Indian Banks' Association (IBA) introduced a formal system of self-discipline in

the Indian Banking Industry in the year 1973, by recommending a ceiling rate
of interest on inter-bank borrowings in call money market. In the year 1977,
the Ground Rules and Code of Ethics (GRACE) were evolved. In a highly
regulated environment, GRACE served its purpose for the last over 20 years, in
bringing about a standard of ethical behaviour among Member Banks in certain
focal areas of interest to the banking public. GRACE also served as a tool
defining the boundaries for interpretation of the directives of the Regulatory
Authority in key areas. However, the framework of GRACE was predominantly
suited to a fully regulated environment.

The environment has undergone transformation following liberalisation and in

the context of financial sector reforms. It was, therefore, felt that there was a
need for comprehensively revising GRACE.

Keeping the above need in view, the IBA Committee to Monitor Code of Ethics
(CMCE) set up a working group drawing members from the CMCE itself to
revise the GRACE. The Working Group drafted a code for banking practice for
uniform adoption by the banks. The draft code for banking practice was
circulated among Member Banks for their comments. The final draft after
incorporating suggestions from Member Banks and our legal consultant was
approved by the IBA Managing Committee. The Code was then forwarded to
the Reserve Bank of India (RBI) for its concurrence. RBI advised that the IBA
Code for Banking Practice is in order for uniform adoption by the Member
Banks.

The IBA Code for Banking Practice thus evolved, is an attempt towards
fulfilling the above need under the liberalised and deregulated environment,
aiming to promote a healthy relationship between the banks. This IBA Code for
Banking Practice shall replace the extant GRACE with effect from 1st
September, 1999 for adoption by all Member Banks.

IBA Code for Banking Practice

1) OBSERVANCE
Member Banks of the Indian Banks' Association (the Association) agree to
observe and abide by the following Ground Rules:

2) PRIZES AND GIFTS

Member Banks shall not give prizes, gifts, donations, etc., or any direct or
indirect benefits in the purchase price or in respect of any other transactions
relating to securities, bonds, etc., as consideration or with a view to getting or
retaining a deposit and or advance account. Promotional schemes duly
approved by the Boards of respective banks may, however, be launched within
the regulatory framework of the Reserve Bank of India. However, it may be
customary to distribute gifts (cost of such gift article should not exceed
Rs.250/- per piece) at the time of Diwali or New Year to the valued customers.
Bank's policy in this regard be approved by the Board.

3) ASSOCIATION WITH CHIT FUNDS/SPECULATIVE VENTURES

Member Banks shall not associate themselves with chit fund companies, which
conduct lottery, gift schemes, etc., or any other speculative ventures. Member
Banks shall also not encourage or lend their names to promote speculative
ventures of any nature. However, it would be in order for banks to open
current accounts, fixed deposits, etc. of such companies in the banks' normal
course of business.

4) DEPOSIT RECEIPTS
When Member Banks issue deposit receipts against cheques/drafts/pay-orders
drawn on local banks, the banks may pay interest on such deposits from the
date on which the relative instrument gets credited/adjusted in the bank's
account at the clearing house (RBI, SBI, etc.).

5) SAVINGS BANK ACCOUNT

Member Banks shall not open savings bank accounts in the name of the
institutions which have been listed out in the Annexure to this Code and also as
amended from time to time.

6) INTRODUCTION OF ACCOUNTS
All deposit accounts, whether savings, current or term deposits, shall be
properly introduced.

7) PRINTING OF CUSTOMER'S LOGO, ETC., ON CHEQUE LEAVES

Member Banks shall not print or allow the customers to print any logo,
advertisement, etc., on the cheque leaves. However, this prohibition need not
be extended to dividend/ interest warrants or refund orders in view of their
limited circulation.

8) COLLECTION OF TERM DEPOSIT RECEIPT ON MATURITY

The Term Deposit Receipt (TDR) received for collection from another bank
shall not be renewed by the TDR issuing bank and delivered to the customer
directly. The TDR issuing bank shall either pay to the collecting bank or else,
the instrument shall be returned, if the issuing bank has any valid reasons not
to pay.
9) RENEWAL OF OVERDUE DOMESTIC TERM DEPOSIT
Renewal of overdue domestic term deposit (from maturity date of overdue
deposit) shall be for a period extending upto at least 15 days beyond the actual
date of renewal. If the renewed overdue domestic deposit is tendered for
premature foreclosure/encashment before completion of minimum 15 days
from the actual date of the renewal, no interest be paid for the overdue period
even if the total overdue period from the date of maturity of the old deposit
receipt exceeds 15 days.

10) PAYMENT OF INTEREST ON TERM DEPOSIT MATURING ON

HOLIDAYS
If the noted due date of a term deposit falls on a holiday, Sunday, non-
business working day, interest be paid for such intervening day(s), at the
originally contracted rate, till the succeeding working day.

11) MATURITY VALUE CERTIFICATE (MVC)

Member Banks shall not issue Maturity Value Certificates (MVCs) under any
circumstances to any person who approach bank branches with offer to
procure substantial rupee deposits.

12) NEGATIVE PUBLICITY

Member Banks shall not make publicity of adverse/weak position of other
banks, in order to wean away the customers of the affected banks.

13) INTEREST PAYMENT

(a) The statements with regard to the rate of interest, method of interest
calculation, etc. in any publicity literature, advertisement and other forms of
publicity on deposit scheme/s of banks shall be precise and intelligible.

(b) Member Banks may follow the Master Charts relating to payment of interest
on deposits prepared by the Association from time to time for fixing maturity
values; for payment of monthly income, annuities, etc.

14) GENERAL CONVENTIONS FOR DOMESTIC DEPOSITS

(a) Member Banks may not accept any deposits for a period longer than 10
years. However, banks may accept deposits for periods exceeding 10 years in
terms of orders of competent courts or in the case of minors where interests of
minors are involved, provided banks are convinced that it is necessary to do so.
Individual banks may decide in this matter based on asset liability management
policies being followed.

(b) Interest on deposits for fixed term may be paid, credited, transferred or
reinvested with frequency not less than the quarterly rests. However, payment
of monthly interest may be allowed, if required, by discounting the quarterly
interest accrued (refer to the Association's Master Charts).

(c) Interest on deposits where the terminal period (month/ quarter/half year
etc., as the case may be) is incomplete shall be paid on maturity.

(d) On deposits repayable in less than three months or where the terminal
quarter is incomplete, interest would be paid for the actual number of days on
the basis of 365 days in a year.

(e) Where the interest is paid at discounted value on monthly basis during the
currency of the deposits: If the terminal quarter or half years consists of one
month (e.g. deposit is for 37 months), interest therefore (i.e. for 37th month)
shall be paid at actuals (i.e. one third of quarterly or one-sixth of half-yearly
interest).

(f) Where the terminal incomplete quarter or half year consists of

(i) one month and over, but less than two months

(ii) two months, and

(iii) two months and over but less than three months, interest shall be paid as
under:

(i) for one month and over but less than two months (e.g. deposit for 37
months and 15 days); or

(ii) two months (e.g. deposit of 38 months) - At discounted value for the first
month (i.e. 37th month) and at actuals for the terminal incomplete month (i.e.
15 days) or second month (i.e. 38th month), as the case may be;

(iii) for two months and over but less than three months (e.g. deposit for 62
months and 15 days) - At discounted value for first and second months (i.e.
61st and 62nd month) and at actuals for the terminal incomplete month (i.e.
15 days).

15) TERMS OF ACCEPTANCE OF DEPOSITS

(a) Member Banks shall not issue an incomplete term deposit receipt which
does not clearly mention the amount actually deposited, period for which the
deposit is placed/accepted and the rate of interest payable as also periodical
rest at which interest is payable.

(b) In case of Reinvestment Plan Deposit, Recurring Deposit and Cash

Certificate in addition to the particulars stated in the above para, banks shall
also mention the maturity value and periodical rest at which the interest shall
be compounded.

16) OVERDRAFT IN SAVINGS BANK ACCOUNT

No overdraft limit on a regular basis be permitted in saving bank account.

17) MONITORING
The Committee constituted by the Association to ensure the
observance/compliance of the Code by the banks shall be empowered to
investigate and follow up the cases of violation of the Code by Member Banks
that may be brought to its notice.
Member Banks shall not violate any of the Ground Rules merely because some
other Member Bank/s has/have violated. They shall, instead, instruct their
branch managers or any other officials that on their coming across any case of
violation by other banks, they shall bring the same to the notice of their head
office, which will take up the matter with the Association. For this purpose,
every Member Bank shall nominate a designated officer who shall liaise
between the bank's branches and the Association in the matter. The
Association shall consider the complaint on violations received from the
designated officer of the complainant bank. Member Banks shall give
immediate effect to the suggestions given by the Committee in respect of any
matter related to violation of this Code.