Book On Interview PDF

PROMOTION MADE EASY
BOOK ON INTERVIEW
(FOR ALL SCALES)
Version 3.0
(A Very useful book for Day to Day Banking and all Knowledge Based exams
related to Banking, Promotion test & Interview)
Sanjay Kumar Trivedy

sktrivedycan@gmail.com, 8691062294 / 8208905244
Preface
Dear Friends,
Interview & Group Discussion is an opportunity for you to present your personality consisting of
your attitude, views, awareness level before the interview board, so that the “potential in you” is
appropriately judged by the members on the interview board, who are learned people in their own field
of specialization. The interview board, in order to judge your Potential evaluates your performance in
the recent past, operating style, team building capabilities, effectiveness, neutral judgement
level,transparency in dealings, initiatives, attitude and leadership qualities.
An official working in the Banking sector has to keep pace with Updated knowledge, skills & attitude,
as the same is required everywhere. Employees play vital role in Banking/service organizations and
they need to be transformed into Knowledge Assets to remain competitive in the dynamic environment
and it is more so with Banks as they are very service sensitive. Thus it is imperative for the bank staff
to serve the clientele with updated information of bank's products & services to accomplish corporate
objectives.
Indian Banking is in its most exciting phases. The impact of liberalization has been wide spread and
has thrown up both challenges and opportunities for bankers. Ever increasing competition is a part of
professional life and the banker who is ahead of his peers in terms of knowledge skill, technology and
quick response will be the winner.The Technology has also played role in this development. The
transfer of amount is now happening through RTGS, NEFT, Net & Moblie Banking. Almost all Banks
have App for Mobile banking using GPRS or NUUP or USSD depending upon their arrangement/software
used by them. The amount transferred through digital mode has increased many folds during last four
to five months.
During the course in the Banking Career, the Performing bankers have to face interviews occasionally.
The interaction during such interviews, mainly focus on, from Job knowledge to attitudinal
aspects,from potential to perform to perforformance and from banking history to emerging banking
scenario. Due to their pre-occupation with their functional routine, the bankers rarely find enough time
to go through economic papers, Financial news/magazines and such study materials. But, they are
expected to be conversant with all changes taking place in the financial services Sector, which has
witnessed notable transformation over last five decades. In order to overcome these difficulties and to
match the expectations in the interview, this book “Capsule on Interview” has compiled having many
unique features to its credit & consists of all topics/syllabus required for Interview / Knowledge with
clear concept & simple language and covers previous years Interview related recalled questions on
subject wise related to our Bank. Our earlier compiled book “Hand Book on Banking “, DRISHTI &
GROUP DISCUSSION will be taken as basic for the banking operations & knowledge.
This book on Promtion Made Easy: Book on Interview, a very useful book for for all scales updated
upto 06.04.2017 has many unique features to its credit & consists of all topics required for Interview &
Group Discussion with clear concept & simple language with previous year recalled questions asked
during Interview & Group Discussion.
All possible care is taken to provide error free information, however, readers may note that the
information given herein is merely for guidance/reference and they need to refer the relevant circulars
& Manuals for full details.
I express my sincere thanks to friends/colleagues for their support in encouraging the idea and
contributing the required resources for release of this book.
I solicit your views on the content and quality of the topics for further improvement.
I wish you all the Success and hope the study material will help in achieving the goal.
Date: 06.05.2017 Sanjay Kumar Trivedy

sktrivedycan@gmail.com, 8691062294 / 8208905244
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Canara Bank, Govt. Link Cell, Nagpur 1|Page
About the Author
Mr. Sanjay Kumar Trivedy, Presently working as Divisional Manager in Canara Bank, Govt. Link, Cell,
Nagpur. He Joined Canara Bank as DRO/PO (AEO) on 10.03.1997 and worked in various places,
starting from Maujgarh branch (1997-2000), Near Abohar(Punjab), Sirsa Main- Haryana (2000-2004),
BMC, Jalandhar (2004-2006) Toiladungari, Sakchi, Jamshedpur(2006-2009), Jhalak near Chaibasa
(2009-2011), J B Nagar, Andheri East , Mumbai( 2011-2013) and then Faculty as well as College in
charge ( Principal ) in Regional Staff Training College, Mumbai (2013-2016). He won more than 200
awards in various fields of Banking by his Bank – Canara Bank, which includes twice gold coin for
CASA mobilization. His best achievement was as an officer/AEO, he converted his Section: Agril
Finance into Hi-tech Agril. Branch at BMC, Jalandhar and while working in Jhalak branch near
Chaibasa (Jharkhand), won twice best Rural banker award from NABARD during 2009-10 &2010-11 in
SHG credit linkage & Farmers Club Formation.
Mr. Sanjay Kumar Trivedy is M.Sc. (Agril), CAIIB, PGDCA, MBA, MBA (Finance),Diploma (IIBF) in Rural
Banking, Treasury, Investment and Risk Management, Commodity Derivatives for Bankers, Advanced
Wealth Management, Certificate (IIBF) in Trade Finance, Certificate in Anti-Money Laundering / Know
Your Customer, Certificate Examination in SME Finance for Bankers, Certificate Examination in
Customer Service & Banking Codes and Standards, Certificate Examination in CAIIB - Elective Subjects
( Retail Banking & Human Resource Management) & Certificate Examination in Microfinance
Mr. Sanjay Kumar Trivedy has teaching experience of more than 16 years, from Sirsa Main Branch
(2000-2004) , he started teaching to his colleagues/staff and in this long journey he has given good
results both in Promotion test as well as JAIIB /CAIIB examination. He has taken IIBF-JAIIB & CAIIB
classes at Mumbai. He has compiled/authored more than 20 books in last three years related banking
- JAIIB, CAIIB, Book on Promotion Test ( all cadres), Interview , Drishti (Current Banking Topics –
Interview book for Scale iv & above), Group Discussion, Certificate course on Customer Service &
BCSBI, AML& KYC, MSME Finance for Bankers, Book on Abroad Posting, Confirmation Test for PO,
Banking & Technology and many more books on day today banking.
Mr. Sanjay Kumar Trivedy is working in a mission mode to reduce knowledge gap among bankers
with objective to provide educational support free of cost to all in general and bankers in particular
with objective to empower our people with better productivity, Sense of satisfaction & Customer
delight.
He can be contacted through e-mail: sktrivedycan@gmail.com, whatsapp no. : 8691062294 /9987519725
INDEX
SI. CONTENTS Page No.
No
1 INTERVIEW TECHNIQUES 04-11
2 OUR BANK AND PRODUCTS 11-49

3 VARIOUS LAWS RELATED TO INDIAN BANKING 49-54
4 LATEST CONCEPT IN BANKING 55-109
5 BANKING BUSINESS STRATEGY 109-113
6 TEST YOURSELF : MOCK INTERVIEW QUESTIONS 113-145
The best way to find yourself is to lose yourself in the service of others - Mahatma Gandhi
1. INTERVIEW TECHNIQUES
How To Face Bank Interviews : Interview is an opportunity for you to present your personality consisting of your attitude, views
and awareness level before the Interview Board, so that the potential in `you' is appropriately judged by the members on the
Interview Board, who are learned people in their own fields of specialisation.
What you should prepare ?
You should spend good time to make the choice of the contents relevant to your interview. These contents differ for interviews
depending upon the level for which the interview is being held. Broadly these can be disintegrated into macro and micro aspects.
What is evaluated during the interview ?
The interview board, in order to judge your POTENTIAL evaluates your Performance in the recent past, Operating style, Team
building capabilities, Effectiveness, Neutral judgment level, Transparency in dealings, Initiatives, Attitude and Leadership
qualities. Though the interview is not a new process for many of you, being already in job, but you have no way of knowing
exactly what is going to be asked and how that would be tackled. The following general tips can help a candidate appearing for
an interview, to face the questions confidently.
Should you prepare pre-scripted questions?
It is important that you must not venture to go for an interview with a predetermined script of exactly what you are going to say.
What is actually required, is the tactics that enable you to navigate successfully through the interview. This author had the
opportunity of being both, the interviewee and interviewer on several occasions during his banking career.
Preparing yourself as the interviewer
There are a number of aspects of critical importance in planning the interview:
Timing - enough time must be allowed for the interviews and making notes between each. Each candidate should be given the
same length of time in the interview. There should be sufficient breaks built into the interview programme.
Re-read the application form or CV, job description and person specification to identify areas which need further exploration or
clarification. The appointment panel should agree the format of the interview and identify questions to cover the key
competencies required by the post. The different subject areas should be allocated between the panel members in advance of
the interview date.
The panel should agree how they will operate as a team during the interviews. The first interview of the day should not be used
as 'a dress rehearsal' - otherwise the appointment panel could be accused of acting unfairly.
The venue of the interview should be of an appropriate size and one which encourages the interviewee's concentration. It
should be comfortable for both interviewers and the candidate (seating, heating, lighting, ventilation, noise level) and be well
sign-posted with a waiting area containing literature about the organisation. There should be no interruptions and mobile
phones should be switched off. Reasonable adjustments must be made to the facilities as necessary where a candidate has
requested this because of a disability.
The reception arrangements for candidates should be welcoming and the receptionist briefed.
The seating arrangement should be as inclusive as possible so that the candidate does not feel isolated.
Preparing the candidate
Prior to the interview the candidate should have sufficient information about the post, the requirements of the post and the
organisation. Candidates should be given adequate notice of the interview date, panel composition and designation and, ideally,
be given a brief tour of the place of work prior to the interview. Candidates are asked to produce documentary evidence of their
qualifications which are stipulated in the person specification.
At the start of the interview, the candidate can be helped by:
the Convener introducing the panel and having name cards placed in front of the members;
the panel putting the candidate at ease;
the Convener explaining the structure and length of the interview;
being informed that notes will be taken to ensure a fair assessment to be made;
being asked whether they have any queries after the introduction;
the use of an opening non-discriminatory 'warm-up'question.
Structure :
Working to a structure is a major step towards improving the quality of interviewing, as it helps to:
ensure that nothing significant has been missed;
keep track of how the interview time is being used;
give candidates a sense of progress through the interview;
help ensure consistency between candidates.
Questions must be planned in advance. It is usual to have a series of questions that are posed to every candidate with specific
ones for individual applications based on information in their application forms. The need to raise additional questions will arise in
order to probe candidates responses and these should be asked at the appropriate time. No question should be asked of a
discriminatory nature e.g. asking a female candidate about her childcare arrangements.
The interview should be structured as follows:
the Opening - this will include introductions, advising candidates of the structure which will be followed and that note-taking will
occur. A few moments of small talk will help to relax the candidate and establish rapport.
the Body - this is the main part of the interview where the required evidence about the candidate's suitability for the post
against the key criteria is obtained.
the Close - Candidates should always be given the opportunity and sufficient time to ask any questions they may have. They
should be informed of the timescales and methods of notifying them of the outcome and should be thanked for attending the
interview.
The Disability Discrimination Act 1995 does not prevent you asking questions about a candidate's disability but this information
must not be used to discriminate. When asking a candidate how their disability may affect their ability to do the job it is
important to focus on competencies required by the post, place these questions in the latter part of the body of the interview,
and indicate where possible a willingness to make those reasonable adjustments which would enable the job to be performed.
Questioning techniques : You should aim to have the candidate talk about 70-80% of the time, as the key aim of the interview is
to obtain evidence from the candidate. Effective interviews depend on well-thought out and well-structured questions.
There are various types of questions:
Open - these questions enable candidates to provide facts and information, describe things, express feelings or opinions
etc. They encourage candidates to start talking. They typically start with the words 'what, why, how?'
Example - 'Tell me about the most challenging project you have completed in the last year'.
Closed - the number of possible answers is limited and are usually either 'yes' or 'no'. They are useful to check facts, or
your understanding of answers or to close the interview.
Example - 'Did you have responsibility for a team in your last job?'
Multiple - these occur when two or more questions are asked at one time. Candidates will normally only answer one of
them - the one they find easiest or heard last. These types of questions should not be used in interviews.
Example - 'Why have you applied for this job, and why do you want to leave your present job?'
Leading - the answer which is expected is suggested in the question, and thus are not appropriate for selection interviewing.
Example - 'We need someone who has good planning skills. How well do you plan ahead?'
Hypothetical - is where the interviewer describes a situation to the candidate and asks him/her how he/she would respond. Too
many of this type should be avoided as the reply might be completely different from what the candidate would actually do, and
you have no way of evaluating the answer consistently.
Example -' What would you do if two members of your team had a fierce argument in the office?'
Behavioural - are useful questions, as you gain evidence of how the candidate has handled similar situations in the past, and
these can concentrate on the specific skill areas of this post.
Example - 'Can you give me an example of when you had to deal with a difficult customer complaint?'
Probing - these are used to follow up after receiving answers to open questions, in order to explore an area in more depth. The
questions should be designed to 'funnel' the information obtained from general to specific information.
Example - 'How would you do it differently next time?'
Reflective - these are powerful and seldom used with skill or consistency. Each question is based on the previous answer and
reflects its content.
Example - 'So, you think that there could have been some improvements. What would have altered the outcome?'
Listening techniques :As the interviewee will be talking for the majority of the time it is vital that interviewers actively listen. The
candidate is providing a lot of information and the interviewer has to be able to recall it, use it, relate it to the key skill areas and
check it for inconsistencies. Reflective questions can be used to pick up on a point the candidate has made and enable you to
probe further. You should concentrate on what the candidate is saying, look at the candidate and ensure that your physical
position reflects your interest. It is vital that all the panel members listen carefully to every answer, even though they may not
have asked the question.
Examples of effective non-verbal responses by interviewers include nodding of the head, smiling and occasional noises of
encouragement. Actions to be avoided are looking at your watch, critical frowning, staring out of the window. Care should be
taken by panel members that non-verbal signals are not communicated between them, indicating what they feel about the
candidate. Interrupting a candidate can be interpreted as discourteous and showing a lack of interest in what the candidate is
saying. However it may be necessary to do so if the candidate has misunderstood the question.
Good active listening involves:
identifying feelings and intentions behind words;
probing answers with further questions;
clarifying and summarising;
evaluating the quality of the answers.
By being empathetic, you will lead the candidate to speak freely and could well reveal information that he/she would not do if an
interviewer was being overbearing or critical. Silence is one of the most effective probing devices. When used at the appropriate
time, it encourages candidates to elaborate their answer.
In short - listen to : · what is being said; · how it is being said; · what is not being said.
Body Language of candidates
Candidates send messages non-verbally which can reveal their emotional state and are well worthwhile being noted by the
panel. The communications expert, Albert Mehrabian's analysis of typical face-to face communications showed that non-verbal
communication has an enormous impact on the understanding of the messages sent by the interviewee in any interview. His
results were : Words alone - 7%; · Voice tones - 38%; · Body language - 55%.
Non-verbal messages are much less likely to be under conscious control and are therefore harder to disguise. They are often
difficult to interpret and care needs to be taken in analysing such messages e.g. a candidate may fold arms as he/she is cold, not
necessarily because he/she is being defensive.
Rehearsal: the Best Laid Plans ...
Rehearsing perfectly worded answers is not a good idea at all Questions you may be expecting are Sei precisely the way you
anticipate. Broad basing your choice of responses is suggested Moreover, you should navigate the interview and introduce topics
related to your core competencies In case you feel that. the moving towards subject / topics in which you are not confident, you
must politely share that you are not su subject General rehearsals do help to polish your performance. Have a mock interview
session. preferab y of a person not hesitant to point out the flaws in your arguments. English. diction and body language
ADOPTING THE
RIGHT ATTITUDE
To be just a little anxious, a little keyed-up about interview is good It generally facilitates rather than inhibitsp Only when you
become overly anxious that you begin to harm your prospects 'Keep your cool' in this kind
Some candidates feel interviews as threatening situations: they worry about their own deficiencies, nervousness, about what the
interviewers think of them. about failing to get the job, and so on It is as failure' overcomes their 'need for achievement'
Stressing the negative aspects of the procedure does littler, take the interview in a more positive way The following are helpful
deal For example an interviewer currently posted as GM in funds department may ask you a question ono try to do as well as I
can in the interview because it will be a good practice for other occasions' and Try regarding their line of thinking.
Anticipating the interviewer's mind-set and preparing accordingly & Do right tense yourself with high expectations.
Telling yourself probably have not got a chance for this, Alternatively, you may prefer to look on the interview as a
joint problem-solving exercise between and another who holds a masters degree in Agriculture may ask you about
Organic farming Thought game, it is a process of informed guessingr interviewer in which you will co-operate
together to find whether this is really the job for you, whethe able to do it well, and whether you would be happy
doing it to trace the background of the Board members Their education background. current profile will more
relaxed feeling that can be helpful to some extent.
Look at the brighter side and keep in mind that you are amongst the very few selected for interview hundreds of aspirants This
will help boost the confidence.
PERSONAL APPEARANCE AND DRESS ,
Over the years. Society has relaxed the dress codes and informal dressing is not looked down upon any more However, one
should be particular in dressing up formally for the interview However, you must present a well groomed look Gentleman: White
or light blue shirt, dark trousers and a matching tie should be preferred. It is essential to wear formal footwear and not sport
shoes
Ladies: Ladies can wear either a dress or a sari as they please It is however essential that they are comfortable and present a
simple but elegant look. Dark colors, flowery prints should be avoided Jewellery and makeup both should be minimal Common
Guidelines: Strong perfumes should be avoided Ensure your nails are trimmed and clean RECEPTION AND THE
IMPORTANCE OF FIRST IMPRESSION
Interviewers sometimes make up their minds about candidates too early in the interview. First impressions can have a powerful
and long lasting effect If you get off on the wrong foot, then there is little time left to set things right Let us look at how you
tackle the introduction.Introduction First thing first: When you enter the interview room, do not forget to close the door behind
you
As you face the interviewer(s), keep a smiling face and walk over to the chair ready for you, but do not sit until asked to do so
Remember not to move the chair.
The way interviewers greet you varies from person to person In any case. do not offer to shake hands until the interviewer
extends Open the conversation by saying 'Good morning Sir / Ma'am' with a smile. Look in the interviewer's eyes Do not just
look at the Chairperson only, give the others a brief glance and smile too (may be even a nod!) Please smile only when you come
in, at appropriate lighter moments in the interview and when you say goodbye.
To sum up the introduction: Take your lead from the interviewer, look at them, put up on a pleasant face and try to exhibit as if
you are glad to be there, even if you feel as though you are facing a firing squad
COMBATING INTERVIEW NERVES
The better your preparation, the more confident you are likely to be. What can you do to keep your calm when you are there?
Try to sit comfortably without actually slouching
No chewing gum or menthol etc
Be Positive in your answers Give yourself a second or two, before responding and consciously check yourself if you are talking
much faster than normal You can, of course be too slow and deliberate in answering.
Sometimes an interviewer or members of a panel may, seem rather threatening and hostile; obviously, this can be unsettling Be
tactful, calm and composed in such a situation
Do not carry your mobile. It may create disturbance ARGUING WITH THE INTERVIEWER
In general. it is best to avoid firm expressions of disagreement with interviewers, except where they get you to express your
views on a topic and then present an opposing argument The interviewers' aim may be to see how well you can argue a case and
support your viewpoint In general. do not look for arguments. but if one is 'offered' you should remain cool, defend your point of
view in an agreeable way and be willing to appreciate finer points in opposing views without actually accepting them
CLOSING THE INTERVIEW
The final phase of an interview is often the one used by interviewers to let you ask any question you may have about the job or
the organization, and you should be prepared for these Obviously. if there is anything else you feel that may work to your credit.
and has not been covered, you can bring it up now The best strategy is to prepare the questions you want to ask before you go
to the interview, otherwise you are likely to find, that at the end of an (often searching) interview, you are mentally fatigued and
your mind goes blank and you miss the opportunity However, do not make the questions too numerous or too detailed
Once again. as you say goodbye, you should look at the interviewer in the eyes (or. if it is a board, a swift glance at each one of
them) and smile. Sometimes, the interviewer may offer a hand to shake. Respond with confidence
CORRECT BODY LANGUAGE : INVALUABLE ASSET
This science is known as Kinesics, which uses the body gestures and facial configuration the method or-communication Everyone
sends and subconsciously picks up various body language signals. The stand or look at persons while talking to them, sends out
waves of negative and positive communication. tells we really feel Many people learn the art of understanding body language
and use it to their advantage ir relationships and enhancing their careers Psychologists have in fact studied body language for
year general principles have been established as positive and negative mode of non-verbal communication or bod
LANGUAGE OF NERVOUSNESS:
Sitting tensely at the edge of a chair. ready to run.
Cracking one's knuckles.
Anxious look on one's face.
Not looking directly at the face and eyes of the person speaking to you.
Looking down or shifting eyes around the room.
Feet, knees, hands, fingers tapping in an endless way.
Constantly pushing back or handling hair.
Playing with keys or tapping a pencil.
Nervous laughter or constant smile.
Coughing, voice cracking or fumbling while speaking. LANGUAGE OF ARROGANCE:
Sitting too relaxed or sloppily in your chair.
Lounging back with legs crossed at the knee.
Head thrown back, looking, and speaking down over the nose.
Playing with keys or tapping a pencil while speaking.
A patronizing and over-confident manner puts people off and makes one the most unacceptable circumstances.Hands folded in
front in a relaxed manner.
Body still and upright but not rigid.
Looking directly at the board member talking to you.
Maintaining eye contact turn by turn, with all the members of the board as you talk to them.
Speaking in a normal and relaxed voice.
Sometimes smiling when you talk (not giggling or simpering). Feet crossed and still.-
Sharing pleasantness, quiet confidence in your own ability and poise
TIPS TO FACE INTERVIEW
Bearing: Walk erect and with confidence. Look into the eyes of the Chairman and Members when you talk to them. Smile and be
pleasant. Be enthusiastic and interested. You must be lively, keen and cheerful. Let your optimism and energy radiate.
Conduct: Politeness pays. Be sympathetic and attentive. Observe meticulously the code of manners and etiquette. Never be
rude or offensive. Do not neglect to pay compliments.
Speech : Talk slowly deliberately and audibly. You should neither shout nor mumble. Pronounce your words clearly and crisply.
Never be dull or monotonous with your words. Avoid
the use of such phrases like, you see, I say, of course I mean etc. Dress: chose your dress with care. It must be befitting the occasion.
Personal Hygiene: Be neat, tidy and clean. See that you are well groomed.
Self control: Do not become emotional or get nervous. Be confident and patient. Check unnecessary movements. The Board may
deliberately try to provoke you and see how easily you could be upset. Never lose your temper.
Do not bluff: State only what you know to be correct. Do not hazard guesses unless you are asked to do so. Shooting lions
and boasting will land you in trouble. Do not try to be too clever.
Remember, the board has year of experience and has seen many candidates.
Own up your mistakes : If the board points out that you had made a mistake and you realize it to be fact, then be courageous
and own it up. Never try to cover it up. The Board will respect you for your honesty.
Initiative: Use your initiative but watch the reactions of the Board. Also be conscious of your limitations. Do not over shoot. Do
not draw conclusions. Be discreet when you talk about your own accomplishments. They should be conveyed subtly and
tactfully.
Criticism and Arguments: Do not criticize. Never try to find faults. As faras possible,
stress the good point of others. It is better to be silent than to criticize. Do not get involved in unproductive
arguments. You have not gone to the interview to win a verbal battle but to have an enjoyable conversation. See how you can
agree rather than to disagree. As a last resort, you may agree or disagree.
Listen and Observe: Keep your eyes and ears open. Study their reactions. You will know when tostop talking and when to listen.
As a rule, do not interrupt. If the other person wishes to talk, let him do so. In fact, encourage him to talk. Be an attentive and
enthusiastic listener.
Practice: Practice, Practice and Practice. You must have as much practice as possible. Enlist the goodwill and co-operation of
your friends, colleagues, elders and family members and have practice session with them. The more practice you
MORE IMPORTANT TIPS FOR FACING INTERVIEWS
You do need to be aware about your surroundings and this includes some familiarity with current affairs. Banking industry
specific questions are common. In addition, there are certain questions you may encounter during the interview, in one for or
another. These relate to questions about yourself, what you have been doing and what you want to do in future. It is a good idea
to sit for mock interviews with your friends or colleagues. Remember, practice makes man perfect.Here are some general
questions you can answer during your mock sessions:
W hat are your strengths and weakness?
Suppose you could choose any particular post in the new scale/ grade, what would it Be and why?
W hat does success means to you and how do you measure it?
What motivates you?
Narrate any two strengths/weaknesses of yours. Have you done anything? In the
last one year to improve yourself? If yes, what?
What has been your greatest achievement in the Bank/in your personal life ? And
your biggest disappointment?
Say something about your best and worst bosses.
What qualities do you value most in those who report directly to you?
Why you should be promoted?
In your view, what were your shortcomings in the earlier tests/ interviews?
What are your hobbies?
W ho is the editor of newspaper your read?
In our Bank, what impressed you much?
How do you handle stress?
Is there anything else you would like to tell us about yourself? In addition to these general questions, you may
face certain questions About your previous assignments. Some of these questions can include the following
W hat do you like and dislike most about your current assignment?
Do you work independently in your current assignment or a part of a team?
Do you prefer working independently or as part of a team?
W hat are some of the problems you encountered in your earlier Assignments and how did you solve them?
To understand your future ambitions and the reasons for seeking Promotions, the board may ask questions like:
Why do you want to work in the new grade /scale
W hat kind of experience do you think this assignment will provide that Your earlier assignment did not provide?
Howdo youfeelaboutworkinglateintheevenings ?AndworkingDuringtheweekends
W hat do you see as your future in the Bank?
Are you considering premature retirement at this point? Why?
How does this job compare with your earlier job?
How can you contribute more to our Bank?
How do you feel about transfer to other Module / Circle?
There is no correct answer as such. What you need to do is to answer this question calmly. Even during the real interview, you
should think before answering the questions. You need to pause before answering as it will help you put together all the points,
substantiating your response. Though you should not gloss over your weaknesses, you need to focus on your success and your
achievements /strengths. You need to convince the interviewer that you are the correct person for the higher position.
SOME MORE TIPS

Take Full advantage of Your Speech & Body language
Project Positive Attitude & avoid the Display of aggression
Must understand your Strength
Cover your weakness
Focus on Your Professional achievement rather than Performance
Do Self Evaluation as to how do you deserve this promotion
Structure your reactions for adverse situations
Hypothetical Questions should be handled by reflecting Positive attitude
Your hobbof the interesties are the reflection of your overall Personality
All questions are Important
Avoid half attempted Responses
Listen Carefully & not to be in a hurry to answer
Be Concise & take care of the Interest of the Members on Board
Practice Before the Interview
Make the experience of Interview Memorable.
BAD BODY LANGUAGE FOR INTERVIEW

TOP 10 BODY LANGU AG E MI STAKES TH AT WIL L TURN POTENTIAL EMPLOYERS OFF
Failure to make eye contact
Weak handshake
Failure to smile
Crossing arms over chest
Playing with something on the table
Playing with hair or touching the face
Fidgeting too much
Bad posture
Using too many hand gestures
A handshake that is too strong
You can manage nerves by giving yourself plenty of time to get to the interview, avoiding caffeine
and by taking deep breaths. But, what will help you impress INTERVIEWER?
Having a good sense of humour
Being well dressed
Being involved in your local community
Being up to date with current affairs and pop culture
Being physically fit
Being up to speed with social media
Final Shots at Interview
FACING INTERVIEW SUCCESSFULLY?
Interview is an opportunity for you to present your personality consisting of his attitude, views and awareness level before the
interview board, so that your potential is easily judged by the members on the Interview Board.
What is evaluated during the interview?
The interview board, in order to judge your POTENTIAL evaluate your Performance in the recent past, Operating style, Team
building capabilities, Effectiveness, Neutral judgment level, Transparency in dealings, Initiatives, Attitude and Leadership
qualities. Though the interview is not a new process for us, being already in job, we have no way of knowing exactly what is
going to be asked and how that would be tackled. The following general tips can help in appearing for an interview, and face the
questions confidently.
Should we prepare pre-scripted questions?
It is important that we must not venture to go for an interview with a pre-determined script of exactly what we are going to say.
What is actually required, is the tactics that enable us to navigate successfully through the interview. Accordingly, we can adhere
to following strategy.
What we should prepare?
We should spend good time to make the choice of the relevant contents. Broadly these can be disintegrated into macro and
micro aspects.
At Macro level we should have an understanding of:
• Important happening(economic and political) taking place globally and their bearing on the performance of our
organization.
• Status of Indian economy and its impact on the banking system in India in terms of growth of business ,quality of
assets and profits.
• Vision and Mission of the bank and its strengths and weaknesses(in terms of quality of manpower, geographical
spread, level of use of information technology, introduction of new customer oriented products, pricing in terms of
interest rates offered and the effectiveness in terms of delivery), our market share , the challenges, our banking
industry is facing and the priorities laid down by the top management of our bank.
At Micro level we should have appropriate information about;

• Professional achievements during the recent 3-4 years
• Strength of family background(including dislocation on promotion, problems of growing children, serving wife,
old parents) and educational and professional background.
• Some information about the subjects studied in the last academic examination
• All important happening around work place(frauds ,shift of big accounts from the bank etc)
• Hobbies, leisure time activities
• Important development reported in the Newspaper of recent weeks.
Take full advantage of speech and body language

We should bear in mind that the employer or the members of the interview board want to know and interview is the medium
for interaction. Hence, we should express ourselves freely as expressions would flow through speech, gestures and body
nd st
language. Please remember that we would normally not get a 2 chance, to improve our 1 impression.
Project the positive attitude and avoid display of aggression
In the interview, our attitude, the confidence with which we communicate and the depth we have about what we know, is
generally given importance. Hence, care should be taken for not reflecting negative frame of mind or negative attitude or
shallow knowledge or aggressive postures.
Must understand our strengths
Before going for an interview, you should draw a list of all your strengths. Your strengths should be projected whether
opportunity arises without making any one feel that it is self-appreciation. You should also have clarity as to , in what way your
strengths alone that you can support for the promotion.
Cover the weakness
We should also understand one weakness and prepare ourselves to cover our weak points, particularly what steps have been
initiated by you in the past to negate the impact of weaknesses. If asked to explain weakness, we should choose a weakness that
is not critical to the success on the job or assignment. The weakness, should preferably relate to the knowledge content in few
areas as opposed to the lack of personal effectiveness. For instance, a weakness relating to lack of knowledge of a particular skill,
say foreign exchange, is preferable to stating that one finds it difficult to manage people. Further, the weakness to be discussed
should be the one which the members of the Interview Board are either already aware of or will discover through the interview
process. While discussing the weakness, one should always concentrate on as to how we have been working on the problem, to
find a solution. We must try to give a tangible account of the efforts we have been making, to convert the weakness into a
strength.
Focus on professional achievement rather than personal performance
In the interviews ”Tell us about yourself” is a generally inquired question which requires much more preparation than other
questions of factual nature, since a candidate is generally not very certain, “from where to begin and how to complete.”
However, if a candidate structures the fats relating to himself carefully in advance, covering the highlights of one’s current
assignment , the past professional experience in brief and also the value we offer to the organization, we can be comfortable
with the Interview Board. It should be taken care that we focus on professional achievements rather than personal performance.
Do self evaluation as to how we, deserve this promotion
“Why do you deserve this promotion” is a frequently asked question and is required to be handled carefully. To answer this
question well, one should be aware of the requirement of Organistaion and should have clarity about what we can offer to
satisfy such requirement. The answer , should reflect the distinction which we have, compared to others, based on which we
deserve the promotion. Putting answers such as having a good job knowledge or being a hard worker, really does not help as
everyone else would claim so, under such circumstances.
Structure the reaction for adverse situation
On a no. of occasions, the candidates are asked about adverse happening in the work place where he has been working till
recently.In such circumstances, one should reflect a positive attitude, be tactful, and diplomatic in the way one describe the
situation. It is desirable that the problem is first defined to make sure that there was a breach of some system of some human
failure.It may be concluded by stating as to what lesson did one learn from the incident?
Hypothetical questions should be handled by reflecting positive attitude
At times a hypothetical situations is given to working out a strategy. For instance, if the candidate is asked as to how he
would increase the profits of a Zone/Branch , he should not start directly with the strategy. Instead, should first talk about
the SWOT analysis with a view to understand the potential available to make a strategy work.The strategy should be based
on the potential available in a particular position.
Hobbies are the reflection of overall personality
We should also be very specific about hobbies, extra curricular activities and other activities and also as to how and why
we pursue those hobbies or activities. How do we spend spare time and how do we manage the time .Additionally, we must
be able to give proper account and thorough understanding of recent assignment and your academic background.
All questions are important
In an interview, all the questions are important and no question is less difficult than the other .Even, simple question, like
which newspaper we read and which TV channel we watch and what is interesting about that could be important to
understand commitment and interests. Hence, only few questions should not be singled out as the toughest or desirable or
expected.It is the working of a question being asked, which makes one question uncomfortable from the other.We should
focus not on the actual wording of the question but on the spirit and context also. Effort should be made that the wording
of a question is interpreted to one’s advantage.
Avoid half-attempted responses
Before answering a question, for a while, one should collect thoughts, so that are able to answer appropriately as blurred
or casual or half-attempted response cannot help.
Listen carefully and do not be in a hurry to answer
Please listen very carefully, to what is being asked. One should not be in a hurry to answer the question. Be patient,stay
fresh, enthusiastic and cooperative. One should not be evasive or hesitant answering the question. Even if a question
makes uncomfortable, make earnest effort to answer it. Please endeavor to answer all question as not answering amounts
to loss of opportunity. However, if one does not have clarity, please humbly express inability to answer so that process of
interview continues.
Be concise and take care of the interest of the members on the Board
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Canara Bank, Govt. Link Cell, Nagpur 10 | P a g e
Be concise,being careful that the point mentioned is not incoherent or boring not lose the interest of the members of the
interview board and give an impression that one cannot organise his thoughts.
Practice before the interview
Before appearing for an interview, practice interview by involving your family members or colleagues. Seeking guidance
from experienced persons or Institutes can certainly bring much improvement.
What if tough questions are asked or one is not able to answer a question?
Inspite of best of the practice and preparation, very often one may be asked questions which he considers tough and
unable to answer.Donot try to give vague answers to such questions.It is better to let the interview Board know so that
another question is asked which is one more opportunity for you to cover your position.
Outside the Interview room
It is pertinent to add that one should avoid anxiety or doing something which one does not do on normal days. Handling an
interview is both an art and science and each interview differs from the other, depending upon the members in the
interview board, the time available with the Board members, the no.of candidates and the vacancies. One has to look into
these aspects and prepare himself, to be successful.
Make the experience of interview members memorable
Please remember, it is the candidate only, who can make this experience memorable and rewarding for himself and his
organisation.
2. OUR BANK & PRODUCTS

Widely known for customer centricity, Canara Bank was founded by Shri Ammembal Subba Rao Pai, a great
visionary and philanthropist, in July 1906, at Mangalore, then a small port town in Karnataka. The Bank has
gone through the various phases of its growth trajectory over hundred years of its existence. Growth of Canara
Bank was phenomenal, especially after nationalization in the year 1969, attaining the status of a national level
player in terms of geographical reach and clientele segments. Eighties was characterized by business
diversification for the Bank. In June 2006, the Bank completed a century of operation in the Indian banking
industry. The eventful journey of the Bank has been characterized by several memorable milestones. Today,
Canara Bank occupies a premier position in the comity of Indian banks. With an unbroken record of profits
since its inception, Canara Bank has several firsts to its credit. These include: Launching of Inter-City ATM
Network ,Obtaining ISO Certification for a Branch,Articulation of ‘Good Banking’ – Bank’s Citizen Charter
,Commissioning of Exclusive Mahila Banking Branch,Launching of Exclusive Subsidiary for IT Consultancy,Issuing
credit card for farmers, Providing Agricultural Consultancy Services. Over the years, the Bank has been scaling
up its market position to emerge as a major 'Financial Conglomerate' with as many as nine
subsidiaries/sponsored institutions/joint ventures in India and abroad.
History : Founded as 'Canara Bank Hindu Permanent Fund' in 1906, by late Shri Ammembal Subba Rao Pai, a
philanthropist, this small seed blossomed into a limited company as 'Canara Bank Ltd.' in 1910 and became
Canara Bank in 1969 after nationalization A good bank is not only the financial heart of the community, but
also one with an obligation of helping in every possible manner to improve the economic conditions of the
common people" - A. Subba Rao Pai.
Founding Principles: 1. To remove Superstition and ignorance. 2.To spread education among all to sub-serve
the first principle. 3.To inculcate the habit of thrift and savings. 4. To transform the financial institution not
only as the financial heart of the community but the social heart as well. 5.To assist the needy. 6.To work with
sense of service and dedication. 7.To develop a concern for fellow human being and sensitivity to the
surroundings with a view to make changes/remove hardships and sufferings.
Sound founding principles, enlightened leadership, unique work culture and remarkable adaptability to
changing banking environment have enabled Canara Bank to be a frontline banking institution of global
standards.
OUR LOGO
The Rich Blue represents stability, scale & depth. Bright Yellow represents optimism, warmth and energy. The
new brand identity is based on the idea of a bond and is a presentation of the close tie between the Bank and
its stakeholders - from customers and employees to investors, institutions and society at large.
OUR TAG LINE : “Together We Can”
The tag line conveys enduring relationship of Canara Bank with its Customers.
OUR SLOGAN “Life Long Banking”
OUR CORPORATE VISION : To emerge as a best practices Bank by pursuing global benchmarks in profitability,
operational efficiency, asset quality, risk management and expanding the global reach.
OUR CORPORATE MISSION : To provide quality banking services with enhanced customer orientation, higher
value creation for stakeholders and to continue as a responsive corporate social citizen by effectively blending
commercial pursuits with social banking.
OUR HISTORY : 1906 - Canara Hindu Permanent Fund Limited founded at 75 A, Dongerkery Street, Mangalore
with Sri Ammembal Subba Rao Pai, as “President”.
First Balance Sheet – Capital Rs.50000; Deposits Rs 42000; Advances Rs 84000; Net Profit Rs 2420 (Rs 112/-
transferred to Reserve Fund).
BRANCHES & OFFICES : Founded as 'Canara Bank Hindu Permanent Fund' in 1906, by late Sri. Ammembal Subba
Rao Pai, a philanthropist, this small seed blossomed into a limited company as 'Canara Bank Ltd.' in 1910 and
became Canara Bank in 1969 after nationalisation.
CANARA BANK- A GLANCE
Founded as 'Canara Bank Hindu Permanent Fund' in 1906, by late Sri. Ammembal Subba Rao Pai, a
philanthropist, this small seed blossomed into a limited company as 'Canara Bank Ltd.' in 1910 and became
Canara Bank in 1969 after nationalisation.Our Bank has a network of more than 6075 branches as at 31.03.2017, spread
over all States & 5 Union Territories of the country and, which are administered through Head Office at Bangalore:- 21 Circle
Offices and Integrated Treasury Wing, Mumbai & 118 Regional Offices having total staff strength is 55845.
NO. OF FUNCTIONAL ACTIVITIES BASED UPON WHICH WINGS ARE FORMED AT HO : 4 {BUSINESS FUNCTIONS, BUSINESS
SUPPORT FUNCTIONS, CORPORATE SUPPORT FUNCTIONS & CONTROL FUNCTIONS}
The Bank has overseas presence in United Kingdom London; Leicester; Hong Kong; China Shanghai; Kingdom
Of Bahrain; Republic Of South Africa Johannesburg; United States Of America New York; United Arab
Emirates Dubai International Financial Centre (DIFC); United Arab Emirates Sharjah Representative Office;
Russia Commercial Indo Bank LLC, (Joint Venture With State Bank Of India) Moscow.
NO. OF EXCHANGE COMPANIES : 2 ( Al Razouki Intl. Exch. Co. Dubai;Eastern Exch. & Fin. Est. Doha)
LEAD BANK RESPONSIBILITY: 23 [Karnataka - 7; Kerala - 5; Tamil Nadu - 6; U.P. - 4; Bihar - 1]
REGIONAL RURAL BANKS sponsored by Bank : 2 : Kerala Gramin Bank – Kerala , Pragathi Krishna Gramin Bank – Karnataka
Board of Directors: The Bank's policies and business are governed by Board of Directors consisting of following members:
• Shri T.N.Manoharan – Chairman
• Shri Rakesh Sharma – Managing Director & Chief Excutive Officer.
• Smt. P. V. Bharti – ED
• Shri Harideesh Kumar B – E D
• Shri Dinabandhu Mahapatra – ED
• Shri Suchindra Mishra – Director representing Government of India
• Smt Uma Shankar - Director representing Reserve Bank of India
• Shri. Krishna Murthy H - Shareholder Director
• Shri. Mahadev NagendraRao - Shareholder Director
• Shri Venkatachalam Ramakrishan Iyer – Shareholder Director
General Information:
• Finance Minister - Sri ARUN JAITLEY
• RBI Governor - Sri URJIT PATEL
• IBA Chairman - Sri RAJIV RISHI, MD&CEO Central Bank Of India
• Chief Vigilance Officer - SRI ANIL KUMAR MITTAL
ORGANISATIONAL SETUP
1. Board of Directors
2. Managing Director and CEO
3. Executive Directors
4. Chief Vigilance Officer
5. Chief Customer Service Officer
6. Wings at Head Office Headed By Chief General Managers/General Managers
7. Circles Headed By Chief General Managers/ General Managers / Deputy General Managers
8. Regional Offices headed by Deputy General Managers / Asst. General Managers
SPECIALISED BRANCHES/BUSINESS UNITS
1. Agriculture Finance Branch
2. Agricultural Consultancy Services
3. Industrial Finance Branch
4. Overseas Branches
5. NRI Branches
6. Professionals Branch
7. Assets Recovery Management Branch
8. Mahila Banking Branch
9. Prime Corporate Branch
10. SME Branch
11. Housing Finance Branch
12. Ultra Small Branch
SUBSIDIARIES
1. Canara Robeco Asset management Company Ltd
2. Canbank Venture Capital Fund Ltd
3. Canfin Homes Ltd
4. Canbank Factors Ltd
5. Canbank Computer Services Ltd
6.Canara Bank Securities Ltd
7. Commercial Bank of India LLC
8. Canara HSBC Oriental Bank Of Commerce Life Insurance Company Ltd
9.Canbank Financial Services Ltd (CANFINA)
10. Regional Rural Banks sponsored by the Bank-3 RRBs and All in profit.
OUR JOINT VENTURES
1. CANARA ROBECO Asset Management Company
2. CANARA HSBC Oriental Bank Of Commerce Life Insurance Company
BRANCHES AND OFFICES ABROAD
1. Branches at London and Leicester each in UK.
2. Branch at Hong Kong
3. Branch at Shanghai, China
4. Branch at Manama, Bahrain.
5. Branch at Dubai
6. Branch at NewYork
7. Branch at Johannesburg
8. JV Bank with SBI in Moscow- Commercial Bank Of India LLC, (CBIL)
SOCIAL BANKING INITIATIVES : Rural Service Volunteer-(RSV),Rural Clinic Service – (RCS), CANGRAMA Sikshana Kendra (CGSK)
Hari Kalyan Yojna,Jala Yoga Yojna,Tram Campaign,Blood Bank, Book Bank, Canara Bank Jubilee Education Fund , CED for Women
Canara Bank Relief & Welfare Society( A. Sevakshetra Hospital; B. Matruchhaya) ,Tribal Counselling Et Coordination Centre
RUDSETI (27), Financial Literacy Centre
Indian Banking at Glance
No. MaJor Indicators Number As on
1 No. of Schedule Commercial Banks 147 31.03.16
2 No. of Bank Branches (lakh) 1.26 31.03.15
3 No. of ATMs (lakh) 1.99 31.03.16
4 Aggregate Deposits (Billion) 93273 31.03.16
5 Bank Credit (Billion) 72496 31.03.16
6 Credit Deposit Ratio (%) 77.72 31.03.16
IMPORTANT POLICY RATES

Bank Rate 6.50 % (w.e.f. 06.04.2017)
Marginal Standing Facility 6.50 % (w.e.f. 06.04.2017)
Cash Reserve Ratio 4.00 %
Statutory Liquidity Ratio 20.50 % (w.e.f. 01.01.2017)
Repo Rate 6.25 % (w.e.f. 04.10.2016)
Reverse Repo Rate 6.00 % (w.e.f 06.04.2017)
Base rate of our bank 9.50 % (w.e.f. 07.01.2016)
Over night MCLR 8.20 % w.e.f. 7th April 2017
th
One Month MCLR 8.25 % w.e.f. 7 April 2017
Three Month MCLR 8.30 % w.e.f. 7th April 2017
th
Six Month MCLR 8.40 % w.e.f. 7 April 2017
One Year MCLR 8.45 % w.e.f. 7th April 2017
ECNOS One Year MCLR +525 BPS, Base Rate + 5 %
Foreign Currency ECNOS 12m LIBOR + 6.5% (IO/19/2010)
BPLR 14.45% wef 01.01.2014
Clean Rate Highest MCLR +700 BPS
SB Rate 4% wef 03.05.2011 (Partially liberalised)
Bank Rate: Under Section 49 of the Reserve Bank of India Act, 1934, the Bank Rate has been defined as ―the standard rate at
which the Reserve Bank is prepared to buy or re-discount bills of exchange or other commercial paper eligible for purchase
under the Act. On introduction of LAF, discounting/rediscounting of bills of exchange by the Reserve Bank has been
discontinued. As a result, the Bank Rate became dormant as an instrument of monetary management. It is now aligned to MSF
rate and used for calculating penalty on default in the cash reserve ratio (CRR) and the statutory liquidity ratio (SLR).
Marginal Standing Facility Rate: To meet additional liquidity requirements, banks can borrow overnight funds from the Reserve
Bank under the Marginal Standing Facility (MSF) at a higher rate of interest, normally 100 basis points above the policy repo rate.
Banks can borrow against their excess SLR securities and are also permitted to dip down up to two percentage points below the
prescribed SLR to avail funds under the MSF.
SLR stands for Statutory Liquidity Ratio. This term is used by bankers and indicates the minimum percentage of deposits that the
bank has to maintain in form of gold, cash or other approved securities. In terms of Section 24 of the Banking Regulations Act,
1949, scheduled commercial banks have to invest in unencumbered government and approved securities certain minimum
amount as statutory liquidity ratio (SLR) on a daily basis. In addition to investment in unencumbered government and other
approved securities, gold, cash and excess CRR balance are also treated as liquid assets for the purpose of SLR.
CRR means Cash Reserve Ratio. Banks in India are required to hold a certain proportion of their deposits in the form of cash.
However, actually Banks don‘t hold these as cash with themselves, but deposit such case with Reserve Bank of India (RBI) /
currency chests, which is considered as equivlanet to holding cash with RBI.
Banks have to maintain minimum 95 per cent of the required CRR on a daily basis and 100 per cent on an average basis during
the fortnight.
Calculations : CRR for the current fortnight= a fixed percentage (%) of the total demand and time liabilities reported by the banks
in terms of Section 42 (1) of the Reserve Bank of India Act, 1934 with a lag of 1 fortnight i.e. CRR for the fortnight ended April 4,
2014 is a fixed percentage (%) of the total demand and time liabilities reported by the banks as on the reporting fortnight March
7, 2014. The Fixed percentage is based on the policy announcement or otherwise.
Repo rate is the rate at which banks borrow funds from the Reserve Bank against eligible collaterals and the reverse repo rate is
the rate at which banks place their surplus funds with the RBI under the liquidity adjustment facility (LAF) introduced in June
2000. The repo rate has emerged as the key policy rate for signalling the monetary policy stance.
Liquidity adjustment facility (LAF): LAF is a monetary policy tool which allows banks to borrow money through repurchase
agreements. LAF is used to aid banks in adjusting the day to day mismatches in liquidity. LAF consists of repo and reverse repo
operations. Repo or repurchase option is a collaterised lending i.e. banks borrow money from Reserve bank of India to meet short
term needs by selling securities to RBI with an agreement to repurchase the same at predetermined rate and date. The rate
charged by RBI for this transaction is called the repo rate. Repo operations therefore inject liquidity into the system. Reverse repo
operation is when RBI borrows money from banks by lending securities. The interest rate paid by RBI is in this case is called the
reverse repo rate. Reverse repo operation therefore absorbs the liquidity in the system.
CANARA BANK – DEC 2016 RESULTS
Major Highlights
• Net profit for Q3 FY17 rose to 322 crore, up by 279% y.o.y.
• Gross profit increased to 1981 crore, up by 27.63% y.o.y.
• Total expenditure declined by 3.81% y.o.y.
• Interest expenses,including interest paid on deposits declined by 9.03% y.o.y.
• Cost of deposits came down to 6.31% from 7.01% last year.
• CASA Deposits increased to 1.54 lakh crore, up by 30.12% y.o.y.
• CASA share (domestic) improved to 32.12% from 25.71% last year.
• Non-Interest Income grew by 53.32% to 1792 crore.
• % share of non-interest income in total income improved to 14.83 %, up from 9.70% a year ago.
• Gross NPA Ratio marginally up at 9.97 % from 9.81% at September 2016.
• Net NPA ratio at 6.72% compared to 6.69% as at September 2016.
• Cash Reco very durin g the quart er at 1021 crore taking th e cumu lative figure to 2979 crore for the
nine months.
• Provision Coverage ratio at 52.52 %, up from 51.75% in September 2016.
• Net Interest Margin (NIM) (Domestic) at 2.34% and NIM (Global) at 2.19%.
• ROA improved to 0.22% and ROE improved to 4.58%.
• Capital adequacy ratio improved to 12.28%, up from 11.54% a year ago.
• Global Business reached 8.42 lakh crore comprising global deposits of 5.10 lakh crore and net
advances of 3.32 lakh crore.
• Su st ai n e d g r o wt h in r e t ail as se t s ( y.o . y) - A gr i cu lt u r e ( 9 .8 3 % ) , M S M E ( 6 .3 4 % ) , R e t ai l L e n d i n g
( 1 3 . 4 7 % ) , D i r e c t H o u s in g ( 1 6 .1 1 % ) , V e h i c l e (14.98%), Education (14.85%) and Other Personal loans
(13.33%).
• Total number of branches at 5972 and Number of ATMs at 10394. 40.31 lakhs Mobile Banking and 27.08
lakhs Net Banking users.
Income, Expenditure & Profit– Q3 FY17
Total income stood at 12079 crore. N o n - i n t e r e s t i n c o m e i n c r e as e d t o 1 7 9 2 c r o r e , w i t h r o b u s t g r o w t h o f
53.32% y.o.y.Total expenditure declined by 3.81% to 10098 crore.Operating expenses of the Bank stood at 2224
crore.
Gross profit at 1981 crore, increased by 27.63% y.o.y.Total provision made in Q3 FY17 at 1659 crore compared to
1467crore in Q3 FY16.The provision for NPAs at 1487 crore against 1432 crore in Q3FY16.
Nine months (9M) FY17 Performance
Operating profit increased to 5941 crore with a y.o.y growth of 8.02%.Net Profit for nine months FY17 aggregated
to 908 crore.Tot al in come stood at 36053 crore, in cluding 22365 crore inco me from loans/advances. Total
Expenses declined by 3.74 % to 30112 crore. Non-interest income for the nine months ended increased by
47.71% to
5158 crore.
Business Performance :Global Business reached 841964 crore.Global Deposits reached 510327 crore.Global Advances
(Net) stood at 331636 crore.Overseas business constituted 7.26 % of the total business. Total business of 8 overseas
branches stood at 61111crore. Clientele accounts increased to 7.63 crore from 7.10 crore last year.
Deposit Portfolio- Thrust on CASA & Retail Deposits : CASA deposits increased to 153704 crore, with a y.o.y growth of
30.12%. CASA share (domestic) improved to 32.12% from 25.71% a year ago. Retail term deposits increased to
197560 crore with a y.o.y growth of 19.08%. Share of retail term deposits in term deposits increased to 62.30% compared
to 51.41% last year.
Credit Portfolio- Thrust on Retail Assets : Retail Assets (Agriculture, MSMEs, Housing & Other Retail Schemes)
constitutes 59.36% of the Bank‘s total credit portfolio, increased from 54.16% a year ago. Advances to Priority
Sector increased to 153632crore, with 7.70% y.o.y growth. Advances to Agriculture grew by 9.83% y.o.y to 71457
crore.
Credit to Micro, Small and Medium Enterprises (MSMEs) recorded a y.o.y growth of 6.34% to 70442 crore.
Credit to M&SE segments reached 50518 crore. The number of Micro Enterprises Accounts recorded a growth of 8.72%.
27.72 lakh women beneficiaries assisted to the tune of 43705 crore. Achieved the mandated targets in respect of
Total Priority (48.06% against 40% ANBC norm), Agriculture (21.39% against 18% ANBC norm), credit to specified
minority communities (17.39% against 15% norm) and weaker sections (14.53% against 10% ANBC norm). Credit to
women beneficiaries (14.18% against 5% norm). Retail Lending Portfolio increased to 54975 crore, with a y-o-y
growth of 13.47%. Housing Loan (Direct) Portfolio increased to 22415 crore, with a y-o-y growth of 16.11%.
Vehicle loans and other personal loans recorded good growth of 14.98% (4748 crore) and 13.34% (13204 crore) respectively.
Education Loan Portfolio increased to 7517 crore, with a y.o.y growth of 14.85%, covering over 2.99 lakh students.
Capital Adequacy :Capital Adequacy Ratio as per Basel III norms improved to 12.28%, up from 11.54% a year ago,
with CET 1 ratio at 8.11% & Tier I ratio at 9.01%. Government shareholding is at 66.30%.
Comfortable capital position for assets growth.
Asset Quality : Net NPA ratio at 6.72% compared to 6.69 as at September 2016.Gross NPA ratio moderately increased
to 9.97% from 9.81% as on September 2016. Cash Recovery during the quarter at 1021 crore taking the cumulative figure to
2979 crore for the nine months. Outstanding restructured portfolio at 22276 crore, constituted 6.46 % of gross advances.
Pradhan Mantri Jan Dhan Yojana (PMJDY) : 62.72 lakhs accounts opened under PMJDY, securing CASA deposits of
2143 crore.3.98 lakh PMJDY account holders have been provided with overdraft facility, amounting to 67.61 crore. 71 Financial
Literacy Centres (FLCs) opened at District/Block levels, educating 10.76 lakh persons. 172 lakh residents have been enrolled
under Aadhaar. 205.38 lakh accounts were Aadhaar seeded, of which 38.45 lakh accounts under PMJDY accounts. As a part of
grievances redressal mechanism for customers, the Bank established Toll free number 1800 425 11222.
Social Security Schemes
63.47 lakhs enrolments have been done under both Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY- 18.38 lakhs) & Pradhan
Mantri Suraksha Bima Yojana (PMSBY– 45.08 lakhs) as at December 2016.
Under Atal Pension Yojana (APY) the Bank has cumulatively mobilized 1.12 lakhs accounts.
Under Sukanya Samriddhi Yojana, 17393 accounts have been mobilized.
Pradhan Mantri Mudra Yojana (PMMY) : Under Mudra Yojana, the Bank disbursed 2807 crore, covering 266143
accounts as at December 2016.
A Holistic Approach to Financial Inclusion (FI) : The Bank has provided banking facilities in all the allotted 10049
villages. Covered all 3962 allotted SSAs by opening of 875 Brick & Mortar branches and engaging Business
Correspondent agents. Besides FI branches, the Bank has opened 473 Ultra Small Branches. Financial Inclusion
branches have garnered business of 14955 crore. The CASA component of FI branches stood at 59%, amounting to
4388 crore. 18 Micro Finance branches have garnered a total business of 523 crore under Urban Financial Inclusion.
163.50 lakh BSBD accounts opened with outstanding CASA deposits of 5476 crore. The Bank has formed 531 farmers‘ clubs.
22556 Self Help Groups (SHGs) have been formed and 24574 SHGs have been credit linked to the extent of 698 crore.
Exposure under SHGs increased to 2310 crore under 1.19 lakh SHGs. Business Correspondent Agents have done 62
lakh transactions, amounting to 1005 crore during the year till December 2016.
Enhanced Delivery Channels & Digital Footprints : The total branch network of the Bank increased to 5972,
including 8 overseas branches (London, Leicester, Johannesburg, New York, Hong Kong, Manama, Shanghai and Dubai).
Total number of ATMs further expanded to 10394. 187 e-lounges were functional across major cities. Debit card
base rose to 3.12 crore. 40.31 lakhs Mobile Banking and 27.08 lakhs Net Banking users. Ratio of e-transactions stood
at 51.26%. M aj o r b r an ch t r an sf o r ma t i o n w i t h 1 2 1 1 Sh i k h a r Br an c h es f o r b e t t e r customer service to drive
business.
New Products & Important Customer-friendly Technology Initiatives
Canara Empower, Unified Payment Interface (UPI) for single platform in accessing multiple bank accounts.
Canara mserve that enables customer to Hot list and Block/Unblock Cards. Canara Cart, an umbrella app containing all mobile
based solutions. Canara Swipe, all missed call soloution in single Application.
Canara GeoLocate Mobile App for locating Branch and ATMs
Green Pin in ATMs to generate Debit Card PIN at the time of fresh issuance of Card and also when the customer forgets the PIN.
CANARA TECH Support for structured resolution of queries related to Tech products.
Awards & Accolades : The Bank was conferred with the following Major Awards in Q3FY17: "SKOCH ORDER OF
MERIT" and "SKOCH SILVER" Awards for Bancassurance & Empower UPI Mobile App during the 46th Skoch Summit.
Indy Wood CSR Excellence Award, 2016, for outstanding achievement in Corporate Social Responsibility (CSR) by
Indywood Film Carnival. 4th SME excellence award by ASSOCHAM. FICCI CSR AWARD- Social Responsible Bank under
Women empowerment. "Star Performer Award" in the 31st Depository Participant Conference. Vigilance Award: Our bank was
conferred with "Corporate Vigilance Excellence Award 2016-17" - Banking Sector, consecutively for the fourth year, instituted
by M/s Institute of Public Enterprise, Hyderabad, for promoting excellence in the field of Vigilance amongst all PSBs/PSUs. Sri R K
Alreja, GM & CVO received the award on behalf of our bank on 3rd March 2017 at Hyderabad.
PRCI Awards: Our Bank bagged seven awards - Gold for Radio Jingle, Silver for Corporate Film and Brochure(CSR) and Bronze for
in house magazine (Regional Language), Corporate Advertisement (Print), Table Calendar 2017 and Big Diary 2017 - in Collatearal
Awards category during 11th Global Communication Conclave held at Bengaluru on 04.03.2017 by Public relations Council of
India (PRCI). Sri Lalit Vaid, GM and Dr S T Ramachandra, DGM, M&RR Wing, HO received the awards on behalf of Bank.
Goals: March 2017 : Thrust on Retail Business & Asset Quality- CASA & retail deposits, retail credit, fee income,
containing NPA, recovery & upgradation and improving operational financial ratios, such as, NIM, RoA, RoE and Cost-
to-Income.
Banking Sector Movement of Business: Canara Bank vis-à-vis SCBs (For the latest fortnight ending March 03, 2017
Amt. ( crore) Scheduled Commercial Banks Canara Bank
March 18, 2016 March 03, 2017 March 18, 2016 March 03, 2017
Deposits 9327290 10542750 436782 452423
Qtm Increase (Y-o-Y 845360 1187680 23380 15887
Growth (%) (Y-o-Y) 9.9 12.7 5.7 3.6
Qtm Increase (FY so far) -- 1215460 -- 15641
Growth (%) (FY so far) -- 13.0 -- 3.6
Market Share (%) -- -- 4.68 4.29
Advances 7249610 7516070 313584 308336
Qtm Increase (Y-o-Y 741230 295610 15265 -4600
Growth (%) (Y-o-Y) 11.3 4.1 5.1 -1.5
Qtm Increase (FY so far) -- 266460 -- -5248

Growth (%) (FY so far) -- 3.7 -- -1.7
Market Share (%) -- -- 4.33 4.10
Credit-Deposit Ratio (%) 77.72 71.29 71.79 68.15
Growth in Deposits
Compared to SCBs’ deposits growth at 12.7% y-o-y, CB’s deposits grew by 3.6% y-o-y.
CB’s deposits in the financial year so far grew by 3.6% compared to a growth of 13.0% registered by SCBs.
The market share of CB’s deposits stood at 4.29% compared to 4.68% as on March 18, 2016.
Growth in Advances
CB’s advances declined by 1.5% y-o-y compared to SCBs’ growth at 4.1%.
CB’s advances in the financial year so far declined by 1.7% compared to a growth of 3.7% for SCBs.
The market share of CB’s advances stood at 4.10% compared to 4.33% as on March 18, 2016.
CB’s credit-deposit ratio stood at 68.15% in comparison to SCBs’ 71.29%.
RBI in its 6th Bi-monthly policy review held on February 22, 2017, kept policy rate unchanged at 6.25%. Consequently, the
Reverse repo rate and marginal standing facility (MSF) rate & Bank Rate stood at 5.75% and 6.75%.
GENERAL MATTERS
Categorisation of Customers:
♣ Low Risk Customers (Level 1 customer):
♣ Salaried Employees
♣ People belonging to lower economic strata
♣ Government Departments
♣ Government Owned Companies
♣ Regulatory and Statutory Bodies
Periodical updation of customer data: (latest photograph and address proof)
Low Risk Customer: Once in 10 years
Medium : Once in 8 years.
High Risk Customers: Once in 2 years
This exercise has to be done quarterly ie in April, July, October and January.
Simple KYC norms procedure for Canara Basic Saving Bank Account.
KYC Guidelines issued under: Section 35A of the Banking Regulation Act, 1949
Medium Risk Customers (Level 2 customers)
High Net worth Customers
Non Resident Customers
Blind and Pardanishin also under Medium Risk Category
FINANCIAL ACTION TASK FORCE(IO 39/2012)
The Financial Action Task Force (FATF) which is a global body, identifies countries / jurisdictions that have strategic deficiencies
in AML/CFT standards and works with them to address those deficiencies that pose a risk to the international financial system.
Politically exposed persons (PEP)(335/2011)
Politically exposed persons are individuals who are or have been entrusted with prominent Public functions in a Foreign Country,
e.g., Heads of States or of Governments, Senior Politicians, Senior Government / Judicial / Military Officers, Senior Executives of
State-owned Corporations, important Political Party Officials, etc
Parameters adopted for Centralised fixing of Threshold Limit.
Rural Semi Urban Urban Metro
SB General (101) 50000/- One lacs Two lacs Three lacs

SB Cansaral (108) 50000/- 50000/- 50000/- 50000/-
SB Canchamp(109) 50000/- 50000/- 50000/- 50000/-
SB Staff (111) One lac One lac One lac One lac
Current 2 lakh 3 lakh 4 lakh 5 lakh
OD/OCC 2 lakh 3 lakh 4 lakh 5 lakh
Transaction using Forged or Counterfiet Indian Currency Notes:
♣ Transactions using forged or counterfeit Indian Currency notes to be reported under Counterfeit Currency Report (CCR).
♣ Attempted transactions by customers are to be reported under Suspicious Transactions Report (STR) even if the
transactions are not completed by customers irrespective of the amount
Retirement of import bills: It applies to private imports where the amount involved is more than `20000/-. Retirement of
import bills should not be made by cash payment.
Revised KYC Norms for Proprietary Concerns.
Branches to Obtain & Verify any of the 2 documents mentioned below:
Proprietor‘s identification procedure and also verify documents in the name of Proprietorship concern like:
1. Proof of the name, address and activity of the concern, like registration certificate (in the case of a registered concern),
2. Certificate/License issued by the Municipal authorities under Shop & Establishment Act,
3. Sales and income tax returns, CST/VAT certificate,
4. certificate/registration document issued by Sales Tax/Service Tax/Professional Tax
authorities,
5. License issued by the Registering authority like Certificate of Practice issued by Institute of Chartered Accountants of India,
Institute of Cost Accountants of India, Institute of Company Secretaries of India, Indian Medical Council, Food and Drug
Control Authorities, etc.
6. Registration /licensing document issued by Central Government or State Government Authority/ Department as well as IEC
(Importer Exporter Code) issued by the office of DGFT may be accepted as identity document.
AADHAR: Is a 12 digit unique identity number which UIDAI will issue for all Indian residents. It is built on database linked to
basic demographic and biometric information of resident concern. Aadhaar will prove identity but will not confer
citizenship. It is sufficient to fulfill the KYC.
The "small value accounts" means and include the accounts of those persons who intend to keep (i) balances not exceeding
Rs.50,000/- (Rupees fifty thousand only) in all their accounts taken together (ii) the aggregate of all credits in a financial
year does not exceed Rs.1 lac and (iii) the aggregate of all withdrawals and transfers in a month does not exceed
Rs.10,000/-.
Maintaining the Records of Transactions (Cir 172/2010):
Banks shall maintain the record of all transactions including the record of all transactions involving receipts by Non Profit
Organizations of value more than Rs.10 lakh or its equivalent in foreign currency.
Cash Transaction Report (CTR): All Cash transactions of the value of more than Rs.10 lakh or it's equivalent in FC or series of cash
transactions aggregating Rs.10 lacs or more in one month. Report to be submitted to FIU IND by 15th of succeeding month.
All Cash Transactions of Rs.10 lakh and above or equivalent in Foreign currency.
All series of cash transactions integrally connected to each other, though less than Rs.10 lakh each, aggregating Rs.10 lakh and
above. Report to Financial Intelligent Unit (FIU-IND) on monthly basis. Records of ALM to be preserved for 10 years.
Domestic Wire Transfer Rs.50,000/- and above should contain full information like name, address, and A/c No. etc.,
A new screen CIM51 - has been introduced for capturing KYC details.
♣ Savings Bank Deposit is called the "Mother of all Deposits".
♣ Intended for savings for future. No restrictions on number and amount of deposit can be made on any day.
♣ Joint accounts : Max.4 members
♣ Minors of age 10 years age can open self operated account in all our branches. The Bank will be implementing the
provision of sending SMS alerts to the parents regarding all transactions in the account, as a precautionary measure.
♣ Minimum balance: Rural Rs.500/- and other than Rural Rs.1000/- with or without cheque Book facility.
♣ Rate of interest : 4% w e f 03.05.2011(RBI fixes)(ROI calculated on daily product basis from 01-04-2010 as per RBI
instructions) Cir 82/2010
♣ Payment of Interest on Savings Bank has been changed from Halfyearly to Quarterly w.e.f. 01-05-2016 [252/2016]
♣ In case of joint accounts with Illiterate and Literate: Operation by Illiterate or
♣ Jointly. In special cases, we can permit operation by literate only, by taking-Authorisation cum Indemnity letter‖ from
illiterate person on stamped paper with requisite value.
♣ Cheque book can be issued for blind person for specific purpose.
♣ Minimum amount of withdrawal /deposit is Rs.10/-
♣ TOD: Satisfactory dealings for 6 months. Scale IV and above can permit upto Rs.10000/-. TOD against expected salary
maximum Rs.5000/-. & for maximum 15 days but with the prior Permission of executive at CO (applicable for upto Scale III
officers) No Powers to sanction TOD in SB/CA by authorities upto Scale III
♣ Free DDs: Upto Rs.25000/- and upto 2 DDs basing on previous month‘s minimum balance. In case of new accounts, upto
Rs.10000/- can be issued free of charges without reference to minimum balance. To be permitted by branch in charge.
♣ Free Cheque leaves per year: 40. Above this Rs.3.00(urban and non individuals) and Rs.2-50(rural) per cheque leaf.
Minimum balance waived in following circumstances:
♣ NRI while opening the account or having other deposits
♣ Zero balance accounts at the time of opening the account or if we are having any other deposit or Housing Loan account
♣ Students Accounts
♣ Pensioners drawing pension through our Bank
♣ Employees of our Bank
♣ Ex-employees of the Bank who are eligible for preferential rate of interest.
♣ Canara Super Salary Savings Account
Financial Inclusion – Implementation (Cir 120/2011):
♣ Our Bank has been allotted 1573 villages with population more than 2000 by State Level Bankers Committee of various
States, for implementation of Financial Inclusion Plan (FIP).
♣ M/s Integra Micro Systems (P) Ltd, (Technology Provider who will supply Handheld Machines, Smart Cards and
Technology.) Their sister concern M/s i25 Rural Mobile Commerce Services a Section 25 Company is our Corporate
Business Correspondent (BC). They have appointed Customer Service Providers (CSPs) for servicing at village level in 500
villages having population above 2000.
♣ M/s Bartronics India Ltd.- (Provide both Technology machines, Smart Cards and BC Service.)
♣ Now, M/s Bartronics India Ltd. has been selected as an additional Service Provider for the remaining 1073 villages. They
will provide Technology as well as Business Correspondent Services by appointing village level Customer Service Providers
(CSPs).
♣ M/s Bartronics India Ltd. has been engaged on OPEX model, where the service provider will provide the POS terminals
(handheld machines) on their own. Cost of Smart Cards will be borne by the bank at the agreed rate. The transaction
based fee is paid on monthly basis to the service provider. Further enrollment charges are also paid to M/s Bartronics
♣ Obtaining the KYC documents is the responsibility of the Branch
General Aspects pertaining to Savings Bank and Current Account:
♣ Wherever Thanks giving letter in NF 154 sent is returned undelivered, branches should immediately take appropriate
action to safeguard the interest of the Bank. Branches can mark High Risk Account Severity memo in option CIM 13 (or)
BA437 in CBS.
♣ For first 6 months, rubber stamp bearing “new account” to be affixed on cheque leaves( IBA guidelines)
♣ All debits of Rs.25,000/- and above in case of SB and Rs.1 lakh and above in case of CA to be authorized by Manager of
Department/Branch in charge for first 6 months Withdrawals by way of Withdrawal form exceeding Rs.15,000/- to be
authorized by Manager in charge of dept. in case of ELB/VLB and Branch incharge or line manager in case of large, small
and medium branches (Cir no.170/2006 & 13/2009) However, all other aspects like checking / confirming the entry,
verifying signature & other details etc., shall be carried out scrupulously by the concerned supervisor only.
♣ Deposits of Rs.1 lakh per person per Bank are having insurance coverage from DICGC. Premium is 10 paise per Rs.100- per
annum, payable half yearly.
♣ Passport size/stamp size Photograph of depositor/authorized signatories Signature on reverse of photo – depositor and
supervisor
♣ Photo not necessary for Pension accounts, employees accounts, term deposits below Rs.10,000/-, NNND a/c.
Quoting of PAN of the customer is mandatory for any of the following transactions related to banking: (Cir 183/2011)
a) Opening a time deposit, exceeding fifty thousand rupees,
b) Opening an account, (not being a time-deposit)
c) Payment in cash for purchase of bank drafts or pay orders or banker's cheques for an amount aggregating Rs.50,000 or
more during any one day
d) Deposit in cash aggregating Rs.50,000 or more during any one day,
e) Submission of application for issue of credit card.
f) Submission of application for issue of debit card.
Current Account(Cir. 432/2010):
♣ For Traders, Businessmen, Corporate bodies etc who operate the account frequently Minimum balance Rs.1000 for Rural
/ Semi - Urban branches and Rs.5000 Urban / Metro branches
♣ Purdanishin Women CA not to be opened generally. However, they can be opened with prior permission of MIPD section
of respective CO.
♣ Illiterate persons CA: Manager/SM can take decision and open Accounts with Minor as Proprietor: Should not ordinarily
be opened. However there is no bar in opening such accounts, but over drawings not to be permitted.
♣ No Interest on CA. Interest at SB rate in case of deceased parties. RRBs sponsored by us ONLY may be paid interest as
advised by HO.
♣ Permissible TOD: 10% of the delegation of powers for sanction of clean loans. Upto Scale III no TOD sanctioning power.
Fixed Deposits (FDR):
♣ Minimum deposit: Rs.1000/- : Maximum no ceiling
♣ Period: Minimum 7 days for deposits of Rs.5 lacs and above and 15 days for less than Rs.5 lacs deposits. Maximum 120
months.
♣ In case of single deposits of Rs.1 crore and above, wherever closed before maturity- Base Rate with 1% Penal Cut.
♣ Monthly Interest: Min. deposit Rs.1000/- and min. period 1 year. If deposit is Rs.10,000/- and above, less than 1 year
period also monthly interest payable.
Capital Gains Accounts Scheme:
♣ Exemption under Section 54, 54B, 54D, 54F or 54G of Income-Tax Act. Accounts can be opened by an individual or on
behalf of a minor, HUF, a firm, a company or an association of persons or a body of individuals. Joint Accounts can not be
opened under the scheme.
♣ Capital Gains accounts can be opened as SB-Capital Gains Account Scheme or Term Deposits – Capital Gains account
scheme (similar to KDR or FDR) Current Account Capital Gains Scheme can be opened by Bohra Muslim community only
Except under circumstances specially permitted for the purpose, withdrawals can be made only after the expiry of the
period for which the deposit under this account has been made and accepted.
♣ No Cheque book facility
♣ Nomination: Depositor of this scheme may nominate upto 3 nominees.
♣ NRE, FCNR accounts can not be opened
♣ Minimum balance applicable as regular deposits
♣ Preferential rate of interest should not be allowed for Capital Gains Account (Senior Citizens and Employees – No
preferential rate of interest)
Part Withdrawal Facility
♣ Permitted per unit of Rs.1000/-.
♣ If amount of deposit accepted in odd amount, odd amount is treated as a unit.
♣ Example: The deposit of Rs.10,505/- may be treated as 10 units of Rs.1000/- and one unit of Rs.505/-
♣ Penalty – 1% penal cut for partly withdrawn portion.
♣ All deposits of domestic, NRE FDRs, KDRs accepted on or after 27-02-96 are eligible
♣ Applicable for all branches.
Canara Tax Saver :128/2012):
♣ Minimum Deposit Rs.100/- and multiples of Rs.100/- maximum Rs.1 lakh Opened as KDR or FDR Individual account - can
be in the name of the individual or in the capacity of karta for HUF
♣ Joint accounts up to 2 persons only
♣ Under Section 80C of Income Tax Act, 1961
♣ Period : 5 years only
♣ No loan facility and can not be accepted as collateral security also.
♣ Nomination available. In case of death, deposit can be closed before maturity and paid to nominee.
♣ No nomination shall be made in respect of deposit applied for and held by or on behalf of a minor.
♣ No closure before maturity
♣ Interest : 5 years : 7.25% w.e.f.13-04-2016 (cir 211/2016) (including employees, ex-employees, senior citizens)
Kamadhenu Deposits(Cir. 33/2011):
♣ Minimum Rs.1000/- No maximum ceiling. Interest compounded quarterly.
♣ Minimum period 5 months Maximum 10 years. Court orders-more than 10 years also
♣ Wherever Bulk Deposits enjoying preferential rate of interest (Rs.100 lacs and above), if closed before maturity, only
applicable base rate of interest is eligible, with 1% penal cut.
♣ 1% Penal Cut for closure before maturity.
Recurring Deposits:
♣ Minimum Deposit Rs.50/- and in multiples of Rs. 50/-.
♣ Minimum period 6 months and in multiples of 3 months thereafter max.120months
♣ Penal charges : Rs.1.50 per Rs.100/- installment per month in case of RD for 5 years and less, Rs.2/- per Rs.100/-
installment per month for RD over 5 years. Credit to Commission A/c Miscellaneous
♣ Maturity on ostensible date/ or one month after payment of final instalment which ever is later(Ostensible date is the
date on which the account completes the aggregate period of deposit as calculated from the date of opening the account)
♣ A discontinued RD is one, where there is continuous default of 4 instalments Irregular RD is one where instalments are not
paid regularly but maintained till maturity
♣ No preferential interest for Senior Citizen‘s RD accounts
♣ For RD accounts which have not completed 15 days, no interest to be paid.
♣ For RD which have not completed 3 months, but completed 15 days, only simple interest to be paid.
Withdrawals in Employees Accounts- Authorisation
♣ Upto Rs.5000/- by supervisor
♣ Upto Rs.10,000/- by officer
♣ Above Rs.10,000/- by Manager/Senior Manager
♣ In extension counters, official in charge can authorize above Rs.5000/-
Use of Ultraviolet Lamps(Cir. 315/2008)
♣ Cash cheques Rs.1000/- and above transfer items above Rs.5000/- are to be screened under Ultraviolet lamp.
Payment of Cheque after Business Hours
♣ Managers/Senior Managers are empowered After business hours but within office hours
♣ Maximum Rs.10,000/- per party – within the available balance , No TOD
♣ Employees not eligible
TDS on Deposits:
♣ New TDS Rate: Applicable with effect from 1st April 2010. Tax at higher of the prescribed rate or 20% will be deducted on
all transactions liable to TDS, where the PAN of the deductee is not available. Interest earned in a year if exceeds
Rs.10,000/-,TDS to be deducted.
♣ Obtain Form 15G/15H if depositors age is 60 years and above) for exemption, in duplicate. Declaration valid for one
financial year only.
♣ Obtain fresh 15G/15H every year.
♣ TDS not applicable for interest paid on SB/RD.
Targets: Priority Sector
♣ Priority Sector Advances : 40% of Adjusted Net Bank Credit (ANBC)
♣ Total Agriculture : 18% of Adjusted Net Bank Credit (ANBC)
♣ Advances to Weaker Sections : 10% of ANBC
♣ DRI: 1% of previous year gross credit ANBC or Credit equivalent Off-Balance Sheet Exposure will be computed as on 31st
March of previous year. (ANBC as on March 31st of Previous year)
♣ ANBC denotes Net Bank Credit (NBC) plus Investments made by banks in Non- SLR Bonds held in HTM category or Credit
pertaining to Off Balance Sheet Items whichever is higher
♣ Priority Sector Target for Foreign banks : 32% of ANBC
♣ Export credit is not a Priority Sector credit for Indian banks. But, for foreign banks,12% of ANBC under export credit is
Priority credit.
♣ A target of 12% of ANBC is to be achieved by domestic banks outside the priority sector under export finance. This is
called as preferred sector. MSE targets within Priority sector: No sub targets for Indian Banks where as 10% of Priority
should go to MSE sector in case of Foreign Banks.
♣ For Indian Banks, growth in Number of MSE Accounts: 10% per annum.
♣ SME advances growth : 20% year over year growth.
Education Loan:
For individuals upto Rs.10 lakhs will be Treated as priority Sector.
Weaker Sections:
♣ Target 10%of ANBC or 25% of Priority (Introduced in 1980 as per recommendations of Krishnaswami Committee)
♣ SF, MF upto 5 acres lands Aritsans, village and cottage industries, with limits upto Rs.50,000/- SGSY beneficiaries
♣ SC/ST beneficiaries(April & October is celebrated as SC/ST Month)
♣ DIR beneficiaries
♣ SJSRY beneficiaries
♣ SLRS beneficiaries
♣ SHGs
♣ Distressed poor to repay debts- Debt swapping scheme
♣ MINORITY COMMUNITIES for above purposes.
Service Area Norms (Cir 232/05):
♣ Applicable for Government sponsored Schemes only.
♣ Branches can finance upto 16 kms in their command area for Priority Sector.
♣ Beyond 16 kms, next higher authority permission required.
Rastriya Krishi Bhima Yojana (RKBY):
♣ Covered by Agriculture Insurance Company.
♣ Loanees : Compulsory upto loan amount
♣ Maximum coverage: 150% of threshold yield
♣ Cutoff for Kharif: November for loanee farmers
♣ For Rabi : May for loanee farmers
Personal Accident Insurance Scheme (PAIS):
♣ Age upto 70 years.
♣ Coverage Rs.50,000/- for death/permanent disability and Rs.25,000/- for partial disability.
♣ Premium Rs.15/- (Bank Rs.10/- + party Rs.5/-)
♣ Nominee has to give notice of death of borrower to bank with in 30 days
Self Help Groups:
♣ SHG is a small group consists of 10-20 members
♣ Group should be in active existence for atleast 6 months
♣ Group should have successfully undertaken savings and credit operations from its own resources.
♣ Group should work democratically
♣ Group to maintain proper records and accounts
♣ Group members should have homogenous background and common interest
♣ The NGOs / Vas should train SHG members to attain skill up gradation and proper functioning.
♣ The bank finance to SHG is based on Savings i.e., 1:1 or 1:2 or 1:4 based on needs and requirements.
♣ An appropriate repayment period may be fixed after discussing with the group
♣ The SHGs will not be in a position to offer any collateral security. Where assets are created out of SHG finance, the same
can be taken as prime security
♣ Documentation: NF950, 951, 952, 953
♣ Delegation of powers to branches: Rs.1 lakh-Small, Rs.2 lakhs – Medium, Rs.3 lakhs –Large branch.
♣ Under SGSY: Rs.5 lakhs, Rs.5 lakhs, Rs.10 lakhs (Small,Medium,Large)
Canara Kutir Yojana(Cir 182/2011)
♣ Housing finance for the members of Self Help Groups.
♣ Members who have satisfactory dealings with our bank are eligible to avail.
♣ The loan can be considered for the construction/ purchase/ repair and renovation, of the house property. Maximum loan
is Rs.75000/- .
Differential Rate of Interest:
♣ Maximum quantum Rs.15,000/- (For physically handicapped additional loan of 5000/- for artificial limbs/Braille typewriter
♣ Housing Loans under DIR Rs.20,000/- for SC/STs and Rs.15,000/- for others.
♣ For EL, as per EL guidelines:
♣ Eligibility: Annual family income Rs.18,000/-- in Rural and Rs.24,000/- in Urban and Semi-Urban areas (cir no.100/08)
♣ Individual whose land holding does not exceed 1 acre of irrigated and 2.5 acres of un-irrigated land. No Ceiling for SC/ST
engaged in Agriculture and Allied activities.
♣ Target(cir 193/07 box item): 1% of previous years Net Bank Credit 2/3rd of DIR loans in Rural & Semi Urban
♣ Minimum 40% to SC/ST beneficiaries
Credit Risk Management Policy
♣ Thrust Areas: Agriculture, MSME, Export segment, Other Priority, Manufacturing Sector, Service Sector etc. Non-Thrust
Areas: Commercial Real Estate, NBFCs, Capital Market & Industries which do not have growth potentials.
♣ Prudential exposure limit to a single borrower: 15% of bank‘s capital funds for Low Risk & Normal Risk customers, and 5%
additional exposure for infrastructure projects. (RBI has enhanced this limit to 25% for Oil Companies with 5% leverage to
go beyond 25% in case of need.) For Moderate Risk Borrowers: 12% of capital funds (additional 3% for infrastructure
projects) and for High Risk Borrowers: 8% of capital funds with 2% extra for infrastructure.
♣ For group accounts, as prescribed by RBI.(regulatory limits i.e. 40% of capital funds. For Infrastructure lending, it can be
50% of capital funds). Board can permit 5% extra limits, with in regulatory limits.
♣ Consortium Financing: No ceiling on number of banks but each bank‘s share should be atleast 10% of total Fund Based
limits. Can be reduced selectively.
♣ Prudential exposure limit for individual non corporate borrowers, which can be permitted by concerned sanctioning
authorities : Individuals – Rs.10 crores.
♣ Proprietorship : Rs.50 crores, Association/HUF- Rs.30 crores, Trust/Society-Rs.75 Cr & Partnership concerns: Rs.75 crores,
Educational Institutions & Hospitals Rs.100 cr, LLP 100 crores. [469/2013, 268/2014]
♣ Exposure to Real Estate : 20% of Gross Credit and to Commercial real estate sector should not exceed 5% of Gross Credit.
♣ Project Parameters for Real Estate: DER not more than 3:1, Promoters contribution: Not less than 25% + 25% advance
money. (margin 40% only if land is purchased from Govt.) FACR 2:1 and above for Term Loans, Repayment 7 to 10 years
including moratorium period.
♣ Canara Rent and Canara Mortgage comes under Commercial Real Estate Sector.
♣ Financing Producers of Feature Films: Bank Finance Maximum: 35%, Margin: 25%, advance from distributors: 40%.
♣ Borrowers (Corporates and other cons^tuents) having sales turnover of over 50 crores shall disclose ―Ageing Schedule‖
of their overdue payables in their periodical returns/statements submitted to the Bank.
♣ Loans to individuals against shares – Maximum Rs.20 lakhs for Demat shares and 10 lakh for physical form shares, from
entire banking system 
♣ Margin on shares: 50%
♣ For subscribing to IPOs, maximum quantum is Rs.10 lakhs only.
♣ Under ESOP scheme, finance upto 90% of the purchase price with maximum Rs.20 lakhs. (If the borrower is having
another loan against shares, total quantum including ESOP should not exceed Rs.20 lakhs).
REGULATION 6 (2) OF CANARA BANK (OFFICERS’) SERVICE REGULATIONS, 1979 – CATEGORISATION OF BRANCHES ( HO Cir
700/2016 )
Category Average Business for 2 years Average Advances for 2 years Incumbency Norms
Small <=Rs.7.50 Cr. Confirmed Scale I Officers
Medium >Rs.7.50 Cr and <=Rs.50 Cr. Scale II Officers
Large >Rs.50 Cr and <=Rs.100 Cr >Rs.15 Cr and <=Rs.40 Cr Scale III Officers
VLBs >Rs.100 Cr and <=500 Cr >Rs.40 Cr and N<=Rs.150 Cr Scale IV Officers
ELBs >Rs. 500 Cr >Rs.150 Cr Scale V Officers
♣ The above revised norms for categorization of Branches shall be effective from the year 2016.
♣ Each year, in the month of May, the Bank may undertake an exercise in the matter of classification of branches on the
basis of the above business parameters and upgrade or downgrade branches taking into account two years of average
business.
Staff Meeting: (Cir No.136/2012)
♣ It aims at ‗Open Culture‘, ‗Family Feeling‘, ‗Group Synergy‘ and ‗Talent Recognition‘ .
♣ Agenda can reflect variety, topicality of issues and branch specific priorities.
♣ Once in a month with agenda decided well in advance.
♣ Expenditure: Rs.20/- per person, per month/meeting.
Job Rotation :
♣ Compulsory both at branches and also at administrative units upto II Line Managers.
♣ The Job Rotation should be normally effected once in every six months.
♣ However, the branch-in-charge, depending on the size of the branch and departments handled, can have some flexibility
regarding the period. But, the same should not be more than 12 months. This is to ensure smooth change over without
affecting the customer service.
Canteen Subsidy: 264/2012.
♣ All branches, irrespective of the staff strength, are eligible for canteen subsidy.
♣ The Subsidy amount at the rate of Rs 75/- per month, per employee shall be released by the Bank to the caterer directly.
♣ SAVINGS DEPOSIT:
An account for individuals, non-trading organizations, permitted institutions etc. can be opened with as minimum an
amount as Rs 500/- with or without out cheque book in Rural Rs 1000/- with or without cheque book in Semi Urban, Urban
& Metro branches. Pass book, pass sheet, nomination, standing instructions, cheque collection facilities, Debit Card, Internet
& Mobile Banking facilities available. Two free DDs upto Rs 25,000/- per month subject to maintenance of stipulated
balance. Instant credit of outstation cheques upto Rs 15,000/-, wherever eligible.
♣ Online SB Account:
For all Customers, Individual and Joint, in particular Young generation and Tech Savvy. Online submission of SB application
through our Bank's website, without the hassles of waiting in "Q' at the branches.
♣ Canara SB Gen-Y :
A scheme for IAS/IPS/IFS Trainees/Students of Premier Professional Colleges like IIT/IIMs/NITs: Extended to all the Branches.
Accounts can be opened with NIL Initial/Minimum balance. Issue of free Debit Card, Credit Card with personal accident
insurance coverage. ATM Cash withdrawal - upto Rs 40,000 daily, Statement of Account - Free every 15 days. Free
NEFT/RTGS facility. Transfer of funds from Parents accounts to Students accounts any where in India by DD/RTGS/NEFT free.
♣ SB - Variant "Canara Jeevandhara":
For Senior Citizens: Issue of Free Senior Citizen Debit Card with Photo ID. Free remittance through NEFT/RTGS twice per
month. Issue of name printed cheque book. Free SMS/IMPS/Net Banking. Additional Loan facility for Pensioners. Locker
facility at concessional rent. Free Personal Accident Insurance coverage* (conditions apply). Assistance in writing and
execution ofWILL. E-donation - Free to specified Institutions. Health Insurance Available at concessional premium rate.
♣ Canara Savings Defence Product :
For Armed Forces and Para-Military Forces: No Minimum balance required. Free unlimited number of transactions in our
ATMs. Issue of Additional Card Free -for Spouse in case of Joint accounts. CashWithdrawal upto Rs 25,000/- per day. No
Annual maintenance charges for Debit Card. Debit Card Usages upto Rs 50,000/-(Silver/Gold) and Rs 2 lakh (Platinum) at
Point of Sale/Merchant Establishments. Easy Loans upto 3 months net salary - - Repayment in 12 months at attractive ROI.
♣ Canara Payroll Package scheme:
For Salaried Employees: A Deposit scheme coupled with
overdraft facility. Minimum average balance Rs 1000/- per month to be maintained. Platinum Debit Card with photo will be
given which offers many concessions & freebies. ATM Cash withdrawal up to Rs 50,000 per day. Issue of Name Printed
Cheque Leaves - 200 Free per annum. Statement of Account through e mail - free every 15 days. Credit card with Accidental
Insurance Coverage Free. Overdrawing in case of emergency 50%of Net salary of the previous month*. Lounge for HNI
Customers. Offsite E-lounge. Conditions apply*.
♣ SB- Variant "Canara Power Plus":
For premier segment of Customers: Minimum Quarterly average balance Rs 1 lakh to be maintained. Free RTGS/NEFT/DDs.
ATM Cash withdrawal Rs 50,000/-per day. Statement of accounts through email every 15 days. Name printed cheque book
upto 300 cheque leaves free. Credit card with Accidental Insurance Coverage Free. Platinum Debit Card with photo will be
given which -offers many concessions & freebies. Issue of Lockers at concessional rent.
♣ CANARA CHAMP:
A Savings Bank Account exclusively for Children who are below the age of 12 years. Account can be opened with as low as Rs
100/- and operated by parent / guardian. Many facilities such as Pass Book, Pass Sheet, nomination, Internet
Banking.(viewing only), Anywhere Banking are available under the scheme. Account holder eligible for educational loan on
preferential basis subject to conditions. Other features such as Complimentary Savings box, Complimentary Personal diary /
photo folder, free Collection of Cheques / DDs gifted to the child up to Rs 25,000/- per annum. Accmulation of Rs.5000/-
and above can be transferred to KDR at the request of the party.
♣ CANARA SMALL SAVINGS BANK ACCOUNT:
SPREADING BANKING TO COMMON PEOPLE: A Savings Bank Account with relaxed KYC norms. Account can be opened on
production of a self attested photograph and affixation of signature or thumb impressions as the case may be, on the form
for opening the account, provided that the Bank official while opening the account certifies under his signature that the
person opening the account has affixed his signature or thumb impression as the case may be, in his presence. Canara Small
Savings Bank Account can be opened with zero initial deposit and maintained with zero balance. Total withdrawals and
transfers in a month not to exceed Rs 10,000/-. Total credits in the account in the year not to exceed Rs 1,00,000/- and
balance in the account not to exceed Rs 50,000/.
♣ CANARA BASIC SAVINGS BANK ACCOUNT - BASIC BANKING FACILITY: A "No frills" basic savings bank account for the
common man. Account can be opened with zero balance. ATM cum Debit Card and Internet and Mobile Banking facility are
free under the scheme. Passbook, Nomination, Standing Instructions, Cheque Collection are also available.
♣ CURRENT DEPOSITS:
For traders, businessmen, corporate bodies etc. who operate the account frequently. Minimum amount for opening an
account: Rs 1000/- in rural and semi-urban branches & 5000/- in urban and metro branches. No ceiling on the number of
withdrawals and credits. Anywhere Banking & Internet & Mobile Banking facilities. Pass sheet, standing instructions, cheque
collection facilities available.
♣ CA variant' Canara Privilege:
For premier segment of Customers: Minimum Quarterly average balance Rs 1,00,000 to be maintained. Free
RTGS/NEFT/DDs. ATM Cash withdrawal Rs 50,000/- per day. Statement of accounts through email every 15 days. No Cash
handling charges upto Rs 5,00,000 per day per account of Rs.100/- denomination and above. Issue of Free name printed
cheque books - up to 500 per annum. Credit card with Accidental Insurance Coverage Free.
♣ RECURRING DEPOSIT:
Amount of Deposit – Minimum Rs 50/- per month (in multiples of Rs 50/-). No ceiling on maximum amount. High Returns -
Attractive rates as applicable from time to time. Interest compounded every quarter. Period of deposit - Minimum of 6
months, maximum of 120 months in multiples of 3 months.
♣ Canara Dhanvarsha:
Flexible RD Account - For all Customers: Flexibiity in payment of instalments. Minimum amount permonth - Rs 1000 and &
Maximum Rs 1 Lac. Flexibility of depositing additional amount including regular instalment upto 10 times. Additional
amount attracts same ROI as for regular amount also. No penal charges upto four number of instalment skips per year. At
present no TDS (As per IT rules prevailing).
♣ FIXED DEPOSIT:
Deposit with a Minimum of Rs 1000/- & Maximum - No ceiling. Period of Deposit - Minimum 15 days & Maximum 120
months. Option available for 7 - 14 days period for deposits of Rs.5 Lakhs and above. Interest Payment - Monthly
(discounted rate), Quarterly, Half-yearly or Annual intervals at depositor's choice. Part withdrawal and Loan against deposits
available. Facility of part withdrawal of deposits in units of Rs 1000/- is available, keeping the rest to earn contracted rate of
interest.
♣ KAMADHENU DEPOSIT:
Deposit with a Minimum of Rs 1000/- & Maximum - No ceiling (can be for odd amounts also). Period of Deposit - Minimum 5
months a Maximum 120 months. Interest compounded every quarter. Closure before maturity and Loan against deposit
permissible. Facility of part withdrawal of deposits in units of Rs 1000/- is available, keeping the rest to earn contracted rate
of interest.
♣ ASHRAYA DEPOSIT (FOR SENIOR CITIZENS):
PREFERENCE TO OUR ELDER PEOPLE IN DEPOSIT SCHEMES: Account can be opened jointly with other Senior Citizens or with
other persons below the age of 60 years subject to the condition that the first depositor should be the Senior Citizen.
Additional rate of interest of 0.50%above the rate as offered to General Public is extended under the scheme.
♣ CANARA TAX SAVER DEPOSIT: A SMARTWAY TO SAVE YOUR TAXWHILE GENERATING INCOME: A term deposit scheme with
the benefits of Deduction from income upto Rs 1.50 lakhs under Sec.80C of IT Act, 1961. Individual account in the name of
the individual for himself or in the capacity of the Karta of a HUF can be opened. Further, Joint account can be opened by
two adults jointly or an adult and a minor and payable to either of the holders or to the survivor. In the case of joint account,
the deduction from income under section 80C of the Act shall be available only to the first holder of the deposit. Minimum
deposit of Rs 100/-(In multiples of Rs 100/- thereafter) and maximum of Rs.1,50,000/- can be made for a fixed period of 5
years and cannot be closed before maturity. Scheme available for NRO accounts also
♣ DOOR STEP BANKING FOR THE PENSIONERS -692/2014:
Delivery of monthly pension at doorsteps of the pensioners aged 75 yrs and above. Minimum amount of delivery cash on
monthly basis- Rs 5000/-; Max Amount- Rs 50,000/- Request of modification once in 6 months. In the event of
hospitalization, pensioner can seek disbursement of amount either in cash or by way of EFT or DD drawn in favour of
hospital; NO age limit; restriction for payment in cash Rs 50000/- Charges: Rs 50 +ST per transaction (may be
waived/concession may be offered).
LOANS & ADVANCES
Credit Risk Management Policy
• Thrust Areas: Agriculture, MSME, Export segment, Other Priority, Manufacturing Sector, Service Sector etc. Non-Thrust
Areas: Commercial Real Estate, NBFCs, Capital Market & Industries which do not have growth potentials.
• Prudential exposure limit to a single borrower: 15% of bank‘s capital funds for Low Risk & Normal Risk customers, and
5% additional exposure for infrastructure projects. (RBI has enhanced this limit to 25% for Oil Companies with 5% leverage to go
beyond 25% in case of need.) For Moderate Risk Borrowers: 12% of capital funds (additional 3% for infrastructure projects) and
for High Risk Borrowers: 8% of capital funds with 2% extra for infrastructure.
• For group accounts, as prescribed by RBI.(regulatory limits i.e. 40% of capital funds. For Infrastructure lending, it can be
50% of capital funds).
• Board can permit 5% extra limits, with in regulatory limits.
• Consortium Financing: No ceiling on number of banks but each bank‘s share should be atleast 10% of total Fund Based
limits. Can be reduced selectively.
• Prudential exposure limit for individual non corporate borrowers, which can be permitted by concerned sanctioning
authorities : Individuals – Rs.5 crores,
• Proprietorship : Rs.30 crores, Association/HUF- Rs.30 crores, Trust/Society-Rs.50 Cr & Partnership concerns: Rs.50
crores.(432/2010)
• Ø Prudential exposure ceiling (solo as well as consolidated fund based and non-fund based) `100 crore in respect of single
entity with constitution as Trust/ Society for Educational Institutions and Hospitals(Cir 172/2010)
• Substantial Exposure Limits : 300% of capital funds as on 31st March of previous year. (For substantial exposure, the
threshold limit is arrived at 10% of capital funds)
• Exposure to Real Estate : 20% of Gross Credit and to Commercial real estate sector should not exceed 5% of Gross
Credit.
• Project Parameters for Real Estate: DER not more than 3:1, Promoters‘ contribution: Not less than 25% + 25% advance
money. (margin 40% only if land is purchased from Govt.) FACR 2:1 and above for Term Loans, Repayment 7 to 10 years
including moratorium period.
• Canara Rent and Canara Mortgage comes under Commercial Real Estate Sector.
• Exposure to NBFCs: To NBFCs : Max.10% of Bank‘s capital funds. For NBFC-Asset
• Financing Companies: max.15% of banks capital funds.(5% extra for NBFCs who lent to infrastructure).
• Bank will finance to those factoring companies who derive atleast 80% of their income from factoring activity and the
receivables purchased form atleast 80% of the assets of the factoring company.
• Financing Producers of Feature Films: Bank Finance Maximum: 35%, Margin :25%, advance from distributors: 40%.
• Borrowers (Corporates and other cons^tuents) having sales turnover of over `50 crores shall disclose ―Ageing Schedule‖
of their overdue payables in their periodical returns/statements submitted to the Bank.
• Loans to individuals against shares – Maximum Rs.20 lakhs for Demat shares and 10 lakh for physical form shares, from
entire banking system
• Margin on shares: 50%
• For subscribing to IPOs, maximum quantum is Rs.10 lakhs only.
• Under ESOP scheme, finance upto 90% of the purchase price with maximum Rs.20 lakhs. (If the borrower is having
another loan against shares, total quantum including ESOP should not exceed Rs.20 lakhs).
• Loans to Mutual Funds: Upto 20% of net asset of the scheme, max.6 months.
• An internal exposure ceiling is fixed for discounting the bills co-accepted by Private Sector Banks, Co Operative Banks and
other Non Prime Foreign Banks for negotiation of documents under LCs, with in 50% of Net Owned Funds of such banks.(with in
25% of NOF in case of co-op banks).
• Bank may directly lend to Private Sector Banks having tangible net worth of Rs.1000 crores and above.
• For Construction Companies, Assessment of working capital limits: Not to exceed 9 times of Net Owned Funds of the
entity. This may be waived to Low Risk rated entities selectively by GM(HO) and above authorities.
• Lending on the guarantees issued by other Banks/Fis: Borrower‘s satisfactory dealings with us for atleast 3 years, Bank
which issued guarantee should have fund based exposure of atleast 10% of the amount guaranteed.
• Benchmark Parameters for Transport Operators: DSCR Not less than 1.50, DER not more than 3:1 (can be relaxed to
4:1), Repayment max.6 yrs + max.3months moratorium.
• Project Financing other than Infrastructure: Upto Rs.100 lakhs: DE Ratio: not more than 3:1(can be relaxed to 4:1with
reasons) DSCR not below 1.50, FACR : not less than 1.33.
• Over Rs.100 lakhs (projects other than infrastructure): DER not more than 2:1(CO head can accept 4:1 with reasons)
DSCR not less than 1.50 (can be relaxed to 1.40),FACR not less than 1.33(1.20 by CO head), IRR 4% above cost of funds.
• IRR applicability: Project Cost Rs.25 crores and above.
• Infrastructure: DER : 2:1 upto 4:1, DSCR not less than 1.50 (relaxable to 1.25).
• Promoters contribution: not less than 11% of project cost, FACR : not less than 1.25 (can be relaxed to 1) IRR : 4% above
cost of funds (Applicable for Project Cost of Rs.25 crores and above.
• IRR for Road Projects can be 2% above cost of funds.
• QOS/HOS: Applicable for parties enjoying fund based limits of `5 crore and above.
• Penal interest @1% for non submission/delayed submission from September 2009 onwards for parties enjoying WC limits
of `5 cr & above. (Cir 7/2010: Penal interest to be charged on liability for the delayed period ie for entire quarter, to be collected
on first day of subsequent quarter).Penal interest of 0.25% on NFB liability subject to a cap of `1 Lakh per month for Parties who
enjoy exclusive NFB. Where Party is enjoying and NFB limit, penalty shall be 1% on FB liability and 0.25% on NFB as above shall
be charged.
Categorisation of branches: Small – Total business upto Rs.5 cr.
• Medium - >Rs.5cr. Upto Rs.25 cr.
• Large - >Rs.25 cr and upto Rs. 75 cr.(with min 10 crore advances)
• Very large: >Rs.75 cr upto Rs.250 cr.(with min.25 cr advances)
• Exceptionally large: Above Rs.250 cr. Upto Rs.1000 crores with min.adv. Rs.100 cr.,
• Premier Branch : Above Rs.1000 crores with minimum .advance. Rs.750 crores. Heading: Small- Scale I with min.4years
experience, medium – Scale II, Large – Scale III, VLB-Scale IV, ELB-Scale V, Premier Br-Scale V
LOAN AGAINST FCNR DEPOSIT IN FOREIGN CURRENCY: Upto 90% : 2% above ROI offered or 2% above LIBOR/SWAP rate for the
period of loan, whichever is higher,Beyond 90% to 100% of deposit: 2% above stipulated rate.
LOAN AGAINST FCNR IN INDIAN CURRENCY: Upto 90% : 11.00% (Base Rate + 0.5%)
90% to 100% : Above rate + 2%,Beyond 100% : Clean Rate
LOAN AGAINST FCNR THIRD PARTY DEPOSIT:Upto 75% : Base Rate + 3%,Beyond 75%: Clean Rate,Loans against NRE/FNCR
deposits, in Indian Currency, closed before maturity where minimum stipulated period is not completed:Against NRE/NRO
deposits: 16.50% (Base Rate + 6%)
• Against FCNR : LIBOR + 2.5%
LOAN AGAINST FCNR DEPOSIT IN FOREIGN CURRENCY:
♣ Upto 90% : 2% above ROI offered or 2% above LIBOR/SWAP rate for the period of loan, whichever is higher
♣ Beyond 90% to 100% of deposit: 2% above stipulated rate.
Issuance of Solvency Certificate:(Cir 433/2010)
♣ Solvency Certificate should be issued only on behalf our customers.
♣ Branch in charge of Small/ Medium/ Large branch, Credit Manager/ SM/ CM of VLBs and AGM of ELB can consider/ issue
Solvency Certificate.
♣ To the extent of declared net worth of the party up to Rs.1 lakh without insisting anyfinancial statements.
♣ To the extent of accepted networth of the party on the basis of unaudited financial statements beyond Rs.1 lakh upto Rs.5
lakhs.
♣ To the extent of accepted networth of the party on the basis of audited financial statements beyond Rs. 5 lakhs.
♣ Commission to be collected @ 0.10% with minimum of Rs.500 and maximum of `Rs.10000 per certificate.
Issuance Of Capability Certificate: (Cir no.433/2010)
♣ Capability Certificate is issued to our customers for submission to Government Departments or to other Organisations for
considering their tender application, for execution of contract or for similar other purposes.
♣ Certificates are insisted to assess the capability in performing the work order/ contract entrusted to them.
♣ Certificate is to be issued for the amount of average performance during the last 3 years. If the performance during the
last 3 years shows an increasing trend, the certificate may be issued for an amount equal to last 3 years performance plus
average increase during the last 3 years.
♣ Commission to be collected @ 1 per Rs.1000 with minimum of Rs.100 and maximum of Rs.500 per certificate.
Rating Sheet For Retail Lending Schemes:
♣ A minimum of 70 % of total marks to be secured by the prospective borrower to be eligible for loan under retail lending
schemes.
♣ The rating sheets are applicable for all retail lending loans other than, Canara Pension, Canara Trade, Canara Rent, Canara
Mortgage.
♣ Relaxation in the qualifying marks may be considered up to a ceiling of 60% only (of the total marks), very selectively by
the next higher authority. The specific reasons for considering the relaxations should be recorded in the CR/Office Note
invariably.
♣ A minimum of 80% of total marks to be secured by the prospective borrower to be eligible for recommending ROI
concession.
Credit Information Companies
• CIBIL- for consumer and commercial segment
• Experian CIC India Private Ltd-for consumer segment only
• Equifax Credit Information Services Pvt Ltd- for consumer segment only
• CRIF High Mark Credit Information Services Pvt Ltd
• Exempted Categories : Staff Loans and loans against own deposit. Though CIR is mandatory, sanctioning authority may
consider following proposal irrespective of risk grade: DRI Loan, Government Sponsored Scheme with loan upto Rs 2
Lacs, Canara Pension Loan, Gold Loan. Agriculture Loan upto Rs 3 Lacs , Fully secured loans upto Rs 2 lacs under non
priority sector , education loan and renewal of existing facilities. In case of CIBIL, there are 3 scores Viz. Trans-union
Score version 1, Trans-union score version 2 and personal score. Trans-union score version 2 shall be reckoned.
Criteria for drawing second CIR apart from CIBIL.
For Secured loans :HL above Rs 10 Lacs , Car Loan & all other secured loans (including EL) above Rs 5 Lacs,
Agriculture Loan above Rs 3 Lacs, MSME segment and all other loans above Rs 10 Lacs .
For Unsecured Loans : Two CIRs to be obtained In personal segment ,Personal loan above Rs 1 Lac ,EL above
Rs 4 Lacs and all other loans above Rs 3 Lacs , Agricultural segment Rs 1 Lac , MSME loans above Rs 2 Lacs
and all other loans above Rs 5 Lacs.
Charges: Rs 50/- per CIR from individual, Rs 500/- for commercial report .
Delegation of power:
For Credit Score 1, 2 and 3 → respec^ve sancôning authority
For Credit Score 4: Upto DGM-CO-CAC (except circle head) → NHA, Circle head CAC & above →
Respective Sanctioning authority
For Credit Score 5: Circle head CAC and above authorities
Renewal of existing facility can be considered by respective sanctioning authority irrespective of Risk Grade.
Applicable in J & K : NI Act , SARFAESI Banking Ombudsman Not applicable in J & K: Service Tax, Consumer Protection Act, DRT
Criteria
1.Credit Audit : Above Rs 1 Cr . Randomly in 5 % of account having limits less than Rs 1 Cr . To be conducted
within 3 months of first disbursement but before six months .Max fee payable to auditor is Rs 5000/-. For
exposure upto Rs 5 Cr , review by circle head. For exposure above Rs 5 Cr revies by GM CA & M wing.
2. Pre Release audit :Rs 5 Cr & above . Within 48 hours of documentation. Audit by Scale III/IV authorities
3. Legal Audit: Rs 5 Cr & above. Max fee to advocate is Rs 5000/-. Part of RBIA and done till loan is
fully repaid
4. Stress Audit: Rs 50 Cr & above in standard assets. Annually by inspecting officers. No closure report
is stipulated.
5. Advisory Committee: All compromise proposal having sacrifice of Rs 1 Cr and above.. Committee
consist Retired high court judge and two former Bankers ( Min ED Rank or Dy MD of SBI)
6. Lok Adalat : upto Rs 20 Lacs . Legal Services Authority Act 1987
7. DRT Lok Adalat : Above Rs 20 Lacs
8. DRT : Rs 10 Lacs & above. Narasimhan Committee. Bank & Financial institution Act 1993
9. Corporate Debt Restructuring: Rs 10 Cr & above . Shyamala Gopinath Committee
10. Red Flagged Account (RFA): Threshold on Early warning Signal and RFS is Rs 500 million (Rs 50 Cr )
11.Non-Cooperative Borrower: Rs 50 million ( Rs 5 Cr)
12.HOS/QOS: FB + NFB Rs 5 Cr & above .Penal 1 % on FB and 0.25 % on NFB on liability for the delayed
period ( entire quarter) .NFB liability alone cap on penal is Rs 1 Lac. To be submitted in 6 w/8 w from the
end of quarter /HY
13.Stock Audit: Once in a year . LR → above Rs 5 Cr , NR/MR/HR/unrated → above Rs 1 Cr . Doubtful →
once in two year for liability below Rs 5 Cr and every year for liability above Rs 5 Cr
14.Project appraisal Report for medium and long term loan : New Borrower → Rs 200 Lcas , Exis^ng
Borrower → Rs 500 Lacs.
15.CMF : Rs 1 Cr and above .Upto moderate risk → bimonthly , HR → monthly
16. Fixed Asset valuation: Once in three years. 1. NR → not required 2.NR→ once in 3 years for Rs 2 Cr and
above, 3.MR & HR →Once in three years for Rs 1 Cr and above.
Priority Sector Classification and Target:
Target: 40 % of ANBC or Credit equivalent amount of off balance sheet exposure, whichever is higher.
1. Agriculture: 18 % of ANBC or CEOBE, whichever is higher. Sub target of 8 % for small and marginal farmer (7 % by March 2016
and 8 % by March 2017). Marginal farmer → 1 hectare and small farmer → 1-2 hectare land holding
1.1 Farm Credit: Up to Rs 50 lacs against pledge/hypo of agriculture produce, KCC, individual
farmers/ JLG distressed farmers indebted to non institutional lenders. Up to Rs 2 Cr loan to
corporate farmers, FPO / companies of individual farmers.
1.2 Agriculture infrastructure : aggregate sanction limit Rs 100 Lacs
1.3 Ancillary activities: Up to Rs 5 Cr to cooperative societies of farmers. Up to Rs 100 Lacs for food and agro processing units.
Outstanding under RIDF. Loans to agriclinic and agri business centres.
1. MSME: Medium enterprises, social infrastructure and renewable energy will form part of priority sector. 7.5 % target
for Micro Enterprises (Including KVIC), by March 2017 (7 % by March 2016). Loan to service sector will be classified as
priority sector, if loan amount is upto Rs 5 Cr for MSE and Rs 10 Cr for Medium.
2. MSME will enjoy priority sector classification upto 3 years after they grow out of MSME category.
3. Export Credit: Incremental export credit over corresponding date of the preceding year , upto 2 % of ANBC or CEOBE
,whichever is higher
4. Education : Education Loan upto Rs 10 Lacs, irrespective of loan amount
5. Housing :
5.1 Upto Rs 28 Lacs ( Overall cost of house maximum Rs 35 lacs ) in metropolitan ( Population above
10 Lacs) and upto Rs 20 Lacs ( Overall cost of house maximum Rs 25 Lacs ) in other centres
5.2 Up to Rs 5 Lacs in metro and Rs 2 Lacs in other centres for repairs
5.3 Loan to Govt agency for construction dwelling units or for slum clearance and rehabilitation of
slum dwellers ( ceiling –Rs 10 Lakh per unit)
5.4 Loan to housing projects for construction of houses for EWS/LIG .Total cost of per dwelling unit
should not exceed Rs 10 Lacs and household income should not exceed Rs 2 lacs per annum
5.5 Loan to HFC for on lending (Rs 10 Lacs per borrower). These loans are restricted to 5 % of the
individual bank’s total priority sector lending
5.6 Outstanding deposit with NHB on account of priority sector shortfall
2. Social Infrastructure: Loans up to a limit of Rs 5 Cr per borrower in tier II to Tier VI centres.
3. Renewable Energy: Up to a limit of Rs 15 Cr. For individual household loan limit will be Rs 10 Lacs
per borrower.
4. Others :
8.1Rs 50000/- per borrower to individuals and their SHG/JLG , provided the individual
borrower’s household income does not exceed Rs 1 Lac in rural areas and Rs 1.6 Lacs in non
rural areas. 8.2 Loan to distressed persons (other than farmer) upto Rs 1 Lac to prepay their
debt to non institutional lenders
8.3 OD upto Rs 5000/- in PMJDY
9. Weaker section :10 % of ANBC or CEOBE ,whichever is higher : Priority sector loans to individual women
beneficiaries upto Rs.100, 000/- per borrower has been included as a part of Weaker section credit.
Government Sponsored Scheme
1. Prime Minister’s Employment Generation Programme (PMEGP)
PMEGP is to generate employment opportunities by setting up only new micro enterprises, for
sustainable employment to artisans’ employment to artisans and unemployment youth.
Maximum project cost in manufacturing sector: up to Rs 25 Lac, Business/service sector: Rs 10 Lacs
Individuals above 18 years are eligible. No income ceiling under the scheme. Applicant must be 8th
class pass for manufacturing projects above Rs 10 Lacs& service / business projects above Rs 5 Lacs.
Subsidy: general borrowers 15 % in urban and 25 % in rural areas. For special category 25% and 35 %
Repayment: 3-7 Years with moratorium
2. National Urban Livelihood Mission (NULM)
The Ministry of Housing and Urban Poverty Alleviation (MoHUPA) has restructured the existing SJSRY and launched the National
Urban Livelihoods Mission (NULM).
Component 4 of NULM is for Self Employment Programme (SEP) : 4.1 is for Individual Enterprises (SEP-I) & 4.2 is for –
Group Enterprises and SHGs (SEP-G)
Implemented in all District Head quarters and all the cities with population of 1 lakh or more. Age Limit: 18 Years at the
time of applying for loan. There is no maximum age limit. However, borrowers above 70 years need not be entertained.
Qualifications :For both components No minimum educational qualification
Project cost / Quantum :SEP –I : Rs 200000/- , SEP-G : Rs 100000/-
Margin: SEP-I : 15-25 % , SEP-G : 25 % or 4 times of the group’s savings .
Subsidy (of project cost) :Interest Subsidy, being interest charged over and above 7% rate of interest
will be available for the term loans granted under SEP-I and SEP-G.
Repayment: 5 Years inclusive of maximum moratorium of 6- months.
Loans granted under SEP-G are not eligible to be covered under CGMSE.
Retail Trade activity is not eligible under SEP –I
Working Capital needs of enterprises under SEP-I shall be considered out of purview of the scheme
guidelines and that is not eligible for interest subsidy.
Revolving Fund (RF)/working capital needs under SEP-G not eligible for interest subsidy.
Women beneficiaries: 30 %. SCs and STs; population based. 3 percent reservation to differently-able.
15 % of the physical and financial targets for the minority communities.
In addition to skill training of the beneficiaries, the ULB arrange to conduct Entrepreneurship
Development Programme for 3-7 days for individual and group entrepreneurs.
3. National Rural Livelihood Mission (NRLM)
The Ministry of Rural Development, has launched NRLM by replacing the existing SGSY scheme, to promote
poverty reduction by building strong institutions of the poor through capacity building of SHGs ( especially
WSHG ) .Scheme is funded by Centre : State Govt in the ratio of 75:25(90:10 NE,100%-UT).
SHGs can avail either Term Loan or Cash Credit Limit or both based on need.
Active existence at least since the last 6 months as per the books of SHGs not from the date of
opening of SB a/c. SHG should be practicing Panchasutra. They are Regular meetings, Regular Savings
,regular inter-loaning ,timely repayment and Up- to date Books of Accounts
Quantum :
1. First dose: 4-8 times to the proposed corpus during the year (Min Rs.50, 000).
2. Second dose: 5-10 times of existing corpus and proposed saving during the next twelve months or
Rs.1 lakhs, whichever is higher.
3. Third dose: Minimum of Rs.2 lakhs, based on the Micro credit plan prepared by the SHGs
4. Fourth dose onwards: Between Rs.5-10 lakhs for fourth dose and / or higher in subsequent doses.
Contribution :No collateral & no margin will be charged upto Rs.10 lakh limit to the SHGs Repayment
installment should not be more than 50% of incremental income
Subsidy (of project cost) :No Capital Subsidy will be sanctioned to any SHG from the date of
implementation of NRLM .Interest subvention, to cover the difference between the Lending Rate of
the banks and 7%, on all credit from the banks / financial institutions availed by women SHGs, for a
maximum ofRs.3,00,000 per SHG. The SHGs will also get additional interest subvention of 3% on
prompt payment, reducing the effective rate of interest to 4%.
For claiming interest subvention (both regular and additional of 3% on a/c of prompt repayment)
refer cir 52/14, 117/14 on operational guidelines.
Repayment:
1. First dose of loan: 6-12 instalments.
2. Second dose of loan: 12-24 months.
3. Third dose: Monthly / quarterly / half yearly & it has to be between 2 to 5 Years.
4. Fourth dose onwards: Monthly/quarterly/half yearly & it has to be between 3 to 6 years.
Provide a minimum Rs 10000/- and max of Rs 15000/- Revolving Fund to SHGs in existence for a
minimum period of 3/6 months and follow the Panchasutra .
NRLM coverage: 50% to SC/STs, 15% are minorities and 3% are persons with disability ultimate target
of 100% coverage of BPL families.
4. Scheme for Rehabilitation of Manual Scavenger (SRMS)
The Objective of the revised SRMS Scheme aims at assisting the manual scavengers, identified during various surveys, for their
rehabilitation in alternative occupations. Manual Scavengers and their dependents, irrespective of their income, will be eligible
for assistance. This scheme replaced SLRS scheme
Quantum :
Term Loan- Up to a maximum project cost of Rs.15.00 lakhs for sanitation related projects and up to Rs.10.00
lakhs for other activities.
Micro Financing – Up to a maximum project cost of Rs.25, 000/- per scavenger. Micro financing will be done
through SHGs & NGOs
Capital Subsidy :
For Project cost upto Rs.200000/- : 50% of project cost
For Project cost above Rs.200000/- upto Rs.5 lakhs: Rs 1 lac plus 33.3% of PC between 2-5 lacs
For Project Cost from Rs 5 lac to 10 lac: Rs 2 lac + 25% of PC between 5-10 lac
For Project Cost from 10 lacs to 15 lacs : 325000/-
Interest Subsidy: To the extent of the difference in rate of interest will be reimbursed to the bank by the
Government / other agencies identified by Government.
Interest: 5% upto Rs.25, 000/- proj. cost for others & 4% & for women beneficiaries 6% for project cost above
Rs.25,000/-
Differential Rate of Interest ( DRI )
Annual family income Rs.18,000/-- in Rural and Rs.24,000/- in Urban and Semi-Urban areas
Individual whose land holding does not exceed 1 acre of irrigated and 2.5 acres of un-irrigated land. No
land Ceiling for SC/ST engaged in Agriculture and Allied activities.
Quantum Maximum : quantum Rs.15,000/- (For physically
handicapped additional loan of Rs.5000/- for artificial
limbs/Braille typewriter )
Interest : 4% Simple
Housing Loans under DIR Rs.20,000/- for SC/STs and Rs.15,000/- for others
2/3rd of DIR loans in Rural & Semi Urban
Minimum 40% to SC/ST beneficiaries
Agriculture Advance
1. Kisan Credit Card Scheme
Cultivation & other short term needs including consumption and Term Loan requirement to owner
cultivator/leased land holders .KCC shouldn’t be issued to parties dealing in SCC commodities, minors,
defaulters.
Sub limit-I as per formula ,Sub limit-II - 3 years net annual income (Max Rs.5 Lakh)
The Sub-limit is not a revolving facility. At the time of Annual review the Sublimit- II shall be reinstated to
the extent of repayment of Principal made during the year. Loan limit should not exceed 50% of value of
the produce
Validity is 5 years .Term loan repayment with in 5 year from date of disbursement
Each withdrawal under the short term sub-limit to be liquidated in 12 months (short term crops)/18
months (in case of long term crops)
No processing fee in case of limit upto Rs.3 lakhs for SF/MF.&Folio Charges @`100/- per Quarter
2. Canara Kisan OD Scheme
Short term Agril needs which cannot be covered under KCC facility. The scheme is not for crop
production .Agriculturists with One year satisfactory dealings can be financed up to maximum 4 times
gross annual income with minimum Rs 1 lac and maximum Rs 7.50 lacs ( if recovery percentage in
scheme is above 90 % ,max Rs 12.50 Las ).
Ceiling per acre mortgaged: Rs 1 lakh (`.1.50 lakh per acre) subject to 50% of value of mortgaged
landed property. With in overall limit, upto Rs 1 lakh can be permitted for repayment of outside debts by
farmer
Tenability : 3 years
Interest: BR+2.10 %( Above Rs.3 lakh upto Rs.25 lakh), upto Rs.100 lakh , ROI for all loans above Rs 1 Cr – linked to scoring
norms.
Folio Charges @`100/- per folio ie 40 entries. Debited quarterly .At the time of Annual review:
Collection of 50% of normal processing fee in case of limits above Rs.1 lakhs (with/without
enhancement in limit).
Eligible for ATM card
Interest: Interest has to be debited half yearly, September/March. Interest debited is to be recovered
within a maximum period of 90 days
3. Kisan Suvidha Scheme
Working Capital (for crop, allied activities) and Term Loan needs to owner cultivator/leased land
holders eligible.
Assessment of sub limit I is done using the same formula we use for KCCS
Under Sub limit 2 ie for term loan quantum is 3 years net annual income of the farmer with max. Rs 5
lakhs
Validity is 5 years
Working capital drawings to be repaid in 12-18 months and each Term loan in 5 years from the date
of disbursement.
Folio Charges @`100/- per folio ie 40 entries. Debited Quarterly
Processing fee to be collected at the time of sanction for the 5th year limit which will be the
sanctioned limit. At the time of Annual review: Collection of 25% of normal processing fee in case of
limits above Rs.5 lakhs (with/without enhancement in limit)
4. Krishi Mitra Credit Card Scheme
Loan to tenant farmers, oral lessess, share croppers and farmers who have lands, but do not have
land records . Finance to only one person of a family
Loan amount `50,000/- Total limit should not exceed 50% of the value of the produce. Minimum 50%
of loan for Crop Cultivation
Interest @ BR+1.20 %. Interest subvention 2% and 3% for prompt repayment with in one year
Interest debited half yearly due in 90 days for running a/c and due along next installment if loan is
sanctioned as Term Loan.
In case of single transaction limit, repayment in 5 years monthly/ quarterly/ half yearly / yearly
instalments .Running limit or single transaction limit- OD Tenablity 3 years
No processing charges and No inspection charges
RKBY applicable
Target: 2.5% of fresh disbursements to KMCCS.
5. Produce Loan
To keep the produce in an approved godown or warehouse or in farmers’ residence enabling them
to sell the produce for a better price of a later date. Loan proceeds to be adjusted to KCC/instalment
of TL and repaid within 12 months from the date of grant.
Also The subvention benefit is extended to eligible post harvest loans against warehouse receipt to
KCC holder Small & Marginal Farmer borrowers, for a period of six months and
Incentive subvention is extended to such of those loans closed promptly but within 6 months from
availing the loan.
Rs 50 lacs is the restriction for Produce Loan to Corporate
Variants of Produce loans
1. Produce stored in their own houses/go downs/Leased go downs(Max-Rs.10 lakh)
2. Warehouse receipts of Central Warehousing Corporation(CWC)/State Warehousing
Corporation(SWC)/ Private sector Warehousing Units
3. Warehouse receipt financing under tie-up arrangements with Collateral Management Companies
Financing against Negotiable Warehouse receipts of accredited Warehouses/Cold storages(Rs.25

lakhs(on lent amount)) 5. Financing the Private Cold Storage units / Private Warehouses by way of
WC limit against the Receivables Rs.25 lakhs(on lent amount)
6. Self Help Groups
SHG is a small group consists of 10-20 members
Group should be in active existence for at least 6 months ,maintain proper record and account
Group should have undertaken savings and credit operations from its own resources.
Group should work democratically
Group members should have homogenous background and common interest
SHG members to attain skill up gradation and proper functioning.
Finance to SHG is based on Savings i.e., 1:1 or 1:2 or 1:4 based on needs and requirements.
An appropriate repayment period may be fixed after discussing with the group
The SHGs will not be in a position to offer any collateral security. Where assets are created out of
SHG finance, the same can be taken as prime security
Delegation of powers to branches: `5 lakh-Smalls, `10 lakhs – Medium, `15 lakhs – large branch.
Under NRLM: `5 lakhs, `10 lakhs, `15 lakhs (S,M,L)
Direct lending to SHGs upto 1:4 of savings and beyond, in cases satisfying norms.
Housing finance to members of SHGs to maximum amount of Rs.75000/- per member.
MSME -Target
7.5 % of ANBC% target for Micro Enterprises (Include KVIC), by March 2017. ( 7 % by March 2016 ) .
Loan to service enterprises will be classified as priority sector, if loan amount is upto Rs 5 crore per
unit for MSE and upto Rs 10 Crore is financed to Medium enterprises.
MSME will enjoy priority sector classification upto 3 years after they grow out of MSME category
Time Norms
Loans upto Rs 25,000 within 2 weeks from the date of receipt.
Loans upto Rs 5.00 lakhs within 4 weeks from the date of receipt.
Loans over Rs 5.00 lakhs upto `25 lakhs- Br-30 days, CO-45 days, HO-45 days
Loans above Rs 25 lakhs- Br-30 days, CO-45 days, HO- within a maximum period of 8 weeks from
the date of receipt.
Security Norms
No collateral security and/or third party guarantee to be taken in respect of loans / advances to
MSME units as under (including KVIC and Government sponsored): (a) Up to `10 lakhs
Up to `25 lakhs in respect of units whose track record and financial position are good as per
Bank records.
Up to `100 lakhs in respect of Micro & Small Enterprises whose borrowal accounts are covered
under CGMSE
Presently CGMSE cover is not available for credit facilities extended to Retail Traders,
Educational Institutions, Training Institutes, Training cum incubator centres and loans/advances granted to Medium Enterprises,
JLG & SHG.
MSME Products
1. Canara MSME CAP
Minimum quantum of loan is Rs 10 Lacs .Maximum quantum for manufacturing unit is Rs 500 Lacs and Service unit is Rs 200 Lacs
.Maximum Term Loan (90 % of project cost) under the scheme is Rs 200 Lacs .Term loan alone cannot be sanctioned . Margin for
TL, WC and NFB is 10 %, Repayment period for Term Loan is 5-10 Years and tenability for working capital is one year
Value of property in urban and metro areas for manufacturing unit should be 100 % and for service
unit 125 % of loan
Value of property in semi urban areas for manufacturing unit should be 125 % and for service unit
150 % of loan
Property of unencumbered residential house /flat / commercial property /Industrial property
situated in metro and urban centres
It is mandatory to get 2 valuation even though the value of property is less than 10 Cr.
Fresh valuation to be obtained from penal valuer in every three years.
Not eligible for GCMSE cover .
2. MSME Vahan
Maximum Rs 25 lacs (above Rs 25 lacs by circle head) can be financed to purchase new &
passenger vehicle (not for taxi purpose) only under the scheme
Retail traders can be financed under the scheme
Margin is 10 % and ROI is BR + 0.50 %. Disbursement directly to vendor through RTGS/ NEFT
Quantum is calculated on the basis of average of last 3 years of net profit .Ans : 3 years
AGF of CGMSE for loans upto Rs 10 Lacs is borne by Bank and further interest concession
For loans above Rs 10 Lacs, it is at the option of borrower to take cover under CGTMSE, else
collateral security to the extent of 100 % of the loan amount to be taken.
Repayment period for 4-wheeler and 2-wheeler are 84 months and 60 months respectively.
Upfront fee under the scheme is 0.25 % of loan amount.
3. Canara Carvan
Both goods and passenger vehicles can be financed to existing Transport operators having 3
years of experience through term loan only
Requirement of minimum 5 vehicles or minimum loan amount of Rs 25 Lakhs permitted under
the scheme. Maximum Rs 5 crore can be financed
Repayment period under the scheme is 60 months
No takeover and only new vehicle can be financed
If CGTMSE cover is not available, minimum 25 % of collateral security by way of land and building is
to be obtained.
Interest concession depends upon scoring model. Interest concession 1 % is available in case of
score above 75 % , 0.50 % concession is available in case of score between 50 -75 % .
0.25 % Upfront fee concession is available in case of score above 75 %.
4. MSE Smart
Maximum loan quantum under MSE smart scheme is Rs 200 Lacs in metro and Urban centres, Rs 50 Lacs at
other centres . Maximum Rs 5 Lacs for working capital. Working capital alone can not be considered
Age limit for applicants are 18-60 Years
Loan quantum for furnishing of office premises / equipment is restricted to 20 % of the eligible
loan quantum subject to maximum of Rs 20 Lacs .Loan for furnishing rental office not permitted.
Term loan assessment is based on minimum of a) 75 % of Project cost .b) 5 times of net annual income
for loans upto Rs 10 Lacs c ) 10 times o net annual income for loans above Rs 10 Lcas .Working capital
needs can be sanctioned upto 10 % of previous year’s receipt .
Margin on working capital is Nil and on term Loan margin is 25 %
Processing Charges / Upfront Fee: 50 % of normal charges
Repayment period for term loan is 5-10 Years and tenability for working capital is 3 years.
If loan is not covered under CGTMSE, minimum collateral by way of land and building at 25 % of
loan amount is to be obtained.
Loan component for construction activities should not exceed 80 % of total loan eligible amount.
Mandatorily coverage of loan up to Rs 100 Lacs in CGTMSE .
5. Canara MSME Expo

The loan amount is linked to turnover of customer and is restricted to a maximum of Rs 50 lakhs. For
the purpose of participation in Trade fair / exhibitions the maximum loan amount is restricted to Rs 25
lakhs .Only exporters with a minimum turnover Rs 100 lakhs in the immediately preceding year and
having credit limit with us can avail loan under the scheme.
If turnover is between 200-500 lacs and 500-1000 Lacs, maximum loan can be sanctioned is Rs 20 Lacs
and Rs 30 Lacs respectively.
Only Term Loan can be sanctioned under the scheme
Repayment period of term Loan is 3 years and repayment holiday can be upto 3 months
Margin under the scheme is 15 -25 % of the project cost
If CGTMSE coverage is not opted by borrower, primary / collateral security by way of land and building
to the extent of 100 % of the loan amount should be obtained.
Minimum DSCR must be 1.5 and Current Ratio must be 1
6. Canara Contractor Scheme (MSME Service)

Fund based limits (WC SOD), NFB-FLC, ILC, BG and Term loan can be provided to Civil, Mining and constructors contractors under
the scheme. Term loan can be granted for purchase of equipment ,construction / purchase of office premises .Existing clients
with satisfactory track record for last 2 Years & new clients who confine their dealings with us can only be financed
Minimum permissible loan amount is Rs 10 Lac and maximum TL is Rs 5 Crore Maximum loan amount of Rs 10 Crore can be
considered under against the properties situated in semi urban and urban centres. Vacant sites with no superstructure can be
taken as security if allotted by government approved local bodies but tenanted property can not be accepted .Valuation is to be
carried out from two panel valuers whenever loan amount exceeds Rs 2 Cr . Property in the name of trust can not be accepted.
Need based finance subject to a maximum of 9 times of TNW of the borrower.
Limit to be secured by collateral to the extent of 125 % of limit.
Margin for TL and NFB is 10 %.
Tenability for working capital is12 months and repayment period for term loan is 7 years and 5 years
for construction activity and other than construction activity.
Processing Charges / upfront fee concession 25 %
In scoring model if marks are above 75 % interest concession 0.75 % from applicable rate ac is given
and if marks are between 60-75 % interest concessions 0.50 % from the applicable rate can be given.
7. Pragati scheme ( Now Closed : cir 180/2016)

To meet business related needs including purchase/ construction of business premises, machinery,
equipments, vehicles and working capital requirements of Micro and Small Enterprises.
Maximum Loan is Rs 10 Lac .Margin is 15 % ( Loan above Rs 25000 )
ROI is BR +0.55 %
Term Loan repayment is 7 years and WC tenability is 3 Years respectively. Maximum moratorium is
6 months
Processing Charges / Upfront fee is 50 % of normal Charges
AGF is to be borne by Bank.
8. Unnati scheme
To meet business related needs including purchase/ construction of business premises, machinery,
equipments, vehicles and working capital requirements of Micro and Small Enterprises.
Minimum loan amount is Rs 10 Lacs and maximum loan amount is Rs 100 lacs Margin is 20 %
ROI is BR +1.25 %
The 0.50 % concession to women borrower and 0.25 % to CGMSE covered is available.
Term Loan repayment is 7 years and WC tenability is 3 Year. Maximum moratorium is 6 months
Processing Charges / Upfront fee is 75 % of normal charges
If BD (90 day) is held as prime security, minimum margin is 25 %
9. OD MSME scheme
Maximum Loan Rs 3 crore can be granted under OD MSME.
Maximum Tenability for OD MSME limit up to Rs 2 Lacs is 2 Years
Tenability for LR , NR and MR rated accounts under OD MSME scheme are 18 months , 15 months and 12 months.
Mortgage of land and building with value not less than 125 % of the limit sanctioned is required unde OD MSME.
Vacant site with no superstructure can be accepted if allotted by Government approved bodies but
tenanted property can not be accepted.
10. Doctor’s Choice
Maximum loan of Rs 5 cr can be granted in Doctor’s Choice scheme.
Sub limit for working capital can be 20 % of the maximum limit subject to a ceiling of Rs 50 Lacs
25 % margin is required ,if term loan is granted for construction of business premises including
construction of quarters and 20 % margin is required ,if term loan is granted for purchase of
equipment . Margin for working capital needs is 20 %
If loan is secured by way of mortgage of immovable property /approved securities, value of which
should not be less than 50 % of total limit permitted.
Repayment period for term loan is 5-7 years with initial moratorium of 3-6 months. The moratorium
may be extended to 12 months where construction of business premises is involved. Tenability of
working capital is 3 years .
11.Financing Start Ups and Early Stage Units promoted by graduates of reputed educational institutions
WC / TL to MSME manufacturing and service units, to graduates of reputed educational institutions, subject to a
minimum of Rs 10 Lacs and maximum of Rs 200 Lacs for Startup and Rs 500 Lacs for Early Stage Units.
Early stage Units are units which have not completed 3 years from the date of commercial
operation/first balance sheet.
Promoters must be graduates from IIMs/IITs/IIITs/ISBs/XLRI/IISCs/IISERs/Symbiosis
Pune/Bangalore/MDI Gurgaon or NITs).Age of the promoters must be between 20-50 years. Margin :
Working capital 25 % , Term Loan 20 %
ROI : Card rate as applicable to MSME units minus 0.25 %
Repayment for project cost upto Rs 100 Lacs :7 Years excluding moratorium, but not to exceed overall
tenor of 10 years
Repayment for Project cost above Rs 100 Lacs→ 7 years & in excepônal case upto 10 years, excluding
moratorium, but not to exceed an overall tenor of 12 years.
Loan upto Rs 100 Lacs: CGTMSE coverage or 50 % of the loan amount by way of Land and Building
/Approved securities/Our Bank deposit either primary/collateral or primary and collateral put together
Loan above Rs 100 lacs: 50 % of the loan amount by way of land and building /approved securities/our
bank deposits either primary/collateral or primary and collateral put together.
Upfront Fee for TL: 0.25 % of sanctioned loan amount. Minimum Rs 5000/-
Delegation of power vested with circle head CAC.
Retail Lending
A minimum of 70 % of total marks to be secured by the prospective borrower to be eligible for loan
under retail lending schemes. The rating sheets are applicable for all retail lending loans other than,
Canara Pension, Canara Trade, Canara Rent, Canara Mortgage. Relaxation in the qualifying marks may
be considered up to a ceiling of 60% only by NHA.A minimum of 80% of total marks to be secured by
the prospective borrower to be eligible for recommending ROI concession.
Cut-off limit for forwarding copies of application / credit report to CO enhanced to `5 lacs for all
branches including VLB / ELB
RL loans are not subject to Mid term review.(Except Traders loans and Doctors choice) irrespective of
SA. Aggregation of liabilities/limits to be done for deciding the sanctioning authority in case of sanction
of second /subsequent loan
Retail Lending products
1. Canara Mortgage scheme
Individual NRI with resident close relative of NRI as co borrower can avail the finance against
unencumbered, residential house / flat /commercial property, vacant / partially tenanted property.
Vacant land is not permissible. Third Party property in name of close relative & spouse and owner of
property is joining as joint borrower can be permitted
Margin requirement is 50 % of market value of property. If property is already mortgaged to our Bank
for any loan and sufficient margin is available for existing loan as well as proposed Canara Mortgage
loan Suitable Canara Mortgage limit can be sanctioned by NHA
NTH requirement. Repayment Period is 84 months (120 months by circle head CAC
Processing Charges are 1% of loan amount ( 5000-50000) ,Documentation Charges are Rs 100/- per lac
( 1000-25000 ) and inspection charges up to Rs 10 Lac loan are Rs 200 per inspection ( Max 600 )
.Inspection Charges above Rs 10 Lacs are Rs 300 per inspection ( or actual whichever is higher )
2. Canara Rent
To meet business /personal needs against rent receivable up to 75 % of net rent receivable for
unexpired period of lease . Residential property can not be accepted under Canara Rent Loan scheme.
Circle head CAC authorities may permit to accept the property leased out to non corporate also
selectively in respect of proposal falling upto their powers.
Repayment period should not exceed unexpired lease period or 60 months whichever is lower.
Repayment period not exceeding 84 months may be permitted by the respective sanctioning authority.
ROI for PSUs and Navratna Cos are BR + 2.50 % and general companies are BR +2.75 %
Processing Charges in canara rent scheme is 0.5 % of loan amount ( 5000-50000 ) and Documentation
Charges are Rs 100 per Lac ( 1000-25000 )
3. Canara Yuva Awas Rin
Eligible customers must be aged between 21-45 Year having 2 years of confirmed service can be
granted Housing loan upto 5 years gross salary with 30 % NTH requirement ( min Rs 10000/-
).Quantum for repairs and renovation is 75 % of project cost (Max 15 lacs )
Margin for loans up to Rs 75 Lacs is 20 % and above Rs 75 Lacs is 25 % .40 % Margin is required in
case if borrower opt to capitalize the pre- EMI interest during repayment holiday
ROI up to Rs 100 lacs → BR ,above Rs100 Lacs → BR + .10 %
Moratorium period of 20 months can be permitted in case of completed flats /ready build house/
takeover and in case of construction maximum 36 months of repayment holiday is permitted with or
without Pre – EMI interest capitalization.
4. Housing Loan to NRI
21-60 years aged individual having NRI status for 3 years and employment abroad for 2 Years can
be granted housing loan up to 4 years of gross annual income with NTH 40 %
Moratorium period of 2 months can be permitted in case of completed flats /ready build house/
takeover , 12 months months in case of purchase of semi finished /old house /finishing /modification
/repair of the house and in case of construction maximum 36 months of repayment holiday is permitted
ROI for loan up to Rs 100 lacs → BR ,above Rs100 Lacs → BR + .10 %
Processing Charges are 0.1 % (500-10000) of loan amount.
5. Premium Housing Loan to HNIs
HNI having annual gross income Rs 25 Lacs & above can be granted housing loan up to 5 years of
gross annual income with minimum NTH 30 % . Minimum loan quantum is Rs 1 Crore .Loan amount
for purchase of plot is restricted to 60 % of total loan. Maximum age by which loan should be
repaid by salaried individual is Retirement age + 5 years and by non salaried individual is 70 years.
Moratorium period of 2 months can be permitted in case of completed flats /ready build house/ take
over , 12 months in case of purchase of semi finished /old house /finishing /modification /repair of
the house and in case of construction maximum 24 months of repayment holiday is permitted .In
case of loan for purchase of flat under construction NHA can permit 36 months moratorium period .
ROI is BR +0.1 % & Processing Charges are 0.1% of loan amount (max Rs 25000 )
6. Housing Loan to Agriculturists
Hosuing loan to Agriculturists owing and cultivating agricultural land of more than 5 acres of irrigated
land / 10 acres of dry land and having satisfactory dealing of 2 Years(selectively waived by Circle head
CAC 563/14 ) can be granted HL up to 4 years of annual gross income . Property must be situated in
Non agricultural residential area
Margin for purchase of old house in case of loan amount exceed Rs 20 Lacs is 25 %
Repayment 30 years or up to the age of 65 years of borrower in monthly / Quarterly / Half Yearly
/Annual EMI.
ROI for loan up to Rs 100 lacs → BR ,above Rs100 Lacs → BR + .10 %
Processing Charges are 0.5 % (500-10000) of loan amount.
7. Housing Loan to Senior Citizens
Senior citizens above 60 years and upto 70 years jointly with surviving spouse or with earning legal
heir aged below 55 are eligible.
HL to pensioners and salaried can be granted upto 50 times of monthly pension / income or 4
times of average gross annual income in case of P & SE persons with a maximum of Rs 75 lacs
Repayment period including repayment holiday (1-18 months) is maximum 15 years or upto the
age 75 years of borrower.
Margin for purchase of old house in case of loan amount exceed Rs 20 Lacs is 25 %
Processing Charges are 50 % of General Housing Loan.
8. Canara Vehicle – 4-wheeler loan
Minimum gross salary /income is Rs 3 lacs, NTH 40 % with minimum RS 12000 p.m. CGM /GM HO CAC
can relax NTH upto 25 % with a minimum of Rs 10000/- in individual cases and also under special
packages.
Margin for loan upto Rs 10 Lac is 10 % ,above Rs 10 Lac &up to Rs 25 Lac is 15 % and loan above Rs 25
Lacs is 20 % .Margin for pre owned vehicle is 25 % and maximum loan is Rs 15 Lac
Repayment for new and old vehicle finance are 84 months and 60 months respectively.
Ineligible entity for Canara Vehicle loan is HUF
Processing Charges are 0.25 %( 1000-5000) of loan amount.
Incentive to dealer and sales executive of dealer are 1 % of loan amount &Rs 1000/- to sales executive
During the pendency of first loan finance for second vehicle can be permitted by NHA and finance to
third vehicle can be permitted by Circle head CAC
ROI for Men → BR+0.30 % , Women → BR + 0.25 %
Delegation of Power : S/M/L Br →5/10/20 Lacs , CM-VLB/DM –CO-CAC →40 Lacs, AGM-ELB/COCAC :
100 lacs, DGM BR/CO CAC →600 Lacs , CGM/GM CO CAC →3000 lacs CGM/GM HO CAC →4000 lacs
9. Canara Budget Scheme
NTH after EMI of proposed loan should not be less than 40 % with a minimum of Rs 10000 in all cases.
Non salaried class not eligible. Salaried class can be financed upto from 6-10 months gross salary
Under special package and under individual cases CGM /GM HO CAC can relax NTH upto 25 % of gross salary subject to
minimum of Rs 7500/- .subject to maintenance of salary account or registration of salary mandate.
Maximum repayment period is 60 months and can be relaxed to 72 months by CGM /GM HO CAC upto their delegated
power. Delegation of power restricted to Branches having NPA less than 3 % under the scheme
ROI : With salary mandate →BR+ 4 % , without salary mandate → BR+ 5 %
Delegation of Power : S/M/L→ Rs 3 Lacs ( 6 months salary) , CM-VLB/DM –CO-CAC →Rs 5 Lacs ( 10
months), AGM-ELB/CO-CAC : Rs 6 Lacs ( 10 months ), DGM BR/CO CAC → Rs 8 Lacs ( 15 months) ,
CGM/GM CO CAC →10 Lacs ( 15 months) CGM/GM HO CAC →Above Rs 10 Lacs ( above 15 months )
10. Teachers’ loan
Maximum loan that can be granted by S/M/L Branches under the scheme is 6 months gross salary
subject to maximum of Rs 2 Lacs and by CM/ VLB, AGM /ELB 10 month’s gross salary subject to
Maximum of Rs 3 Lacs.
NTH after EMI of proposed loan should not be less than 30 % with a minimum of Rs 10000/- in all cases
Under special package CGM /GM HO CAC can relax NTH upto 25 % of gross salary subject to
minimum of Rs 7500/-.
Teachers’ loan is repayable in 48 EMI and can be relaxed upto 60 months by NHA
ROI → BR+ 3.75 %
11. Vidya Turant Scheme
Education loans to pursue higher studies in reputed institutions viz., I st level IIMs/IITs/ NITs /IISc/ISB
(Hyderabad). Other than the designated branches can also sanction the loans under Vidya Turant
Scheme ,upto the limits specified for collateral free loan under the scheme
Maximum limit of waiver of collateral security to vidya turant loan applicants of IIT /IIM /NIT /IISC
students are up to Rs 20 Lacs and ISB students are up to Rs 30 Lacs
Rate of interest in Vidya turant Loan is Base rate
Braches to convey the sanction to applicant within 48 hours through E mail.
Upfront / Processing charges under the scheme is Nil
Repayment of loan upto Rs 7.5 Lacs is 10 years and of loan above Rs 7.5 Lacs is 15 years
Entire loan is classified under Non Priority if loan amount exceeds Rs 10 Lacs
12. Pradhan Mantri Awas Yojana
Operational till 31.03.2022
It is for EWS/LIG beneficiaries residing in urban areas and to be implemented by all semi-urban, urban
and metro branches/RAHs
Annual household income: EWS →upto Rs 2 Lacs, LIC → upto Rs 6 Lacs. For self employed person
affidavit can be obtained for annual income upto Rs 2.5 Lacs.
Quantum: 4 times gross annual income with 40 % NTH. Maximum loan Rs 24 Lacs.
ROI : Base Rate , Repayment: 15 Years ( Max moratorium 18 months ) ,processing Charges : Nil
Credit linked interest subsidy of 6.5 % for 15 years or till tenure of loan whichever is less. Claim of
subsidy from NHB on quarterly intervals by RA Wing HO.
Carpet area for EWS is 30 sq mtr. And for LIG 60 Sq mtr (Built up area).
Construction to be completed within 18 months to become eligible for interest subsidy. The NPV of the
interest subsidy will be calculated at a discount rate of 9 %.
Age: 21-55 Years. If age is above 50 years, the major legal heir to join the loan. The house should be in
the name of female head or joint name of male head and his wife. If there are no adult female
members, house can be in the name of male member.
Delegation for HL : S/M/L →10/15/30 Lacs , Credit manager in VLB/ELB → Rs 15 Lacs , Sr manager in VLB/ELB → Rs 30 Lacs CM-
VLB/DM –CO-CAC →50 Lacs, AGM-ELB/CO-CAC : 100 lacs, DGM CO CAC →200 Lacs ( 133 % security) , CGM/GM CO CAC →300
lacs ( 133 % security) CGM/GM HO CAC →300 lacs with 133 % security in respect of DGM headed circle and Rs 500 Lacs with 150
% security , ED CAC above Rs 500 Lacs with 150 % security.
TECHNOLOGY PRODUCTS / SERVICES
ONLINE SUBMISSION OF APPLICATION FOR OPENING SB ACCOUNT

• Web portal created for submission of online Application for opening SB Account for Resident Indian Citizens holding
PAN Card. (SB online facility for opening joint accounts- Cir- 271/2014); NRI Customers can open Saving Bank Account
Online(599/2014)
• One Time Pass Word (OTP) message will be received in the prospect's mobile.
• The prospective customer will receive an e mail with a link to fill up application & submit .
• After the prospect Submits the application successfully he/she will get an e - mail to go to the branch of his / her choice
within 7 days , and submit KYC documents /2 photos and initial deposit of Rs 1000/
TAB BANKING- OPENING SAVING BANK ACCOUNT THROUGH TABLET (Cir 697/2014 )
• Prospective Customer can make request through Internet, SMS and by calling our Customer Care. Marketing Officer will
facilitate opening of account by visiting customers‘ place Customer data will be keyed in by MO through TABLET which flows to
CBS on acceptance of data by the Branch and account will be opened. Welcome Kit will be delivered immediately on opening
account by Marketing Officer. Debit Card / Net Banking will be made operational by the branch after opening the account.
Regular Saving Bank Account, Individual A/c under product code 101 can be opened.Facility only available for Residents who
are major (18 years and above). The initial deposit will be minimum Rs .10000/= and same is payable only through Cheque duly
crossed favoring "Canara Bank – A/c <Name of Account Holder>".
• No Cash is to be accepted as initial deposit by the Marketing Officer. View the requests for their circle in MO Tracker
application.
Sourcing of Applications: By calling Call Center Helpline at 1800-425-0018, By sending SMS as "SB" to 09289292892,Online Form
Filling.
CANARA BANK PAYMENT GATEWAY – ( Cir 217/2015 )
Customers can choose our Bank Payment Gateway while making the online payments with the merchants enrolled in our Bank
Payment Gateway.
QUICK SB ACCOUNT OPENING (CANARA QUICK ACCOUNTS) – ( Cir 217/2015 )
At CPCs is based on the scanned image of the Account Opening forms uploaded by branches.
ONLINE CHAT – ( Cir 217/2015 ) :Apart from customers/non-customers chatting with our Customer Care officials, our
domestic branches can chat with Help Desk for guidance on their day to day activities by clicking on the link “Chat with
Helpdesk” available in our „CANNET‟.
CANARA E-INFOBOOK ( Cir 100/2014 & 368/2014 ) : It is an electronic passbook and banking related information facility
on Mobile handsets. The facility supports multiple Operating Systems (Android 2.2 ft above, Windows 8, IOS 7.1 ft above and
Windows/Android/10S TAB ), is Network Agnostic and can be used on all variety of handsets supporting Internet facility with
specified operating systems. The Canara e-Infobook can be used by all the Canara Bank customers who have registered mobile
number with their accounts. The application will retrieve the details of users on the basis of mobile number itself. This
application is available in 8 languages i.e in English, Hindi, Kannada, Tamil, Malayalam, Telugu, Bengali and Marathi. The services
currently available to customers are: Electronic pass sheet of accounts (last 10 transactions, last 15 days transactions and last 30
days transactions for SB/OD accounts and last 25 transactions for Current Accounts), Booking online appointment for accessing
Locker using Android version, Products information, Statement of accounts to email Ids, Tracking of transactions date wise,
Cheque status, ATM locator, Branch locator, Balance enquiry, Locker operation appointments(for Android version), Accounts
summary and What's new in Canara Bank.
BALANCE ENQUIRY : Facility for the customer to know the balances in their account by giving missed call from mobile
registered with the Bank to 09015483483
RETAIL LOAN SCHEME DETAIL THROUGH MISSED CALL Details through SMS (455/2015)
09015 637 637 : Home laon enquiry; 09015 642 642 : Car laon enquiry
09015 257 257 : Home laon enquiry for HNI; 09015 778 668 : Home laon enquiry for NRI
AUTOMATIC RECEIPT OF A/C PASS SHEET THROUGH EMAIL : Automatic receipt of A/C pass Sheet through email at pre
determined intervals.
SMS ALERTS FOR CORPORATE NET BANKING USERS ( Cir 398 / 2014 ) : For getting SMS alerts customer's mobile number
has to be registered with the Bank either through the concerned Branch or through any Canara Bank ATM. At present Bank is
sending SMS to the customers for various activities like, all transactions (irrespective of the amount) through ATM/ Net Banking /
Mobile Banking and for transactions done at branch for more than 25000/-, minimum balance not maintained, account while
transferring account from operative to inoperative and vice versa, pre/post alert installment and arrears for loan accounts, term
deposit maturity, cheque book issue, pension credits, welcome message for newly opened accounts.
CANARA M-WALLET ( Cir 383/2014; 55/2015 ) : It is designed for making cardless and cashless transactions safely through
the amount assigned to the m-Wallet. This facility provides a simple and secure way of extending utility payment services
through Mobile Phones to Canara Bank Customers. The customers with their registered mobile numbers can avail this facility.
Canara m-Wallet provides services like: Cardless Merchant payments, Transaction between m-Wallet to m-Wallet using mobile,
Wallet Summary, Mobile Top-ups, Utility Bill payments etc.Designed for making card less and cashless transactions safely
through the amount assigned to the m-Wallet.; maximum transaction per day per customer - Rs. 1,00,000/- with a monthly cap
of Rs. 1,00,000.
CANARA EASY CASH SERVICE ( Cir 438 & 568/2014) : Canara easy Cash service is designed to serve the migrant population
who do not have access to formal banking channels. This service facilitates fund transfers of small value for this segment of
society, giving push to the process of financial inclusion. This will also benefit student community who will be able to receive
funds without having an account. Canara easy Cash is the instant money transfer (IMT) service that allows our customer to send
money to any user having mobile, with the help of Canara Bank ATM at any time (24 x 7). The beneficiary need not be customer
of any Bank, and can withdraw cash through IMT enabled Canara Bank ATMs without any card easily and instantly using the One
Time Password (OTP) received through SMS and code shared by the Remitter. The Remitter ,by using ATM card ,has to enter
,beneficiary‘s 10 digits mobile number , 4 digit remitter‘s code and amount in multiple of Rs 100/-
- The beneficiary has to enter 10 digits mobile number of beneficiary , 4 digit cose shared by remitter and 6 digit OTP received on
his /her mobile ( sent by Bank ) ,in IMT enabled Canara Bank ATM for withdrawing the Cash
-Minimum amount per transaction is Rs. 100/- & Maximum amount per transaction is Rs. 5000/-
-Maximum Monthly limit per remitter is Rs. 25000/-
E-lounge: E-lounge is an outlet where basic banking services are made available to the customer at a convenient / comfortable
place on a self operating basis. Customer can avail the banking facilities in E-lounges are: Cash deposit, Cash withdrawal, Cheque
deposit, Passbook updation, On line transactions through Netbanking (if enrolled for Net Banking). In a nutshell E-lounge is a mini
bank branch operated by the customer himself, without the intervention of Bank staff. It also facilitates as an outlet for servicing
and marketing of banking and banking related technology products with added convenience to the customer.
CANARA P-SERVE ( Cir 438 & 631/2014 ) : Facility provided through Touch Screen Kiosks installed in e-Lounges of Canara
Bank. It provides personal services platform for the customers in the e-lounges. The services offered to the customers through
Canara P-Serve include:Request to issue RuPay debit card,Request to issue VISA Credit card, Cheque Book Request,Opening of
Savings Bank account. This can be availed by non customers also,Opening of RD account,Opening of PPF account,Online
Application for Loans,Insurance Products,Mutual Funds,Online Shopping facilities in collaboration with Dhamaal.com, Expert
Opinion from customer care executives through Video Chat
SAFE DEPOSIT LOCKER PACKAGE : RENT COLLECTION ( Cir 383/2014 ) :

Enhancement in SAFE package: (a)Hold Funds in CASA for rent collection, b) Rent Collection through STP
MISSED CALL BANKING: Customer can get his/her account balance by giving a missed call to 09015 483 483 through his/her mobile number
registered with the Bank.
Change of Mobile Numbers used for Missed Call Alert Services ( Cir 465/2015 & 48/2016)
The existing Missed Call Numbers have been changed to the new Virtual Numbers. The old and new Mobile Numbers for
different Missed Call Alert Services are as under:
SN Missed call no. Service NRI - Missed call no. (48/2016)
1 0 9015 483 483 To Enquire the Balance 0091 9015 483 483
2 0 9015 734 734 To Enquire the last 5 Transactions 0091 9015 734 734
3 0 9015 613 613 To Enquire the last 5 Transactions in Hindi 0091 9015 613 613 ( 3 a/cs)
4 0 9015 637 637 Home Loan Enquiry 0091 9015 637 637
5 0 9015 642 642 Car Loan Enquiry 0091 9015 642 642
6 0 9015 257 257 Home Loan for HNI Customers 0091 9015 257 257
7 0 9015 778 668 Home Loan for NRI Customers 0091 9015 778 668
PASS BOOK PRINTING KIOSK: In continuation with our efforts to bring in new technology products in the functioning of the bank,
we have introduced "Pass Book Printer Kiosk (PBK)" to select branches. The Pass Book Kiosk is aimed to increase productivity and
performance with high - end technology. It is convenient and user friendly to use in the bank premises or in a remote location.
With the help of Pass Book Kiosk, customers can print their passbook on their own any time during the banking hours. The Pass
Book Kiosk is a voice enabled machine and easy to use. This will reduce the time and process of passbook printing in the
branches.
CASH DEPOSIT MACHINE: In continuation with our efforts to bring in new technology products and effective alternate delivery
channels in the functioning of the bank, we have introduced "Cash Deposit Machine (CDM)" to select branches. The Cash Deposit
Machine is aimed to increase productivity and simplify customer needs with the help of technology. It is very simple and user
friendly as a customer can Deposit Cash to any Account of his/her choice from these machines without waiting in the queue of
Cash Counters. The Machine can accept 40 pieces of notes at a time and it credits the account instantly. This will enable
customers to deposit cash on their own, during the banking hours and thus will reduce the time and process for depositing cash
in the branches.
CANARA TECH SUPPORT (CTS) –( Cir -536/2014 & 115/2015 ) : Portal for Lodging CBS software related queries. Revised
procedure for Non-CBS Related Queries. Single Window for both CBS Software and NON-CBS Technical Support. The Portal is
available under Single Authentication Service (SAS). Existing Remedy Server Application will be dispensed. Portal for Lodging CBS.
Branches/offices can lodge the non-CBS/CBS cases in the portal for redressal of such cases. Non-CBS related queries can be
ledged separately in the following 7 groups-Antivirus & DMS,Internet / Mobile Banking, Network
Kiosk,Bio-Metric,ATM,Other Applications
Cases lodged by the branches will be available to their Circle TM Section for redressal. Circle TM Section has two options- Either
they can attend to the issue and reply to the Branch or in case the issue cannot be resolved by them, the case can be assigned to
DIT Wing. Once the case is assigned to DIT Wing, the case will be automatically assigned to the respective groups depending on
the selection of the icon. In case of other applications, the cases will be directly available to Application Development &
Maintenance (ADM) Group and it will be taken care of by the Group. DIT Contact List is also provided in the home page of the
portal. Software Issues – Dispensing of ―Remedy Server.
NET BANKING: Online Banking at anytime, anywhere through Internet on 24x7 basis. Caters to both Retail and Corporate
customers. Facilities available for Retail Customers are: - View account details - CASA, Term Deposit and Loan accounts, Printing
of transaction details, Fund Transfer - To Intra Bank ft Inter Bank accounts, Term deposit Opening, Online Tax payment, Utility
Bill payments, Applying for IPO through ASBA, Repayment of installments to own Loan account, Registration for Mobile Banking
facility, Donation to religious and philanthropic Trusts. Facilities available for Corporate Customers are - View Print account
details CASA, Fund Transfer - To Intra ft Inter Bank accounts and Bulk File Upload Facility. Suitable security and risk mitigation
measures are implemented for Net Banking. Second factor authentication is ensured through One Time Password (OTP) for
beneficiary maintenance and fund transfer. In updated Net Banking, customers can avail facility of multiple transfer of funds
within Canara Bank, without creating beneficiary. Customers are given an option to access Classic or Contemporary design
Screens. Candigital, an upgraded version of Cansecure, will provide secured Net Banking environment.
INTERNET BANKING TO CUSTOMERS

Facilities View account details – CASA, TD, Loan Accounts.; Query account activities – CASA, Loan A/c and
other queries; Online Financial Transactions – Intra bank funds transfer and Inter bank Funds
transfer; Online Payment – Tax Payment – Excise & Service Tax; Other utilities – Bill Payments;
Registration of Canmobile available through net banking; Registration for PassSheet; SMS alerts
enabled for transactions exceeding Rs5000/-
LIMITS FACILITY RETAIL(Rs) CORPORATE (Rs)
PERMISSIBLE IN Funds Transfer - Own Account No Limit No Limit
NET BANKING FundsTransfer– Intra Bank – Third 5,00,000 1 Crore
Party
704/2014 Funds Transfer – Inter Bank – RTGS 5,00,000 1 Crore
Funds Transfer – Inter Bank – NEFT 5,00,000 1 Crore
Funds Transfer – Bulk 5 ,00,000 5 Crores
Bill Payment 2,00,000 5,00,000
Discontinuation To withdraw internet banking facility, he has to give 21 days notice.
Ref. Circulars Cir no. 425/2010, 19/2010.,334/2012; 704/2014,476/2015,348 & 320/2015
MOBILE BANKING: Canmobile A mobile banking product to our customers. It is simple, safe, swift and instant. It is
available on GPRS, WAP, USSD and SMS channels. Facilities available are: - Balance Enquiry, Mini Statement, IMPS
Funds Transfer using MMID (P2P), IMPS Funds Transfer using IFSC (P2A), IMPS Funds Transfer to Merchants (P2M),
Funds Transfer within Canara Bank, Register Beneficiary (For Funds Transfer within Canara Bank), Generate OTP
(For IMPS P2M Pull Transaction), Generate MMID, Retrieve MMID, Cancel MMID, Cheque Book Request, Donations
to Charitable Temples, Trusts, etc, M- Commerce - Mobile Top-Up / recharge, M- Commerce - DTH recharge, Loan
ft Term Deposit Enquriy (presently in WAP channel), Branch Locator, ATM Locator, Change M-Pin, Manage Self-
Account, Forgot M-Pin, Manage Beneficiary, De-register Account, Change Channel, Synchronize, Refer a Friend,
Feedback, Contact us, Hot-Listing of Debit Card through SMS (for all bank customers), Hot-Listing of Credit Card
through SMS (for all bank customers), Aadhaar seeding through SMS (for all bank customers), SMS based IRCTC
ticket booking, IMPS Payment Gateway Services [can be used by Mobile Banking customers after going to any
Payment Gateway (viz., IRCTC, etc.) Customers can use the IMPS option for making payments instead of Credit
Card or Debit Card]
CANMOBILE (MOBILE BANKING)

Ineligible Accounts Joint accounts, Non Resident Accounts; Account/s of HUFs, Trusts, Clubs and
Associations., Account/s under Court orders/Attachment orders, Dormant
account/s, Corporate Accounts, KYC non compliant accounts
Limits For Funds Limit Per Transaction Limit Per Day
Transfer For USSD/ SMS
Intra Bank(Within CanaraBank ) 5,000/- 5,000/-
IMPS – Interbank (To other Banks ) 5,000/- 5,000/-
For GPRS/WAP
Intra Bank(Within CanaraBank) 50,000/- 50,000/-
IMPS – Interbank (To other Banks) 50,000/- 50,000/-
Ref. Circulars  Cir no.166/2011 ,174/2013,146/2015,546/2015
Banker‘s Balance Daily Monitoring System (606/2014)

Effective Funds Management help in Cost Reduction. Impact on Capital on account of higher Banker‘s Balances. Capital
conservation and optimization to be ensured by maintaining minimum Banker‘s Balances. Capital saving is the need of hour.
Dash Board for monitoring Daily Banker‘s Balances introduced URL http://172.16.35.15/bankersBalDashboard/Home.aspx in
Cannet > Other Links
Canara BillPay. (654/2014) : Canara BillPay facility has been enabled under ―Payments‖ in the Net Banking Login menu as well
as in www.canarabank.in .With Canara BillPay, customer can make payment to listed billers with their debit card or netbanking
credentials
Internet Banking To Customers (FCDB – FLEXCUBE DIRECT BANKING)(Cir 19/2010,
425/2010, 12/2012 610/2014, 623/2014, 677/2014, 685/2014, 145/2015(POLICY)
Online User can be created for Internet Banking through www.canarabank.in. Requirement are ATM Card, Customer ID or Last
Debit or Credit transaction. The site is secured by 128 bit SSL certificate issued by M/s IDRBT Hyderabad.
WEB BASED MARKETING PORTAL (Cir 442/2014) : Web based marketing portal www.canarabankemart.com for e-commerce of
products /services of MSME Entrepreneurs ,provides free listing of company‘s profile in directory services ,facilitates MSMEs to
showcase products online to global buyers across the world ,get enquiries for listed products ,upload E-catalogs and market their
product online and to post an event or advertise for their products .
Visa Money Transfer Fast Funds (VMTFF)(Cir 187/2013)
• A facility for Canara Bank Debit Card issued in association with Visa International for inbound cross border money
transfer facility.
• Inbound cross border money transfer facility to our Bank VISADebit Cardholders.
Amount will be credited within 30 minutes of receipt of message at our ATM Switch.
Full KYC is mandatory.
NRE accounts are not eligible.
Credit Cards are not eligible.
Entire operation is system driven.
Scheme details
1. Only personal remittances from overseas are allowed to the credit of the Cardholder‘s account linked to the Visa Debit
Card in India. The remitter and beneficiary should be individuals only.
2. Transaction amount limit is USD 2500 per remittance and maximum 30 transactions per calendar year are allowed for a
beneficiary. NRE accounts are not eligible under this scheme.
3. Debit Card should be valid and the card should have been issued in full compliance of KYC norms.
4. Outbound Cross border remittances and also inbound cross border remittances to Credit Card account are not allowed.
5. Funds will be credited to the beneficiary‘s account linked to Debit Card within 30 minutes of receiving the message.
6. Our bank earns incremental interchange of US$ 0.80 per transaction.
7. There is no need for the beneficiary to visit the branch, fill up forms or carry documentation as in the case of other money
transferschemes and gets access to money within minutes.
8. KYC/AML/CFT guidelines shall have to be complied in respect of beneficiaries‘ account.
• Presently this facility of remittance is available in the following Banks:
UAE: Any UAE Exchange outlet
Singapore: Program launching soon with a leading bank
China: ICBC Bank (Net Banking)
Russia: JSC Russian Standard Bank, Commercial Bank, Moscom Privat Banke. Kazakhstan: Kazkommerts bank, JSC
Halyk Savings Bank ofKazakhstan
E-Trading (Online Trading Facility (OLT)(Cir no.71/2008, 195/09)
• This facility is being extended in association with our wholly owned broking subsidiary M/s Canara Bank Securities Ltd
(M/s CBSL) through their trading portal "CANMONEY.IN".
• For availing OLT facility, a client should have an operative Bank account with one of our CBS branches, a depository
(demat) account with our Bank and a Trading Account with our broking services.
• The Bank account, demat account and trading account of the client are integrated for extending hassle free platform to
the client for trading in securities. The client, all by himself, will be able to trade in securities by logging on to the trading
portal "canmoney.in" from "ANYWHERE" and "AT ANY TIME", by allocating funds / securities. After the transactions are
put through, online transfer of funds / securities automatically takes place seamlessly.
• Clients need not write cheques to cover their payment obligations nor tender delivery instructions for transfer of sold
securities.
• The sale proceeds are credited online to the Bank account of the client.
Products offered:
Online Subscription to Mutual Funds - Akin to online subscription to IPO. No paper work either for purchase orredemption of
units. Facility to opt for SIP / SWP and to Switch. Details of complete holding statement at single page. Value added service
without any extra charge (limited period offer).
Online Trading In Futures & Options -Facility to provide margins online. No need to provide advance
deposits to trade in the segment. Benefit of calendar spread marginsonline. Use of common fund for cash, FNO and Currency
futures.
Online Trading In Cash Segment (Equities): Online Trading In Currency Derivatives
 Seamless trading in both  Facility to clients having forex
Exchanges viz. NSE, BSE.  Varied products like Cash N exposure.
Carry, Intraday, BITSOT.  No documentation / paper work to take exposures.
 Leverage for day traders.  Lower margins and brokerage compared to FNO
 Facilityof product conversion. segment.
 8 hours trading per day from 9.00 am to 5 pm.
Online Subscription to IPOs:

No need to hunt for IPO application forms.
 No need to spend precious time in filling the details.
 No need to write cheques. ASBA facility available.(Application supported by blocked amount)
 No need to visit bidding centres / brokers office to submit application before the cut off time.
 No need to preserve the application stub. Details always available in the site.
 Easy to apply. Client need to key in the number of shares to be applied and rate. Rest of the contents to be submitted with
mere click of mouse.
 Value added service without any extra charge.
ASBA – Application supported by Blocked Amount(Cir no. 313/2010, 589/2013)
 SEBI guidelines:Our Bank has been enlisted by SEBI as Self Certified Syndicate Bank [SCSB] and as per the guidelines our Bank
can act as an SCSB for Capital Issue
 Application to public issues:ASBA is an application containing an authorization to block the application money in the bank
account, for subscribing to an issue
 How it works:In an ASBA process, only the amount to the extent of application money authorized will be blocked in the bank
account. The balance money, if any, in the account can still be used for other purposes
 Earn interest on Application money If an investor is applying through ASBA, his application money shall be debited from the
bank account only if his/her application is selected for allotment after the basis of allotment is finalized, or when the issue is
withdrawn. The blocked amount will earn interest and hence the customer need not suffer any interest loss The applicant need
not wait for refund order if there is no allotment of shares. Simply the block will be relased. So that the applicant can make use
of the application money.
• Eligibility:The intending ASBA investors holding account in any of our branches can submit ASBA application in any of our
Designated Branches
• Requirement of D/P ac.:The intending investors need not have their DP
Account with our Bank to use ASBA facility with us.
Controlling Br:Capital Market Services Branch, Mumbai
• Other features:During block period if a cheque is to be returned when the account shows the balance but is blocked as per
ASBA, the branch has to give reason " Exceeds Arrangement" and return.
• Joint Account can be blocked, in case the ASBA applicant is one of the authorized signatories to the account. Garnishee
order, Attachment order from Income Tax and other regulatory authority etc., is applicable on the blocked amount also.
• For extending ASBA facility NSYABA web module is available in all the Branches.(New SYstem - for IPO - Against Blocked
Amount)
Depository Participant Services (Demat Account)(Cir 89/05 656/2014)
A Depository is an institution which holds investors‘ securities in electronic form. The depository also provides services
related to various transactions in such securities. A depository interfaces with its investors through Depository
Participants. Depository Participants maintain investors‘ accounts (demat accounts) which are similar to Savings
Bank/Current accounts with a Bank. Purchase and sale of securities can be done through demat account. Presently there
are two depositories in India viz., NSDL (National Securities Depository Limited) and CDSL (Central Depository Services
Ltd). Our Bank is a Depository Participant of NSDL.
PMLA relating to DP services-Circles to address letters to officer / Manager in-charge of DP service center, nominating
him as ANTI MONEY LAUNDERING OFFICER (AMLO). Existing MONEY LAUNDERING REPORTING OFFICER (MLRO) at Circle
Office nominated under PMLA for regular banking activity shall be MLRO for depository activity also. Concept of "In-
Person Verification" (IPV) which is required for opening of demat accounts is to be adopted. Risk Profiling of DP clients
into Low, Medium and High Risk categories to be done as per HO Circular 89/2005
(1) Our DP clients are permitted to remit their dues through any of our branches, by furnishing their eight-digit client
id (Demat A/c No.)
(2) Amounts so remitted by demat clients should be credited to Current Account No. 2442 201 001982 (Canara Bank
BG S E B) at our Bangalore Stock Exchange Branch to enable our Central DP to appropriate the remittances to
respective demat accounts.
(3) Eight digit client id should invariably be mentioned as NARRATION while posting such credits (656/2014)
E- GOVERNANCE(Cir 327/2011)
In order to improve the quality and efficiency of the service delivery and to enable the banks to move gradually towards
less paper based transactions, the Department of Financial Services, Ministry of Finance, Government of India has
directed that all Public Sector Banks (PSBs), Financial Institutions (FIs) and Public Sector Insurance Companies (PSICs) shall
take up the e-Governance. With effect from 1st September 2011, PSBs, FIs and PSICs shall deal with disbursal/ payments
only through direct credit to accounts, excepT for petty cash. This shall include payments to staff, vendors, suppliers and
disbursement of loans and payments towards instalments and investments.
Online Tax Accounting System (OLTAS-Cir 235/2011)
• Direct Tax Collection data from collecting branches is sent to nodal branches for onward transmission to Tax
Information Network of NSDL through Link Cell, Nagpur through OLTAS software.
• Funds details are also transmitted through the system for crediting tax collections to Central Accounts system (CAS) of
RBI, Nagpur
• Provision to capture PAN/TAN as per requirement of CBDT is also enabled
• Counter foil to be given to tax payer can also be generated from the system
DESKTOP MANAGEMENT SOLUTION(Cir 42/2012)
Our Bank has implemented Desktop Management System for Centralized Management of computers and users. Centralised DMS
is required in our Bank for:
Protecting all Desktops, LAPTOPs and Servers of the Bank by using Standard Group Policy enforcement Solution.
Distributing the application software, OS and other software updates to the desktops and Laptops.
Ensuring that all desktops are with Antivirus solution and also updated with the latest version / pattern files ongoing
basis.
Ensuring that all desktops and Laptops are updated with the latest O/S updates and patches.
Maintaining the inventory details of Hardware and software Asset and generate the reports.
Taking entire control of Desktops remotely and fix the problem.
CENTRALIZED SOLUTION FOR SERVICE UNITS (CSSU) PACKAGE FOR SERVICE UNITS VIZ. ACCOUNTS/CLEARING SECTIONS AND
MAIN BRANCHES(Cir 208/2012,67/2014)
• The CSSU package replaced the existing ASIAS package, working at Accounts/Clearing Sections.
‗Branch Accounts Section' (BAS) Department introduced at Service Units - pre-requisite for implementation of the CSSU
package.
• The Interface between CSSU and CBS is through Straight Through Process (STP).
The Accounts/Clearing Sections relieved of maintenance of servers, master maintenance and version control and it
would be taken care of at DIT.
• CSSU Day Closure should be done only after ensuring that all the Zones opened in CSSU are closed and the entries have
been pushed to CBS through STP.
• Liquidation of CBS DDs/DWs and RRB DDs through STP has been completed. Day closure in CSSU should be done on the
same day without fail as the STP process checks for the date sync in CSSU and CBS and the Zones opened for the
Previous Day cannot be processed on the next day.
• The Processing Date should be the same in CSSU and CBS.
Linking of CASA accounts to Direct Benefit Transfer (DBT) Schemes (416/2014): Ministry of Finance, GOI has directed all Banks
to have a separate MIS for all DBT Schemes at the CBS level. In view of that, required DBT Schemes and parameters are now
made available in the CBS.
Procedure: Use CHM63 Options In Flexcube to map various DBT Schemes to the beneficiary‟s CASA Accounts. An option for
linking the CASA accounts to DBT SCHEME in bulk is also provided through GEFU option ST045. The template of GEFU file can be
obtained from TM Section of CO.
Online Loan Application & Status Tracking System (OLTS)( 79/2012, 21/2013,
139/2013,132/2013,80/2013,305/2012, 504/2013, 304/2014 352/2014)
• An internet based web-package which allow clients to logon to our Bank‘s website and to submit online loan application.
The package also allows clients to track the status of their loan applications.
• For processing online applications received through our Bank‘s website, an intranet web based package has been enabled
by our DIT wing and the same is available under "SAS‖. This is a three-tier package which can be accessed by authorized
users from Head Office(Nodal Office), Circle Offices (Link Offices), Retail Asset Hubs and Branches(Users) for carrying out
various activities relating to processing of online loan applicationser caption "OLTS – Online Loan Application & Tracking
System
• Administrators have been assigned at all levels to further assign roles to identified officials
• After the client successfully submits online loan application form, the same is available at Nodal Office for viewing /
downloading / further assigning to Circle office. Nodal Office(concerned Wings at Head Office) after verifying the details of
the application will assign the applications to respective Circle Offices .
• Nodal Officials at Circle Office will have to view the OLTS package daily and view the applications received. After verifying
the details these applications have to be Reassigned to the concerned RAH /SME Sulabh /AF &PS section or down loaded
and the PDF file sent by mail to the branch as the case may be.
• Besides Circle offices are also need to map these applications to a Customer Relationship Manager / contact person before
assigning. This will help in sending a system generated message (SMS / e-mail) to the applicant, informing the name of the
person to be contacted for completion of other formalities for processing / sanction of the loan. Circle can map the name
of an official from RAH / Marketing Department and his contact details will be relayed by the system to the applicant to
enable him to approach the designated official.
• Immediately thereafter, the designated contact person at RAH/SME Sulabh should contact the applicant and extend
necessary help / guidance to the applicant to fulfill all the requirements for sanction. The Status of the applications have to
be marked in the OLTS package at each stage by the concerned Nodal Officials of RAH or by Circle (in case of Branch
proposals) so that the applicant can track the status of his/her application on line. This system is to be followed till ALPS
package is fully implemented by all the branches and Retail Asset Hubs.
Online submission of Application for opening SB Account(Cir 504/2013 ,271/2014 )
• Web portal created for submission of online Application for opening SB Account for Resident & Non Resident Indian
Citizens holding PAN Card
• Personal Data- Mobile No/Date of Birth/ PAN No and e-mail id to be fed & submitted
• One Time Pass Word (OTP) message will be received in the prospect's mobile.
• The prospective customer will receive an e-mail with a link to fill up application & submit.
• After the prospect Submits the application successfully he/she will get an email to go to the branch of his / her choice
within 7 days, and submit KYC documents /2 photos and initial deposit of Rs.1000/
• The Branch will receive an e mail regarding the submission SB application of the prospective customer.
• When the party comes , the Branch has to down load the SB application from Single Sign On Package & do the needful
• Minors and Staff are not permitted to submit the SB application online
• On line submission of application for SB Joint account facilitated
Online Payment Facility to Customers/Institutions(Cir 93/2013, 222/2013)
• Online payment facility to our customers/Institutions/ corporate/Government bodies in order to collect payments/fees
through online from their customers.
• As we do not have our own payment gateway, the subject facility will be enabled through one of our empanelled
aggregator and the same is chargeable for transaction through our Bank and other Bank Channels. The charges will vary
from aggregator to aggregator based on the expected transaction volume and the same is not negotiable .
• Bihar State Electricity Board, Patna, Babasaheb Bhimrao Ambedkar University, Lucknow , Chamundeshwari Temple,
Mysore and IIS Bangalore have been enabled .
• It is cost effective, will pave way for increasing the CASA base, e-transactions and also our fee based income as the
aggregators will be sharing
a portion of the commission earned by them with our Bank for the
transactions put through our Alternate Delivery Channel products like Debit card,Credit Card, Net Banking etc,.
Advising LC and BG through XMM(Cir 184/2013,22/2013)
• Use of SFMS is made mandatory for sending and receiving all inter-bank and intra bank transmission of ILC messages with
immediate effect & use of SFMS for advising inland bank guarantee (BG) by issuing bank to the beneficiary through an
advising bank.
• ILC and BG are to be necessarily created in FCC package.
• XMM (Xchanging Messaging Middleware) is a secured messaging system procured to interface Flexcube Corporate and
SFMS. Branches have to necessarily create ILCs and BG in FCC Package as is being done hitherto. Then the user has to login
to http://canaraxmm:8888/CANARAXMM/Login.jsp link to access "XMM Package. Branches have to process the ILC or BG
messages in XMM Application on the same day.
• Necessary clauses to be incorporated in the respective forms and agreements pertaining to ILC and BG .
• Check for incoming message on day to day basis.
BANK GUARANTEE
Details of advising bank for sending advice through SFMS shall be obtained from the applicant in NF 823 – Letter of request for
issue of Bank Guarantee / Extension of Bank.
Before sending Bank Guarantee advice through SFMS to advising bank, Branches have to ensure correctness of all the details of
Bank Guarantee made available in XMM package under "Field 77C-Details of Guarantee including Beneficiary's name and full
address. Branches can correct the above data if required and also provide any additional information like contract reference
number or notification number, etc., in Field 77C.
Inland letter of documentary credit (ILC) (22/2013,65/2014, 594/2014)
For transmission of ILC message through the XMM Package by the branch, three persons viz., Maker, Checker (verifier) and
Checker(Authorizer) are required. 4 XMM Package will pull data from ILC lodged in Flexcube Corporate-FCC . The samewill be
available in "Repair Message" option in XMM Package for the users to complete the message. Once authorized in XMM Package,
the message will be moved to SFMS automatically.
4 After the ILC message is sent successfully and acknowledgement is received from SFMS Gateway, XMM application can be
configured to send e-mail to the customer along with "Transmitted copy" of ILC message in PDF format".
4 Amendment to Inland Documentary Letter of Credit is also required to be transmitted through SFMS.
4 Incoming LC messages from other branches/Other Bank branches will flow to XMM, Application through SFMS and any branch
user including 'Maker' can take a printout of the incoming message.
Branches should not negoRate ILCs issued in physical form from 1st January 2015. Report of Pending ILC Messages in ―XMM
Package‖ is made available in Business Objects – Report No. 110029.
Accountability will be fixed on the persons responsible for issuing/negotiating ILCs in manual format (594/2014)
All Inland LCs (ILCs) & Domestic Bank Guarantees (BGs) shall be routed through SFMS. Originating branches shall collect 100 plus
taxes per message from the customer for transmitting ILC/ BG message through SFMS. Introduction of New Direct Non-
Implemented GL -- 209272718 (SL SFMS FEE IDRBT) for crediting SFMS charges recovered from the borrowers for each
originating Inland LC/BG transaction transmitted through SFMS. Corporate Credit Group-III, shall be the nodal agency for
monitoring and
making payment to IDRBT (554/2014)
Digital Signature /Certificate (459/2015)
e-Token: Hardware used to store digital signature
Digital Signature: Digital key used to authenticate exchange of message or documents
Class II certificate : Used by individual for the purpose of signing
Class III certificate: Used in server
REAL TIME GROSS SETTLEMENT (RTGS): A Real time, secure payment mode, processed and settled simultaneously. Each payment
instruction is handled individually. The processing and settlement is on real time basis from 8 AM to 4.30 PM for customer payment on all
working days. Inter Bank payment timing is 8 AM to 7.45 PM on all working days. Payment is final and irrevocable and the receiver can utilize
the funds immediately. Minimum funds transfer Rs.2,00,000/-. Straight Through Process (STP) is implemented for automatic accounting and
settlement of RTGS transactions. Facility has been extended in all our branches and Administrative Offices. The RTGS facility can be used for
direct credits to loan accounts.
NATIONAL ELECTRONIC FUNDS TRANSFER (NEFT): An efficient, secure, economical and expeditious Inter-Bank funds transfer and clearing
system. No minimum limit for transactions under NEFT. The processing and settlement is hourly basis from 8 AM to 7 PM. Straight Through
Process (STP) is implemented for automatic accounting and settlement of NEFT transactions. Facility has been extended in all our branches.
NEFT facility is extended to the two sponsored Regional Rural Banks. NEFT facility can be used for direct credits to loan accounts. Walk-in
customers who do not have an account with remitting bank can send remittance through NEFT upto Rs.50,000/- by paying cash. One way
remittance facility from India to Nepal through NEFT with a ceiling of 250000/- and maximum of 12 remittances in a year is available.
Empower - Unified Payment Interface (UPI) application is enabled with an enhanced feature –QR Code based payment.
EMPOWER can be available for CASA account holders with proprietorship concerns/individual accounts/individual OD account
holders so that payments can be accepted. The Maximum amount for transacting through UPI is 1, 00,000/- per day per customer.
There is no lower limit in UPI. The merchant must have an android smart phone version 4.4.4 and above. The merchant should
have been issued a debit card. The Mobile Number of the merchant should be registered.
Bharat Interface for Money (BHIM) - NPCI has developed a common UPI BHIM, which would co-exist with other apps
released by participating banks. BHIM is a simplified version of the existing UPI Applications of individual Banks. BHIM is an
additional UPI platform to Bank‟sUPI application and does not replace the same. BHIM consists of basic functionalities whereas
Bank‟s UPI application- eMpower is an exhaustive one. Similar to eMpower, BHIM is also presently enabled only for Android
smart phones with version 4.1.1 and bears the same pre-requisites as required for eMpower. Features available in BHIM: Balance
enquiry, Transaction history, Pay option, Collect option, Scan & pay through QR code, Change & generate UPI-PIN, and Change
account. Maximum limit per transaction under eMpower is Rs.1 lac and under BHIM is Rs.10000. Maximum limit per day under
eMpower is Rs.1 lac and BHIM is Rs.25000.
Debit & Credit Cards

International Travel prepaid Card: Multicurrency (USD, GBP ,EUR,CAD,AUD,SGD & AED) prepaid card with reloadable option
having 5 years validity. Buffer amount is US $ 10. Kit contain two cards, one is primary and second is backup card. Sale fee is Rs
200 , Reload fee is Rs 50 and Encashment charges are Rs 100/- . Card cannot be used in India, Nepal, North Korea, Iran and Cuba
Canara World Credit Card: In association with Master card. Printing customized background on the card. Minimum net annual
income Rs 7.5 Lacs. Card limit Rs 1-25 Lacs .Card issuance fee is Rs 2000/- ,Annual fee : Nil , Inactivity fee: RS 1000/- p.a. ( Min annual
turnover of Rs 50000/- not achieved ).Accidental Insurance Cover is Rs 2-8 Lacs.Cash withdrawal limit Rs 50000/- , Csh withdrawal
charges : Rs 30 per 1000/-, Baggage Insurance & Purchase protection : Rs 25000/- , Lost Card liability : Nil . Rewards Points : Rs
0.50/Rs100 .
Business Debit Card – Global: In association with Master Card ( BIN 529819) . Non Photo card. Meant for SME segment .OD and CA
customer with Individual and proprietor constitution. Valid for 10 years. Inactivity fee is Rs 300/- ( No fee till 25.02.18 , Min annual
turnover Rs 50000/- , 20 % variation may be considered in turnover ) .Cash withdrawal limit is Rs 50000/- , Purchase transaction limit
Rs 2 Lacs. Lost card liability upto Rs 5 Lacs covered from the time of intimation to the bank, in excess of 1 % of the claim amount or Rs
2000 whichever is higher. Misuse of counterfeit card on net banking: Rs 20000/- Misuse for air ticket purchase: Rs 50000/-. Reward
point Rs 0.50 / Rs 100. Annual and enrollment fee : NIL , Replacement : Rs 50 . Hotlisting Rs 150/-. Accidental Insurance Cove Rs 2-8
Lacs. Purchase protection and baggage Insurance : Rs 25000/-
4.Rupay Platinum Debit Card: Average quarterly balance : Rs 50000/- or purchase transaction by Canara Bank debit Card to the
tune of Rs 50000/- during previous 12 months. Cash withdrawal limit Rs 50000/-. Purchase limit Rs 2 Lacs. Complementary
insurance cover upto Rs 2 lacs against risk of death and permanent disability.Accidental Insurance cover Rs 2-8 Lacs. Annual fee :
Nil , Inactivity fee : Rs 500/- ( turnover less than Rs 50000/- or balance below Rs 50000/- ) . Lost card liability : Rs 5 Lacs.
5. Canara Global Credit Card/ Classic- Visa /Standard- Master: Min income Rs 1 lac p.a. , Staff Rs 60000/- , Inactivity fee Rs 400/-
( turnover below Rs 12000/-) .Free add on card ( Inactivity fee Rs 300/- turnover Rs 12000/-) Card limit : 10-30 % of annual gross
income ( Min Rs 10000/- & Max Rs 3 Lacs ) . Cash withdrawal Rs 50000/- ( Max 50 % of card limit). Accidental Insurance Cover Rs
1-4 Lacs.Baggage insurance Rs 25000/-Hotlisting fee Rs 300/- .Free duplicate card
6.Canara Gold Card : Minimum Income Rs 2 Lacs . Card limit 30 % of annual gross income .Rs 50000- Rs 25 Lacs.No enrolment
fee. Inactivity fee Rs 750/- .( for turnover below Rs 25000/-) . Hotlisting fee : Rs 300/-. Free duplicate card.
7. Canara Corporate Card: Enrolment fee is Rs 250/- . Card limit: Rs 50000- Rs 100 Lacs & in multiples of Rs 5000/- Cash
withdrawal limit: 50 % of card limit → Max Rs 5 lacs , per add on card withdrawal limit Rs 25000/- . Max add on cards 99.
8.Canara Visa international Gold Card :Valid for one year . Min US$ 3000 ( Gross annual income Rs 2-4 Lacs) , Max US$ 15000 (
Gross annual income Rs 10 Lacs & above )
9. Canara Non personalized Credit Card: It is standard master card variant with 3 year validity. Max Card limit is Rs 3 lacs. Max
cash withdrawal limit is Rs 50000/- Issuance charges are Rs 250 which are waived till 31.3.2017
10. EMV CHIP Cards: Valid for 5 years . Charge for issuance: Rs 250
11. Canara Bank International Travel Prepaid Card: This card is a prepaid card – the value of the card shall be paid up front.
Card is valid for 5 years. A non personalized CHIP Card with PIN/Signature. Up to seven currencies viz.USD, EURO, GBP,
AUD, CAD, SGD and AED( United Emirates Dirham) can be loaded in a single card. TAX PAN need not be insisted upon for
remittance made towards permissible current account transactions up to USD 25,000. The card cannot be used in India, Nepal,
Bhutan, North Korea, Cuba & Iran. The list of exempted countries may vary as per RBI guidelines. Where the card is used for
transactions other than the in a currency available in the card, cross-currency rates at MasterCard specified rates will be applied.
This rate will be marked up by a rate as decided by the bank which is presently 3%. The card value can be reloaded during the
validity of the card. Refund shall be permitted only after 10 days from the date of last transaction in the card for ensuring
accounting all transaction with the card. Cardholders can retain the unspent foreign exchange in the card up to USD 2000 or its
equivalent in other currency for future trips till expiry of the card, as per extant FEMA guidelines. Unspent currency in the card in
excess of USD 2000 or its equivalent in other currencies needs to be surrendered within 180 days of arriving in India. The card
can be used for making payments for online purchase, merchant outlets as well as to withdraw cash. Initial sale fee: Rs.200 + ST,
Reload fee: Rs.50+ST, Encashment Charges: Rs.100 +ST, Reissue /renewal charges: Nil, Statement request: Nil, New ATM Pin :
Nil, Replacement card fee : free , Cross currency usage : 3 % mark up
THIRD PARTY PRODUCTS & SUBSIDIARIES

FOCUS ON 3RD PARTY PRODUCTS
• 100% Branch Activation for all third party products.
• 100% coverage of Insurable assets with United India Insurance Co. Ltd.
• Organizing EXPOs at Industrial Tech Parks / Estates & SEZs to generate leads for general insurance and other Third party
products.
• Observing “Help our Customer Day” on 5th of every month with an objective to cover at least one family per branch with
Health Insurance on that day.
• Achievement of all Third Party year end Targets to augment our Feed Based Income. Target “HNI”, “Upper Middle Class” and
“Tech Savvy” clients for aggressively marketing of Demat/ OLT
FOCUS FEE INCOME-STRATEGIES
• PCBs/VLBs need to focus more on generating fee income-LC/BG
• Focus on LC & BG (non-fund business)
• Augment Tax collection.
• Recovering arrears of lockers & minimizing Vacancies.
• New PPF and Pensioner’s accounts to grow.
• Marketing and cross-selling of all products- 4 products per client
• Involve all staff members in effective cross selling.
• Rationalize recommendation for concession in RoI & Charges
• Leakage in fee income to be plugged
THIRD PARTY /CROSS SELLING PRODUCTS

Bank distributes associate party products across all bank branches. Selling associate party products is a risk free avenue to
augment our non-interest income. Under Associate party business Bank is soliciting all types of Insurance and Mutual Fund
business.
Insurance:
Bank distributes Insurance products under corporate agency model without any risk participation. As per new IRDAI corporate agency
regulations 2015, bank as a corporate agent has more responsibilities and is mandated to provide post sale service to policy holders,
put in place a board approved policy for Bancassurance business and solicit business strictly in adherence with the code of conduct
prescribed by IRDAI. Under these new regulations bank can tie up with a maximum of 3 companies under each vertical of insurance
business - Life, Health and General Insurance.
As on date, bank is tied up with the following companies for insurance business:
Life Insurance Canara HSBC OBS Life Insurance Co., our own JV Co. With 51% share Holding incorporated in 2007-08.
Health Insurance - Apollo Munich Health Insurance Co. since 2013-14
General Insurance - United India Insurance Co. since 2006-07 and Bajaj Allianz General Insurance Co. since 2016-17.
Life Insurance products
Life Insurance products can be broadly classified as Traditional plans and Unit Linked Insurance Plans. Traditional Plans are non-
unit linked and have guaranteed benefits, whereas the ULIPs are market linked and as such, the returns are market related and
not guaranteed. Our JV partner Co. Canara HSBC OBC Life Insurance Co. (CHOICe) offers both traditional and ULIPs.
Traditional Plans
Smart Stage Money Back Plan - Offers money back at the end of 4,8 & 12 years and maturity at the end of 15 years
Smart Monthly Income Plan - Provides monthly income for 15 years from 11th policy year onwards.
Assured Nivesh Plan - An endowment plan with multiple options
Smart Junior Plan - A Child Insurance Plan
Smart Suraksha Plan - A pure Term Insurance Plan
Smart Immediate Income Plan An Annuity Plan
Group Secure Plan A pure term insurance exclusively covering the Life of Housing, Personal & Educational Loan borrowers
Single premium and Regular premium options available
Traditional Plans fetch higher first year (15% - 30%) and renewal commission( 1% - 7.5%) to the bank.
Unit Linked Insurance Plans (ULIPs)

Smart Goals Plan - Two Options 5 year and 10 - 25 years premium payment plans
Smart Life long plan - Provides lifelong protection up to 99 years
Platinum Plus - A plan specifically designed for HNIs
Smart Future Plan - A Child Insurance Plan
ULIP plans offer relatively lesser first year(5-6.4%) and renewal commission(1-2%).
General Insurance products:

A) United India Insurance apart from offering all types of general insurance products has specifically designed the following two
products for Canara Bank customers:
Canara Mediclaim - A family floater health insurance plan with sum insured options upto Rs. 10 lacs with 3 plan options A,B &C .
Plan A - Account holder + Spouse+ upto 2 Children, Plan B includes dependent Parents or parents in law and Plan C is for customers
aged below 35 years at attractive premium rates.
Uni-Home Care Plan - A property cum Accidental death cover policy for housing loan borrowers
B) Bajaj Allianz General Insurance Co. In addition to their general products has specifically designed the following plans for
Canara Bank customers:
Fire & PA Cover for Home Loans - A property cum Accidental Death / PTD with auto increasing cover every year to meet the
rising cost of construction due to inflation. It also provides cover for the home interiors.
Global Personal Guard Policy - Basically a loan protection cover for all types of loans with death, PPT, PTD, EMI cover & Income
protection benefits (for injuries / death due to Accidents only).
Bank earns 10% commission on fire / other policies & 15% for PA policies. For Canara Mediclaim it is 12.5%
Health Insurance with Apollo Munich Health Insurance
Easy Health Group Plan - Offers Individual, Family floater and Parents Plan options and dependent Children upto 4 can be
covered under Family floater Plan. The plan offers Annual health check up benefit after every renewal irrespective of claim,
uniform premium rates across all age groups,
Anokhi Suraksha Plan - A specially designed Personal Accident cover plan for Groups / MSMEs / Corporates with 3 plan options
@ premium of Rs. 100, 200 & 500 respectively. The plan offers Death benefit, Hospitalisation and OPD reimbursements for
injuries due to accidents only.
MSME Health Insurance Plan - Catering to Micro, Small, Medium enterprises Bank earns 15% commission on all AMHI Health
Insurance policies.
Mutual Fund Business:
Bank has also entered into Distribution agreement with Canara Robeco Mutual Fund, our JV Co. with 51% share holding to
distribute all their products across branches. Canara Robeco offers all types of funds like Equity, Balanced, Tax Saver, Monthly
Income, Dynamic Bond, Gold, Liquidity, Capital Protection etc funds.
OUR SUBSIDIARIES / ASSOCIATE

CANARA BANK SECURITIES LIMITED
It is wholly owned subsidiary of the Bank and has positioned itself as a corporate broking entity and financial intermediary
offering investment and online trading services in the capital market. The Company has obtained membership/certificate from
NSE/BSE/SEBI for Stock Broking and also member of MCX stock exchange.
The Company is offering investment and online trading facilities in the capital market-Cash Segment, Futures and Options and
Currency Derivatives Segments and subscription to public issues and Mutual Fund products.
Company’s Unique Selling Product is 3 in 1 A/c FPancharatna consisting CASA, Demat & Online Trading account.
CANBANK VENTURE CAPITAL FUND LIMITED
A wholly owned by our Bank. Trustee and Manager of Canbank Venture Capital Fund (CVCF) which provides Equity for Expansion of
Industries and also Startup companies Till now 5 Funds have been launched .The Company has launched Emerging India Growth Fund
during the year 2010 with a corpus of Rs 500 Crs and is a Close-ended, Domestic, General purpose (Sector Agnostic) Fund which aimed
to capture the growth opportunity of the resurgent domestic market
The CVCF recently has in association with Ministry of Electronic Development (MeitY) has launched a new fund (fund of funds). The fund
has started sanctioning investment to daughter funds.In addition to the above the company has proposed to launch a new fund Empower
India.
CANBANK FACTORS LIMITED:
Bank presently holds 70 % the main activities of M/s Canbank Factors Ltd are Domestic Factoring, a powerful alternative
instrument, particularly designed to meet the post sales working capital requirement of the industrial/trade/service sector.
FACTOR fixes a limit for purchase of DEBTS and allows PREPAYMENT generally up to 80% of the invoice value.
Invoice Discounting, a variant of factoring, where finance is provided against invoices backed by LCs of Banks. This will enhance the
liquidity and by converting credit sales into cash sales. Rate of discount and charges are very competitive and in accordance with the
market trends. The company has plans to introduce other variants of Factoring and to improve its working efficiency by “Networking of
its branches with the Registered Office. Its clients are MSME and Non-MSME borrowers.
CANARA ROBECO ASSET MANAGEMENT COMPANY LIMITED
A joint venture company with Bank’s Stake of 51% and Robeco NV of Netherlands having a stake at 49%. Manage assets of
Mutual Fund and its Clients are Investors in Mutual Funds.
Its Unique Selling Product is Systematic Investment Plan (SIP) for Retail Investors and also provide Offshore Advisory Services
Canara HSBC Oriental Bank of Commerce Life Insurance Company Limited (CHOICe)
A joint venture company with Bank’s Stake of 51%, Oriental Bank of Commerce [1 23% and HSBC with 26% stake. Carry on Life
Insurance business in India and Clients are Joint venture partner’s Individual Customers under banc assurance model.
CANBANK COMPUTER SERVICES LIMITED
Our Bank stake holds 69% stake in the company and remaining stake is with other PSU/ private banks. Company designs and
develops software for banks, financial institutions and Government Departments, with its extensive in-house infrastructure and
proven technical expertise backed by strong banking domain. All its Products and Projects are well documented and user-
friendly, with on-line help, data encryption and audit features. It also offers services in the services like Business Process
Outsourcing, Training, Web based solution, Information Systems Audit, Migration Audit, Consultancy Services, Pre-shipment &
Post-shipment testing of Hardware, Software Testing, IT Enable services like ATM managed services, Any Time Payment Kiosks
,Registrars and Transfer Agents etc .
Its major clients include Canara Bank, Andhra Bank, State Electricity Boards, Housing Boards, Gramina Banks etc
CAN FIN HOMES LIMITED
The company is an associate of our Bank promoted by us with current stake of 30% in the company.
The prime objective and activity of the Company is to provide long term finance to individuals for construction or purchase of
residential houses/flats and to Companies or Corporations or Societies or Associations for the purpose of construction or
purchase of residential houses / flats.
Over the years, the Company has added new products to their range, and value addition is done to the existing products to keep
updated with the changing market scenario and the competition, which is getting tougher with each passing day. Personal loans
to the existing borrowers, loans for purchase of sites, insurance cover for loanees, etc. are some examples of innovation/value
addition.
The Company also took a major step in diversification by launching three Non-Housing Finance Products, namely Loan against
Commercial Properties (LCP) as well as Rent Receivables (LRR) and Mortgage loans against house properties.
CANBANK FINANCIAL SERVICES LIMITED (wholly owned company)

A wholly owned company, is presently attending to matters like collection of lease rentals, realization of investments and follow
up of court cases.
HRD MATTERS
Staff Meeting: Agenda can reflect variety, topicality of issues and branch specific priorities. Conducting staff meeting on third
Friday of every month ismandatory .It may be conducted during office hours and may stretch beyond office hours at time . Once
in a month with agenda decided well in advance. Expenditure: Rs. 20 /per person, per month/meeting. A goal oriented, target,
task oriented, education oriented meetings.
Job Rotation: Compulsory both at branches and also at administrative units up to II Line Managers. The Job Rotation should be
normally effected once in every six months. The branch in charge, depending on the size of the branch and departments
handled, can have some flexibility regarding the period. but, the same should not be more than 12 months. This is to ensure
smooth change over without affecting the
customer service.
Employees Suggestion Scheme: To put in place system, procedures & reduce risk to inculcate team spirit. All employees of the
Bank are eligible to participate.Employees in O&M Section, Management Audit System, Inspection Wing and their overseeing
executives are not eligible. Group of employees: Minimum 3 and Maximum 5.
Study Circle: Under this forum of Study Circle, important topics can be discussed like Time Management, Stress Management,
Yoga and Meditation, Taxation, Blood Donation, Basel III norms, Quiz Program, etc. However, care to be taken to see that the
topic chosen is interesting one and kindle desire in the minds of employees and active their thinking process. Periodicity of
conducting study Circle meeting is once in 3 months in case of branch and bimonthly in CO. Topics of banking/nonbanking will be
discussed by inviting a guest speaker who is well versed with the topics. Honorarium of Rs. 200 can be paid in case of branch
having staff strength of less than 50 and Rs. 500 in case of CO/Branch
having more than 50 staff strength.
Presentation of Milestone Awards: After completion of 25 years of meritorious service. The cost of the award should not exceed
Rs. 5000/
The award will be presented in the monthly staff meeting. Award may be presented during the staff meeting of April / October –
Every Year
Canteen Subsidy: All branches, irrespective of the staff strength, are eligible for canteen subsidy. The Subsidy amount at the rate
of Rs 75/per month, per employee shall be released by the Bank to the caterer directly (w.e.f. 1/9/2012).
Festival Advance to Employees: Rs. 30,000/for Officers, Rs.20,000/for Clerical Staff, Rs.15,000/for Subordinate staff
Livery To Subordinate Staff: Ceiling limit for providing livery to all subordinate staff including Part Time ,Employees on Scale
Wages is enhanced as follows: Terry cot Livery : Rs. 2,500/for 3 sets once in 2 years[existing limit Rs.2000 /Woollen livery : Rs.
2,500/for 1 set once in 3 years[existing limit Rs.2000 /The above limits will be effective from 01.12.2011
Medical Aid: ( On and from 1.11.2007): Officers in JMG & MMG Scales – Rs. 5100/p.a.;Officers in SMG & TEG Scales –Rs.
6320/pa.
Incentive Scheme to Honor Alert Staff:
• Upto Rs.10000/- : Cash Award Rs.500/- + Appreciation letter – CO Head
• Rs .10001/- to Rs.1 Lac – Cash Award upto Maximum of Rs.2000/- + Appreciation letter by CO Head
• Rs .100001 to Rs 5 lac - Rs .7000/- + App. Letter by ED
• Rs .500001 and above - Rs .10,000/- + App. Letter by CMD
Withdrawals in Employees Accounts Authorization : Upto Rs.5000/by supervisor, Upto Rs.10,000/by officer ,Above
Rs.10,000/by Manager/Sr.Manager, In extension counters, official in charge can authorize above Rs.5000
Local Purchase Of Stationery – Limits per annum (Cir.318/2010)
• Small branches/Currency Chests : Rs.5000.00
• Medium Branches, Lead Bank Offices: Rs. 10000.00
• Large branches/ VLBs/ Accounts Section/LPCs: Rs.15000.00
• ELBs/PCBs/RSTCs/Zis/RAH/ID : Rs.20000.00
• Premises Section Of Circle Offices :Rs.50000.00
“GHAR GHAR DASTAK & MADHUR MILAN” - A Marketing Drive / Mass Contact Program for Business Augmentation
The previous financial year, 2015-16, was a landmark for our Bank as we recorded a good growth in share of CASA to Domestic
Deposits. The said efficiency ratio improved by 200 bps to 27.40 % as at 31/03/2016. The entire success is attributed to the
enthused response and sustained momentum of the Circles and Branches towards the Corporate initiatives undertaken
throughout the year.
During the recently concluded 2016 Shubh Aarambh Campaign, Branches mobilized Rs 2939 Cr CASA from new accounts. The
Campaign enabled us to achieve our March 2016 targets set out under Life Insurance, Health Insurance, Mutual Fund and Non-
Interest Income from Associate Party Products.
As we have embarked our journey into the new FY 2016-17, a need is felt to launch across the country an initiative that will
infuse and inspire a thrust towards business growth under all our key focused discipline / parameters.
It is in this direction that we are pleased to launch our new Corporate Initiative “GHAR GHAR DASTAK & MADHUR MILAN”.
The Project is to be undertaken across the country / all branches in phases and endeavor at working towards all key focus areas
of the Bank simultaneously. The program is modeled as an Outreach / Mass Contact Program wherein our branches need to
scout for new business from existing as well as prospective customers thereby enlarging the clientele base / business prospects
for our Bank.
Target Group ::
The program covers all the Branches Et Circles of the Bank. Branches have been grouped on the basis of their category - Metro,
Urban, Semi Urban and Rural for the purpose of reckoning their performance.
Campaign Objectives ::
The Campaign / Drive is christened as “GHAR GHAR DASTAK & MADHUR MILAN”.
“Ghar Ghar Dastak” means “Door to Door Contact” & “Madhur Milan” means “Happy Banking” under our outreach program.
It encompasses the following objectives ::
Generate leads and business under Retail Assets, Liabilities and enhance Mobile Banking / Digitization across all Branches.
Approach and meet the prospective Et existing clients in the command area of the branch for soliciting of further business.
Also, contacting all stressed loan accounts for recovery and up gradation of NPA accounts.
The larger goal being activation of all branches for retail business growth Et focused management of stressed accounts in
our Bank.
3. Duration of the Campaign ::
The Project is launched with immediate effect. Circles have been advised to ensure that the Ghar Ghar Dastak drive is initiated
latest by 16/05/2016.
It shall remain operational throughout the year with focus on attaining of monthly / fortnightly business levels.
The Project shall be implemented in phases.
In the Phase I, the project shall take off on Pilot Basis at State Et District Headquarters (Metro / Urban Centres) as well as
other important branches as identified by the Circles/ROs.
nd
Based on the experiences, it shall be rolled out to all the remaining branches in 2 phase.
We shall hold / conduct the Phase I for at least 3 months before rolling 2nd phase.
4. “Ghar Ghar Dastak” ::
As the name suggests, the branches should carry out a door to door contact program.
To kick start, the identified branches shall conduct a Staff Meeting for sensitizing, briefing Et engaging the staff with the
Campaign for generating leads from the customers.
The branch staff shall be divided into teams and assigned potential areas / localities to approach and meet the prospective
Et existing clients for canvassing retail assets Et liabilities business.
We are stipulating a minimum Retail Business, Credit Cards Et Tech Products to be secured by the branches depending on the
location / categorization of the branch (enclosed as per annexure).
The branches shall scout for business aiming to achieve the monthly / fortnightly targets allocated.
th
Ghar Ghar Dastak should be carried out by all the identified branches from 8th to 17 of every month for contacting
existing / potential customers for mobilizing Retail deposit and Retail loans as well as generating compromise / OTS / up
gradation proposal in all problem loan accounts for mission Can Adalat.
Marketing Officials are also to be engaged with pre-fixed targets.
“Madhur Milan” ::
It stands for maintaining happy banking relationship with the customers, as a delighted customer is our ambassador for growth and
visibility.
The successful / sourced applicants/customers shall be invited for Madhur Milan at the Branch.
Emphasis Et Success shall be on the actual disbursement / asset delivery before the audience, requesting the customers to
share their banking experiences.
On the Madhur Milan Day, the branch should be decked up at its best and the invitees are to be handed over sanction
letters and A/c opening welcome kits over hi-tea, after business hours.
Inviting also, at least 10-15 loyal depositor / credit clientele including HNIs / family members of NRIs to strengthen the
existing relationship and also as recognition for their continued patronage.
th
Madhur Milan should be conducted 2-3 days after Ghar Ghar Dastak activity. It may be held on 20 of every month
across the country to enhance the visibility of the inventive and innovative concept. Branches / RO / CO should co-
ordinate Et ensure conducting the same before end of the month.
Branch Head should keep the list of Top 100 deposit customers Et Top 100 credit customers with full details such as
address, telephone number, business with the branch, etc. All such customers should be contacted immediately and may
be invited to Madhur Milan evening during the year.
Branches shall report the accomplishments / progress to respective RO / CO, on a monthly basis within 3 days of Madhur
Milan, for consolidation and onward transmission to Head Office.
3. VARIOUS LAWS/ACTS RELATED WITH INDIAN BANKING SYSTEM

Background:
Banking in India is governed by various laws and legal provisions, requirementsrestricctions and guidelines. This is required in
order to maintain transparency between banking institutions and customers with whom they conduct business.
The following are the important laws whose statutory provisions the Banks have to comply with.
The Banking Regulation Act, 1949
The main statute governing the banks in India is the Banking Regulation Act 1949.
By virtue of the powers conferred by the Act, The Reserve Bank of India and the Government of India exercise control over
banks right from the opening of the Branches to their winding up. The purpose of enactment of this Act was to consolidate the
banking system and suitably amend the laws relating to banking sector and to regulate the Banking Companies including co-
operative banks. This Act is not applicable to primary agriculture societies, and cooperative land development banks.
Section 22 of the Act regulates the entry of a company into banking business by licensing as provided. It also put restrictions on
share holding, directorship, voting powers and other aspects of banking companies. There are several provisions in the act
regulating the business of banking such as restrictions on loans and advances, provisions relating to rate of interest,
requirements as to cash reserve ratio, provisions regarding audit and inspection and submission of balance sheet and accounts.
The act also provides for control over the management of banking companies.
Reserve Bank of India Act, 1934 : This Act was enacted on 6th March, 1934 to constitute the Reserve Bank of India with the
following objectives:
 To issue of Bank Notes.
 For keeping reserves for securing monitory stability in India and,
 To operate the currency and credit system of the country to its advantage.
The Act deals with the following:
 Incorporation, capital, management and business of the bank.
 Central banking functions like Issue of Bank Notes, monetary control, acting as banker to the Government and
Banks, lender of last resort etc.
. Collection and furnishing credit information.
 Acceptance of deposits by Non Banking Financial Institution (NBFI).
 Handling Reserve Fund, Credit funds, publication of bank rate, audit and accounts etc.
 Penalties for violation of the provision of the act or direction issued there under.
 The Government of India has adopted a committee based approach for formulating policy on maintaining price stability
while keeping the objective of growth in mind.The committee will conduct four meetings in a year and shall publicize
its decisions after each meeting.The committee has come into force from 27.06.2016.
Important Provisions:
Definition of a Scheduled Bank –
According to Section 2(e), Scheduled Bank means a bank whose name is written in the 2nd schedule of RBI Act, 1934 and which
satisfies the conditions laid down in Section 42(6), - Paid up capital and reserves of not less than Rs. 5 lac, satisfaction of RBI that
the affairs will not be conducted by the bank in a way to jeopardize the interests of the depositor.
It may be a State Co-operative Bank, a company defined in Companies Act, 1956, an institution notified by Central Government
for the purpose and a corporation or a company incorporated by or under any law in force, in any place outside India. Any bank
that is not included in the 2nd Schedule of RBI is called Non-Scheduled Bank.
Section 49 defines Bank Rate as

The Standard Rate at which it (the bank) is prepared to buy or rediscount bills of exchange or other commercial paper eligible for
purchase under this Act‖. By varying the bank rate, the RBI can to a certain extent regulate the commercial bank credit and the
general credit situation of the country.
The impact of this tool has not been very great because of the fact that the RBI does not have a mechanism to control the
unorganized sector. Further the money market in our financial system is not fully developed, so that the Bank rate policy will
have if desired impact on the financial system.
Supervisory role of the RBI: Inspection of Banks:
The most significant supervisory function exercised by the RBI is the inspection of Banks. The basic objectives of inspection
of banks are to safeguard the interests of the depositors and to build up and maintain a sound banking system in
conformity with the banking laws and regulations as well as the country‘s socio-economic objectives.
Accordingly, inspections serve as a tool for overall appraisal of the financial and managerial systems and performance of the
banks, toning up of their procedures and methods of operation and prevention of serious irregularities. RBI has now adopted
`Risk Based Supervision‘ system which focuses on:
a. Evaluating both present and future risks
b. Identifying incipient problem
c. Facilitating prompt intervention / early corrective action
d. Replacing present compliance based /transaction based approach (CAMEL).
e. Periodicity depends on risk rather than volume of business.
The RBI‘s powers to conduct inspections are contained in various provisions of the Banking Regulation Act, the most important
being Section 35. This apart, inspections may be necessary under the provisions of Section 23, 37, 38, 44, 44A, 44B and 45 of the
Act.
Audit of Annual Accounts of Banks:
Banks have to close their books of accounts every year as at March 31st and prepare a Balance Sheet and Profit and Loss account
as prescribed in the III schedule of the Banking Regulation Act.
These annual accounts are required to be audited by auditors appointed by the Bank each year with the prior approval of the
Reserve Bank of India, as per Section 30(1A) of the Banking Regulation Act, in respect of private sector banks. Section 10(1) of
the Banking Companies [Acquisition and Transfer of Undertakings] Act, 1970 / 1980 provides for audit of annual accounts of
banks in the case of nationalized banks.
Negotiable Instrument Act, 1881:

The NI Act, 1881 defines the cheque, Bill of exchange, DP Note, Drawer, Drawee, Maker, Payee, and also lays down the laws
relating to payment of the customers cheques by a banker and also protection available to a banker.
The relationship between banker and customer being debtor – creditor relationship, the bank is bound to pay the cheques
drawn by his customers. This duty on the part of Bank to honour its customer‘s mandate is laid down in section 31 of the NI Act.
Section 10, 85, 89 and 128 of the NI Act grants protection to a paying banker.
CHEQUE TRUNCATION SYSTEM: CTS 2010:

Truncation is the process of stopping the flow of the physical cheque issued by a drawer to the drawee branch. The physical
instrument will be truncated at some point en-route to the drawee branch and an electronic image of the cheque would be sent
to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc.
The images captured at the presenting bank level would be transmitted to the Clearing House and then to the drawee
branches with digital signatures of the presenting bank. Thus each image would carry the digital signature, apart from the
physical endorsement of the presenting bank, in a prescribed manner. The physical instruments are required to be stored for
a statutory period. It would be obligatory for presenting bank to warehouse the physical instruments for that statutory
period. In case a customer desires to get a paper instrument back, the instrument can be sourced from the presenting bank
through the drawee bank.
Indian Contract Act, 1872:
Banking involves interaction between a banker and customer. A customer of a bank may be a depositor, borrower or any other
person merely utilizing one of the various services provided by the banker. The relation between the Banker and the customer
will vary according to the transaction carried out. The relationship may be Debtor- Creditor, Creditor- Debtor, Bailor-bailee, etc.
The interaction of a bank with its customer creates certain obligations and gives certain rights to both the bank and the
customer. All Agreements are contracts, if they are made by parties competent to contract, for a lawful consideration and with a
lawful object, and are not expressly declared to be void.‖ All Banking transactions are therefore, separate contracts.
Contract of indemnity-
A contract by which one party promises to save the other from loss caused to him by the contract of the promisor himself, or by
the conduct of any other person, is called a contract of indemnity.
There are two parties to the contract of Indemnity-i.e. the indemnifier and the indemnified. This is defined in Section124 of the
Indian Contract Act.
Contract of guarantee : The contract of guarantee is defined in Section126. There are three parties to the contract of guarantee.
They are:
Surety, Principal debtor and creditor.
A contract of guarantee is a contract to perform the promise, or discharge the liability, of a third person in case of his default.
The person who gives the guarantee is called the surety, the person in respect of whose default the guarantee is given is called
the principal debtor and the person to whom the guarantee is given is called the creditor. A guarantee may be either oral or
written.
Bailment.
A bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the
purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The
person delivering the goods is called the bailor‘. The person to whom they are delivered is called the bailee‘.(Section148).
Pledge.
The bailment of goods as security for payment of a debt or performance of a promise is called pledge. The bailor is in this case
called pawnor. The bailee is called pawnee.
Section172
Agent and Principal:
An agent is a person employed to do any act for another, or to represent another in dealing with third persons. The person for
whom such act is done, or who is so represented, is called the principal. When the bank collects the cheque on behalf of the
customer the Bank is the agent and the customer is the Principal.-(Section182).
Indian Partnership Act, 1932-
Partnership is the relationship between persons who have agreed to share the profit of a business carried out by all or any of
them, acting for all. The relationship between partners is governed by Partnership Deed. Firm is not the legal entity but governed
by Indian Partnership Act, 1932.
Any person capable to enter into the contract can be a partner in the firm. Max partners: Non banking business=10, other=20
The act provides for registration of partnership and it is necessary that a banker dealing with partnership firm should verify as to
whether the firm is registered or not.
This would help him to know all the names of the partners and their relationship. The act of the partner shall be binding on the
firm if done:
(a) In the usual business of the partnership.

(b) In the usual way of business.
(c) As a partner, i.e. on behalf of the firm and not solely on his own behalf.
(d) An unregistered firm cannot sue but can be sued
Limited Liability Partnership Act, 2008:

LLP is a body Corporate having separate legal existence having mixed characteristics of Partnership Firm & Companies.As per the
need of the day, the Parliament enacted the Limited Liability Partnership Act, 2008 which received the assent of the President on
7th January, 2009. The Limited Liability Partnership (LLP) is viewed as an alternative corporate business vehicle that provides the
benefits of limited liability but allows its members the flexibility of organizing their internal structure as a partnership based on a
mutually arrived agreement.The LLP form would enable entrepreneurs, professionals and enterprises providing services of any
kind or engaged in scientific and technical disciplines, to form commercially efficient vehicles suited to their requirements.
Owing to flexibility in its structure and operation, the LLP would also be a suitable vehicle for small enterprises and for
investment by venture capital. Indian Partnership Act, 1932 shall not be applicable to LLPs and there shall not be any upper
limit on number of partners in an LLP. Partners are not personally liable rather will be liable up to the extent of his share as
LLP agreement. For all purposes of taxation, an LLP is treated like any other partnership firm. It is separate from its
Partners. It can sue and be sued.
Indian Companies Act, 1956:
A company is a juristic person created by law, having a perpetual succession and common seal distinct from its members.
In India, companies are governed by Companies Act, 1956.All the companies are required to be registered under Companies Act,
1956. Section 11 of the Companies Act provides that an Association or Partnership consisting of more than 10 in the case of
Banking Business and more than 20 in the case of other business shall be registered under the companies act. If not registered,
the said association or partnership will be illegal. The business and the objects of a company and the rules and regulations
governing its management are known by two important documents called Memorandum of Association and Article of
Association. Company is juristic person created by law, having a perpetual succession and common seal distinct from its
members. Company is owned jointly by a group of persons. It has a legal existence separate from that of owners.
Properties of company are owned by company and not jointly by owners who are called shareholders. Unlike partners,
shareholders are not personally liable for the debts of the company. They cannot participate in day to day management of
company. It is managed by its directors.
Amendments made in the Indian Companies Act, 2013:
The amendments to the Companies Act 1956 in 2013 Act has introduced several new concepts and has also tried to streamline
many of the requirements by introducing new definitions. After getting approval of both the houses of Parliament, the long-
awaited Companies Bill 2013 obtained the assent of the President of India on 29 August 2013 and became Companies Act, 2013
(2013 Act). The changes in the 2013 Act have far-reaching implications that are set to significantly change the manner in which
corporates operate in India.
Highlights of Companies Act 2013:
1. Immediate Changes in letterhead, bills or other official communications, as if full name, address of its registered
office, Corporate Identity Number (21 digit number allotted by Government), Telephone number, fax number,
email ID, website address if any.
2. One Person Company (OPC): It's a Private Company having only one Member and at least One Director. No
compulsion to hold AGM. Conversion of existing private Companies with paid-up capital up to Rs 50 Lacs and
turnover up to Rs 2 Crores into OPC is permitted.
3. Woman Director: Every Listed Company /Public Company with paid up capital of Rs 100 Crores or more / Public
Company with turnover of Rs 300 Crores or more shall have at least one Woman Director.
4. Resident Director: Every Company must have a director who stayed in India for a total period of 182 days or more in
previous calendar year.
5. Accounting Year: Every company shall follow uniform accounting year i.e. 1 st April -31st March.
6. Loans to director – The Company CANNOT advance any kind of loan / guarantee / security to any director, Director of
holding company, his partner, his relative, Firm in which he or his relative is partner, private limited in which he
is director or member or any bodies corporate whose 25% or more of total voting power or board of Directors is
controlled by him.
7. Articles of Association- In the next General Meeting, it is desirable to adopt Table F as standard set of Articles of
Association of the Company with relevant changes to suite the requirements of the company. Further, every
copy of Memorandum and Articles issued to members should contain a copy of all resolutions / agreements
that are required to be filed with the Registrar.
8. Disqualification of director- All existing directors must have Directors Identification Number (DIN) allotted by central
government. Directors who already have DIN need not take any action. Directors not having DIN should initiate
the process of getting DIN allotted to him and inform companies. The Company, in turn, has to inform registrar.
9. Financial year- Under the new Act, all companies have to follow a uniform Financial Year i.e. from 1st April to 31st
March. Those companies which follow a different financial year have to align their accounting year to 1st April
to 31st March within 2 years. It is desirable to do the same as early as possible since most of the compliances
are on financial year basis under the new Companies Act.
10. Appointment of Statutory Auditors- Every Listed Company can appoint an individual auditor for 5 years and a firm of
auditors for 10 years. This period of 5 / 10 years commences from the date of their appointment. Therefore,
those companies have reappointed their statutory auditors for more than 5 / 10 years; have to appoint another
auditor in Annual General Meeting for year 2014.
Foreign Exchange Management Act (FEMA):
Foreign Exchange Management Act (Also known as FEMA) was enacted in 1999.
It came into effect from 1st of June 2000.
FEMA has made considerable improvement over FERA which was supposed be very stringent and draconian.
This Act aims to consolidate and amend the law relating to foreign exchange with the objective of facilitating external
trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India.
Other Important Legal and statutory provisions affecting bankers are:  Transfer
of Property Act,
 Information Technology Act, 2000
 Code of Civil Procedure Act, 1908
 Recovery of Debts due to Banks and Financial Institutions Act, 1993 (DRT)
 Stamps Act
 Right to Information Act
 Foreign Exchange Management, Act, 1999
 Bankers Book Evidence Act, 1891
 Consumer Protection Act 1986
Regulators and Regulatory compliance:
The Reserve Bank of India:
The banks in India are required to comply with the guidelines issued by the RBI from time to time.
The most important of them is the strict adherence to the norms laid down in respect of KYC and AML.
The RBI has laid down specific guidelines in respect of documents to be obtained while opening of bank
accounts.
These documents are called Officially Valid Documents (OVD).
The OVD are:
Passport/ Driving License with photo, Aadhar card issued by the UIDAI, Voter ID issued by the Election commission of India, job
card under NREGA issued by the State Governments, PAN card (Only for ID proof).
Registration certificate of the firm issued by the Municipal corporation under the Shops and establishment Act, Certificate of
incorporation in case of companies, Sales Tax/ IT returns, in case of corporate a/cs.
List of ‘Officially Valid KYC Documents’ for Account Opening must be obtained from the customers to verify the identity and
address of the customers. It must be noted that only the documents mentioned in the list provided by the RBI would be
accepted by the branches while opening of any new account. Branches would not have the discretion to accept any other
document for this purpose. The RBI also enforces the compliance of stipulated norms in respect of Forex transactions by the
banks.
The regulatory functions of the RBI:
RBI controls the monitory policy of the country.
It keeps vigil on the functioning of the banks in the country and ensures that, they maintain various rates such as CRR, SLR in
accordance with the formulated policies .
The RBI conducts inspection of the branches of various banks to monitor the proper implementation of the guidelines.
It also calls for Various reports such as CTR/STR ( Through FIU-Ind) in respect of domestic transactions and R reports in respect of
Forex transactions, being carried out by the Banks in India.
It wields power to levy penalties on the erring banks who flout the guidelines issued by the RBI in respect of KYC/AML or FOREX
matters.
Registrar of Companies(ROC):
Registrars of Companies (ROC) appointed under Section 609 of the Companies Act, covering the various States and Union
Territories are vested with the primary duty of registering companies and LLPs floated in the respective states and the Union
Territories and ensuring that such companies and LLPs comply with statutory requirements under the Act. These offices function
as registry of records, relating to the companies registered with them, which are available for inspection by members of public
on payment of the prescribed fee. The Central Government exercises administrative control over these offices through the
respective Regional Directors.
The charge of the financing Institutions on the assets of the company are required to be registered with the ROC within 30 days
from the date of creation of charge. If the charge has remained to be created within the stipulated time of 30 days, then also the
charge can be created by paying the additional fee by way of penalty.
Central Registry:
Central Registry of Securitisation Asset Reconstruction and Security Interest (CERSAI) is a central online security interest
registry of India. It is primarily created to check frauds in lending against equitable mortgages, in which people would avail
multiple finances against the same asset from different banks.
CERSAI's mandate is to maintain a centralized data bank of equitable mortgages created and registered where it contains
information on the equitable mortgage taken on a property along with details of the financial institution that has extended the
loan as well as details about the borrower. CERSAI also allowed lenders to register transactions of securitisation and asset
reconstruction. According to the government's directives, financial institutions must register details of security interests created
by them with CERSAI within 30 days of its creation.
Banking Codes and Standard Boards of India (BCSBI)

It is an autonomous body establishe on 18.02.2006 with an aim to monitor and assess the compliance with codes and
minimum standards of service to Individual customers to which the banks agree to.
The main function of the Board is to ensure adherence to the "Code of Bank's Commitment to Customers".
It sets minimum standards of banking practices for banks to follow dealing with individual customers in their day-to-
day operations.
It provides protection to customers and explains how banks are expected to deal with customers in their day-to-day
operations.
The BCSBI ensures that the commitment of the member banks are implemented for the benefit of the customers.
Banking operation related issues:
Settlement of accounts of deceased account holders, Remittances, Safe Deposit Lockers. Deposit Accounts. Internet
banking. Privacy and confidentiality of the information relating to the customer. To treat all personal information as
private and confidential. Norms governing advertisements, marketing and sales by banks. To Publicize the code.
Matters relating to financial issues:

Loans and advances and guarantees. Tariff schedule/ Interest rates. Compensation for loss, if any, to the customer due to the
acts of omission or commission on the part of the bank. Foreign exchange services.
Standardised Public Grievances Redressal System (SPGRS):
This is a Standardised system for addressing public grievances. It has been launched on 11.01.2013, under the directives of
Government of India. Complaint Redressal committee Chaired by the Managing Director.
1) Evaluate feedback from the customers on quality of service received by them
2) To review the implementation of codes of commitment under BCSBI.
3) Submit the report on its performance to the customer service committee on quarterly basis.
4) Icon provided on the Bank’s website “Online complaints (SPGRS)”.
5) Tracker ID is generated to know the status of the complaint.
6) Complaint escalates to next higher authority after the stipulated no of days, if the complaint remains unaddressed
at a particular level.
9) Non customers also can lodge complaints through Toll free numbers/online.
10) Public Grievance portal introduced by the Govt. of India (www.pgportal.gov.in)
Banking Ombudsman
Banking Ombudsman is a quasi judicial authority functioning under India’s Banking Ombudsman Scheme 2006 and the authority
was created pursuant to a decision made by the Government of India to enable resolution of complaints of customers of banks
relating to certain services rendered by the banks. The Banking Ombudsman Scheme was first introduced in India in 1995, and
was revised in 2002. The current scheme became operative from 1 January 2006, and replaced and superseded the banking
Ombudsman Scheme 2002. From 2002 until 2006,
The type and scope of the complaints which may be considered by a Banking Ombudsman is very comprehensive, and it has
been empowered to receive and consider complaints pertaining to the following operational issues
 Non-payment or inordinate delay in the payment or collection of cheques, drafts, bills inward remittances
 Failure to issue or delay in issue, of drafts, pay orders or bankers’ cheques;  Non-adherence to prescribed working hours;
 Delays, non-credit of proceeds to parties' accounts, non-payment of deposit or non-observance of the Reserve Bank directives,
if any, applicable to rate of interest on deposits in any savings, current or other account maintained with a bank
 Forced closure of deposit accounts without due notice or without sufficient reason;  Failure to honour guarantee or letter of
credit commitments;
 Failure to provide or delay in providing a banking facility (other than loans and advances) promised in writing by a bank or its
direct selling agents;
 Delays in receipt of export proceeds, handling of export bills, collection of bills etc., for exporters provided the said complaints
pertain to the bank's operations in India; Financial loss incurred to customer due to wrong information given by bank official.
 Any other matter relating to the violation of the directives issued by the Reserve Bank in relation to banking or other services.
 complaints from Non-Resident Indians having accounts in India in relation to their remittances from abroad, deposits and
other bank-related matters;
 Non-adherence to the fair practices code as adopted by the bank; and
 Vide their Circular No.CSD.BOS.4638/13.01.01/2006-07 dated May 24, 2007, the Reserve Bank of India has amended their
Banking Ombudsman Scheme, 2006 and the scheme shall be operative with amended effect.
4. Latest Banking concepts
New Development Bank (NDB): Current financing and investment patterns are inadequate in meeting investment
needs of the emerging economies. Private international capital flows are not only volatile they are also insufficient in
volume and maturity to fund sustainable development, which typically requires long-term investment. In the above
backdrop, BRICS states viz, Brazil, Russaia, India, China and South Africa started New Development Bank (NDB),
formerly referred to as the BRICS Development Bank in the year 2012. The initial authorized and subscribed capital of
the bank is $100 billion and $50 billion respectively and the same is equally distributed among the founding members.
The bank is headquartered in Shanghai, China. The objective of the Bank is to support public or private projects
through loans, guarantees, equity participation and other financial instruments. A significant aspect of the Bank is to
establish global, regional and local partnership with the new as well as established Multilateral Development Banks
(MDBs) and with market participants. It provides technical assistance for projects to be supported by the Bank. The
vision of the Bank is not restricted to funding infrastructure requirements but also envisages building a knowledge
sharing platform among the developing countries and promote sustainable development. It is a testament of coming of
age of these countries in the world of development finance and enables the emerging and developing economies to
achieve their aspiration of standing on their own feet. NDB issued its first green financial bond in the year 2016 with
issue size of RMB 3 billion (Renminbi, currency of China), tenor of 5 years with interest rate at 3.07% per annum. The
proceeds of the bond are used for infrastructure and sustainable development projects in the member countries. Shri K
V Kamat from India is the first elected president of the NDB.
International Financial Reporting Standards (IFRS): Convergence to IFRS will require significant alterations to financial
accounting and reporting processes and systems. The potential benefits of an integrated global capital market regulated
by a single world-wide financial reporting language would be long lasting and it is a big step towards improving the
efficiency of international capital markets. Regulators will benefit from greater consistency and quality of information. It
also enhances the communication of the Bank's financial results and position together with other performance indicators
to analysts, investors, customers as well as other stakeholders. It also benchmarks the entity against its global peer group
gaining a broader and deeper understanding of its relative strengths by looking beyond the country and regional bench
marks. It is proposed that the Corporates are to be moved to IFRS in a phased manner.
Internal Capital Adequacy Assessment Process (ICAAP): This is intended to ensure that the capital held by the Bank is
commensurate with the Bank's overall risk profile. The ICAAP takes into account effectiveness of Bank's risk
management system in identifying, assessing, measuring, monitoring and managing various risks. ICAAP comprises all of
the Bank's procedures and measures designed to ensure appropriate definition and measurement of risks and
appropriate level of internal capital in relation to Bank's risk profile.
Unique Customer Identification Code (UCIC): The increasing complexity and of financial transactions necessitate that
customers do not have multiple identities within a bank as well as across the banking/financial system. RBI has directed
all Banks to allot UCIC for each and every customer. The UCIC help the bank to identify the customers, avoid multiple
identities, track the facilities availed, monitor financial transactions in a holistic manner and enable to have a better
approach to risk profiling of customers. While opening account, all bank branches are advised to verify with Central KYC
Registry whether the customer or applicant is already having account with other banks or not. This can be done entering
the key fields like name, date of birth, gender, phone number and one of the Identification Proofs viz., Aadhaar or
Passport number or PAN or Driving License or Voter ID etc. If the applicant is the existing customer with Branch/Bank,
new account can be opened but with existing customer ID only. Branches should ensure that no new customer ID to be created
for an existing customer.
Forensic Audit is defined as the application of accounting methods to the tracking and collection of forensic evidence,
usually for investigation and prosecution of criminal acts such as embezzlement or fraud. It involves examination of
legalities by blending the techniques of propriety, regularity and investigative and financial audits. The objective is to
find out whether or not true business value has been reflected in the financial statements and in the course of
examination to find whether any fraud has taken place. Forensic Auditors has a unique job because the responsibility
involves the integration of accounting, auditing, and investigation skills. It involves thinking beyond the numbers and
out of the box. It essentially presumes the existence of fake transactions. It requires a more proactive, skeptical
approach in examining the books of accounts.
RuPay Card: is the Indian domestic card payment network set up by National Payments Corporation of India (NPCI) at
the behest of banks in India. RuPay cards can be used in all the ATMs of NPCI network and POS terminals & e-com
transactions (Internet) enabled for RuPay acquiring. Currently the merchant fee is significantly high ranging from 1 to
1.50% on account of inbuilt charges of VISA/Master and Banks. The Rupay system lowers the cost of the transactions for
shops and enables them to adopt electronic mode of payments. In a way it reduces the overall transaction costs for the
banks, merchants and nation as a whole. The Indian market offers huge potential for cards penetration despite the
challenges. RuPay Cards will address the needs of Indian consumers, merchants and banks. There are under-
penetrated/untapped consumers segments in rural areas that do not have access to banking and financial services.
Right pricing of RuPay products would make the RuPay cards more economically feasible for banks to offer to their
customers. In addition, relevant product variants would ensure that banks can target the hitherto untapped consumer
segments. RuPay card is uniquely positioned to offer complete inter-operability between various payments channels
and products. NPCI currently offers varied solutions across platforms including ATMs, mobile technology, cheques etc
and is extremely well placed in nurturing RuPay cards across these platforms. Cardholders whose age is between 18 to
70 years are eligible for personal accidental coverage of 71 lakh provided there should be minimum one transaction
within 90 days. The recent initiative of the Government/RBI in introduction of RuPay cards has immense benefit to card
users, card issuing institutions and Merchant establishments which is a win-win situation to all besides saving precious
foreign currency to the nation.
Whistle Blower Policy: In compliance with listing agreement relating to Corporate Governance, all banks are required to
have a Whistle Blower Policy to enable the staff to inform the unethical behavior, actual or suspected fraud or violation
of law or improper practice of the staff members of all cadres, direct to the Board of the Bank without informing their
superiors. The employee shall make a written disclosure to the Audit Committee of the Bank in a closed/secured
envelope along with supportive documents. The identity of the complainant will not be revealed. In case where the
complainant is being victimized for filling a complaint, the complainant can approach CMD/ED for redressal. It provides
protection to the Whistle Blowers from unfair termination/harassment from the superiors. Audit Committee of the Bank
reviews the Whistle Blower mechanism at regular intervals.
Holding Company: By definition, a holding company is a company organized with the intention of acquiring equity
ownership in other companies. A holding company can gain control over its subsidiaries without investing the entire
equity requirement. Thus, it allows for structural leverage due to its ability to control the business of its subsidiaries by
holding majority (just over 50% shareholding), but at the same time allowing for fresh external investment for the
balance stake. Another key advantage of a holding company structure is that while it allows investment in multiple
businesses under one parent company, it also ring-fences each business from the risks of the other, by
preventing the business performance of one business from affecting the performance and valuation of another. For
investors, this offers the option to gain an exposure to any preferred business along with the flexibility to structure the
investment (as debt, equity etc.) to meet their investment objectives. A holding company could also be an attractive
target for strategic acquisitions, wherein these companies could be sold individually or collectively, thereby facilitating
an exit for the investor. The holding company structure has certain inefficiencies that need to be recognized viz.,
distribution of dividends accompanied by two layers of dividend distribution tax and limited liquidity for minority
shareholders. However, if the holding company structure is designed appropriately in the light of the objectives and
scale of its businesses, it can lead to synergies and efficiencies in the underlying businesses and the commercial benefits
there from can outweigh the tax and regulatory inefficiencies. According to RBI, banks will require additional capital of
75 lakh crore over the years to meet the Basel-III norms. To raise the required capital, PSBs will soon be allowed to set
up a holding company. However, Government's holding in the banks will not go below 51 per cent.
One Person Company (OPC): In order to encourage unorganized proprietorship business entities to enter into organized
corporate world, Companies Bill 2012 was passed. With introduction of OPC, a company can be started with one
member and it is treated as Private Limited Company. The minimum share capital required is 71 lakh. The promoter can
appoint a nominee so that perpetual succession provision is ensured. OPC can be formed in three ways viz., Company
limited by shares, Company limited by guarantee and Unlimited Company. OPCs are exempted from holding Annual
General Meetings. Provisions relating to minimum board meetings and quorum are not applicable. In case OPC has
more than one director, it shall conduct atleast one board meeting in each half-year and time gap between two
meetings should be minimum 90 days. Relaxations and exemptions granted and benefits available will definitely
encourage small and mid-size business to carryon business in corporate form.
Reverse Mortgage: The genesis of Reverse mortgage can be traced to developed countries where Silver Line segment
(people above 65 years group) constitutes major chunk of population on account of higher standards of living, better
access to health care and higher life expectancy. The ever-rising cost of living and health care has prompted
Banks/Financial Institutions to introduce the Reverse Mortgage in the US, UK and Australia. It works like a traditional
mortgage loan, but only in reverse direction. Under this borrower does not make regular payments to a lender;
instead he receives payments from the lender. It supplements the income of the Senior Citizens, particularly to those
whose pension or income is low. Instead of being dependent on their children/relatives for monetary support, this
would be an ideal option for elderly people to continue with a graceful lifestyle. The borrower need not repay the
loan during their life time and can also continue to live in their house during their life time. Thereafter, the legal
heirs have the option to repay the bank loan and redeem the property. Otherwise, the bank will sell the property and
liquidate the loan. The scheme is gaining momentum slowly.
Corporate Governance: It is the system by which companies are directed and controlled by the Management with
greater transparency in the best interest of all the stakeholders. It encompasses commitment to values / ethical
business conduct to maximize shareholder values on a sustainable basis, while ensuring fairness to all stakeholders
including customers, employees, investors, vendors, Government and society at large. Good Corporate Governance,
Good Government and Good Business go hand in hand. Openness, integrity and accountability are the key elements of
Corporate Governance for any corporate entity. The major recommendations of "Ganguly Committee" on Corporate
Governance in banks are as under:
Boards should be more contemporarily professional by inducting technical and specially qualified personnel. There should be a
blend of "historical skill" set
and "new skill" set, i.e. skills such as marketing, technology and systems, risk management, strategic planning, treasury
operations, credit recovery, etc.
Directors should fulfill certain "fit and proper" norms viz., formal qualification, experience and track record. Certain
criteria adopted for public sector banks such as the age of director being between 35 to 65 years and that he/she should
not be a Member of Parliament / State Legislatures, etc. may be adopted for private sector banks also.
Selection of Directors could be done by a nomination committee of the board.
Need-based training should be imparted to the directors to equip them to govern the banks properly.
It is suggested formation of five committees of the board viz., Nomination Committee, Audit Committee, Shareholder's Redressal
Committee, Supervisory Committee and Risk Management Committee.
Ethical leadership is need of the hour to conduct the business on sound lines. Every organization needs to note "What is
ethical but not legal should not be done and at the same time what is legal but not ethical should not be practiced".
Domestic Systemically Important Banks (D-SIBs): During the recent global financial crisis, it was observed that
problems faced by certain large and highly interconnected financial institutions hampered the orderly functioning of the
financial system, which in turn, negatively impacted the real economy. Government intervention was considered
necessary in many jurisdictions to ensure financial stability. Cost of public sector intervention and consequential
increase in moral hazard require that future regulatory policies should aim at reducing the probability of failure of
Systemically Important Banks (SIBs) and the impact of the failure of these banks. Further, the Basel Committee on
Banking Supervision (BCBS) came out with a framework for identifying the Global Systemically Important Banks (G-SIBs)
as well as D-SIBs. The indicators which would be used for assessment are - size, interconnectedness, substitutability and
complexity. Based on the sample of banks chosen for computation of their systemic importance, a relative composite
systemic importance score of the banks will be computed. In the above backdrop, RBI has initiated steps to assess D-
SIBs and the computation of systemic importance scores will be carried out at yearly intervals. The first exercise was
done in the month of August 2015 and identified two banks as D-SIBs viz., State Bank of India and ICICI Bank.
Permanent Account Number (PAN): As per section 139 (4A) of Income Tax Act 1961, all individuals whose income
exceeds the tax free limit and in case where the person carrying a business, the sales turnover or gross receipts
exceeds 75 lakh in a year are required to have PAN and the same is to be quoted in all returns and correspondence
with IT authorities. As per the revised guidelines, the purchaser of goods and services shall furnish PAN number where
the value of the transaction is beyond 72 lakh irrespective whether paid by cash, card, cheque or online. Similarly, the
monetary limits for quoting PAN increased to 710 lakh from 75 lakh for sale or purchase of immovable property. With
regard to payment of hotel/restaurant bills, the limit is increased to 750000 from existing 725000/- and for purchase
or sale of shares of unlisted company it is raised from 750000/- to 71 lakh. Persons who do not hold PAN are required
to fill a form and furnish any one of the specified documents to establish their identity. The above changes in the rules
are expected to be useful in widening the tax net by non-intrusive methods and to curb black money.
Dematerialization (Demat) signifies conversion of physical form of securities in to electronic form and the
converted securities will be credited to customer account with Depository Participant (CDSL/NSDL). This can be used
for shares, bonds and Mutual funds. Now, it is mandatory that the investor should have Demat account to subscribe
IPO/FPO. The benefits associated are - Faster settlement cycle, Elimination the risk of bad delivery, No stamp duty,
Easy for the banks to lend against shares, Eliminate
delays/thefts/interceptions/fake certificates and Online credit of Dividends and Bonus/Rights/Split shares, if any.
Money Mules: An individual with bank account is recruited to receive cheque deposits or wire transfers and then
transfer these funds to accounts held on behalf of another person or to other individuals is called Money Mules. The
fraudsters adopt variety of methods including spam e-mails, advertisements on genuine recruitment web sites, social
networking sites, instant messaging and advertisements in newspapers. Many times the address and contact details of
such mules are found to be fake and making difficult for enforcement agencies to locate the account holder. RBI
advised the banks to strictly adhere to the guidelines on KYC/AML/CFT to protect our customers from misuse by such
fraudsters.
Nachiket Mor Committee: RBI appointed Nachiket Mor committee on Comprehensive Financial Services for Small Businesses
and Low Income Households. The major recommendations of the committee are:
Every Indian resident above the age of 18 should be issued a Universal Electronic Bank Account automatically at the time of
receiving their Aadhar number. Access to Electronic payment points should be made available to all residents within a 15 minute
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walking distance by 1 January 2016.
All low income households and small businesses should be provided with convenient access to formally regulated lenders
to meet their credit needs at affordable price.
Universal access to a range of insurance and risk management products (crop failure, live stock, fire, human loss etc.,) with
reasonable charges.
To set up specialized banks "Payments Bank" with a minimum capital of 750 crore to provide payment services and deposit
products to small businesses and low-income households. These banks are allowed to accept a maximum deposit of not more
than 750000/-.
The existing banks are also permitted to create a Payments Bank as a subsidiary. Lending Norms by Micro Finance
Institutions (MFI): MFI sector has witnessed tight regulations in the light of spate of suicides by MFI borrowers in
combined AP State and subsequent report submitted by Malegam Committee on NBFC-MFI in 2011. The growth pace of
this sector is sluggish in the recent years. In order to boost the operations of this sector, RBI has revised the limits
upward with regard to total indebtedness of borrowers, eligible rural and semi-urban household annual incomes and
loan amounts to be disbursed in the first and subsequent cycles.
Income / Quantum of Loan Existing Revised
Household Annual Income
Rural 60000 100000
Semi-Urban / Urban 120000 160000
Disbursement of Loans
i)First Cycle 35000 60000
ii)Subsequent Cycles 50000 100000
However, the total indebtedness of the borrower, excluding educational / medical expenses, may not exceed 71 lakh.
Swavalamban Scheme: The New Pension System (NPS Lite) is aimed to inculcate the saving habit and to
provide pension benefit to the citizens through systematic savings plan. Under this, the government has made a
provision to pay an incentive of 71000 per year (up to 2017) to every NPS account opened subject to the minimum
contribution of 71000 and maximum 712000 per annum. The age of the subscriber should be between 18 to 60 years.
The subscriber is required to invest minimum 40% accumulated savings to purchase a life annuity from any IRDA
regulated insurance company, in case where he opts for exit at the age of 60. If the subscriber prefers to exit before
60 years, he is
required to invest minimum 80% of accumulated savings in annuity policy. In an unfortunate event, the nominee
receives 100% of the NPS pension wealth in lump sum. However, the exit would be subject to the overriding condition
that the amount of pension wealth to be annuitized should be sufficient to yield a minimum amount of 71000 per
month. If not, the percentage of pension wealth to be annuitized would be increased so that the pension amount
becomes 71000 per month, failing which the entire pension wealth would be subject to annutisation.
Swavalamban Health Insurance Scheme: Health services and its access to persons with disabilities assume a very
significant role in order to enable and empower persons with disabilities (PwDs) to live independently and with dignity
as possible. In this context, the Health Insurance facility becomes important but presently such products are not easily
available for persons with developmental disabilities. In such a situation, a tailor made Group Health Insurance Scheme
called "Swavalamban Health Insurance Scheme" is introduced with the objective of providing affordable Health
Insurance to persons with blindness, low vision, leprosy-cured, hearing impairment, loco-motor Disability, mental
Retardation and mental Illness. It also aims to improve the general Health condition & quality of life of persons with
disabilities. The Trust Fund for Empowerment of Persons with Disabilities, under the Department of Empowerment of
People with Disabilities, Ministry of Social Justice and Empowerment, signed a Memorandum of Understanding (MoU)
with the The New India Assurance Company on providing a comprehensive and affordable Health Insurance Scheme for
the PwDs. The scheme is designed to deliver comprehensive cover to the beneficiary as well as his family (Spouse & up
to two children), has a single premium across age band and can be availed by PwDs aged between 18 years and 65 years
with family annual income of less than 73 lakh per annum. The scheme also ensures coverage of any pre-existing
condition and a health Insurance covers up to 72 lakh per annum as family floater. Under the MoU, the New India
Assurance Company Limited issues a list of Hospitals, where the Insured persons can avail cashless treatment.
New Pension Scheme: It is introduced for Bank Employees in the year 2010 under which Bank employees are eligible
for Defined Contributory Pension Scheme (DCPS). It is mandatory that all employees who have joined the service of
the Bank or after 1st April 2010 enroll themselves as members of this scheme which entails obtaining of Permanent
Retirement Account Number (PRAN) from NSDL who are the Central Record Keeping Agency. Under this scheme, the
members shall contribute 10% of the Basic pay and Dearness Allowance towards the DCPS and the bank shall make a
matching contribution in respect of these employees. The scheme is governed by Pension Fund Regulatory and
Development Authority (PFDRA) and the funds are managed by approved fund managers from public and private
sector with proven track record. Employees would be free to carry their PRANS to new employments or continue as
individuals after change of employment status.
Floating Rate Deposits — Bank Term deposits are the most preferred among the variety of investment options.
However, of late the Bank depositors found unattractive as the real rate of return is low and sometimes negative since
they get interest at contracted rate only while the interest rates are on the rise. Asset Liability management is the
greatest challenge for the Banks as majority of the banks liabilities are of short term while the repayments of assets
spread over relatively longer tenure i.e. beyond 36 months. Further, the present term deposit interest rate scenario is
acting as disincentive for long term investors since the interest rate on deposits of beyond 2/3 years is low compared to
short term deposits. Normally, the retail borrowing happens at floating interest rates whereas their deposits with banks
attract fixed rate exposing them to interest rate risk. In the above backdrop, Banks have been examining the feasibility
of introduction of floating rate term deposits, wherein the rate of interest keeps changing depending on the market
rates. The interest rate is reset with reference to a benchmark/anchor rates which are directly observable and
transparent to the customer. Floating rate term deposit looks ideally attractive for the retail investors. On the flip
side, since the interest rate is floating, the income from term deposits may be adversely impacted when the rates fall.
The floating deposit rate concept helps banks to manage their assets and liabilities better. At present, the Floating
Interest Rate Deposits are being offered select banks only and the concept is yet to take momentum in India.
Deregulation of SB Interest Rates: As per RBI guidelines banks are free to determine their savings bank deposit interest
rate w.e.f 25.10.2011 subject to the following two conditions viz., First, each bank will have to offer a uniform interest
rate on savings bank deposits up to 71 lakh, irrespective of the amount in the account within this limit. Second, for
savings bank deposits over 1 lakh, a bank may provide differential rates of interest, if it so chooses. However, there
should not be any discrimination from customer to customer on interest rates for similar amount of deposit. Further,
banks are free to determine their interest rates on NRE/NRO deposits w.e.f. 16.12.11. However, interest rates offered
by banks on the said deposits should not be higher than those offered by them on comparable domestic rupee deposits.
Banks are paying interest on SB accounts on Daily Products on quarterly basis. Though, the deregulation of interest is in
vogue, at present all most all Public Sector Banks are paying 4% interest where as few Private Sector Banks are
extending interest beyond 4% p.a.
Core Banking Services (CBS): It is an integrated solution where entire data of branches is stored in a central server and
all the transactions of the branches will be done through this server. All back office activities such as Interest
calculations, Levying Service Charges, Parameter Setting/Updation, Generation of Reports/Returns, Providing MIS, Start
of Day and End of Day operations are undertaken by the central server. The customer's data can be accessed from
various outlets at various geographical centers. It enables the bank to provide triple "A" services (Any Branch, Any Time,
Any Where) to the customers through Multiple Delivery Channels viz., Branches, ATMs, Mobile, Lobby, Corporate
Terminals, Kiosks and Internet Banking. It enabled the banks to introduce technology embedded value added products
besides implementing Data Warehousing, Data Mining and Customer Relationship Management concepts. CBS is an
opportunity to banks to improve customer service as well as operational efficiency of the banks. However, it is an
imperative for banks to have a re-look to the existing systems and procedures to suit the changed environment.
Doorstep Banking: Extending Banking services like pick up of cash, instruments and delivery of cash etc., to Corporate
Customers / Government Departments / PSUs / Individual Customers at their place through Employees / Agents is
called Doorstep Banking. However, banks are not allowed to extend such services to Individual Customers. Cash
collected from the customer should be acknowledged by issuing a receipt on behalf of the bank. Cash collected from
the customer should be credited to the customer's account on the same day or next working day, depending on the
time of collection. Doorstep services should be offered only to KYC compliant customers and the charges should be
prominently indicated on brochures. It is a win-win situation for both customers and banks.
Service tax is a tax which is payable on services provided by the service provider to the Govt. of India. However, the
Service Provider can collect this tax from the consumer of service i.e. Recipient of service. The concept of service tax came
into effect in 1994 and was introduced by the then Finance Minister Dr. Manmohan Singh. Earlier Service Tax was payable
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only on a specified list of services. From 1 July 2012 onwards, all services (except those specified in the negative list of
services by the Govt) are now liable for service tax. Budget 2016-17 has increased the service tax rate from 14.50% to 15%
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(additional levy of 0.50% towards Krishi Kalyan Cess) with effective from 1 June 2016.
Indian Rupee Symbol: Now Indian rupee joined the select club of currencies such as the US Dollar, Euro, British Pound and
Japanese Yen that have a clear distinguishing identity and it is considered as a step towards internationalization of Indian Rupee.
Though the symbol is not be printed or embossed on currency notes or
coins, it would be included in the Unicode Standard and major scripts of the world to ensure that it is easily displayed and
printed in the electronic and print media. The new symbol portrays the nation's strength & stability, both politically and
economically and acts as Brand Ambassador.
Mutual Funds Vs Exchange Traded Funds (ETF) - Both the funds provide investors with the opportunity to diversify
portfolios without having to pay the prohibitive trading costs that would normally required, which particularly benefits
retail investors, who tend to execute smaller trades. By investing in either a mutual fund or ETF, the investor indirectly
owns the portfolio of securities in which the fund invests and receives its share of the income generated by the fund
based on ownership percentage. Mutual fund is the better choice for the investors who adopt strategy wherein an equal
amount of money is invested in the fund each period, regardless of whether the fund's price is up or down. Unlike ETFs,
the mutual fund transactions do not attract any commission and one can simply buy or sell the mutual fund units at their
Net Asset Value (NAV). However, more sophisticated investors may want to place a bet that the portfolio in which an ETF
is invested will decrease in value by selling it short. ETFs tend to be more tax efficient than their mutual funds. When we
sell shares of an ETF, you are usually selling them to another investor, so the fund itself is unaffected. In contrast, when
we sell shares of a mutual fund, we are selling them back to the fund itself, and the fund may need to sell some of the
securities in its portfolio to fulfill its redemption requests. This can trigger capital gain income, which becomes taxable
income for the other investors in the fund.
Banking Ombudsman (BO) Scheme — It cover redressal of grievances against deficiency in banking services viz.,
deposits, loans, debit/credit cards, remittances (DD/PO/ECS/NEFT/RTGS) etc. BO undertakes the cases where the value of
dispute does not exceed T10 lakhs. The complaints can be made in any form including online (email) and the same will be
processed without any fee. The complainant is required to take up the matter with the concerned branch for redressal of
the grievance and wait for 30 days and if not addressed he can approach the BO. He should not have filed a complaint
before any other forum or court or consumer forum or arbitrator on the same subject matter and be pending when he
approaches the B.O. On receipt of the complaint, notice will be sent to the bank advising the bank to settle the grievance
within fifteen days from the date of receipt of the notice or else submit version and also attend a conciliation meeting at
the office of the BO. If the grievance is not settled by conciliation, it will be taken up for passing an award. The
complainant will have to accept award within fifteen days of receipt of the award. The time limit for implementation of
award is 30 days from the date of such receipt of acceptance letter. However, Bank can approach Reviewing Authority
(Deputy Governor RBI). Compensation for mental agony, reputation loss etc., will not be considered as per the provisions
of the Scheme.
Right to Information Act 2005 — The act has come into effect from October 12, 2005. This Act is meant to give to the
citizens of India access to information under control of public authorities to promote transparency and accountability in
these organizations. However, this mechanism is meant for seeking information only and not for making complaints.
Under this Act, Citizens of India will have the right to make the request for information in writing, clearly specifying the
information sought. The application should accompany a fee of 710/- either in cash or DD/PO. The application for
request should give the contact details (postal address, telephone number, fax number, email address) so that the
applicants can be contacted for clarifications or the information. All Public Sector Banks are covered under this act and
they are required to furnish the information sought by the citizens of India. Branch Managers are designated as Central
Assistant Public Information Officers (CAIPO) and they have to forward the requests received to the Zonal Managers
concerned, who are designated as Central Public Information Officers (CPIO). The ultimate responsibility lies with CPIO
to get the matter expedited within stipulated time of 30 days. While disposing off the request under RTI Act, CPIO is
required to mention clearly the time limit of 30 days and address of the Appellate
Authority to the complainant. The Appellate Authority is the Senior Central Public Information Officer, who will be one of the
General Managers at Head Office.
Gyan Sangam-I: Banks and financial institutions are the backbone of the economy the stronger the financial
system, stronger would be the growth of the economy. However, of late, it is observed that the Public Sector Banks
(PSBs) are lagging behind in key indicators compared to private banks. In this direction, the government has
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embarked on a mission to overhaul PSBs, beginning with a two day high-profile retreat "Gyan Sangam" on 2 & 3
January 2015 in Pune to search for out-of-the-box ideas to reorient them to support the country's bid to move back
to a high-growth trajectory. The objective of this retreat was to find solutions to problems, and this was the first
step towards catalyzing transformation. A framework is drawn to achieve universal financial inclusion, leveraging
technology to improve efficiency, rethinking priority sector lending, improving risk management, asset quality and
recovery, consolidation and restructuring state-run banks besides building a robust people strategy. P. J. Nayak
Committee report on governance in banks was also discussed in the meeting. The report has a number of useful
suggestions relating to the composition of bank boards, appointment of chief executives and their tenure. PSBs are
subject to dual regulation - from the Ministry and the RBI. By far the most discussed proposal is to have a separate
holding company in which the government's shares in these banks will be vested. The holding company will monitor
the performance of PSBs, make suggestions to improve governance and act as a buffer between them and the
government and help in raising additional capital. It confers greater autonomy for the PSBs to enable them to
function on commercial lines. While addressing the retreat, Prime Minister reiterated the importance of
professional management in banks and assured that there would be no interference by the Government in the
functioning of the Banks. Further, the issue of financial literacy has highlighted and called upon banks to take the
lead in encouraging financial literacy campaigns in schools, villages and unbanked areas. The deliberations of the
retreat can be summed up in three words viz., Recapitalization, Consolidation and Professionalization of Banks'
Boards and their management. With this we envisage that Indian Banking system should attain the status of top
banks of the world.
Indradhanush (Rainbow): To revive the fortunes of Public Sector Banks (PSBs), government unveiled a seven-point plan
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named as Indradhanush on 14 August 2015 focuses on systemic changes which are as under:
It is proposed to recruit the executives from the private sector on hire basis to run state-owned banks.
Setting up of Bank Board Bureau to monitor the functioning of PSBs.
The government will inject capital into debt-laden state banks to the tune of 770000 crore over next five years and also
propose to set up a Bank Investment Committee, which will act as a holding company for shares on behalf of the
government.
Strengthening of the existing Asset Reconstruction Companies (ARCs) to deal more effectively with stressed assets.
The government will strive to make it easier for PSBs to hire. The government is looking at introducing Employee Stock
Ownership Plan (ESOPs) for the PSU bank managements.
The government also announced a new framework of key performance indicators for state-run lenders to boost efficiency in
functioning while assuring them of independence in decision making on purely commercial considerations.
The process of governance reforms will continue to focus on important key areas such as optimizing capital, digitizing processes,
strengthening risk management, improving managerial performance and financial inclusion.
Ban ks need autonomy to oper ate. Unless the go vernment ce ases to be the single largest st ake holder in
these entiti es, this auto nomy will remain only o n paper.
Presently, there are no strong laws that enable banks recover money from willful defaulters. In most such cases, the
defaulters seek legal recourse to delay the process of loan recovery. A strong bankruptcy law, like in the west, is
necessary for banks to deal with crisis-ridden companies and promoters. It offers a decent exit route to the promoter
and freedom for the bank to take over the company before the value of the underlying asset deteriorates sharply.
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Gyan Sangam-II: In the summit (Gyan Sangam-I) held on 2 & 3 January 2015, the government gave the assurance of
infusing enough capital into PSBs to strengthen their balance sheets, reducing interference in banks' business, de-
stressing banks by prodding all ministries involved in clearances to kick-start stalled projects, resolving issues that delay
recovery through Debt Recovery Tribunals (DRTs) and finally fortifying the framework for governance and appointments
at the top level. Though, there were few initiatives from RBI and Government, still several issues remain unresolved till
date. At the same time, PSBs have been encountering new challenges. The biggest concern among PSBs and
policymakers today is the increased level of stressed assets and the resultant erosion in capital. As per the extant
guidelines, the capital infusion is linked to the performance of the banks which got worsened during the current year.
The RBI's asset quality review that prodded banks to make provisions for visibly stressed accounts has wiped out profits
of PSBs in Q3. In the above backdrop, the two-day (6 th & 7 th March 2016) summit named a forum where the highest
officials from PSBs, RBI and the Government was held at New Delhi to discuss the pertinent issues confronting the
banking sector viz., Mergers and Acquisitions, Management of Stressed Assets, Technology, Digital and Financial
Inclusion and Credit growth. Government was actively looking into forming a Bank Consolidation Committee and tweak
laws such as SARFAESI and Debt Recovery Tribunals (DRT). It is the time to streamline the process of DRTs and make it
online which definitely improve the disposal time significantly.
Channel Financing is a new approach or system supporting business by a realignment of existing products, delivery
process, procedures and organization structures so as to provide a comprehensive solution to the working capital
requirements of an entity. It aims at extending working capital finance to authorized suppliers / dealers, whose small
businesses are connected to large companies as suppliers/dealers in the business of the entity. Channel Finance provides
credit facility to the suppliers of the Corporate for the supplies made is called as `Supplier Finance'. Similarly credit
facility is provided to the dealers for the goods delivered by the corporate called as `Dealer Finance'.
Supplier Finance: Bank pays amount directly to the main operative account of the supplier as per advise of the
corporate by discounting the bills with maximum of 180 days tenor and the same will be recovered from Corporate on
respective due dates. If the supplier is enjoying working capital limits with another banker, the amount shall be credited
to the account maintained with the said bank. An undertaking letter is to be obtained from the Corporate to pay the
amounts on the due dates of bills discounted by our Bank. Alternatively, wherever feasible, Post dated cheques of the
main operative account are to be obtained from the Corporate to enable the Bank to realize the dues on the respective
due dates of the bills.
Dealer Finance: In case sanction of Bill facility to the Dealer as per referral letter of Corporate and agreed by the
dealer(s), a suitable Bill discounting limit is assessed and post dated cheques are obtained from the dealer(s). The
particulars of deliveries of the final products to the respective dealers are provided to the Bank with supporting
documents such as invoices, bills of exchange and other documents evidencing delivery of goods to the dealers. The
payment is made by the Bank to the credit of main operative account of the Corporate and the same will be recovered
from the dealers on the respective due dates of the bills. If the Corporate is enjoying working capital limits with
another banker, the amount shall be credited to the account maintained with the said bank.
Treasury Management - Concepts

Banks not only lend money to customers but also invest in securities such as Bonds and Debentures of Government as
well as Corporates. These instruments are easily tradable in the capital and money market. The tradability of securities
makes investments an attractive option for banks for deployment of their funds. Further, banks buy securities not only to
trade but also to hold them till maturity to take advantage of the attractive returns with relatively lower risk. Banks are
allowed to invest in shares of companies. However, the volumes are low due to associated high risk besides regulatory
restrictions. The investment portfolio of the banks broadly divided into three groups viz.,
Trading Book - Securities purchased with the intention of selling them within 90 days are held in the trading book. Trading
opportunities arise in the market on account of fluctuation in interest rates and arbitrage opportunities.
Available for Sale (AFS) - Securities which are bought with the intention of selling them but not necessarily within 90
days is considered to be AFS securities. They are also part of the trading portfolio of the bank but only the time frame is
different. Both the trading and AFS securities have to be "Marked to Market" every quarter while finalization of
quarterly results.
Held to Maturity (HTM) - These securities are meant to be held till their date of maturity and the purpose investing in
them is to earn reasonable steady income. These securities are carried in the books at cost or purchase price till
maturity. Hence, HTM securities need not be "Marked to Market" as the bank is certain of receiving the maturity value
on the specified date. Banks are not allowed to shift securities freely from trading and AFS to the HTM book as this may
lead to overstating of profit figures. However, banks can opt for shifting only once in a year to adjust their overall
portfolio. Banks are permitted to exceed the limit of 25% of total investments under HTM category provided (a) the
excess comprises of only of SLR securities and (b) the total SLR securities held in the HTM category is not more than 23%
by March 2014.
Call Money Markets: Call and notice money market refers to the market for short term funds ranging from overnight
funds to funds for a maximum tenor of 14 days. Under Call money market, funds are transacted on overnight basis
where as in case of notice money market; funds are transacted for the period of 2 days to 14 days.
Coupon Rate: It is a rate at which interest is paid, and is usually represented as a percentage of the par value of a
bond. It refers to the periodic interest payments that are made by the borrower (who is also the issuer of the bond) to
the lender (the subscriber of the bond) and the coupons are stated upfront either directly specifying the number
(e.g.8%) or indirectly tying with a benchmark rate (e.g. MIBOR+0.5%).
Zero Coupon Bond / Deep Discount Bond: The bond is issued at a discount to its face value, at which it will be
redeemed. When such a bond is issued for a very long tenor, the issue price is at a steep discount to the redemption
value. The effective interest earned by the buyer is the difference between the face value and the discounted price at
which the bond is bought. The essential feature of this type of bonds is the absence of intermittent cash flows.
Commercial Paper (CP): It is a short-term instrument to enable non-banking companies to borrow short-term funds
through liquid money market instruments. CPs is therefore part of the working capital limits as set by the maximum
permissible bank finance (MPBF). CP issues are regulated by RBI Guidelines issued from time to time stipulating term,
eligibility, limits and amount and method of issuance. CP can be issued for maturities between a minimum of 7 days and
a maximum up to one year from the
date of issue. The maturity date of the CP should not go beyond the date up to which the credit rating of the issuer is valid. CP
can be issued in denominations of 75 lakh and multiples thereof. It is mandatory that CPs should be rated by credit rating
agencies. In a bid to make CPs attractive, the RBI has allowed issuers to buyback these instruments through the secondary
market before maturity. It attracts stamp duty.
Certificates of Deposits (CDs): It is a negotiable money market instrument and issued in dematerialized form or as a
Usance Promissory Note, for funds, deposited at a bank or other eligible financial institutions to raise short-term
resources within the umbrella limit fixed by RBI. CDs may be issued at a discount on face value. CDs differ from term
deposit as they involve the creation of paper, and hence have the facility for transfer and multiple ownerships before
maturity. Banks use the CDs for borrowing during a credit pickup, to the extent of shortage in incremental deposits.
Minimum amount of a CD should be one lakh and in multiples thereof. The maturity period of CDs should be not less
than 7 days and not more than one year. However FIs are allowed to issue CDs not exceeding 3 years from the date of
issue. Banks have to maintain the appropriate reserve requirements (CRR/SLR) on the issue price of the CDs. It attracts
stamp duty. Banks/Fis cannot grant loans against CDs.
Securitization is an effective tool to reduce the mismatches in the maturities of assets and liabilities. It is a financing
technique that involves pooling and re-packing of illiquid financial assets in to marketable securities. There are six
players viz., Borrowers, Lending Banker (who becomes an originator for the Securitization transaction), Special Purpose
Vehicle (SPV), Credit Rating Agency, Investors and Service Providers. The process of securitization involves identification
of financial assets, rating of these assets by the rating agency, creation of a SPV for handling the securitization
transaction, assignment of future receivables in favour of the SPV, issuance of marketable securities based on these
underlying financial assets and selling the same to the investors. The service providers recover the amount periodically
and remit to the SPV and who in turn pass the benefit to the investors.
Asset and Liability Management — RBI Guidelines: Of late, it is observed that PSBs have been accepting Bulk
Deposits/Certificate of Deposits route to increase balance sheet size at very high interest rates, adversely affecting the
profitability besides exposing the banks to ALM Risk. RBI directed banks not to accept Bulk Deposits beyond 10% of the
total deposits and the total of Bulk Deposits & Certificates of Deposits should not exceed 15% of total deposits of the
bank at any given point of time. An appropriate time-bound strategy for reduction of such existing bulk deposits should
be put in place.
AdJusted Net Bank Credit (ANBC) denotes Net Bank Credit plus investments made by banks in non-SLR bonds held in HTM
category. However, investments made by banks in the Recapitalization Bonds and Inter-bank exposures will not be taken into
account for the purpose of priority sector lending targets/sub-targets.
Subordinate Debt is a debt owed to an unsecured creditor that in the event of liquidation can only be paid after the
claims of secured creditors have been met. Normally, subordinate debt ranks below other secured loans with regard to
claims on assets or earnings.
External Borrowings & Concepts
External Commercial Borrowings (ECB): It is the borrowings by the Corporates and Financial Institutions from
International markets. ECBs include Commercial Bank loans, Buyer's Credit, Supplier's Credit, Securitized Instruments
such as Floating Rate Notes, Fixed Rate Bonds etc. ECBs are usually available at interest rate of 100 to 400 basis points
above LIBOR (London Inter Bank Offered Rate).
American Depository Receipt (ADR): It is a negotiable certificate of ownership in the shares of non-American Company
that trades in an American Stock Exchange. ADRs make it convenient for Americans to invest in foreign companies as
ADRs carry prices and dividends in dollars, and can be traded on the US stock exchanges like the shares of US based
companies.
Special Drawing Rights (SDR): It is the International Monetary Fund's own currency. The value of SDRs is set relative to a basket
of major currencies. It is used only among governments and IMF for balance of payments settlement.
Global Depository Receipt (GDR): These are the instruments through, which the Indian companies raise their
resources from international markets. It is a negotiable certificate issued by a depositary company (normally an
investment bank) representing the beneficial interest in shares of another company whose shares are deposited with
the depository. It is a Dollar denominated instrument, traded on Stock Exchange in Europe or USA or both and
represents publicly traded specified number of local currency equity shares of the issuing Company.
Foreign Direct Investment (FDI): An investment which is made directly on the production facilities (either by buying a
company or by establishing new operations of an existing company) of a country by a foreign source, usually a foreign
company. These investments are more enduring than foreign investment in shares and bonds.
Masala Bonds: Recently, the RBI has permitted banks to raise capital through "Masala Bonds" in the overseas market in
Indian Rupee. RBI's proactive steps acknowledged the potential of the market and issuance of these bonds from banks
will help broaden and deepen the market for making the product more sustainable in the long run as a financing option.
It definitely paves the way to develop the overseas market for rupee denominated bonds and enable the banks to
shore-up their capital requirements (Tier-I & II) for financing infrastructure and affordable housing projects.
Derivatives: A credit derivative derives its value from the credit quality of the underlying loan or bond or any other
financial obligation of an underlying company. The underlying asset can be equity, index, foreign exchange (forex),
commodity or any other asset. Derivative products initially emerged as hedging devices against fluctuations in
commodity prices and commodity-linked derivatives remained the sole form of such products for almost three hundred
years. The financial derivatives have become very popular in the recent years. Credit Derivatives are financial instruments
designed to transfer credit risk from the person / entity exposed to that risk to a person / entity who is willing to take on
that risk.
SWAP refers to exchange of one asset or liability for a comparable asset or liability for the purpose of lengthening or
shortening maturities or raising or lowering coupon rates to maximize revenue or minimize financing costs. This may
entail selling one securities issue and buying another in foreign currency; it may entail buying a currency on the spot
market and simultaneously selling it forward. There are various types of SWAPs such as Equity swap, Currency swap,
Credit swaps, Commodity swaps, Interest rate swaps etc. These can be used to create unfunded exposures to an
underlying asset since counterparties can earn the profit or loss from actions in price without having to post the
notional amount in cash or collateral. Swaps can be used to hedge certain risks such as interest rate risk or to wonder on
changes in the expected direction of underlying prices.
Futures & Options: An agreement to buy or sell a fixed quantity of a particular commodity, currency or security for
delivery on a fixed date in the future at a fixed price. Unlike an 'option', a 'futures' contract involves a definite purchase
or sale and not an option to buy or sell. It may entail potential unlimited loss. However, Futures provide an opportunity
to those who must purchase goods regularly to hedge against changes in prices. An arrangement where the rate is fixed
in advance for the purchase or sale of foreign currency at a future date is called forward contract. Option is a contract,
which gives the holder the right but not the obligation. A call and put option is a right to buy and sell the underlying
product respectively.
Liberalized Remittance Scheme (LRS): RBI introduced the scheme as a step towards further simplification and
liberalization of the foreign exchange facilities available to resident individuals. As per the Scheme, resident individuals
may remit up to USD 250000 per financial year (April to March) for any permitted capital and current account
transactions. This limit also includes remittances towards gift (USD 5000 per remitter/donor per annum) and donation
(USD 5000 per remitter/donor per annum) by resident individual. Under the Scheme, resident individuals can acquire
and hold immovable property or shares or debt instruments or any other assets outside India, without prior approval of
the Reserve Bank. Individuals can also open, maintain and hold foreign currency accounts with banks outside India. In
addition, the existing facility of release of exchange by Authorized Dealer up to USD 10000 or its equivalent in a
financial year for one or more private visits to any country will continue to be available on a self declaration basis. It is
mandatory to have PAN number to make remittances under the Scheme. Further, Resident individuals are allowed to
acquire equity shares of a foreign entity by way of/under i) qualification shares ii) professional services rendered and iii)
ESOP scheme.
Factoring and Forfeiting: Factoring is a method where by the factor undertakes to collect the debt assigned by exporter
where as international forfeiting is a method whereby the exporter sells the export bills to the forfeiter for cash.
Forfeiting is resorted to for export of capital goods on medium terms and long-term credit, whereas the factoring is
mainly short-term trade finance. In respect of forfeiting, the guarantee by the importer's banker is normally insisted
upon whereas in factoring such guarantee by the importers banker is usually not stipulated. Forfeiting is without
recourse to the seller (exporter), while factoring is undertaken both with and without recourse to the seller.
Fed Tapering - "Tapering" is a term that exploded into the financial lexicon when U.S. Federal Reserve Chairman Ben
Bernanke stated in testimony before Congress that that Fed may taper or reduce the size of the bond-buying program
known as Quantitative Easing (QE). The US central bank (Federal Reserve) has been spending substantial funds to
boost the US economy as part of QE. Under the plan, the Fed has been buying assets - a mixture of US government
debt and mortgage bonds. This has the effect of driving down US interest rates, including the cost of mortgages, car
loans and financing for business. Quantitative easing was never intended to last forever, since each bond purchase
expands the Fed's "balance sheet" by increasing the amount of bonds it owns. The program is designed to stimulate
the economy. Tapering isn't an immediate, dramatic event instead it is likely to take place in a phased manner so as to
create minimal market disruption. Tapering is going to remain dependent on economic conditions - Fed may pull back
slightly if the economy continues to strengthen, but it could also increase the program again if the economy slowed or
the financial markets were shocked by an unforeseen crisis. Fed tapering is not only necessity for reducing long-term
inflationary pressures but it is also important from a macro-economic standpoint as US Fed balance sheet is becoming
unsustainably huge. Tapering will definitely reflect confidence on the sustainability of economic growth and will be a
longterm positive rather than a negative.
Volcker Rule restricts deposit-taking banks from engaging in proprietary trading, prohibiting them from engaging in
more complex activities that are prone to conflicts of interest, in order to safeguard the core of the banking system, i.e.
commercial or traditional banking (deposit taking and lending). The rule prohibits any banking entity from engaging as
principal in short-term trading in securities, derivatives, or commodity futures, i.e. activities that may not be compatible
with the risk profile of the banking entities, but allows exemptions for market-making, hedging, trading in US
government securities, and other activities. There is a concern that it would be a challenging task to separate
proprietary trades from permissible trades. Under the Volcker Rule the reporting and compliance regime is expected to
assume greater significance. The rule applies to all US banks and bank-holding companies and all foreign bank-holding
companies with US subsidiaries or branches. The Volcker Rule prescriptions can affect the operations of the US banks
operating in India as they are active players as market makers in domestic foreign exchange market, Government
securities market and interest rate swap market. This will change the entire depth and breadth of the Indian markets.
An important fall-out of this rule could well be the decline in liquidity in these markets and the resultant cost escalation
for market participants.
Bitcoins: It is a virtual and digital version of cash emerging as a global payment platform that can be used through
smart phones, tablets, and other devices. Bitcoin was introduced in 2009 by pseudonymous developer Satoshi
Nakamoto, when the global financial crisis led to distrust of Banks and Government was high. It is a peer-to-peer
payment network and digital currency based on an open source protocol, which makes use of a public transaction
log. When paying with Bitcoin, there will be no exchange of digital notes or tokens between buyer and seller. Instead,
the buyer requests an update to a public transaction log which shows ownership of the coins and is maintained by a
decentralized network that verifies and timestamps payments. What makes Bitcoin unique is that there is a record as
to who possesses it, and there is a network that records transactions and there is no way to increase the number of
Bitcoins in existence. It works on Cryptography proof that allows any two willing parties to transact directly with each
other without the need for a trusted third party - whether it is State or Bank or Regulator. Bitcoin is fast evolving in
terms of merchant adoption. Many large business houses, including Microsoft, Dell, PayPal, Dish Network, Expedia,
NewEgg and TigerDirect have adopted it. Bitcoin helps businesses save on transaction cost and settlement time and
mitigates risks related to foreign exchange. Bitcoin may be well suited to facilitating cheap cross-border money
transfers. However, these coins lack intrinsic value as their value depends only on the willingness of users to accept
them. Further, the big psychological hurdle in its usage is inability to reverse or recall transaction.
At present, the usage of virtual currency is not authorized by any central bank or monetary authorities. Israeli is in
forefront in creating tools to facilitate the Bitcoins to be used in many ways such as buying of products, sending
remittances and investments in stock market. The United States is currently considered to be Bitcoin friendly compared
to other nations. On the flipside, there are concerns with regard to maintenance of its value, KYC compliance, taking
undue advantage of the system (unlawful activities) by unscrupulous persons/agencies and lack of consumer protection.
Recently, the Central Banks of Europe, China and India expressed their concerns about the usage of the unregulated
st
currency. As on 1 January 2017, it is estimated that 15 million Bitcoins are in circulation across the globe and the value
of one Bitcoin reportedly quoted at $1000. Definitely, it is going to be a game-changer in virtual currency arena
provided it crosses regulatory hurdles.
Corporate Bond Market

Corporate rely on internal accruals or external sources or combination of both to meet their capital requirements.
Normally, funds are raised from external sources either in the form of Equity or Debt or Hybrid instruments that
combine the features of both debt and equity. Majority of corporate requirements are being met through borrowings
from Banks / Financial institutions in the form of project loans, syndicated loans, working capital, trade finance, etc.
Further, corporate sector raises funds through public issues or private placement route (issue of securities by a
company to a select group of persons not more than 50).
Of late, corporate are focusing attention on Bond market to meet their financial requirements by issuing debt instruments -
Commercial paper (CP) or Corporate Debentures/Bonds (CB). While CP has maturities between one week and a year, corporate
bonds have longer maturities.
Corporate Bonds are transferable debt instruments issued by a company to a broad base of investors viz., Public Debt
and Private Debt. The former type is an instrument issued by central and state governments, municipal authorities
and the later pertains to bonds issued by financial and non-financial corporates. There are three main pillars that
make up the corporate bond market ecosystem viz., the Institutions, Participants and the Instruments. The
institutions comprise of the securities market regulator (SEBI), the banking regulator (RBI), the credit rating agencies,
clearing houses, stock exchanges and the regulations and governance norms prescribed by these institutions.
Development of long-term debt markets is critical for the mobilisation of the huge magnitude of funding required to
finance potential businesses as well as infrastructure expansion. Despite a plethora of measures adopted by the
authorities over the years for development of Corporate Bond market.
Development of domestic corporate debt market in India is thwarted by a number of factors viz., illiquidity in the secondary
market, narrow investor base, high costs of issuance, inaccessibility to small and medium enterprises, dearth of a well-
functioning derivatives market, regulatory restrictions, high interest rates etc.
Development of Corporate Bond market is likely to be a gradual process. However, it is important to understand
whether the regulators have sufficient willingness to shift from a loan-driven bank-dependent economy to deep
developed bond market by corporate in a phased manner. Vibrant, deep and robust corporate bond markets are
essential to enhance stability of financial system of a country, mitigate financial crises and support the credit needs of
corporate sector, which is vital for the growth of an economy.
Recent Developments: The listed companies are allowed to lend money to banks through repo market mechanism,
essentially overnight money, something that can have wide ranging ramifications for call money rates, short-term
money market rates as well as the banking system liquidity. The RBI also seeks legal amendments to allow banks to
borrow from it by pledging corporate bonds. The proposal to allow foreign portfolio investors direct access to bond
trading platforms for government and corporate paper will widen the investor base. The RBI has also proposed that
banks push corporate clients to borrow from the bond market. As per RBI guidelines, Foreign Portfolio Investors (FPIs)
are allowed to have direct access to NDS-OM to ease the process of investment in debt securities. It has also been
agreed with SEBI to provide FPIs facility to trade directly in corporate bonds.
Bankruptcy Code
The Insolvency and Bankruptcy code which aims at speed-up the process of liquidation or revival of companies.
However, the fact remains that the recovery rate in India is around 20% of the value of the debt only as the promoters
stay in control of the company even after the default and tend to divest assets of the company which is detrimental to
the interest of the stakeholders. Further, even to decide whether to save or liquidate an ailing company is taking
undue long time under the existing bankruptcy rules.
rd
It is reported that large number of corporate borrowers (1/3 of the total borrowers) is facing significant balance sheet
distress, leading the banking industry to squander good money after bad money, hampering the credit cycle adversely.
When banks pull back from lending, it hurts the macro economic situation which has again direct bearing on the asset
quality of banks.
Though, RBI initiated many steps in this direction, the desired result is not seen as the key problem for the present issue
is the multiplicity of frameworks viz., Debt Recovery Tribunals (DRT), Corporate Debt Restructuring Mechanism (CDR),
Joint Lenders' Forum, Strategic Debt Restructuring (SDR) etc. The establishment of earlier CDR or the present SDR
mechanism has become another instrument for banks to postpone bad news. The SDR scheme micro manages the
process and it attempts to replace subtle business judgment with a fixed bureaucratic scheme, probably not a right
prescription. Further, Banks are facing challenges in recovering of debts from the wilful defaulters. Thus, the bankruptcy
code needs to be a clean and modern replacement for these multiple procedures. To address the issue and to create a
sound framework for all creditors, GOI constituted a committee to review and revisit "Bankruptcy Law Reforms" and
entrusted the task to Shri T.K. Vishwanathan to draft a bankruptcy code. This is one of the most important initiatives of
the government and the major recommendations of the committee report are:
Formation of an Insolvency Adjudicating Authority which will have the jurisdiction to hear and dispose of cases by or
against the debtor. DRTs would hear the cases for individuals and unlimited liability partnership firms where as cases
for companies, limited liability entities will be dealt by National Company Law Tribunal.
The creditor and the debtor will engage in negotiations to arrive at an agreeable repayment plan for composition of the
debts and affairs of the debtor, supervised by a resolution professional.
The period prescribed for insolvency resolution is 180 days, which may be extended to 270 days by the Adjudicating
Authority only that too in exceptional cases.
The insolvency resolution plan is to be approved by a majority of 75% of voting share of the financial creditors.
Fast track insolvency process is made available for certain entities to complete the resolution process within 90 days
from the trigger date.
The insolvency and Bankruptcy code is a veritable watershed reform which shall create an environment where failure of
business enterprises is accepted by the society and a mechanism to resolve such failures is created. This shall help in
reducing the burden of the courts by doing away unnecessary litigation which ensures to protect the interest of all
stakeholders.
Marginal Cost of Funds based Lending Rate (MCLR)

Reserve Bank of India advised all Banks not to lend below Base Rate w.e.f. 01.07.2010 except certain categories
such as Differential Rate of Interest (DRI) advances, Loans to bank's own employees, Loans to bank's depositors
against their own deposits, Interest Subvention Schemes viz., Crop loans, Export credit and Restructured loans.
As per RBI guidelines on Base Rate, Banks are required to fix Base Rate duly taking Cost of Deposits/Funds,
Negative carry in respect of CRR and SLR, Unallocated Overhead Costs and Average Return on Net Worth in to
consideration. There is no uniformity with regard to adoption of methodology in arriving cost of deposits/funds,
which is the vital component for Base Rate. Majority banks have been adopting average cost of funds method
which is causing lag in transmission of policy rates.
In order to have transparency in the methodology followed by the banks in arriving the existing Base Rate and to
improve the transmission of policy rates into lending rates of banks as well as to ensure availability of bank credit
at interest rates which are fair to the borrowers as well as the banks, RBI has introduced Marginal Cost of funds
based Lending Rate (MCLR) in lieu of present Base Rate with effective from 1 st April 2016 and the highlights of the
new norms are as under:
• Adopting marginal cost of funds methodology. All loans and credit limits availed by the borrowers will be
priced with reference to MCLR.
• Actual lending rates will be determined by adding the components of spread to the MCLR.
• Banks will review and publish their MCLR of different maturities every month on a pre-announced date.
• Banks may specify interest reset dates on their floating rate loans. They will have the option to offer loans
with reset dates linked either to the date of sanction of the loan/credit limits or to the date of review of
MCLR.
• The periodicity of reset shall be one year or lower.
• The MCLR prevailing on the day the loan is sanctioned will be applicable till the next reset date, irrespective
of the changes in the benchmark during the interim period.
• Existing loans/credit limits linked to the Base Rate may continue till repayment or renewal, as the case
may be. Existing borrowers will also have the option to move to the Marginal Cost of Funds based Lending
Rate (MCLR) linked loan at mutually acceptable terms.
• It will be a tenor linked internal benchmark.
Since the MCLR is tenor linked internal bench mark rate, Banks are likely to levy different Interest Rates for
different tenor based loans. Probably, with the implementation of new norms, Indian Banks slowly will be moving
to International standards of benchmarking rates.
Prompt Corrective Action (PCA) Framework for Commercial Banks
The RBI has specified the following regulatory trigger points to commercial banks, as a part of prompt corrective action (PCA)
Framework.
CRAR less than 9%, but equal or more than 6% - Banks are required to submit capital restoration plan to RBI. Further,
there will be restrictions on RWA expansion, entering into new lines of business, accessing / renewing costly deposits,
and making dividend payments, borrowing from inter-bank market, reduction of stake in subsidiaries, reducing its
exposure to sensitive sectors like capital market, real estate or investment in non-SLR securities, etc. In case where
CRAR less than 6%, but equal or more than 3%, RBI could take steps to bring in new Management/Board, appoint
consultants for business/organizational restructuring, take steps to change ownership. In case CRAR less than 3%,
impose moratorium on the bank and also initiate steps to merge / amalgamate / liquidate the bank.
Net NPAs over 10% but less than 15% - Special drive to reduce NPAs and contain generation of fresh NPAs; review loan
policy and take steps to strengthen credit appraisal skills, follow-up of advances and suit-filed/decreed debts, put in place
proper credit-risk management policies; reduce loan concentration; restrictions in entering new lines of business, making
dividend payments and increasing its stake in subsidiaries. Where Net NPAs 15% & above, Bank's Board is called for
discussion on corrective plan of action.
ROA less than 0.25% - Restrictions on accessing costly deposits, entering into new lines of business, bank's borrowings
from inter-bank market, making dividend payments and expanding its staff; steps to increase fee-based income; contain
administrative expenses; special drive to reduce NPAs and contain generation of fresh NPAs; and restrictions on
incurring any capital expenditure other than for technological up-gradation and for some emergency situations.
Broad classification of Banks basing on PCA framework

Classification Tier-1 Risk Based Capital
Leverage Ratio
Risk Based Capital Ratio
Well Capitalized 10% & above 6% & above 5% & above
Adequately Capitalized 8% & above 4% & above 4% & above
< 4% & < 3%
Under Capitalized < 8% < 4%
under CAMEL
Significantly
< 6% < 3% < 3%
undercapitalized
Critically undercapitalized Leverage Ratio is equal or less than 2%
As and when the bank reaching the levels of undercapitalized, or significantly undercapitalized, or critically
undercapitalized - RBI imposes restrictions on the concerned bank in respect of payment of capital distributions and
management fees, growth of assets, expansion proposals and submission of a capital restoration plan. In addition to
above, these banks are required to take prior approval from RBI in respect of entering into any material transaction
other than in the usual course of business, such as any investment, expansion, acquisition, sale of assets, or other
similar action; extending credit for any highly leveraged transaction; amending the institution's charter or bylaws;
making any material change in accounting methods; paying excessive compensation or bonuses; paying significantly
high interest on new or renewed liabilities; making any principal or interest payment on subordinated debt. Recently,
Indian Overseas Bank is subjected to PCA ambit and restrictions are imposed on branch expansion, dividend payout
and staff recruitments to improve internal controls and consolidation of its activities. The restrictions were, however,
lifted after two years once its performance improved. Some more banks are likely to join in the list shortly.
Central Repository of Information on Large Credits (CRILC) /
Wilful Defaulters (WD) / Reflagged Accounts (RFA)
CRILC: RBI has set up a Central Repository of Information on Large Credits (CRILC) in January 2014 and issued guidelines
to all lending institutions (Banks and non-banking companies) for management of stressed assets. As per the guidelines,
the lenders are directed to share information with CRILC on quarterly basis regarding borrowers having aggregate
exposure (fund ad non-fund) of 75 crore and above, including information regarding written-off accounts, balance of
current account and information regarding non co-operative borrowers. Banks will also have to furnish details of all
Current accounts of their customers with outstanding balances, both debit and credit, of 71 crore and above. Banks will
be required to submit SMA status of the borrowers to CRILC. If an account is slipped in to SMA-2 at any time or SMA-1 for
any two quarters or SMA-NF for three quarters in a year, then the bank would be required to initiate corrective action.As
per RBI guidelines a non cooperative borrower is broadly one who has any one or all of the mentioned irregularities viz.,
Does not provide necessary information required by a lender to assess his/ its financial health even after two reminders;
Denies access to securities etc., as per terms of sanction or does not comply with other terms of loan agreements within
stipulated period; Hostile/indifferent or in denial mode to negotiate with the bank on repayment issue; Plays for time by
giving false impression that some solution is on horizon; Resorts to vexatious tactics such as litigation to thwart timely
resolution of the interest of the lender/s. Once a borrower is identified as Non Cooperative Borrower, the same has to be
reported to CRILC. Any exposures to such borrowers will attract higher/accelerated provisioning (5%) in case of slippage
even if it is a standard asset. In view of the above the field functionaries are not permitted to consider sanction of
enhancement / fresh limits to Non Cooperative Borrowers, even though they fall under their limits. These have to be
forwarded to HO with due recommendation and proper justification has to be provided in the appraisal while considering
the renewal of credit facilities/enhancements/fresh sanctions.
Wilful Defaulters: As per RBI guidelines, a Wilful Defaulter would be deemed to have occurred, where the unit has
defaulted in meeting its payment / repayment obligations to the lender even when it has capacity to honour the said
obligations or where the unit has not utilized the finance for the specific purpose for which finance was availed of but
has diverted the funds for other purposes or disposed of or removed the movable fixed assets or immovable property
offered for the purpose of securing a term loan without the knowledge of the Bank/Lender. It covers all non
performing borrowal accounts with aggregate outstanding balance (funded facilities and such non-funded facilities
converted into funded facilities) of 725 lakhs & above. Forensic audit should be conducted in high value accounts
before recommending for identifying the related borrowers as willful defaulters. In all other accounts, a certificate
from concurrent auditor or any other auditor appointed by bank should be obtained for declaring the borrower as
willful defaulter. The classification of the borrower as Willful defaulter is vested with Committee at Head Office.
However, the borrower will be given reasonable time (15 days) for making submission to the committee. Bank is
required to submit the details of willful defaulters to RBI and TransUnion CIBIL Limited. RBI advised all Banks/Financial
Institutions not to extend any additional credit facilities to the Wilful Defaulters and they are debarred from floating
new ventures for a period of 5 years from the date RBI publication and also liable for criminal proceedings for breach
of trust, cheating and wrong certification under IPC. RBI advised the lending institutions to formulate a policy to spell
out the criteria to publish the names and photographs of defaulting borrowers (willful) and the approach is neither
discriminatory nor inconsistent.
Red flagged Accounts (RFA): Alarmed over the rise in frauds in the banking system by the individuals/corporate
borrowers and mounting Non-Performing Assets (NPAs), the RBI has introduced the concept of a Red Flagged Account
(RFA). It is an important step towards fraud risk control as it throws one or more Early Warning Signals (EWS) of
suspicious fraudulent activity of the borrowers. Some of these signs are bouncing of high-value cheques, a raid by tax
officials, a dispute on title of collateral securities or funds coming from other banks to liquidate a loan due, etc. Banks
being custodians of public money cannot afford to ignore such EWS and need to trigger to launch a detailed
investigation into a RFA. The threshold for EWS and RFA is an exposure of 750 crore or more at the level of a bank
irrespective of the lending arrangement, whether solo banking, multiple banking or consortium.
The decision to classify any standard or NPA account as RFA or fraud will be at the individual bank level and it would be
the responsibility of this bank to report the RFA or fraud status of the account on the CRILC platform so that other
banks are alerted. Thereafter, within 15 days, the bank which has red flagged the account or detected the fraud would
ask the consortium leader or the largest lender to convene a meeting of the Joint Lenders Forum (JLF) to discuss the
issue. The account would be red flagged by all banks and subjected to a forensic audit commissioned or initiated by the
consortium leader or the largest lender under multiple banking arrangements. The forensic audit must be completed
within three months from the date of the JLF meeting authorizing the audit. Within 15 days of forensic audit, the JLF
will reconvene and decide on status of the account. In case the decision is to classify the account as a fraud, the RFA
status would change to fraud in all banks and reported to RBI and on the CRILC platform within a week.
No restructuring or grant of additional facilities may be made in the case of RFA or fraud accounts. Further, the
provisions as applicable to wilful defaulters would apply to the fraudulent borrowers including the promoter director and
other whole time directors of the company in so far as raising of funds from the banking system or from the capital
markets by companies with which they are associated is concerned, etc. Borrowers who have defaulted and have also
committed a fraud in the account would be debarred from availing bank finance from banks and financial institutions for
a period of five years from the date of full payment of the defrauded amount.
Micro Units Development and Refinance Agency Limited (MUDRA)
As per NSSO Survey-2013, there are close to 5.77 crore small-scale business units, mostly sole proprietorships,
which undertake trading, manufacturing, retail and other small-scale activities. Most individuals, especially those
living in rural and interior parts of India, have been excluded from the benefits of formal banking system.
Therefore, they never had access to insurance, credit, loans and other financial instruments to help them establish
and grow their micro businesses. Majority of them depend on local money lenders at exorbitant interest rates.
Today, this segment is unregulated and without financial support or cover from the organized financial banking
system.
th
In the above backdrop, MUDRA was launched on 8 April 2015 with a corpus of 720000 crore and a credit guarantee corpus of
73000 crore. Now it is operating as a subsidiary company of SIDBI with the following objectives:
• Bring stability to the microfinance system through regulation and inclusive participation.
• Extend finance and credit support to Microfinance Institutions (MFI) and agencies that lend money to small
businesses, retailers, self-help groups and individuals.
• Register all MFIs and introduce a system of performance rating and accreditation. This will help last-mile
borrowers of finance to evaluate and approach the MFI that meets their requirement best and whose past record
is most satisfactory.
• Provide structured guidelines for the borrowers to follow to avoid failure of business or take corrective steps in
time. It helps in laying down guidelines or acceptable procedures to be followed by the lenders to recover
money in cases of default.
• Offer a Credit Guarantee scheme for providing guarantees to loans being offered to micro businesses.
• Introduce appropriate technologies to assist in the process of efficient lending, borrowing and monitoring of distributed
capital.
MUDRA borrowers are classified into three segments viz., the starters (Shishu Loans up to 750000/-), the mid-stage
finance seekers (Kishor - Loans above 750000/- and up to 75 lakh and the next level growth seekers (Tarun - Loans above
75 lakh and upto 710 lakh). Initially, sector-specific schemes will be confined to "Land Transport, Community, Social &
Personal Services, Food Product and Textile Product sectors". Banks are advised to classify all loans sanctioned up to 710
lakh for income generating non-farm activities can be classified under Mudra Loans. All TODs sanctioned in PMJDY
accounts up to 75000/- also can be classified under Mudra and loans sanctioned under Shishu are exempted from Unit
Inspection and Ledger Folio charges. In the long run, it is proposed to launch new schemes such as Mudra Card, Portfolio
Credit Guarantee and Credit Enhancement, to encompass more sectors.
Govt. of India envisages building appropriate framework for developing an efficient last-mile credit delivery system to small and
micro businesses. Hope this will be a game changer in the ensuing years.
Retail Banking
Retail Banking is basically a mass banking with focus on Individual customer rather than on large Corporate
Houses/Groups, both on liabilities and assets side of the balance sheet. While Savings, Current and Fixed deposits, with
certain flavors, remain the prominent products on the liability side; the assets side includes products like Housing,
Education, Vehicle, Clean and Personal loans. Besides the above, banks are also extending ancillary services such as
Credit/Debit cards, Depository services, Bank assurance products, Mutual funds etc. It is appropriate to call Retail
Banking as a Life Cycle Product package for individuals to meet all their banking needs right from childhood to silver-line
age. While considerable growth rate is seen under PSBs deposits, the share of low cost deposits has come down from
40% to 35% during the last one decade. Similarly, Yield on advances is under strain on account of offering competitive
interest rates to corporate clientele besides rise of Non Performing Assets over the years. Today, the survival and the
success of the banks crucially depend on sustainability of Net Interest Margin (NIM), which is possible only through
judicious deposit mix (CASA) besides augmenting Interest Income through expansion of credit portfolio with quality. In
the above backdrop, banks have been focusing attention on Retail banking.
The Retail Banking segment is of heterogeneous nature as it comprises of various sets of people like Professionals,
Employees, Entrepreneurs, Labour, Farmers, and Students etc. While the basic banking requirement i.e. Bank Account,
remain the same for all the segments, they need specific services depending on their demographic, economic and social
background. To reach the target customers the market can be segregated based on the geographic, demographic,
psychographic and behavioral aspects. In order to penetrate in to the untapped market, there is an imminent need to
map the banking requirements of the existing/prospective customers to the available products and channels on a
priority.
The sustained GDP growth has given a fillip to a consumer boom. The rise of the Indian middle class coupled with more
liberal attitude towards spending and personal debt is one of the major reasons for increased retail lending in India.
Further, the increased proportion of young population (70%) provides greater demand for retail banking services. Retail
lending enables the banks to improve interest spread as the lending rates are normally higher than other segments and
the credit risk tends to be well diversified. This segment generally loyal and tend not to shift accounts very often and
facilitates cross selling.
There are seven Ps viz., Product, Price, Promotion, Place, People, Process and Physical evidence, play a vital role for the
banks in developing and designing of retail bank products. The appropriate mix will deliver the desired results.
However, Product and People are to be very much cared in marketing strategies of retail products by the frontline staff.
Today there are many players in the market to extend retail banking services on one hand and increased discerning
demands of the customers on the other hand, which is making the banks to walk on the tight rope with utmost care and
caution. Providing uninterrupted cost effective value added services to the customers is another major challenge for the
banks. India is experiencing a surge in retail banking and the market has decisively got transformed from a Sellers'
market to a Buyers' market in the light of evolving macro-economic environment, increased profile of Gen-Y and rapid
advancement in information technology. Retail Banking is going to play significant role in Indian Banking landscape and
banks now need to use retail banking as a growth trigger.
Gold Monetization Schemes
Sovereign Gold Bond Scheme (SGB) 2015: As part of implementation of Budget 2015-16 proposals, Govt. of India
has introduced Sovereign Gold Bond Scheme (SGB) on 5 th November 2015. SGBs are government securities
denominated in grams of gold. They are substitutes for holding physical gold. Investors have to pay the issue price
in cash and the bonds will be redeemed in cash on maturity. The Bonds are issued by RBI on behalf of Government
of India. The objective of the scheme is to discourage the investors to buy physical gold duly ensuring reasonable
return on their investment. It protects the interest of the investors since they receive the ongoing market price at
the time of redemption/premature redemption. Further it offers a superior alternative to holding gold in physical
form. The risks and costs of storage are fully eliminated. It is free from issues like making charges and purity in the
case of gold in jewellery form. The salient features of the Bonds are as under:
No Item Details
Eligibility Resident Indian entities including Individuals, HUFs, Trusts, Universities and Charitable
1
Institutions
2 Denomination In multiples of grams of gold with basic unit of 1 gram
3 Minimum size 2 units (2 gram gold)
4 Maximum limit 500 grams per person in a fiscal year (April to March)
5 Account type Individual or Joint
6 Forms of Bonds Optional - Physical or Demat
th
7 Tenor 8 years. However pre-closure permitted from 5 year
2.75% p.a. payable half~yearly on the initial value of the investment
8 Interest Rate
9 Nomination Available
10 Transferability Transferable
11 Tax treatment Taxable as per Income Tax Act.
Not applicable. However, the responsibility of complying with the tax laws rests with the
12 TDS
investor
In Indian Rupees on the basis of the previous week's simple average closing price
13 Redemption for gold of 999 purity published by IBJA
The holders of the bond shall be entitled to create pledge, hypothecation or lien in
14 Loans
favour of scheduled banks
KYC documents such as Voter ID, Aadhaar Card / PAN or TAN / Passport and residential
15 Documentation
proof required to be obtained
Banks earn 1% of SGB as fee which is paid by GOI. It is a source of other income to the Banks. As investors will get
returns that are linked to gold price, the scheme is expected to reduce the demand for physical gold. The bonds will
offer same benefits as physical gold and the bonds can be used as collateral for loans and can be sold or traded on
stock exchanges as they are available in demat form. At the same time investors need not worry about holding
physical gold.
So far, there are 4 issues since launching of the scheme and attracted many investors to this product. Hope this will
help the economy to reduce gold imports and enable minimize current account deficit which is the need of the hour.
Gold Deposit Scheme: With a view to bring privately held stock of gold into circulation, Govt. Of India / RBI advised
banks to introduce Gold Deposit Scheme (GDS). The salient features of the scheme are as under:
No Feature Details
Individuals (single/joint); HUFs; Trusts (including Mutual
1 Eligibility Funds/Exchange Traded Funds registered under SEBI);
Companies.
Gold deposited (Bars/Coins/Jewellery) will be melted after removing the base metal
Forms of subscription and non-gold elements, if any, to identify the pure gold content of uniform fineness.
2
3 Minimum Quantity 30 grams and no upper limit
4 Tenor of deposit Six months to Seven years (in multiples of three months)
0.50% for deposit up to 3 years; 0.75% for deposit of more than 3 years up to 7
years. Interest is calculated in terms of Gold Currency (XAU) based on principal
5 Interest Rate
quantity of deposit.
Gold Deposit Certificate (GDC) will be issued by Nodal

6 Certificate Branch after the Gold is melted, assayed and minted at India Government Mint (IGM).
The customer will be required to submit the original

certificate, duly discharged on the reverse, to reach the Nodal Branch one month
before maturity (15 days in case of cash repayment). The principal quantity of
deposit will be paid in cash or gold (995 fitness) as specified by the customer in the
7 Redemption Application Form. Any fraction quantity (< 10 grams) will be paid in equivalent
Rupees. Premature Payment is permitted after a lock in period of six months with
penalty of 0.25% on applicable interest rate.
Any time after maturity as per the term and interest rate available on maturity.
8 Renewal
Transferable by Endorsement and Delivery. In case of
Transferability certificates issued in dematerialized form, the depository rules for transfer would apply.
9
Transfer to be noted with Nodal Branch.
Loan facility Rupee Loan available at select Branches of our Bank for up to 75% of notional value of
10
Gold Deposited.
Exemptions from Income Tax, Wealth Tax and Capital Gains available.
11 Tax Benefits
The customers would have to fulfil all KYC requirements as
applicable to other deposit products. In addition,
Documents
12 customers will be required to submit Inventory Form with description of gold, number
required
of pieces and weight of gold after preliminary checking of purity.
The mobilised gold with the bank will constitute an eligible asset under SLR if the banks hold such gold with
themselves in physical form. Banks are required to convert the liabilities and assets denominated in terms of gold
into rupees for the purpose of compliance with reserve requirements / capital prescription requirements / balance
sheet translation requirements.
The GDS is a significant step towards mobilizing India's gold and it can provide a fillip to the gems and jewellery
sector by making gold available as loans from the banks. However, the success of the scheme depends on trust of
the consumers flowing around the monetization ecosystem, ease of transactions, robust infrastructure to handle
increased volumes (scalability) besides providing win-win platform to all the stakeholders. The scheme is going to
be operational shortly on circulation of final guidelines by the regulator.
Real Estate Investment Trusts (REITs)
Real Estate sector is playing a key role in economic development as many other sectors such as Steel, Cement,
Labour etc., are depending on this sector. Real estate, particularly commercial real estate as an asset class has
traditionally been out of reach of an average Indian investor as the entry level investment is huge and prohibitive.
In order to provide access to common investor to this segment, REITs are permitted to raise funds through an
Initial Public Offer (IPO) or Follow-on Public Issue (FPO), QIP, Rights Issue and any other mechanism specified by
SEBI. Once REITs pool money from investors, units with minimum ticket size of 72 lakh will be issued to the
investors which can be traded on stock exchanges (minimum lot size is 71 lakh).
REITs invest the funds received in income generating real estate assets such as shopping malls, office buildings,
apartments, hotels, warehouses etc. As per SEBI guidelines, REITs are close ended schemes and can only invest in
income generating real estate properties, prohibiting investments in vacant land. REIT schemes have to be rated by
a credit rating agency and shall not invest more than 15% in a single real estate project.
The dividend payout depends on cash flow (distributable income) through sale of property or through rental income. As per
SEBI guidelines, it is mandatory for REITs to declare 90% of distributable income as dividend to the unit holders. Thus, these
instruments emerge as new asset class - typically a liquid, dividend paying and asset backed instrument. The investors in
REITs will enjoy twin benefits - Yie/d and capita/ appreciation. Normally, the risk-averse investors opt for this type of
instruments.
The REIT is an investment vehicle that invests in rent-yielding completed real estate properties has the potential to
transform the Indian real estate sector. Currently, developers incur huge capital expenditure especially in
Commercial Real Estate (CRE), on land, construction, furnishing, etc., which remains locked for long years until the
asset generates returns to break-even. REIT will help attracting long-term financing from domestic as well as
foreign sources at low cost. The disclosure norms such as average rents, occupancy levels, tenant profile, renewal
profile, etc., have been paving the way to improve the transparency and governance issues and it is a win-win
situation to both developers and investors.
The existing Dividend Distribution Tax (DDT), Minimum Alternate Tax (MAT) and stamp duty implications need to
be resolved to encourage the retail investor participation in this sector. It is pertinent to tap interest from foreign
investors as it would be a very viable asset class in the backdrop of low interest rates prevailing globally.
Therefore, amendments to the foreign exchange control regulations is required to enable foreign private equity
players who are currently invested in commercial stabilised assets to sponsor/manage the REIT. Listing of REITS
would be greatly beneficial to the Indian real estate industry as it would be viable exit options to the relevant
stakeholders. However, to ensure the success, the Government needs to move quickly on the REIT market reforms.
Startup India
Many enterprising people who dream of starting their own business lack the resources to do so and as a result,
their ideas, talent and capabilities remain untapped and the country loses out on wealth creation, economic growth
and employment. In the above backdrop, the Prime Minister of India announced a new scheme "Startup India" on
/5 t ~ August 20/5. It is a revolutionary scheme that helps the people who wish to start their own business with
required encouragement and support. The objective of the scheme is that "India must become a nation of Job
Creators instead of being a nation of Job Seekers':
Startup India means an entity whether it is a Partnership firm, or Limited Liability Partnership or Private Limited
company incorporated or registered in India, not older than 5 years, annual turnover does not exceeding Rs.25 crore in
any preceding financial year, and it should work towards innovation, development, deployment or commercialization of
new products, processes or services driven by technology or intellectual property.
One of key challenges faced by Startups in India has been access to finance. Often Startups, due to lack of
collaterals or existing cash flows, fail to justify the loans. In order to provide funding support, Government has set
up a fund with an initial corpus of Rs.2500 crore per annum for the next 4 years. The Fund is not meant for
investing directly into Startups, but shall participate in the capital of SEBI registered Venture Funds. Debt funding
to Startups is also perceived as high risk area and to encourage Banks and other Lenders to provide Venture Debts
to Startups, Credit guarantee mechanism through National Credit Guarantee Trust Company (NCGTC)/ SIDBI is
being envisaged with a budgetary corpus of Rs.500 crore per year for the next four years.
The action plan initiated by the Government to achieve the desired results is creating environment to do the
business with ease with simplified systems/procedures and providing fee exemptions as well tax concessions. A
startup ecosystem comprises of entrepreneurs, different kinds of financial support such as debt financing, equity
investments, grants, and non-financial support including incubation, acceleration support, mentoring and
technical experts. Hope that this initiative will go a significant way in reiterating Government of India's
commitment to making India the hub of innovation, design and Start-ups.
Make in India
India is a country with rich natural resources besides abundant skilled manpower. However, the economy is not
growing in the desired direction and majority educated youth moving abroad for livelihood which is a cause of
serious concern. In the above backdrop, The "Make in India" program was launched by Shri Narendra Modi, Prime
Minister in September 2014 as part of a wider set of nation building initiatives with focus on to boost the domestic
manufacturing industry and to invite foreign investors to India. The logo for the campaign is an elegant lion, inspired
by the Ashoka Chakra and designed to represent India's success in all spheres.
Make in India is a powerful, galvanizing call to Indian Citizens & Business Leaders, and an invitation to potential
Partners & Investors across the Globe. It represents a comprehensive and unprecedented overhaul of outdated
processes and policies. Most importantly, it intends a complete change of the Government's mindset and move
towards "Minimum Government & Maximum Governance" philosophy. The program aims to inspire confidence in
India's capabilities amongst potential partners within and outside India duly providing a framework for a vast amount
of technical information on the following 25 industry sectors to reach out to huge market via social media.
Automobiles Food Processing Renewable Energy
Automobile Components IT and BPM Roads and highways
Aviation Leather Space
Biotechnology Media and Entertainment Textiles and garments
Chemicals Mining Thermal Power
Construction Oil and Gas Tourism and Hospitality
Defence manufacturing Pharmaceuticals Wellness
Electrical Machinery Ports
Electronic Systems Railways
Opening up of key sectors like Railways, Defence, Insurance and Medical Devices has paved the way to attract Foreign
Direct Investment inflows. It demonstrated the transformational power of collaborative model "Public Private
Partnership (PPP)", and has become a hallmark of the Make in India program. There is visible momentum, energy and
optimism and moving on its way to become the world's most powerful economy.
Stand Up India Scheme (SUIS)
India is one of the promising economies where people have intelligent minds, ideas, concepts and above all much
more dedication towards their career compared many countries across the world. If these people get a strong
financial backup, there is every possibility that our country definitely can achieve a lot more success and capable
of finding respectable place among developed nations. In the above backdrop, Prime Minister has launched a
novel employment scheme titled "Stand up India Scheme (SUIS)" on 5 th April 2016, with the objective to promote
entrepreneurship amongst the Schedule Caste / Schedule Tribe and Women duly providing handholding support
to enable them from mere "Job Seekers to Job Creators". The broad features of the scheme are as under:
• Indian Citizens whose age is above 18 years.

• Meant for Scheduled Caste (SC) or Scheduled Tribe (ST) and Woman.
• Loans under the scheme are available for only Green field Projects.
• The entrepreneur may be engaged in manufacturing, services or the trading sector.
• The loan shall be a Composite loan (Term loan and working capital) between 710 lakh and upto 7100 lakh.
• The Scheme envisages 25% margin money which can be provided in convergence with eligible Central /
State schemes. While such schemes can be drawn upon for availing admissible subsidies or for meeting
margin money requirements. In all cases, the borrower shall be required to bring in minimum of 10% of the
project cost as own contribution.
• Besides primary security, the loan may be secured by collateral security or guarantee of Credit Guarantee
Fund Scheme for Stand-Up India Loans (CGFSIL), nodal agency National Credit Guarantee Trustee
Company (NCGTC), as decided by the banks.
• The interest rate would be applicable rate of the bank for that category (rating category) not to exceed (MCLR+3%+
tenor premium).
• The term loan is repayable within 7 years with a maximum moratorium period of 18 months.
• Other Benefits:
• Earlier the startups had to struggle very much to get them registered. Now the government launched a
st
mobile app on 1 April 2016 whereby the registration process will take only a day to complete. Also a web
portal is launched to give clearances, approvals, etc. The labor law related inspection will not be carried
out on the startups for the first three years.
• The startups can now claim up to 80% rebates on patent costs and the government will also be paying the fees
of the facilitator that helped the startup to obtain the patents faster for Intellectual Property Rights (IPRs) by
introducing simplified procedures.
• The eligibility criteria of having a prior experience or turnover experience to open a business has now be removed -
without compromising on the quality of the goods produced.
• Tax exemptions on capital gains can now be claimed by the investors under this scheme. The tax exemption
regulation which is applicable for newly formed MSMEs will now be extended to all start ups for the first 3
years. However startup will be eligible for tax benefits only after obtaining a certificate from the Inter
Ministerial Board.
Goods & Services Tax (GST)

GST is a comprehensive tax levy on manufacture, sale and consumption of goods and services at a national level. It is a part of
proposed tax reforms in India having an extensive base that instigate the applicability of an efficient and harmonized
consumption tax system. The system of GST is commonly accepted in more than 140 countries across the world.
Structural Tax Reforms: The GST will reshape the indirect tax structure by subsuming majority of indirect taxes like
excise, sales and services levies. This will do away with the complex indirect tax structure of the country, thus improving
the ease of doing business in the country.
Cost Competitiveness: Exports will become competitive as the GST regime will eliminate the cascading impact of taxes. GST is a
key 'brahmastra' for India's gross domestic product in times of challenging global environment.
Unified Market: GST will lead to the creation of a unified market, which would facilitate seamless movement of goods across
states and reduce the transaction cost of businesses. It will help bring down logistical costs.
Increased Tax Collections: Under the GST, manufacturers will get credits for all taxes paid earlier in the goods/services
chain, thus incentivizing firms to source inputs from other registered dealers. This could bring in additional revenues to
the government as the unorganized sector, which is not part of the value chain, would be drawn into the tax net.
Combating Corruption: Documentation is a prerequisite to claim input tax credit. Thus, the new tax regime is seen as less
intrusive, more self-policing, and hence more effective way of reducing corruption.
Tax compliance: The supplier, because of the paper trail left by the GST, knows that his evasion will be more likely to be detected
once his client is audited. It improves tax compliance in the long run.
However, on the flip-side, the service tax rate could shoot up from the current level of 15 per cent (including Krishi Kalyan Cess
to 18 per cent may lead to rise in prices and inflation in the short run.
Impact on Exports: The GST system mandates that all duties must be paid at the time of a transaction while refund for
these can be obtained after exports. This means the exporter will have to arrange funds for the inputs, manufacturing
and payment of duties and taxes. This may warrants increased working capital requirement which need to be resolved.
Impact on Banking and Financial Services: At present, the effective tax rate on banking and financial services (Loan
processing, Debit/Credit card, insurance premium, Funds transfer, Service charges etc.,) is 14% which is likely to up by
another 4% to 5% once the GST is implemented.
Conclusion:
The GST rollout will be a time-consuming, complex process. There are a few key amendments which include changing the
wording on the matter of five-year compensation to the states and work out a model to strengthen the built of the state dispute
resolution mechanism, and, probably, working out a definition for the concept of revenue neutral rate (no loss, no profit tax rate
for states).
The GST council agreed to implement rate structure with four slabs viz., 5, 12, 18 and 28%. The lowest rate i.e. 5% is proposed
to mass consumer goods; the essential services are taxed at 12%; the products which are commonly used by the lower middle
class are taxed at 18%; and white goods & consumer durables are taxed at peak rate of 28%. Apart from this, four "Demerit"
goods viz., Luxury cars, Pan masala, Aerated drinks and Tobacco products will be taxed at 40% to 65% inclusive of a cess.
Once implemented, the GST will replace all versions of indirect tax levies including VAT, octroi, excise duty, service tax and
any other state-level taxes. This is a big exercise and putting in place the systems to implement this will take months. Though
bigger states are on board, the GST Bill will have to go through several other smaller states where practical implementation
issues will play a bigger role than politics.
The macroeconomic impact of a change to the introduction of the GST is significant in terms of growth effects, price effects,
current account effects and the effect on the budget balance. Further, in a highly developed open economy with a high and
growing service sector, a change in the tax mix from income to consumption-based taxes is likely to provide a fruitful source of
revenue. Implementation of GST could facilitate a much needed correction in fiscal deficit.
Passage of GST amendment is an important landmark in the history tax reforms in India. Nevertheless it is only the beginning of
a long journey.
Aadhar Bill - 2016

The Unique Identification Authority of India (UIDAI) was established by Government of India with an objective to
implement Multipurpose National Identity Card in the country. It is also called as UID or Aadhar Card. It is aimed to
eliminate duplicate/fake identities and to put hassle-free, cost effective verification/authentication system in place
thereby to save considerable resources of various User Departments as well as beneficiaries at large. Central/State
Governments and Public Sector Banks are acting as Registrars for the project. The Registrar or its agents collect details
of Demographic information and Biometric details such as Facial Image (Photo), Finger Prints (10) and iris scan of the
applicant to establish individual's uniqueness. De-duplication exercise ensures that nobody gets more than one number
and in case a person already enrolled approaches the registrar, his biometric parameters will be run through the
database and if matches his application will be rejected right away. It is a 12 digit identity code and will remain a
permanent identifier. Aadhaar number is Indian equivalent to the Social Security Number in the United States of
America.
Unique Identification project was initially conceived by the Planning Commission in the year 2006 as an initiative that
would provide identification for each resident across the country and would be used primarily as the basis for efficient
delivery of welfare services. It would also act as a tool for effective monitoring of various programs and schemes of the
Government. Subsequently, Shri.Nandan M. Nilekani joined as first Chairman of UIDAI in July 2009. The Council is to
advise the UIDAI on Programme, methodology and implementation to ensure co-ordination between Ministries /
Departments, stakeholders and partners.
The recently passed Aadhaar Bill-2016 plans to use the identification number issued by UIDAI to deliver state subsidies
directly in to the hands of the beneficiaries. The bill has gained utmost importance on account of its utility as well as the
other issues associated with it. The lion portion of the Union Budget has been towards many kinds of subsidies and
monetary payments to the economically weaker sections segments of the country. But as these payments trickle down
from the centre through long chain of intermediaries to the final beneficiary, a lot of it is lost on account corruption,
leakages and bribes. The government is now keen to reduce these leakages by crediting subsidies directly into the bank
accounts of the beneficiaries through its JAM initiative - Jan Dhan Bank account Aadhaar Number - Mobile Number.
The Aadhaar Bill directly affects the residents in two ways. One, with the government now having a right to demand
for Aadhaar, the Identification Number may soon become essential to avail any subsidy or service from the
government. Two, there are concerns that once the citizens share so much information with the government, including
sensitive information such as fingerprints, these may be vulnerable to data theft or misuse by the authorities.
However, Aadhaar Bill has some safeguards in place to address the privacy concerns. The UIDAI is not permitted to
share information relating to any individual - be it personal details such as date of birth or biometrics except under sec
33 of the bill which are as under:
• In the interest of "National Security" which will be decided by the Oversight Committee comprising Cabinet
Secretary, Secretaries of Legal affairs, Electronic and Information Technology.
• Courts may order that an individual's biometric and demographic information may be revealed.
It gives a big push to the government's financial inclusion agenda and provides strong foundation to deliver better
services and improve the operational efficiency of the system.
Financial Sector Legislative Reforms Commission (FSLRC)

Financial sector being a catalyst for the real sector growth has to be dynamic enough to support the growth aspirations.
The institutional framework i.e. laws, policies and organizations, governing the financial sector should enable its orderly
growth in tune with such aspirations. The existing framework governing the financial sector built up over 60 Acts with
multiple rules and regulations date back several decades, when the financial landscape was very different from that of
today. At present, India has a legacy financial regulatory architecture viz., Reserve Bank of India (RBI), Securities
Exchange Board of India (SEBI), Insurance Regulation and Development Authority (IRDA), Pension Funds Regulation and
Development Authority (PFRDA) and Forward Market Commission (FMC).
While the objective of RBI is to manage the monetary and credit system of the country, SEBI works towards promotion
of orderly and healthy growth of the securities market duly protecting the interests of the investors. Similarly, IRDA
promotes and regulates insurance industry and PFRDA deals with pensions and old age income security among all
citizens of the country. The FMC is the chief regulator of forward and future markets in India. The weaknesses in the
existing structure are prevalence of gaps where no regulator is in-charge, conflicts between regulators & laws.
Fragmentation of financial regulation leads to a reduced ability to understand risk and problems are likely to
exacerbate.
In the above backdrop, Financial Sector Legislative Reforms Commission (FSLRC) was set up in the year 2011 chaired by
Shri B N Srikrishna, a former Supreme Court Judge, to review and rewrite the legal-institutional architecture of the
Indian financial sector. The commission presented its report in the year 2013 and proposes a sweeping reorganization
of the financial architecture and the significant recommendations are as under:
It is proposed that RBI will perform three functions viz., Monetary policy, Regulation and Supervision of banking in enforcing the
proposed consumer protection law and micro-prudential laws. Further, It is proposed to create a separate agency to manage
Public Debt, removing these functions from the RBI. Central Government would promulgate 'rules' governing inbound capital
flows while the RBI would promulgate 'regulations' governing outbound flows.
The report presents ambitious legislative reforms that could be brought about by introducing 'non-sectoral' laws (Laws
that represent a common set of principles for governance of financial sector regulatory institutions; Laws that are not
specifically applicable to any one sector). The present operations of SEBI, PFRDA and FMC would be rolled into a new
Unified Financial Agency (UFA). The unification of regulation and supervision of financial firms would yield consistent
treatment in consumer protection and micro-prudential regulation. This would yield benefits in terms of economies of
scope and scale in the financial system. To implement the revised financial regulatory architecture, it is proposed to create
a new agency "Financial Redressal Agency". These initiatives enable the entities to focus attention on the core objectives
i.e. innovation and Consumer protection.
Payments Banks & Small Finance Banks
In the liberalized financial world, every citizen need to have a bank account to meet their financial needs may be
savings, borrowings and remittances. This is more so with the unbanked and under-banked population. However, the
fact remains that the transaction costs have become barriers for penetration of banking into rural and unbanked areas.
In the above backdrop, Reserve Bank of India has initiated steps to introduce the concept of setting up of "Payments
Banks" and "Small Finance Banks".
Payments Banks: The primary objective of setting up of Payments Banks will be to further financial inclusion by providing
small savings accounts and payments/remittance services to migrant labour workforce, low income households, small
businesses, other unorganized sector entities and other users, by enabling high volume-low value transactions in deposits
and payments/remittance services in a secured technology driven environment.
The eligible promoters will include existing non-bank prepaid payment issuers and other entities such as
individuals/professionals, NBFCs, Corporate Business Correspondents, Mobile telephone operators and Super market
chains. A promoter/promoter group can have a joint venture with an existing scheduled commercial bank to set up a
payment bank subject to the stake holding complying with Banking Regulation Act. RBI would assess the 'fit and proper'
status of the applicants on the basis of their past record of sound credentials and integrity; financial soundness and
successful track record of at least 5 years in running their businesses.
The Payments Bank will be set up as a differentiated bank and shall confine its activities to further the objectives for
which it is set up. Therefore, the Payments Bank would be permitted to undertake only certain restricted activities such
as
Acceptance of demand deposits (current and savings bank deposits). Payments Banks will initially be restricted
to holding a maximum balance of 71 lakh per customer. After the performance of the Payments Bank is gauged
by the RBI, the maximum balance can be raised. However, the payments bank cannot undertake lending
activities. However, as per the recent RBI guidelines, Payment Banks are allowed to accept deposits beyond 71
lakh with sweep arrangements with other Scheduled Commercial Bank or Small Finance Bank. This arrangement
should be activated with prior written consent of the customer.
The Payments banks will provide small savings accounts and payments/remittance facilities to migrant labour
workforce, low income households, small businesses, other unorganized sector entities and other users
through various channels including Branches, BCs, and ATMs. Cash-out can also be permitted at Point-of-Sale
terminal locations as per extant instructions issued under the PSS Act. In the case of walk-in customers, the
bank should follow the extant KYC guidelines issued by the RBI. However, these banks are not allowed to
issue credit cards.
No Pass book will be issued to the customer. However, account information will be provided to the
customers through multiple user friendly modes viz., SMS, E-mail, Internet Banking etc. They may provide a
statement of account in paper form on request on chargeable basis.
Opening of physical access points require prior permission from RBI for the initial five years period.
A Payments Bank may choose to become a BC of another bank for credit and other services which it cannot
offer. The Payments Bank cannot set up subsidiaries to undertake non-banking financial services activities.
The other financial and non-financial services activities of the promoters, if any, should be kept distinctly
ring-fenced and not comingled with the banking and financial services business of the Payments Bank.
The minimum paid up capital for Payments Bank shall be 7100 crore. The promoter's minimum initial contribution to
the paid up voting equity capital of Payments Bank shall be at least 40 per cent which shall be locked in for a period of
five years from the date of commencement of business of the bank. Shareholding by promoters in the bank in excess
of 40 per cent shall be brought down to 40 per cent within three years from the date of commencement of business of
the bank. Further, the promoter's stake should be brought down to 30 per cent of the paid-up voting equity capital of
the bank within a period of 10 years, and to 26 per cent within 12 years from the date of commencement of business
of the bank. Foreign Direct Investors (FDIs) are allowed to invest up to 74 per cent of the paid up capital of the bank.
The Payments Bank shall be required to maintain a minimum capital adequacy ratio of 15 per cent of its risk weighted
assets (RWA) on a continuous basis, subject to any higher percentage as may be prescribed by RBI from time to time.
The minimum Tier-I & Tier-II capital should be 7.50% each. The capital adequacy ratio will be computed under
simplified Basel-I standards.
RBI has mandated that these banks are required to invest a minimum of 75% deposits collected from the public in
government securities up to one year maturity. They are allowed to hold a maximum of 25% in current / fixed deposits
with other scheduled commercial banks for operational and liquidity management purposes. These banks are required
to maintain CRR and SLR as applicable to the existing commercial banks. The Payments Bank should have a leverage
ratio of not less than
3.3 per cent, i.e., its outside liabilities should not exceed 33 times its net-worth / paid-up capital and reserves.
New Players: RBI has granted "in-principle" approval to set up Payments Banks to 11 players viz., Aditya Birla Nuvo Ltd.,
Airtel M Commerce Services Ltd., Cholamandalam Distribution Services Ltd., Department of Posts, Fino PayTech, Ltd.,
National Securities Depository Ltd., Reliance Industries Ltd., Shri Dilip Shantilal Shanghvi, Shri Vijay Shekhar Sharma,
Tech Mahindra Ltd. and Vodafone m-pesa Ltd.
A detailed scrutiny was undertaken by an External Advisory Committee (EAC) as well as Internal Screening Committee
(ISC) and furnished the list to the Committee of the Central Board (CCB) of RBI. The CCB evaluated applicants to assess
whether there would be unacceptable risk even to the narrower functions of a payments bank. It has selected entities
with experience in different sectors and with different capabilities so that different models could be tried. It did ensure
that all the selected applicants have the reach and the technological and financial strength to service hitherto excluded
customers across the country. The Payments Banks has plenty of business potential as the command area (rural and
semi-urban) is unbanked or under-banked. However, the players need to adopt appropriate cost effective innovative
viable business model.
Out of 11 in-principle approvals, subsequently 3 applicants viz., Tech Mahindra, Cholamandalam Investments & finance
company and Dilip Shantilal Shangvi have withdrawn from the race. Recently, RBI has approved M/s.Aditya Birla Nuvo
ltd., to set up bank with title "Paytm Payments Bank" and the the bank commenced operations in the month of January
2017.
Small Finance Banks: Majority of residents of Rural areas are deprived of basic banking services on account of non
availability of bank branches due to high cost operations and low volume. To address this issue RBI permitted private
players to set up Local Area Banks (LAB) in the year 1996. At present four LABs are functioning satisfactorily and playing
an important role in the supply of credit to micro and small enterprises, agriculture and banking services in the unbanked
and under-banked regions. To strengthen the existing system further, RBI issued fresh guidelines for licensing of Small
Finance Banks in the private sector in the month of July 2014.
The objective of the Banks will be for furthering financial inclusion by extending basic banking services to underserved and
unserved sections of the population and also to extend credit facilities to small business units, small farmers, micro and small
industries and other unorganized sector entities in their limited areas of operations through high technology & low cost
operations.
Resident individuals/professionals with 10 years of experience in banking and finance, Companies and Societies will be
eligible as promoters to setup Small Finance Banks. Existing NBFCs, MFIs and LABs can also opt for conversion into Small
Finance Banks after complying with all legal and regulatory requirements. Local focus and ability to serve small
customers will be a key criterion in licensing Small Finance Banks. RBI would assess the "fit and proper" status of the
applicants on the basis of their past record of sound credentials and integrity etc., for at least a period of 5 years.
However, the proposals from large public sector entities and industrial and business houses, including NBFCs promoted
by them, will not be entertained to setup Small Finance Banks.
The area of operations of the Small Finance Banks will normally be restricted to contiguous districts in a homogeneous
cluster of States/Union Territories. However, the bank will be allowed to expand its area of operations beyond
contiguous districts in one or more States with reasonable geographical proximity. These banks must have at least 25%
their branches in unbanked rural areas.
The minimum paid up capital for Small Finance Bank shall be T100 crore. The promoter's minimum initial contribution
to the paid up voting equity capital of Payments Bank shall be at least 40 per cent which shall be locked in for a period
of five years from the date of commencement of business of the bank. Shareholding by promoters in the bank in excess
of 40 per cent shall be brought down to 40 per cent within three years from the date of commencement of business of
the bank. Further, the promoter's stake should be brought down to 30 per cent of the paid-up voting equity capital of
the bank within a period of 10 years, and to 26 per cent within 12 years from the date of commencement of business of
the bank.
The Small Finance Bank shall be required to maintain a minimum capital adequacy ratio of 15 per cent of its risk weighted
assets (RWA) on a continuous basis, subject to any higher percentage as may be prescribed by RBI from time to time. The
minimum Tier-I & Tier-II capital should be 7.50% each. The capital adequacy ratio will be computed under simplified
Basel-I standards.
These banks are subject to all prudential norms and regulations of RBI as applicable to existing commercial banks
including requirement of maintenance of CRR/SLR and priority sector lending targets. These banks are required to
extend 75% of its Adjusted Net Bank Credit to priority sector which include agriculture, micro loans, rural home loans,
education loans etc. While Leverage Ratio set at 4.50%, the Liquidity Coverage Ratio (LCR) is as applicable to SCBs.
The maximum loan size and investment limit exposure to single/group borrowers/issuers will be restricted to 15% of its
capital funds. At least 50% of its loan portfolio should constitute loans and advances of size up to 725 lakh in order to
extend loans primarily to micro enterprises.
Small Finance Banks may, at their discretion, issue passbooks for the deposit accounts in addition to the electronic
confirmation of the deposit. These banks should send a statement of accounts once in six months to the registered
address free of cost, if passbooks have not been issued. However, account information will be provided to the
customers through multiple user friendly modes viz., SMS, E-mail, Internet Banking etc. They may provide a statement
of account in paper form on request on chargeable basis.
These banks may engage all permitted entities, including the companies owned by their business partners and own group
companies, on an arm's length basis as Business Correspondents.
New Players: Microfinance Institutions (MFIs) dominated the second set of differentiated banks announced by RBI
recently. Eight out of Ten approved Small Finance Banks belongs to Micro Finance sector. The entities who received "in-
principle" approval to set up Small Finance Banks are - Au Financiers (India) Ltd., Disha Microfin Private Ltd., Eqitas
Holdings Private Ltd. (Ahmedabad), Equitas Holdings Private Ltd. (Chennai), ESAF Microfinance and Investments Private
Ltd., Janalakshmi Financial Private Ltd., RGVN (North East) Micro Finance Ltd., Suryoday Micro Finance Private Ltd., Ujjivan
Financial Services Private Ltd., and Utkarsh Micro Finance Private ltd.
The entry of MFIs in this segment is a revolutionary step since these entities are well-familiar with the nuances of banking
with the poor borrowers. MFIs were so far not allowed to accept deposits and engaged in extending credit after sourcing
money from commercial banks. Now, by getting access to banking, these entities can tap public deposits, which will
significantly lower their cost of borrowing and enable them bring down their rate of interest on loans from the current 24-
26 per cent to a level decided by the market competition, possibly lower double digit figures. Becoming
Small Finance Banks will help them significantly lower their borrowing costs, and engage in businesses focused on small and
medium enterprises and the lower end of the retail customer base.
In the light of rapid developments in the technology, RBI proposes to redefine the "Branch outlet" by including all
Extension Counters, Satellite Offices, Ultra Small Branches, Fixed Point Business Correspondent outlets and manned
ATMs as Banking Outlet. All Scheduled Commercial Banks are required to open minimum 25 percent of their new
outlets in Unbanked Rural Centers (URC).
Impact on existing banking players: Once these firms enter the banking landscape, logically, the bigger commercial
banks will face intensified competition in retail segment especially CASA deposits and small-value loan market. State-
run banks, which used to have dominance in rural areas of the country with their reach, will find competition tougher if
the new set of banks hit the market with competitive rates of interest to poach customers. Public Sector Banks will have
to work harder. Nevertheless, the entry of Small and Payments banks mark the biggest banking revolution India has
witnessed after the nationalization of banks. This will create positive disruptions in the country's banking sector,
intensifying competition, thus making banking more affordable for the common man.
The new set of banks viz., Payments Banks & Small Finance Banks are generally operate among low-income segments and
not chase big borrowers. Logically, they have to work out viable models to stay in the competition. This can give a major
boost to financial inclusion and credit-expansion to unbanked areas given that in this case financial inclusion wouldn't be a
charity forced by regulation like the existing commercial banks. In this case it would be the mainstay of the business. That's
good news for the Indian poor.
Both Payments Banks and Small Finance Banks are "niche" or "differentiated" banks, with the common objective of
furthering financial inclusion. Technology plays a major role in this regard. These Banks definitely unlocks business
potential and paves the way to reach the bottom of pyramid, which is a long cherished desire of the nation.
New Banks and Payments & Small Finance Banks
The guidelines for "Licensing of New Banks in the Private Sector" have now been released by RBI and the salient features are:
i) Eligible Promoters: Entities/groups in the private sector, entities in public sector and Non-Banking Financial
Companies (NBFCs) shall be eligible to set up a bank through a wholly-owned Non-Operative Financial Holding Company
(NOFHC).
ii) `Fit and Proper' criteria: Entities/groups should have a past record of sound credentials and integrity, be
financially sound with a successful track record of 10 years. For this purpose, RBI may seek feedback from other
regulators and enforcement and investigative agencies.
iii) Corporate structure of the NOFHC: The NOFHC shall be wholly owned by the Promoter/Promoter Group. The NOFHC
shall hold the bank as well as all the other financial services entities of the group.
iv) Minimum Voting Equity capital requirements for banks and shareholding by NOFHC: The initial minimum paid-
up voting equity capital for a bank shall be 75 billion. The NOFHC shall initially hold a minimum of 40 per cent of the
paid-up voting equity capital of the bank which shall be locked in for a period of five years and which shall be
brought down to 15 per cent within 12 years. The bank shall get its shares listed on the stock exchanges within 3
years of the commencement of business by the bank.
v) Regulatory framework: The bank will be governed by the provisions of the relevant Acts, Statutes, Directives,
Prudential regulations and other Guidelines / Instructions issued by RBI and other regulators. The NOFHC shall be registered
as a non-banking finance company (NBFC) with the RBI and will be governed by a separate set of directions issued by RBI.
vi) Foreign shareholding in the bank: The aggregate non-resident shareholding in the new bank shall not exceed 49% for
the first 5 years after which it will be as per the extant policy.
vii) Corporate governance of NOFHC: At least 50% of the Directors of the NOFHC should be independent directors. The
corporate structure should not impede effective supervision of the bank and the NOFHC on a consolidated basis by RBI.
viii) Prudential norms for the NOFHC: The prudential norms will be applied to NOFHC both on stand-alone as well as on a
consolidated basis and the norms would be on similar lines as that of the bank.
ix) Exposure norms: The NOFHC and the bank shall not have any exposure to the Promoter Group. The bank shall not
invest in the equity/debt capital instruments of any financial entities held by the NOFHC.
x) Business Plan for the bank: The business plan should be realistic and viable and should address how the bank
proposes to achieve financial inclusion.
xi) Other conditions for the bank:
• The bank shall open at least 25 per cent of its branches in unbanked rural centres (population up to 9,999 as per the
latest census)
• The bank shall comply with the priority sector lending targets and sub-targets as applicable to the existing domestic
banks.
• Banks promoted by groups having 40 per cent or more assets/income from non-financial business will require RBI's
prior approval for raising paid-up voting equity capital beyond 710 billion for every block of 75 billion.
• Any non-compliance of terms and conditions will attract penal measures including cancellation of licence of the
bank.
xii) Additional conditions for NBFCs promoting/converting into a bank: Existing NBFCs, if considered eligible, may be
permitted to promote a new bank or convert themselves into banks.
Procedure for RBI decisions: At the first stage, the applications will be screened by RBI and thereafter, the
applications will be referred to a High Level Advisory Committee. Based on committee recommendations RBI issues
in-principle approvals. The validity of the in-principle approval will be one year. In order to ensure transparency, the
names of the applicants will be placed on the Reserve Bank website after the last date of receipt of applications.
Under revised norms, RBI has issued licenses to two banks viz., IDFC Ltd., and Bandhan Financial Services and they have
commenced operations in the year 2015.
Impact of the Budget: The budget announcements have direct bearing on many sectors and impact the interest rates,
stock markets and whole economy. How the finance minister spends and invests money affects the fiscal deficit. The
extent of the deficit and the means of financing it influence the money supply and the interest rate in the economy.
High interest rates mean higher cost of capital for the industry, lower profits and hence lower stock prices. The fiscal
measures undertaken by the government affect public expenditure. For instance, an increase in direct taxes would
decrease disposable income, thus reducing demand for goods. This decrease in demand will translate into a decrease in
production, therefore affecting economic growth. Similarly, an increase in indirect taxes would also decrease demand.
This is because indirect taxes are often partially or completely passed on to consumers in the form of higher prices.
Higher prices imply a reduction in demand and this in turn would reduce profit margins of companies, thus slowing
down production and growth. Non-plan expenditure like subsidies and defence also affect the economy as limited
government resources are used for non-productive purposes.
Demonetization of Currency
Demonetization is the act of stripping a currency unit of its status as legal tender. So far India has pulled select
denominations of its currency twice - pre and post independence. The first was when 71000, 75000, and 710000 notes
were taken out of circulation in January 1946. However, all three notes were reintroduced in 1954. Subsequently, during
th
Janata Government regime, again the high denomination currency notes were withdrawn from circulation on 16 January
1978.
Background & Triggers: Of late, Indian economy has been witnessing rampant circulation of Fake Currency Notes that
primarily being used to propagate terrorism and subversive activities such as espionage, smuggling of arms, drugs and
other contrabands detrimental to the interest of the Indian economy. The other menace of the nation is the
disproportionate rise of Black Money by adopting corrupt practices casting elongated shadow (parallel economy) on
real economy. As per World Bank report, the size of the shadow economy was estimated at 23.72% of the GDP in 2007.
It corrodes the vitals of the country's economy and ignites inflation affecting adversely the common man. Further, it
deprives Government of its legitimate revenues which could have been otherwise used for welfare/development
activities. In the above backdrop, Government of India has taken a bold step to demonetize the Specified Bank Notes
th
(SBN) of 7500 and 71000 with effect from 9 November 2016. However, the public are allowed to deposit demonetized
notes into their bank accounts and/or exchanged in bank branches or Issue Offices of RBI till the close of business hours
th
on 30 December 2016. The courageous move was hailed as a masterstroke by one and all.
Impact on the Economy:
It has death blow to black money hoarders and corrupt people but also struck a sledgehammer at nefarious designs
of Pakistan to fund terrorism and to disrupt the Indian economy with counterfeit currency.
Quantum of cash in circulation has direct bearing on corruption level. Monetization of currency has
significant impact on curbing the corruption practices. The influence of currency in election system is likely to
come down.
The demonetization has impact on inflation as consumer spending activities are likely to be reduced drastically.
It has adverse impact on real estate sector and may witness corrections in land/house prices. Ultimately, the
affordable housing may become a reality which is a long cherished desire of common man.
Since huge money in circulation is withdrawn is possibly lead to slower industrial production which has
direct impact on GDP growth rate of current year i.e. 2016-17.
Public likely to make use the Banking & Financial system optimally through Branch Network/ADCs/Digital &
Mobile Banking which truly augments the CASA deposits as well as profitability of the Banking Industry.
When the financial system is cleansed, the government's revenue would naturally increase and the wealth of
the nation would be spent to uplift the poor and the law-abiding citizens would be the greatest beneficiaries.
The ultimate aim is to move towards cashless economy by eliminating corruption, middlemen and prevent leakages
in government schemes through JAM trinity (Jan Dhan, Aadhar and Mobile). Further, this process ensures direct
transfer of funds to the intended beneficiary without any middleman or leakage of revenue — be it scholarship,
subsidy, compensation or insurance. There might be little inconveniences to some people for few days but in the
long run the benefits for Indian economy far outweigh it. This historic step will open up new opportunities for the
poor and the middle class and let us join hands in making this Demonetization a Big Success.
Monetary Policy
Monetary policy is the process by which monetary authority of a country, generally a central bank controls the supply of money
in the economy by its control over interest rates in order to maintain price stability and achieve high economic growth. In India,
the central monetary authority is the Reserve Bank of India (RBI) which monitors and regulates the monetary policy of the
country stabilizes with the following objectives:
1. Price Stability implies promoting economic development with considerable emphasis on price stability.
The centre of focus is to facilitate the environment which is favorable to the architecture that enables
the developmental projects to run swiftly while also maintaining reasonable price stability.
2. Controlled Expansion of Bank Credit and money supply with special attention to seasonal requirement for credit
without affecting the output.
3. Promotion of Fixed Investment with an aim to increase the productivity by restraining non essential fixed
investment.
4. Restriction of Inventories and stocks to avoid over-stocking and idle money in the organization.
5. Promote Efficiency - It aims to increase the efficiency in the financial system and tries to incorporate
structural changes such as deregulating interest rates, ease operational constraints in the credit delivery
system, to introduce new money market instruments etc.
6. Reducing the Rigidity - RBI tries to bring about the flexibilities in the operations which provide a
considerable autonomy. It encourages more competitive environment and diversification. It maintains its
control over financial system whenever and wherever necessary to maintain the discipline and prudence in
operations of the financial system.
Recent Developments: Government of India amended the RBI Act and entrusted the task of monetary policy
making to newly constituted "Monetary Policy Committee (MPC)" consisting of six member panel with three
members from RBI (Governor, Deputy Governor and another official) and three independent members nominated
by the Government. The committee meets 4 times a year to decide on monetary policy by a majority vote and if
there is a tie, the RBI governor gets the deciding vote. The new committee is expected to bring "value and
transparency" to rate setting decisions to move towards to maintain a comfortable rupee liquidity position,
augment foreign exchange liquidity and maintain a policy framework that would keep credit delivery on track so as
to arrest the moderation in growth.
In a nutshell, the broad objectives of monetary policy are - Maintaining price stability, ensure adequate flow of credit to the
productive sectors to support economic growth and financial stability. However, the relative emphasis among the
objectives varies from time to time, depending on evolving macroeconomic developments. Policy decision will have far
reaching implications for the economy, investors, savers and borrowers.
Monetary Policy refers to the use of the following Direct & Indirect instruments to regulate the availability, cost and use of
money & credit.
Direct Instruments:
Cash Reserve Ratio (CRR): The share of net demand and time liabilities that banks must maintain as cash balance with
the Reserve Bank. The Reserve Bank requires banks to maintain a certain amount of cash in reserve as a percentage of
their deposits to ensure that banks have sufficient cash to cover customer withdrawals. At present the stipulated CRR is
4%. Regulator uses CRR for dual purpose as liquidity reserve and as a monetary policy tool. On weekly basis, Banks have
to report their daily deposit position and balances with RBI to enable them to monitor maintenance of CRR. This is a mandatory
reserve to be kept by the banks to meet the unexpected withdrawals from customers. It is also an instrument used by RBI to
control credit flow in the economy.
Statutory Liquidity Ratio (SLR): This is a quantitative measure takes by RBI to control the credit supply in the
economy. The banks are required to maintain the share of net demand and time liabilities in safe and liquid
assets, such as government securities, cash and gold. Banks are advised to invest in securities issued and
guaranteed by government known as Statutory Liquidity Ratio (SLR). At present SLR requirement is 20.75% of
demand and time liabilities of bank. It is another liquidity cushion. The SLR securities are part of the investment
portfolio of the bank. The HTM book primarily consists of SLR investments which have to be held permanently.
Refinance facilities: Sector-specific refinance facilities (e.g., against lending to export sector) provided to banks.
Indirect Instruments:
Liquidity AdJustment Facility (LAF): It is a mechanism for liquidity management through combination of repo operations,
export credit refinance facilities and collateralized lending facilities, supported by open market operations of the RBI at set
interest rates. RBI manages its liquidity in the market through the operation of LAF as part of its monetary policy and
money supply targets. It undertakes reverse repo transactions to mop up liquidity and repos to supply liquidity in the
market. The LAF transactions are currently being conducted on overnight basis. Consists of daily infusion or absorption of
liquidity on a repurchase basis, through repo (liquidity injection) and reverse repo (liquidity absorption) auction
operations, using government securities as collateral.
Repo/Reverse Repo Rate: These rates under the Liquidity Adjustment Facility (LAF) determine the corridor for
short-term money market interest rates. In turn, this is expected to trigger movement in other segments of the
financial market and the real economy.
i) Repo is a money market instrument, which enables collateralized short term borrowing through sale
operations in debt instruments such as treasury bills and dated securities. It is a rate at which RBI lends to banks
for short periods. Generally, repos are done for a period not exceeding 1 4 days. Repo rate helps the banks to get
funds at a cheaper rate and increase in Repo rate makes the borrowing more expensive. The present rate is 6.25%.
ii) Reverse Repo is the mirror image of a repo. It is a rate at which RBI borrow funds from banks by selling
treasury bills at predetermined rate and dated government securities. This is also a debt instrument used by RBI
to control money supply in the economy. An increase in Reverse Repo rate can cause the banks to transfer more
funds to RBI and similarly reduction of rate may dampen the interest of the banks to lend to RBI. The present rate
is 5.75%
Open Market Operations (OMO): Outright sales/purchases of government securities, in addition to LAF, as a tool
to determine the level of liquidity over the medium term.
Marginal Standing Facility (MSF): Scheduled commercial banks can borrow over night at their discretion up to one per cent
of their respective NDTL to provide a safety valve against unanticipated liquidity shocks. The present rate is 6.75%.
Bank Rate: It is the rate at which the Reserve Bank is ready to buy or rediscount bills of exchange or other
commercial papers. It also signals the medium-term stance of monetary policy. The present rate is 6.75%.
Market Stabilization Scheme (MSS): This instrument for monetary management was introduced in 2004. Liquidity
of a more enduring nature arising from large capital flows is absorbed through sale of short-dated government
securities and treasury bills.
In an expansionary monetary policy, money supply increases causing an expansion in aggregate demand through
lower interest rates. This stimulates interest sensitive spending on investment for manufacture of goods, housing,
export, business etc. and in turn, acting through multiplier leads to a rise in gross domestic product. The reverse
process takes place when monetary policy is tightened. However, in a fully employed economy monetary
expansion would primarily raise prices and nominal gross domestic product with little effect on real GDP as the
higher stock of money would be chasing the same amount of output.
Other concepts:
Hot Money: Money held in one currency that is liable to switch to another currency, in a flash, in response to better returns or in
apprehension of adverse circumstances. Such a flight of money might cause the currency's exchange rate to plunge.
Reserve Money (M0): Currency in circulation + Bankers' deposits with the RBI + 'Other' deposits with the RBI = Net RBI
credit to the Government + RBI credit to the commercial sector + RBI's claims on banks + RBI's net foreign assets +
Government's currency liabilities to the public - RBI's net non-monetary liabilities. M1 - Currency with the public +
Demand deposits with the banking system +'Other' deposits with the RBI. M2 - M1 + Savings deposits with Post offices.
M3 - M1+ Time deposits with the banking system = Net bank credit to the Government + Bank credit to the commercial
sector + Net foreign exchange assets of the banking sector + Government's currency liabilities to the public - Net non-
monetary liabilities of the banking sector. M 4 - M3 + Deposits with post office (excluding NSCs).
Inflation: It is termed as the continual rise in the general level of prices. It is commonly expressed as an annual percentage rate
of change on an index number.
Hyper Inflation: An express growth in the rate of inflation whereby, money loses its value to the extent where other mediums of
exchange like barter or foreign currency come into vogue.
Consumer Price Index (CPI) is an inflationary indicator that measures the change in the cost of a fixed basket of
products and services, including housing, electricity, food, and transportation. The CPI is published monthly and it is
also called cost-of-living index.
Stagflation: A condition in the economy that is characterized by the twin economic problems viz., slow economic growth and
rising prices.
Deflation: A sustained fall in the general price level of goods and services, usually accompanied by fall in output and jobs.
Recession: A phase of dismal economic activity, usually accompanied by rising unemployment. It is defined by two successive
quarters of negative GDP growth and is considered to have a cyclic character.
Stagnation: It is a period during which economy does not grow or grows very slowly. As a result, unemployment increases and
consumer spending slows down.
Devaluation: A fall in the fixed official rate at which one currency is exchanged for another in a fixed exchange rate system.
While it is mostly by a deliberate act of government policy, in recent years, financial speculation has also been identified as
a responsible factor.
Demonetization: Withdrawal of currency from circulation with an aim to strike at counterfeiting of currency and unaccounted
money.
Arthakranthi is a suggestion which is being widely debated to address the important issues such as rampant corruption
and fiscal deficit that are being confronting the country. It suggests abolition of taxes except for Customs & Import
duties and introduction of Bank Transaction Tax on receipts. It also suggests currency compression by ensuring that the
highest currency denomination is 750/-, which paves the way to adopt banking system extensively and also enables to
phase-out fake currency from the system which is the need of the hour. Though, the suggestion appears simple and
attractive but needs political will and revamping of entire eco system. In this direction, the present Government has
taken a bold step of withdrawal of 71000 & 7500 currency notes from circulation on 8 th November 2016.
National Institute for Transforming India (NITI) Aayog: It was set up in the month of January 2015 as a successor to the
erstwhile Planning Commission with a soul objective to work as a Think Tank to the Government for providing policy
inputs as well as designing strategic and long term programmes for the Central and State Governments. It acts as the
quintessential platform of the Government of India to bring States to act together in national interest, and thereby
fosters Cooperative Federalism. At the core of NITI Aayog's creation are two hubs viz., Team India & Knowledge and
Innovation. The Team India Hub leads the engagement of states with the Central government, while the Knowledge and
Innovation Hub builds NITI's think-tank capabilities. These hubs reflect the two key tasks of the Aayog. NITI Aayog is also
developing itself as a State of the Art Resource Centre, with the necessary resources, knowledge and skills, that will
enable it to act with speed, promote research and innovation, provide strategic policy vision for the government, and
deal with contingent issues. Recently, Government has issued guidelines advising all Public Sector Undertakings (PSU) to
seek concurrence from NITI Aayog for strategic sales and monitoring the closure of loss making companies.
Union Budget - Concepts
Union Budget is the annual report of India as a country. It contains the government of India's revenue and
expenditure for the end of a particular fiscal year, which runs from 1 st April to 31 st March. The Union Budget is the
most extensive account of the government's finances, in which revenues from all sources and expenses of all
activities undertaken are aggregated. It comprises the revenue budget and the capital budget. It also contains
estimates for the next fiscal year.
Capital Budget is different from the revenue budget as its components are of a long-term nature. The capital
budget consists of capital receipts and payments. Capital receipts are government loans raised from the public,
government borrowings from the Reserve Bank and treasury bills, loans received from foreign bodies and
governments, divestment of equity holding in public sector enterprises, securities against small savings, state
provident funds, and special deposits. Capital payments are capital expenditure on acquisition of assets like land,
buildings, machinery, and equipment. Investments in shares, loans and advances granted by the central
government to state and union territory governments, government companies, corporations and other parties are
also part of capital budget.
Revenue Budget consists of revenue receipts (taxes and other sources) and expenditure. Revenue receipts are
divided into tax and non-tax revenue. Tax revenues are made up of taxes such as income tax, corporate tax, excise,
customs and other duties that the government levies. In non-tax revenue, the government's sources are interest
on loans and dividend on investments like PSUs, fees, and other receipts for services that it renders. Revenue
expenditure is the payment incurred for the normal day-to-day running of government departments and various
services that it offers to its citizens. The government also has other expenditure like servicing interest on its
borrowings, subsidies, etc. Usually, expenditure that does not result in the creation of assets, and grants given to
state governments and other parties are revenue expenditures. The difference between revenue receipts and
revenue expenditure is usually negative. This means that the government spends more than it earns. This
difference is called the revenue deficit.
Direct Taxes are the taxes that are levied on the income of individuals or organizations. Income tax, corporate
tax, inheritance tax are some instances of direct taxation. Income tax is the tax levied on individual income from
various sources like salaries, investments, interest etc. Corporate tax is the tax paid by companies or firms on the
incomes they earn.
Indirect Taxes are those paid by consumers when they buy goods and services. These include excise and customs
duties. Customs duty is the charge levied when goods are imported into the country, and is paid by the importer
or exporter. Excise duty is a levy paid by the manufacturer on items manufactured within the country. Usually,
these charges are passed on to the consumer.
Plan and non-plan expenditure - The plan expenditures are estimated after discussions between each of the
ministries concerned and the NITI Aayog. Non-plan expenditure is accounted for by interest payments, subsidies
(mainly on food and fertilizers), wage and salary payments to government employees, grants to States and Union
Territories governments, pensions, police, economic services in various sectors, other general services such as tax
collection, social services, and grants to foreign governments. Non-plan capital expenditure mainly includes
defence, loans to public enterprises, loans to States, Union Territories and foreign governments.
Fiscal Policy is a change in government spending or taxing designed to influence economic activity. These changes
are designed to control the level of aggregate demand in the economy. Governments usually bring about changes
in taxation, volume of spending, and size of the budget deficit or surplus to affect public expenditure. Fiscal deficit
is the gap between the government's total spending and the sum of its revenue receipts and non-debt capital
receipts. It represents the total amount of borrowed funds required by the government to completely meet its
expenditure.
Finance Bill - The government proposals for the levy of new taxes, alterations in the present tax structure or
continuance of the current tax structure beyond the period approved by Parliament, are laid down before Parliament
in this bill. The Parliament approves the Finance Bill for a period of one year at a time, which becomes the Finance
Act.
Gross Value Added (GVA) Vs. Gross Domestic Product (GDP) - GVA is defined as the value of output less the value
of intermediate consumption. Value added represents the contribution of labour and capital to the production
process. When the value of taxes on products (minus subsidies on products) is added, the sum of value added for
all resident units gives the value of GDP. Thus, GDP of any nation represents the sum total of GVA i.e, without
discounting for capital consumption or depreciation in all the sectors of that economy during the year after
adjusting for taxes and subsidies. As per Central Statistical Organization (CSO) it was decided that sector-wise
st
estimates of GVA now be given at basic prices instead of factor cost with effect from 1 January 2015. In simple
terms, for any commodity the basic price is the amount receivable by the producer from the purchaser for a unit of
a product minus any tax on the product plus any subsidy on the product. However, GVA at basic prices will include
production taxes and exclude production subsidies available on the commodity. On the other hand, GVA at factor
cost includes no taxes and excludes no subsidies and GDP at market prices include both production and product
taxes and excludes both production and product subsidies.
Union Budget 2016-17 — Highlights
Economic Survey: Growth of the economy accelerated to 7.6% in 2015-16 despite unfavorable global conditions
and two consecutive years shortfall in monsoon. India hailed as a 'bright spot' amidst a slowing global economy by
IMF and foreign exchange reserves touched highest ever level of about 350 billion US dollars. However, the
challenges anticipated ahead are many due to global slowdown & turbulence and additional fiscal burden on
account of 7 th Central Pay Commission recommendations and implementation of One Rank One Pension. The
Finance Minister laid down an economic framework to implement the vision of empowering India through the 9
pillars of economic framework viz., Double farmer income within five years, Strengthen Rural Sector, Focus on
Social sector especially health care, Skill development & Job creation, Infrastructure investment, Financial Sector
Reforms, Governance Reforms, Prudent Fiscal Management and Tax Reforms.
Budget & Priorities:
Finance Minister Arun Jaitley unveiled a budget for the poor announcing new rural aid schemes and skimping on a
bank bailout with an objective to spread the benefits of growth more widely among India's 1.3 billion people.
The theme of the present budget is 'Transform India' and main focus is on ensuring macro-economic stability
and prudent fiscal management, boosting on domestic demand, continuing with the pace of economic
reforms and policy initiatives to change the lives of our people for the better.
Government is paying enhanced attention on priority areas viz., farm and rural sector, social sector, infrastructure
sector employment generation and recapitalization of the banks. In this direction, introduced Pradhan Mantri Fasal
Bima Yojana and New health insurance scheme to protect against hospitalization expenditure.
It is proposed to provide a stable and predictable taxation regime and reduce black money. Domestic taxpayers can
declare undisclosed income or such income represented in the form of any asset by paying tax at 30%, and surcharge at
7.5% and penalty at 7.5%, which is a total of 45% of the undisclosed income. Declarants will have immunity from
prosecution.
To continue with the ongoing reform programme and ensure passage of the Goods and Service Tax bill and
Insolvency and Bankruptcy law besides giving a statutory backing to AADHAR platform to ensure benefits reach
the deserving.
The other significant tasks proposed are to push important Banking Sector reforms, listing of general insurance
companies and bring changes in FDI policy. Amendments in the SARFAESI Act 2002 to enable the sponsor of an
Asset Reconstruction Company (ARC) to hold up to 100% stake in the ARC and permit non institutional investors to
invest in Securitization Receipts.
Silent revolution is underway with regard to subsidy delivery mechanism in the country. Seeing the success of LPG
and Social Security Pensions through Direct Benefit Transfers (DBT), government proposes to extend the same to
fertilizer subsidy. These initiatives definitely arrest leakages and costs significantly which paves the way to bridge
the fiscal deficit.
Total expenditure projected at 719.78 lakh crore, plan expenditure pegged at 75.50 lakh crore and non-Plan
expenditure kept at 714.28 lakh crores. Fiscal deficit retained at 3.5%. The important budget allocations are as
under:
An amount of 72.94 lakh crore earmarked for Defence sector.

Social sector including education and health care - 71.52 lakh crore, of which 738500 crore allotted to MGNREGS scheme.
Total investment in the road sector, including Prime Minister Gram Sadak Yojana (PMGSY) allocation, would be 797000
crore. It is aimed to connect 65000 eligible habitations by 2019.
Allocated an amount of 787765 crore to Rural sector of which agriculture and Farmers' welfare is 735984 crore.
Infuse 725000 crore to Public Sector Banks as part of recapitalization of banks.

Long Term Irrigation Fund will be created in NABARD with an initial corpus of about 720000 crore.
715000 crore earmarked for Interest Subvention for farmers.

Prime Minister Fasal Bima Yojana 75500 crore.
Pradhan Mantri Mudra Yojana (PMMY) increased to 71.80 lakh crore.
As part of "Make in India" program, changes are made in customs & excise duty rates on certain inputs to
reduce costs and improve competitiveness of domestic industry in sectors like Information technology
hardware, capital goods, defence production, textiles, mineral fuels & mineral oils, chemicals & petrochemicals,
paper, paperboard & newsprint, maintenance repair and overhauling of aircrafts and ship repair.
Low oil prices driving down CAD, steadily falling fiscal deficit and low inflation have set the stage for lower interest
rates.
Steps taken in the key areas of roads, railways, mining, power and housing should start yielding results now and lead to
faster economic growth.
Alternate Delivery Channels & E-products
Hitherto, Branches were only the strategic outfits (Delivery Channels) and invariably the customers are required to visit the
branches at the specified timings to complete their transactions. Extending service to the customers round the clock without
presence of physical branch is called as "Alternate Delivery Channels". Adoption of new delivery channels (ATM, Mobile and
Internet Banking) has become order of the day for banks to survive in the competitive environment to meet the emergent
expectations of the customers besides achieving the optimum utilization of scarce resources. The convenience coupled with cost
effectiveness has enabled the cardholders to use the card extensively for all their retail payments.
ATM is an electronic device, which acts as an independent banker without any human intervention. ATM provides round the
clock service throughout the year (24X7X365) to the customers. ATMs extend services such as Cash Withdrawal, Balance
Enquiry, Cash/Cheque Deposit, Funds Transfer, Bill Payments, Payment of Direct Taxes, Mobile Recharge, Mobile Banking
Registration etc. Cardholder needs to enter password for each financial transaction on ATM.
ATM / Debit Card is a payment card used to with draw cash from ATM, purchase of goods and payment for services
automatically debiting to the card holder's bank account instantly, to the extent the credit balance exists. The card holder can
draw cash using the PIN from ATM up to the balance available in his account subject to daily caps prescribed by Bank from time
to time. To provide further value added services to customers, Banks are offering funds transfer facility through ATMs at free of
cost. Under this, ATM/Debit Card holders can transfer funds Inter/Intra Bank using the card number of the beneficiary. There is
no requirement for registration of beneficiary and the amount can be transferred instantly to any card number. As per RBI
guidelines, Card to Card transfer limit is fixed as 75000/- per transaction and 725,000/- per month. For the benefit of persons
of disabilities, RBI has made it mandatory for banks to have talking ATMs with Braille Keypads at all new ATMs installed from 1st
July 2014.
In order to facilitate the cardholders RBI has issued guidelines to all banks not to levy service charges on ATM transactions of
Savings Bank Cardholders. Other Bank Cardholders are allowed to withdraw cash on any ATM up to 710000/- per transaction.
st
However, RBI has reduced the number of free transactions per month at non-home bank ATM to Three (3) w.e.f. /
November 20/4 in six metros viz., Mumbai, Kolkata, Chennai, Bangalore and Hyderabad. Five transactions per month are
allowed free for Savings account holders in all other locations. Any transaction beyond the said stipulation (3 or 5) attracts
charges @ Rs.20/- per transaction (inclusive of service tax). With regard to transactions on home bank ATMs, the banks are
given discretion to levy charges. The number of free transactions shall be inclusive of all types of transactions, financial or
non-financial. However, it is not applicable to Basic Savings Bank Deposit accounts (Small/No Frill) and they continue to avail
five free transactions. With this, the customer of a Bank has become customer of all Banks, which has paved the way for Any
Bank Banking. Further, RBI allowed the banks to levy charges to their own customers for more than five transactions at their
own ATMs also.
White Label ATMs are purely managed by third party service providers and have their label. These are branded non bank ATM
machines. Cash handling, management and logistics are provided by third party. Debit cards of all banks can be operated
through these machines. The role of the concerned bank is only limited to provide account information and back end money
transfers to the third parties managing these ATM machines. This initiative will enable the excluded segments to avail ATM
services as at present majority ATMs are confined to Urban/Metro areas only.
However, service provider levy charges which are to be either bear by the Bank or the customer. RBI has allowed white
label ATM's in India to have more penetration of ATM machines. Tata Communications Payment Solutions has become
the first company to launch this service in India under the brand name "Indicash". It has a tie up with majority
commercial banks and now you will soon see branded non bank third party white label ATM machines in your vicinity.
Brown Label ATM — We always think that the bank branded ATM machines operated by the bank concerned, but
this is not the case. Banks only handle part of the process that is cash handling and back-end server connectivity.
The ATM machine is owned by the third party service provider along with the physical infrastructure. This type ATM
is called as "Brown Label ATM" and acts as intermediate between Banks owned ATM and White Label ATM.
Complaint Resolution: The revised guidelines has led to increased volume on ATM Network leading to deficiency in
service on account of technology issues and the resolution is taking undue long time, which is causing concern to the
customers and regulators. In the above backdrop, RBI issued the following directives to all banks:
ATM failed transactions are to be resolved within a maximum period of 7 working days from the date of receipt of the
customer complaint.
In case of delay in resolution of the complaint within 7 working days, the bank shall pay compensation of
7100/- per day, to the aggrieved customer and shall be credited to the customer's account automatically on
the same day when the bank affords the credit for the failed ATM transaction.
However, the cardholder (customer) is entitled to receive such compensation for delay, only if a claim is lodged with the
issuing bank within 30 days of the date of the transaction.
As per recent guidelines, Banks are advised to issue debit cards with photographs with a view to reducing the instances
of misuse of lost / stolen cards. Further, banks are asked to ensure full security of the cards and any loss incurred by the
cardholder on account of breach of security or the failure of the security mechanism would be borne by the banks. ATM
is most cost effective since the investment and operational cost are low when compared to traditional Branch Banking.
Interoperable Cash Deposit Machines: As part of NPCI initiatives, now Cash Deposit Machines (CDM) / Bulk Note
Acceptors (BNA) are linked to the National Financial Switch (NFS) and become interoperable. A customer of Indian
Banking Industry can have access to any CDM/BNA to deposit money across the country. Truly, like withdrawal from
any ATM (irrespective of the customer Bank), now cash also can be deposited in any Bank machine up to a specified
limit without any charges. This is leading to "Any Where Banking" by extending 24x7x365 banking services to the
customers in letter and spirit.
Digital Payments
RBI has been playing pivotal role in the area of national payment system, which is the backbone of economic activity
and has taken several initiatives for a safe, secure, sound and efficient payment system in India. Last one decade
witnessed spurt in digital payments on account of increased adoption of technology and regulatory guidelines. The
evolution of e-payment systems in India are:
i) Speed clearing: Banks as part of their normal banking operations undertake collection of cheques/drafts
deposited by their customers drawn on other banks and the collection process is taking 7 to 14 days since cheques
need to move physically from presentation centre to drawee centre. In order to reduce the collection time, RBI has
introduced Speed Clearing where in cheques/drafts drawn on outstation are treated on par with local cheques and
presented in the local clearing provided the presentment location is MICR/ECCS centre and the destination bank
branch is under CBS platform. However, Government cheques are not eligible for collection under Speed Clearing.
Drawee bank debits the account online without movement of cheque and sends the proceeds to the collecting bank.
Under Speed Clearing, it would be working on T+1 or 2 basis. No charges for cheques up to 71 lakh. For above one
lakh the maximum amount that can be levied is 7150/-. In case of return of cheques, the charges ranges from 750 to
7500 depending on the value of the instrument. The facility of immediate credit would not be applicable to cheques
collected under speed clearing arrangements.
ii) Cheque Truncation System (CTS): It is the process of stopping the flow of the physical cheque issued by a drawer
at some point by the presenting bank en-route to the paying bank branch. In its place an electronic image of the
cheque is transmitted to the paying branch through the clearing house, along with relevant information like data on
the MICR band, date of presentation, presenting bank, etc. Cheque truncation thus obviates the need to move the
physical instruments across bank branches, other than in exceptional circumstances for clearing purposes. Further,
domestic instruments, where both presenting and drawee banks are the same are not allowed in the CTS. To
facilitate the transformation to an image based processing scenario, RBI directed all banks to issue cheques
confronting to CTS-2010 standard with uniform features in terms of size, paper quality and fields such as the MICR
band, signature and date format. Now, CTS is implemented at all the MICR centres with the introduction of Grid
Based Cheque Truncation clearing. Under this, all cheques drawn on bank branches falling within in the grid
jurisdiction are treated and cleared as local cheques. Cheque collection charges including Speed Clearing Charges
should not be levied if the collecting bank and the paying bank are located within the jurisdiction of the same CTS
grid even though they are located in different cities. CTS effectively eliminate the associated cost of movement of the
physical cheques, reduce the time required for their collection and bring elegance to the entire activity of cheque
processing. In addition to operational efficiency, CTS offers several benefits to banks and customers, including human
resource rationalisation, cost effectiveness, business process re-engineering, better service, adoption of latest
technology, etc. Thus, it has emerged as an important efficiency enhancement initiative undertaken by RBI in the
Payments Systems arena.
iii) Electronic Clearing System (ECS): The introduction of ECS - Credit i.e. Single Debit - Multiple credits, helped large
corporate bodies to pay their dividend, interest and refunds electronically on the due date, which is very cost
effective to Bank and its customers. Similarly, the utility bodies are now in a position to collect their bills through ECS
Debit (Multiple Debits - Single Credit) right on the due date. The entire process including passing the credits to the
beneficiaries' accounts take only one day, which is convenient and cost effective to both banks and customers.
iv) As per RBI guidelines, Banks are advised to obtain ECS (Debit) mandate from the term loan borrowers who are
maintaining operative accounts with other banks to facilitate timely and regular recovery of loan installments. In
order to strengthen the recovery mechanism, RBI directed the banks to replace all existing Post Dated Cheques (PDC)
with ECS mandates with immediate effect.
v) National Automated Clearing House (NACH): National Payments Corporation of India (NPCI) has implemented the
NACH, a web based solution for Banks, Financial Institutions, Corporates and Government to facilitate interbank, high
volume, electronic transactions which are repetitive and periodic in nature. It is a centralized system, launched with
an aim to consolidate multiple ECS systems running across the country leveraging robust technology platform with a
single set of rules. It supports the financial inclusion measures through Aadhaar based transactions and Mobile based
ACH transactions. The system is covering all core banking enabled bank branches spread across the country. It is used
for making bulk transactions towards distribution of subsidies, dividends, interest, salary, pension etc. and also for
bulk transactions towards collection of payments pertaining to telephone, electricity, water, loans, investments in
mutual funds, insurance premium etc. Further, it has best in class security features, cost efficiency & payment
performance (STP) coupled with multi-level data validation facility accessible to all participants in real-time mode
rather than batch mode. It gives a positive confirmation from investors' bank about registration acceptance or non-
acceptance, unlike ECS. Investors can opt for a one time registration and avail this facility any time for their future
investments and can make use of this payment mode for their Lump-sum Mutual Fund investments apart from SIPs.
Realization of funds from the investors account happens on "T" day which helps them to track their payments on
time. The existing ECS is replaced with NACH with effective from 01.04.2016.
vi) Any Branch Banking (ABB): Under CBS, Branch customer has become Bank customer and they are allowed to
approach any branch across the country for deposit of cheque or cash and withdrawal of cash or transfer of money.
No cash payment will be made to third party (bearer). However, payment to third party up to 720000/- is allowed to
NRE / NRO accounts and branch should ensure identity of the bearer while making payments. With regard to deposit
of cash / transfer of funds among the bank branches is allowed at par for any amount.
vii) Real Time Gross settlement (RTGS): RBI launched RTGS for instant transfer of funds across the banks (7200000/- &
above) across the banks within India. It offers a powerful mechanism for limiting settlement and systemic risks in the
inter-bank settlement process. It enables in expediting the settlement, control and governance mechanism in the
banking system. Funds will be transferred electronically and credited to the beneficiary accounts instantaneously.
Transfer of funds below 7200000/- are not allowed under RTGS. It saves lot of time and paper work and cost effective
(Not exceeding 755/-). The timings for customer payments are 8 AM to 4 PM on all regular days including Saturdays
except second and fourth Saturdays of the month with effective from 01.09.2015. Similarly, for interbank payments;
the timings are 8 AM to 7.15 PM on all the days as stated above.
viii) National Electronic Funds Transfer (NEFT): For the benefit of retail customers, RBI introduced NEFT scheme. Under
this, funds can be transferred across the banks instantaneously. There is no cap on minimum and maximum amount
for NEFT. RBI has given discretion to the banks to levy charges, however, the service charge should not exceed 25/-
per transaction. The timings for NEFT payments are 8 AM to 7 PM on all regular days including Saturdays except
second and fourth Saturdays of the month with effective from 01.09.2015. The number of settlements is 12 in a day.
Customer is required to furnish IFSC Code number of the Bank Branch and correct account number of the beneficiary
for smooth transfer of funds under RTGS/NEFT.
ix) Debit cards known as check cards. It operates like cash or a personal check. Debit cards are different from credit
cards. Credit card is a way to "Pay Later" whereas debit card is a way to "Pay Now." In case of debit card, bank
account of the customer will be debited immediately on completion of transaction. Debit cards are accepted at many
locations, including retail stores, petrol pumps, and restaurants. The liberalized norms coupled with ease of usage
have led to increase debit card base over the years. Of late, banks are consciously driving the customers to alternate
delivery channels by issuing debit cards on the day of opening of the account itself to reduce the work load and to
enable them to pay focused attention on core banking activities. In order to make Credit/Debit Card transactions
more secure, RBI mandated the card holders to enter PIN while transacting at POS terminals. As per recent RBI
guidelines, all banks are mandated to issue only Chip enabled Cards w.e.f.01.10.16.
xiii) RuPay Cards: It is a domestic card payment network established by National Payment Corporation of India (NPCI)
having more than 100 Banks in India as members with its ATM network spread across the country. These cards can be
used in all the ATMs of NPCI network and POS terminals & e-com transactions (Internet) enabled for RuPay acquiring.
The various types of RuPay cards are as under:
Card Type Meant for

RuPay Kisan Farmers availing Agriculture production loans (Crop Loans)
RuPay Aadhaar Beneficiaries of Electronic Benefit Transfer (EBT) scheme
RuPay Debit Beneficiaries under Financial Inclusion schemes
It provides accidental insurance cover upto 71 lakh without any charge to the customer. To avail this benefit, the card
must be used atleast once in 90 days. The existing identification modes used in new delivery channels has a major
drawback as it recognize the PIN but not the person. Sometimes, it leads to impersonation and may cause financial loss. To
overcome the problem, biometric technologies such as Fingerprint Recognition, Face Recognition, Voice Authentication,
Hand Geometry, Retinal Scanning, Iris Scanning and Signature Verification have come in to force. Whenever the user
access to delivery channel, it verifies with the server and deliver the service if found correct.
viii) Credit cards: The concept of credit card was used in 1950 with the launch of charge cards in USA by Diners Club and
American Express. Credit card became more popular with use of magnetic strip in 1970. The first Credit Card was issued
in 1981 and Gold Card in 1986 by VISA. Credit cardholder need not carry cash and purchase goods and services at any
approved Merchant Establishments/Point of sale Terminals by tendering the card duly signing the charge slip. Further,
cardholders can make online purchases through internet using the card and PIN. Added to this, cardholder can withdraw
cash at any ATM across the globe. However, cash advance attracts charge i.e. transaction fee as well as service
fee/interest charge.
x) Charge Card is like any Credit or Debit Card. These cards neither offer revolving credit like the Credit Card nor debit
the account instantaneously like Debit Card. However, the cardholder is required to settle the bill in full by the due
date each month. Charge cards make a good option to develop financial discipline which likely to enable the
cardholders to improve their credit history. Further, charge card offers a dynamic limit, while rewarding good
payment record.
xi) Prepaid Card looks like a credit card and works like a debit card. These cards resemble credit and debit cards in
appearance and allow users to load any amount up to 750000/- and can be used at any ATM/Point of Sale
Terminal. On use of card, funds are directly debited from the card. Cardholders preload the cards with funds via a
cash deposit or wire transfer. There are no finance fees or interest payments as
charges are deducted from the prepaid balance. It is an opportunity for people who have had little or no access to the
mainstream financial system by loading funds onto a prepaid card. It is a secure and convenient alternative to cash.
Various types of Prepaid Cards are - Re-loadable Cards (value is replenished once it is used), Disposable Cards
(discarded once the value is used), Closed Cards can be used for a specific purpose (Phone Cards) and Open Cards
(multi-purpose). Re-loadable cards are most popular among "under-banked" individuals, or those who tend not to
possess conventional bank accounts.
xii) Gift Card is one of the paperless payment systems and is highly popular in card industry. It is a card with predetermined limit
and value is loaded through cash or transfer from the account. However it is not reusable.
xiv) Internet Banking is leveraging the potential of Internet to facilitate customer access to his account from any place
at any time. Apart from viewing the transactions in his account for any period, the customer is able to effect transfer of
funds and request for various services. Internet is one of the cost effective channel for delivery of banking services.
Internet Banking is provided to Individual/Joint/Sole proprietary concerns, Corporate etc. at their request. The terms
and conditions governing Internet banking are displayed on the Bank's website. The services available through Internet
banking are - View account balances and download statements, Transfer of funds within Bank and across the Banks,
Request for Cheque Book / Fixed Deposit, Payment of Utility bills viz., Electricity, Telephone, Income Tax etc., Booking
of Train/Bus/Airline tickets, Recharge of Moble / Online shopping, Online Equity Trading - Primary and Secondary
market etc.
Customer access is controlled through "Customer ID" and "Password". It is protected with "firewalls" to prevent
unauthorized access, hacking and virus infection. Advanced encryption technology is used to ensure that messages
from/to the customers are not intercepted and misused by others. Registered customer has an option to transfer
balances between linked operative accounts of the same customer across the branches and also undertake third party
transfers from his/her account to any other operative account. Funds transfer facility to the customers across the
Banks through NEFT/RTGS is allowed on Internet. Normally, the transaction limit is fixed at 72 lakh per day, inclusive
of all types of funds transfers (Self, Third party, External, e-tax payments, Online trading, e-commerce etc.). However,
banks can have their own limits depending on the client profile. To execute funds transfer facility, the internet
customer is required to create an account i.e. Online Authentication Code (OAC), which is a mandatory.
Applications Supported by Blocked Amount (ASBA) is a payment method for IPO or FPO where the bidding amount
remains in investors account, but blocked by the bank until allotment is done. It is made mandatory for both retail and
institutional investors with effective from 1 st January 2016. The investors have option to bid IPO/FPO either through
designated branches or Internet Banking. Revision and cancellation of bids are permitted till the issue closure date and
time. The investor continues to earn interest on the application money. It enables the listing process faster. Registrar
transfers the allocated shares to investor's Demat Accounts. No charges will be levied to the investors for this service.
It is an opportunity to branches to improve low cost deposits and non-interest income since bank earns commission on
each application received under ASBA.
In the light of potential risks (hacking and phising) associated with Internet Banking and to protect the interest of the internet
customers, Banks have introduced Two Factor Authentication where bank generates six-digit One Time Password (OTP) and
sending as SMS to the customer as and when the customer transacts on internet.
xv) Mobile Banking: The mobile-phone revolution that is transforming the world could also turn into a banking
revolution. Banks have been exploring the feasibility of using mobile phones as an alternative channel of delivery of
banking services. The swift growth in number of Mobile users and wider coverage of mobile phone networks has made
this channel an important platform for extending banking services to customers. Today, the number of Mobiles in India
crossed 1000 million of which 1/3 rd mobiles are in Rural India alone. At present, Mobile Banking is providing the Bill
payment and Funds Transfer facility besides information services to the customers. The recent guidelines issued by RBI
on Mobile Banking are as under:
RBI approval is required to extend mobile banking services.

All the transactions/services should be in Indian currency only. Cross-border transfers through mobile banking are
strictly prohibited and the operating banks have to be based, licensed and supervised in India.
Registered customers can only avail this facility from banks. For financial services one time registration should be done
through a signed document.
Banks are allowed to provide cash-out through ATMs or BCs subject to cap of 710000/- per transaction and maximum of
750000/- per month per customer.
Banks may put in place end-to-end encryption of the mobile PIN number (mPIN) for better security.
Banks are advised to provide registration facility to the customers at all ATMs as well as other Alternate Delivery
Channels.
All operative account holders having ATM/Debit card are eligible to avail this facility. Customer has an option to link any
CASA account connected to the card with the mobile number. However, the mobile handset should be Java enabled or
Windows Mobile 5.0 & above model or Windows Mobile Professional model with activated GPRS (General Packet Radio
Service). Customer can register for mobile banking through Branch or ATM across the country. It is hassle-free paperless
process and upon registration, customer receives a registration slip which contains the default application password and
MPIN. Under this the customer can transfer 750000/- in a day through mobile banking application and 75000/- SMS tag
messaging which attracts transaction cost of 75/- plus applicable service charges.
The National Payment Corporation of India (NPCI) launched the intermediate payment service i.e. Inter Bank Mobile
Payment Service (IMPS), a 24/7 real-time electronic Interbank fund transfer on a Person-to-Person (P2P) or Person-to-
Merchant (P2M) basis, which has boosted mobile banking. It gives the banks an opportunity to expand their customer
base without incurring additional infrastructure costs. It would also help in financial inclusion as it would provide a large
number of un-banked people access to banking services. Banks could save a huge amount of money on card issuance and
merchant acquiring with zero point of sale cost. Mobile Banking is the hottest area of development in the banking sector
and is expected to replace the credit/debit card system in future. The increased phase of mobile usage is going to place
our country on the top in the Asia Pacific region shortly.
xvi) Interbank Mobile Payment Service (IMPS): The National Payment Corporation of India (NPCI) has rolled out
National Unified USSD platform (NUUP) based mobile banking service to boost IMPS based transactions. Users can dial
*99# short code on their handset, which will allow every banking customer to access banking services with a single
number across all banks - irrespective of the telecom service provider, mobile handset make or the region. The service
is currently available on MTNL/BSNL telecom operators and with majority commercial banks. Since the service is
Unstructured Supplementary Service Data (USSD) based, it will work only with GSM telecom operators and not with
CDMA. Apart from that, the service does not need users to send an SMS or require a GPRS enabled device and can be
used even on a basic mobile handset. As of now, users can perform Interbank Mobile Payment Service (IMPS) fund
transfer through the service with a daily
transaction limit of 75000 per customer. MMID or Mobile Money Identifier is a seven digit random number issued by
the bank. When the customer dial *99# the service will ask for entering first three letters of Bank name or first four
letters of IFSC code. Customers can select i) Balance enquiry ii) Mini Statement iii) Send money using MMID iv) Send
money using IFSC code v) Show MMID vi) MPIN vii) Generate OTP. The prerequisites for using this application are
Mobile Banking Registration, MMID and MPIN. The charges will be levied by Telecom service provider @ 0.50 paise per
session which is most cost effective to the customers.
xvii) Mobile Wallet: It is another payment channel independent of bank account. Recently, RBI has permitted the
telecom service providers to enter into this space through collaboration. These entities can undertake host of
services - Deposit, transfer of funds, utility payments and cash withdrawal. Under this the funds can be
transferred from mobile to mobile and mobile to bank account. Companies that have launched mobile wallet in
India are Paytm, Chillr, Buddy, mPay, Airtel money, Zip cash, Mobi cash etc.
xviii) Unified Payments Interface (UPI) is a unique payment solution as the recipient is now empowered to initiate
the payment request from a smart phone. It facilitates "virtual address" as a payment identifier for sending and
collecting money and works on single click Two factor authentications without knowing the recipient's name,
mobile number, bank account number and IFSC code. It allows the user to pay directly to different merchants
without the hassle of typing card details or net banking password. It also provides an option for scheduling push
and pull transactions for various purposes like sharing bills among peers. One can use UPI app instead of paying
cash on delivery on receipt of product from online shopping websites and can perform miscellaneous expenses
like paying utility bills, over the counter payments, barcode (scan & pay) based payments, donations, school fees
and other such unique and innovative use cases. The interface is the advanced version of NPCI's Immediate
Payment Service (IMPS) which is a 24*7*365 funds transfer service. In order to make use the UPI services both
the bank customer and the beneficiary is required to register with the bank and get the virtual ID.
xix) BHIM: A new digital application "Bharat Interface for Money (BHIM)" is launched on 30 th December 2016 by
Shri Narendra Modi, Prime Minister of India. It acts as aggregator for all UPI based offerings of banks across the
country. Till now, each bank has come out with its own mobile banking application on UPI platform being
operated by NPCI. It is built by NPCI and expected to evolve as the common UPI application to facilitate faster and
smoother digital payments.
Password: Form a random sequence of words and/or letters but easy to remember say base-word. Add numbers to the
base-word to make it more secure and use punctuation and symbols to complicate it further. Create complexity with
upper and lowercase letters. Change the password frequently and do not share your password with anyone and desist
the practice of writing password on paper or in the system.
Digital Payments - Initiatives: Government of India has initiated the following measures to promote digital payments by the
Banking/Financial system.
Issuance of Debit cards to all eligible accounts.

Any Branch Banking is allowed without any charges.
Payment of wages/salaries by the organizations to the employees through banking channels preferably e-mode only.
It is directed that all payments handled by banks to their customers, vendors, suppliers will be done electronically from
1st July 2012 onwards.
The validity period of cheques/demand drafts is reduced from 6 to 3 months w.e.f 1st April 2012 to discourage
discounting of negotiable instruments.
NPCI initiated steps to popularize 'RuPay' where Debit/Credit card payments are being routed through Indian e-service
intermediaries which bring down the costs and improve their acceptability.
Merchant Discount Rate (MDR) is the fee that merchant establishment pays to the terminal deploying bank (Acquiring
Bank), which play vital role in Point of Sale (POS) transactions. Recently, RBI advised banks to cap MDR at 0.75 percent
for transactions up to 72000/- and 1 percent for transactions above 72000/- to popularize POS transactions using Debit
Cards.
Banks are advised to promote Credit/Debit cards to pave the way for cashless economy. Further, card based
transactions leave adequate audit trails and hence disincentives black money generation.
Obtaining Post-dated Cheques (PDCs) from the borrowers is stopped forthwith and banks are advised to get ECS (Debit)
mandate from borrowers.
Demonetization of high value currency notes i.e. 71000/- & 7500/- with effect from 9th November 2016.
In the light of post demonetization, the usage of cash is likely to lose its prime place with gradual replacement of
cards, e-wallet and digital payments both in small and high value financial transactions, in a phased manner. Hope now
it is the time to move from JAM trinity viz., Jandhan, Aadhaar and Mobile to CAM trinity viz., Cloud, Aadhaar and
Mobile to handle the increased volumes with ease.
Financial Inclusion is the delivery of banking services at an affordable cost to the vast sections of disadvantaged and
low income group. As banking services are in the nature of public good, it is essential that availability of banking and
payment services to the entire population without discrimination is the prime objective of the public policy. It means
not only to extending banking facilities to rural people but also to provide at their convenient time and location.
Availability of banking services means to provide Basic Savings Bank Deposit Account (formerly known as No-Frills
account) with Overdraft facility; Remittance product for Electronic Benefit Transfer (EBT) and other remittances;
Variable Recurring Deposit and General Credit Card or Kisan Credit Card etc.
Evolution of Financial Inclusion: Social Banking is an instrument for Financial Inclusion. Though, social banking initiatives
were introduced in India long back through measures such as co-operative banking movement, nationalization of banks
(in 1969 & 1980), creation of Regional Rural Banks etc., their success was largely constrained by the size and population
of the country (1.21 billion) and non-availability of banking services. In the above backdrop financial inclusion has
received a big boost and greater efforts have been laid on inclusive banking. The following are the steps initiated for
enhancing financial inclusion in India.
Introduction of Basic Saving Bank Deposit account (known as No-Frill account) for all individuals with simplified KYC
norms.
Information and Communication Technology (ICT) based Business Correspondent model for delivery of low cost
door step banking services in remote villages is being implemented.
All villages with population above 2000 are already covered under FIP. Process of covering the remaining
villages with population below 2000 is underway.
Opening of 25% of new branches by banks in unbanked rural centers is made as mandatory.
Mobile and network companies have been allowed to partner with banks in offering services collaboratively.
Government has encouraged a multi-channel approach including mobiles, handheld devices, smart cards, micro ATMs,
kiosks etc., for providing financial services to the target group.
A village is considered to be covered by banking service if either a Brick & Mortar Branch or Ultra Small Branch or
Business Correspondent.
Basic Savings Bank Deposit Account (BSBDA): As per RBI directions, Banks are required to adopt simplified procedure to
open SB accounts without any stipulation on minimum balance. All individuals who are eligible to open normal SB
accounts can open No frills accounts subject to introduction from another account holder who complied KYC norms. The
introducer's account with the bank should be at least six month old and should show satisfactory transactions.
Photograph of the customer who proposes to open the account and also his/her address needs to be certified by the
introducer OR any other evidence as to the identity and address of the customer to the satisfaction of the bank. These
accounts do not attract service charges / penal charges. No cheque book shall be issued. Drawals from account shall be
permitted only through numbered withdrawal forms accompanied by passbook. Once the balance in the account
exceeds 750000/- or total credits in the account exceeds 7100000/- in a year, no further transactions will be permitted
in the account. Similarly, the aggregate of all withdrawals and transfers in a month can not exceed 710000/- since post
demonetization period. The customer has to close the account and open normal saving account fulfilling the complete
KYC procedure. As per the recent guidelines, BSBDA account holders, who are earning members of the family
and preferably women of the house and who had satisfactory dealings with the bank for at least six months, are
eligible to avail overdraft facility not exceeding an amount of 75000/-. However, Minors, Kisan Credit Card / General
Credit Card holders and the account holders whose age is beyond 60 years are not eligible to avail overdraft facility.
Overdraft attracts interest @ Base Rate+2%. BSBD accounts which are not KYC compliant are to be treated as "Small
Accounts" and are subjected to the limitations as stated above.
Prime Minister Jan Dhan YoJana (PMJDY): Though, India has been moving forward rapidly with modern banking and
financial systems, it is untenable that a large majority of our population is deprived of basic banking facilities on
account of trapping in a perpetual cycle of exclusion and deprivation. Thus, Banks need to enroll uncovered
households and open their accounts. This is a national priority and there is urgency to this exercise as all other
development activities are hindered by this single disability. Thus, there is a need to break that cycle. In the above
th
backdrop, Government of India has launched a new scheme "PMJDY" on 28 August 2014. It is a National Mission on
Financial Inclusion with an ambitious objective of covering identified unbanked households by opening two bank
accounts to each household. With this, every household gains access to banking and credit facilities and will enable
them to come out of the grip of moneylenders, manage to keep away from financial crises caused by emergent needs,
and most importantly, benefit from a range of financial products.
In the above backdrop, banks are advised to open Savings Bank accounts with simplified procedure by obtaining
Aadhaar card as proof of identity as well as address proof. Further, Banks are allowed to open zero balance accounts
and ensure that operations take place in all such accounts at subsequent dates. The account holder (18 to 70 years) is
issued with RuPay debit card with an inbuilt accident insurance of 71 lakh at free of cost. The account holder will also
get life insurance cover of 730000/-. However, the life cover will not be available to the accounts opened after 31 st
January, 2015. Further, the account holder should normally be head of the family or an earning member of the family
and should be in the age group of 18 to 59. In case the age of the head of the family is above 60 years, the second
earning person of the family will be covered subject to eligibility. Central/State/PSU employees (in service or retired),
income tax payees and Aam Admi Bhima Yojana beneficiaries are not covered under this scheme. Govt. intends to
route all subsidies through these accounts and also propose to extend Micro insurance and Micro Pension products.
Banks are advised to convert the existing normal bank accounts of DBT beneficiaries into PMJDY accounts on written
request made by the customer. It is an ongoing scheme. As part of Financial Inclusion initiatives, TOD facility may be
allowed to accounts opened under PMJDY scheme as well as SBEBT and SBGFI scheme beneficiaries. The eligible TOD
amount is arrived based on average balance of the last 6 months multiplied 4 times or 50% of last 4 months credit
summation, whichever lower subject to maximum 75000. However, this facility is not available to those who availed
any loan under KCC/GCC facility. Interest on such TODs should be within MCLR+2%.
Opening a BSBDA/PMJDY is only the first step in building the relationship which would require sustained efforts on the
part of Banks as well as Customers to achieve the objective of Financial Inclusion. However, in rural areas customers
cannot be expected to come to branches in view of opportunity cost and Time and hence banks will have to reach out
through a variety of technology driven delivery channels such as ATMs, Bio-metric ATMs, Mobile ATMs, Smart Cards and
use of Post offices.
i) Low Cost ATMs: The presence of ATMs mostly found in Metro/Urban centers and banks are not keen to install at Rural/Semi
Urban centers in view of high investment and low transaction volume. Deployment of low cost ATMs at Rural/SU centers with
basic features (cash withdrawal, balance enquiry etc.,) enables the customers to have access to cost effective convenient
banking.
ii) Biometric ATMs: The penetration of ATMs into Rural / Semi-urban areas may not serve the purpose unless it is
put to use by both Literate and Illiterates. The existing ATMs are not being used optimally by rural folk on
account of PIN and Password related issues. Introduction of Biometric ATMs enables the illiterate and semi-
literate customers to avail ATM facilities on par with literate customers. Under this, Thumb impression of the
cardholder will be scanned and transfer the same to central server as one time measure. While swapping the
card customer is required to keep thumb on the slot, system verifies the finger print and allows access to his
account/s. These ATMs are also called as Micro ATMs.
iii) Mobile ATMs are designed for providing ATM facility to the rural folk as well as other customers. The Van
would move at the pre-determined places and also accessible to Biometric card holders. It can also be used
for opening of accounts during the visits to the rural areas.
All the above initiatives warrant the banks to invest substantial amount on infrastructure besides recurring expenditure.
There is an urgent need to bank on alternatives to overcome the said constraints and to extend branch less banking to
achieve desired goal.
Business Correspondent (BC): The BC model allows the bank to use third parties (Individuals/associations/institutions) to extend
the basic banking services using Micro ATMs. BCs use biometric smart cards, in which customer data including finger prints are
stored and works on PoS machines with key management.
Business Facilitators (BF) Model envisages the use of intermediaries by the banks to provide Non Financial Services
to the public such as creating awareness about banks' products/services, identification of borrowers/processing of
applications, post sanction monitoring and follow-up etc.
Ultra Small Branches: Recently, the Government has directed banks to set up "Ultra Small" branches in all villages
under financial inclusion scheme by March 2012, typically in a premises spread 100 to 200 sft. It aims to provide a
wide range of banking services, including credit transactions, in villages where only cash transactions are being
provided by BCs. A designated officer will visit the village on a prefixed date and time every week with laptop and will
be connected to Bank's central server (CBS).
Grama Kranthi General Credit Card (GK-GCC) Scheme: It is an Entrepreneurial credit scheme for covering the general
credit needs of the Bank's customers in FI villages. The nature of the loan is by way of overdraft/cash credit with no
end use stipulation. All SB account holders having active Smart card with satisfactory transactions at least for a
period of 3 to 6 months are eligible to avail General Credit Card. Account is in the nature of cash credit and the
quantum of limit is based on the assessment of income and cash flow of the entire household. However, the
maximum limit per household shall be 725000/-. No collateral security should be insisted upon. The card holder is
entitled to draw cash from the Point of Sale Terminals deployed at the custody of the CSP stationed at the particular
village through authentication of fingerprints using smart card. Account will be reviewed every year and renewed
after 3 years.
Financial Inclusion — Progress: Government/RBI has adopted a structured and planned approach towards FI by not just
focusing on improving access to financial services but also encouraging demand for financial services through financial
literacy initiatives. Adopted a bank-led model for FI, but have permitted non-bank entities to
partner banks in their FI initiatives. Further, banks are advised to open 25% of all new branches in unbanked rural centers. It
is also emphasized to open accounts of all eligible individuals in camp mode with the support of local Government
authorities and seed the existing and new accounts with Aadhaar numbers to ensure smooth roll out of the Government's
Direct Benefit Transfer (DBT) initiative.
Common Service Centers: Under the National e-Governance Plan (NeGP), the Common Services Centers (CSCs) have
been established with front end service delivery points at the village level, for delivery of Government, Social and
Private Sector services in the areas of agriculture, health, education, entertainment, FMCG products, banking and
financial services, utility payments, etc. The infrastructure at the CSC includes a fixed place of business say 100 to
150 sq. ft, specified working hours, a Personal Computer/Lap top with internet connectivity web-cam, printer,
power backup, biometric scanner. CSC acts as BC and providing ICT based banking services in unbanked villages. The
Service Provider would be required to appoint BC. The Identified BC should not have been defaulters to any
financial institution and should not have been blacklisted by any bank in the last two years for deficiency of service.
The BC must be responsible to receive and pay money, to transfer money from one to another. BC may also be used
for deposit mobilization and recovery of loans. The BC is responsible for routing all transactions of all villages in the
assigned villages so that effective marketing and follow up, can take place.
Direct Benefit Transfer (DBT): The Central and State Governments have been earmarking substantial budgetary
allocations towards social security and welfare schemes through various subsidies with an aim to improve the
standard of living of vast majority of people who require social assistance. The fundamental challenge for any
subsidy framework is to ensure effective targeting of beneficiaries which is a complex task and fraught with two
types of errors viz., errors of Inclusion and errors of Exclusion. The former involves the wrongful inclusion of
beneficiaries ineligible for subsidy, while the later concerns the exclusion of eligible beneficiaries. In the process,
the lion share of subsidies has not been reaching the target group defeating the very purpose of the schemes. In
order to ensure electronic transfer of subsidies directly into the accounts of the beneficiaries, they need to have
bank account. Accordingly, banks have been advised that the service area bank in rural areas and banks assigned
the responsibility in specific wards in urban area ensure that every household has at least one bank account. In this
direction, the Government has taken the following initiatives:
All Banks are advised to provide basic banking services at all villages having population of above 2000 either
opening a bank branch or appointing a Business Correspondent Agent in each of the FI village.
All banks must complete the mapping of their respective service area to ensure that one BC is available in
each Gram Panchayat. The collection of account opening data including Aadhaar number is to be done by
BC.
Banks are advised to establish a regular "Brick and Mortar" or "Ultra Small Branch" in all habitations with
population of 5000 and above in under-banked districts and 10000 and above in other districts. Further,
Banks are advised to provide onsite ATMs at all branches across the country.
Further, it is stipulated that a BCA has to be made available within a radial distance of 2 KM and a branch within a
radial distance of 5 KM. Banks should issue Debit Cards to all eligible account holders.
The fact remains that the responsibility of implementation of financial inclusion initiatives and risky lending rests with
the PSBs, while Private Sector Banks largely play safe. Though the intention of FI initiatives is welcoming, PSBs have
been facing enormous pressure to meet the huge targets in a time bound manner. It is consuming considerable
resources of the Banks which need to be compensated.
Social Security Schemes
I. Pradhan Mantri 7eevan jyoti Bima YoJana (PMJBY)
Criteria Scheme Details
Insurance Coverage 72 lakhs (Death due to any reason)
Premium 7330/- p.a.plus applicable service tax
Eligibility All SB accounts holders aged between 18-50 years
Coverage up to 55 years of age. There after no premium & no insurance coverage
st st
Period of coverage From 1 June to 31 May every year
An undertaking for auto debit to his account and Keeping balance in the account
Documents required
for debit of premium amount
Identified Insurance Companies. Banks have discretion to select
Insurance Company the company - for example India First Life Insurance Company
(IFLIC) is the agency for Andhra Bank.
The policy shall terminate on any of the following events and no benefit will become
payable (a) On attaining age 55 years (age near birth day) subject to annual renewal up to
that date (entry, however, will not be possible beyond the age of 50 years).
(b) Closure of account with the Bank or insufficiency of balance to keep the insurance in
force.
(c) In case a member is covered under PMJJBY with LIC of
Termination of assurance India/other company through more thanoneaccount and
premium is received by LIC/other company inadvertently,
insurance cover will be restricted to 72 lakh and the premium
shall be liable to be forfeited.
(d) Participating Banks shall remit the premium to insurance companies in case of
regular enrolment on or before 30th of June every year and in other cases in the same
month when received.
A lien clause is incorporated whereby claims for deaths occur
Lien Clause during the first 45 days from the date of enrollment will not be
paid by the Insurance Company. However, deaths due to
accidents will be exempt from the lien clause.
II. Pradhan Mantri Suraksha Bima YoJana (PMSBY)
Criteria Scheme details
Insurance Coverage 72 lakhs (Accident Insurance Coverage only)
712/- per annum per member. The premium will be deducted from the account
holder's savings bank account through 'auto debit' facility in one installment on or
st
before 1 June of each annual coverage period under the scheme. However, in cases
st
Premium where auto debit takes place after 1 June, the cover shall commence from the first
day of the month following the auto debit. Revision of premium will be done after 3
years.
All Savings bank account holders of aged between 18 years (completed) and 70 years
Eligibility Conditions (age nearer birthday) who give their consent to join /enable auto-debit, as per the
above modality, will be enrolled into the scheme
Insurance coverage United India Insurance Company-Death 72 lakh; Full disablement - 72 lakh; Partial
disablement 71 lakh
III. Atal Pension YoJana (APY)
Criteria Scheme Details
Indian Citizens especially those in the unorganized sector are eligible to enroll as
Target group members in the scheme. Existing PF / EPF / PPF / Govt. pensioners/Tax Payers are also
can become members of the scheme. To encourage to save for retirement.
Eligibility 18 to 40 years. The accounts can be opened through bank branch where SB account is
maintained.
Subscriber joining at 18 years of age have to contribute 742/- and 7210/- on monthly
basis to get a fixed monthly pension of 71000 and 75000 respectively. The monthly
Contribution contribution is payable by auto debit
facility from the subscribers SB account. The minimum period of
contribution by the subscriber would be 20 years.
Government co-contribution is 50% of the total contribution amount or 71000 per
Government annum, whichever is lower, for a period of 5 years. However, the Govt. co-contribution is
Contribution not available for those who are already covered by the existing PF/pension schemes.
Minimum monthly pension between 71000 & 75000 to the Subscriber / spouse with
Benefits
return of corpus to the nominees after 60 years of age.
Exit before 60 years of age is generally not permitted but in case a subscriber chooses to
exit, he shall only be refunded the contributions made along with the net actual interest
earned thereon after deducting the account maintenance charges etc. The subscriber is
Voluntary Exit not eligible for Government co-contribution and interest earned thereon. However, if
the account is closed due to terminal illness or death of subscriber, the accumulated
corpus including govt. contribution and interest thereon will be returned to the
subscriber or the nominee as the case may be.
If the subscriber dies before the age of 60 years, the spouse will be given an option
to continue contribution for the remaining vesting period. The spouse of the
Death subscriber shall be entitled to receive the same pension amount as that of the
subscriber until the death of the spouse.
Existing Swavalamban beneficiaries (18-40 years) can be migrated to APY

automatically unless they opt out. Government co-contribution is available for 5
years, i.e., from 2015-16 to 2019-20 for the Subscribers who join the scheme during
Other features the period from 1 st June 2015 to 31st March 2016. The management of funds under
APY is as per the investment pattern specified by Government. Individual Subscribers
will not be having any option for choice of investment or select Pension Funds.
Administration of the Pension Fund Regulatory and Development Authority (PFRDA) through NPS architecture.
Scheme
Documentation Application Form, Self Declaration & Authorization for auto debit.
IV. Sukanya Samriddhi YoJana: Government of India introduced the scheme in the month of March 2015 with
an objective to ensure a bright future for girl children in India. It facilitate them proper education and
carefree marriage expenses. It offers a small deposit investment for the girl children with higher interest
rate compared to the current bank interest rates. At present the interest rate is 9.20% p.a. The account can
be opened and operated by the natural or legal guardian of a girl child up to 10 years of age and beyond 10
year the girl child may operate her own account, if she chooses to. The minimum deposit required is 71000/-
per annum or multiples of 7100/- thereafter and the maximum amount that can be deposited in this account
is 71.50 lakh per annum. The tenor of the scheme is 21 years from the date of opening of the account.
However, operations in the account shall not be permitted once she gets married. To meet the financial
needs of the account holder for the purpose of higher education and marriage, withdrawal up to 50% of the
balance at the credit, at the end of the preceding financial year shall be allowed as withdrawal provided the
account holder attains the age of 18 years. All banks are advised to popularize the scheme among the
existing and prospective customers and open the accounts on behalf of GOI.
Interest Subvention Schemes
1. Short Term Agricultural Credit: In order to provide short term credit (Crop Loans, PAGCC, Kisan Vikas Cards,
Rythu Mitra Groups, Joint Liability Groups, Agricultural Gold Loans and Working Capital Loans financed to
Fisheries) to the farmers at reasonable interest rate, Government of India announced a scheme of Interest
Subvention in the year 2006. Under this, farmer receives short term credit at 7% p.a. from the date of
disbursement to the end of the respective season with an upper limit of 73 lakh on the amount. Now the benefit is
extended to small and marginal farmers availing Kisan Sampathi loans against negotiable warehouse receipts and
restructured crop loans (CCATL) on account of natural calamities. However, Agricultural Medium Term Loans are
not covered under this scheme. Government will provide Interest Subvention to the banks (PSBs, RRBs, and
Farmers Service Co-operative Societies) on the amounts financed to farmers (short term).
Banks lending to short term agricultural credit are eligible to claim 2% Interest Subvention from Government of India.
Further, farmers are eligible for another 3% interest subvention who repays the loan promptly. This additional
subvention is available to Public Sector Banks on the condition that the effective rate of interest on short term
production credit up to 73 lakh for such farmers will be 4% p.a. Branches are required to submit claim half-yearly
(September & March) for reimbursement of interest subvention amount from RBI. For crop loans up to one lakh
disbursed in AP State attracts zero interest rate as state government is reimbursing the entire interest to the banks
for prompt payment. Further, RBI has advised the Banks to ensure that all crop loans against which they are claiming
interest subvention should satisfy, inter alia, the following criteria:
The borrower should be a farmer

The rate of interest charged should not exceed the rate stipulated by the Govt of India
The amount of loan is fixed according to the prescribed scale of finance for agricultural loans and the loan is used
for stated purpose
Seasonality is observed in regard to both disbursement and recovery
2. Export Credit: Government is providing interest subvention at 3% p.a. to all Scheduled Commercial Banks in
respect of rupee export credit (Pre & Post shipment) extended to employment oriented export sectors such as
Handicrafts, Handlooms, Carpets, Readymade garments, processed agriculture products, Sports goods, Toys,
Engineering items, ITC and Textile goods. However, merchant exporters are not covered under this scheme. Banks
are required to completely pass on the said interest benefit to all eligible exporters upfront and submit the claims
to RBI on a monthly basis through a revolving fund system. This scheme is also called as "Interest Equalization
Scheme" w.e.f. 01.04.2015 and valid for 5 years.
3. Micro & Small Enterprises: Paavala Vaddi Scheme was introduced for the benefit of Micro & Small Enterprises
set up in AP State except in the Municipal Corporation limits of Hyderabad, Vijayawada and Visakhapatnam. The
scheme is applicable to the term loans availed on fixed capital investment by the eligible new Micro and Small
Enterprises on or after 01.04.2008. More than 75% of the plant and machinery should be new and not second
hand. Under the scheme, interest charged over and above 3% p.a. (i.e. 10% - 3% = 7%) will be reimbursed to the
group at half yearly intervals. However, the maximum reimbursement is restricted to 9% p.a. The benefit is
th
available for a period of 5 years i.e. up to the first half of 6 year or till the closure of term loan, whichever is
earlier. However, this benefit is available to only those accounts, which in regular in payment of principal and
interest. It is applicable to one-time payment accounts also.
4. Housing Loans: The objective of the scheme is to provide interest subsidy on housing loan as a measure to
generate additional demand for credit and to improve affordability of housing to eligible borrowers in the middle
and lower income groups. The scheme is expected to provide relief to prospective home owners and improve
home ownership in the specified target segment. Interest subvention of 1% will be available on housing loans up to
715 lakh to individuals for construction/purchase of a new house or extension of an existing house, provided the
cost of construction / price of the new house/extension does not exceed 725 lakh. All loans sanctioned and
disbursed on or after 01.10.2009 are eligible for the said interest subsidy. It will applicable to the first 12
installments of all such loans sanctioned and disbursed during the currency of the scheme and will be computed
for 12 months on the disbursed amount. The subsidy amount will be adjusted upfront in the principal outstanding,
irrespective whether the loan is on fixed or floating rate basis. The interest subvention is applicable for the eligible
borrowers for one housing unit only. The scheme will be implemented through Scheduled Commercial Banks.
However, Non Resident Indians for construction of farm houses and staff members of the banks are not eligible for
interest subsidy under this scheme.
5. Educational Loans — Interest Subvention/Subsidy: India is one of the few countries having large pool of
young people, which is an opportunity to the country provided these Human Assets are converted into Knowledge
Assets. Providing proper education to the students is a prerequisite to achieve the desired goal. The poor
financial background of the students is one of the major constraints for the students aspiring for higher studies.
To ensure technical/professional education to all the deserving students by providing required financial support
by way of Interest subsidy. In the above backdrop, Government of India has launched the following schemes:
i) Central Scheme to provide Interest Subsidy (CSIS) to provide interest subsidy during the period of moratorium
i.e. course period plus one year or six months after getting job, whichever is earlier, on loans taken by students
belonging to Economically Weaker Sections (EWS) from scheduled banks under Educational Loan scheme of the
Indian Banks Association, for pursuing any of the approved course of studies in technical and professional
streams, from recognized institution in India. The benefits of the scheme would be applicable to those students
belonging to EWS with annual gross parental/family income upper limit of 74.5 lakhs p.a. from all sources. The
interest subsidy shall be available to the eligible students only once, either for the first graduate degree course or
post graduate degree/diplomas in India. Interest subsidy shall however be admissible for integrated courses
(graduation plus post graduate). In order to claim the interest subsidy from Nodal agency, bank branches are
required to obtain income proof certificate from appropriate authority as decided by state government and
agreement with borrower/parents.
ii) Padho Pardesh - Government of India, Ministry of Minority Affairs has formulated a scheme for interest
subsidy on educational loans for overseas studies to promote educational advancement of students from minority
communities (Muslims, Christians, Sikhs, Buddhists, Jains and Parsis) for adoption by all banks. The objective of the
scheme is to award interest subsidy to meritorious students belonging to economically weaker sections of notified
minority communities so as to provide better opportunities for higher education abroad and enhance their
employability. The approved courses are Masters, M. Phil and Ph.D levels. Presently the subsidy is restricted to the
loans with limits specified under IBA model scheme i.e. 720 lakhs only. The overall family income of the student
should not more than 76 lakhs per annum. Certificate obtained at the time of availing loan, will be sufficient for
income proof. The scheme shall be applicable from the academic year 2013-14 starting from 1 st April, 2013. Loans
sanctioned and disbursed from 01.04.2013 onwards will only be eligible for interest subsidy under this scheme.
iii) Dr.Ambedkar Central Sector Scheme: The objective of the scheme is to award Interest Subsidy to meritorious
students belonging to economically weaker sections (Backward Class & Economically Backward Class) of the society
so as to provide them better opportunities for higher education abroad and enhance their employability. The
eligible courses are Masters, M.Phil and Ph.D. Loans sanctioned under this scheme are eligible for interest subsidy
for the period of moratorium i.e. course period plus one year after completion or 6 months after getting job,
whichever is earlier. Presently the subsidy is restricted to the loans with limits specified under IBA model scheme
i.e. 720 lakhs only. The overall family income of the student should not exceed 73 lakh per annum. Income
certificate submitted by the student (issued by revenue authorities) at the time of applying for loan is treated as
valid proof of annual income and subsequent increase/decrease has no effect on the eligibility. The scheme is
effective from 01.04.2014.
6. SHG Loans: AP State Government introduced "Vaddi Leni Runalu" scheme with effective from 01.01.2012 for all
repayments made after that date for the outstanding SHG Bank loans, including any fresh loans given thereafter.
The interest incentive will be available only to those accounts who repay the loans regularly. The incentive will be
released directly to the credit of SHG account once in Half-year.
Non Fund Business
Bank Guarantee: As a part of Banking Business, Bank Guarantee (BG) Limits are sanctioned and guarantees are issued on
behalf of our customers for various purposes. Broadly, the BGs are classified into two categories:
i) Financial Guarantees are direct credit substitutes wherein a bank irrevocably undertakes to guarantee the
payment of a contractual financial obligation. These guarantees essentially carry the same credit risk as a direct
extension of credit i.e. the risk of loss is directly linked to the creditworthiness of the counter-party against whom
a potential claim is acquired. Example - Guarantees in lieu of repayment of financial securities/margin
requirements of exchanges, Mobilization advance, Guarantees towards revenue dues, taxes, duties in favour of
tax/customs/port/excise authorities, liquidity facilities for securitization transactions and Deferred payment
guarantees.
ii) Performance Guarantees are essentially transaction-related contingencies that involve an irrevocable
undertaking to pay a third party in the event the counterparty fails to fulfill or perform a contractual obligation. In
such transactions, the risk of loss depends on the event which need not necessarily be related to the
creditworthiness of the counterparty involved. Example - Bid bonds, performance bonds, export performance
guarantees, Guarantees in lieu of security deposits/EMD for participating in tenders, Warranties, indemnities and
standby letters of credit related to particular transaction.
Though, BG facility is a Non-fund Facility, it is a firm commitment on the part of the Bank to meet the obligation in
case of invocation of BG. Hence, monitoring of Bank Guarantee portfolio has attained utmost importance. The
purpose of the guarantee is to be examined and it is to be spelt out clearly if it is Performance Guarantee or
Financial Guarantee. Due diligence of client shall be done, regarding their experience in that line of activity, their
rating/grading by the departments, where they are registered. In case of Performance Guarantees, banks shall
exercise due caution to satisfy that the customer has the necessary experience, capacity and means to perform the
obligations under the contract and is not likely to commit default. The position of receivables and delays if any, are
to be examined critically, to understand payments position of that particular activity. The financial position of
counter party, type of Project, value of Project, likely date of completion of Project as per agreement are also to be
examined. The Maturity period, Security Position, Margin etc. are also to be as per Policy prescriptions and are
important to take a view on charging BG Commissions.
Branches shall use Model Form of Bank Guarantee Bond, while issuing Bank Guarantees in favour of Central Govt.
Departments/Public Sector Undertakings. Any deviation is to be approved by Zonal Office. It is essential to have
the information relating to each contract/project, for which BG has been issued, to know the present stage of
work/project and to assess the risk of invocation and to exercise proper control on the performance of the
Borrower. It is to be ensured that the operating accounts of borrowers enjoying BG facilities route all operations
through our Bank accounts. To safeguard the interest of the bank, Branches need to follow up with the Borrowers
and obtain information and analyze the same to notice the present stage of work/project, position of Receivables,
Litigations/Problems if any leading to temporary cessation of work etc.
The Financial Indicators/Ratios as per Banks Loan Policy guidelines are to be satisfactory. Banks are required to be
arrived Gearing Ratio (Total outside liabilities+proposed non-fund based limits / Tangible Networth - Non Current
Assets) of the client and ideally it should be below 10.
In case where the guarantees issued are not returned by the beneficiary even after expiry of guarantee period,
banks are required to reverse the entries by issuing notice (if the beneficiary is Govt. Department 3 months and
one month for others) to avert additional provisioning. Banks should stop charging commission on expired Bank
Guarantees with effect from the date of expiry of the validity period even if the original Bank Guarantee bond duly
discharged is not received back.
Letter of Credit: A Letter of Credit is an arrangement by means of which a Bank (Issuing Bank) acting at the request
of a customer (Applicant), undertakes to pay to a third party (Beneficiary) a predetermined amount by a given date
according to agreed stipulations and against presentation of stipulated documents. The documentary Credit are
akin to Bank Guarantees except that normally Bank Guarantees are issued on behalf of Bank's clients to cover
situations of their non performance whereas, documentary credits are issued on behalf of clients to cover situation
of performance. However, there are certain documentary credits like standby Letter of Credit which are issued to
cover the situations of non performance. All documentary credits have to be issued by Banks subject to rules of
Uniform Customs and Practice for Documentary Credits (UCPDC). It is a set of standard rules governing LCs and
their implications and practical effects on handling credits in various capacities must be possessed by all bankers. A
documentary credit has the seven parties viz., Applicant (Opener), Issuing Bank (Opening of LC Bank), Beneficiary,
Advising Bank (advises the credit to beneficiary), Confirming Bank Bank which adds guarantee to the credit opened
by another Bank thereby undertaking the responsibility of payment/negotiation/acceptance under the credit in
addition to Issuing Bank), Nominated Bank - Bank which is nominated by Issuing Bank to pay/to accept draft or to
negotiate, Reimbursing Bank - Bank which is authorized by the Issuing Bank to pay to honour the reimbursement
claim in settlement of negotiation/acceptance/payment lodged with it by the paying / negotiating or accepting
Bank. The various types of LCs are as under:
i) Revocable Letter of Credit is a credit which can be revoked or cancelled or amended by the Bank issuing the credit,
without notice to the beneficiary. If a credit does not indicate specifically it is a revocable credit the credit will be deemed
as irrevocable in terms of provisions of UCPDC terms.
ii) Irrevocable Letter of credit is a firm undertaking on the part of the Issuing Bank and cannot be cancelled or amended
without the consent of the parties to letter of credit, particularly the beneficiary.
iii) Payment Credit is a sight credit which will be paid at sight basis against presentation of requisite documents
as per LC terms to the designated paying Bank.
iv) Deferred Payment Credit is a usance credit where payment will be made by designated Bank on respective due dates
determined in accordance with stipulations of the credit without the drawing of drafts.
v) Acceptance Credit is similar to deferred credit except for the fact that in this credit drawing of a usance draft is a
must.
vi) Negotiation Credit can be a sight or a usance credit. A draft is usually drawn in negotiation credit. Under this,
the negotiation can be restricted to a specific Bank or it may allow free negotiation whereby any Bank who is
willing to negotiate can do so. However, the responsibility of the issuing Bank is to pay and it cannot say that it is
of the negotiating Bank.
vii) Confirmed Letter of Credit is a letter of credit to which another Bank (Bank other than Issuing Bank) has
added its confirmation or guarantee. Under this, the beneficiary will have the firm undertaking of not only the
Bank issuing the LC, but
also of another Bank. Confirmation can be added only to irrevocable and not revocable Credits.
viii) Revolving Credit is one where, under the terms and conditions of the credit, the amount is revived or
reinstated without requiring specific amendment to the credit. The basic principle of a revolving credit is that after a
drawing is made, the credit reverts to its original amount for re-use by beneficiary. There are two types of revolving
credit viz., credit gets reinstated immediately after a drawing is made and credit reverts to original amount only
after it is confirmed by the Issuing Bank.
ix) Installment Credit calls for full value of goods to be shipped but stipulates that the shipment be made in specific
quantities at stated periods or intervals.
x) Transit Credit - When the issuing Bank has no correspondent relations in beneficiary country the services of a
Bank in third country would be utilized. This type of LC may also be opened by small countries where credits may not
be readily acceptable in another country.
xi) Reimbursement Credit - Generally credits opened are denominated in the currency of the applicant or beneficiary.
But when a credit is opened in the currency of a third country, it is referred to as reimbursement credit.
xii) Transferable Credit - Credit which can be transferred by the original beneficiary in favour of second or
several second beneficiaries. The purpose of these credits is that the first beneficiary who is a middleman can earn
his commission and can hide the name of supplier.
xiii) Back to Back Credit/Countervailing credit - Under this the credit is opened with security of another credit. Thus, it is
basically a credit opened by middlemen in favour of the actual manufacturer/supplier.
xiv) Red Clause Credit - It contains a clause providing for payment in advance for purchasing raw materials, etc.
xv) Anticipatory Credit - Under this payment is made to beneficiary at pre-shipment stage in anticipation of his
actual shipment and submission of bills at a future date. But if no presentation is made the recovery will be made
from the opening Bank.
xvi) Green Clause Credit is an extended version of Red Clause Credit in the sense that it not only provides for
advance towards purchase, processing and packaging but also for warehousing & insurance charges. Generally money
under this credit is advanced after the goods are put in bonded warehouses etc., up to the period of shipment.
Other concepts
i)Bill of Lading: It should be in complete set and be clean and should generally be to order and blank endorsed. It
must also specify that the goods have been shipped on board and whether the freight is prepaid or is payable at
destination. The name of the opening bank and applicant should be indicated in the B/L.
ii) Airway Bill: Airway bills/Air Consignment notes should always be made out to the order of Issuing Bank duly mentioning
the name of the applicant.
iii)Insurance Policy or Certificate: Where the terms of sale are CIF the insurance is to be arranged by the supplier and they
are required to submit insurance policy along with the documents.
iv) Invoice: Detailed invoices duly signed by the supplier made out in the name of the applicant should be called for and the
invoice should contain full description of goods, quantity, price, terms of shipment, licence number and LC number and
date.
v) Certificate of Origin: Certificate of origin of the goods is to be called for. Method of payment is determined basing
on the country of origin.
vi) Inspection Certificate: Inspection certificate is to be called for from an independent inspecting agency (name
should be stipulated) to ensure quality and quantity of goods. Inspection certificate from the supplier is not
acceptable.
vii) Lloyds Certificate: Shipments should be made only by Conference Vessels, which are in the approved list of
Lloyds Register of Shipping and classified as Lloyds 100 A1 or its equivalent classification. Age of the vessel should
not be more than 25 years and it should be seaworthy. Any other documents required by the applicant, such as
weight certificate, packing list, quality certificates should be mentioned in the application.
LoC/LoU is issued for making payment of Import Bills received either under FLC or on collection basis for imports
made into India in favour of Overseas Bank or Financial Institution outside India to the extent of US $ 20 million or
its equivalent per transaction. The period of such LoC / LoU / Guarantee has to be co-terminus with the period of
credit, reckoned from the date of shipment. No roll-over/extension will be permitted beyond the permissible
period. The precautions & Conditions for issuance of LOC/LOU are:
The facility may be considered in cases where there is mismatch between cash flows to meet the FLC commitment on
the due date.
At any point of time the liability under FLC, FIBC and LoC/LoU/Guarantee put together shall not exceed the
sanctioned FLC limit.
The stocks procured under FLC/Letter of Comfort are to be deducted to ensure Working Capital limits are fully
secured by adequate Drawing Power.
Multi currency option is not available to the importer.
In case the import is made on collection basis, branch should ensure strict compliance of KYC/AML regulations.
Commission to be collected upfront @ 0.50% per quarter or part thereof for the specified period of liability i.e. actual
validity period of LOC / LOU / Guarantee.
Importer is required to pay all-in-cost (with a ceiling over 6 months LIBOR minus 200 basis points) to the
Overseas Bank / FI outside India. All-in-cost includes arranger fee, upfront fee and management fee.
General Guidelines: LC is to be opened for our own customers known to be participating in the trade. The importer
should have Import Export (IE) code number allotted by Director General of Foreign Trade. The importer should
have adequate sanctioned limits and/or funds provision for clearance of goods. Exchange control copy of license to
be obtained in case of the item of import falls under negative list. If the import is freely permissible obtain a
declaration from the importer to that effect. Import LCs is to be advised through our Foreign Correspondents. Date
of dispatch of goods should be after the date of opening of the LC. When the LC is opened against third party
licence, the applicant should hold a proper letter of authority issued by the import licence holder along with the
exchange control copy of the licence. The description of goods, validity for shipment, country of shipment and origin
are as per the provisions of Policy/Licence etc. Branch is required to obtain confidential report on the overseas
seller at the time of opening of LC in case where the value of LC is $25000 and above, however, in case of borrowers
with credit rating of A+ the limit is above USD 1 lac. Confidential report is a must in case where the importer
dealings with the branch are less than 1 year irrespective of the value.
LC should be opened only in favour of overseas supplier/manufacturer or shipper of goods and not in favour of
the applicant himself or his nominee. Terms of shipment such as FOB/C&F/CIF etc are to be clearly mentioned.
For C &F and FOB, applicant should hold insurance cover note/policy in the joint names of the Bank and the
Opener. The policy should cover at least 110% of the CIF value, and is valid for entire shipment period. Usance
period should not exceed 180 days. LC should not be opened for import of goods from banned countries. LC
should be signed by two officers, where the value of LC is 710000 and above, where it is not issued through
SWIFT. LC should invariably contain a clause that the credit is subject to the provisions of UCPDC 600 and URR 725.
LC should stipulate a condition that the shipments should be made only by conference vessels, which are on the
approved list of Lloyds or any certificate to show that the vessel is seaworthy & not more than 25 years old. LC
should insist for an inspection certificate issued by a well known international Inspection Agencies. Last date of
shipment should be within the validity of Licence. Goods are to be consigned only in the name of LC opening bank
and never directly to the buyer. Similarly Documents of title to goods should be required to be sent only to the LC
opening Bank but not to the importer directly. The origin of the goods is to be specifically mentioned in the
application. No onerous clause is incorporated in the LC, which is detrimental to the interest of the Bank. Payment
to be claimed only against presentation of full set of documents. Currency in which payment for import is to be
made is in accordance with the permitted methods of payment.
LC — Operational Guidelines: LC covering letter should be addressed to the bank to whom LC is being forwarded
and signed by authorized officer of the branch duly mentioning Full name of the signatory of the letter, His/her
Designation, Signature number/Power of Attorney number allotted by the bank, Authorized Email ID of the branch
and Clearly mentioning that the any information relating to the said Letter of credit can be obtained by email id as
provided in the letter by quoting the LC no and date. On receipt of LC, advising bank to send e-mail through its
authorized mail ID seeking confirmation from LC opening bank in having issued the said LC. LC opening bank is
required to give confirmation by email on the same email id of the LC advising bank, through its authorized e-mail
ID only. The confirmation should normally be under the signature of signatories other than those to LCs. Effort may
be made to verify the same through search engines such as google whether the firm exists, if so its addresses and
other information positive or negative against the firm. Certain information is available on the internet in public
domain such as sales tax defaulter or whether registration with sales tax still valid or not. Information is available
state wise and within the state circle wise. The same may be confirmed by LC opening and advising banks.
LC discounting/negotiating bank to send confirmation by an email on the authorized email ID of the LC opening
bank informing that the name of the courier, its docket no and list of documents dispatched. It has been
ascertained that all the necessary details such as name of the beneficiary, date of last shipment, details of goods to
be purchased under LC, name of LC advising bank etc is captured in CBS system while opening LC. Even all
amendments such as amendment in last date of shipment, date of expiry and even change in usance and the
amount of LC are also captured in CBS. Therefore LC confirmation work can also be centralized within the bank.
Confirmation needs to be sent though the authorized email of the LC opening bank to the authorized email ID of LC
negotiating bank.
Since transmission of LC messages through SFMS was introduced and stabilized, IBA has advised all member banks
not to negotiate LCs issued in physical form w.e.f. 1st January 2015. While discounting bills drawn against LCs, the
banks should ensure that LC is received through SFMS only. It is aimed at establishing a safe and secure
environment in banking industry for conducting trade finance business and for sending and receiving messages for
LC instruments. This serves as the basic platform for transmitting messages of Inland Letter of Credits by all banks
in India.
Recent guidelines on Trade Credit (Buyers Credit & Suppliers Credit): As per revised guidelines, RBI has allowed
resident importer to raise trade credit in Rupees (INR) within below framework after entering into a loan
agreement with the overseas lender:
Trade credit can be raised for import of all items (except gold) permissible under the extant Foreign Trade Policy.
Trade credit period for import of non-capital goods can be upto one year from the date of shipment or upto the
operating cycle whichever is lower.
Trade credit period for import of capital goods can be upto five years from the date of shipment.
No roll-over/extension can be permitted by bank beyond the permissible period.
Banks can permit trade credit upto USD 20 million equivalent per import transaction.
Banks are permitted to give guarantee, Letter of Undertaking or Letter of Comfort in respect of trade
credit for a maximum period of three years from the date of shipment.
The all-in-cost of such Rupee (INR) denominated trade credit should be commensurate with prevailing market
conditions.
All other guidelines for trade credit will be applicable for such Rupee (INR) denominated trade credits.
Trade Credit Flow:
Importer imports goods in USD / EUR / Or any other freely convertible foreign currency.
Importer will ask Importers Bank to book conversion rate for making payment on due date of bill and provide
equivalent INR details for arranging buyers credit quote.
Importers arranges quote through buyers credit consultant in INR
Indian Bank sends lou in INR to Indian Bank Overseas Branch.
Indian Bank Overseas Bank transfers INR to Importers Bank.
Importers Banks receives INR, converts the same in USD / Eur and makes payment to Supplier.
On due date importer pay Principal + Interest in INR to Importers Banks
Importers Bank makes payment in INR to Indian Bank Overseas Branch.
RISK MANAGEMENT
What is Risk?
Risk is a probability of loss, may be direct or indirect. Direct loss may be relating to loss of capital or earning whereas indirect
loss may be loss of business. Thus, risk means probability of loss of earning, capital or business.
For example:
In case of non-payment of dues bank will suffer a loss, in case of compromise loss of earning (waiver) or loss of capital in case of
write off.
Frauds committed by either employees or outsiders results into loss of business.
What is Risk Management?
The four letters ‘RISK’ indicates that risk is an unexpected event or incident, which needs to be identified, measured monitored
and control.
R = Rare (Unexpected) I
= Incident (Outcome)
S = Selection (Identification)
K = Knocking (measuring, monitoring, controlling)
Thus, the risk management is a sum of (1) Risk identification (2) Risk measurement (3) Risk monitoring and (4)
Risk control with a view to maximize Risk Adjusted Return on Capital Employed = (RAROCE).
Different Types of Risks?
Broadly speaking the risk can be divided into four main categories.
(1) Market Risk (2) Operational Risk (3) Credit Risk and (4) Country Risk
Market risk:
Market Risk is the risk that the value of an investment will decrease due to movement in market factors. Market risk may be
relating to:
Liquidity Risk: Potential inability of a bank to meet its repayment obligations in a timely and cost effective manner e.g.
Mismatch of deposits and assets.
Interest Rate Risk: Risk due to change in market interest rate, which might adversely affect the bank‘s financial position. The
NIM will reduce. This depends on types of assets such as fixed or floating rate, quantum of advance etc.
Foreign Exchange Risk or currency risk : Risk due to upward/downward movement in exchange rate when there is an open
position, either spot or forward or both in an individual currency.
Commodity Price Risk: The price fluctuation in commodity, which are charged to the bank as security etc. by way of
hypothecation and /or pledge.
Equity Price Risk is a loss in value of the bank‘s equity investments and or equity derivatives, arising out of change in equity
price. Price fluctuation in stock market where bank has invested fund.
OPERATION RISK:
It is a risk relating to direct or indirect losses arising out of inadequate or failed internal processes, people, system, business,
management and/or external factors. Generally, any risk not categorized as market or credit risk is called operational risk.
Broadly speaking operational risk covers following:
(1) People (2) Process (3) Management (4) System (5) Business and (6) External.
COUNTRY RISK:
Country Risk is the possibility that a Country will be unable to service or repay its debts to foreign lenders in a timely manner.
Country Risk is the risk arising while dealing with other countries such as sovereign risk, political risk, transfer risk, currency risk,
cross border transactions, defaulter country risk etc.
Bank has established adequate systems and controls for identifying, measuring, monitoring and controlling Country Risk
Exposure. Operating Units are advised to obtain earmarking of limits from Treasury Division, Baroda Corporate Centre, Mumbai
for Country Risk before taking exposures on various countries. CRMS statement with respect to country wise exposure is
submitted by all branches on quarterly basis.
CREDIT RISK
Credit risk is a risk of potential loss arising out of inability or un-willingness of a customer or counter party to meet its
commitments in relation to lending, Hedging, settlement and other financial transactions. Thus, credit risk may be relating to;
Direct lending: Default risk, (non-payment of instalment and interest by the loanee).
Off Balance Sheet items: Counter party risk-Invocation of Guarantee or crystallization of L/C liability for which dues have not
been paid or denied by the counter party.
Treasury Operations: Forward Contract obligations, Credit Derivatives etc. On due date the party is refusing/ denying the
payment/ delivery.
Security transaction: The counter party may not effect fund settlement/ security settlement.
Counter Party Risk: When there are two or more contracts entered into and liabilities are depending upon happening of certain
events and the party on whose behalf we have taken exposure express his inability to pay out is called counter party risk.
Portfolio Risk: It is also called Credit Concentration Risk. This arises due to failure of particular segment/activity where the
bank is having substantial exposure. To mitigate such risk there are sectoral exposure, single /group exposure ceiling, activity
ceiling etc.
Defaulter Risk there is one contract only i.e. between bank and borrower, may be due to unwillingness or inability of the
borrower.
Credit Risk Management Framework
It includes all the components such as policies, procedures, system, tools, models, data, templates, analysis, study, reports etc. in
physical and electronic form. All the components of the framework are an integral part of Credit Risk Management Policy.
TOOLS FOR CREDIT RISK MANAGEMENT:
Credit is considered as core business activity of banking which results into profit. Therefore, it is necessary to
increase the credit portfolio and also to mitigate the risk relating to credit. Following are the tools available for
risk assessment and monitoring:
 Pro p er C r ed it Asses s men t
 Un if or mit y in c red i t p ro ces si ng t h rou gh C PCs
 Op er at io n s in th e acc o u nt
 St o ck St at em en ts
 QIS /QM R
 Revi ew o f acco u n t an d f in an ci al st at em en ts
 A SC ROM an d PSR
 Audit & inspections: concurrent audit, annual audit, Stock audit, periodical inspection, ZIC inspection, etc.
 Discretionary Lending power and ‗ Cap‖
 Exposure ceiling- Single, Group, and activity exposure.
 Insurance and Credit rating
 Secured & unsecured
 SMA 02
 Internal Audit of branch has now been changed to Risk based internal Audit
CREDIT RATING of a business and its Methodololgy:
The BOBRAM Risk Rating Model for Commercial Advances above Rs.25 lacs is based on two dimensional rating
methodology specified under Basel -II Accord requirements. The credit risk rating process as per BOBRAM Rating
Models involves three types of ratings for each credit facility.
Obligor (Borrower) Rating -for credit worthiness indicating the Probability of Default (PD)
Facility Rating -representing the Loss Given Default (LGD) and Composite Rating -which is
indicative of the Expected Loss (EL)
1.OBLIGOR (BORROWER) RATING
The obligor (Borrower) rating is indicative of creditworthiness of an obligor or the Probability of Default (PD) and it is based on
the assessment of past and projected cash flows of the company.
For assessment of an obligor, the rating structure consists of evaluation by way of four modules viz. 1) Industry Risk, 2) Business
Risk, 3) Financial Risk and 4) Management Quality.
2.Obligor (Borrower) Rating Grades:
Obligor Rating Grades range from BOB-1 to BOB-10. However depending upon the model used, the rating grades ranging from
BOB-1 to BOB-10 or BOB-3 to BOB-10 or BOB-6 to BOB –10.
FACILITY RATING
Facility Rating involves assessment of the security coverage for a given facility and indicates the Loss Given Default (LGD) for a
particular facility. Facilities proposed/ sanctioned to a company are assessed separately under this dimension of rating.
Facility Rating (FR) Grades:
Facility Rating grades range from FR-1 to FR-8.
3.COMPOSITE RATING
The Composite Rating (CR) – which is the matrix or the combination of PD and LGD; indicates the Expected Loss in case the
facility is defaulted. The Composite Rating is worked out automatically by the software based on the matrix of Obligor
(Borrower) Grade (BOB Rating) and Facility Rating Grade (FR).
Composite Rating Grades:
Composite rating grade ranges from CR-1 to CR-10. CUT-OFF GRADE FOR ACCEPTANCE
Bank has accepted BOB-6 as the cut-off point for the acceptance of an obligor (borrower) based on Obligor (Borrower) rating
carried out as per the applicable model. The rating models have been grouped in three categories for the purpose of specifying
cutoff point for the acceptance of an obligor (borrower) as per details mentioned hereunder:
PRICING
The composite Rating or the Combined Rating (CR- 1 to CR-10) is computed on the basis of matrix of Obligor Rating for credit
worthiness and the Facility Rating representing the expected loss in case of default.
Bank has introduced Risk based pricing for Home Loons & Car Loons w.e.f 0l.04.2016 and for Mortgage Loons and Traders Loan
w.e.f 23.05.2016. (Based on CIBIL score of borrower).
Mandatory two credit reports in case of Retail Loans from CIBIL & Equifax based on exposure (Ref:- BCC:BR:107:628 dated
18.12.2015)
Bank has implemented evaluation of Risk Adjusted Return on Capital (RAROC) framework for all credit proposals with
aggregate credit exposures of Rs. 5 Crores and above. (Ref:-BCC: BR:108:132 dated 21.03.2016; BCC:BR:108/242 dated
24.05.2016; BCC:BR:108/408 dated 07.09.2016; BCC:BR:108/408/ dated 07/09/2016)
Risk Management approaches:
BASEL Guidelines:The Basel Committee on Banking Supervision (BCBS) is a committee of banking supervisory authorities that
was established by the central bank governors of the Group of Ten countries in 1974. It provides a forum for regular
cooperation on banking supervisory matters. Its objective is to enhance understanding of key supervisory issues and improve
the quality of banking supervision worldwide. The Committee also frames guidelines and standards in different areas.
A.Basel I guidelines
In 1988, BCBS came out with its recommendations for a set of minimum capital requirements for banks which came to known
as Basel I Accord. The accord focused primarily on Credit Risk. The assets of a bank were classified into different risk groups
which carried different credit risk weights from 0 to 150.
Generally investments in Govt. Securities carried 0% risk weight, claims on banks attracted 20% risk weight and loans to others
were assigned risk weights depending on the asset category they belong to. In principle banks were advised to hold capital
equal to 8% of the risk weighted value of the assets. In India Reserve Bank of India mandated for banks to maintain minimum
capital @ 9% of the risk weighted assets (RWA).
Market Risk was introduced in 1996. But Operational Risk was not addressed under Basel I accord.
Capital adequacy ratio which denotes the strength and stability of a bank to absorb losses, if any, arising out of assets financed
by the bank is calculated as below.
Capital Adequacy Ratio (Basel I) = Eligible Total Capital
RWA (Credit Risk) + RWA (Market Risk)
B.Basel II guidelines:
During the period 1988-1998, markets for credit derivatives and securitizations grew rapidly. It was an open secret that banks
were employing these to take advantage of shortcomings in the 1988 Accord's crude system of risk weights. This practice is
called regulatory arbitrage.
This lack of risk sensitivity under the Basel I accord collapsed the economic decision making. It was felt over time that the Basel I
was one-size-fit-all approach for capital regulation. It prescribed single credit risk factor across a class of obligors thus ignoring
the default probability or risk rating of different borrowers/ obligors. All the corporate lending was carrying the risk weight of
100%. This result in assigning same amount of capital for exposures to “AAA” rated and “BB” rated corporate.
In response to the banking crises in 1990 and in view of the above drawbacks BCBS decided in 1999 to propose a new, more
comprehensive capital adequacy accord. This accord is known as “A Revised Framework on International Convergence of Capital
measurement and Capital Standards”. It came out with the final version of the Basel II Accord which was published on June 26,
2004. The new framework was set to be made applicable from 2006 end. Under the new guidelines banks were advised to
maintain minimum capital of 8% of the total Risk Weighted Assets (RWA).
In India RBI set a deadline of 31st March, 2008 for foreign banks operating in India and Indian banks operating overseas, to move
to Basel II norms. For other banks the time line was set as 31st March, 2009. Banks are required to maintain a minimum capital
9% of the total RWA. Our Bank has implemented Basel II norms or New Capital Adequacy Framework (NCAF) from 31st March,
2008.
Operational Risk, such as system breaking down or people doing wrong things, which was hitherto not covered under Basel- I
got introduced under Basel II.
Basel II aims at
1. Ensuring that capital allocation is more risk sensitive
2. Enhance disclosure requirements which will allow market participants to assess the capital adequacy of an institution
3. Ensuring that credit risk, operational risk and market risk are quantified based on data and formal techniques The
Basel II Norms primarily stress on 3 factors, viz. Capital Adequacy, Supervisory Review and Market discipline. The Basel
Committee calls these factors as the Three Pillars to manage risks.
1. Pillar - 1
1.1 Minimum Capital Requirement
It involves calculation of the total minimum capital requirements for credit, market and operational risk. The minimum capital
requirements are composed of three fundamental elements: a definition of regulatory capital, risk weighted assets and the
minimum ratio of capital to risk weighted assets.
The formula for calculation of CRAR is Eligible Total Capital
RWA (Credit Risk) + RWA (Market Risk) + RWA (Operational Risk)
For calculation of RWAs under Credit, Market and Operational Risk there are different approaches, depending on the
preparedness and sophistication of banks, as prescribed by BCBS. The types of approaches are as under:-
Credit Risk -
Standardised Approach
Foundation Internal Rating Based Approach (FIRB)
Advanced Internal Rating Based Approach (AIRB)
Market Risk-
Standardised Duration Approach
Internal Model Approach (IMA)
Operational Risk-
Basic Indicator Approach (BIA)
The Standardised Approach (TSA)
Advanced Measurement Approach (AMA)
Roll out of operational Risk Management system SASEGRC (BCC: BR: 107:257 dated 01-06-2015, BCC:BR:107/399 dated
01.08.2015): Bank has decided to roll-out this system for all entities of the bank, on solo basis, in India w.e.f. 01-06-2015.
The system will benefit the bank in online collection of operational risk loss data such as accident of banks vehicle, damage to
physical assets due to fire, flood, earthquake, etc. and its tracking in terms of recovery, impact of the bank’s profit and loss
account.
All the operating units of the bank i.e. all branches, RO, SME, RLF etc are required to report the operational risk losses of their
respective unit within 15 days of its detection in this system. The structure of the reporting and all other related issues are
described in annexure I of the above circular.
Standardised Approach to Credit Risk:
Under the Standardized Approach, bank‘s credit portfolio have been grouped into various class types like Domestic and Foreign
Sovereign, Banks, Corporate, Public Sector entities, Regulatory Retail portfolio etc.
The bank will allocate risk weight to fund and non-fund based assets, depending on the quality of assets as reflected in the risk
rating secured by the borrower from External Credit rating institutions.
Credit Conversion Factor (CCF):
For example: AAA‘ rated account will have risk weight of 20%, while the A‘ rated accounts will have risk weight of 50%, BBB rated
account will have risk weight of 100% and so on. Off Balance Sheet items will be converted to credit risk exposure by multiplying
with Credit Conversion Factor‘ from 0% to 100%. Risk weight of 100% may entail a capital charge of 9%, risk weight of 50% may
entail a capital charge of 4.5% and a risk weight of 20% may entail a capital charge of 1.8% etc.
Credit Risk Mitigation (CRM) Techniques:
Collateralised Transactions - Certain securities are eligible to be considered for Basel-II purpose. The securities may be either
prime securities or collateral securities like cash margin, Bank‘s own deposit, NSC, Indira Vikas Patras & Kisan Vikas Patra, LIC
policies, Gold, etc i.e. cash or near cash securities are considered as security for Basel-II purpose. In respect of Standard Assets
Basel-II does not recognize land and building, Plant and Machinery as Collateral for risk mitigation purposes.
On Balance Sheet netting - It is confined to loans / advances and deposits, where banks have legally enforceable netting
arrangement, involving specific lien with proof documentation. Loans and advances are treated as exposure and deposits as
collateral. Exposure may be offset against eligible collateral credit.
Guarantees - The eligible guarantors are Sovereign, sovereign entities, ECGC, PSEs, Banks, Primary Dealers with a lower risk
weight than the counter party (borrower), other entities rated AA or better External CreditRating Agencies approved by RBI.
Domestic - CARE, CRISIL, ICRA, FITCH & BRIPL (Brickwork Rating India Pvt. Ltd.) Foreign – Standard & Poor, Moody‘s & FITCH
Basic Indicator Approach (BIA):Under this approach, banks must hold capital for operational risk equal to the average over
the previous three years of a fixed percentage (denoted alpha, in the formula below) of positive annual gross income. If
annual gross income is negative or zero, it should be excluded while calculating the average. It can be expressed as below;
K= å (GI 1.3*a)/3
Where K = Capital Charge under Basic Indicator Approach
GI- Gross Income (annual), where positive, over the previous three years. a - 15% as per Basel-II accord.
Internal Capital Adequacy Assessment Process (ICAAP): ICAAP comprises of all bank‘s procedures and measures to ensure the
appropriate identification and measurement of risks, appropriate level of Internal Capital in relation to bank‘s risk profile and
applications and further development of suitable risk management systems, comprehensive strategies and procedures for
continuous evaluation and regular review, composition and distribution of internal capital which is considered adequate to cover
current risk and any future risk in both quantitative and qualitative terms.
Risks to be captured in Pillar II: Credit Concentration Risk – Concentration Risk may be used in a broader sense to include
concentration by sector, Concentration by Industry, geographical location and concentration of risk mitigant measures.
Country Risk: The exposure to various countries are in terms of rating categories as specified by the ECGC guidelines on Country
Risk Management in terms of percentage to Tier 1 and Tier 2 Capital.
Interest Rate Risk in the Banking Book: Interest Rate Risk is taken to be the current or prospective risk to both the earning and
capital of the bank arising from adverse movements in interest rates. In the context of Pillar 2, this is to be estimated for only,
given that the interest rate risk in the trading book is already covered under Pillar 1 market risk regulation.
Liquidity Risk:
Liquidity Risk occurs when an institution is unable to fulfil its commitment in time when commitment falls due. The liquidity risk
for the bank will be monitored and measured as per the ALM Policy. It is not mandatory to maintain capital for liquidity risk.
Reputation Risk: Reputation risk is the current or prospective indirect risk to earnings and capital from adverse perception of the
image of the bank on the part of customers, shareholders and regulator. Reputation risk may originate in lack of compliance with
industry service standards and regulatory standards, failure to deliver on commitments, lack of customer friendly service and fair
market practices, a service style that does not harmonize with customer expectation.
Business and Strategic risk: Business risk means current or prospective risk to earnings and capital arising from changes in the
business environment and from adverse business decisions.
Basel III Capital Accord: Reserve Bank of India has issued guidelines based on Basel II reforms on capital regulation applicable to
banks operating in India. The Basel III capital regulation has been implemented from 1st April 2013 in India phases and it will be
fully implemented as on 31.03.2019.
Minimum total capital requirement under Basel III:
As % Of RWA
Regulatory Capital (Risk Weighted Asset)
i Minimum common equity Tier I Ratio 5.50
ii Capital conservation Buffer (comprised of common equity) 2.50
iii Minimum common equity Tier 1 Ratio plus capital conservation buffer (i+ii) 8.00
iv Additional Tier I capital 1.50
v Minimum Tier I capital(i+iv) 7.00
vi Tier 2 capital 2.00
vii Minimum total capital ratio (MTC){(v)+(vi)} 9.00
viii Minimum total capital ratio plus capital conservation buffer[(vii)+(ii)] 11.50
Capital Adequacy under New Capital Adequacy Framework (Basel II) and Basel III (BCC: BR: 107:477 dated 28 09-2015):
Our Bank has implemented the New Capital Adequacy framework (NCAF), popularly known as Basel-II guidelines, w.e.f. 31st
March, 2008. It this reference, RBI has directed the banks in India to implement Basel III guidelines on capital Regulation from
01st April 2013 and disclose the Basel III capital ratio from quarter ended 30th June 2013 onwards.
There has not been much change in Calculation of RWA under Basel II and Basel III, other than that for claims on Bank Assets
Class, where Risk Weight of Indian Banks and banks operating in India would be calculated on Minimum common Equity Capital
and Capital Conservation Buffer ratio prescribed by RBI, rather than on Total CRAR under Basel II guidelines.
GYAN SANGAM:
Gyan Sangam is a forum where the highest officials from public sector banks, the government and the Reserve Bank of
India, meet to discuss issues facing by the Banking Sector. The interaction of ministry officials, RBI Governor and heads
of PSBs in an informal setting is a novel idea. As a management tool, a meeting away from the pressures of day-to-day
work is meant to unfreeze the established behavior bpatterns and enable the divergent shareholders i.e. the
government, owner, regulators and the banks themselves to open a healthy dialogue.
Indradhanush – A Mission launched by Govt. of India to revamp PSU banks
As per the brain child of P J Nayak committee, Ministry of Finance under the Department of Financial Services has
launched Mission Indradhanush that aimed to revamp the functioning of public sector banks so that PSBs can
compete with the Private Sector Banks. The mission is regarded as one of the big steps after the nationalization of
banks in 1970s.
The mission includes the seven key reforms of appointments, which is also known as A2G for PS Banks.
1. Appointments
2. Bank Board Bureau
3. Capitalization
4. De-stressing PSBs
5. Empowerment
6. Framework of Accountability
7. Governance Reforms
P.J. Nayak committee on banking sector reforms
The Committee to Review Governance of Boards of Banks in India was constituted by the RBI Governor on 20th
January, 2014. The terms of reference of the committee included review of the regulatory compliance requirement of
the boards of banks, the working of these boards, regulatory guidelines on bank ownership/concentration, and an
examination of board compensation guidelines.
Government Announces Banks Board Bureau to Advise PSBs
Taking the first step towards a holding company structure for public sector banks (PSBs), the government has setup of
a Bank’s Board Bureau (BBB). It will recommend appointment of directors in PSBs and advice on ways of raising funds
and dealing with issues of stressed assets. Former Comptroller & Auditor General of India Mr Vinod Rai has been
named the first chairman.
RBI Guidelines to Banks on Implementation of Ind AS
RBI has released guidelines for banks on complying with the new norms under Companies (Indian Accounting Standards – Ind AS)
Rules, 2015. Banks are required to comply with Ind AS for financial statements for accounting periods beginning from April 1,
2018 onwards.
Fraud Reporting and Monitoring - Operationalisation of Central Fraud Registry by RBI
During his Fourth Bi-monthly Monetary Policy Statement, 2014-15, Governor of RBI announced, “Along with early
detection mechanisms for frauds, a Central Fraud Registry is also proposed to be created simultaneously as a
searchable centralized database for use by banks.”Accordingly, RBI has operationalized the Central Fraud Registry – a
searchable centralized database for use by banks with effect from 20th January 2016. This is in line with the various
initiatives of RBI for early detection and minimization of loan related frauds.
Regulatory Support to Start Up India
RBI has come out with various policy changes and initiatives to promote the ease of doing business and contribute to
an eco-system conducive for growth of entrepreneurship, particularly in respect of the start-up enterprises. A majority
of these changes relate to cross border transactions aimed at addressing the funding concers for the startup
companies.
Asset Quality Review (AQR) by RBI
RBI has begun the Asset Quality Review (AQR) process to ensure cleaning of books of Indian Banks which have been
reeling under the pressure of high level of stressed assets. RBI has identified loans which were of concern along with
those with potential weaknesses.
RBI Relaxes Norms to IFSC Banking Units (IBUs)
RBI while issuing guidelines relating to setting up of financial institutions in the International Financial Services Centres
(IFSC) restricted the IFSC Banking Units (IBUs) from few activities which have been now reviewed. While the IBUs were
not allowed to open any current or savings accounts, now the regulator has decided that the IBUs can open foreign
currency current accounts of units operating in IFSCs and of non-resident institutional investors to facilitate their
investment transactions.
Norms for Financial Literacy Centers (FLCS) Revised
In view of the considerable progress made in the area of Financial Inclusion and to concentrate the efforts of the
FLCs on keeping the already opened accounts active, RBI has issued revised guidelines for FLCs of lead banks and
the operational guidelines for the conduct of camps by FLCs and rural branches of banks.
Brick and Mortar Branches in Villages with Population more than 5000 without a Bank Branch of SCB The heads of SLBC
convener banks have been asked by RBI to identify villages with population above 5000 without a bank branch of a
Scheduled Commercial Bank (SCB) in their state. The villages thus identified may be allotted among SCBs (including
Regional Rural Banks) for opening of branches. It has been asked to complete the opening of bank branches under this
roadmap by March 31, 2017.
SEBI Releases a Concept Note on Green Bonds
Market regulator SEBI has released Consultation Paper on Issuance of Green Bonds. A Green Bond is like any other bond
where a debt instrument is issued by an entity for raising funds from investors but what differentiates it from other bonds is
that the proceeds of a Green Bond offering are ear-marked for use towards financing ‘green’ projects.
Pradhan Mantri Fasal Bima Yojana:

Government of India has recently approved Pradhan Mantri Fasal Bima Yojana (PMFBY) which would replace the
existing schemes of National Agricultural Insurance Scheme (NAIS) & Modified National Agricultural Insurance
Scheme (MNAIS) from Kharif 2016. PMFBY would be available to the farmers at very low rates of premium which
would be maximum upto 1.5% for Rabi and upto 2% for Kharif for Food crops, Pulses and Oilseeds and upto 5% for
Annual Horticulture/ Commercial Crops. This scheme would provide insurance cover for all stages of the crop cycle
including post-harvest risks in specified instances.
Sovereign Gold Bond Scheme 2016:
The Sovereign Gold Bond Scheme 2016 opened for subscription from 18th January to 22nd January 2016. Bonds are
issued by RBI on behalf of Government of India. The bonds are sold through banks, SHCIL and designated post offices.
National Investment and Infrastructure Fund (NIIF):
International pension funds and sovereign funds from countries such as Russia, Singapore and UAE have evinced
interest in participating in India’s INR 40000 crore NIIF. The NIIF is meant to fund development of infrastructure
projects, including reviving stalled ones.
RBI Announces Marginal Cost of Funds Methodology for Interest Rate on Advances (MCLR):
RBI has finalized and released the guidelines under Marginal Cost of Funds Methodology for Interest Rate on
Advances. The new internal benchmark rate to which all rupee loans sanctioned and credit limits renewed wef April
01, 2016 will be reference rate and has been christened as Marginal Cost of Funds based Lending rate (MCLR). It will
replace ‘Base Rate’ and will be the internal benchmark for such purposes.
The MCLR shall comprise of:
a. Marginal cost of funds
b. Negative carry on account of CRR
c. Operating costs
d. Tenor premium
Financial Engineering:
Financial engineering is about the development and creative application of financial technology for solving financial
problems, exploiting financial opportunities, and for otherwise adding value. Some of trends and examples are E-
Banking, Internet Banking, Mobile & SMS Banking, ATM expansion, volumes of Debit & Credit Card, RTGS and NEFT.
Crowd funding:
It is the practice of funding a project or venture by raising monetary contributions from a large number of people,
typically via the internet / social media. Usually Social / Cultural projects and start-ups are using this informal source of
finance. Crowd funding is a form of alternative finance, which has emerged outside of the traditional financial system.
Peer-to-Peer (P2P) lending:
The practices of lending money to individuals or businesses through online services that match lenders directly with borrowers.
i.e. Lending Club. It is an online investment platform to enable borrowers to attract lenders and investors to identify and
purchase loans that meet their investment criteria
5 / 25 Scheme of Reserve Bank of India:
Reserve Bank of India launched the 5/25 scheme (officially called the Flexible Structuring of Long Term Project Loans to
Infrastructure and Core Sector Industries) and subsequently extended it to existing project loans in addition to new
loans there may have been a collective sigh of relief from bankers and corporate. The ‘5/25’ moniker summarily refers
to the feature that the loan will be repaid over a maximum period of 25 years. However, the banks will have to
refinance the loan every 5 year
Red Flagged Accounts:
A bank can label an account a Red Flagged Account (RFA) if the loan account is under suspicion of fraudulent activity and such a
suspicion is thrown up by early warning signal (EWS). Banks must use such triggers to launch a detailed investigation. All RFAs
will have to be reported to the Central Repository of Information on Large Credits (CRILC).
Bandhan Bank Limited: (Inaugurated on 23 August 2015 in Kolkata)

Bandhan Bank Limited was incorporated on 23rd December 2014 as a wholly-owned subsidiary of Bandhan Financial
Holdings Limited. Bandhan received the in-principle approval of the Reserve Bank of India (RBI) for setting up a
universal bank in April 2014; the banking regulator gave its final nod in June 2015. Incidentally, Kolkata-headquartered
Bandhan is the first bank set up in eastern part of India after Independence.
IDFC Bank Limited:
The Reserve Bank of India granted a universal banking license to IDFC Limited on July 23, 2015. IDFC Ltd. demerged on
October 1, 2015, transferring all assets and liabilities of its lending business (“Financing Undertaking”) to IDFC Bank
Limited. IDFC Bank Ltd. is a subsidiary of the IDFC Ltd., and was inaugurated on October 19, 2015 in New Delhi. It is
head quartered in Mumbai.
Payments Bank:
The RBI on 19.08.2015 granted ‘in principle’ approval for payment banks to 11 entities. Payments banks are new
stripped-down type of banks, which are expected to reach customers mainly through their mobile phones rather than
traditional bank branches. They can’t offer loans but can raise deposits and pay interest on these balances. They can
enable transfers and remittances through a mobile phone. The list of approved Payments Bank includes:
1. Aditya Birla Nuvo Limited
2. Airtel M Commerce Services Limited
3. Cholamandalam Distribution Services Limited
4. Department of Posts
5. Fino PayTech Limited
6. National Securities Depository Limited
7. Reliance Industries Limited
8. Shri Dilip Shantilal Shanghvi
9. Shri Vijay Shekhar Sharma
10. Tech Mahindra Limited
11. Vodafone m-pesa Limited
The “in-principle” approval granted will be valid for a period of 18 months, during which time the applicants have to comply with
the requirements under the Guidelines and fulfill the other conditions as may be stipulated by the Reserve Bank.On being
satisfied that the applicants have complied with the requisite conditions laid down by it as part of “in-principle” approval, the
Reserve Bank would consider granting to them a license for commencement of banking business under Section 22(1) of the
Banking Regulation Act, 1949. Until a regular license is issued, the applicants cannot undertake any banking business.
No need of reporting fixed deposits in pre-existing accounts:
The Indian government has clarified that the implementation of the Foreign Account Tax Compliance Act (FATCA) and
Common Reporting Standards (CRS) will not entail reporting of all fixed deposits and auto sweep facilities in pre-
existing savings bank accounts. It is informed that in such cases, no additional documentation is obtained for these
fixed deposits accounts as they are intrinsically related to existing saving bank account and all KYC documents are
available for the existing saving bank account, the Central Board of Direct Taxes said on their website.
Foreign Account Tax Compliance Act:
The provisions commonly known as the Foreign Account Tax Compliance Act (FATCA) became law in March 2010. FATCA targets
tax non-compliance by U.S. taxpayers with foreign accounts and focuses on reporting:  By U.S. taxpayers about certain
foreign financial accounts and offshore assets
 By foreign financial institutions about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers
hold a substantial ownership interest
 The objective of FATCA is the reporting of foreign financial assets; withholding is the cost of not reporting.
Highlights of Companies Act 2013
The 2013 Act has introduced several new concepts and tried to streamline many of the requirements by introducing new
definitions.
1. Immediate Changes in letterhead, bills or other official communications, as if full name, address of its registered
office, Corporate Identity Number (21 digit number allotted by Government), Telephone number, fax number, email
ID, website address if any.
2. One Person Company (OPC): It's a Private Company having only one Member and at least One Director. No
compulsion to hold AGM. Conversion of existing private Companies with paid-up capital up to Rs 50 Lacs and turnover
up to Rs 2 Crores into OPC is permitted.
3. Woman Director: Every Listed Company /Public Company with paid up capital of Rs 100 Crores or more / Public
Company with turnover of Rs 300 Crores or more shall have at least one Woman Director.
4. Resident Director: Every Company must have a director who stayed in India for a total period of 182 days or more in
previous calendar year.
5. Accounting Year: Every company shall follow uniform accounting year i.e. 1 st April -31st March.
6. Loans to director – The Company CANNOT advance any kind of loan / guarantee / security to any director, Director of
holding company, his partner, his relative, Firm in which he or his relative is partner, private limited in which he is
director or member or any bodies corporate whose 25% or more of total voting power or board of Directors is
controlled by him.
7. Articles of Association- In the next General Meeting, it is desirable to adopt Table F as standard set of Articles of
Association of the Company with relevant changes to suite the requirements of the company. Further, every copy of
Memorandum and Articles issued to members should contain a copy of all resolutions / agreements that are required
to be filed with the Registrar.
8. Disqualification of director- All existing directors must have Directors Identification Number (DIN) allotted by central
government. Directors who already have DIN need not take any action. Directors not having DIN should initiate the
process of getting DIN allotted to him and inform companies. The Company, in turn, has to inform registrar.
9. Financial year- Under the new Act, all companies have to follow a uniform Financial Year i.e. from 1st April to 31st
March. Those companies which follow a different financial year have to align their accounting year to 1st April to 31st
March within 2 years. It is desirable to do the same as early as possible since most of the compliances are on financial
year basis under the new Companies Act.
10. Appointment of Statutory Auditors- Every Listed Company can appoint an individual auditor for 5 years and a firm of
auditors for 10 years. This period of 5 / 10 years commences from the date of their appointment. Therefore, those
companies have reappointed their statutory auditors for more than 5 / 10 years; have to appoint another auditor in
Annual General Meeting for year 2014.
Master Direction - Reserve Bank of India (Interest Rate on Deposits) Directions, 2016:
The provisions of these Directions shall apply to every Scheduled Commercial Bank {including Regional Rural Banks(RRBs)}
licensed to operate in India by Reserve Bank of India. These directions shall not be applicable to operations of foreign
branches of Indian banks.
Bulk Deposit:
1. Single Rupee term deposits of Rupees one crore and above for Scheduled Commercial Banks other than Regional Rural
banks
2. Single Rupee term deposits of Rupees fifteen lakhs and above for RRBs.
Interest Rate framework
1. The rates shall be uniform across all branches and for all customers and there shall be no discrimination in the matter
of interest paid on the deposits, between one deposit and another of similar amount,
accepted on the same date, at any of its offices.
2. The rates shall not be subject to negotiation between the depositors and the bank.
3. No interest shall be paid on deposits held in current accounts.
4. Differential interest rate shall be offered only on bulk (term) deposit
5. The additional interest may be paid on deposits after obtaining a declaration from the depositor
concerned, that the monies deposited or which may be deposited from time to time into such account belong to the
depositor:
• member or a retired member of the bank’s staff, either singly or jointly with any member or members of
his/her family; or
• the spouse of a deceased member or a deceased retired member of the bank’s staff; and
• an Association or a fund, members of which are members of the bank’s staff;
6. Scheduled Commercial Banks shall, at their discretion, formulate term deposit schemes specifically for resident Indian
senior citizens, offering higher and fixed rates of interest as compared to normal deposits
of any size.
7. Scheduled Commercial Banks shall, at their discretion, give their resident Indian retired staffs, who are
senior citizens, the benefit of additional interest rates as admissible to senior citizens over and above the additional
interest payable to them by virtue of their being retired members of the banks’ staff.
8. Scheduled commercial banks shall not pay any remuneration or fees or commission or brokerage or incentives on
deposits in any form or manner to any individual, firm, company, association, institution or
any other person except commission paid to agents employed to collect door-to-door deposits under a special scheme,
commission paid to Direct Selling agents/ Direct Marketing Agents as part of the outsourcing arrangements and remuneration
paid to Business facilitators or Business Correspondents.
Master Direction - Know Your Customer (KYC) Direction, 2016:
In terms of the provisions of Prevention of Money-Laundering Act, 2002 and the Prevention of Money-Laundering
(Maintenance of Records) Rules, 2005, Regulated Entities (REs) are required to follow customer identification
procedure while undertaking a transaction either by establishing an account based relationship or otherwise and
monitor their transactions.
There shall be a Know Your Customer (KYC) policy duly approved by the Board of Directors of REs (Regulated Entities)
or any committee of the Board to which power has been delegated. The KYC policy shall include following four key
elements:
(a) Customer Acceptance Policy;

(b) Risk Management;
(c) Customer Identification Procedures (CIP); and
(d) Monitoring of Transactions
Framework for Revival and Rehabilitation of Micro, Small and Medium Enterprises (MSMEs):
In order to provide a simpler and faster mechanism to address the stress in the accounts of MSMEs and to facilitate the
promotion and development of MSMEs, the Ministry of Micro, Small and Medium Enterprises, Government of India,
vide their Gazette Notification dated May 29, 2015 had notified a ‘Framework for Revival and Rehabilitation of Micro,
Small and Medium Enterprises’.
Thereafter, certain changes in the captioned framework have been carried out in order to make it compatible with the
existing regulatory guidelines on ‘Income Recognition, Asset Classification and provisioning pertaining to Advances’.
Accordingly, a revised Framework along with operating instructions has been furnished by RBI on 17.03.2016 to
operationalize the Framework by the banks (not later than June 30, 2016).
Indian Companies Act, 2013:

After getting approval of both the houses of Parliament, the long-awaited Companies Bill 2013 obtained the assent of the
President of India on 29 August 2013 and became Companies Act, 2013 (2013 Act). The 2013 Act has introduced several new
concepts and has also tried to streamline many of the requirements by introducing new definitions. The changes in the 2013 Act
have far-reaching implications that are set to significantly change the manner in which corporate operate in India.
5. BANKING BUSINESS STRATEGY

CASA STRATEGY
To undertake massive CASA Campaign across the country to mobilize new accounts
Focus on relationship building and posting of relationship officer/manager at least at district level & relationship
manager of Scale IV/V at state level to have good liaison with government departments/corporate.
To have School/College teachers account to boost our retail liability/retail asset products portfolio.
Allocation of Publicity budget to identified block level branches for increasing visibility.
Conduct of Regular CASA Campaigns during each quarter with specific emphasis on CASA Accounts mobilization from
HNI / Payroll accounts, Government Departments ( Panchayat, Block level, District level and state level accounts, RUSA,
Govt. school & Colleges, MP/MLA accounts/ TASC account
Revival of Inoperative / Dormant accounts
Focus on New Branches for exponential growth in CASA of new branches
Organizing HNI / NRI Meets at frequent intervals at all major centers.
Transformation of additional Shikhar branches with a view to enhance customer service resulting in higher CASA
growth. ( we have seen 20% CASA growth in these branches)
COMPETITION WITH PAYMENT BANK

New banks will offer interest higher than PSBs hence retail depositors will move to payment bank, have impact on CASA
of banks, tighten NIM of banks,
Customer will open account with payment banks for small ticket payments
Customer will get newest / easy technology for their payments
If will have less impact if they offer easy payment options for their small tickets payment by offering new tech based
App
Step to minimize impact on PSBs:
New technology for payments need of customers, provide better platform for mobile payments,
improve customer service, Banks need to understand their customers, in order to understand the current market trends
and predict the future trends, segmentation of customers and specific / appealing products for a particular segment,
rewards/points for making payments, privacy and security
collaborate with them to create a partnership model
CUSTOMER SERVICE
In order to achieve the set goals, Customer Service needs to be given adequate attention. Following customer centric
initiatives undertaken to reduce customer complaints and enhance business:-
Counter service to be improved.
Rude behavior of staff to be eliminated and Zero tolerance level for rude behavior. During FY15-16, 131 cases of rude
behavior were reported.
Timely and Speedy redressal of customer complaints.
Providing priority services to the Senior Citizens and Pensioners.
Motivating customers as well as staff for usage of Tech products.
Popularizing Missed Call Facility, Internet and Mobile Banking, Canara e-info book, Canara Easy Cash etc.
Sensitization of staff to improve our position in BCSBI rating amongst all Banks.
Steps initiated towards Information dissemination, Transparency, Customer Centricity, Grievance Redressal, Customer
feedback etc.
LOSS MAKING TURNAROUND

Stress on improving net interest income
Increasing the CD ratio
Reduction in cost of deposits by increasing CASA ratio and reducing Bulk deposit
Reducing / eliminating NPA
Containing the operating expenses
New MCLR Base Rate - key features

Starting 1st Apr 2016, all new floating rate loans such as home loan, loan against property and business loans would be
priced with reference to the new MCLR Base Rate or Marginal Cost Based Lending Rate
The margin over MCLR base rate would be fixed at the time of sanction and cannot be changed unless there is a change
in the customer’s credit profile
Banks would publish MCLR for at least five durations starting with overnight MCLR. However banks may publish MCLR
base rates for more than five periods
The banks may revise the MCLR rate every month
The interest reset frequency on a loan benchmarked to the MCLR would correspond to the duration of the MCLR. For
example, the interest rate on a home loan priced with reference to the 1 year MCLR rate would be reset every year.
Similarly, the rate of interest on a loan benchmarked to the 3 month MCLR rate would be reset every three months
Loans sanctioned under the old base rate formula would be unaffected and the base rate changes would continue to be
notified by banks as is done now. However, all existing borrowers have the option of shifting to MCLR formula without
attracting any prepayment charges
Why was a new regulation needed:
Issue 1: Fast to go up and slow to come down: It was observed that whenever RBI increased rates, banks were prompt
in raising interest rates on all floating rate loans. However, when RBI announced repo rate cuts, banks were slow in
cutting rates to customers and in most cases, did not reduce the base rate to the extent of the decrease in repo rate
(see tables below). Bankers argued that the cost of bank funds (deposits) did not fall instantaneously with policy rates
and hence the reduction in lending rates could not be instantaneous as well. RBI kept asking banks why the same
argument did not hold true when rates were raised. Below table illustrates the trend in RBI repo rate, base rate of
major banks and prime lending rate (PLR) of large housing finance companies.
Issue 2: Increase in spread (margin) post disbursement: It was observed that banks offered a low interest rate initially
to customers by offering loans at very low spreads (or margin) over base rate and then increased the spread after a few
months without any coherent reason. This was seen as being unfair as the applicable rate of interest to the customer
was increased even if the base rate did not increase. RBI had repeatedly been flagging this issue to the banks and
nudging them not to do so. While most banks agreed with the RBI view, some banks continued this practice resulting in
many disputes being referred to the RBI Banking Ombudsman.
How it works
So far, banks followed diverse methodologies for computing the minimum rate at which they could lend—the base rate.
Now, the RBI has asked all banks to follow the marginal cost of funds method to arrive at their benchmark lending rate.
MCLR will be calculated after factoring in banks' marginal cost of funds (largely, the interest at which banks borrow
money), return on equity (a measure of banks' profitability), negative carry on account of cash reserve ratio (the cost
that banks incur on account of keeping reserves with the RBI), operating costs and tenure premium (longer the loan
term, higher the interest/premium).
The actual lending rate will be MCLR plus the spread determined by banks after taking into account their business
strategy and credit risk of the borrower, among other parameters.
Banks can review MCLR once a quarter till March 2017, after which they will have to publish the MCLR on a monthly
basis. Lenders will also have to specify the interest reset dates on their floating rate loans. They can either grant loans
with reset dates linked to the date of sanction, or the date of MCLR review. The interest rate charged to a borrower will
be applicable until the next reset date. The gap between two reset dates cannot be longer than a year
Core benefits
The RBI expects the new formula to make floating lending rates more responsive to its policy rate cuts. Ratings agency
ICRA believes that the norms will improve policy transmission for new borrowings. "(MCLR) will impact new borrowers
immediately: they will benefit in a declining interest rate scenario and take a dent when interest rates are rising," says
ICRA. Even existing borrowers will have the option to switch to MCLR when it is introduced. "They should move to the
new system as it is more sensitive to interest rate changes, but they must be prepared for frequent changes in their
loan tenure, given that interest rate changes typically affect tenure rather than EMIs," says Vineet Jain, Founder and
CEO of loan aggregator portal loan street. in.
While RBI expects the new regime to benefit retail borrowers, hurdles remain. For instance, ICRA notes, the complete
transmission or RBI's cuts to the retail borrower will depend on the extent banks cut term deposit rates as well as the
proportion of term deposits in the overall liabilities of a bank. "If a reduction in banks' deposit rates matches the repo
rate reduction and term deposits constitute 60% of the funding, reduction in MCLR will be limited to 60% of the repo
rate cut," says ICRA. Bear in mind bank rates could fall in the next few quarters, as RBI is expected to ease policy rates—
but they will go up sharply once the cycle turns and RBI increases rates
How is MCLR calculated?
You can expect MCLR to be linked to fresh (incremental) cost of borrowing. However, there is more to it. Borrowing is
not just rates of fixed deposits. It includes current account balances, savings account balances, wholesale borrowings,
borrowings from RBI.
But there is more to it. Let’s look at various components of MCLR.
Marginal Cost of Funds: This is cost of fresh (incremental) borrowing to the bank. It takes into account interest rates of
different types of deposits (current, savings, term deposits etc). Marginal cost of funds is not just the deposits
(borrowings) that the bank has accepted. There is some equity too. Hence, cost of equity is also considered.
Marginal cost of funds = Marginal cost of Borrowing X 92% + Return on Net worth X 8%
For exact calculation, you can refer to the RBI Circular.
Negative Carry on Cash Reserve Ratio: Banks have to keep a certain level (4% as on April 5, 2016) of their deposits with
the Reserve Bank. This ratio is the Cash Reserve Ratio (CRR). Banks don’t earn any interest on the amount. Essentially,
they can use 96% of the deposits for lending and the remaining 4% does not earn the bank anything. RBI allows some
leeway for this with adjustment to the
Operating Costs: Bank’s costs are not limited to interest it pays on deposits. There are expenses on salaries, branch rent
or other expenses that are not directly charged to the customers. Cost of raising funds is also included under this head.
Tenor Premium/Discount: Higher the loan tenor, higher the tenor premium. Tenor refers to the period of interest rate
reset. Even though your loan tenor is 15 years but if the loan reset is done every year, 1-year MCLR will be applicable
REORGANISATION
Enhance connectivity between branches and controlling offices
Improve monitoring of branches for business growth and development
REDUCING NPA
Monitoring of all newly slipped accounts for upgradation/recovery action.
Initiating SARFAESI action in all eligible cases.
Special drive campaign for recovery under D4 and Loss Assets.
Conducting Pan India Mega E-auction on regular basis.
Conducting Adalat/Mega Adalat/Regular Recovery Camps at Branches/Circles.
Use of Special OTS Scheme for reduction of NPAs under Small value (upto Rs. 10 lacs) and MSME NPA accounts (upto
Rs. 100 lacs).
Encouraging more number of proposals under One Time Settlement.
Formation of dedicated Recovery team at each RO consisting of 5 to 10 members who will assist Branches through field
visit for personal contact of Defaulters.
Filing suit in all eligible cases and following up the same for early settlement.
Intensive follow up of DRT cases for obtaining/ execution / enforcement of RCs for recovery with the help of DRT
Liaison Officers.
Declaring the Borrowers/guarantors as “Wilful Defaulters” / “Non Co- operative Borrower” wherever applicable and in
fraud accounts taking immediate steps for filing FIR / Criminal complaints / CBI cases depending upon facts of each
case.
Making extensive use of forum like Lokadalat / National Lokadalat for early recovery. Ensuring conduct of Lokadalat in
every district of each Circle at least once in a quarter.
Making use of Revenue Recovery Act in States like Kerala, Uttar Pradesh, etc., where the same is very effective in
recovery of dues.
Enrolling more no. of SARFAESI / Recovery Agents to assist branches to speed up recovery process.
RETAIL LENDING
Retail Lending by every branch and aim to achieve NIL lending branches.
Task force to be made in each Circle for branches having CD Ratio less than 50% in order to improve the CD Ratio to
minimum 70%.
Marketing of Online Instant In-principle Sanction for Housing Loan and Car Loan on digital platform throughout the
year.
Wide publicity of Housing Loan and Car Loan products especially during festival time to increase the visibility.
Focus on reduction in turnaround time at RAH from 9 days to 7 days.
Tie up with premier education institutions Viz. IIMs, IITs, NITs & other Premier institutes
Extending the services of Direct Selling Agents to all the Circles.
Chalking out quarterly schedule of Campaigns targeting different segments viz. Housing, Vehicle coinciding with festival
season and Education coinciding with Admission period.
MSME
Each ELB/ VLB to identify and finance at least one Small & Medium Enterprises Unit every month.
All branches to source and refer minimum one Credit proposal per quarter to their respective SME Sulabh for sanction.
Focus on “PRODUCT SPECIFIC MONITORING”.
MSME CONNECT- Mega Credit camps will be continued in each quarter of 2016-17 at all Circles on a single day to create
and sustain awareness and pool sources for increased flow to MSME sector.
Regular Camps & Cluster meets for sourcing the proposals will be conducted at Sulabhs and cluster of branches.
START UP SUMMIT – Summits will be arranged at all centres for Start up Entrepreneurs inviting
Distinguished guests from Government departments and local industrial bodies/organizations for necessary inputs and
guidance for successful entrepreneurship.
“GHAR GHAR DASTAK & MADHUR MILAN” - A Marketing Drive / Mass Contact Program for Business Augmentation
The previous financial year, 2015-16, was a landmark for our Bank as we recorded a good growth in share of CASA to Domestic
Deposits. The said efficiency ratio improved by 200 bps to 27.40 % as at 31/03/2016. The entire success is attributed to the
enthused response and sustained momentum of the Circles and Branches towards the Corporate initiatives undertaken
throughout the year.
During the recently concluded 2016 Shubh Aarambh Campaign, Branches mobilized Rs 2939 Cr CASA from new accounts. The
Campaign enabled us to achieve our March 2016 targets set out under Life Insurance, Health Insurance, Mutual Fund and Non-
Interest Income from Associate Party Products.
As we have embarked our journey into the new FY 2016-17, a need is felt to launch across the country an initiative that will
infuse and inspire a thrust towards business growth under all our key focused discipline / parameters.
It is in this direction that we are pleased to launch our new Corporate Initiative “GHAR GHAR DASTAK & MADHUR MILAN”.
The Project is to be undertaken across the country / all branches in phases and endeavor at working towards all key focus areas
of the Bank simultaneously. The program is modeled as an Outreach / Mass Contact Program wherein our branches need to
scout for new business from existing as well as prospective customers thereby enlarging the clientele base / business prospects
for our Bank.
Target Group ::
The program covers all the Branches Et Circles of the Bank. Branches have been grouped on the basis of their category - Metro,
Urban, Semi Urban and Rural for the purpose of reckoning their performance.
Campaign Objectives ::
The Campaign / Drive is christened as “GHAR GHAR DASTAK & MADHUR MILAN”.
“Ghar Ghar Dastak” means “Door to Door Contact” & “Madhur Milan” means “Happy Banking” under our outreach program.
It encompasses the following objectives ::
Generate leads and business under Retail Assets, Liabilities and enhance Mobile Banking / Digitization across all Branches.
Approach and meet the prospective Et existing clients in the command area of the branch for soliciting of further business.
Also, contacting all stressed loan accounts for recovery and up gradation of NPA accounts.
The larger goal being activation of all branches for retail business growth Et focused management of stressed accounts in
our Bank.
3. Duration of the Campaign ::
The Project is launched with immediate effect. Circles have been advised to ensure that the Ghar Ghar Dastak drive is initiated
latest by 16/05/2016.
It shall remain operational throughout the year with focus on attaining of monthly / fortnightly business levels.
The Project shall be implemented in phases.
In the Phase I, the project shall take off on Pilot Basis at State Et District Headquarters (Metro / Urban Centres) as well as
other important branches as identified by the Circles/ROs.
Based on the experiences, it shall be rolled out to all the remaining branches in 2nd phase.
We shall hold / conduct the Phase I for at least 3 months before rolling 2nd phase.
4. “Ghar Ghar Dastak” ::
As the name suggests, the branches should carry out a door to door contact program.
To kick start, the identified branches shall conduct a Staff Meeting for sensitizing, briefing Et engaging the staff with the
Campaign for generating leads from the customers.
The branch staff shall be divided into teams and assigned potential areas / localities to approach and meet the prospective
Et existing clients for canvassing retail assets Et liabilities business.
We are stipulating a minimum Retail Business, Credit Cards Et Tech Products to be secured by the branches depending on the
location / categorization of the branch (enclosed as per annexure).
The branches shall scout for business aiming to achieve the monthly / fortnightly targets allocated.
Ghar Ghar Dastak should be carried out by all the identified branches from 8th to 17th of every month for contacting
existing / potential customers for mobilizing Retail deposit and Retail loans as well as generating compromise / OTS / up
gradation proposal in all problem loan accounts for mission Can Adalat.
Marketing Officials are also to be engaged with pre-fixed targets.
“Madhur Milan” ::
It stands for maintaining happy banking relationship with the customers, as a delighted customer is our ambassador for growth and
visibility.
The successful / sourced applicants/customers shall be invited for Madhur Milan at the Branch.
Emphasis Et Success shall be on the actual disbursement / asset delivery before the audience, requesting the customers to
share their banking experiences.
On the Madhur Milan Day, the branch should be decked up at its best and the invitees are to be handed over sanction
letters and A/c opening welcome kits over hi-tea, after business hours.
Inviting also, at least 10-15 loyal depositor / credit clientele including HNIs / family members of NRIs to strengthen the
existing relationship and also as recognition for their continued patronage.
Madhur Milan should be conducted 2-3 days after Ghar Ghar Dastak activity. It may be held on 20th of every month
across the country to enhance the visibility of the inventive and innovative concept. Branches / RO / CO should co-
ordinate Et ensure conducting the same before end of the month.
Branch Head should keep the list of Top 100 deposit customers Et Top 100 credit customers with full details such as
address, telephone number, business with the branch, etc. All such customers should be contacted immediately and may
be invited to Madhur Milan evening during the year.
Branches shall report the accomplishments / progress to respective RO / CO, on a monthly basis within 3 days of Madhur
Milan, for consolidation and onward transmission to Head Office.
6. TEST YOUR SELF: MOCK INTERVIEW QUESTIONS

MOST IMPORTANT QUESTIONS –VERY COMMON TO ALL FROM WORKBOOK OF YOUR BRANCH /DIARY
1) Date of opening of branch 6) Important Depositors/Borrowal Clients
2) Targets for Deposits, Advances, NPA 7) Staff Strength
3) Profit, Cost , Yield. 8) Major Business of branch
4) Inspection Gradation 9) Section/Work being attended by you at present.
5) CASA 10) Name of Overseeing Executive
11) Project Shikhar Branch – Details & why it so ? 12) Top ten Depositors/Advances/NPA / NRI /Imp. Events
What is the meaning of ANBC

Computation of Adjusted Net Bank Credit:
I Bank credit in India (As prescribed in item No VI of Form „A‟ (Special return as on March 31st ) under section 42 (2) of the RBI
Act, 1934
II Bills rediscounted with RBI and other approved Financial Institutions
III(I-II) Net Bank Credit (NBC)*
IV Bonds/debentures in Non-SLR categories under HTM category + other investments eligible to be treated as priority sector +
outstanding deposits, as on preceding March 31st , under RIDF, and other eligible funds with NABARD, NHB,SIDBI and MUDRA
Ltd + outstanding PSLCs
V Eligible amount for exemption on issuance of long term bonds for infrastructure and affordable housing
VI + Advances extended in India against the incremental FCNR (B)/ NRE deposits, qualifying for exemption from CRR/SLR
requirements, till their maturity
III+IV-V- VI Adjusted net Bank Credit (ANBC)
04 Define priority sector?
1. Sectors which impacts large sector of population, the weaker sections
2. Sectors which are employment intensive like agriculture and micro and small enterprises
3. Sectors which provided basic amenities to human life
4. Sectors which contributes to GDP/economy development
05 What are the components under Priority sector advances?
1. Agriculture
2. Micro small and Medium enterprises
3. Export advances
4. Housing Loan
5. Education Loan
6. Social Infrastructure
7. Renewable Energy
8. Other Priority sector
06 What are the components of weaker sections category?
Priority sector loans to the following borrowers will be considered under weaker sections category:
1. Agricultural labourers – more than 50% of their annual income is from activities related to agriculture
2. Tenant farmers – farmers who take land on lease for cultivation
3. Share croppers – persons who cultivate others land with a condition to share the produce on an agreed basis
4. Artisans, village and cottage industries where individual credit limits do not exceed Rs. 100000/-.
5. Beneficiaries of National Rural Livelihood Mission (NRLM)
6. Scheduled castes and scheduled tribes
7. Beneficiaries of Differential Rate of Interest (DRI) scheme
8. Beneficiaries of National Urban Livelihood Mission (NULM)
9. Beneficiaries under the scheme for Rehabilitation of Manual Scavengers (SRMS)
10. Loans to Self Help Groups (SHG)
11. Loans to distressed farmers indebted to non- institutional lenders
12. Loans to distressed persons other than farmers not exceeding Rs. 50000/- per borrower to prepay their debt to non-
institutional lenders
13. Loan to individual women beneficiaries up to Rs. 100000/- per borrower
14. Loan sanctioned under (1) to (13) above to persons from minority communities as notified by Govt. of India.
15. Person with disabilities
16. Overdraft in PMJDY accounts upto Rs.5000/-.
07 Why we should promote you?
In my opinion, I am better equipped with the quality of connecting and collaborating with both internal and external customers.
This quality is very much essential in effective team building and excellent customer service which is very essential in present day
customer centric banking.
In my opinion due to dedication, domain knowledge & experience
I am better equipped in aligning quality and skills of my staffs as per corporate objectives. In this process, I shall be able in
bringing sense of responsibility and ownership among staff. Now-a-days customers require faster decisions and with
increased delegated authority on elevation to higher grade, decision making process will be faster and delivery of bank‟s
product will be within turnaround time.
It is well said as in TEAM- “Together Each One Achieves More”; I will certainly achieve corporate objectives more efficiently due
to effective and motivated team of staffs and good customers.
I had always added good business to the bank.
I am also very loyal and attached to my esteemed organization.
Therefore, if I be given an opportunity to shoulder higher responsibility, I will contribute more effectively in the development of
my beloved organization.
08 What is the meaning of your name?
Person Specific
09 What is special about the place to which you belong/ are working?
Person Specific
10 How will the organization gain with your selection?
Person Specific
11 What are your strengths/ weakness?
Person Specific
12 What are strengths/ weakness of your current job?
Person Specific
13 What do you consider your greatest achievement?
Person Specific
14 Where do you see yourself in a 5 year’ from now?
Person Specific
15 What are your extracurricular activities/ hobbies?
Person Specific
16 How do you perceive the bank after 5 year?
Person Specific
17 Who are our competitors? And how can we meet the competition?
Person Specific
18 What are the Strategies to increase our market share?
- Superior Customer Experience
- Increasing thrust on marketing & sales
- Market & customer survey
- Customer segmentation based approach
- Assistance in product designing suited to our target customer base
- Focused approach on leveraging of technology
19 What will banking look like 10 years from now?
20 SWOT analysis of the economy, banking sector and of the bank?
21 You have done courses of Financial Advisor, MBA Finance,MBA HRM What is the use in bank
Throughout the life we deal with the people & finance. My degree is all about knowing people & finance which are very much
required for a Banker.
Person Specific
22 You are qualified, You Might Have so many option, why you are working in bank.
In Banking Industry we are having opportunity to work for each & every
areas/activities of economy Person Specific
23 What is your specific quality, which differential from others
Hard Work & Passion to achieve the Goal. Person Specific
24 Which place is easy to work and why
It is in the mindset. If we involve our self every place is easy to work. Person Specific
25 What is your contribution in Banking industry
Wherever I worked, always working for the image/reputation building of the Bank by giving a quality service to the customers
and guiding the new entrants in Bank who are contributing for the growth of Bank. Person Specific
26 Defined in one sentence - Make in India
Make in India is an initiative launched by the Government of India to encourage multi-national, as well as national companies to
manufacture their products in India.
27 What is Digital India
1. Creation of Digital Infrastructure
2. Provision of all the Government Services through Digital Channel
3. Increasing Digital Literacy
28 What do you mean by Stand up India
The scheme is intended to promote entrepreneurship among SC/ST & Women. Loan Amount Rs. 10.00 lacs to Rs. 100.00 lacs for
new Entrepreneur
29 what is Start up India
Start up India is a flagship initiative of the GOI, intended to build a strong ecosystem for nurturing innovation and start-ups in the
country.
All Stand up India can be Start up India but all start up India cannot be stand up India.
30 What is Financial inclusion
Accessibility, Affordability & Availability of Financial Services to Weaker section is Financial Inclusion
31 What is Difference between off B/S items & contingent Liability
The items which are not appearing the balance sheet e.g. LC & LG, etc are known as Off Balance items for which provisions are
made by the bank equally as for the on-balance sheet items whereas cases pending in the court, etc where the financial loss is
not known to Bank comes under contingent liability.
32 What is Digital Banking
Banking Services through the Digital Channels
33 What do understand by Project Utkarsh
Transformation process for better customer experience, Sales Culture & Process Efficiency. The objective is to become the
leading digitally enable PSB with improved profitability & high customer centricity.
34 What is Project Indradhanush:
Most Comprehensive Reforms for PSBs after 1969 in which Seven Initiatives of Banking Reform: Appointment, Bank Board
Bureau, Capitalisation, De-stressing of Bank, Empowerment, Framework of Accountability, Governance Reforms
35 PMMY: Pradhan Mantri Mudra Yojana
To create an inclusive, sustainable and value based entrepreneurial culture, in collaboration with our partner institutions in
achieving economic success and financial security. 1. Shishu :- Loan up to Rs. 50,000 2. Kishore :- Loan ranging from Rs. 50,000 to
Rs. 5 lakh 3. Tarun :- Loan above Rs. 5 lakh and below Rs. 10 lakh
36 PMJJBY
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY) provides life insurance cover of Rs. 2 lakhs for an annual premium of Rs.
330/-. This is an annual cover starting from June 1, 2015, renewable from year to year and provides cover for death due to any
reason. The scheme would be administered through Life Insurance Corporation of India. All resident savings bank account
holders in the age group of 18 to 50 years are entitled to join.
37 MUDRA: Funding to unfunded and formalizing the informal
38 PMSBY
The scheme will be a one year cover, renewable from year to year; Accident Insurance Scheme offering accidental death and
disability cover for death or disability on account of an accident.
Scope of coverage: All savings bank account holders in the age 18 to 70 years in participating banks will be entitled to join. In
case of multiple saving bank accounts held by an individual in one or different banks, the person would be eligible to join the
scheme through one savings bank account only.
39 What is Skill India
Skill India is a campaign launched by Prime Minister Narendra Modi on 15 July 2015 with an aim to train over 40 crore people in
India in different skills by 2022.
40 What is the future of banking
Still our country has unbanked population as under PMJDY we have captured only one person per family. Therefore, we see a
vast scope & potential for Bank in future.
Digital Banking
Virtual Banking. For example ING Diva is a bank in Germany without branch. Giving all banking facilities without having a single
bank branch in Germany. Our bank can have a subsidiary to tap young generation banking customers pan India. Will give new
identity and good penetration in future retail banking. Operational expenditure saved can be passed back to client. Competition
from payment Bank’s can be neutralised well in advance.
Using authentic data base properly in banking system to reduce TAT and better customer service. KYC Bank concept to be
introduced. (CERSAI is working on it)
Proper Benefit of IT and Technology: Client as well bankers are not using proper IT platform. Data base of all Govt departments
and Banks to be well connected. Linkage at Indian Banking system can reduce the issues of KYC, improve TAT and reduce frauds.
Volume of population India can be benefited a lot with synchronization.
41 hat do you understand by Merger of Banks
It‟s good idea to have strong banks to meet the challenges of growing economy. To move at next level is demand of time and
need to be done quickly. Process of merger to be designed properly. It should not be used an tool to decrease PSU banks. Entire
banking system of Country to participate in the process; not only PSU. Role of PSU banks were decided to develop the economy
not earn only profit. Banks role since 1969 can‟t be ignored in development process.
42 Privatization of PSU Banks
It can be used to shift ownership of state in the name of generating profit or increasing efficiency but this will affect the govt‟s
motto to grow the last person‟s economical condition. In my opinion more autonomy should be given to all PSU banks. Single
Regulatory body to be created to control entire PSU banking system. IBA is ready to take this forward. IBA should be made
statuary body and entire team should be appointed in line with lokapl or other regulatory body; totally free from political and
bureaucracy.
43 What is NPA Management
First of all it should be renamed as asset management. Because we manage good things not bad. NPA is something needs to be
kicked out from the system not to be managed. In the business of baking it can‟t be avoided. Based on Indian scenario it‟s a
need of hour to have proper asset monitoring system (If possible centralized system for entire PSU Bank who take care of stress
assets). Same person responsible for credit growth can‟t manage asset as well. And person who deals bad assets can‟t grow
credit. Recovery mechanism to improve. Proper education of borrowers should be arranged for. If we succeed in changing mind
set of borrowers 50% issues resolved immediately. For other reasons viz. Market situation, economical condition, industry
specific problems need to be analysed and according asset to be classified. We can give more time based on requirement to
classify such assets NPA based on the requirement of business of that entity. Such accounts should be transferred to “Special
Care Units” of bank and specialists should guide borrowers to come out from the situation.
44 What are top 5 qualities of a good branch manager?
i. Problem solving
ii. Adaptability
iii. Conflict resolution.
iv. interpersonal skill
v. Team leader
vi. Quick decision making
vii. Diplomatic & situational
viii. Have ability to speak right thing with right person with right time.
45 What are the benefits of leveraging of technology?
Benefits of Leveraging Technology: For Banks:
Cost reduction, increased efficiency.
Increased reach, wider range of products and Services.
New source of revenues
Speed and accuracy in service delivery.
Customer loyalty,
Customer profile based marketing.
Quick decision marketing.
For Customers
Convenience, Self reliance, safety
Global access, round the clock service.
Cost effectiveness.
46 What do you understand by Citizen Charter/Customer Rights
Right to Fair Treatment/Right to Transparency & Honest Dealing/Right to Suitability/Right to Privacy/Right to Customer
Grievance & Compensation
47 What is UPI: Unified Payments Interface
UPI was launched by National Payments Corporation of India with Reserve Bank of
India's vision of migrating towards a 'less-cash' and more digital society. NPCI has built on the Immediate Payment Service (IMPS)
platform through which one could transfer money instantly by going online-by adding another layer that allows easy debit
capability even on mobile phones. Unified Payments Interface (UPI) is architecture and a set of standard APIs (Application
Programming Interface) to facilitate the next generation online immediate payments leveraging trends such as increasing
Smartphone adoption, Indian language interfaces, and universal access to Internet and data.
48 What is Net Neutrality
Net neutrality (also network neutrality, Internet neutrality, or net equality) is the principle that Internet service providers and
governments should treat all data on the Internet the same, not discriminating or charging differentially by user, content, site,
platform, application, type of attached equipment, or mode of communication.
49 Monetary Policy Committee
MPC to guide interest rate in the Economy. The Committee will have six members. The committee will consist of the RBI
governor, the deputy governor in charge of monetary policy and one official nominated by the central bank. The other three
members will be appointed by the central government through a search committee, said the Finance Bill. This search committee
will comprise of the cabinet secretary, the secretary of the Department of Economic Affairs, the RBI governor and three experts
in the field of economics or banking as nominated by the central government.
The members of the MPC appointed by the search committee shall hold office for a period of four years and shall not be eligible
for re-appointment, said the government.
The monetary policy committee framework will replace the current system where the RBI governor and his internal team have
complete control over monetary policy decisions.
50 What is Monetary Policy and who is responsible for the same
Monetary policy is that process by which monetary authority of a country, generally a central bank controls the supply of money
in the economy by its control over interest rates in order to maintain price stability and achieve high economic growth. In India it
is RBI through MPC which is responsible for Monetory Policy Implementation.
51 Repo Rate
The rate at which the RBI lends money to commercial banks is called repo rate.
52 Reverse Repo Rate
Reverse Repo rate is the short term borrowing rate at which RBI borrows money from banks.
53 Bank Rate & Repo Rate
Loan vs. Securities – bank rate usually deals with loans, whereas, repo or repurchase rate deals with the securities. The bank rate
is charged to commercialbanks against the loan issued to them by central banks (RBI), whereas, the repo rate is charged for
repurchasing the securities.
54 Preventive Vigilance Committee
At Branch Level Frequency of Meeting: Monthly
55 What is Priority Sector?
The sectors which are proving the basic needs (Food, Shelter, Cloth) of mankind.
56 what are the Benchmark under Priority Sector Lending
PSA: 40%, Agriculture: 18%, Small & Marginal Farmers: 8%, Micro Enterprises: 7.5%, Weaker Section: 10%
57 Marginal & Small Farmer
Farmers with landholding of up to 1 hectare (Marginal Farmers). Farmers with a landholding of more than 1 hectare and up to 2
hectares (Small Farmers).
58 Micro, Small and Medium Enterprises (MSMEs)
Manufacturing Sector
Enterprises
Investment in plant and machinery/Equipment
Micro Enterprises
Does not exceed twenty five lakh rupees
Small Enterprises
More than twenty five lakh rupees but does not exceed five crore rupees
Medium Enterprises
More than five crore rupees but does not exceed ten crore rupees
Service Sector
Micro Enterprises
Does not exceed ten lakh rupees
Small Enterprises
More than ten lakh rupees but does not exceed two crore rupees
Medium Enterprises
More than two crore rupees but does not exceed five crore rupees
58 WHAT IS CLAYTON’S RULE?
As per this rule, each withdrawal in the running account like cash credit account is considered as a new loan and each deposit as
a repayment of the loan in the order in which it is made. The first debit in the account is considered to have been discharged or
reduced by the first item in the credit side and accordingly other entries follow suit in chronological order. To avoid application
of Clayton‟s Rule, the bankers stop operation of the running accounts in case of death of a partner/guarantor/joint account
holders etc.
60 What is a Business Debit Card?
Card Shall be issued to all Current Account customers, with AQB Rs. 1.00 lacs and above
Free issuance charges
Withdrawal limit through ATM – Rs. 50,000
Daily shopping through POS & online – Rs. 2 lacs
Free Airport lounge access at airport- 2 in a quarter
Personal Accidental Insurance cover – Rs. 2 lacs
Exclusive offers from Visa on travel, entertainment and dining
61 Usecure Credit Card
Credit Card Backed by Deposit
Limit up to 80% of the Term Deposit kept under lien
Spending limit- max. Rs. 5 lacs
62 Signature Credit Card
For high net worth customers.
EMV Chip Card
International Card
Limit will be 20% of latest ITR/Salary slip with a minimum of Rs. 1.00 Lac
63 What is the main difference between Project and Asset Finance?
If the finance is based on existing cash flow then it is asset finance (assets which are not generating cash) and if the finance
depends upon future cash flows out of the usage of asset created by our finance then it is project finance.
64 What is DSCR & its Bench mark?
Average DSCR: 1.5:1 with minimum DSCR of 1.2:1
65 What is Current Ratio & its benchmark as per our loan Policy?
CR: 1.17 and above
66 DER
Debt Equity Ratio <=2.00:1
67 TOL/TNW
Total Outside Liabilities to Tangible Net Worth Ratio<=4:1
68 IRR: Internal Rate of Return
IRR is the discount rate which makes the Net Present Value (NPV) of future Cash Flow equal to zero. The guiding principle to
decide whether any project is acceptable is that its IRR should be greater than the cost of capital.
IRR approach
is used for assessment of Term Loans of Rs 10 crores and above with repayment period of 5 years or more
A project is generally accepted if its IRR is higher than 15%.
69 Methods of Assessment
a. Turnover Method
b. Flexible Bank Finance Method
c. Cash Budget Method
d. Net owned Fund for NBFCs
70 Turnover Method
Working capital limit shall be computed at 20% of the projected sales turnover accepted by the Bank.
In the case of MSE borrowers, seeking/enjoying fund based working capital facilities up to Rs.500 Lacs from banking system, the
limits shall be assessed on the basis of turnover method
working capital limits to the non MSE borrowers requiring working capital facilities up to Rs.100 Lacs
The guidelines on turnover method were framed assuming an average production /processing cycle of 3 months (i.e. Working
capital would be turned over four times in a year).
71 Flexible Bank Finance
Flexible Bank Finance method is normally applicable for account with credit limits of Rs. 1 Crore and above for other advances &
above Rs.5 Crores for MSE advances.
72 Cash Budget Method
Cash Budget Method may be adopted in case of specific Industries/Seasonal activities such as Software Development,
Construction Industry, Film Industry, Sugar, Fertilizers etc., and working capital short term loans.
The cash budget method can be used for assessment while lending to NBFCs.
73 Net owned Funds Method
RBI vide its Master Circular on 'Bank Finance to NBFCs' has withdrawn Net Owned Funds method for NBFCs except for Residuary
Non-Banking Companies (RNBCs).
74 Holding on Operation
"Holding on operation" may be considered for a period of 6 months to viable/potentially viable units (MSME or otherwise). This
will allow subject units to draw funds from the cash credit account at Least to the extent of their deposit of sale receipts during
the period of such "holding on operation" less pre-agreed cutbacks to reduce overdues. Holding on operation essentially implies:
a. Continuous operations in the account, like opening fresh LCs to the extent of reduction in devolvement, even if devolvement is
not fully cleared
b. Roll over of LC opened by the Bank
c. Allowing operations in the cash credit account despite interest / forced debits
not being cleared
d. Fall in drawing power etc
Such holding on operations may generally be permitted with a cut back towards reduction in overdues.
Further, operations are allowed within existing outstanding / exposure level.
Holding on operations within the overall sanctioned limits to be permitted by the next higher authority up to RLCCs and
respective delegatee thereafter. Permission to allow holding on operation in the account is to be reported as per reporting
system in the Bank.
75 Channel Finance
This is the concept of 'supply chain' with the chain having three perceptibly distinct links - the pre-production, production and
post- production. There is a proper continuity and coordination of all related issues like delivery channels of goods, services and
finances. The finances required for the organization transfused across the business cycles will have to be healthily circulated and
supported, sustaining the supply chain of activities. This process of infusing the financial lifeblood across the supply chain is
normally the gist of channel financing. Thus the focus of channel finance is to extend an integrated financial and commercial
solution to the supply and distribution channels of a business unit.
Our other products 'UNION PROCURE' and 'UNION SUPPLY' also can be promoted concurrently, as Channel Finance Products.
76 Line of Credit
Line of Credit is a facility to offer flexibility to clients to maneuver between the various working capital facilities sanctioned with
relative ease compared to the prevalent system of restricting the usage of funds within the maximum limits available within the
facility only.
This system will essentially facilitate medium / large business units as a point of flexibility in managing their institutions
borrowing arrangement without any additional cost.
77 TAKE-OVER OF ADVANCES CODE
The specific reasons for shifting the account from Financial Institution / other Bank to our Bank should be ascertained.
The advance to be taken over should be rated CR4 or better
Discrete inquiries with at least 3 people in the similar line of activity / buyers / suppliers and their view about the prospective
borrower's credentials, financial soundness, integrity, reputation and capability (amount proposed to be taken over) must be
obtained
The account should have been a Standard Asset in the books of the other Bank/Fl during the preceding 3 years
The unit should have earned net profits (post tax) in each of the immediately preceding 3 years.
Credit Report of the existing bankers, which is a basic due diligence, should be obtained.
Statement of account of the existing bank for preceding 6 - 12 months is to be obtained and verified to assess the quality of
operations with the existing bankers
Current Ratio of 1.17 However, CR- may be considered on case to case basis up to 1.10-by sanctioning authority looking to other
strengths of the proposal.
TOL/TNW Ratio of 3:1 and in case of Trade accounts above 4:1.
The average DSCR for the project should not be less than 1.50 at the time of take-over or for the remaining period of advance.
The project should not be in the implementation phase at the time of takeover of the loan.
78 RISK RATING
For borrowers rated with Bank's own models, the hurdle rate for new borrowers / Greenfield projects will be CR-5 and for
takeover and CRE loans to builders the same will be CR-4.
Hurdle rate for new accounts, if rated by external credit rating agencies is BB and for takeover accounts is BBB.
79 Decoy Customer? What is the purpose? Who has issued the guidelines?
A “Decoy Customer” is an officer of the bank, who will be deputed for a day to some other branch in an adjoining district in a
disguised manner i.e., without disclosing the fact that he is an employee of the bank with the intention of noting down whether
the branch is following all the KYC norms for opening an account.
80 What are SMA 0, SMA 1 & SMA 2?
81 What is “Relief” under OTS proposal as per new Recovery Policy?
Relief is the total amount of contractual dues minus the settlement amount
82 What is the Eligibility criteria for Taking Action under SARFAESIA
-Account should be classified as NPA
-The total dues in the account should be more than Rs.1 lac
-The property against which action is proposed should be Non-Agricultural(however usage of property at the time of initiating
SARFAESIA is other than agriculture, then such properties can be attached)
-Total dues in the account should be more than 20% of the original loan amount plus interest charged in the account
83 What is the Gross NPA of the Bank as on 31.03.2016
Bank Specific - In UBI Gross NPA: Rs. 24171 Crores (8.70%), Net NPA: Rs. 14026 Crores (5.25%)
84 What is the Periodicity for submission of Monitoring Reports in case of Stressed accounts? (SMA category)
Monthly Basis. In case of standard accounts it is on quarterly basis
85 Provision coverage Ratio
The ratio of provisioning to gross non-performing assets. Indicates the extent of funds a bank has kept aside to cover loan losses.
PCR of our Bank as on 31.03.2016 is 50.98%
86 USPs of our home loan product
a. No limit
b. Higher quantum eligibility of individuals at the higher income slabs
c. Flexible repayment options
d. Longer repayment period at 30 years
e. TAT of 5 days
f. Top-up loan eligibility
g. Personal loan to housing loan borrowers
h. Higher age limit up to 70 years
87 CRAR as on 31.03.2016 of our Bank
Bank Specific . UBI it is 10.56%
88 CASA as on 31.03.2016
Bank Specific -
89 What is the difference between Garnishee Order & Attachment Order
90 What are the stages of Money Laundering?
a. Placement
b. Layering
c. Integration
91 Who is a 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 Co-Parceners.
92 Under KYC what is the Frequency of updation of Customer Profile
a. For Low risk customers once in 10 years
b. For medium Risk customers once in 8 years
c. For High Risk customers once in 2 years
93 What are the various Reports under KYC
a. CTR: Cash Transaction Report
b. STR: Suspicious Transaction Report
c. CCR: Counterfeit Currency Report
d. NTR: Non-Profit making Organisation Transaction Report
e. CWTR: Cross Border Wire Transfer Report
94 Under Partnership Account: What is the Maximum Number of Partners -
100
95 What is the Maximum Number of Shareholder in Pvt Company
200
96 What is COPRA and its Jurisdiction:
COPRA - Consumer production act. Consumer Protection Act, 1986 is an Act of the Parliament of India enacted in 1986 to
protect the interests of consumers in India. ... Consumer Protection Act, 1986 is an Act of the Parliament of India enacted in 1986
to protect the interests of consumers in India. District Forum: Rs. 20.00 lacs . State Forum: Rs. 100 lacs. National Forum: Above
Rs. 100 lacs.
97 How many branches are authorized to accept PPF?
Bank Specific - In UBI 1229 Branches. ROI: 8.10% for 2016-17. Maximum Inv/year: Rs. 150000/-
98 What is CRILC?
Central Repository of information on Large Credits. RBI mandated as per the above guidelines that the stressed accounts
identified under SMA sub categories with exposure of Rs.5 Crores and above have to be reported to CRILC
99 What is RFA?
RFA is Red Flagged Accounts. Where any signals of fraud is found, such accounts to be classified as RFA. Accounts with limits of
Rs.50.00 crores and above have to be reported under the guidelines. RBI has suggested 45 early warning signals to identify such
irregularities.
100 What is 5:25 scheme?
5:25 scheme (Flexible Structuring of existing Infrastructure loans) is applicable for Long term infrastructure projects where the
moratorium period is very long. Banks have the liberty to revisit the options after every 5 years and continue the finance,
provide additional finance, or exit the exposure. The maximum period for such projects can go up to 25 years. Total loan period
should not exceed 85% of initial concession period (leaving a tail of 15%).
101 What is SDRS?
SDRS is Strategic Debt Restructuring Scheme announced by RBI, where banks can acquire ownership of borrowal units wherever
such accounts are under stress/NPA. Alternatively, they can hand over the management of such units to more efficient persons,
which will result in revival of the economic value of the unit. Such ownership can take place only where all the banks put
together equity holding exceeds 51% (debt is converted into equity).
102 Whisch are the Restricted Areas for grant of loans:
a. Loan against of Bank‟s own share
b. Loan against Gold Bullions/Silver Bullions/Primary gold
c. Loan for purchase of Gold in any form
d. Loan against Certificate of Deposit
e. Loan against partly paid shares
f. Loan against FDR/Deposit of Other bank
g. Loan for purchase of KVPs
103 LAS (Lending Automation Solution): How many Modules?
a. Loan Processor
b. IRB Module
c. Credit Monitoring Module
d. NPA Manager
e. MIS Module
104 Why the MCLR reform?
At present, the banks are slightly slow to change their interest rate in accordance with repo rate change by the RBI. Commercial
banks are significantly depending upon the RBI‟s LAF repo to get short term funds. But they are reluctant to change their
individual lending rates and deposit rates with periodic changes in repo rate. Whenever the RBI is changing the repo rate, it was
verbally compelling banks to make changes in their lending rate. The purpose of changing the repo is realized only if the banks
are changing their individual lending and deposit rates.
105 How to calculate MCLR
The concept of marginal is important to understand MCLR. In economics sense, marginal means the additional or changed
situation. While calculating the lending rate, banks have to consider the changed cost conditions or the marginal cost conditions.
For banks, what are the costs for obtaining funds? It is basically the interest rate given to the depositors (often referred as cost
for the funds). The MCLR norm describes different components of marginal costs. A novel factor is the inclusion of interest rate
given to the RBI for getting short term funds – the repo rate in the calculation of lending rate.
Following are the main components of MCLR.
1. Marginal cost of funds;
2. Negative carry on account of CRR;
3. Operating costs;
4. Tenor premium.
Negative carry on account of CRR: is the cost that the banks have to incur while keeping reserves with the RBI. The RBI is not
giving an interest for CRR held by the banks. The cost of such funds kept idle can be charged from loans given to the people.
Operating cost: is the operating expenses incurred by the banks
Tenor premium: denotes that higher interest can be charged from long term loans
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%.
In essence, the MCLR is determined largely by the marginal cost for funds and especially by the deposit rate and by the repo
rate. Any change in repo rate brings changes in marginal cost and hence the MCLR should also be changed.
According to the RBI guideline, actual lending rates will be determined by adding the components of spread to the MCLR. Spread
means that banks can charge higher interest rate depending upon the riskiness of the borrower.
Powerful element of the MCLR system form the monetary policy angle is that banks have to revise their marginal cost on a
monthly basis. According to the RBI guideline, “Banks will review and publish their MCLR of different maturities every month on
a pre-announced date.” Such a monthly revision will compel the banks to consider the change in repo rate change if any made
by the RBI during the month.
Regarding the status-quo of base rate, the initial guidelines from the RBI indicate that the Base rate will be replaced by the
MCLR. “Existing loans and credit limits linked to the Base Rate may continue till repayment or renewal, as the case may be.
Existing borrowers will also have the option to move to the Marginal Cost of Funds based Lending Rate (MCLR) linked loan at
mutually acceptable terms.”
106 How MCLR is different from base rate?
The base rate or the standard lending rate by a bank is calculated on the basis of the following factors:
1. Cost for the funds (interest rate given for deposits),
2. Operating expenses,
3. Minimum rate of return (profit), and
4. 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.
1. Marginal cost of funds;
2. Negative carry on account of CRR;
3. Operating costs;
4. 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.
107 Insolvency Vs Bankruptcy
• Insolvency refers to a financial state and bankruptcy to a distinct legal concept
• Insolvency is a financial condition or a state experienced when a legal entity or a person‟s liabilities exceeds their assets and
can no longer meet their debt obligations on time as they become due.
Bankruptcy is defined as a successful legal procedure that resulted from an application to the relevant court by
• A Legal Entity or a person
• Creditor
• Special Resolution filed by a company with the Registrar
• To be declared as Insolvent
Insolvency does not necessarily lead to bankruptcy, but all bankrupt debtors are considered Insolvent
108 Why the Govt. has brought THE INSOLVENCY AND BANKRUPTCY Code, 2016?
• Multiple Laws to deal with Insolvency
• Overlapping jurisdiction of laws
• Lack of clarity in their provisions
Delay in disposal of applications
109 How it is beneficial for economy?
• Timely Resolution of cases
• Creditors can seek recourse
• Confidence to Creditors & Investors in India & Abroad
• Deepen the Bond Market
• Protect the interest of workers & employees
• Fair chance to recover a company before it erodes
• Ranking in ease of doing business will improve
110 Benefits of the Code
• Code to help wind up sick businesses
• Cross-border insolvency
• Protect workers of a bankrupt company
• Fast Track Corporate Insolvency Resolution Process
• Voluntary Liquidation of Corporate Persons, Firms and Individuals
• Concept of operational creditor
• Simple Procedure to resolve insolvency
111 Insolvency Professionals
A specialised cadre of certified professionals known as insolvency professionals (IPs)
will be created to handle insolvency resolution. These IPs will conduct the insolvency resolution process, take over the
management of a company, assist creditors in the collection of relevant information, and manage the liquidation process.
112 Insolvency Professional Agencies
The IPs will be enrolled with insolvency professional agencies (IPAs). The IPAs will conduct examinations, certify IPs, and enforce
a code of conduct for their functioning. Further, an IPA will furnish a performance bond to the regulator (Bankruptcy Board) on
the commencement of insolvency resolution by a member IP. This bond will act as a surety against any misconduct by the IP
during the resolution process.
113 Information Utilities
• Information utilities will be set up to collect, collate and disseminate financial information related to debtors. Such information
will be collected from creditors and include records of debt, liabilities and defaults of a debtor.
• The information available with these utilities will be used as evidence to initiate insolvency resolution, and assist creditors in
drafting a plan to resolve insolvency.
114 Insolvency and Bankruptcy Board of India
• The Insolvency and Bankruptcy Board of India will be set up as a regulator to oversee functioning of entities created under the
Code, including IPs, IPAs and information utilities.
• The Board will have 10 members, including representatives from the central government and the Reserve Bank of India.
115 What is e-KYC?
Online generation of AADHAR
116 What are the Rights of a Banker ?
1. Right of general lien
2. Right of set- off
3. Right of Appropriation
4. Right to act as per the mandate of the customer
117 What are the Parameters of ranking the Bank by BCSBI?
- Transparency
- Customer Centricity
- Information Dissemination
- Customer Feedback
- Grievance Redressal
118 Scheme for Sustainable Structuring of Stressed Assets (S4A)
Resolution of large borrowal accounts which are facing severe financial difficulties may, inter-alia, require co-ordinated deep
financial restructuring which often involves a substantial write-down of debt and/or making large provisions. Citing the case of
the Strategic Debt Restructuring (SDR) mechanism which provides 18 months for banks to make prescribed provisions for the
residual debt and mark-to-market (MTM) provisions on their equity holding arising from conversion of debt, banks have
represented for allowing more time to write down the debt and make the required provisions in cases of resolution of large
accounts.
119 Bank Board Bureau
BBB started functioning from 01.04.2016
It has replaced the Appointments Board for appointment of top level jobs at PSBs
Composition: Six member body with at least 3 former bankers, 2 professionals and secretary, DFS
Functions:
Recommendations for appointment of full-time directors as well as non-executive Chairman of PSBs
Give advice to PSBs in developing differentiated strategies for raising funds through innovative financial methods and
instruments and to deal with stressed assets
Guide banks on mergers & consolidations
120 Why banks are giving more thrust to Retail lending now a days?
Retail lending has the following advantages for the Banks:
i. Less Risk and Diversification of Risk
ii. High earnings
iii. Capital conservation due to less risk weight under certain segments
iv. Creates wide customer base
v. Less effort in delivery of loans
121 What are the drivers of Retail lending that is giving a boost to Retail lending in our Country?
i. Rising Disposable Incomes
ii. Nuclear Family Concept taking root
iii. Demographic Dividend
iv. Government Initiatives
v. As Alternate Investment
vi. Urbanization
vii. Consumerism
viii. Growing Aspirations
ix. Unit Value Growth
x. Increase in Double Income Families
xi. Innovation in banking products and services.
xii. Deregulation of interest rates.
xiii. Changes in life style of working/middle class.
122 What are the challenges facing banks for enhancing retail lending?
i. Cut throat competition
ii. Susceptibility to Frauds
iii. Need for constant innovation in products
iv. Need for setting up of a state-of-the-art marketing set-up
v. Non- digitization of land records in some States
123 What are the fundamentals driving growth of home loans in the country?
i. Demand for housing continues to grow with the population
ii. Existing housing shortage in the country especially in the affordable category
iii. Rising Urbanization driving significant chunk of growth
iv. Home owner profile changing- Age of housing loan borrowers coming down and
people getting more comfortable with financing
v. Penetration of housing finance increasing
vi. Average value of homes on the rise
vii. Loan values going up
124 What are the strategies to enhance retail lending in the Bank?
i. Tie up with builders, Auto dealers, Educational institutions, Govt. departments, etc.
ii. Canopy at Residential Apartments, Corporate offices, Residential colonies, etc.
iii. Stalls at exhibition and other promotional events
iv. Referral through our CC/CD/SB Customers.
v. Staff relatives and friends
vi. Presentations at Corporate Offices.
vii. Putting up specialized schemes to RO and Corporate Office.
viii. Pamphlets at strategic locations.
ix. Internal Staff, building rapports with existing customers for cross selling
x. Involving Top Executives while liasoning with builder, corporate, high end customers.
xi. Participating in Rotary/ lions and other club meetings.
xii. Sponsoring professional association meetings in order to target Professionals.
125 What are the USPs of our home loan product?
i. No limit
ii. Higher quantum eligibility of individuals at the higher income slabs
iii. Flexible repayment options
iv. Longer repayment period at 30 years
v. TAT of 5 days
vi. Top-up loan eligibility
vii. Personal loan to housing loan borrowers
viii. Higher age limit up to 70 years
126 Why Banks should sell third party products like insurance, mutual funds, etc.?
i. Thinning interest spreads necessitates improvement in fee-based income
ii. Scope for improving income without much additional expenses
iii. Need to optimize Human / Infrastructure / Capital resources
iv. Customers need Universal banking
v. Scope to Cross sell / Up-sell
vi. More off-take of products offered on package terms
vii. Increasing propensity to spend / save by the populace
viii. Growing Middle income / High net worth segment
ix. Need for retaining / improving market share
x. Permits delivery through multiple channels
127 What is Inflation?
In economics inflation means, a rise in general level of prices of goods and services in
an economy over a period of time. When the general price level rises, each unit of currency buys fewer goods and services. Thus,
inflation results in loss of value of money. Another popular way of looking at inflation is "too much money chasing too few
goods". The last definition attributes the cause of inflation to monetary growth relative to the output / availability of goods and
services in the economy.
128 What is Stagflation?
Stagflation refers to economic condition where economic growth is very slow or stagnant and prices are rising
129 What is our Bank’s Vision Statement?
BANK SPECIFIC
In UBI it is “To become the Bank of first choice in our chosen areas by building beneficial and lasting relationships with customers
through a process of continuous improvement”
130 What is our Bank’s Mission Statement?
BANK SPECIFIC
In UBI It is:
To be a Customer Centric Organization known for a differentiated Customer Service
To Offer a comprehensive range of products to meet all financial needs of Customers
To be a top creator of Share Holder Wealth through focus on profitable growth.
To be a Young Organization leveraging on Technology and an Experienced Workforce
To be the Most Trusted Brand admired by all stake holders
To be a Leader in the area of Financial Inclusion
131 BRAND Promises of our Bank
BANK SPECIFIC
In UBI
1] Value For Money
2] Committed turnaround time for delivery of products and services
3] Choice of channels
4] Transparency in Products offerings and prices
What is a repo rate? :
Repo rate is the rate at which banks borrow funds from the RBI to meet the gap between the demands they are facing for money
(loans) and how much they have on hand to lend. If the RBI wants to make it more expensive for the banks to borrow money, it
increases the repo rate; similarly, if it wants to make it cheaper for banks to borrow money, it reduces the repo rate.
What is a reverse repo rate? :
This is the exact opposite of repo rate. The rate at which RBI borrows money from the banks (or banks lend money to the RBI) is
termed the reverse repo rate. The RBI uses this tool when it feels there is too much money floating in the banking system. If the
reverse repo rate is increased, it means the RBI will borrow money from the bank and offer them a lucrative rate of interest. As a
result, banks would prefer to keep their money with the RBI (which is absolutely risk free) instead of lending it out (this option
comes with a certain amount of risk). Consequently, banks would have lesser funds to lend to their customers. This helps stem
the flow of excess money into the economy Reverse repo rate signifies the rate at which the central bank absorbs liquidity from
the banks, while repo signifies the rate at which liquidity is injected.
What is bank rate? :
This is the rate at which RBI lends money to other banks (or financial institutions. The bank rate signals the central bank‟s long-
term outlook on interest rates. If the bank rate moves up, long-term interest rates also tend to move up, and vice-versa. Banks
make a profit by borrowing at a lower rate and lending the same funds at a higher rate of interest. If the RBI hikes the bank rate
(this is currently 6 per cent), the interest that a bank pays for borrowing money
(banks borrow money either from each other or from the RBI) increases. It, in turn, hikes its own lending rates to ensure it
continues to make a profit.
What is call rate? :
Call rate is the interest rate paid by the banks for lending and borrowing for daily fund requirement. Since banks need funds on a
daily basis, they lend to and borrow from other banks according to their daily or short-term requirements on a regular basis.
What is CRR?
Cash Reserve Ratio, refers to a portion of it enables that RBI control liquidity in the system, and thereby, inflation by tying their
hands in lending money
What is SLR? :
Besides the CRR, banks are required to invest a portion of their deposits in government securities as a part of their statutory
liquidity ratio (SLR) requirements. What SLR does is again restrict the bank‟s leverage in pumping more money into the economy
BANK PERFORMANCE TERMINOLOGY
1. Burden efficiency ratio: i.e. Non-Interest cost less non-interest revenue divided by total business X 100. An increasing trend
would show lack of burden bearing capacity.
2. Cash coverage ratio: i.e. cash divided by total business liabilities X 100. An increasing trend signifies presence of more of idle
investments.
3. Non-performing advances ratio i.e. non-performing advances divided by total or net advances X 100. An increasing trend
implies gradual increase in bad credit portfolio.
4. Total business growth ratio i.e. current period‟s business divided by last period‟s business. An increasing trend shows
improvement.
5. Priority sector ratio i.e. PS advances divided by total advances X 100. The ratio shows the advances mix.
6. Aggregate deposits are the total deposits of a bank at the close of the accounting year. These include deposits from public and
deposits from banks. From a different angle, the aggregate deposits equal the total of all demand and time deposits. A high
deposit figure signifies a bank‟s brand equity, branch network and deposit mobilization strength.
7. Average working funds (AWF): The AWF at the beginning and at the close of an accounting year or at times worked out as
fortnight or monthly average.
8. Working funds These are total resources (total liabilities or total assets) of a bank as on a particular date. Total resources
include capital, reserves and surplus, deposits, borrowings, other liabilities and provision. A high AWF shows a bank‟s total
resources strength. There is a school of theory which maintains that working funds are equal to aggregate deposits plus
borrowing. However, more pragmatic view in consonance with capital adequacy calculations is, to include all resources and not
just deposits and borrowings.
9. Net profits are the profits net of provisions, amortization and taxes.
10. Operating profits: Net profits before provisions and contingencies are called operating profits. This is an indicator of a bank‟s
profitability at the operating level.
11. Total debt Total debt equals total borrowings plus aggregate deposits. Total borrowings include borrowings in India and
outside India. In turn, borrowings in India include borrowings from RBI, borrowings from other banks and borrowings from other
institutions and agencies. It indicates a bank‟s propensity to leverage its net worth.
12. Net worth: This is aggregate of core equity capital and reserves and surplus. The net worth is tangible which is net of
accumulated losses and unamortized preliminary expenses. It stands for the core strength of a bank and denotes a bank‟s
margin of safety, its cushion for all creditors and its base foundation.
13. Total debt to net worth: The ratio is expressed as a number. The corresponding ratio in a manufacturing company is termed
the debt-equity ratio. This ratio denotes a bank‟s degree of leveraging, relative to its net worth. A higher ratio is proof of bank‟s
ability to leverage its net worth effectively.
14. Gross advances: These include overdraft, bills purchased, cash credit, loans and term loans including food credit. From a
different angle, aggregate advances include advances inside India and advances outside India. When the food credit is reduced
from the gross advances, it amounts to non-food credit.
15. Investments: Investments include investments in government securities, shares, bonds, commercial papers and debentures
and other approved securities.
16. Interest income: The sum total of discount, interest from loans, advances and investment and from balance with RBI and
other interest flows.
17. Interest income to average working funds: Expressed as a percentage, this ratio shows a bank‟s ability to leverage its average
total resources in enhancing its main stream of operational interest income.
18. Non-interest income: This is other income of a bank. It includes items such as exchange commission, brokerage, gains on sale
and revaluation of investments and fixed assets and profits from exchange transactions.
19. Non-interest income to average working funds This ratio denotes a bank‟s ability to earn from non-conventional sources. In a
liberalized environment, this ratio assumes significance. For, it mirrors a bank‟s ability to take full advantage of its operational
freedom.
20. Operating expenses: Equals the non-interest expenses. The operating expenses to AWF ratio explain the overall operational
efficiency of a bank. In fact, this ratio is one of the indictors of profitability of a bank.
21. Interest spread: This is the excess of total interest earned over total interest expended. The ratio of interest spread to AWF
shows the efficiency of bank in managing and matching interest expenditure and interest income effectively. Interest spread is
critical to a bank‟s success as it exerts a strong influence on its bottom line.
22. Net spread: is an alternative term for operating profit in the banking industry. The net spread to AWF ratio reveals a lot
about the overall
operational efficiency of a bank.
23. Risk weighted assets: The cumulative risk weighted value of assets plus risk weighted credit converted contingent liabilities,
which is used as the denominator for computing the capital adequacy ratio of bank.
24. Adjusted capital to risk weighted assets ratio: It reckons the unimpaired capital (net of net NPAs) available with the bank to
mitigate potential adverse impact of credit, market and operational risk.
25. Net profit to AWF: The ratio is a foolproof indicator of excellent utilization of resources and optimum leveraging of funds.
26. Net profit to net worth: The ratio is equivalent of the return on net worth ratio used in other industries. It is indicator of
profitability and return on shareholders‟ funds.
27. Operating profits to net worth: This is a corollary to NP/NW ratio and is another indicator of shareholders‟ return.
28. Capital adequacy ratio: This ratio relates a bank‟s core net worth to its risk-weighted assets. The ratio is internationally
accepted risk-driven measure of a bank‟s degree of capitalization. A higher ratio indicates that a bank is well capitalized vis-a-vis
its perceived risks. It is an excellent indicator of a bank‟s long term solvency.
29. Credit Monitoring Tools & NPA Reductions
30. Effects of Demonetisations
31. Effects of Inflation on Economy
32. Adhar Bill -2006
33. Bankcruptcy Code
Operation Related Interview Questions

Latest Changes happened during 2014-2016 i.e. new products or schemes , All schemes of
S B , C A , D e p o s i t s , R e t a i l L e n d i n g , M S M E , A g r i c u l t u r e , O T H E R ADVANCES, RBI latest Policy Guide lines, Know
your Branch and your business Segments – Brnach/ Circle/ Bank.
Know your work & related functions, know your branch ( Flash report ), Top ten deposits, aAdvances, NPAs, NRI
Customers of your branch as well as Merit & demerits of your branch regarding business potential in your
command area.
1. Compliance Function – Nature of work
2. Tell about Credit Audit; what is the maximum period permitted for
carrying out such audit.
3. What is the provision norm for standard asset?
4. What are the provision norms for sub standard / doubtful / loss assets and on
which balance, the same to be worked out.
5. What are the provision norms for infrastructure loans and sub standard
unsecured infrastructure loans?
6. Fraud types. Why frauds are taking place in financial sector.
7. What is DCCO in infrastructure loan?
8. Categories of priority sector. Whether export credit can be covered under priority
sector.
9. Ineligible accounts under SARFAESI.
10 . Wh at is d eemed NPA ? Wh et h er s is ter con cer n s al so t o b e cl ub b ed an d
p r ov is io n s t o b e mad e.
11 . Insider trading.
12 . What is teaser rate?
13. What is LIBOR. Where the rate is applied.
14 . What is minimum limit to be availed under PCFC?
15 . Post shipment faci lity in export cr edit in f oreign c urrency – t ell the sch eme name.
16 . Tell about Canara Trade Scheme.
17 . Retail Trade is classified under which sector.
18. What are key Banking Indicators?

19. What is Foreign Exchange Reserve(FOREX RESERVES)?
20. What is implications of Forex Capital Inflows?
21. In Housing Loans how Risk Weights depend on LTV?
22. What is Bank Rate?
23. Tell something about Cash Reserve Ratio?
24. T el l s o m et h in g a bo u t S t at u t o r y L iq u id it y Rat i o ?
25. Wh at i s l i q u i d i t y ad j u s t m e n t f a c i l i t y ( L A F ) - Re p o an d R e v e r s e r e p o ?
26. Wh at i s cal l mo n ey m ar ket ?
27. Wh at i s co mmer ci al pap er ( CP) ?
28. Wh at i s c e r ti f ic a te o f d e p o si ts ( C D s) ?
29. T e l l s o m e t h i n g ab o u t G l o b al F i n a n c i al C r i s i s - G e n e s i s , I m p ac t & L e s s o n s ?
30. T el l ab o u t C u r r en t E c o n o m ic S c e n ar i o in I n d i a?
31. Wh at a r e S t i m u l u s P a c k ag e s an n o u n c e d G o v t o f I n d i a t o ad d r e s s g l o b al
recession?
32. Wh at i s In t e r n at i o n a l F i n an c i al R e p o r t in g St an d ar d s ( I F R S) ?
33. Wh at i s n e t i n t e r e s t m ar g i n ( N I M) & h ow i t c an b e i m p r o v e d ?
34. Wh at i s r e t u r n o n a s s ets ( R O A ) & h o w i t c an b e i mp r o v e d ?
35. Wh at i s B as e l I I g u i d e l i n e s f o r c ap i t a l r e q u i r e me n t i n B an ks ?
36. Wh at ar e m ain h i gh li gh t s o f CE N S US 2 0 1 1 ?
37. Wh at is Lokp al Bill ?
38. Wh at w i l l b e i mp ac t of S B i n t e r es t r at e s d e r e g ul at i o n ?
39. Wh at ar e r e as o n s f o r I n fl at io n i n In d i a?
40. Wh at i s WP I & w h e n n ew s e r i e s s t ar t e d ?
41. Wh at i s I m p o r t an c e o f M S M E t o I n d i an E c o n o m y & B an k i n g s e c t o r ?
42. Wh at ar e h i g h l i g h t s of Fo r e i g n T r ad e Po l i c y 2 0 0 9 - 1 4 ?
43. Wh at i s B as e R at e s ys t e m ? R e as o n s f o r s w i t c h i n g o v e r f r o m B P L R t o B as e
R at e ?
44. Wh at is Basel III ?
45. Please define 3G?
46. Wh at i s R B I I R A C n o r m s f o r I n f r as t r u c t u r e F i n an c i n g ?
47. Wh at i s g en e r al p r o v is io n in g no r ms ?
48. Wh at i s P r o vi s io n i ng C o v er ag e R at io ?
49. Wh at s w eat eq u it y sh ares ?
50. Wh at i s S e c u r i t y i n r e s p e c t o f R o ad an d H i g h w ay P r o j e c t s ?
51. Wh at is Escrow A/c?
52. Wh at i s T ru s t & Re t e n t i o n A /c s ( TRA ) ?
53. Wh at i s D eb t s er v i c e Re s er v e A c c o u n t ?
54. Wh at is Senior Debt?
55. Wh at is Ju nior Debt ?
56. What is Financial C l o s u r e ?
57. Wh at is G o ld en Sh are?
58. Wh at i s C o r p o r a t e D e b t R e s t r u c t u r i n g ( C D R) ? , S D R , J L F & C A P .
O T HER Q UES T IO N BA N KS
1. What if you're posted in remote area far away from your hometown? Are you ok with that? Will you be
comfortable posted in rural or naxal areas? Who will look after your family?
2. What is guarantee that you'll not leave banking sector? You seem too young and confused to handle the job
pressure here. (Yes, they've asked this in past!)
3.If you're a branch manager, how will you increase the profit of the branch? How will you attract more customers? (Hint:
Branch manager is not a door to door salesman. his strategy has to be bigger.)
4. If bank introduces a new home loan product, how will you sell it? (Hint: Contact builders and real estate developers of the city,
free publicity through social networking site, pamphlets etc.etc.)
5. A customer has made FD of 10 lakhs, but within 6 months, he comes back to break his FD for to purchase a car. How will
you handle? (Hint: offer him car loan, show the comparative advantage of taking car loan vs breaking FD before maturity vs
tax benefit etc.etc.)
6. What are three points that make you better banker than people sitting outside?
7. What is the most recent bank related advertisement you've seen. And what do you think about it? Was it
attractive or was it poorly designed?
8. As a customer if you've to open a bank account, which bank will you chose? What factors will you consider before picking
a bank?
9. In which bank do you have an account already? How you feel as a customer? If you were in working in the
same bank, what initiatives will you take for more customer satisfaction?
10.Assume that you have been selected and after you probation period you are posted somewhere in India as
a Branch Manager and Branch is in not a good position. What steps you will take to bring it on right path?
11.IF you have being allotted target to increase business in some backward area, what will you do?
12.In your branch suppose following happens, what will you do?
13.Inflation, WPI, CPI, monetary policy
14.Financial Intermediaries: Banks, RRBs, NBFCs (Part 3 of 3)
15. Liquidity Adjustment facility (LAF), Marginal Standing facility (MSF), Repo, reverse repo, SLR, CRR, NEFT, RTGS,
NDTL: meaning explained
16. Cash Reserve Ratio (CRR) Controversy between SBI & RBI: meaning, implication on Economy Explained
17. Banking Business Correspondents Agents (BCA): Meaning, functions, Financial Inclusion, Swabhimaan, Common
Service Centres (CSC)
18. Banking Ombudsman: Meaning, functions, appointment, reforms explained
19. SARFAESI Act, Asset Reconstruction Company (ARC), Security Receipts (SR), QIB, DRT, Central Registry
20. Banking Amendment Bill: Issues, Features, Problems, Reforms meaning explained
21. Cheque Truncation System (CTS-2010): Meaning, Advantages explained
22.Barter-Money-Bitcoin: Fungibility, Double coincidence of wants, division of labour
23. white label ATM and financial inclusion.
24. Banking licensing for new banks. its impact on public sector banks. GK things like “committee is headed by the former
RBI Governor Bimal Jalan.”
25. COBRAPOST sting operation on money laundering by banks. and the subsequent action by RBI. And what should
be done to prevent it in future.
26. What is Priority sector lending? (followup) Should farmers be given loan at cheaper rate when they're already
getting subsidy on fertilizer and diesel?
27. We should abolish concept of CRR, and we should have just insurance of deposit? Do you agree?
28. What are the two main problems banks are facing today? and What should be done to solve them?
29. What are your views on strikes by Bank employees?
30. What do you think deregulation of saving account is good step?
31. What is no frill account? How does it help in Financial Inclusion? Does opening no frill account sufficient to achieve
the process of fin.inclusion?
32. Which banking sector is stronger: Indian or western? And why?
33. Which banks are better private or PSU? and why?
34. What role does bank play in empowerment of women?
35. What role has banking sector played in India's success story?
36. What do you know about bancassurance? Is it good or is it bad?
37. Difference between investment banker and retail banker? Which one is more important for economy?
38. Why should bank consider Debt equity structure of a company before loaning?
39. NPA, its classification, ways to recover? (Hint: NPA lassification must be mugged up verbatim. else they'll
deliberately ask followup questions to confuse you.)
40. What is Negotiable instruments act? (hint: related with Cheque bouncing) Who is NRI? Can a NRI open an account in a bank
as a normal citizen? Can PIO open an account in Indian bank as a normal citizen? What are the documents required for opening
an NRI Account? Can a student studying abroad be termed as an NRI?
41. Tell us about “Nomination” facility in banking.
42. What do you understand by KYC? What document required for KYC? What documents are required to open a
bank account?
43. CBS, SWIFT, NEFT, RTGS. What are their full forms, features and benefits?
44. NPM, LRM, ARC, SARFAESI ACT
45. All the basics: RBI, its functions, repo, reverse repo, CRR, SLR and their impact on bank.
46. How can RBI control inflation?
47. What is refinance?
48. ECGC, packing credit, buyer's credit, letter of credit.
49. Sources of income of bank except interests.
50. Main difference between Banks and NBFC.
51. What do you know about Rural banking and Financial Inclusion?
52. What is ombudsman? what is his powers and functions?
53. What is MFI? From where does MFI get funds?
54. How is rural banking different from retail banking?
55. What is the difference between hacking and phishing?
56. Equitable Mortgage? interest subvention? Amortization?
57. Car Loan, Personal Loan, student loans, home loans, education loans (and what are their on going approx.
interest rates?)
58. What is ABSA account?
59. What is Swawlamban scheme?
60. What is POS terminal? How bank gets benefited from POS? What amount bank charge from
shopkeepers for POS terminals?
61. Tell me something about E-Banking? and its benefits to branch?
62. What is branchless banking?
63. Various types of Banks and their examples
64. Difference between banking n finance
65. Difference between micro financial institutions and NBFCs.
66. Difference between between Co-operative societies, SHGs & JLGs
67. What is money laundering? What has the government done to prevent it? What's Bank's role in
preventing money laundering?
68. How important is CASA Portfolio for the bank
69. What is term deposit and demand deposit?
70. What are alternate channels of banking?
71. Have you ever used an ATM? What is the full form of ATM? Can you Name some ATM Manufacturer
Companies? What are the other uses of an ATM? Balance Enquiry, Cash Withdrawal, Pin Change, Mini
Statement.
72. What is the difference between banking and finance?
73. What is Credit Rating agency?
74. What is working capital? What are preferential shares?
75. What is more beneficial to a company- Equity or Debentures?
76. What is DEMAT account? What is PAN card? Are they same thing?
77. What is Inflation? How it is controlled?
78. A poor person has come, he has no documents for KYC form but he wishes to open account.
79. electricity is gone and customers are complaining
Some staff member is on leave and customers are getting restless
80.If you will improve this weakness then will you become a perfect man? (Hint: no.)
81.What is the meaning of excellence to you? When will you consider yourself a successful person?
82.Do you consider yourself a creative person? If yes, how will find job satisfaction in banking sector, where rules and
procedures have to be adhered strictly?
83.What is the difference between a leader and a manager? Does a leader need to be a good manager too?
84.What are the qualities of a good leader? Suppose, you are made a leader of a team unknown to you, there you find
somebody who is already a leader there and even better than you. What will you do?
85. How to make your Bank at No.1? What are the issues? (Despite being No.3 in Balance Sheet size , why your profitability is
lower? Why share price of BOI is not picking up?
86. Lower Retail-11.33/16694 NPA
87. In a phased manner, we are increasing Retail Lending and CASA. We are not concentrating on top line.
88. Where you will invest? G-Sec? Why? Duration? Long duration /Short Duration?
89. Value at Risk(VAR)only in non- interest bearing asset?
VaR is the maximum loss likely not exceeding in holding/ portfolio with a given probability (say 99% or 95%) defined as
the confidence level, over a specified period of time using historical data/Insight into foreign regulation working with
diverse people.
90. How your Hongkong exposure is helpful to you and Bank?
91. What is price stability-Slowly rising prices?
92. Factoring/Forfeiting – Def.
a. In a typical factoring arrangement, the client (seller) makes a sale, delivers the product or service and
generates an invoice. The factor (the funding source) buys the right to collect on that invoice by agreeing to
pay the seller the invoice's face value less a discount--typically 2 to 6 percent.
b. It is a method of exporttradefinancing, especially when dealing in capital goods (which have long
paymentperiods) or with high risk countries. In forfeiting, a bank advancecash to an exporter againstinvoices or
promissory notes guaranteed by the importer's bank. The amount advanced is always 'without recourse' to the
exporter.
93. Before finalising Monetary Policy, the RBI Governor discusses about :Inflation/Liquidity/Agri.
Production/Monsoon/Inflationary expectations.
94. Why RBI Governor has not increased Repo Rate in December,2014 despite 0% WPI in November? Base effect waiting for
Feb?
A: The Governor had maintained that he want.Reduced inflation may be partly due to base effect. CPI to be on the
trajectory towards 8% by Jan,2015 and 6% by jan,2016.And his contention has been the policy making should be guided
more by forward looking INFLATION EXPECTATIONS rather than by any retrospective measure for any specific period.
Hence, no cut.
95. Have you heard of “Take out financing?”
a. As the Banks have resources mostly of short term whereas , infrastructure financing is long term which creates
Asset Liabilities mismatch. Financing for longer duration projects(20-25 years) through term loans(5-7) years
with an understanding to hand over to some other financial institution to avoid ALM
96. ALM-Dynamic structure to measure, manage balance sheet with an eye over NIM.
a. Asset Liability Mismatch refers to a situation pertaining to asset and liability management. A mismatch occurs
when assets that earn interest do not balance with liabilities upon which interest must be paid. For example,
an asset that is funded by a liability with a different maturity creates a mismatch.
97. Long term financing
98. Bank or FI?
99. 5-25 restructuring in existing projects
100. Problems in Infrastructure project:
a. Land Acquisition, Environment clearance, Coal linkage, Project Monitoring by Govt.-latest Govt. Initiatives-
Cabinet Committee on investments.
101. Anything you want to highlight about yourself?
a. I have a well diversified exposure in Rural and Semi-Urban, Urban and Metropolitan in
small/medium/Agriculture/Large Corporate in Branch/RO/ZO/HO in domestic and Overseas Banking including
Treasury Function and managing an NBFS on deputation.
102. Customer Service? – What are the issues and how to improve?-Technology, ITES, etc.
103. IT problems in Banks? Heavy investment, connectivity issue etc.
104. Data mining
a. Data Mining is an analytic process designed to explore data (usually large amounts of data - typically business
or market related - also known as "big data") in search of consistent patterns and/or systematic relationships
between variables, and then to validate the findings by applying the detected patterns.
105. Customer Relationship Management (CRM)
a. Customer relationship management (CRM) is a system for managing a company's interactions with current and
future customers. It often involves using technology to organize, automate and synchronize sales, marketing,
customer service, and technical support.
106. Customer Service in Pvt. and Public Sector Banks-Difference
a. Less social service by Pvt. sector banks in comparison to Public Sector Banks.
b. Emphasis on Quality Customers by Private sector Banks.
c. Hi-technology in Private Sector Banks in comparison to Public sector which leads to better Customer Service.
d. Well informed/trained personnel which helps in better service to customers.
e. Adequate no.of staff in Private Sector Banks leading to better customer service.
107. Tech Savvy- Pvt. Sector Banks
108. Capital raising-How to raise capital?
a. Initial Public Offer (IPO), Follow on Public Offer (FPO), rights issue, bonus issue, Private Placements-QIP ,Global
Depository Receipt, Conversion of Perpetual non-Cumulative Preference Shares
109. Programme-Capital raising process.
110. Govt. role in capital issuing to the Banks.
111. Market is not conducing as many shares of PSBs are below BV.
112. How to improve Capital Adequacy: NPA reduction, CASA.
113. Suppose we want to raise Rs.3000 crores capital. What is the process and why we should raise capital?
114. Derivative reforms? Interest rates Futures’ Currency Futures,
115. Financial Stability ?Financial Responsibility and Budget Management
116. FATCA: The Foreign Account Tax Compliance Act (FATCA) is a United States federal law that requires United States persons,
including individuals who live outside the United States, to report their financial accounts held outside of the United States,
and requires foreign financial institutions to report to the Internal Revenue Service (IRS) about their U.S. clients. Congress
enacted FATCA to make it more difficult for U.S. taxpayers to conceal assets held in offshore accounts and shell
corporations, and thus to recoup federal tax revenues.
Q. What is brief profile of your zone? What was your contribution to the Zone? Why C/D ratio is so poor in Bihar. Why banks
are reluctant to contribute to state’s growth by making lending available?
My Zone spans across the 11 most diverse and challenging district of North Bihar which is marked by the conspicuous unity in
diversity of caste, creed, Topography, language and belief. It is often hindered by extremes of nature like flood, drought,
entrepreneurial idiosyncrasies The Zone has been a binding force behind the economic movement of the State in general and
zone in particular .After my taking over as Zonal Manager of the Zone, I fathomed the SWOT level of the zone and ensured the
Credit off take in the desired bucket of Agriculture, MSME and Retail and in most of these segments Zone has been achieving the
allocated level of budget on quarterly basis. I also ensured to have achieved the Profit budget of the Zone and numerical liability
budgets under Retail segments of Savings and CD Accounts. The banks in the North Bihar are willing to contribute to the cause of
the state by augmenting CD ratio and We have lent sizeable volume to the MSME /Indirect Agriculture by given the land records
lying with the State Government and nature of entrepreneurship our efforts seem miniscule in the national context . We have
sowed an ambitious seed of Credit Avenue which will overcome the gestation lag by actually coming to the surface. I am satisfied
when I look back at my level of compassion and involvement.
Q. How was performance of your zone in the field of financial inclusion- Jan DhanJojna ? Do you think , this is going to change
the condition of poor.
The Zone has out achieved its budget under Pradhan Mantri Jan Dhan Yojna by opening 2.37 lacs accounts under PMJDY and is
among the Top Five performers of Bank Of India .Even Bank of Baroda with 1.65 lacs PMJDY account across the allocated 10
districts lag far behind us .The Jana Dhan Yojna is expected to improve the position of the Have Nots by providing them an ample
scope of Investment avenues and Life insurance. The best part of this yojna seems to provide the financial impetus and banking
propensity to the most relevant portion of the state. The banking condition of the state is bound to improve by garnering
adequate commercial avenues .
Q. Tell us something about Bihar ‘s economy ? Do you think, we should still count Bihar in the list of BIMARU states of the
country ?
The State of Bihar is marked by walking contradictions of being leviathan prosperity on the one end and acute penury on the
other .Bihar is thus unable to cover for the chasms created between the two . The state is deprived of multilateral investment
avenue and has to remit billions of Rupees to its more prosperous counterparts. The elitist strata’s of this state are unable to
plough back the tangible and intangible yields for gainful consumer surplus . Still , I believe the state is out of the cobweb of
being a BIMARU state and on the course of being a developing unit .
Q. How agrarian practices in Bihar are different from states like Punjab and Haryana ?
The State of Punjab and Haryana were the early starters in the field of HYVP imbibed from Mahalanobis Model of Mexico. The
basic requirement of this model stemmed from the principle tenets of Land Reforms which were implemented successfully in
the state of Punjab and Haryana. The state is undergoing the stages of consolidation of land and will have to adopt the area
specific agrarian models. Presently,the agriculture model in the state is marked by small holding size, lack of intensive and
extensive farming , lack of uses of manures and tillers despite the best soil quality and water level in the state .
Q. Contribution of agriculture sector to country’s GDP is constantly going down? Do you think agriculture sector has reached
a saturation point in India?
The Agriculture Sector in the economy is maintaining a satisfactory level in absolute terms but as during the course of Phase II
liberalization programme our Secondary and Tertiary Sector has been showing a robust growth (especially the Tertiary Sector )
.Hence relative level of percent of GDP is apparently going down . As per Nobel Laureate Sri J k Gailbraith , such growth is
hallmark of a rapidly growing economy .
Q. What are your views on GM crops ? Should we allow GM cropping / GM foods in India to meet the food security for our
growing population ?
“The GM cropping is the mean of rewriting the biological or organic order of the target product to raise its quality and yield. It
is devoid of and side effect related to the product or process” . The GM crops are not having any adverse health features and
are compliant to European and American level of consumption standards. The GM foods in India could be promoted on the
pattern of Israel, Holland and Denmark. It would not only satisfy the growing aspirations but also stem the Agri proportion of the
GDPs. For an Agri economy of India’s pedigree it could be promoted to ensure consumption and Exports. India’s journey from
conspicuous consumption driven to exports is primarily on account of partial adoption of GM cropping.
Q. Recently, public sector banks were suggesting re-classification of priority sector portfolio? What are your views?
The Priority Sector Lending was based on the economic priorities of the country pertaining to 80s and 90s however with the
burst on EOU, SEZ, Employment Avenue of MSME and Services sector, classification could be re cogitated. This would enhance
economic focus on the relevant sector of the economy.
Q. What banking sector reforms you think are necessary to improve the banking sector in general and public sector banks in
particular?
I think banking reform should consist of (i) Manpower Planning (ii) Reclassification of priority sector relevant to the banking
system under area specific approach (iii) The mechanism of recovery bolstered by the Government agencies (iv) Centralization
and decentralization of decision and process respectively (v) Opening and management of specialized banking branches
Q. What do you feel are the reasons for growing NPAs in banks in recent times? Why position of public sector banks is more
vulnerable in comparison to private sector banks? What measures should be taken to improve the situation?
The general reasons behind the growth in the NPA stemmed from the prevailing economic condition which has remained sticky.
The systemic failure of the economic activity in the state with respect to Agriculture, Small Industry ,Stag flationary economic
trend, trickle down effect of the sluggish economic activity and partly due to tooth less recovery mechanism which has a
propensity of accelerating demonstration effect . The private Sector bank are more focused on the retail sector and less towards
Infra development , Agri business, MSME and need less to mention that later has a propensity for cyclical fluctuations . The
Overseas exposure of the private banks is miniscule in proportion vis a vis Public Sector bank . Public Sector bank has to focus on
the different set of regulatory assets which has pull and pushes .
Q. What issues were discussed in recent banking conclave called Gyan Sangam at Pune ?
(i) Achieving universal financial Inclusion
(ii) Leveraging technology and digitization to improve cost efficiency
(iii) Fostering profitable priority sector lending
(iv) Robust risk profiling and recovery mechanism
(v) Building a robust Manpower planning for public sector banks
(vi) Consolidation and Restructuring of PSB for better capital efficiency /productivity
Q. What are your views on bank consolidation?

It is a very tricky subject as to the bank consolidation is caused on account of bank’s diverse Nationalization in 70s and 80s. The
consolidation would improve bank’s capital base and would provide the competitive edge over the peers with the physical
strength. The amalgamated structure would thwart the unscrupulous designs a great deal and enhance the business spirit of the
banks in question. On the other hand, we have to plan adequately for ensuring capital mergers under homogenous and
heterogeneous business /manpower planning and design.
Q. What do you mean by corporate governance? What are your views on separation of two top positions – Chairman and MD.
What is the rational for this separation of two positions? Do you think this will help in improving the corporate governance in
public sector banks.
The Corporate governance consists of culture rather than a business set up . It involves our stages of development towards a
predetermined level at the macro level and the methodology involved is at pyramidicalling level of business planning and its
achievement. The set up functions and every level of decisions like Head Office, NBG, and Branches. The CG is affected on
account of lopsided and inconsistent business existence. Hence separating both Chairman and MD will ensure transparency,
consistency , specialization and would continue to direct the bank towards utopian level of development . Both of them would
ensure improving Corporate Governance
Q. GDP data released by the government last week shows a very encouraging picture? What could be the reasons for better
numbers? What is the change in methodology of computation of GDP data?
The GDP has two methodology of calculating the value at operating cost and market Price and India being the low cost , labor
intensive country tend to under value its GDP which could be valued correctly if we take Intra national inflation, risk weightage
of the country ‘s foreign exchange, Non economic inputs , Foreign Exchange exchequer of the country . As per Todaro’s data on
GDP computation, India enhances its standing on the GDP level to Worldwide third.
Q. How e-banking is helping in extending the reach as well as improving the services in the country ?
The E-banking has minuscule human intervention and is based on the state of art technical expertise with 100 % accuracy and
speed. The level of human error is estimated to be 0.04% ( Badal Mukherjee model of growth ) . With the advent of extensive 4
G model in India and Gargantuan user surplus service is bound to improve.
Q. What are your views on New Banking Licenses in India. How payment banks can help in connecting the masses in rural
areas?
The payment banks with their acquaintance and outreach can help masses being connected financially. The liberal banking
licenses regime would expedite the ongoing financial inclusion efforts to the optimum level.
Q. Do you think banks need to decrease the interest rates at this stage and help in revival of the economy?
Yes! It would ensure offtake of credit to the most relevant segments of the society and will increase the demand for the funds.
The surplus funds would increase inflation at the outset but with the inbuilt employment enhancing mechanism, it is bound to
revive the ailing economy.
Q. Recently, some banks were suggesting for broad basing the concept of CRR? They were suggesting inclusion of forex and
gold reserves in the eligible kitty? What do you say?
The correct classification of the off balance sheet exposure would be broad based with the introduction of the forex and gold
reserves in the eligible kitty CRR will rightly be classified and release of funds would be correctly classified .
Q. Do you think, banks will be able to meet the huge capital requirements to meet the Basel III norms? What are the norms
for bank leverage ration under Basel III recently announced by RBI?
The additional requirement of 3.56% of Capital level under BASEL III will require huge capital requirements and looking at the
Capital structure of the bank, it seems challenging for the banking industry. However India being the signatory for the BASEL
frameworks, it has to comply to the terms of BASEL III regulations for
(i) Improving bank’s risk mitigation
(ii) Improving bank’s management and governance
(iii) Improving transparency and disclosures
(iv) Ensuring Micro prudential and Macro prudential compliances
Q. What is the position of ITES in your Zone?

Well! ITES remains a challenge, not because of my initiative related lacunae but on account of our propensity to sell to the
relevant segment of the society. The challenges involve location, cash management, safety and security of the infrastructure,
adequacy of IT related infrastructure which always remains a big challenge. We are having a customer base of more than 21.78
lacs out of which 29.57% are availing our ATMs. The ATMs when I joined remained at 18 and has improved to 153 at the moment
and we are in the process of installing another 23 by March 2015. The average hits to our ATM is satisfactory at 153 when card
base is around 5.13 lacs . The card base is sluggish for its growth on account of Bank’s acceptance of RUPAY card. Our below par
performance is on account of poor growth under Internet banking, BTM, IMT, E-Banking, SWIFT etc. However, we are ever on
the prowl to make it to the satisfactory level of acceptability. We have been able to increase the wallet share from 1.07 to 1.49.
Q. Gyan Sangam at Pune:
Recently, banking conclave in the name of – Gyan Sangam –was organized at Pune (January,15)
Top officials and ministers from the government and CMDs from all public sector banks alongwith industry experts attended the
conclave.All banks adopted six major resolutions.The five points include :
Achieving universal financial Inclusion
Leveraging technology and digitization to improve cost efficiency
Fostering profitable priority sector lending
Robust risk profiling and recovery mechanism
Building a robust Manpower planning for public sector banks
Consolidation and Restructuring of PSB for better capital efficiency /productivity
In a bid to improve governance, the Govt. has separated the posts of Chairman and Managing Director (CMD) in nationalised
banks. Managing Directors (MD) will now be designated as Chief Executive Officer (CEO). Two Reserve Bank committees,
headed by AS Ganguly in 2002 and PJ Nayak in 2014, had recommended separation of the post.
The government wanted to have at least a few global-sized banks. The banking sector of a country mirrors its economic rise.
Japan and China had banks in the top ten banks of the world during their economic rise.
PM seeks end to lazy banking and asks banks to be more proactive. He said he is against any political interference in functioning
of banks but supports necessary “intervention” in the public interest.
Dollar – Rupee Exchange Rate Present Scene :

What may be the reasons for currency fluctuations in recent times ?OrWhy rupee is weakning against dollar despite low crude
prices ?
Currency prices like any other commodity are determined by it’s demand and supply and it is not only actual demand and supply
but our perception about the future demand and supply which in turn depends on so many fundamental factors like :
BOP position particularly the CAD position,
Currency reserve position in the country,
Inflation rate,
Relative Rate of Interest,
And so many other economic and even political factors.
The recent fluctuations may be on account of following factors::
Positives : Helping rupee to strengthen against USD :

Falling oil prices : Crude Oil prices has touched lowest of six years to USD 53 per barrel. India is a major importer of
oil with almost 70 % imports of it's consumption. This has reduced dollar demand by the oil companies drastically.
Dollar purchases by oil companies have almost halved amid falling crude prices. Their daily buying on most days is
now about $270 mn, against about $500 mn around the same time last year. With global oil prices falling to their
lowest level in six years, dollar buying by oil marketing companies (OMCs) has also declined sharply from a few
months earlier. Global crude was $115 a barrel in June 2014 and is now $35 a barrel.This is a big positive for our
currency market and should help rupee strengthen.
Huge ForexReserves :Today, India has huge forex reserves of about USD 350 billion which are all time high.
Moderation in Inflation :
Negatives : May weaken rupee :

US's strong growth : US economy has been showing good growth in recent times. The Federal Reserve has
indicated that they may increase their interest rates during 2015. This will make investments in US to be more
attractive, leading FIIs to pull back their portfolio investments in India resulting in pressure on rupee.
Threat of Global Slow Down : Entire Europe is in problem. Greece is sending disturbing news. Countries like
Russia,Brazil are in big problems. China is also showing slowdown indications. So, there is threat of some kind of
slow down of global economy. In such a scenario, overseas investors may like to protect their overseas
investments and pull back from emerging economies like India.
A sharp rise in gold import and a fall in export growth pushed the Current Account Deficit (CAD) to $10.1 bn (2.1
%of gross domestic product) Q2 of 2014-15, , compared to $5.2 bn (1.2 %of GDP) for July-September 2013. The
deficit was $7.8 bn (1.7 %of GDP) in the Q1.
Our State FM has recently indicated dollar to remain in the range of RS. 60 – 65 in the short range which will be
good for our exports.
E-banking extending reach in a big way :

Government and banks have been trying to encourage account holders to use alternative channels. Banks are innovating and
aggressively promoting mobile and Internet banking.
According to the RBI, development of the payments and settlements system is evidenced by the increasing use of electronic modes
for transactions.
The cost of a transaction at a bank branch is Rs. 40-50 and ATM, the cost is Rs. 10-12, whereas, on the digital medium, it drops
further to Rs. 2-3 a transaction.
Leading the digitisation race are private banks, which have been aggressive on this front, especially in the last one year or so.Most
other banks, too, are now offering their respective mobile applications and promoting them.
ICICI Bank has launched about six mobile apps since July last, including video banking and Passbook, which helps customers
view their recent savings, credit card and PPF account transactions on their mobile phones even without having Internet service. It
has also launched a pilot programme, titled Inter-operable Electronic Toll Collection on roads and highways.
In the wake of e-commerce transactions gaining traction, the RBI is looking to remove the two-factor authentication requirement
for small-value transactions up to Rs.3,000 in order to make transactions easier.
PSBs not lagging : In 2014, public sector banks too moved beyond their stereotypical image to join the mobile and Internet
banking channels.
State Bank of India, the country’s largest lender, has opened six fully digital branches and plans to increase the number, going
ahead. In 2014, it launched the ‘SBI ka branch abaapkijeb main hai’ .
Recently, SBI also launched a technology training centre to coach customers and bank staff on technology and e-banking.
Interest rate Scenario :Why RBI is conscious about interest rate easing ?
i. The recent decline in inflation is partly due to the base effect but according to economists this is likely to reverse early
next year. Also, the Ministry of Agriculture has forecasted a lower kharif output for cereals, pulses and oilseeds which
could put some upward bias on inflation in the coming months.
ii. Supply side issues in agriculture have still not been sorted out.
iii. Inflation expectations still remain elevated.
iv. Interest rate cuts in India will reduce the interest rate differential with the US, which is expected to raise rates late this
year, which might lead to capital outflows.
v. Although crude oil prices have crashed from a peak of $115 to $53.00, rupee has also depreciated , negating some
good effect of crashing of crude oil price as far as Indian crude oil imports are concerned. There is strong likelihood that
the USD will appreciate more in the coming months in light of interest rate hike to be implemented by the Fed
probably in the second half of CY15.
New Bank Licences :
Government is planning to issue banking license for the Department of Posts (DoP). With this Post offices may act as bank
branch. This will increase the banking reach to the remotest places as DoP operates 1,54,882 post offices (with nearly 90 %of
the network in rural areas).
Rajan gets ‘Governor of the Year’ award (Business Standard)
Global magazine Central Banking has honoured Reserve Bank of India (RBI) Governor RaghuramRajan with Governor of the Year
award for 2015. “This award is a recognition of the part, the RBI and its staff have been playing in bringing macro economic
stability to the Indian economy, in creating more competition and new growth opportunities in the banking and financial
markets, as well as in expanding financial inclusion“.
How has your foreign posting been beneficial to the bank?

As our branches operate as a self-contained unit (deciding sourcing, pricing n investment itself with its own ALCO) function
pretty much like a bank, the foreign assignment gave me an opportunity to function more like a business head/Treasurer, albeit at a
smaller scale. This has greatly enhanced my conceptual skills and enabled me to understand things as they fit in the wider
organizational structure.
My stint at a foreign centre has provided me insights in a foreign regulatory environment. As there is a clamor for convergence of
regulatory standards globally, India might move to some of the regulatory methods in vogue in the developed world. As this
happens, I will be better equipped to operate in a changing regulatory environment in India.
It is widely believed that teams with members from diverse backgrounds perform better than those having members from similar
cultural and social background. Hence, every organization, global or local is encouraging diversity at work. As my foreign
assignment has sensitised me to cultural,social and religious differences at workplace, I will prove to be a better leader of a diverse
team.
Difference between Target and Budget ?
A budget is usually thought of as a plan and the way most of us meet this in practice, it does look like a lot of things heaped into
one.We tend to think of the budget as being a result of a forecast and then used to peg targets for those responsible for that budget.
Economic Inclusion : Economic inclusion is a term used to describe a variety of public and private efforts aimed at bringing
underserved consumers into the financial mainstream. In the U.S., there are a number of partnerships and initiatives focused not
only on expanding the availability of safe, affordable financial products and services, but also on education consumers about
ways to become fully integrated into the banking system.
Islamic Banking
Islamic banking refers to a system of banking or banking activity that is consistent with the principles of the Shari'ah
(Islamic rulings) and its practical application through the development of Islamic economics where no interest is paid but
dividend or appreciation.The principles which emphasize moral and ethical values in all dealings have wide universal appeal.
• GDP 7.5% , Base change.
• BOI CASA down ?
• Senior level vaccum.
• Attrition in Human Resources
• Foreign Branches
• Burden or contributing.
• Profitabilitythan obvious
• Vision for delivery channels.
RBI issues final guidelines on capital buffer for Banks (Internal working group- Mr. B Mahapatra)
The RBI released the final guidelines for enabling banks to have unhindered credit flow to sectors such as infrastructure, power
and ports during difficult times. Technically called Countercyclical Capital Conservation Buffer (CCCB), it is a system where
banks save in good days for tough times.
It also aims to reduce the overexposure of the banking system during good times, as banks have been found to lend excessively
and often carelessly when the going is good. “The CCCB may be maintained in the form of Common Equity Tier 1 (CET 1)
capital or other fully loss-absorbing capital only, and the amount of the CCCB may vary from 0 to 2.5 %of total risk weighted
assets (RWA) of the banks”.
RBI will, announce the percentage of money that banks need to set aside as CCCB at least four quarters in advance, mainly based
on the credit-GDP ratio in the economy at various points in time.
The banks will have to start setting aside money as soon as the Credit-GDP ratio falls to 3 % and will increase progressively till
the Credit-GDP ratio reaches 15 % when banks will have to set aside a full 2.5 % of the total risk weighted assets towards CCCB.
Foreign banks having their operations in India will also have to maintain the CCCB as prescribed from time to time. “All banks
operating in India (both foreign and domestic) should maintain capital for Indian operations under CCCB framework based on
their exposures in India”
Subject to restrictions-“Banks not meeting the mandated CCCB will be subject to restrictions on discretionary distributions (may
include dividend payments, share buybacks and staff bonus)
Treasury-Liquidity Management, Regulatory Compliances with profit motive
• Optimum level of investment is defined twice of Net worth or 10% of total advances as per last annual Balance Sheet as
investment is akin to advances.
• SLR-Investment-regulatory-21.50% presently
• Non-SLR-Credit Substitute but exit route is there, but it is liquid in nature and we can offload in the market with
minimum loss
• Special Securities-Strategic Investments-long term capital appreciation and helpful in Bank’s business activities,like-
CIBIL
• Non SLR-Banks , Debentures,Commercial Paper , CD, Equity,Security Receipts, Venture Capital
• Risk weight –Venture capital-150%
• RBI prudential norms are being followed.
• We have also defined sectoral limit exclusively for Treasury-But borrower wise limits are clubbed with Credit
Dept(Banks as whole)
• Modified Duration-To take longer view of entire portfolio and understand the interest rate sensitivity.
• PV01-Effect of 1bps 0.01% change in yield curve on the value of security and this is used as stop los or take profit limit.
• Maturity wise limits:
• Upto I yr 1-3 yrs 3-5 yrs 5-7 yrs 7-10 yrs More than 10yrs
• Rs.640 crores Preferential allotment of equity through Private Placement to LIC and New India Insurance
Co.Ltd.
• LIC can invest 15% max in any Govt. Institution/undertaking.
• Duration of Treasury Investment has increased due to longer duration of SEB bonds under restructuring.
• Infrastructure bonds with residual maturity of more than 7 years are classified in HTM
• Yield on investment is highest-8.12%.High cost deposits taken at Quarter end and credit pick up is also on these day-
May be under pressure for renewal
RBI Committees
i. Vimal Jalan Committee for New Banks
ii. Bandhan and IDFC
iii. Urjit Patel-Monetary Policy-CPI 4%+-2% movement from WPI to CPI.
iv. Why CPI-covers service sector which is 60% as WPI covers mainly of GDP &Manufacturing
v. Shymala Gopinathan Payment Banks and Small Finance Banks
vi. PJ Nayak Committee-Corporate Governance
How to turn around the Bank?

How ROA, ROE can be improved? Increase Income and reduced expenditure.
• CD ratio declining
• Provisioning declining
• Govt. has not considered capital infusion-ROA above average(3 years),ROE above average(last year)
• Why High Cost deposit should be taken as we have already high liquidity’
• CASA declining –How to improve
• Recovery to be stepped up
• Size of Balance Sheet is increasing but bottom line is declining-Reasons
• Provisioning increase to try for non-interest income
• Cash retention limit has been reduced
• Reconciliation –Old entries
• Controlling further slippage in advances
• Written off recovery
• Misc Income-Third Party Products, Received incentive for Third Party Products.
Types of ATMs:
White label ATMs: These are ATM’s which are not owned by banks but by private ATM service providers. Customers from any
bank can deposit or withdraw money from such ATM,s. Your banks pay a service fee for the usage. “Such ATMs will help take
banking services to remote places,” official sources said. Besides, it will help sponsored banks to set-up ATMs without incurring
capital expenses for owning money dispensing machine.
Brown label ATMs: The ATM is named under the brand of the sponsor bank but the ATM machine is not owned by the bank. At
present, banks allow customers of other banks five free-of-charge cash withdrawals at their ATMs every month but end up
paying around Rs 3,000 crore a year to settle inter-bank transaction costs.
In such cases, the hardware as well as lease is under the ownership of the service provider, while connectivity and cash handling
and management is the responsibility of the sponsor bank.
STAR MISSION ONE:
Bank’s three MANTRAS of Star Mission One are:
 NPA Management,
 CASA augmentation by increasing CASA to 35% (on daily average basis),
 Rebalancing of Advances portfolio in favour of Retail lending (Retail, MSME and Agriculture).
CASA
For more than a decade, there was just one mantra on every Indian banker's lips — CASA. It delivered loads of profits for private
sector banks, and it even became part of the lexicon at state-run banks over the years. It has become so ubiquitous that banners
in branches in rural India scream 'Deposit Mobilization Programme — CASA' when the client who walks in may hardly know what
CASA stands for.
CASA stands for current accounts and savings accounts of customers in banks. These are two categories of accounts where the
cost of funds is low and have become crucial for bank profitability. Current accounts, usually maintained by businesses, have no
interest at all. Savings accounts, where the salaried class keeps its earnings, had meager interest rates, at least till the time RBI
freed up the rates.
The latest quarter earnings of banks probably provide a peep into how the strategies of most banks could change in the days to
come. The pioneer of CASA-led banking HDFC Bank had this to say — its so-called CASA fell to 46% in June 2012 from 49% a
year ago. The minnow in the business, Yes Bank, which raised interest rates on savings accounts, said the proportion of its low-
cost funds rose to 16.3% of total deposits from 10.9% a year earlier. This trickle is not going to turn into a tide anytime soon, but it
has begun.
For a long time, interest rates on saving account was mandated at 3.5%, which was paid on the minimum deposits that were
parked in six months. But in the past couple of years, the Reserve Bank of India made three changes:
1. Asked banks to pay interest on savings account on a daily basis
2. Hiked the rate to 4%
3. Freed the rates
This changed the way banks looked at CASA. Private banks like Yes Bank, Kotak Mahindra Bank and IndusInd Bank, with low
CASA base, began offering higher rates to lure depositors. But public sector banks and the top-three large private banks — HDFC
Bank, ICICI Bank and Axis Bank — which have sizable share of CASA deposits, refrained from raising the interest rate from 4%.
The theory of low-cost banking — CASA — will run out of steam one day. Bankers and analysts may have to look out for the next
mantra.
Retail lending
The solution to CASA conundrum is increase in retail lending. The drivers of growth in this segment are:
1. Economic prosperity and the consequent increase in purchasing power

2. Changing consumer demographics
3. Technology
4. Declining interest rates
5. Credit risk diversification - At the beginning of the reforms process, banks were burdened with a high percentage of
non-performing assets (NPA) in their commercial and industrial lending portfolio. Banks looked at retail loans from the
point of view of diversification of their loan portfolio, because in retail loans, the average ticket size is small and loans
are widely distributed over a large number of borrowers. So, the average risk associated with retail loans is lower than
corporate loans. In fact, risk adjusted return on retail loans is significantly higher than the corporate loans during
normal times.
6. Information asymmetry - This is perhaps the least talked about driver of retail lending. In retail lending (in fact, in the
entire gamut of retail banking), there is an inherent inequality between the bank (which is a large organization), and the
customer (who is an individual). This inequality emerges from information asymmetry, legal resources, and the capacity
to negotiate and withstand losses. One of the major manifestations of information asymmetry in retail lending is the
standard form contracts and fine print, which hardly any retail customer ever reads or understands fully. Standard form
contracts are not a result of a negotiation process; they are offered on a take-it-or-leave-it basis; and contain various
clauses in fine print (or in lengthy documents) which mostly operate to the disadvantage of the customer. The feedback
received in this aspect even from those retail customers who are well educated and brilliant professionals; comes as a
surprise. Most of them are not able to fully understand the mechanisms of floating and fixed rates of interest in housing
loans, as specified in the loan documents. For less educated the mechanism of Equated Monthly Installments (EMI)
serves well to hide the effective interest rate. Many retail customers do not possess the financial literacy to
differentiate between various products offered by different banks.
• CABINET CLEARS INTEREST WAIVER FOR FARM LOANS:
The Union Cabinet has given its ex-post facto approval for an interest waiver of farmers accessing short-term crop loans from
co-operative banks for the two months of November and December, 2016.
The decision also provides for interest subvention to National Bank for Agricultural and Rural Development (NABARD) on
additional refinance provided by NABARD to Co-operative Banks.
This decision will ensure availability of resources with Cooperative Banks to help farmers to get easy access to crop loans
from Co-operative Banks to overcome difficulties due demonitisation during Rabi operations.
Additional resources are to be provided to Cooperative Banks through NABARD for refinance to the Cooperative Banks on
account of interest waiver of two months for November and December, 2016.
˜ PRADHAN MANTRI GRAMIN DIGITAL SAKSHARTA ABHIYAN FOR RURAL DIGITAL LITERACY:
The Cabinet has approved ‘Pradhan Mantri Gramin Digital Saksharta Abhiyan’ (PMGDISHA) to make 6 crore rural households
digitally literate by March 2019.
PMGDISHA is expected to be one of the largest digital literacy programmes in the world. Under the scheme, 25 lakh
candidates will be trained in the FY 2016-17; 275 lakh in 2017-18; and 300 lakh in 2018-19. The outlay for this project is Rs.
2,351.38 crore to usher in digital literacy in rural India.
Foreign Direct Investment in India
Sector FDI Limit Entry Route
Agriculture & Animal Husbandry 100% Automatic
Plantation Sector 100% Automatic
Mining 100% Automatic
Defence Manufacturing 100% Automatic up to 49% Above 49% under
Government route in cases resulting in access to
modern technology in the country
Broadcasting 100% Automatic
Broadcasting Content Services 49% Government
Print Media 26% Government
Publishing/printing of scientific and technical 100% Government
magazines/specialty journals/ periodicals.
Publication of facsimile edition of foreign 100% Government
newspapers
Civil Aviation — Airports 100% Automatic
Green Field Projects & Existing Projects
Civil Aviation – Air Transport Services 100% Automatic up to 49%
Scheduled Air Transport Service/ Domestic Above 49% under Government route
Scheduled Passenger Airline 100% Automatic for NRIs
Regional Air Transport Service
Civil Aviation 100% Automatic
Construction Development: Townships, Housing, Built- 100% Automatic
up Infrastructure
Industrial Parks 100% Automatic
Satellites- establishment and operation, subject to the 100% Government
sectoral guidelines of Department of Space/ISRO
Private Security Agencies 74% Automatic up to 49%
Above 49% & up to 74% under
Telecom Services 100% Automatic uproute
Government to 49%
Above 49% under Government route
Cash & Carry Wholesale Trading 100% Automatic
E-commerce activities (e-commerce entities would engage 100% Automatic
only in Business to Business (B2B) e-commerce and not in
Business to Consumer (B2C) e-commerce.)
Single Brand retail trading 100% Automatic up to 49%
Above 49% under Government route
Multi Brand Retail Trading 51% Government
Duty Free Shops 100% Automatic
Railway Infrastructure 100% Automatic
Asset Reconstruction Companies 100% Automatic
Banking- Private Sector 74% Automatic up to 49%
Above 49% & up to 74% under
Government route
Banking- Public Sector 20% Government
Credit Information Companies (CIC) 100% Automatic
Infrastructure Company in the Securities Market 49% Automatic
Pension Sector 49% Automatic
Power Exchanges 49% Automatic
White Label ATM Operations 100% Automatic
Non-Banking Finance Companies (NBFC) 100% Automatic
Pharmaceuticals(Green Field) 100% Automatic
Pharmaceuticals(Brown Field) 100% Automatic up to 74%
Above 74% under
Government route
Food products manufactured or produced in India 100% Government
• LUCKY GRAHAK YOJANA AND DIGI-DHAN VYAPAR YOJANA - FOR INCENTIVISING DIGITAL PAYMENT:
NITI Aayog has announced the launch of the schemes Lucky Grahak Yojana and the Digi-Dhan Vyapar Yojana to give cash
awards to consumers and merchants who utilize digital payment instruments for personal consumption expenditures.
The primary aim of these schemes is to incentivize digital transactions so that electronic payments are adopted by all sections
of the society, especially the poor and the middle class and National Payment Corporation of India (NPCI) shall be the
implementing agency for this scheme.
A) LUCKY GRAHAK YOJANA [CONSUMERS]: It includes daily reward of Rs. 1000 to be given to 15,000 lucky Consumers for a
period of 100 days; Weekly prizes worth Rs.1 lakh, Rs.10,000 and Rs. 5000 for Consumers who use the alternate modes of
digital Payments. This will include all forms of transactions viz. UPI, USSD, AEPS and RuPay Cards but will for the time being
exclude transactions through Private Credit Cards and Digital Wallets.
B) DIGI-DHAN VYAPAR YOJANA[ MERCHANTS]: It includes prizes for Merchants for all digital transactions conducted at
Merchant establishments and Weekly prizes worth Rs.50,000, Rs.5000 and Rs.2,500.
C) MEGA DRAW ON 14TH OF APRIL–AMBEDKAR JAYANTI: Three Mega Prizes for consumers worth Rs.1 cr, 50 lakh, 25 lakh
th th th
for digital transactions between 8 November, 2016 to 13 April, 2017 to be announced on 14 April, 2017.
UNION GOVERNMENT ANNOUNCES PACKAGE FOR PROMOTION OF DIGITAL & CASHLESS ECONOMY:
The Union Government has announced package of incentives and measures for promotion of digital and cashless economy in the
country to supplement the surge in the digital transactions aftermath demonetisation of old Rs.500 and Rs.1,000 notes for
promotion of digital cashless economy and cutting out cash transactions.
Highlights of Package
Petroleum companies will offer a discount of 0.75% on diesel and petrol to consumers who pay through digital means.
0.5% discount will be given to people who will buy monthly seasonal tickets in the Suburban railway networks through digital
payment mode and passengers will get 10 lakh rupees free accident insurance cover on booking of Railway ticket through
online mode and payments through digital mode for railways catering, accommodation, retiring room will also attract 5%
discount.
10% discount on General Insurance and 8% discount on new life Insurance policies of PSUs purchased online.
10% discount will be available to users for payment of toll on National Highways using RFID card and Fast Tags.
NABARD will extend financial support to eligible banks for deployment of two Point of Sale (PoS) devices each in 1 Lakh
villages with population of less than 10,000 and will also support Rural Regional Banks (RRBs) and Cooperative Banks to issue
Rupay Kisan Cards to over 4 crore 32 lakh Kisan Credit Card (KCC) holders to enable them to make digital transactions at ATMs
and POS machines.
Merchants will not pay more than Rs.100 monthly rental for PoS terminals, Micro ATMs & mobile POS from merchants.
• M E R G E R O F 5 A S S O C I A T E B A N K S A N D BHARTIYA MAHILA BANK:
State Bank of India’s board has approved merger of five associate banks and Bharatiya Mahila Bank (BMBL) with SBI wef
01.04.2017
As per the merger proposal, SBBJ shareholders will get 28 shares of SBI (Rs 1 each) for every 10 shares (Rs 10 each). Similarly,
SBM and SBT shareholders will get 22 shares of SBI for every 10 shares. In the case of Bharatiya Mahila Bank, 4,42,31,510
shares of SBI will be swapped for every 100 crore of Rs 10 each. However, there will not be any share swap or cash outgo as
SBH and SBP are wholly-owned by the SBI.
With merger of all the five associates and BMBL, SBI will become a global-sized bank and could compete with the largest in
the world, with an asset base of Rs 37,00,000 crore or over $555 billion, with 22,500 branches and 58,000 ATMs. It will have
over 50 crore customers. SBI has close to 16,500 branches, including 191 foreign offices spread across 36 countries.
˜ UNION GOVERNMENT PROPOSES 4 GST SLABS:
The Union Government has proposed a four-slab rate structure for the new indirect tax regime i.e. Goods & Services Tax (GST)
ranging from 0 to 26 per cent at the meeting of the GST Council.
Secular growth rate of 14% will be taken into consideration for calculating the revenue of each state in the first five years
of implementation of the GST.
Base year for calculating the revenue of states will be 2015 16.
States getting lower revenue will be compensated by the Centre and compensation fund will be created from the Cess on
top of the GST on ultra-luxury items and demerit goods.
The rate structure will be revenue-neutral so that there is no need to burden consumers with additional tax. Goods item
along with other 50% items of common usage to be exempted from the tax to keep the inflation under check.
• INDIA’S FIRST INTERNATIONAL EXCHANGE AT GIFT CITY:
The Prime Minister has inaugurated India’s first international exchange India INX at the International Financial Service
Centre (IFSC) of GIFT (Gujarat International Financial Tech) City Gandhinagar, Gujarat.
India INX is a wholly-owned subsidiary of the Bombay Stock Exchange (BSE). It will enable Indian firms to compete on equal
footing with offshore firms.
India INX will initially trade in equity derivatives, currency derivatives, commodity derivatives including index and Stocks.
Subsequently, it will offer depository receipts and bonds once required infrastructure is ready.
It will work for 22 hours in a day working from sunrise to sunset i.e. starting when Japan exchanges begin and close when
US markets end. It will have 250 trading members including commodity and overseas brokers.
• TAX-EXEMPTION TO PARTIAL WITHDRAWAL FROM NATIONAL PENSION SYSTEM (NPS):
Following provisions have been introduced in the Finance Bill 2017 related to NPS.
The existing provision of section 10(12A) of the Income Tax Act, 1961 provides that payment from NPS to a subscriber on
closure of his account or opting out shall be exempted up to 40% of total corpus at the time of withdrawal. The amount
utilized for purchase of annuity is also tax exempt. At the time of normal exit, 40% of the total corpus is mandatorily required
to be purchased for annuity. The subscriber has the option to use higher amount for purchase of annuity.
In order to provide relief to the subscriber of NPS, it has been proposed to insert a new clause (12B) in the Sec 10 of Income
Tax Act, 1961 to provide exemption on partial withdrawal not exceeding 25% of the contribution made by an employee in
accordance with the terms and conditions specified under PFRDA Act.
• FIPB SCRAPPED TO EASE FDI: To ease the inflow of Foreign Direct Investment (FDI), Finance Minister has announced scrapping
of FIPB. As a result of various measures taken by the government with regard to Foreign Direct Investment policy, over 90 per
cent of FDI proposal have come through the automatic route over the last three years.
• SOVEREIGN GOLD BONDS 2016-17 SERIES IV:

The Government of India launched the 7th tranche and last offering of the Sovereign Gold Bonds (SGB) Series IV for 2016-17
on Feb. 27, 2017. The fourth series of Sovereign Gold Bonds 2016-17 was open for subscription from Feb. 27, 2017 to March
th
03, 2017. The date of issue being 17 March.
The tenure of the bond will be for a period of eight years with an exit option from the fifth year to be exercised on the
interest payment dates. An individual can minimum invest one gram in the scheme per fiscal year while maximum limit
according to the scheme is set at 500 grams for the same period. The bonds will give an interest at the rate of 2.5% per
annum paid twice a year on the initial value of the investment.
NO LIMIT ON CASH WITHDRAWAL FROM MARCH 13:
During its 6th Bi-Monthly Monetary Policy Review, RBI announced to phase out weekly limit on cash withdrawal from savings
accounts in two stages, starting from Feb., 20.
First, the weekly withdrawal limit for savings accounts were raised to Rs 50,000 from Rs 24,000 w.e.f. February 20 and from
March 13, there are no limit on cash withdrawal from savings accounts.
The RBI had put limit on cash withdrawal from bank accounts in the wake of demonetization of Rs 500 and Rs 1,000 notes on
November 8.
˜ MASALA BONDS TO GET MORE TAX BENEFITS:
Rupee-denominated offshore bonds, popularly known as masala bonds, have got a tax benefit boost with the Union Budget
exempting them from taxation for transfer among nonresidents, while a low rate of tax TDS at 5 per cent will apply for
investors till 2020 effective from 01.04.2016.
A concessional with-holding rate of 5 per cent is being charged on interest earned by foreign entities in external commercial
borrowings or in bonds and government securities and this concession is available till June 30, 2017 and is proposed to be
extended to June 30, 2020. This benefit is also extended to rupee-denominated (masala) bonds.
It is further proposed to extend the benefit of Section 194LC to rupee-denominated bond issued outside India before July 1,
2020. This amendment will take effect retrospectively from April 1, 2016 and will, accordingly, apply in relation to the
assessment year 2016-17 and subsequent years, according to the Budget.
In order to provide relief in respect of gains arising on account of appreciation of rupee against a foreign currency at the time
of redemption of masala bonds to secondary holders, the government has decided to amend the Income Tax Act.
Economic Survey 2016-17 Highlights:
7 Major Reform Achievements of the past year:
Goods & Service Tax (GST),Bankruptcy Bill,Constitution of Monetary Policy Committee(MPC)
Aadhar Bill,FDI liberalization reforms,Unified Payment Interface (UPI): Inter Operability and making the M in JAM a
reality,Promoting Labour Intensive Sectors (Apparels and made-ups)
 The central government is committed to achieving its fiscal deficit target of 3.5% of GDP this year. The central government
fiscal deficit declining from 4.5% of GDP in 2013- 14 to 4.1%, 3.9%, and 3.5% in the following three years.
 Fixed investment (Gross Fixed Capital Formation (GFCF)) to GDP ratio at current prices is estimated to be 26.6% in 2016-
17, vis-a-vis 29.3% in 2015-16.
 The survey suggested concept of Universal Basic Income (UBI) as an alternative to the various social welfare schemes in an
effort to reduce poverty.
 Demonetization to impact growth rate by 0.25-0.5%, but ensures long-term benefits. There will be 0.25 percentage point
to 1 percentage point reduction in nominal GDP growth relative to the baseline of 11.25% and a 0.25 percentage point to
0.5 percentage point reduction in real GDP growth relative to the baseline of estimate of about 7%.
 Benefits include increased digitalization, greater tax compliance and a reduction in real estate prices, which could increase
long-run tax revenue collections and GDP growth.
 GST will create a common Indian market, improve tax compliance and governance, and boost investment and growth; it is
also a bold new experiment in the governance of India’s cooperative federalism.
The Survey proposed to set up Public Sector Asset Rehabilitation Agency (PARA) to buy bad loans from state-run banks so
that the lenders can be relieved of a problem that has been weighing on their performance, and can shift focus to lending.
Union Budget FY2017-18 key takeaways:
•  Revenue Deficit for next year is pegged at 1.9% and Fiscal Deficit targeted at 3.2% of GDP.
•  Target for agricultural credit for 2017-18 is set at Rs 10 lakh crore.
•  Higher target of Rs.2.44 lakh crore under Pradhan Mantri MUDRA Yojana.
•  To complete 1 crore houses by 2019 for houseless and those living in kaccha houses Mission Antyodaya to bring one crore
households out of poverty and to make 50,000 gram panchayats poverty free by 2019.
•  Fasal Bima Yojana – 40% cropped area to be covered in 2017-18 and 50% in 2018-19.
•  Highest ever allocation for MNREGA at Rs.48, 000 crore.
•  Allocation for infrastructure development at Rs.3.96 lakh crore.
•  Banks to install 10 lakhs PoS terminals by March 2017 and 20 lakh Aadhar based PoS to be introduced by March 2018.
•  Allowable provision for non performing asset is increased to 8.5% from 7.5%. For recapitalizing the Public Sector Banks,
budget kept aside Rs.10, 000 crore for FY18.
•  Demonetization to create a new normal for a bigger and cleaner GDP, slowdown is only transient. Effects of
demonetization will not spill over to the next year.
•  125 lakh people adopted the BHIM app so far; merchant version of Aadhaar-enabled payment will be launched shortly for
those without debit cards, mobile phones. Govt will launch two new schemes to promote the use of BHIM app.
•  Bharat Net Project, for increasing connectivity allocated Rs 10,000 crore.
•  Sanitation in rural areas has gone up from 42% in October 2014 (launch of Swachh Bharat) to 60% now.
•  SANKALP – Rs 4000 crores allotted to train for market oriented training. At least 3.5 crore youth will be provided market-
relevant training under Sankalp programme.
•  The budget reduced existing rate of taxation for individuals with income between Rs 2.5 lakh to Rs 5 lakh to 5% instead of
10%.
•  Surcharge of 10% for those whose annual income is Rs 50 lakh to Rs1 crore; Surcharge on Rs 1 crore or more remains
unchanged.
•  Those individuals in the tax bracket of Rs 50 lakh will stand to benefit from a tax rebate of Rs 12,500.
• Other Domestic Economy and Banking Developments:
•  The Nikkei Markit India Manufacturing Purchasing Managers’ Index (PMI) an indicator of manufacturing activity increased
to 50.4 in January from 49.6 in December 2016. Services sector contracted for third month. The services PMI stood at 48.7 in
January, as against 46.8 in December 2016. A score above 50 denotes expansion and one below this level means
contraction.
•  General Anti-Avoidance Rule (GAAR) will come into effect from April 1, 2017. It will be effective from the assessment year
FY19, said the Finance Ministry said in a press release.
• Rising NPAs and sluggish economic growth sparked 60% decline in corporate borrowing over the last six years. This will put
constraints on lending by the banks, according to an India Spend analysis.
•  Bank credit to the industry contracted 4.3% y-o-y in December for the third straight month, to Rs.25.79 lakh crore. In
December 2015, the corresponding figure stood at Rs.26.95 lakh crore, with a growth of 4.9% over December 2014. Retail
loans recorded their moderate growth in the last 18 months, at 13.5% to Rs.15.09 lakh crore, according to RBI.
•  Banks can encash SR issued by ARC and raise capital. Banks will get an option to exit the unsold portion of the bad loans
that are held as security receipts (SR) on their books.
•  Restructured education loans not to be treated as NPAs. Banks may allow up to three spells of moratorium (not exceeding
6 months each) during life cycle of education loan, taking into account spells of unemployment/underemployment, without
treating the exercise as restructuring, said RBI.
•  Rs 5,582.83 crore withdrawn from Jan Dhan accounts in a month post note ban. Jan Dhan accounts have witnessed net
withdrawal of Rs 5,582.83 crore since December 7, the day deposits in these accounts soared to all time high in the
backdrop of demonetization.
•  The value of transactions at point-of-sale (PoS) machines dropped over 25% in January after peaking in December in the
wake of demonetization. The aggregate value of credit and debit card transactions between January 1 and 30 was Rs.41,
748.43 crore, as against Rs 52,223.84 crore for December 2016, data released by RBI.
•  Post demonetization, the card based transactions has risen up to 90% of total sales in third quarter of 2016-17. Most of
these departmental stores are located in Metros and Tier I and II cities where consumers were readily shifting to card
payments, India Ratings and Research (Ind-Ra) said.
•  Digital banking with the value of transactions on the Unified Payments Interface (UPI) platform to cross Rs.1000-crore
mark in January, 2017. In November, the platform had reported transactions worth just Rs.90 crore.
Changes in IT law that come into effect from 1-4-2017
(1) Limit for payment of expenses by cash (both, capital and revenue expenditure) reduced from Rs.20000 to Rs.10000 per day
in aggregate per person. Capital expenses paid in cash beyond the said limit will not be taken into account for depreciation
purposes. However, the cash payment limit for lorry fright etc. remains the same at Rs.35000.
(2) No person shall receive an amount of two lakh rupees or more, by cash (Sec. 269ST) —
(a) in aggregate from a person in a day; or
(b) in respect of a single transaction; or
(c) in respect of transactions relating to one event or occasion.
The penalty for violation of above is to be a sum equal to the amount of such receipt.
Examples for above -
 i) If one sells goods worth Rs. 300000 through three different bills of Rs.100000 each to one person and accepts *cash in single
day* at different times then section 269ST(a) will get violated.
 ii) If one sells goods worth Rs. 300000 through *single bill* to another person and receives cash of Rs.150000 on day 1 and
another Rs.150000 on day 2 then section 269ST(b) will get violated, since it pertains to single transaction.
 iii) If one accepts cash of Rs.180000 for *sales* and Rs.20000 for *freight charges*, then section 269ST(c) will get violated
even if cash is accepted on different dates, since they pertain to a single sales event.
 iv) If one sells his car for Rs.300000 and receives the amount in cash, then penalty levied on him will be Rs.300000.
(2A) In view of the newly introduced above said penal provisions relating to cash sales, the existing provisions (in vogue from
1.6.2016) relating to collection of TCS @ 1% on cash sales exceeding Rs.2 lakhs (Rs.5 lakhs, in the case of jewellery) are
deleted. Consequently, there is no need to collect TCS on cash sales exceeding Rs.2 lakhs. Straight away it will attract equal
amount penalty now.
(3) For below Rs.2 crores turnover cases -
 For Non Cash Sales (through Digital, Online, cheque, Bank etc.) : Net Profit will be taken as 6% of Turnover/Gross Receipt.
 For Cash Sales : Net Profit will be taken as 8% of Turnover/Gross Receipt.
(4) Tax Exemption limit is Rs.2,50,000/- (same as earlier) -
 After that, upto Rs.5 lakh, Tax Rate is 5% (earlier it was 10%). Tax rebate of maximum Rs.2500 will be allowed, for total
income upto Rs.3.50 lakhs.
 Individuals having total income exceeding Rs.50 lakhs but below Rs.1 crore, are to pay surcharge @ 10% of the tax. Those
having total income exceeding Rs. 1 crore shall continue to pay surcharge @ 15%.
(5) Payment of Rent - Rs.50,000 per month by any Individual or HUF (not subject to Tax Audit requirements) - deduct TDS @ 5%.
(6) Capital Gain in respect of Land & Buildings -
– Periodicity for long term Capital Gain is reduced from 3 years to 2 years.
– Base year shifted from 01.04.1981 to 01.04.2001 for all assets including Immovable property.
(7) Corporate tax rate for the account year 2017-18 for companies with annual turnover upto Rs. 50 crores (in the account year
2015-16) is reduced to 25%. No change in firm tax rate of 30%.
(8) Donations made exceeding Rs.2000 will be not be eligible for deduction under section 80G, unless these are made using
modes other than cash. Consequently, trusts accepting 80G donations may advise their donors to give donations exceeding
Rs.2000 vide cheque / RTGS / digital modes.
(9) Sale of unquoted shares to be taxed at (deemed) fair value.
(10) In absence of PAN of the buyer of specified goods, the rate of TCS will be twice of the extent rate or 5%, whichever is
higher.
(11) From financial year 2017-18, if Return is not filed within due date, late fee of Rs.5000 for delay up to 31st December, and
Rs. 10000 thereafter.
(12) Every person who is eligible to obtain AADHAR number, should quote such number, on or after 1 July 2017, in the Return of
income. Furthermore, every person who has been allotted PAN as on 1st July 2017 must intimate the AADHAR number to the
Tax Authority, failing which, PAN allotted to such person shall be deemed to be invalid. Kindly note that linking of AADHAR with
PAN is not possible, unless name as per AADHAR and PAN match perfectly. Hence, please take steps to rectify your name as per
AADHAR to match as per PAN.
(13) Where Sec.12AA registered trusts modify their objects clause, they need to apply within 30 days to CIT for approval of the
modified clauses.
RECENT COMMITTEE ON BANKING
IMPORTANT COMMITTEE
1. B N Srikrishna Committee - to review institutionalization of arbitration mechanism in India_____
2. Ajit Mohan committee - to fight against the menace of online piracy.
3. Nripendra Mishra Committee - on Indus Water Treaty.
4. Ratan Watal Committee for Digital Payments. Note: The 11- member committee was notified in September 2016 by the
Union Finance Ministry to review existing payment systems in country and recommend appropriate measures for
encouraging Digital Payments & - to suggest steps to promote card payments
5. Committee on Demonetisation - Andhra Pradesh Chief Minister N. Chandrababu Naidu.
6. Recalibration of Automated Teller Machines (ATM) - Task Force headed by S.S Mundra, Deputy Governor, Reserve Bank of
India (RBI)
7. Chandrababu Naidu Committee : Committee on effects of Demonetisation of States/People
Committee Date Headed by

Mundra Committee-To Speed up the Process of November 2016 S.S .Mundra
Recalibration of ATMs
To study the regulatory issues relating to Financial June 2016 SudarshanSen
Technology (Fintech) and Digital Banking in India
PJ Nayak Committee -To Review Governance of June 2016 P J Nayak

Boards of Banks in India.
To look at the various facets of household August 2016 Dr. TarunRamadorai
finance in India and to benchmark India's
position
Working Group on Import Data Processing and April 2016 A. K. Pandey
Monitoring System
Working Group on Interest Rate Options February 2016 P. G. Apte
Advisory Committee on Ways and Means Advances to December 2015 Deepak Mohanty
State Governments January 2016 Sumit Bose
Committee on Mediumterm Path on Financial Inclusion
Committee on Differential Premium System for Banks September 2015 Jasbir Singh
in India
Working Group on Compilation of Flow of Funds August 2015 D. K. Mohanty
Accounts for Indian Economy August
2015 D. K. Mohanty Compilation of Flow of Funds
Accounts of the Indian Economy
High Powered Committee on Urban Co June 2015 R. Gandhi
operative Banks (UCBs)
Committee on Data Standardization March 2015 LP. Parthasarathi
Internal Working Group (1WG) to Revisit the March 2015 Lily Vadera
Existing Priority Sector Lending Guidelines
Committee on Capacity Building in Banks and September 2014 G. Gopalakrishna
NonBanks
Committee on Implementation of July 2014 B. Mahapatra
Countercyclical Capital Buffer
Committee on Data and Information July 2014 D. K. Mohanty
Management in the Reserve Bank of India.
Committee on Productivity Growth for the June 2014 B. N. Goldar
Indian Economy
Committee to Review Governance of Boards of May 2014 P. J. Nayak
Banks in India
Working Group on Resolution Regime for May 2014 Anand Sinha
Financial Institutions
GIRO Advisory Group - UmeshBellur Group on April 2014 Anil Kumar Sharma
Enabling PKI in Payment System Applications
Committee on Licensing of New Urban September 2011 Malegam Committee
Cooperative Banks
Committee on Issues and Concerns in the NEFC August 2011 Usha Throat
Sector
Recent dispensation given to banks on capital
Revaluation reserves arising out of change in the carrying amount of a bank’s property may be reckoned as CET1 capital at a
discount of 55%, instead of as Tier 2 capital subject to meeting the following conditions:
• bank is able to sell the property readily at its own will and there is no legal impediment in selling the property;
• the revaluation reserves are shown under Schedule 2: Reserves & Surplus in the Balance Sheet of the bank;
• Revaluations are realistic, in accordance with Indian Accounting Standards.
• valuations are obtained, from two independent valuers, at least once in every 3 years;
• the external auditors of the bank have not expressed a qualified opinion on the revaluation of the property;
• Treatment of foreign currency translation reserve (FCTR)
• Banks mayreckon foreign currency translation reserve arising due to translation of financial statements of their foreign
operations in terms of Accounting Standard (AS) 11 as CET1 capital at a discount of 25% subject to meeting the
following conditions:
• The FCTR are shown under Schedule 2: Reserves & Surplus in the Balance Sheet of the bank;
• The external auditors of the bank have not expressed a qualified opinion on the FCTR.
Treatment of deferred tax assets (DTAs) : DTAs which relate to timing differences may be recognized in the CET1 capital up to
10% of a bank’s CET1 capital, at the discretion of banks.
Asset Quality Review (AQR) : RBI has introduced Asset Quality Review (AQR) of banking sector and has mandated
banks to clean up the entire balance sheet by 31.3.2017. It also involved recognizing potential stresses in various accounts and
pro-active provisioning for the same. This resulted in huge provisioning by banks, especially PSBs due to huge exposure to
stressed segments such as infrastructure, textiles, iron & steel etc.
According to AQR, accounts which are stressed in a particular bank/potentially stressed has to be classified similarly across all
the banks. The accounts involve amount to an aggregate exposure of Rs.150,000 cr.For the current financial year till December
quarter, most banks have classified only 50% of accounts according to RBI AQR. The remaining 50% will be classified in March
quarter resulting in similar provisioning requirements. The AQR has resulted/will result in the following state of banking system
Public sector banks (PSBs) account for as much as 85 per cent of the banking sector's weak assets. Increasing stress is
also visible in the quantum of strategic debt restructuring and 5/25 structuring being carried out by banks.
PSBs added nearly Rs.1 trillion in bad loans in the quarter ended 31 December, amounting to a 29% increase over end-
September. Gross non-performing assets (NPAs) of 39 listed banks surged to Rs.4.38 trillion for the quarter ended 31
December, from Rs.3.4 trillion at the end of September 2015. PSBs accounted for Rs 3,97 trillion crore or 90 per cent of
the total gross NPAs in the quarter.
Average gross NPA ratio for PSB stands at 7.32 per cent - about three times more than private banks (2.74 per cent)- for
December 2015 quarter. Provisions against bad loans surged by 90% between the September and the December
quarter
PSBs' provisioning for bad loans totalled Rs 43,717 crore in the December 2015 quarter (Q3 FY16) – double from the
year-ago levels. And, this figure is eight times the provisions made by private-sector peers.
The aggregate net profit of the 39 listed banks fell 98% to Rs.307 crore in the December 2015 quarter from Rs.16,806
crore in the year earlier
Public sector banks reported an aggregate loss of Rs.11,200 crore in the December 2015 quarter compared to a profit of
Rs.6,970.8 crore in the year-ago quarter
Even to maintain a credit growth of 10-12 per cent per annum between 2015-16 and 2018-19, public sector banks
(PSBs) would need to raise Tier I capital of Rs 1.6-2.4 lakh crore and additional Tier 1 (AT1) capital of Rs 1.0-1.1 lakh
crore.
The deterioration in asset quality in the first nine months of the current fiscal has been faster than expected for various
reasons, such as the severe downturn in global commodity prices, inability of the leveraged players to sell assets, and
the proactive identification of stressed assets as part of RBI's asset quality review
According to a report by Credit Suisse, bad loans are likely to move up further to 6.6% of loans by Mar 2016 as most
banks have deferred the impact over two quarters.
According to Moody’s, the capital requirement for state-owned banks to be as high as Rs.1.4 trillion by March 2019, of
which, the government is providing only Rs.70,000 crore.
The Twin Balance sheet problem

One of the dark spots of the economy is the banking sector’s health, probably why the Economic Survey 2016-17 devotes an
entire section to what it calls the twin balance sheet problem of stressed corporates and banks.
By yoking the corporate sector’s balance sheet problem of high leverage to banks’ rising non-performing assets (NPAs), the
Centre believes a solution to the NPA problem must necessarily address corporate balance sheet stress.
While this could be debated, the discourse itself admits of the difficulties in explaining the inherent contradictions in the Indian
context. For instance, high NPAs coexisting with normal economic growth or high corporate leverage at a time when private
investment has actually been falling off, a fact also confirmed by declining bank credit.
The twin balance problem required a coordinated approach to debt management, which was lacking. NPAs are largely the result
of the stressed cash flows of a few large companies, mainly in core industry and infrastructure, caused by economic downturn
rather than bad governance.
Therefore, the solution lies in trimming debt to sustainable levels, including through write-offs or conversion to equity. While the
RBI introduced several schemes on exactly the same lines, they did not work because
Credit delivery and appraisal are two clear areas crying for reforms. . Either fit-for-purpose specialised agencies need to be
revived or serious attempts have to be made to develop debt markets to meet the needs of large corporates, failing which the
root causes of the NPA problem will remain unaddressed.
Swiss Challenge Method
A Swiss challenge is a form of public procurement in some jurisdictions which requires a public authority (usually an agency of
government) which has received an unsolicited bid for a public project (such as a port, road or railway) or services to be provided
to government, to publish the bid and invite third parties to match or exceed it.
Some Swiss challenges also allow the entity which submitted the unsolicited bid itself then to match or better the best bid which
comes out of the Swiss challenge process. Indian journalist Vinayak Chatterjee describes it as "one of the lesser known and even
lesser-used methods of public procurement for core and social infrastructure projects
In 2009, the Supreme Court approved the method for award of contracts.
This method can be applied to projects that are taken up on a PPP basis but can also be used to supplement PPP in sectors that
are not covered under the PPP framework.
Responding to the announcement, minister for railways Suresh Prabhu tweeted, “400 stations across country development. A
big step in passenger service, modernization, mega investments, big job creation. Cabinet approve. Budget announcement
fulfilled. Stn (Station) dev (development) with complete transparency with PPP. Top class amenities, shopping etc. Cities get
icons.
Bad Bank
A 'bad bank' is basically a bank incorporated to take over bad loans from commercial banks and enable the lender community to
focus on lending as stretched non-performing loans prolong the healing process in the organisation. Outside India, developed
economies like that of the UK and the US have adopted 'Good Bank Bad Bank' approach as a successful restructuring and
accelerated resolution tool. China set up state-owned asset management companies (AMCs) during the banking crisis in the late
1990s to oversee non-performing loans and the process delivered good results. These AMCs helped rejuvenate China's economy
by turning delinquent borrowings into state-owned enterprises.
The bad bank concept is not entirely new in India. When IDBI Ltd converted into a bank in 2004, the government set up a
Stressed Asset Stabilization Fund (SASF) to hive off its stressed and non-performing cases worth Rs. 9000 crore. The idea was to
separate stressed loans of the bank through the SASF, which would focus entirely on fund recovery while the bank would
continue to function as an entity free of any large bad loans. According to a report by the Comptroller and Auditor General of
India, SASF could recover only Rs.4000 crore by the end of March 2013. This indicates segregation of good and bad debt isn't
enough to solve the bad debt problem. Though it creates a good balance sheet, it does not necessarily solve the ground level
problem of recovery. It is sometimes also seen as a 'moral hazard' shielding banks from their own inconsistencies and failure to
take proper precautions.
A bad bank may have been a solution in other countries, however, certain aspects will have to be considered while evaluating
the need to set up one in India. Stress in the Indian financial sector is concentrated in public sector banks, which would require
capitalization and funding to flow from the government. One could say that a proxy of bad bank exists in India under the S4A
scheme, which account-wise segregates healthy and unhealthy portions of a debt. This can be supplemented further by
developing a market for stressed asset sale for ARCs. A secondary market for securities issued by ARCs can also be a source of
additional capital in the system
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PROMOTION MADE EASY

Sanjay Kumar Trivedy

Date: 06.05.2017 Sanjay Kumar Trivedy

He can be contacted through e-mail: sktrivedycan@gmail.com, whatsapp no. : 8691062294 /9987519725

2 OUR BANK AND PRODUCTS 11-49

TIPS TO FACE INTERVIEW

SOME MORE TIPS

BAD BODY LANGUAGE FOR INTERVIEW

At Micro level we should have appropriate information about;

Take full advantage of speech and body language

2. OUR BANK & PRODUCTS

IMPORTANT POLICY RATES

Qtm Increase (FY so far) -- 266460 -- -5248

Rural Semi Urban Urban Metro

SB General (101) 50000/- One lacs Two lacs Three lacs

Financing against Negotiable Warehouse receipts of accredited Warehouses/Cold storages(Rs.25

5. Canara MSME Expo

6. Canara Contractor Scheme (MSME Service)

7. Pragati scheme ( Now Closed : cir 180/2016)

TECHNOLOGY PRODUCTS / SERVICES

ONLINE SUBMISSION OF APPLICATION FOR OPENING SB ACCOUNT

SAFE DEPOSIT LOCKER PACKAGE : RENT COLLECTION ( Cir 383/2014 ) :

INTERNET BANKING TO CUSTOMERS

CANMOBILE (MOBILE BANKING)

Ref. Circulars  Cir no.166/2011 ,174/2013,146/2015,546/2015

Banker‘s Balance Daily Monitoring System (606/2014)

Online Subscription to IPOs:

Debit & Credit Cards

THIRD PARTY PRODUCTS & SUBSIDIARIES

THIRD PARTY /CROSS SELLING PRODUCTS

Unit Linked Insurance Plans (ULIPs)

General Insurance products:

OUR SUBSIDIARIES / ASSOCIATE

CANBANK FINANCIAL SERVICES LIMITED (wholly owned company)

3. VARIOUS LAWS/ACTS RELATED WITH INDIAN BANKING SYSTEM

Section 49 defines Bank Rate as

Negotiable Instrument Act, 1881:

CHEQUE TRUNCATION SYSTEM: CTS 2010:

(a) In the usual business of the partnership.

Limited Liability Partnership Act, 2008:

Banking Codes and Standard Boards of India (BCSBI)

Matters relating to financial issues:

Treasury Management - Concepts

Corporate Bond Market

Marginal Cost of Funds based Lending Rate (MCLR)

Prompt Corrective Action (PCA) Framework for Commercial Banks

Broad classification of Banks basing on PCA framework

Micro Units Development and Refinance Agency Limited (MUDRA)

Gold Monetization Schemes

Gold Deposit Certificate (GDC) will be issued by Nodal

The customer will be required to submit the original

Real Estate Investment Trusts (REITs)

Automobile Components IT and BPM Roads and highways

Aviation Leather Space

Biotechnology Media and Entertainment Textiles and garments

Chemicals Mining Thermal Power

Construction Oil and Gas Tourism and Hospitality

Defence manufacturing Pharmaceuticals Wellness

Electrical Machinery Ports

Electronic Systems Railways

Stand Up India Scheme (SUIS)

• Indian Citizens whose age is above 18 years.

Goods & Services Tax (GST)