum CRR balances up to 70% of total CRR requirement
on all days of the fortnight. If it is not maintained, penal interest @3% above bank rate for
first day and second day onwards, Bank rate plus 5%.
Bank
Debtor
Creditor
Debtor
Trustee
Lessor
Bailee
Trustee
Agent
Pawnee
(Pledgee)
Mortgagee
Assignee
Agent
Customer
Creditor
Debtor
Creditor
Beneficiary
Lessee
Bailor
Beneficiary
Principal
Pawner
(Pledger)
Mortgagor
Assignor
Principal
Trustee
Beneficiary
Attachment Order
Issued by Revenue Authorities
Besides balance in the accounts at the
time of receipt of order, it covers future
credits
Applicable when relationship between the
bank and the customer is of debtor and
creditor at the time of receipt of order or
at a future date
When issued in single name, applies pro-rata
to joint account of the assesses with other
person
When issued in joint names, applies to their
individual accounts like a garnishee order
Same as garnishee order
Rights of a Banker
1. Right of general lien
It can be exercised on the goods and securities of the debtor, which are received in the
capacity of a creditor. A banker can sell goods/securities after giving the debtor a
reasonable notice. In case of time barred jewel loan, bank has got a right to sell the
jewels and appropriate the amount to loan account and other dues of the borrower.
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Definition of Customer
As per Prevention of Money Laundering Act, 2002, a Customer is defined as:
i.
A person or entity that maintains an account and/or has a business relationship with
the Branch;
ii.
One on whose behalf the account is maintained (i.e. the beneficial owner);
iii.
Beneficiaries of transactions conducted by professional intermediaries, such as Stock
Brokers, Chartered Accountants, Solicitors etc. as permitted under the law
iv.
Any person or entity concerned with a financial transaction which can pose significant
reputational or other risks to the bank, say a wire transfer or issue of high value
demand draft as a single transaction.
Beneficial Owner
Beneficial Owners shall mean the natural person who ultimately owns or controls a client
and/or the person on whose behalf a transaction is being conducted, and includes a person
who exercises ultimate effective control over a juridical person.
It is mandatory to create Cust IDs of all beneficial owners (BOs) like Proprietor, Partners,
Directors, Authorised signatories in case of Clubs, Associations etc, Trustees, Karta and CoParceners.
When does KYC apply?
a. Opening of a new Deposit/borrowal account
b. Opening of a subsequent account where documents as per current KYC compliance not
submitted while opening the initial account
c. Opening a locker facility where documents are not available with the bank for all locker
facility holders
d. When bank feels it is necessary to obtain additional information from existing customers
based on the conduct of account
e. Periodic intervals based on instructions received from RBI
f. Where there are changes to signatories, mandate holders, beneficial owners, etc
General Guidelines
i.
The information collected from the customer for the purpose of opening an account is to
be treated as confidential and details thereof are not to be divulged for cross selling or
any other purposes.
ii. The branches, therefore, to ensure that information sought from the customer is relevant
to the perceived risk, is not intrusive, and is in conformity with the guidelines issued in
this regard.
iii. Any other information from the customer shall be sought separately with his/her consent.
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The purpose and reason for opening the account or establishing the relationship
The anticipated level and nature of the activity to be undertaken
The expected origin of the funds to be used within the relationship
Details of occupation/employment and sources of wealth or income
ii.
iii.
iv.
There is now no requirement of submitting two separate documents for proof of identity
and proof of address. If the officially valid document submitted for opening a bank
account has both, identity and address of the person, there is no need for submitting any
other documentary proof.
Officially valid documents (OVDs) for KYC purpose include: Passport, driving license,
voters' ID card, PAN card, Aadhaar letter issued by UIDAI and Job Card issued by NREGA
signed by a State Government official or any document as notified by the Central
Government in consultation with the regulator.
To further ease the process, the information containing personal details like name,
address, age, gender, etc., and photographs made available from UIDAI as a result of eKYC process can also be treated as an 'Officially Valid Document'.
No separate proof of address is required for current address
Relaxation regarding officially valid documents (OVDs) for low risk customers
If a person does not have any of the 'officially valid documents' mentioned above, but if is
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Low Risk Customers: - For the purpose of risk categorization, individuals (other than High
Net Worth) and entities whose identities and sources of wealth can be easily identified
and transactions in whose accounts by and large conform to the known profile, shall be
categorized as low risk.
ii.
Medium Risk Customers:-Customers that are likely to pose a higher than average risk to
the Branch or which are neither low risk nor High Risk shall be categorized as medium risk
customers.
iii.
High risk customers:- Customers, especially those for whom the sources of funds are not
clear or are in cash intensive business, such as accounts of bullion dealers (including subdealers), jewellers, dealers in wild life articles, Arms and Ammunition dealers, etc will be
categorized as high risk requiring enhanced due diligence
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ii.
iii.
iv.
E KYC
E-KYC is a screen-based interface that accepts Aadhaar number and fingerprint and sends it
to NPCI through bank's network. If the fingerprint is matched at UIDAI, the KYC data as
defined in their interface specifications will be returned. E-KYC application will display the
KYC data on screen and on acceptance; it will be saved into the database.
i. The solution also exports an interface that can be invoked by any client application to use
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iii.
iv.
Single depositor - Addition is permitted at the written request of the sole depositor
Deposit in the joint names of two or more persons (including E or S , Any one or
Survivor), addition/deletion in the deposit account would be permitted at the written
request of all the depositors
If the request for addition/deletion of a name is received from the survivor(s), after
the demise
of one or more of the joint depositors, the legal heirs of the
deceased depositor(s) and the survivor(s) should give the consent letter.
In point no ii & iii noted above, at least one of the original depositors should continue in
the account.
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20
iii.
iv.
v.
vi.
a.
b.
c.
d.
e.
TDS is not required to be deducted in respect of persons who submit declaration in Form
15G or Form 15H as per the provisions of Income Tax Act.
Form 15G may be submitted by an individual (other than Senior Citizen), HUF, Association
of persons, body of individuals, Trust or any other category of depositor (other than firm
& Company) whose total estimated income for the Financial Year is less than the taxable
limit.
Form15H can be submitted by an individual, who is a senior Citizen, provided he/she
declares in Form 15H that the tax on his/her estimated total income during the financial
year will be NIL.
Quoting of PAN number is made mandatory for acceptance of Form 15G or15H.
Non residents are not eligible to submit Form 15G or 15H.
Certificate from the Assessing Officer for lower/nil tax deduction
In cases of assesses like educational Institutions, hospitals, charitable institutions etc.
whose income is exempt from Income Tax, an application in Form No.13 has to be made
to the ITO (TDS) who after satisfying himself that the income of the applicant is exempt
will issue a certificate under Section 197.
If such certificate is produced, the branch can act accordingly and note the same in CBS.
Non deduction certificates u/s 197 are issued for prospective period and not applicable
for the period prior to the date of the issue of the Certificate.
The date up to which the Certificate is valid should be diarized manually for removal of
exemption in CBS system. (Exempt up to date in Finacle validation check)
Branches to ensure all the transactions (covered by submission of ITO certificates as
above) are reported in e-TDS quarterly returns (26Q & 27Q).
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Types of Customer
Minors
According to Section 3 of Indian Majority Act 1875, a Minor is a natural person who has not
completed the age of 18 years. Where, however a legal guardian of the person or property
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of a minor has been appointed by a Court of Law before he has attained the age of 18
years, he attains majority on completion of 21 years.
A major is a person who has attained the age of 18 years.
Sec 11 of Indian Contract Act: Minor is not competent for contract and contract with
minor is void ab initio.
Sec 183 of Indian Contract Act: A Minor cannot appoint an agent. A Minor cannot delegate
powers to others. A Minor can be appointed as an agent and bind his principal.
Sec 26 of NI Act: A minor can draw, endorse or negotiate a cheque or bill but he cannot be
liable. Other parties to that instrument are liable.
A Minor cannot appoint Nominee. A minor can be appointed as nominee.
A Minor cannot become a partner but can be admitted to benefits of partnership
firm. On attaining majority, within 6 months, he has to exercise his option to continue in
partnership. If he is silent, he is liable ab initio. A minor cannot stop payment of cheque
issued by partnership firm.
Minor account operated by guardian: On minor attaining majority, we should
not pay cheques signed by guardian, though the cheque is dated prior to
attaining majority
Mother as guardian of Minor: Permitted by Supreme Court: Even if father is
alive, mother can open and operate all types of deposit accounts of minor. A Minor can
open
and
operate accounts
on
attaining 10
years age
and
he is
literate. Joint accounts of 2 minors can be opened provided both are at least 10 years age
and literates, belonging to same family and operation jointly
Account in the sole name of minor
a. A person is a minor who is 10 years or more and can read and write.
b. He should appear competent to transact business.
c. No account should be opened in the name of a minor who is blind (even if he is more
than 10 years old) to be operated by himself.
d. Minor should come personally to withdraw the amount from his account.
e. In ordinary course no chequebook should be issued. However, if it is issued, it should
be affixed with a rubber stamp encashable by self at counter only
f. Date of birth of minor should be noted on the account opening form and should be
verified by the bank.
g. In case of term deposit, the maturity date of the deposit should not be earlier than
the date on which the minor attains majority. In such cases, relaxation has been
allowed for accepting deposits beyond 10 years. Further, no loan or premature
payment should be allowed till the minor attains majority.
h. In the event of death of a minor during his/her minority, the balance in the account
can be paid to natural guardian, as it is generally believed that the natural guardian
could have provided money for opening account to the minor.
Minor cannot delegate authority in self operated accounts.
In case of Joint accounts with minor and guardian, we can accept either or
survivor operation condition. It will be in dormant till minor attains majority
and on attaining majority, he can also operate the account.
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Partnership account:
As per companies act 2013, the number of partners can be 100 (Earlier this
number was restricted to 10 for Banking Business and 20 for business other
than banking.)
NBFC, HUF, Minor, Insolvent, Insane & alien enemy cannot become a partner in partnership
NBFCs are prohibited from contributing capital to any partnership firm/LLPs/Association
of Persons or to be partners in partnership firms/LLPs/Association of Persons and in case
of existing partnership firms/LLPs/Association of Persons, NBFCs shall seek early
retirement from the partnership firms. Each partner is an agent of the firm and also agent
for other partners
Partners are jointly and severally liable for all the acts
One partner has the power to countermand (stop payment) the cheque given
by other partner.
Dissolution of the firm : Death, insolvency, retirement of a partner - causes dissolution
If account is having credit balance, the remaining partners can give a valid discharge to
the bank.
If the account is having debit balance, operations should be stopped to decide the liability
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Concept of One Person Company (OPC limited) introduced by way of Company Bill 2013.
Number of Director 1
Memorandum of Association:
Constitution of the Company and it establishes the relationship of the
company
with the rest of the world.
Company cannot go beyond the
memorandum. It contains:
Name of the Company with Ltd as last word,
Registered Office address or State in which the registered office of the
company is situated,
Object/objectives of the company
Authorised Capital/Issued capital of the company
Limited liability clause
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Articles of Association
These are by laws and internal rules and regulations of the company.
Articles are indoor management of the company.
Borrowing powers of directors, procedures for appointment and removal,
retirement and rotation of directors
Articles can be amended by general body resolution. If the borrowing powers
are silent, still the company can avail the loan because every trading
company has the implied powers to borrow.
Certificate of Incorporation: Registrar issues this certificate. This is birth certificate of
company.
Certificate of Commencement of Business:
This is issued by Registrar of companies after it is satisfied that certain
minimum capital has been subscribed by the public.
This certificate is not required in case of private limited companies.
Other matters relating to companies:
Borrowing powers of company: Private ltd company - Unlimited powers.
Public Ltd Company: Borrowing powers up to paid up capital plus free reserves of
the company. If requires more than this, consent of shareholders in general body meeting
is required.
Death of a Director: does not affect the operations in the account.
The Directors cannot delegate their authority to any other person
Charge creation is required to be registered when charge created on by way
of Hypothecation of stocks, book debts, mortgage of immovable properties,
ship, goodwill, uncalled share capital of the company.
Charge registration is not required in case of Pledge of goods or securities or
against Fixed Deposits.
Section 125 of Companies Act:
Charges created on a companys assets
(except pledge) have to be registered with Registrar of Companies within 30
days of creation of the charge.
ROC can grant extension of 30 days in filing particulars of charge under Sec 125. Company
is required to pay additional fees not exceeding 10 times of specified fees. Beyond this
period, permission from Company Law Board is required.
A person cannot have more than 15 Directorship concurrently (Sec 275 of companies Act)
Getting charge registered is companys responsibility. If company getting failed to
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HUF:
Under Mitakshara School of Hindu Law, HUF can be formed by the Hindus, Sikhs, Jains and
Buddhists.
The eldest coparcener including Female is Kartha. All male and female major members are
coparceners.
The eldest member will be KARTHA even if he/she lives outside India. Kartha
can appoint any other coparcener or third party to conduct business of HUF.
Coparcener cannot stop payment of cheque unless he is authorized to
operate the account.
Kartha alone has the power to incur debts for family business and legal necessity of the
family.
Supreme Courts judgment: "A HUF directly or indirectly cannot become partner of a firm
because the firm is an association of individuals. HUF is a floating body whose
composition changes by births, deaths, marriages and divorces. A HUF not being a legal
person cannot enter into an agreement of partnership
Trust
Unless specifically provided for in the trust deed, No trustee or trustees can
raise loans against the security of the assets of trust.
Trustees cant delegate powers to outsiders even with mutual consent.
Death or insolvency of trustee does not affect the trust property and the bank
can pay cheques issued by the trustee prior to his death.
Limited Liability Partnership (LLP) Account
Formation:
Two or more persons can form a LLP.
No upper limit on the number of partners in an LLP
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Nomination
30
insolvent person.
In Case of Safe Custody Article-Single nominee only. In case of Joint Lockers with joint
Operations, there can be 2 nominees.
A Minor cannot appoint nominee. On his behalf nomination facility can be exercised by the
person legally competent to act on behalf of the minor.
In case of accounts in the name of single persons, nomination must be obtained. If the
depositor does not want to nominate anybody, a written letter should be obtained from
him in this regard.
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Payment of a Cheque:
Form of cheque has not been given in the Act (CTS 2010 STD)
Different Ink: A cheque can be drawn in different inks, different handwritings
or
different scripts. It can be paid
The cheque should be written in Hindi or English or Regional language
Date: A cheque dated prior to its date of its presentation is called ante dated cheque and
can be paid within 3 months from the date of issue.
Post dated cheque means a cheque which is dated subsequently to the date of
presentation.
Both ante dated and posted dated are valid as per Law. A post dated cheque
can be
passed only on the date written on it or within 3 months thereafter.
A cheque becomes stale after 3 months of its issue
A drawer of a cheque may reduce the validity of the cheque for less than 3 months. Such
cheque should not be paid after that validity period.
The drawer can revalidate the cheque any number of times.
A cheque with impossible date like 31-06-2010 should be paid on the last day of the month
or within 3 months of the last day of the month.
A cheque dated prior to the date of opening the account or prior to issue of cheque book
can be paid if otherwise is in order.
Sec 18 of NI Act: If the Amount in words and figures differs, the amount written in words
will be the amount intended to be payable. Amount in words can be paid.
If the balance available in the account is just equal to the amount of cheque, the cheque
can be paid.
If numbers of cheques are presented at the same time and the balance is not sufficient to
pay all the cheques, then normally priority is given to cheques
favouring
revenue
authorities, then cheques favouring public authorities. If balance is left, maximum number
of cheques should be paid taking care that cheque of very small amount is not
dishonoured.
Sec 65 of NI Act: Banking Hours: The payment of a cheque should be made only during
banking hours. Otherwise, it will not be a payment in due course. Reasonable amount can
be paid to DRAWER even after business hours
If there is any mutilation of the cheque, it should be confirmed by the drawer.
Material Alteration: Any change in date, amount or name of payee is called material
32
alteration. The change from Order to Bearer, Cancellation of Crossing or converting Special
Crossing into general crossing is also called as material alteration.
Bearer to Order, Crossing a cheque, converting general crossing to special crossing is not
material alteration.
If any material alteration on a cheque, it can be paid only after confirmation from drawer
i.e. drawer has to authenticate material alteration with full signature.
Sec 89 of NI Act: Paying banker gets protection in case of payment of materially
altered cheque if the alteration is not apparent at the time of payment and payment
has been made in due course.
If The Payee Is Fictitious Person: Cheque can be paid to bearer if it is payable
to
bearer. If cheque is payable to order, it can be paid only to drawer.
Bearer Or Order: If cheque is payable to Bearer or Order, it can be paid to bearer. If
neither bearer nor order is written, it is payable to order.
If there is Forgery In Signatures, such instrument is null and void. Paying banker will not
get protection if it pays such a cheque even though the drawer might have been
careless in custody of the cheque book or bank might have sent statement of account
and customer did not point out the mistake.
If the cheque has been signed by the drawer himself but in a different fashion, the
banker will not be liable.
Crossing
Sec 123 of NI Act: If a cheque or draft bears across its face addition of two parallel
transverse lines with or without addition of words and Company or any
abbreviation
thereof, it is called General Crossing.
General Crossing is direction to PAYING BANKER to pay the cheque or draft through some
bank.
Even if the name of a city is written between two parallel lines like Delhi, it will
continue to be a general crossing and the cheque can be paid to any bank.
Sec 124 of NI Act: When a cheque or Draft bears the name of bank across its face with or
without two parallel transverse lines either with or without the words Not Negotiable it
is said to be specially crossed.
A cheque with special crossing can be paid only to the named bank or his authorized
agent for collection
The special crossing is in favour of a Bank and not in particular of Branch.
The act does not restrict the payment of a Crossed Cheque to the banker in cash.
For special crossing, it is not necessary that the cheque should bear two parallel lines.
Provisions to crossing are applicable only to cheques and drafts and not to Promissory Note
and Bill of Exchange.
Sec 127 of NI Act: A cheque crossed to two banks has to be returned unpaid unless crossed
by one bank to another as his agent for collection.
Account Payee crossing is not recognized by law but is a long standing practice among
bankers.
Account Payee Crossing is direction to COLLECTING BANKER. Cheque should be credited to
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payment of the said amount, to the holder in due course of the cheque, within 15 days of
the receipt of the said notice.
Sec 141 of NI Act: In case of a company, every person, who at the time of offence was
committed, was in charge of and was responsible to the company for the conduct of
business of the company as well as the company shall be deemed to be guilty of
offence. Nominee Directors shall not be responsible.
Complaint should be made in the court of a metropolitan magistrate or a Judicial
magistrate of first class or above within one month of the date of cause of action, i.e.
payment not made within 15 days.
Banks cheque returning memo having official mark of the bank shall be presumed to be
proof of dishonor of cheque. Same rights and remedies will be available to the payee
against dishonour of electronic funds transfer as are available to the payee under Section
138 of the Negotiable instruments Act, 1938.
Bill of exchange:
A Documentary bill is one which is accompanied by any document of title to goods like LR,
RR, Bill of Lading etc.
Accommodation Bill means a bill issued without consideration. Dealing in such bill is
called as Kite Flying.
If in a bill of exchange or promissory note, interest rate is not mentioned, it will be 18%
p.a.
To accept bill, drawee is allowed 48 hours excluding public holidays to accept the bill.
If a usance bill is payable after date, its due date is calculated from the date of bill and if
it is payable after sight, its due date is calculated from the date of acceptance.
Sec 22 of NI Act: 3 days grace period is allowed in the case of Usance Bills. If the due date
is fixed on a particular day, no grace period.
Sec 25 of NI Act: If a bill matures for payment on public holiday, it falls due on
immediate next preceeding business day.
If the drawee does not accept the bill within stipulated period, it is treated as
dishonoured by non acceptance. If is not paid on due date, it is dishonor by non-payment.
If the dishonor is got certified from Notary Public, such certificate is called a Protest. (Sec
100 of NI Act). For foreign bills, noting & protesting is compulsory.
If a Bill is dishonoured by Non Acceptance, the holder can recover the amount from all
prior parties except drawee. In this case, the drawer will be Principal Debtor.
If the bill is dishonoured due non-payment (after acceptance), the holder can recover
amount from all prior parties including the acceptor of the bill. In this case, acceptor will
be Principal Debtor.
Demand Bill need not be stamped.
Usance Bills: Usance period upto 3 months, no stamp duty is levied if the bill is for genuine
trade transaction and bank is a party to the bill.
Negotiable Instruments Act 1881
Section 85A: Demand Draft: An order to pay money, drawn by one office of a
- Strive Hard Make a Mark
35
Dock Warrant
Warehouse Receipt (Wharfinger
certificate)
Delivery Order
GRs issued by transport operators
approved by IBA.
Lorry Receipts approved by IBA are
negotiable instruments
Banking Ombudsman - BO
Established under - BO Scheme 1995 by RBI in exercise of powers vested in it under Section
35A of the BR Act. Applies to J & K
Complaints alleging deficiency in banking service. Non-payment /inordinate delay in
payment or collection of collection of cheques, bills drafts etc.
Non acceptance of small denominations
Non issuance of DDs, non adherence to working hours, failure to honour guarantee,
36
37
Against National Commission to Supreme Court: Rs. 50,000/- or 50% of claim whichever is
less. Appeal within 30 days.
Non compliance: Fine up to Rs. 2000 to Rs. 10,000/-, Imprisonment of 1 month to 3 months
or both.
Frivolous Complaint: Fine can be maximum up to Rs. 10,000/- and will be given to the
opposite party.
Admission of complaint: within 21 days from the date on which the complaint was received.
Limitation period for lodging the complaint is 2 years from the date of cause of action
arises.
38
BCSBI
Based on the recommendations of committee on Procedures and Performance Audit of on
Public Services (Tarapore Committee), RBI in its annual policy for 2005-06, had proposed to
set up an independent Banking Codes and Standards Board of India (BCSBI).
Constitution
39
40
41
2.
3.
Name of the official at the branch whom you may approach if you have a grievance
Name and address of the Regional / Zonal Manager / Principal Nodal Officer (PNO)
whom you can approach if your grievance is not redressed at the branch
Name and contact details of the Banking Ombudsman under whose jurisdiction the
branch falls
Information available in booklet form
Displaying on our website our policies on
Deposits
Cheque collection
Grievance Redressal
Compensation
Collection of Dues and Security Repossession
Important time schedules under BCSBI code- Summary of key time commitments:
Closure of account on customer request- 3 days
Notice for closure of account by Bank 30 days
Transfer of account to other branch 3 days operationalization at new branch- 2 weeks
Acknowledgement of complaint 1 week
Redressal of customer complaint (max) 30 days
Closure of account by bank- Notice 30 days
Settlement of deceased claim case 15 days
Change in fee/charge- notice period- 1 month
Designating an account as dormant, inoperative or unclaimed- prior notice- 3 months
Return of unpaid/dishonoured cheque 24 hours
Loan recovery- time to visit customer- 7 am to 7 pm
Draft should be valid uniformly in banks- 3 months
Duplicate DD should be issued within 14 days
If duplicate DD not issued in time, interest payment should be made at FDR rate
Immediate credit- outstation instruments- banks discretion
Rate of interest payable in case of delay in collection of outstation cheques- banks
discretion
Composition of branch level customer service committee- BM, representatives of all
staff categories
Customer day celebrated on 15th every month
Employee working hours begin 15 minutes before customer service hours- Goiporia
committee
Safe Deposit Locker: Fixed Deposit to cover 3 years rent
Return securities/documents/Title Deeds 15 days of the repayment of all dues
Confirm cancellation/closure of Credit Card 7 days
Not charge any processing fee for loans up to Rs. 5 lakh, whether sanctioned or not.
Dispose of your application for a credit limit or enhancement in existing credit limit up
to Rs. 5 lakh within two weeks; and for credit limit above Rs. 5 lakh and up to Rs. 25
lakh within 3 weeks; and for credit limit above Rs. 25 lakh within 6 weeks from the date
42
BCSBI, after series of deliberations/consultations with the representatives of banks, RBI, IBA
etc. has once again carried out revision in the codes in January 2014 and MSE Codes in 2015.
BCSBI Code Compliance Rating
BCSBI has been monitoring, as part of its mandate, compliance with the Codes of Banks
Commitment to Customers and Banks Commitment to Micro & Small Enterprises by
carrying out survey of select branches of member banks for verifying implementation of the
Codes by the banks.
Parameters of Ranking (Weightage)
A.
B.
C.
D.
E.
Eligibility for opening The scheme is open to Individuals and account can also be opened
Account, 1968
on behalf of minor child as a natural / legal guardian, on behalf of
HUF, on behalf of an association of persons or a body of
individuals.
Subscription
Minimum amount Rs.500/- and maximum Rs.1,50,000/- per
annum. The number of installments in a financial year does not
exceed 12.
Period
Minimum period is 15 years and can be extended in a block of 5
years.
Rate of Interest
Presently, 8.10% wef 01.04.2016 however, subject to change as
per Govt. Notification from time to time.
Withdrawal from the Partial withdrawals are allowed after the expiry of 5 financial
Fund
years.
Partial withdrawal is restricted to 50 % of the amount at credit
at the end of 6th year immediately preceding the year in which
the withdrawal is made.
Entire amount can be withdrawn after completion of 15 years.
- Strive Hard Make a Mark
43
After the expiry of one year but before the expiry of 5 years from
the end of the year in which initial subscription was made, a loan
of 25% of the credit balance at the end of the second year
immediately preceding the year in which the loan is applied may
be availed of by the subscriber.
Nominations
Premature Withdrawal
Tax Concessions
The balances under PPF are not subject to court attachment. PPF
accounts can be opened at any of the 1229 authorized branches:
Facility
of
Rs. 15 lakhs
60 years (55 years for those who have retired under a
voluntary or a special voluntary scheme provided
investment is made within 1 month of date of receipt of
retirement benefits .
For retired Defence personnel retired on superannuation
- no age limit.
And for those retiring other than on superannuation,
minimum age is 55.
premature Available after 1 year of holding but with penalty
44
of
Not available
Not available
Available
Generally single, Joint mode is permitted but only spouses
will be allowed to open the accounts jointly.
applications Forms are available with our 1229 authorized branches.
Eligibility
Monetary Limits
Documents
Subscription
Limits
Duration
Rate of Interest
Tax Benefits
Annual subscription during F.Y. eligible for tax exemption under Sec 80 C
of I.T. Act.
Interest earned on the deposit amount under the scheme is tax free.
No tax will be levied on the maturity amount.
Premature Closure
Mode of Deposit
Withdrawal:
50% of the balance lying in the account as at the end of previous financial
year for the purpose of higher education, marriage after attaining the age
of 18 years.
45
Completion of 21 years from the date of opening of the account & where
the marriage of the account holder takes place before completion of such
period of 21 years. (Affidavit verifying Account Holders 18 years of age as
on date of closing of account)
1229 Authorised branches can open Sukanya Samriddhi accounts
Accounts will be opened in GBM module, once enabled
Circular letter No. 00325 06.04.2015
Eligibility
Subscription
Limits
Defined contribution by subscriber depending upon his age & targeted pension
Minimum: Rs 42/- p.m. for subscriber of 18 years of age.
Investment
Period
Duration/ Exit
The exit from the Scheme is permitted at the completed age of 60 years with
100% annuitisation of pension wealth. On exit, pension available to the
subscriber. Exit also permitted in the event of death of beneficiary or
terminal disease.
Monthly
Pension
Benefits
Operations
Sectors which impact large sections of the population, the weaker sections
Sectors which are employment- intensive such as agriculture, Micro and small
enterprises.
Sectors which meets the basic needs of a common man
Sectors which contributes more to GDP of country
46
Total Priority 40% of Adjusted Net bank Credit (ANBC) or credit equivalent amount of offSector
Total
Agriculture
whichever is higher.
Within the 18 percent target for Agriculture, a target of 8 percent of ANBC or
Credit Equivalent Amount of Off-Balance sheet Exposure, whichever is higher is
prescribed for small and marginal farmers, to be achieved in a phased manner
i.e. 7 % by March 2016 and 8 % by March 2017
Micro
enterprises
Export credit
whichever is higher.
sections
47
II
III(I-II)
IV
Eligible amount for exemptions on issuance of long term bonds for infrastructure and
affordable housing as per circular DBOD.BP.BC.No.25/08.12.014/2014-15 dated July
15, 2014.
VI
Eligible advances extended in India against the incremental FCNR (B) /NRE deposits,
qualifying for exemptions from CRR/SLR requirements.
48
49
50
Service enterprises:
Micro ( service) enterprises - enterprises engaged in providing service and whose original
investment in equipment (excluding land, building, furniture, fittings or other items not
directly connected with rendering of service) does not exceed Rs.10.00 lacs
Small (service enterprises) enterprises engaged in providing service and whose original
investment in equipment (excluding land, building, furniture, fittings or other items not
directly connected with rendering of service) is more than Rs.10.00 lacs but does not
exceed Rs.2.00 crores.
Medium Service Enterprises: enterprises engaged in providing service and whose original
investment in equipment (excluding land, building, furniture, fittings or other items not
directly connected with rendering of service) is more than Rs.2.00 crores but does not
exceed Rs.5.00 crores.
51
Loans to entities involved in assisting the decentralized sector in the supply of inputs to
and marketing of outputs of artisans , village and cottage industries
Loans to co-operatives of producers in the decentralized sector viz. artisans, village and
cottage industries
Loans sanctioned by banks to MFIs for on-lending to MSME sector as per the conditions
applicable to Qualifying Assets
Credit outstanding under General credit cards (including Artisan Credit Card, laghu
Udyami Card, Swarojgar Credit Card and Weavers card etc in existence and catering to the
non-farm entrepreneurial credit needs of individuals)
To ensure that MSMEs do not remain small and medium units merely to remain eligible for
priority sector status, the MSME units will continue to enjoy the priority sector lending status
up to three years after they grow out of the MSMSE category concerned.
Education
Loans to individuals for educational purposes including vocational courses up to Rs.10.00 lakh,
irrespective of the sanctioned amount will be considered as eligible for priority sector
Housing
Loans to individuals up to Rs. 28.00 lakh in metropolitan centres with population above 10
lakh and Rs. 20.00 lakh in other centres for purchase/construction of a dwelling unit per
family excluding loan sanctioned to banks own employees.
The overall cost of the dwelling unit in the metropolitan centre and at other centre should
not exceed Rs.35 lakh and Rs. 25 lakh respectively
52
Loans for repair to the damaged dwelling units of families up to Rs.2.00 lakh in rural/
semi-urban areas or Rs.5.00 lakh in urban/metro areas.
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 Rs. 10.00 lakh per
dwelling unit.
The Loans sanctioned by banks 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 Rs.10.00 lakh per dwelling unit.
Housing loans backed by long term bonds are exempted from ANBC
For the purpose of identifying the economically weaker sections and low income groups,
the family income limit of Rs.200000/- per annum, irrespective of location, is prescribed
Bank loans to housing finance companies (HFCs), approved by NHB for their refinance, 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 Rs. 10.00 lakh per borrower, provided the all inclusive interest rate charged
to the ultimate borrower is not exceeding lowest lending rate of our bank for housing
loans plus two percent per annum
The eligibility under priority sector loans to HFCs is restricted to 5 % of the individual
banks total priority sector lending, on ongoing basis. The maturity of bank loans should
be co-terminus with average maturity of loans extended by HFCs.
Export Credit:
Incremental export credit over corresponding date of the preceding year, up to 2 percent of
ANBC or Credit Equivalent Amount of Off-balance Sheet Exposure, whichever is higher,
effective from April 1, 2015 subject to a sanctioned limit of Rs. 25 crore per borrower to units
having turnover of up to Rs. 100 crore
Social infrastructure:
Bank loans up to a limit of Rs.5.00 crore per borrower for building social infrastructure for
activities namely schools, health care facilities, drinking water facilities and sanitation
facilities in Tier II to Tier VI centres.
Renewable Energy:
Bank loans up to a limit of Rs.15.00 crore to borrowers for purposes like solar based power
generators, biomass based generators, wind mills, micro-hydel plants and for non-
53
Loans to distressed persons (other than farmers) not exceeding Rs. 100000/- per borrower
to prepay their debt to non-institutional lenders.
Overdrafts, up to Rs. 5000/- (per account), granted against basic banking/saving accounts
under Pradhan Mantri Jan Dhan Yojana (PMJDY) provided the borrowers household annual
income in rural areas does not exceed Rs.100000/- and for non-rural areas it should not
exceed Rs. 160000/-.
Loans sanctioned to State Sponsored Organizations for Scheduled Castes/ Scheduled Tribes
for the specific purpose of purchase and supply of inputs to and/or the marketing of the
outputs of the beneficiaries of these organizations.
The all inclusive interest (effective annual interest, processing fee and service charges)
charged to the ultimate borrower by the originating entity should not exceed the base
rate of the investing bank plus 8 % per annum.
Investments made by banks securitized assets originated by NBFCs, where the underlying
assets are loans against gold jewellery, are not eligible for priority sector status.
54
Inter Bank Participation Certificates (IBPCs) bought by banks, on a risk sharing basis, shall
be eligible for classification under respective categories of priority sector, provided the
underlying assets are eligible to be categorized under the respective categories of priority
sector and the banks fulfill the Reserve Bank guidelines on IBPCs.
Agricultural labourers more than 50% of their annual income is from activities related to
agriculture
Share croppers persons who cultivate others land with a condition to share the produce
on an agreed basis
55
In states, where one of the minority communities notified is, in fact , in majority, the
other notified minority communities only coming under purview of weaker sections
In the case of a partnership firm, SHGs, JLGs, if the majority of the partners/members
belong to one or the other of the specified minority communities, advances granted to
such partnership firms may be treated as advances granted to minority communities
Bank credit to MFIs extended for on-lending to individuals and also to members of
SHGs/JLGs will be eligible for categorization of priority sector advance under respective
categories viz., agriculture, micro, small and medium enterprises, and others as indirect
finance, provided not less than 85% of total assets of MFI (other than cash, balances with
banks and financial institutions, government securities and money market instruments)
are in the nature of qualifying assets. In addition, aggregate amount of loan, extended
for income generating activity, is not less than 70% of the total loans given by MFIs.
A qualifying asset shall mean a loan disbursed by MFI, which satisfies the following
criteria:
1. The loan is to be extended to a borrower whose house hold income does not exceed
Rs.100000/- in rural areas and Rs.160000/- in non-rural areas.
2. Loan does not exceed Rs.60000/- in first cycle and Rs.100000/- in subsequent cycles.
3. Total indebtedness of the borrower does not exceed Rs.100000/-.
4. Tenure of loan is not less than 24 months when loan amount exceeds Rs.30000/- with
right to borrower of prepayment without penalty.
5. The loans is without collateral
6. Loan is repayable by weekly, fortnightly or monthly installments at the choice of the
borrower.
56
Fund
(RIDF)
established
with
NABARD
and
other
funds
with
For the purpose of allocation of RIDF and other funds, as decided by RBI from time to
time, the achievement levels of priority sector lending as on the March 31st will be taken
into account.
The deposit under various funds will be called upon by NABARD or such other Financial
Institutions as per the terms and conditions of the scheme.
From 2016-17 onwards, the achievement will be arrived at the end of financial year based
on the average of priority sector target / sub- target achievement at the end of each
quarter.
The interest rates on banks contribution to RIDF or any other funds, period of deposits,
etc. shall be fixed by RBI from time to time and will be communicated to the concerned
banks every year by RBI at the time of allocation of funds
57
2 Weeks(fortnight) -
8 9 weeks
2. Rejection of Proposals:
Branch managers may reject applications (except in respect of SC/ST) provided the
cases of rejection are verified subsequently by the Divisional/Regional Managers. In
the cases of proposals from SC/ST, rejection should be at a level higher than that of
Branch manager.
Agricultural advances can be classified asShort term loans the loans which are normally to be repaid within 36 months depending upon
the crop.
Medium term loans the loans which are to be repaid in installments repayable within 60 months
or 5 years.
Long term loans the loans where the repayment schedule is more than 60 months
Production credit loans that are sanctioned for crop production for meeting cost of fertilizers,
seeds, labour etc. (working capital requirement for production of crops) These loans are normally
sanctioned as per scale of finance for each crop decided by DCC.
58
The scheme launched in April 2008 by merging Prime Minister Rojgar Yojana (PMRY) and
Rural Employment Generation Program (REGP).
The Scheme is administered by Ministry of Micro, Small & Medium Enterprises (MoMSME) by
the help of Khadi & Village Industries Commission (KVIC).
Objective
To generate employment opportunities in rural as well as urban areas of the country
through setting up of new self employment enterprises.
Eligibility
Any individual above 18 years of age as well as SHGs, provided they have not availed
benefits under any of the schemes.
No income ceiling for assistance for setting up projects under PMEGP.
The Beneficiaries should have passed at least the 8th standard for setting-up project
costing above Rs. 10 lacs in the manufacturing sector & above Rs. 5 lacs in the business /
services sectors
Project cost
Scheme The provides for projects costing up to Rs. 10 lacs (maximum) under business /
services sector & Rs. 25 Lacs (maximum) under manufacturing sector
Project cost includes Capital Expenditure & one cycle of Working Capital
A project without Capital Expenditure are not eligible under the scheme
Cost of land not to be included in the project cost
Application sponsored only for working capital to be considered with the permission of the
controlling office in exceptional cases
Margin
General Category 10%
Special category (SC/ST/OBC Minorities/ Women/ Ex servicemen, physically handicapped,
NER, Hill & Border areas) - 5%
It is one time assistance
Subsidy
Subsidy in case of General category is 25% for rural & 15% for urban areas
Subsidy in case of Special category is 35% for rural & 25% for urban areas
- Strive Hard Make a Mark
59
The subsidy should be claimed within 15 days from nodal branch and nodal branch to
remit subsidy to finance branch within next 15 days. Hence subsidy should be received
before 30 days
Backend Subsidy
The subsidy should be kept in the form of Term Deposit Receipt (TDR) for a period of 3
years in the name of the beneficiary and credited to the borrowers loan account after 3
years from the date of first disbursement
No interest will be paid on the TDR and interest will not be charged on the loan for the
corresponding amount of TDR
In case the account becomes Non Performing Asset before 3 years for the reasons beyond
the control of the beneficiary, the subsidy can be adjusted to the loan account
Sponsoring agency
The beneficiary can directly approach the Bank / Financial Institution along with the
project proposal
It can be sponsored by KVIC / KVIB / DIC / Panchaayat Karyalayas etc
However, the applications received directly by the Banks will be referred to the Task
Force for its consideration
Collateral Security
No collateral security for projects up to Rs. 10.00 lacs.
However, all loans considered under PMEGP should be covered under CGTMSE as per the
eligibility criteria applicable to CGTMSE scheme (except finance made for Agriculture,
trading purposes and any type of finance made to SHGs)
Training
On sanction of the projects, first instalment of the loan will be released to the
beneficiaries only after completion of EDP (Entrepreneurs Development Programme) for at
least two weeks.
EDP of minimum 3 days can be done for small service activities projects up to Rs. 2 lacs
Repayment Period
03 to 07 years, depending upon the activity, cash flow & economic life of the asset
Interest Rate
Interest rate as per instruction of CO from time to time as applicable for the purpose of
loan
Points to remember
Only one person from a family is eligible for a loan
The family includes self & spouse
The subsidy is only one time assistance
Sign board to be displayed at prominent places
100% physical verification of assets to be done by KVIC or agency authorized by KVIC like
AFC (Agriculture Finance Corporation)
Banks to coordinate and assist KVIC for physical verification
Marketing support for the products produced may be provided through KVIC
The following activities listed as negative activities are not to be considered for finance:
a. Industry / Business connected with meat manufacturing
- Strive Hard Make a Mark
60
The Ministry of Rural Development, Government of India has launched National Rural
Livelihood Mission by restructuring Swarnajayanthi Gram Swarozgar Yojana (SGSY)
effective from 1.4.2013
Objective
NRLM focuses on building, nurturing and strengthening the institutions of the poor women,
including the SHGs and their Federations at village and higher levels.
CIF will be provided to SHGs through village level / cluster level federations to undertake
the common / collective socio-economic activities
Banks will lend to all the women SHGs @7% up to an aggregated loan amount of
Rs.300000/-
61
The SHG will also get additional interest subvention of 3% on prompt payment, reducing
the effective rate of interest to 4%
Eligibility for lending
Group with active existence for 06 months as per the books not from the date of opening
S/B account
SHGs following panch-sutras
Grading Norms as fixed by NABARD by scoring
Disintegrated SHGs revived and continue to be active for a period of 3 months
Loan amount
The loans may be used for meeting social needs, high cost debt swapping and taking up
sustainable livelihoods by the individual members with in the SHGs or to finance any
viable common activity started by the SHGs
Multiple assistance can be given, over a period of time through repeat doses
First dose: 4-8 times to the proposed corpus during the year or Rs. 50000/- whichever is
higher
Second dose: 5-10 times of existing corpus and proposed saving during the next 12 months
or Rs.100000/- whichever is higher
Third dose: Minimum of Rs. 200000/- based on the credit plan prepared by the group and
appraised by federation/support agency and the previous history
Fourth dose onwards: Rs. 5-10 lacs based on micro credit plans of the SHGs and their
members
Type of facility
Term loan / cash credit loan / both based on the need. In case of need, additional loan
can be sanctioned even though previous loan is outstanding.
Repayment Schedule
The first dose of loan will be repaid in 6 to 12 installments
Second dose of loan will be repaid in 12 to24 installments
Third dose repayment will be fixed based on cash flow and it has to be between 2 to 5
years either on monthly / quarterly / half yearly installments
Fourth dose onwards: Same as that of third dose but 3 to 6 years
Security and Margin
No collateral & no margin up to Rs. 10 lacs
No lien should be marked against bank account of SHGs
No deposit should be insisted while sanctioning loans
Dealing with willful defaulters
Should not be financed under NRLM
Defaulters can be allowed to benefit from the thrift and credit activities of the group and
up to assistance of revolving fund
At the stage of economic activity, they should not be allowed to access the benefits till all
the outstanding loans are repaid
Group may finance among the members excluding wilful defaulters
Default due to genuine reasons, banks may follow the norms suggested for restructuring
the account with revised repayment schedule
62
Accounts where all of the interest and/or instalments were paid within 30 days of the due
date during the entire tenure of the loans
63
Introduced in the year 2007 and revised with effect from November 2013
The objective of the scheme is to assist the manual scavengers for their rehabilitation in
alternate occupations
Eligibility
Manual scavengers and their dependents, irrespective of their income, will be eligible for
assistance
A person employed or engaged to clean excreta with the help of such devices and using
such protective gear shall not be a manual scavenger
Identified manual scavengers, one from each family would be eligible for receiving Cash
assistance of Rs.40000/- immediately after identification, in monthly installments of Rs.
7000/Amount of loan
Loan upto a maximum cost of Rs. 10 lakhs and Rs. 15 lakhs in case of sanitation related
projects like vacuum Loader, Suction Machine with vehicle, Garbage Disposal Vehicle, Pay
and Use toilets etc.
Repayment
Repayment period including moratorium period 5 years for projects up to Rs.5 lakhs and 7
years for projects above Rs. 5 lakhs with a moratorium period of 2 years
Rate of Interest
Projects up to Rs. 25000/- will be 5% per annum (4% per annum for women beneficiaries),
For projects above Rs. 25000/- it is 6% per annum
Interest subsidy to the extent of the difference will be given to the banks by the
respective State Channelizing Agencies ( SCAs)
Back ended subsidy
a. up to Rs. 200000/- it is 50% of the project cost,
b. From 2 lakhs to 5.00 lakhs it is Rs. 1 lac + 33.3% of project cost between Rs. 2-5 lakhs,
c. From 5 lakhs to 10 lakhs it is Rs.2.00lakhs + 25% of project cost between Rs. 5-10 lakhs,
d. for projects of Rs. 10 to Rs. 15 lakhs it is Rs. 325000/-( to be kept in subsidy reserve
fund)
Under this scheme the banks provide credit to the target group at concessional interest
rates of 4% p.a.
Purpose
Loan will be given for agri. Activities/collection& processing of forest products /cottage &
rural industries/tea shop/cycle rickshaw/mending footwear etc.
Eligibility
The family income of the borrower from all sources should not exceed Rs.18,000/- (in
case of rural areas) and Rs.24,000/- (in case of urban and semi-urban areas).
The land holding of the borrower should not exceed 2.5 acres (in case of dry land) or 1
acre (in case of wet land). However, SC/ST borrowers are eligible irrespective of their
land holdings.
The borrower should not avail any other credit at the same time.
Loan: Rs.15,000/- is to be given as a composite loan .
- Strive Hard Make a Mark
64
65
200
200
1000
800
300
200
2000
200
200
1500
10000
300
Good will
Capital
Sundry Debtors
Term Loan
Plant and Machinery
Sundry Creditors
Reserves
Expenses payable
Bank Borrowings / cash credit
Debentures
Net profit
Depreciation
300
2000
1600
2000
2500
1200
1000
200
1400
1200
500
200
Calculate
Current Ratio / Quick Ratio / Net working Capital / Debt Equity Ratio /
Debt Service Coverage (consider that installment during the year is 400) Ratio /
Stock turnover ratio / Debtor Turnover ratio / Debtor velocity ratio / Net profit %.
Answer:
LIABILITIES
OWNERS FUNDS
Capital
Reserves
B TOTAL(Net Worth)
LONG TERM LIABILITIES
Unsecured Loans
Term Loan
Debentures
SUB TOTAL(Term Liabilities)
`
2000
1000
3000
800
2000
1200
4000
CURRENT LIABILITIES
Provision for Expenses
Sundry Creditors
Expenses Payable
200
1200
200
1400
3000
GRAND TOTAL
Liabilities)
(Total
of
10000
ASSETS
FIXED ASSETS
Land and Building
Plant and Machinery
Vehicles
SUB TOTAL(Fixed Assets)
NON CURRENT ASSETS (NCA)
Investment in Firms
Security Deposit
SUB TOTAL (Total Non Current
Assets)
INTANGIBLE ASSETS
Goodwill
Pre Operative Expenses
SUB TOTAL(Total Intangible
Assets)
CURRENT ASSETS
Cash
Sundry Debtors
Stocks
Prepaid Expenses
Total Current Assets - Subtotal
GRAND TOTAL (Total of Assets)
`
1500
2500
1000
5000
300
200
500
300
200
500
200
1600
2000
200
4000
10000
66
Capital + Reserves
2000+1000
NW - Intangibles
3000 - 500
3000
500
2500
4000+3000
4000
7000
LTL + Networth
Current Liabilities
Short
Term
Sources
(= Current Liabilities)
Outside Liabilities
(= LTL + CL)
Long Term
(= Fixed Assets+
Uses
Intangible Assets
Current Assets
Gross
Working (= Total CA)
Capital
Short Term Uses
NCA+
4000+3000
7000
5000+500+500
6000
4000
4000
(CA)
3000
3000
4000
CA - CL
4000-3000
1000
4000-2200
1800
Current Ratio
CA CL
4000 3000
1.33:1
Quick Ratio
QA CL
1800 3000
0.66:1
LTL TNW
4000 2500
1.66:1
DSCR
Stock
Ratio
Drs T/o Ratio
Debtors Velocity
Ratio
Net Profit %
Return on NW
Sales
Sy
Debtors
(Sy DrsSales) x
12
(NP Sales) x
100
(NP TNW) x 100
100001600
6.3 times
(160010000) X 12
(500 10000) x 100
1.92
months
5%
20%
67
INDICATIONS
A favourable trend
Decrease
in
Sales
Increase in Profit
Decrease
Profit
Increase
Debtors
in
in
Decrease
Debtors
in
Increase
Creditors
in
Increase
Capital
in
A
favourable
indication,
if
accompanied by a higher % of an
increase in sales check-up, the
bad & doubtful debts, if any may
indicate
unsatisfactory
recovery
A favourable Indication, it
should be accompanied by a
growth in sales, it indicates
effective sales management
Indicates better Credit terms with
the suppliers, Increase should
be
accompanied
an
proportionate
increase
in
business
It indicates additional funds
brought
in
by
the
unit-a
favourable indication, Ascertain
the purpose for increase
&
its ultimate utilization
Is
it
on
account
of
replacement of Machinery in the
normal business? Is it for the
sake of expansion
/
diversification plans
Ensure that taxation & other
liabilities met out of earning for
the last year
Ensure that the
increase in
inventory is for production
Increase in Fixed
Assets
Decrease
Provisions
in
Increase
Inventory
in
Depreciation
Reduction
Term Loan
in
favourable Indication
GUIDELINES
Ascertain
that
increase
is
qualitative and not on account of
inflation
May be on account of undertrading
Ascertain the portion of profits
retained in the business
Ascertain the reasons
Ascertain the reasons check up
the age of debtors Delete debtors
above
6
months
obtain
confidential report from banker.
Sudden Decrease in Debtors
may indicate diversion of
funds.
A mere increase in Creditors may
indicate
that
the borrower is
not in a position to generate
enough
funds needed for
the payment to trade Creditors
Ensure that the increase is not due
to capitalization of reserves.
Ensure
that
the
capital
expenditure is acceptable to the
banker and there is no diversion
of funds.
Ensure
that
increase
in
inventory, i.e.
not
for
speculative purpose
Ensure that Depreciation has been Ensure
that
there
is
no
charged
change
in
the
depreciation
method.
It indicates
a
favourable Ensure that repayment is not out
position. The borrower has got of working capital funds.
repayment capacity
68
IRAC Guidelines
Performing asset - standard asset:
Assets which do not disclose any problem and do not carry more than normal
risk and also generates income for the Bank are Performing Assets
Interest and / or installment of principal remain overdue for a period of LESS THAN 90 days
in respect of Term Loan
The account is not out of order in respect of OD/CC
Over dues under Bills are less than 90 days whether purchased / discounted
In case of Agricultural advances, interest / installment of principal, the over
dues are within 2 crop seasons in case of short duration crops and one crop
season in case of long duration crops
SMA CLASSIFICATION (SMA0, SMA 1, SMA 2)
SMA 0
SMA 1
SMA 2
Interest/Installment/Bill Purchased
or
Discounted/Packing
Credit/Excess in W C limit/Nonadjustment
of
ad
hoc
limit/Operation
in
the
a/c
dormant/deficit in DP.
Default up to
30 days
Default from
31 days up to
60 days
Default from
61 days up
to 90 days
SMA 0
SMA 1
SMA 2
LC/LG/DPGL Installments/Other
Non-fund based commitment
viz. derivatives, Buyers credit,
Forward Contracts, un hedged
forex exposure etc.
Up to 30 days
31-60 days
61 up to 90
days
69
EAS II
SMA 0
Branch
submits
the
renewal proposal within
one month from expiry of
limits to the sanctioning
authority
Categorization of advances
1. Short
Duration
Crops
Grace
period
for categorizing
as NPA after
due date
Standard
SMA 1
SMA 2
A)Under
12 months (two Default up to 3 Default more than 3 Default for more
irrigated
crop seasons)
months
months up to 9 months than 9 months & up
conditions
to 12 months
(more
than
one crop in a
year)
B)Under rain 24 months (two Default up to Default more than 12 Default more than
fed conditions crop seasons)
12 months
months & up to 21 21 months & up to
(Only
one
months
24 months
crop
in
a
year)
2. Long
duration
crops
70
c.
d.
e.
f.
g.
h.
audits by banks; or reduction of drawing power (DP) by 20% or more after a stock audit; or
evidence of diversion of funds for unapproved purposes; or drop in internal risk rating by 2
or more notches in a single review.
Return of 3 or more cheques (or electronic debit instructions) issued by borrowers in 30
days on grounds of non-availability of balance/DP in the account or return of 3 or more
bills / cheques discounted or sent under collection by the borrower.
Devolvement of Deferred Payment Guarantee (DPG) installments or Letter of credit (LCs)
or invocation of Bank Guarantees (BGs) and its non-payment within 30 days.
Third request for extension of time either for creation or perfection of securities as
against time specified in original sanction terms or for compliance with any other terms
and conditions of sanction.
Increase in frequency of overdrafts in current accounts.
The borrower reporting stress in the business and financials.
Promoter(S) pledging/selling their shares in the borrower
company due to financial
stress.
Non-Performing Asset:
Nature of loan
Term Loan
CC/OD
Bills (purchased/discounted)
Agri. Advance
71
Loss Asset
A NPA need not go through the various stage of classification. In cases of serious credit
impairment, such assets should be straightway classified as doubtful (where value is more
than 10% of liability) or Loss asset (where realizable value of the security is less than 10% of
outstanding liability) as appropriate.
Central government guaranteed a/c s to be treated as NPA only if the govt. repudiates
its guarantee when claimed.
State govt. guaranteed a/c s Irrespective of invocation, a/c to be classified as NPA if
principal / interest is overdue for more than 90 days.
Loan against NSCs/KVP/IVP/LIC Not NPA up to surrender value.
Advances under consortium based on record of recovery of the individual Bank.
Asset classification is borrower wise and not facility wise.
Multiple facilities one a/c NPA, then all a/c s NPA (percolated NPA).
Classification is based only on recoveries and not on value of securities or net worth of
party and/or guarantors.
In case of fraud a/c s, the a/c straight away classified as doubtful or loss asset.
Accounts regularized near balance sheet date is an NPA account if inherent weakness is
observed.
Due Date: Due date refers to the date on which interest / instalment is payable by the
borrower. Interest has to be collected at monthly rests in respect of Working capital and
Term Loans except agricultural advances. Interest falls due for payment immediately on the
date of debit. Exceptions are where repayment holiday is given such as Project finance,
Educational loans, agricultural advances, Gold Loans, Loans to staff etc.
Standard Assets:
Category of Standard Advances
Direct Advances to Agriculture and MSE Sectors(Micro & Small)
Commercial Real Estate
Commercial Real Estate-Residential Housing
Teaser Rate Housing Loan-till 1 year from date on which rates are
reset at higher rates if a/c remains standard
All other Loans and Advances (including Medium Enterprises)
Restructured accounts under standard category (restructured
after 01.06.13 )
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Provision
0.25%
1.00%
0.75%
2.00%
0.40%
5.00%
72
4.25%
Provision
15%
25%
25%
40%
100%
100%
100%
GROSS NPA
NET NPA
= Gross NPA
Less
1. Provision on NPA as per norms
2. Additional/floating provision
3. ECGC/CGT claim received pending for appropriation
4. Provision due to diminution in fair value in case of
restructured accounts.
5. Amount outstanding in Unrecovered Interest account, if any
Provision Coverage Ratio (PCR): Provision coverage ratio refers to the percentage of provision
that the bank has set aside, against the loan amount to meet an eventuality where the loan
might have to be written off if it becomes irrecoverable. It is a measure that indicates the
extent to which the bank has provided (set aside money to bear the loss) against the troubled
part of its loan portfolio.
Recovery Measures
SARFAESIA
Though there already existed a Debt Recovery Tribunals (DRTs) established under
Recovery of Debts Due to Banks Act, 1993 (RDDB Act, 1993) to take care of banks
debts (above Rs 10 lacs), need was felt to have one more legislation to strengthen
the banks. Narasimhan Committee I & II and Andhyarujjana Committee also suggested
enactment of a new legislation for securitization and empowering Banks and Financial
- Strive Hard Make a Mark
73
Court. Accordingly SARFAESIA Act was passed by Parliament and received assent of
the President on 17th December, 2002. Subsequently the said Act has under gone two
major amendments i.e Enforcement of Security Interest and Recovery of Debts Laws
(Amendment) Act, 2004 (Act 30 of 2004) and Enforcement of Security Interest and
Recovery of Debts Laws (Amendment) Act, 2012 (Act 1 of 2013).
Powers to the Bank
c. To appoint any person for managing the secured assets taken possession of
[Section 13(4)(c)]
d. Requiring any debtor (under book debts) of NPA borrower to pay directly to the
Bank [Sec. 13(4)(d)]
13(4)(c)]
Sec. 13(4)
Sec.13(7)
Sec 13(8)
Particulars
Asset Reconstruction, establishment of AR companies, functions and governance
etc.
Issuance of 60 days Demand Notice
Authorised Officer to reply, within 15 days, to any representation/objection
received during 60 days period. (However, even after lapse of 60 days statutory
period if the Authorised Officer receives any representation/objection the same
should also be replied). The reply should be elaborate and touch all issues
raised by the borrower and with due application of mind.
right of secured creditors to take various measures including physical possession
of secured property after expiry of 60 days
Right of secured creditors to recover all such costs, expenses, charges
incidental to action, incurred by them out of the sale proceeds of property
If dues of secured creditors are tendered by debtors in full any time before the
date fixed for sale/auction, then secured creditors shall not proceed with sale
of property. As per the various judicial pronouncements the
mortgagor/borrower has right to redeem his property till issuance of the sale
certificate in favour of the purchaser.
74
Sec 13(10)
Sec 13(11)
Sec 13(13)
Sec 14
Sec 14(3)
Sec 15 & 16
Sec. 17
Sec 17(6)
Sec. 18
Sec.18(C)
Sec 19
Sec 20 - 30
Sec 31
Where more than one creditor has financed the financial asset, then the
measures prescribed under Sec 13 (d) will be taken only when such secured
creditors of 60% in value of the outstanding agree to initiate action under the
above provision.
Where dues are fully met by sale of assets, secured creditors can file suit in
DRT or any other competent court for recovery of balance amount.
Without prejudice to the right against the debtor, creditor has right to proceed
against the guarantor or sell the pledged assets
Debtor shall not transfer, alienate or sell the secured property mentioned in
notice after issuance of notice u/s 13(2) without creditors consent
Power of CMM or DM to take possession of such assets and handover such assets
to the secured creditor. According to the recent amendment, secured creditor
while approaching to CMM/DM to file an affidavit containing 9 point
declaration.
No act of such CMM or DM shall be called in question in any court or before any
authority
Regarding taking over of Management
Right to appeal Any person including the borrower aggrieved by any of the
measures taken by the secured creditor may approach DRT within 45 days of
from the date of such measures. DRT if satisfied may restore the possession or
order for such other relief. However, such cases to be disposed of within 4
months.
Aggrieved party (if DRT has not disposed of case within 4 months) may make an
appeal to DRAT
Aggrieved party against orders of DRT, may approach DRAT within 30 days of
receipt of orders subject to paying fees and also depositing 50% of the amount
determined as dues by DRT (DRAT may reduce this amount to not less than 25%
duly recording the reasons)
Where an application or an appeal is expected to be made or has been made
under sec. 17 of the Act the secured creditor or any person claiming a right to
appear before the Tribunal or the Court of Dist. Judge or the Appellate Tribunal
or High Court may lodge a caveat in respect thereof. [Inserted by the
Enforcement of Security Interest and Recovery of Debts Laws (Amendment) Act,
2004 w.e.f.03.01.2013.]
Borrower entitled to compensation when possession by secured creditor is
reversed by a court/DRT for any reason
Establishment of central registry & related provisions
Sec.34
Sec.35
Sec 32
75
76
77
Lok Adalat
a. It is voluntary process and works on the principle that both the parties to the dispute are
willing to sort out their dispute amicably. Through this mechanism, disputes can be
settled in a simpler, quicker and cost effective way.
b. The National Legal Services Authority constituted under the Legal Services Authority Act,
1987 is the Apex Agency for laying down principles and polices for making legal services
available under the Act.
c. Lok Adalat is a process wherein the borrowers are given opportunity to settle their dues
under compromise.
d. Lok Adalats are conducted at State Level, District Level and Taluk Level Legal Services
Authority in the respective states.
e. Branches / Regional Office have to follow up with the legal service authorities at the
district level where the branch is situated for identifying the dates of Lok Adalat and
ensure that maximum number of NPA accounts is settled in Lok Adalat.
f. The monetary ceiling of cases to be referred to Lok Adalat organized by civil court is
Rs.20.00 Lacs
g. The Bank will identify cases and furnish list of cases to the Authorities, who would send
notices to the borrowers to appear before Lok Adalat. The Bank would hold intensive pre
Lok Adalat meets with the borrowers and educate them on the advantages of settling
their dues through Lok Adalat and encourage them to participate in the Lok Adalat.
h. Lok Adalats are also held at different courts like DRT, High Court, Supreme Court etc.
periodically irrespective of the amount involved.
Features of Lok Adalat
a. Lok Adalats can hear both suit filed (litigation) and non suit filed (Pre- litigation) Cases.
b. In pre-litigation stage, NPAs with total outstanding up to Rs.20.00 Lacs (total dues
including dummy interest) can be referred to Lok Adalats organized by Legal Service
Authority at state/ district / taluka level.
c. The cases which are pending before various forums such as Civil Court, DRT, DRAT can
also be settled in Lok Adalat if the parties arrive at settlement with mutual consent.
d. No court fees is involved when Pre litigation cases are referred to the Lok Adalat.
However, if a pending case is settled at Lok Adalat, any court fee already paid will be
refunded.
e. Every award made by Lok Adalat shall be final and binding on all the parties to the
dispute, and no appeal shall lie to any court against the award.
f. There is no strict application of the procedural laws and the Evidence Act while assessing
the merits of the claim by the Lok Adalat. The parties to the disputes though represented
by their advocate can interact with the Lok Adalat judge directly and explain their stand
in the dispute and the reasons therefore, which is not possible in a regular court of law.
g. NPAs which can be settled through Lok Adalat can be brought before the Lok Adalat
directly instead of going to a regular court first and then to the Lok Adalat.
78
79
Foreign Exchange
What is Foreign Exchange?
As Per Foreign Exchange Management Act 1999, Foreign Exchange Means Foreign Currency &
includes
All deposits, credits, balances payable in any foreign currency and
Drafts, TCs, LCs and bills of exchange expressed or drawn in Indian currency and payable in
foreign exchange
Drafts, TCs, LCs or bills of exchange drawn by banks, institutions or persons outside India but
payable in Indian currency
In simple terms Foreign Exchange refers to the currencies of other countries. It means the
claims of residents of one country to the foreign currency payable abroad
For Example: An Indian exporting goods to UK and invoicing it in GBP will receive the payment
in GBP. The GBP is foreign exchange to India.
WHY FOREX REQUIRED?
Capital Account Transaction: Transaction which alters the assets and liabilities,
including contingent liabilities outside India of persons resident in India or Assets and
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80
81
82
(To be
Guidelines to Branches:
No introduction required (passport can be treated as self introduction)
NRE details to be entered in CUMM under sub menu option N
A/c can be opened with zero balance
Chq Book to be issued after receiving initial remittance in to the a/c
Accounting Entries on Receiving Remittance from Customer:
Method (1):
Party while on his visit to India gives Foreign Currency Cheq / FDD / Trav. Cheques / Foreign
Currency and requests for credit to his NRE SB a/c by purchase / on realization.
Steps Involved:
Send the Cheque / DD to Centralised Cheque Collection Center (CCC), Mumbai along with
prescribed collection schedule duly mentioning the 15 digit a/c no. of the party. (Ref: IBD Cir
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83
84
Particulars
(1)
(2)
(3)
(4)
Joint account
In the names of two or more In the names of two or more May be held jointly with
non-resident individuals or non-resident individuals or residents
Nomination
Resident individuals
(close relatives as per
nd
companies act) as 2
applicant on former or
survivor basis permitted
since 22/09/11
Resident individuals
(close relatives as per
nd
companies act) as 2
applicant on former or
survivor basis permitted
since 22/09/11
Permitted
Permitted
Permitted
85
Indian Rupees
Indian Rupees
Repatriable
Repatriable
Repatriable
Type of
Account
Savings, Current,
Recurring, Fixed Deposit
Savings, Current,
Recurring, Fixed Deposit
Minimum: 1 Year
As applicable to resident
accounts.
Rate of Interest
Operations by
Power of
Attorney in
Subject to cap :
86
Rupee Loans
In India
To the Account
holder / third
party
Permitted
No ceiling but subject to
No ceiling but subject to
usual margin requirements usual margin requirements
restricted to withdrawals
for permissible local
payments or remittance
to the account holder
himself through normal
banking channels.
Foreign
No ceiling but subject to
No ceiling but subject to Not Permitted
Currency Loans usual margin requirements usual margin requirements
in India /
Abroad
To the Account
holder / third
party
Purpose of
Loan
Personal requirement
and / or business
purpose *
a. In India
ii) to Third Party Fund based and / or nonfund based facilities for
personal purposes or for
carrying on business
activities *. (Please refer to
para 9 of Sch. 2 to FEMA
5).
87
Not permitted.
* The loans cannot be utilised for the purpose of re-lending or for carrying on agriculture or plantation
activities or for investment in real estate business. $ Provided no funds are remitted to India and are
used abroad only.
Note :a. When a person resident in India leaves India for Nepal and Bhutan for taking up employment or
for carrying on business or vocation or for any other purpose indicating his intention to stay in Nepal and
Bhutan for an uncertain period, his existing account will continue as a resident account. Such account
should not be designated as Non-resident (Ordinary) Rupee Account (NRO).
b. ADs may open and maintain NRE / FCNR (B) Accounts of persons resident in Nepal and Bhutan who
are citizens of India or of Indian origin, provided the funds for opening these accounts are remitted in
free foreign exchange, Interest earned in NRE / FCNR (B) accounts can be remitted only in Indian
rupees to NRIs and PIO resident in Nepal and Bhutan.
c. In terms of Regulation 4(4) of the Notification No.FEMA.5/2000-RB dated May 3, 2000, ADs may open
and maintain Rupee accounts for a person resident in Nepal / Bhutan.
d. The regulations relating to the various deposit schemes available to Non-Resident Indians have been
rd
notified vide Notification No.FEMA.5 dated 3 May 2000, as amended from time to time. The relevant
Notifications and A P (DIR Series) Circulars have been placed on our website www.rbi.org.in and may
please be referred to for full details.
e. AD Category I banks and authorized banks may credit proceeds of demand drafts / bankers'
cheques issued against encashment of foreign currency to the NRE account of the NRI account holder
where the instruments issued to the NRE account holder are supported by encashment certificate issued
by AD Category I / Category II.
f. AD Category I banks and authorised banks may permit remittance of the maturity proceeds of FCNR
(B) deposits to third parties outside India, provided the transaction is specifically authorised by the
account holder and the authorised dealer is satisfied about the bonafides of the transaction.
g. The term loan (against NRE / FCNR deposits) shall include all types of fund based/nonfund based facilities.
h. In case of loans against FCNR deposits, the margin requirement shall be notionally calculated on the
rupee equivalent of the deposits.
88
89
Interest rates on NRE & NRO (SB & Term) deposits deregulated by RBI w.e.f 16.12.11
(RBI:DBOD:63 dt 16/12/11)
NRIs are free to hold / own / transfer / invest any assets acquired abroad even after their return
to India for permanent settlement. An investor can also retain & reinvest the income earned on
investments made under LRS (9110 dt . 24/10/11)
Funds in NRO a/c can be transferred to NRE a/c upto USD 1 Mio per FY subject to compliance of
conditions (9283 dt 15.05.12)
Under this scheme Resident Individuals can remit up to USD250,000/- per Financial Year
for permitted current / capital a/c transactions
Resident Individuals are free to acquire and hold shares of listed companies or invest in
Mutual funds etc without prior approval of RBI
Resident individuals can also maintain foreign currency a/cs abroad
Can be utilised for repayment of loan availed abroad as NRI on becoming Resident Indian
Can be utilised for Gift / Donations
Remittance by DD in own name or third party with whom the permissible transaction will
be put through is permitted against self declaration
Conditions:
90
91
of
forex
Upto USD 3000 in FC. Up to USD 5000 for Iraq and Libya,
For Russia and Iran & CIS countries & for HAJ pilgrimage No ceiling.
92
Green Clause LC: Authorises the nominated bank to give advance payment for
Warehousing and Insurance Charges
High Sea Sales: Where the goods under import are sold on the way to Indian
shores before they actually land at the port. It takes place by way of
endorsement on documents.
Payment will be made by original importer and
goods will be delivered to endorser.
Importer-Exporter Code is allotted by DGFT (Ten Digit)
93
It can be in the form of bank loans, buyers credit, suppliers credit, floating
bonds, fixed rate bonds.
It is availed from Nonresident lenders.
There are two routes for availing ECB: Automatic route and approval route.
rate
94
Automatic route is used for investment in real sector (mfg sector/service sector).
Corporate borrowers (except financial intermediaries) are eligible.
Individuals, Trusts, Non-profit organizations are not eligible.
MFI & NGOs engaged in micro finance eligible. (Up to USD 10 Mn in a financial year)
Indian companies in the hotel sector (with a total project cost of INR 250 crore or more),
may avail ECB under USD 10 billion scheme with RBI permission i.e.
under the approval route.
Developers/builders, housing finance companies (HFCS)/ National Housing Bank (NHB) are
permitted to avail ECB for low cost affordable housing projects, under the approval
route.
Basel III reforms are the response of Basel Committee on Banking Supervision (BCBS) to
improve the banking sectors ability to absorb shocks arising from financial and economic
stress, whatever the source, thus reducing the risk of spill over from the financial sector to
the real economy. It has its origins in the financial market turmoil after failure of Bretton
Woods system of managed exchange rates in 1973.It had resulted into large foreign
currency losses to many banks world over. In response to this During Pittsburgh summit in
September 2009, the G20 leaders committed to strengthen the regulatory system for
banks and other financial firms and also act together to raise capital standards, to
implement strong international compensation standards aimed at ending practices that
lead to excessive risk-taking, to improve the over-the-counter derivatives market and to
create more powerful tools to hold large global firms to account for the risks they take. For
all these reforms, the leaders set for themselves strict and precise timetables.
Consequently, the Basel Committee on Banking Supervision (BCBS) released
comprehensive reform package entitled Basel III: A global regulatory framework for
more resilient banks and banking systems (known as Basel III capital regulations) in
December 2010.
Basel III reforms strengthen the bank-level i.e. micro prudential regulation, with the
intention to raise the resilience of individual banking institutions in periods of stress.
Besides, the reforms have a macro prudential focus also, addressing system wide risks,
which can build up across the banking sector, as well as the procyclical amplification of
these risks over time. These new global regulatory and supervisory standards mainly seek
to raise the quality and level of capital to ensure banks are better able to absorb losses on
both a going concern and a gone concern basis, increase the risk coverage of the capital
framework, introduce leverage ratio to serve as a backstop to the risk-based capital
measure, raise the standards for the supervisory review process (Pillar 2) and public
disclosures (Pillar 3) etc. The macro prudential aspects of Basel III are largely enshrined in
the capital buffers. Both the buffers i.e. the capital conservation buffer and the
countercyclical buffer are intended to protect the banking sector from periods of excess
credit growth.
Reserve Bank issued Guidelines based on the Basel III reforms on capital regulation on
May 2, 2012, to the extent applicable to banks operating in India. The Basel III capital
regulation has been implemented from April 1, 2013 in India in phases and it will be fully
implemented as on March 31, 2019. Further, on a review, the parallel run and prudential
95
Regulatory Capital
Minimum Common Equity Tier 1 ratio
Capital conservation buffer (comprised of Common Equity)
As% of RWA
5.5
2.5
96
8.0
iv
v
vi
vii
viii
1.5
7.0
2.0
9.0
11.5
buffer [(vii)+(ii)]
ELEMENTS OF COMMON EQUITY TIER I CAPITAL
1. Common shares (paid up equity) issued by the bank which meet the criteria for
classification as common shares for regulatory purpose.
2. Stock surplus (share premium) resulting from the issue of common shares
3. Statutory reserves
4. Capital reserves representing surplus arising out of sale proceeds of assets.
5. Other disclosed free reserves, if any
6. Balance in P & L account at the end of the previous fin year
7. Current year profits can be reckoned on quarterly basis provided incremental NPA
provision at end of any of 4 quarters of previous Fin year have not deviated more than 25%
from avg of 4 qtrs.
8. Revaluation reserves arising out of change in the carrying amount of a bank's property
consequent upon its revaluation may, at the discretion of banks, be reckoned as CET1
capital at a discount of 55%, instead of as Tier 2 capital under extant regulations, subject
to certain conditions.
Deduction: Regulatory adjustment /deductions to be made from total of 1 to 7.
ELEMENTS OF ADDITIONAL TIER I CAPITAL
1. Perpetual Non-Cumulative Preference Shares (PNCPS),which comply with the regulatory
requirements.
2. Stock Surplus (share Premium) resulting from the issue of instruments included in
Additional Tier I capital.
3. Debt Capital instruments eligible for inclusion in Additional Tier I capital, which comply
with the regulatory requirements.
4. Any other type of instruments generally notified by RBI from time to time for inclusion in
Additional Tier 1.
Deduction: Regulatory adjustments/deductions to be made from total of 1 to 4.
ELEMENTS OF TIER 2 CAPITAL
1. General Provisions and Loss Reserves :General provisions on standard assets, floating
Provisions, Provisions held for Country Exposures, Investment Reserve account, excess
provisions which arise on account of sale of NPAs and Counter cyclical provisioning
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97
2.
3.
4.
5.
buffer up to max of 1.25% of total credit RWA under Standardised approach. Under
IRB (Internal Rating Based) approach where the total expected loss is less than total
eligible provision than the difference may be recognize the difference as Tier II up to a
max of 0.6% of credit RWAs calculated under IRB approach.
Debt Capital Instruments issued by Bank.
Preference share capital instruments(PCPS/RNCPS/RCPS)issued by banks;
Stock surplus (share Premium) resulting from the issue of instruments in Tier 2 capital.
Any other type of instrument notified by RBI
Standard
Approach, Foundation
Internal
rating
Based
approach, Advance Internal rating based approach.
Standard Approach(comprising maturity method & duration
method),Internal risk based approach
Basic
Indicator
Approach, Standard
Approach, Advance
Measurement Approach
International agencies
a. Fitch;
b.
Moodys;
c. Standard & Poors
and
98
Risk
0%
50%
125%
35%
Staff
loans Rs
secured
by mortgages
superannuation
benefits
(iii)Above
30 lac
and upto or
Rs charge
75 laconwith
Loan to
Other staff loans (being part of regulatory retail)
Value(LTV)ratio
of less than
equal
to 75%
Other assets/loans(which
areornot
specified)
20%
75%
75%
100%
100%
Open
position
currency
(iv) Above
Rs in30Gold/foreign
lac and upto
Rs 75 lac with Loan to
100%
0%
20%
20%
20%
20%
20%
75%
35%
150%
50%
75%
150%
80%
99
100
101
1.
2.
3.
4.
Marginal Cost: The marginal cost that is the novel element of the MCLR. The marginal cost of
funds will comprise of Marginal cost of borrowings and return on networth. According to the
RBI, the Marginal Cost should be charged on the basis of following factors:
1. Interest rate given for various types of deposits- savings, current, term deposit, foreign
currency deposit
2. Borrowings Short term interest rate or the Repo rate etc., Long term rupee borrowing
rate
3. Return on net worth in accordance with capital adequacy norms.
The marginal cost of borrowings shall have a weightage of 92% of Marginal Cost of Funds
while return on net worth will have the balance weightage of 8%.
- Strive Hard Make a Mark
102
1.
2.
3.
4.
1.
2.
3.
4.
The base rate or the standard lending rate by a bank is calculated on the basis of the
following factors:
Cost for the funds (interest rate given for deposits),
Operating expenses,
Minimum rate of return (profit), and
Cost for the CRR (for the four percent CRR, the RBI is not giving any interest to the banks)
On the other hand, the MCLR is comprised of the following are the main components.
Marginal cost of funds;
Negative carry on account of CRR;
Operating costs;
Tenor premium
It is very clear that the CRR costs and operating expenses are the common factors for both
base rate and the MCLR. The factor minimum rate of return is explicitly excluded under
MCLR.
But the most important difference is the careful calculation of Marginal costs under MCLR. On
the other hand under base rate, the cost is calculated on an average basis by simply averaging
the interest rate incurred for deposits. The requirement that MCLR should be revised monthly
makes the MCLR very dynamic compared to the base rate.
Under MCLR:
1. Costs that the bank is incurring to get funds (means deposit) is calculated on a marginal basis
2. The marginal costs include Repo rate; whereas this was not included under the base rate.
3. Many other interest rates usually incurred by banks when mobilizing funds also to be carefully
considered by banks when calculating the costs.
4. The MCLR should be revised monthly.
5. A tenor premium or higher interest rate for long term loans should be included.
103
Acronym
1
ADC
AEPS
AIRB
AMA
AMB
AML
AOF
APY
AQB
10
AQR
11
ARC
12
13
BBB
BCSBI
14
BO
Banking Ombudsman
15
BO
Beneficial Owner
16
CAP
17
18
CAP
CASA
19
CBB
20
CBS
21
CC
Cash Credit
22
23
CCB
CCR
24
CCU
25
CDD
26
CFT
27
CGTMSE
28
CIF
29
CIP
30
COD
Cost of Deposit
31
32
CPI
CRR
33
CSOLOP
34
CTR
35
CTS
36
CV
Credit Voucher
5
6
104
CV
Cash Voucher
38
CVO
39
CWTR
40
DBC
41
DBC
42
DBMS
DBT
45
DCCO
DD
46
DRIC
47
48
DRT
DV
49
ECS
50
ED/EOW
51
EDD
52
53
EDW
e-KYC
54
EMI
55
FATCA
56
FATF
57
FDR
58
59
FIRB
FIU
60
FOREX
Foreign Exchange
61
GBM
62
GDP
63
GOI
Government of India
64
HNI
65
66
HQLA
HUF
67
IB/RAW
68
IFSC
69
IMPS
70
IRAC
71
IT
Information Technology
72
KYC
73
KYC B
74
KYC BR
43
44
105
LAS
76
LC
Letter of Credit
77
LCR
LG
80
LGD
LLP
81
LP
Legal Person
82
LR
Leverage Ratio
83
84
MCLR
MICR
85
MIS
86
MMS
87
88
MPLS
NACH
89
NEFT
90
NP
Natural Person
91
NPA
Non-Performing Asset
92
NPO
93
94
NPS
NRI
95
NTR
96
OD
Overdraft
97
OFAC
98
ORMC
99
OTS
100
OVD
101
PAN
102
103
PCA
PEP
104
PIO
105
PMLA
106
PO
Pay Order
107
PPO
108
PVC
109
110
RAM
RBI
111
RCSA
112
ROAA
78
79
106
ROE
RRB
Return on Equity
Regional Rural Bank
115
RTGS
116
SCB
117
SDR
118
SDV
119
SLR
120
SMA
121
SOD
Secured Overdraft
122
SSA
123
STR
124
STR
125
TDS
126
TL
Term Loan
127
UCIC
128
UIDAI
129
UMP
130
131
UPI
USP
132
UTS
133
YOA
Yield on Advances
113
107
108