Department of Banking Operations and Development Central Office INDEX I. Domestic Deposits II.

Deposits Of Non-Resident Indians (Nris) III. Advances IV. Advances Against Shares And Debentures V. Donations VI. Loans For Premises VII. Service Charges I. DOMESTIC DEPOSITS 1. Whether banks can accept interest free deposits? Banks cannot accept interest free deposits other than in current account. 2. Whether banks can pay interest on savings bank accounts quarterly? Banks can pay interest on savings bank accounts at quarterly or longer rests. 3. Whether banks can pay interest on term deposits monthly? Interest on term deposits is payable at quarterly or longer rests. In case of monthly deposit schemes, as per banking practice, the interest is calculated for the quarter and may be paid monthly at the discounted value. 4. Whether banks can pay differential rates of interest on term deposits aggregating Rs.15 lakh and above? Differential rates of interest can be paid on single term deposits of Rs.15 lakh and above and not on the aggregate of individual deposits where the total exceeds Rs.15 lakh. 5. Whether banks can pay commission for mobilising deposits? Banks are prohibited from employing/engaging any individual, firm, company, association, institution for collection of deposits or selling of deposit linked products on payment of remuneration or fees or commission in any form or manner except commission paid to agents employed to collect door-to-door deposits under a special scheme. Banks have also been permitted to use the services of Non-Governmental Organisations(NGOs)/ Self Help Groups(SHGs)/ Micro Finance Institutions(MFIs and other Civil Society Organisations(CSOs) as intermediaries in providing financial and banking services including collection of deposits through the use of the Business Facilitator and Business Correspondent models and pay

reasonable commission/fees. 6. Whether banks can prematurely repay term deposits on their own? A term deposit is a contract between the bank and the customer for a definite term and it cannot be paid prematurely at the banks option. However, a term deposit can be paid prematurely at the request of the customer subject to the terms of the contract, including penalty, if any. 7. Whether banks can refuse premature withdrawal of term deposits? Banks may not normally refuse premature withdrawal of term deposits of individuals and Hindu Undivided Families (HUF), irrespective of the size of the deposit. However, banks at their discretion, may disallow premature withdrawal of large deposits held by entities other than individuals and Hindu Undivided Families. Banks should notify such depositors of their policy of disallowing premature withdrawals in advance, i.e. at the time of acceptance of deposits. 8. Whether banks can levy penalty for premature withdrawal? Banks have the freedom to determine their own penal rates of interest for premature withdrawal of term deposits. 9. How and when are banks required to pay interest on the deposits maturing on holiday/ non-business working day/ Sunday? Banks should pay interest at the originally contracted rate on the deposit amount for the holiday/ Sunday/ non-business working day intervening between the date of expiry of the specified term of the deposit and the date of payment of the proceeds of the deposit on the succeeding working day. 10. Whether banks can pay additional interest admissible to banks' staff on the deposit placed in the name of minor child/ children of the deceased members of staff? No. Children (including minor) are not eligible for additional interest admissible to banks' staff members/ retired staff members. 11. Whether additional interest admissible to banks' staff can be paid on the compensation awarded by the court to a minor child and deposited in the joint names of minor child and parent? No. As the money belongs to the minor child and not the banks' staff, additional interest cannot be paid. 12. Whether banks are permitted to offer differential rate of interest on other deposits? Banks can formulate special fixed deposit schemes specifically for resident Indian senior citizens offering higher and fixed rates of interest as compared to normal deposits of any size.

13. At what rate is interest payable on a deposit standing in the name of a deceased depositor? a. In the case of a term deposit standing in the name/s of a deceased individual depositor, or two or more joint depositors, where one of the depositors has died, the criterion for payment of interest on matured deposits in the event of death of the depositor in the above cases has been left to the discretion of individual banks subject to their Board laying down a transparent policy in this regard. b. In the case of balances lying in current account standing in the name of a deceased individual depositor/ sole proprietorship concern, interest should be paid only from May 1, 1983 or from the date of death of the depositor, whichever is later, till the date of repayment to the claimant/s at the rate of interest applicable to savings deposits as on the date of payment. However, in the case of NRE deposits, if the claimants are residents, the deposit on maturity is treated as a domestic rupee deposit and interest is paid for the subsequent period at the rate applicable to domestic deposits of similar maturity. 14. What are the guidelines for renewal of overdue deposits? All aspects concerning renewal of overdue deposits may be decided by individual banks subject to their Board laying down a transparent policy in this regard and the customers being notified of the terms and conditions of renewal, including interest rate, at the time of acceptance of the deposit. The policy should be non-discretionary and non-discriminatory. II. DEPOSITS OF NON-RESIDENTS INDIANS (NRIs) 15. Whether concessional rate of interest is applicable when a loan against FCNR(B) deposit is repaid in foreign currency? Banks have the freedom to fix the rate of interest chargeable on loans and advances against FCNR(B) deposits to the depositors without reference to their Benchmark Prime Lending Rate (BPLR) irrespective of whether repayment is made in Rupees or in Foreign Currency. 16. Whether banks can accept recurring deposits under the FCNR(B) Scheme? No. Banks cannot accept recurring deposits under the FCNR(B) Scheme. 17. Who can fix the interest rates on NRE and FCNR(B) deposits? The Boards of Directors of banks have been empowered to authorise the Asset-Liability Management Committee to fix interest rates on deposits within the ceiling prescribed by RBI. 18. Whether banks are permitted to offer differential rate of interest on NRE/ FCNR(B) deposits?

Yes. Banks are permitted to offer differential rates of interest on NRE term deposits as in the case of domestic term deposits of Rs.15 lakh and above within the ceiling prescribed. Regarding FCNR(B) deposits, banks are free to decide the currency-wise minimum quantum on which differential rate of interest may be offered subject to the overall ceiling prescribed. 19. What is meant by Reinvestment Deposit? Reinvestment deposits are those deposits where interest (as and when due) is reinvested at the same contracted rate till maturity, which is withdrawable with the principal amount on maturity date. It is also applicable to domestic deposits. 20. Whether FCNR(B) deposits can be renewed with retrospective effect (i.e. from the maturity date)? If yes, what is the rate of interest payable? A bank may, at its discretion, renew an overdue FCNR(B) deposit or a portion thereof provided the overdue period from the date of maturity till the date of renewal (both days inclusive), does not exceed 14 days and the rate of interest payable on the amount of the deposit so renewed shall be the appropriate rate of interest for the period of renewal as prevailing on the date of maturity or on the date when the depositor seeks renewal, whichever is lower. In the case of overdue deposits where the overdue period exceeds 14 days, the deposits can be renewed at the prevailing rate of interest on the date when the renewal is sought. If the depositor places the entire amount of overdue deposit or a portion thereof as a fresh FCNR(B) deposit, banks may fix their own interest for the overdue period on the amount so placed as a fresh term deposit. Banks are free to recover the interest so paid for the overdue period if the deposit is withdrawn after renewal before completion of the minimum stipulated period under the scheme. 21. Whether interest rate stipulations applicable to loans in rupees under FCNR(B) schemes are applicable to loans denominated in foreign currency? No. Interest rate stipulations applicable to loans in rupees under FCNR(B) schemes are not applicable to loans denominated in foreign currency, which are governed by the instructions issued by the Foreign Exchange Department of RBI. 22. Under what circumstances additional interest over and above the declared rate of interest can be paid in case of FCNR(B) deposits? In respect of deposits accepted in the name of a. member or a retired member of the banks staff, either singly or jointly with any other member or members of his/ her family, or b. the spouse of a deceased member or a deceased retired member of the banks staff, the bank may, at its discretion, allow additional interest at a rate not exceeding one per cent per annum over and above the rate of interest stipulated, Provided that i. the depositor or all the depositors of a joint account is/ are non-resident/s of Indian nationality or origin, and ii. the bank shall obtain a declaration from the depositor concerned that the moneys so deposited or which may, from time to time, be deposited, shall be moneys belonging to the depositor as

stated in clause (a) and (b) above. iii. the rate fixed by the bank for deposits of staff members, existing or retired, should not exceed the ceiling rate prescribed by RBI. Explanation: The word "family" shall mean and include the spouse of the member/ retired member of the banks staff, his/her children, parents, brothers and sisters who are dependent on such a member/ retired member but shall not include a legally separated spouse. 23. In the case of a deceased depositors NRE/FCNR(B) deposit, in the event of legal heirs effecting premature withdrawal before completion of the minimum prescribed period, whether any interest is payable? No. A deposit has to run for a minimum stipulated period, which is at present one year for both FCNR(B) and NRE deposits, to be eligible to earn interest. 24. Whether banks can pay interest on NRE and FCNR(B) deposits for the intervening Saturday, Sunday and holidays between the date of maturity and payment? Yes. Whenever the due dates fall on Saturday/Sunday/non-business working day/holidays, banks are permitted to pay interest on NRE and FCNR(B) deposits at the originally contracted rate for the intervening period between the due date and date of payment so that no interest loss is suffered by the depositors. III. ADVANCES 25. What is the meaning of the word Free in the lending rate prescription? Banks are free to fix Benchmark Prime Lending Rate (BPLR) for credit limits over Rs.2 lakh with the approval of their respective Boards. BPLR has to be declared and made uniformly applicable at all the branches. The banks may authorize their Asset-Liability Management Committee (ALCO) to fix interest rates on Deposits and Advances, subject to their reporting to the Board immediately thereafter. The banks should also declare the maximum spread over BPLR with the approval of the ALCO/Board for all advances. 26.(i) What are the intermediary agencies? (ii) What are housing finance intermediary agencies? An illustrative list of Intermediary Agencies is as under: 1. State Sponsored organizations for on-lending to Weaker Sections@ 2. Distributors of agricultural inputs/ implements. 3. State Financial Corporations (SFCs)/ State Industrial Development Corporations (SIDCs) to the extent they provide credit to weaker sections. 4. National Small Industries Corporation (NSIC). 5. Khadi and Village Industries Commission (KVIC) 6. Agencies involved in assisting the decentralized sector. 7. Housing and Urban Development Corporation Ltd. (HUDCO)

8. Housing Finance Companies approved by National Housing Bank (NHB) for refinance. 9. State sponsored organization for SCs/STs (for purchase and supply of inputs to and/or marketing of output of the beneficiaries of these organizations). 10. Micro Finance Institutions/ Non-Government Organizations (NGOs) on lending to SHGs. @ Weaker sections include i. Small and marginal farmers with landholdings of 5 acres and less, and landless labourers, tenant farmers and share-croppers; ii) Artisans, village and cottage industries where individual credit requirements do not exceed Rs. 50,000/-; iii) Beneficiaries of Swarnjayanti Gram Swarozgar Yojana (SGSY); iv) Scheduled Castes and Scheduled Tribes; v) Beneficiaries of Differential Rate of Interest (DRI) scheme; vi) Beneficiaries under Swarna Jayanti Shahari Rozgar Yojana (SJSRY); vii) Beneficiaries under scheme of Liberation and Rehabilitation of Scavengers (SLRS); viii) Advances to Self-Help Groups (SHGs); ix) Loans to distressed poor to repay their debt to informal sector, against appropriate collateral or group security. Loans granted under (i) to (ix) above to persons from minority communities as may be notified by Government of India from time to time. In states, where one of the minority communities notified is, in fact, in majority, item (ix) will cover only the other notified minorities. These States/Union Territories are Jammu and Kashmir, Punjab, Sikkim, Mizoram, Nagaland and Lakshadweep. 27. Whether banks can charge interest rate without reference to their own BPLR? Yes. Banks are free to determine the rates of interest without reference to their BPLR and regardless of the size, in respect of following loans: (i) a. Loans for purchase of consumer durables. b. Loans to individuals against shares and debentures/ bonds c. Other non-priority sector personal loans including credit card dues. d. Advances/ overdrafts against domestic/ NRE/ FCNR(B) deposits with the bank, provided that the deposit/s stands/ stand either in the name(s) of the borrower himself/ borrowers themselves, or in the names of the borrower jointly with another person. e. Finance granted to intermediary agencies (excluding those of housing) for on-lending to ultimate beneficiaries and agencies providing input support. f. Finance granted to housing finance intermediary agencies for on-lending to ultimate

beneficiaries g. Discounting of Bills h. Loans/Advances/Cash Credit/Overdrafts against commodities subject to Selective Credit Control (ii) Loans covered by participation in interest refinancing schemes of term lending institutions Banks are free to charge rates as per stipulations of the refinancing agencies without reference to BPLR. 28. Whether it is in order for banks to have multiple BPLRs? No. Since all lending rates can be determined with reference to the Benchmark PLR by taking into account term premia and/or risk premia, there is no need for multiple BPLRs. These premia can be factored into the spread over or below the BPLR. 29. Whether banks can grant fixed rate loans for purposes other than project finance? Banks have the freedom to offer all loans at fixed or floating rates subject to conformity to their Asset Liability Management (ALM) Guidelines. Banks should use only external or market-based rupee benchmark interest rates for pricing of their floating rate loan products. 30. Whether the revised BPLRs will be applicable to the existing advances? Yes. Banks are required to invariably incorporate the following proviso in loan agreements in the case of all advances, including term loans, enabling banks to charge the applicable interest rate in conformity with the directives issued by RBI, except in case of Fixed Rate Loans "Provided that the interest payable by the borrower shall be subject to the changes in interest rates made by the Reserve Bank from time to time". 31. Whether banks may charge interest below BPLR on loans above Rs.2.00 lakh? Yes. At present, loans up to Rs.2 lakh carry the prescription of not exceeding the Benchmark Prime Lending Rate (BPLR) and on the loans above Rs.2 lakh, banks are free to determine the rate of interest subject to BPLR and spread guidelines. Keeping in view the international practice and to provide operational flexibility to commercial banks in deciding their lending rate, banks may offer loans at below BPLR to exporters or other creditworthy borrowers including public enterprises on the basis of a transparent and objective policy approved by the respective Boards. 32. Whether banks are permitted to charge interest below their declared BPLR under consortium arrangement to offer a rate comparable to that of the leader bank? No. Banks need not charge a uniform rate of interest even under a consortium arrangement. Each member bank should charge rate of interest on the portion of the credit limits extended by them

to the borrowers subject to their BPLR. 33. What should be penal rate of interest? With effect from October 10, 2000, banks have been given the freedom to formulate a transparent policy for charging penal interest with the approval of their Board of Directors. However, in the case of loans to borrowers under priority sector, no penal interest should be charged for loans up to Rs.25,000. Penal interest may be levied for reasons such as default in repayment, non-submission of financial statements, etc. However, the policy on penal interest should be governed by well-accepted principles of transparency, fairness, incentive to service the debt and genuine difficulties of customers. 34. Consequent on the deregulation of interest rates on advances over Rs.2 lakh with effect from October 18, 1994, whether banks should pay DICGC Guarantee fees in respect of priority sector advances? As regards DICGC Guarantee fees, banks have been given the discretion to absorb or to pass on the guarantee fees to the borrower in case of advances over Rs.25,000/- excluding advances to weaker sections. Banks should bear DICGC guarantee fees in respect of advances up to Rs.25,000/- and all advances to weaker sections. 35. Whether interest on loans and advances could be charged at varying periods ranging from monthly rests to yearly rests? With effect from April 1, 2002 banks have been charging interest on loans and advances at monthly rests except in the case of agricultural advances (including short term loans and other allied activities) where the existing practice continues. 36. What rate of interest is chargeable on loans/ advances granted to Staff Members of the banks or Staff Members of Co-operative Credit Societies? The interest rate directives on advances granted by banks will not be applicable to loans or advances or other financial accommodation made or provided or renewed by a scheduled bank, inter alia, to its own employees. Where the advances are provided by banks to co-operative credit societies formed by the banks' staff members for lending to constituents (i.e. staff of the bank), the interest rate directives of RBI will not apply in case of such advances. IV. ADVANCES AGAINST SHARES AND DEBENTURES 37. Whether banks can sanction loans against the equity shares of the banking company to its directors? No. 38. Whether any ceiling has been fixed on the banks exposure to the capital market?

With effect from April 1, 2007 a bank's total exposure, including both fund based and non-fund based exposure, to the capital market in all forms covering its direct investment in equity shares, convertible bonds and debentures and units of equity oriented mutual funds; advances against shares to individuals for investment in equity shares (including IPOs), bonds and debentures, units of equity-oriented mutual funds and secured and unsecured advances to stockbrokers and guarantees issued on behalf of stockbrokers and market makers; all exposures to Venture Capital Funds (both registered and unregistered) should not exceed 40 per cent of its net worth, as on March 31 of the previous year. Within this overall ceiling, the banks direct investment in shares, convertible bonds / debentures, units of equity-oriented mutual funds and all exposures to Venture Capital Funds (VCFs) [both registered and unregistered] should not exceed 20 per cent of its net worth. For computing the ceiling on exposure to capital market, the banks direct investment in shares will be calculated at cost price of the shares. The aggregate exposure of a consolidated bank to capital markets (both fund based and non-fund based) should not exceed 40 per cent of its consolidated net worth as on March 31 of the previous year. Within this overall ceiling, the aggregate direct exposure by way of the consolidated banks investment in shares, convertible bonds / debentures, units of equityoriented mutual funds and all exposures to Venture Capital Funds (VCFs) [both registered and unregistered] should not exceed 20 per cent of its consolidated net worth. 39. What is the definition of net worth of a bank? Net worth would comprise of Paid-up capital plus Free Reserves including Share Premium but excluding Revaluation Reserves, plus Investment Fluctuation Reserve and credit balance in Profit & Loss account, less debit balance in Profit and Loss account, Accumulated Losses and Intangible Assets. No general or specific provisions should be included in computation of net worth. Infusion of capital through equity shares, either through domestic issues or overseas floats after the published balance sheet date, may also be taken into account for determining the ceiling on exposure to capital market. 40. Whether banks can make short sales of shares? No. Banks are prohibited from making any short sales of shares. 41. Whether banks can invest in fixed deposits of non-financial companies? There is no prohibition on banks placing of funds with non-banking non-financial companies under their Public Deposit Schemes. However, investment in the Public Deposit Scheme of such companies should be classified by banks as loans/ advances in their balance sheet and returns submitted under the Banking Regulation Act, 1949 and the Reserve Bank of India Act 1934. 42. What should be the method of valuation for advances against shares/ debentures/ bonds? Shares/ debentures/ bonds accepted by banks as security for loans/ advances should be valued at the prevailing market prices.

43. Whether banks can sanction bridge loans to companies? Yes. Banks can sanction bridge loans to companies for a period not exceeding one year against the expected equity flows/ issues as also the expected proceeds of non-convertible Debentures, External Commercial Borrowings, Global Depository Receipts and/ or funds in the nature of Foreign Direct Investments, provided the bank is satisfied that the borrowing company has made firm arrangements for raising the aforesaid resources/ funds. Bridge loans extended by a bank will be included within the ceiling of 40% of net worth prescribed for banks aggregate exposure to the capital market. 44. What is the ceiling on the quantum of loans which can be sanctioned by banks to individuals against security of shares, debentures and PSU bonds, if held in physical form and in dematerialized form? Loans/ advances granted to individuals against the security of shares, debentures and PSU bonds should not exceed Rs.10 lakh and Rs.20 lakh, if the securities are held in physical form and dematerialized form respectively. The maximum amount of finance that can be granted to an individual for subscribing to IPOs is Rs.10 lakh. However, the bank should not provide finance to companies for their investment in IPOs of other companies. Banks can grant advances to employees for purchasing shares of their own companies under Employees Stock Option Plan (ESOP) to the extent of 90% of purchase price of shares or Rs.20 lakh whichever is lower. NBFCs should not be provided finance for on-lending to individuals for subscribing to IPOs. Loans/ advances granted by a bank for subscribing to IPOs should be reckoned as an exposure to capital market. 45. What is the margin stipulated for advances against shares held in physical form and dematerialised form? A uniform margin of 50% has been stipulated for all advances against shares/ /financing of IPOs/issue of guarantees for capital market operations. Within this 50 percent margin, a minimum cash margin of 25 percent should be maintained in respect of guarantees issued by banks for capital market operations. 46. Is any margin stipulated for banks' exposure to commodity markets? The minimum margin of 50% and minimum cash margin of 25% (within the margin of 50%), as stipulated in the case of banks' exposure to capital markets, will also apply to guarantees issued by banks on behalf of commodity brokers in favour of the national level commodity exchanges, viz, National Commodity & Derivatives Exchange (NCDEX), Multi Commodity Exchange of India Limited (MCX) and National Multi-Commodity Exchange of India Limited (NMCEIL) in lieu of margin requirements. V. DONATIONS 47. Whether banks can make donations?

Yes. The profit making banks may make donations during a financial year, aggregating up to one percent of the published profit of the bank for the previous year. However, the contributions/ subscriptions made by banks to Prime Ministers Relief Fund and to professional bodies/ institutions like Indian Banks Association, National Institute of Bank Management, Indian Institute of Bankers, Institute of Banking Personnel Selection, Foreign Exchange Dealers Association of India, during a year will be exempted from the above ceiling. Unutilised amount of the permissible limit of a year should not be carried forward to the next year for the purpose of making donations. 48. Whether loss-making banks can make donations? Yes, loss making banks can make donations up to Rs.5 lakh only in a financial year. 49. Whether overseas branches of the banks can make donations abroad? Yes, the overseas branches of the banks can make donations abroad, provided the banks do not exceed the prescribed ceiling of one per cent of their published profit of the previous year. VI. LOANS FOR PREMISES 50. What are the norms and procedure laid down by RBI for acquisition of accommodation on lease/ rental basis by commercial banks for their use, i.e. for office and residence of the staff? i. The Board of Directors of the banks should lay down the policy and formulate operational guidelines separately in respect of metropolitan, urban, semi-urban and rural areas covering all areas in respect of acquiring premises on lease/ rental basis for the banks use. These guidelines should include also delegation of powers at various levels. The decision in regard to surrendering or shifting of premises other than at rural centers should be taken at the central office level by a committee of senior executives. ii. The Board of Directors of the bank should lay down separate policy for granting of loans to landlords who provide them premises on lease/ rental basis. The rate of interest to be charged on such loans should be fixed as per the lending rate directives issued by RBI with BPLR as the minimum lending rate for the loans above Rs.2 lakh. The rate of interest may be simple or compound, in accordance with the usual practice of the bank, as applicable to other term loans. iii. Banks should provide a suitable mechanism for redressing the genuine grievances of the landlord expeditiously. iv. The details of negotiated contracts in respect of advances to landlords and rental (including taxes etc. and deposits of Rs.25 lakh and above) on premises taken on lease/ rental by the public sector banks, should be reported to the Central Bureau of Investigation (CBI) as per the extant Government instructions. This requirement will not be applicable to banks in the private sector.

VII. SERVICE CHARGES 51. Is there any ceiling on service charges to be levied by the banks? Indian Banks Association (IBA) has dispensed with the practice of prescribing service charges to be levied by banks for various services rendered by them. With effect from September, 1999, the Reserve Bank has granted freedom to banks to prescribe service charges with the approval of the respective Board of Directors. As announced in the Annual Policy Statement for the year 2006-2007, in order to ensure fair practices in banking services, Reserve Bank of India (RBI) constituted a Working Group to formulate a scheme for ensuring reasonableness of bank charges, and to incorporate it in the Fair Practices Code, the compliance of which would be monitored by the Banking Codes and Standards Board of India (BCSBI). The Working Group, which examined various issues, such as basic banking/financial services to be rendered to individual customers, the methodology adopted by banks for fixing the charges and the reasonableness of such charges, has identified twenty-seven services related to deposit/loan accounts, remittance facilities and cheque collections, as an indicative list of basic banking services to be offered by banks. The recommendations of the Working Group have been accepted by RBI with certain modifications. Based on the recommendations of the Working Group, RBI has issued a circular DBOD. No. Dir. BC. 56/13.03.00/2006-07 dated February 2, 2007 to all scheduled commercial banks. 52. What are the parameters to be adopted for identifying basic banking services? Banks have been advised to identify basic banking services on the basis of two parameters indicated by the Working Group, namely, (i) banking services that are ordinarily availed by individuals in the middle and lower segments and (ii) the value of transactions, namely, cheque collections and remittances up to Rs. 10,000 for each transaction and up to $500 for forex transactions. The indicative list of banking services includes services relating to Deposit Accounts (cheque book facility, issue of pass book / statement, ATM Card, Debit Card, stop payment, balance enquiry, account closure, cheque return - inward, signature verification); Loan Accounts (no dues certificate); Remittance facilities (Demand Draft issue/ cancellation/ revalidation, Payment Order - issue/ cancellation/ revalidation/ duplicate, Telegraphic Transfer issue/ cancellation/ duplicate, Electronic Clearing Service (ECS), National Electronic Fund Transfer (NEFT) / Electronic Fund Transfer (EFT); Collection Facilities (collection of local /outstation cheques, cheque return- outward). Banks are required to implement the recommendations of the Working Group on making available the basic banking services at reasonable prices/ charges and towards this, delivering the basic services outside the scope of the bundled products. 53. What are the principles to be followed by banks in order to ensure reasonableness in fixing and communicating service charges? Banks are required to follow the following principles for ensuring reasonableness in fixing and communicating the service charges -

(a) For basic services to individuals, banks should levy charges at rates that are lower than the rates applied when the same services are given to non-individuals. (b) For basic services rendered to special category of individuals (such as individuals in rural areas, pensioners and senior citizens), banks should levy charges on more liberal terms than the terms on which the charges are levied to other individuals. (c) For basic services rendered to individuals, banks should levy charges only if the charges are just and supported by reason. (d) For basic services to individuals, banks should levy services charges ad-valorem only to cover any incremental cost and subject to a cap. (e) Banks should provide to the individual customers upfront and in a timely manner, complete information on the charges applicable to all basic services. (f) Banks should provide advance information to the individual customers about the proposed changes in the service charges. (g) Banks should collect for services given to individuals only such charges which have been notified to the customer. (h) Banks should inform the customers in an appropriate manner recovery of service charges from the account or the transaction. 54. What are the other steps to be taken by banks? Banks are required to take steps to ensure that customers are made aware of the service charges upfront and changes in the service charges are implemented only with prior notice to the customers. Banks are also required to have a robust grievance redressal structure and processes, to ensure prompt in-house redressal of all their customer complaints. Further, full-fledged information on bank products and their implications should be disclosed to the customers, so that the customers can make an informed judgment about their choice of products. 1. What is RBI's role with regard to conduct of Government's banking transaction? In terms of Section 20 of the RBI Act 1934, RBI has the obligation to undertake the receipts and payments of the Central Government and to carry out the exchange, remittance and other banking operations, including the management of the public debt of the Union. Further, as per Section 21 of the said Act, RBI has the right to transact Government business of the Union in India. State Government transactions are carried out by RBI in terms of the agreement entered into with the State Governments in terms of section 21 A of the Act. As of now, such agreements exist between RBI and all the State Governments except Government of Sikkim.

2. How does Reserve Bank of India discharge its statutory obligation of being 'Banker to Government'? Reserve Bank of India maintains the Principal Accounts of Central as well as State Governments at its Central Accounts Section, Nagpur. It has put in place a well structured arrangement for revenue collection as well as payments on behalf of Government across the country. A network comprising the Public Accounts Departments of RBI and branches of Agency Banks appointed under Section 45 of the RBI Act carry out the Govt. transactions. At present all the public sector banks and three private sector banks viz. ICICI Bank Ltd., HDFC Bank Ltd. and Axis Bank Ltd. act as RBI's agents. Only authorised branches of Agency banks can conduct Govt. business. 3. How payment into Government account is made? All monies for credit to Government account like taxes or other remittances can be made by filling the prescribed challans of the Government/Department concerned. These challans along with the requisite amount (by way of cash, cheque or DD) are required to be tendered with the authorised bank branches. 4. When is the receipted challan for payment made into Government Account made available? The receipted challans in case of cash tender are generally handed over to the remitter immediately across the counter. In case of payments made by cheque/DD, the receipted challan is issued only on realization of the instruments based on the clearing cycle of the local Clearing House. In all such cases, a paper token is issued to the depositor indicating the date on which the receipted challan will be ready for delivery. The receipted challan will have to be collected within 15 days from the date indicated on the paper token by surrendering the paper token. 5. What if the paper token is misplaced / lost? In case of loss of original token, on a specific request and on payment of prescribed fees, the receipted challan is issued. 6. What if the Receipted Challan is misplaced? No duplicate challan is issued under any circumstances. Instead, a 'Certificate of Credit' is issued on specific request with the requisite particulars and payment of prescribed fee. 7. What is the remedy if the cheque issued by Government is misplaced or lost in transit? The payee of the cheque has to approach the cheque issuing authority and apply for a duplicate cheque explaining the circumstances under which the original cheque was lost or misplaced. After satisfying himself, the drawer may issue a letter to the payee bank requesting it to record STOP payment against the lost cheque. The bank thereafter checks whether the cheque is already paid. If not paid, it records 'STOP PAYMENT' order till the expiry of the validity of the cheque and issues a 'NON PAYMENT CERTIFICATE'.

8. Are Agency banks compensated for conduct of Central/State Government business? The accredited banks are paid remuneration by RBI for conduct of State/Central Government transactions. Such remuneration is called Agency Commission. The rates of agency commission applicable at present (from 1.7.2005) are as under: 1. Receipts : Rs. 45 per transaction 2. Pension Payments : Rs. 60 per transaction 3. Payments other than pension : 9 Paise per Rs.100/- turnover On-line Tax Accounting System (OLTAS) for Direct Taxes 9. What is OLTAS? It is a system introduced in April, 2004 for collection, accounting and reporting of the receipts and payments of Direct Taxes on-line through a network of bank branches. The tax payers data flow from banks directly to Tax Information Network (TIN) maintained by National Securities Depository Ltd. 10. What are the major changes envisaged? Under OLTAS, only a Single Copy Challan is used with a tear off portion for the Tax Payer. The three new single copy challan in use are as under: A common single copy Challan No. ITNS 280 for payment of Income Tax on Companies (Corporation Tax) and Income Tax (other than Companies). Challan No. ITNS 281 for depositing Tax Deducted at Source/Tax collected at source (TDS/TCS). It has two major Heads i.e. (a) 0020 for company deductees and (b) 0021 for noncompany deductees. Challan No. ITNS 282 for payment of Hotel Receipts Tax, Gift-Tax, Estate Duty, Expenditure Tax, Wealth Tax, Securities Transaction Tax and Other miscellaneous direct taxes. 11. Does a tax-payer get his copy of the challan? No. He only gets the tear-off portion from the challan from the bank after getting it duly stamped by the bank with a unique Challan Identification Number (CIN). 12. What is CIN? It is Challan Identification Number. It is a unique number containing the following information: (i) 7 digits BSR Code of the bank branch where tax is deposited (ii) Date of presentation of the challan (DD/MM/YY) (iii) Serial number of Challan in that branch on that day (5 digits)

The CIN has to be quoted in the Income Tax Return as a proof of payment. CIN is also to be quoted in any further enquiry. 13. How to obtain the new Challans? The Challans are available on the website http://www.incometaxindia.gov.in. Challans are also available at the local Income Tax Offices and also with private vendors. 14. What would happen if theacknowledgement counterfoil is misplaced? Approach the bank where tax was deposited. The branch will issue a certificate after following certain procedures which contains payment particulars including CIN. 15. Can the Tax payer pay Direct/Indirect taxes through internet? Yes. Most of the banks are providing the facility to their customers. 16. Where can a tax-payer get the detailed procedure on OLTAS? Please visit http://www.incometaxindia.gov.in. 17. What is the new procedure for payment of direct taxes at banks? The authorised bank branches accept Direct Taxes by cash or cheque/demand draft drawn on the same branch or on other banks/branches with Single Challan. The bank immediately returns the tear off portion of the challan duly stamped with a unique Challan Identification Number (CIN) when the payment is made in cash. In the case of challans presented with cheque/demand draft drawn on other banks/branches, tear-off portion of the challan will be released to the tax-payer only after the realisation of the cheque/demand draft but tax shall be deemed to have been paid on the date of tender. 18. How does the new system benefit the taxpayer? The new system is of immense benefit to the common taxpayer. Now a single copy simplified Challan has to be filled up replacing the earlier quadruplicate Challan. Secondly, it would be possible to obtain an acknowledgement for taxes paid at your own bank branch immediately. Further, the acknowledgement counterfoil with the rubber stamp containing the Challan Identification Number (CIN) assures that the payment is properly accounted for. The Tax payer can view the details of tax paid by him by logging on to http://tinnsdl.com and typing the unique CIN given by the bank. (For more details please visit NSDL Home page www.nsdl.co.in). Taxpayer is no longer required to attach copies/acknowledgement of challan with the Return. He should only mention the CIN details in the Income-tax Returns. 19. Can the tax-payer still use the old forms? No. Tax is accepted only with the new prescribed challan forms.

These FAQs are issued by the Reserve Bank of India for information and general guidance purposes only. The Bank will not be held responsible for actions taken and/or decisions made on the basis of the same. For clarifications or interpretations, if any, the readers are requested to be guided by the relevant circulars and notifications issued from time to time by the Bank and the Government. Your Guide to Money Matters Money as a means of payment, consists of coins, paper money and withdrawable bank deposits. Today, credit cards and electronic cash form an important component of the payment system. For a common person though, money simply means currency and coins. This is so because in India, the payment system, especially for retail transactions still revolves mainly around currency and coins. Here is an attempt to answer some of the Frequently Asked Questions on Indian Currency. A) Some Basics History of Coins / currency: I. Coins The first documented coinage seems to have started with 'Punch Marked' coins issued between the 7th-6th Century BC and 1st Century AD. The coinage can be classified into the following periods: a. b. c. d. e. f. g. Ancient Medival Mughal Late pre-colonial British India Republic India Others.

India won its independence on August 15, 1947. During the period of transition India retained the monetary system and the currency and coinage of the earlier period. India brought out its distinctive coins on 15th August, 1950. Coins in India are presently being issued in denominations of 25 paise, 50 paise, one rupee, two rupees and five rupees. Coins upto 50 paise are called 'small coins' and coins of Rupee one and above are called 'Rupee Coins'. Coins can be issued up to the denomination of Rs.1000 as per the Coinage Act, 1906. II. Currency:

Financial Instruments and 'Hundies' in India have a venerable history. Paper Money, in the modern sense, traces its origins to the late eighteenth century with the issues of private banks as well as those of semi-government banks. The Paper Currency Act of 1861 conferred upon Government of India the monopoly of Note Issue bringing to end banknote issues of Private and Presidency Banks. Government of India continued to issue currency notes till the Reserve Bank of India (RBI) was established on 1st April, 1935. Reserve Bank issued banknotes in January 1938 when the first Five Rupee banknote was issued bearing the portrait of George VI. This was followed by Rs. 10 in February, Rs. 100 in March and Rs. 1,000 and Rs. 10,000 in June 1938. The George VI series continued till 1947 and thereafter as a frozen series till 1950 when post independence banknotes were issued, with the Ashoka Pillar watermark. Banknotes in the Mahatma Gandhi Series were introduced in 1996 and were issued in a phased manner in the denominations of Rs.5, Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000. Banknotes in MG series 2005, in the denomination of Rs.10, Rs.20, Rs.50, Rs.100 Rs.500, and Rs.1000 with additional / new security features are presently being issued. What is the Indian currency called? The Indian currency is called the Indian Rupee (INR) and the coins are called paise. One Rupee consists of 100 paise. What are the present denominations of banknotes in India? At present, banknotes in India are issued in the denomination of Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000. These notes are called banknotes as they are issued by the Reserve Bank of India (Reserve Bank). The printing of notes in the denominations of Re.1, Rs. 2 and Rs.5 has been discontinued as these denominations have been coinised. However, such banknotes issued earlier can still be found in circulation and these banknotes continue to be legal tender. Can banknotes and coins be issued only in these denominations? Not necessarily. The Reserve Bank can also issue banknotes in the denominations of five thousand rupees and ten thousand rupees, or any other denomination that the Central Government may specify. There cannot, though, be banknotes in denominations higher than ten thousand rupees in terms of the current provisions of the Reserve Bank of India of Act, 1934. Coins can be issued up to the denomination of Rs.1000. Demonetization of higher denomination banknotes. Rs. 1000 and Rs.10000 banknotes, which were then in circulation were demonetized in January 1946, primarily to curb unaccounted money. The higher denomination banknotes in Rs.1000, Rs.5000 and Rs.10000 were reintroduced in the year 1954, and these banknotes (Rs.1000, Rs.5000 and Rs.10000) were again demonetized in January 1978. What are the present available denominations of coins in circulation in India?

Presently 25 paise, 50 paise, one rupee, two rupees and five rupee coins are being issued. Coins up to 50 paise are called 'small coins' and coins of Rupee one and above are called 'Rupee Coins'. Though the coins in the denomination of 1 paise, 2 paise, 3 paise, 5 paise, 10 paise and 20 paise may still be in circulation, due to lack of demand these coins are not being issued. What is legal tender? The coins issued under the authority of Section 6 of The Coinage Act, 1906, shall be legal tender in payment or on account i.e. provided that a coin has not been defaced and has not lost weight so as to be less than such weight as may be prescribed in its case: - (a) coin of any denomination not lower than one rupee shall be legal tender for any sum, (b) half rupee coin shall be legal tender for any sum not exceeding ten rupees, (c) any other coin shall be legal tender for any sum not exceeding one rupee [Section 13 of The Coinage Act, 1906]. Similarly, the One Rupee notes issued under the Currency Ordinance, 1940 are also legal tender and included in the expression Rupee coin for all the purposes of the Reserve Bank of India Act, 1934. Every banknote issued by Reserve Bank of India (Rs.2, Rs.5, Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000) shall be legal tender at any place in India in payment or on account for the amount expressed therein, and shall be guaranteed by the Central Government, subject to provisions of sub-section (2) Section 26 of RBI Act, 1934. What is the meaning of "I promise to pay" clause? As per Section 26 of Reserve Bank of India Act, 1934, the Bank is liable to pay the value of banknote. This is payable on demand by RBI, being the issuer. The Bank's obligation to pay the value of banknote does not arise out of a contract but out of statutory provisions. The promissory clause printed on the banknotes i.e., "I promise to pay the bearer an amount of X" is a statement which means that the banknote is a legal tender for X amount. The obligation on the part of the Bank is to exchange a banknote for coins of an equivalent amount. Why is One Rupee liability of the Government of India? The Government of India derives authority to issue Rupee coins from the Coinage Act. As such the rupee coins issued by Government constitute the liabilities of the Government. B) Currency Management. What is the role of the Reserve Bank of India in currency management? The Reserve Bank derives its role in currency management from the Reserve Bank of India Act, 1934.The Reserve Bank manages currency in India. The Government, on the advice of the Reserve Bank, decides on various denominations of banknotes to be issued. The Reserve Bank

also co-ordinates with the Government in the designing of banknotes, including the security features. The Reserve Bank estimates the quantity of banknotes that are likely to be needed denomination-wise and accordingly, places indent with the various printing presses. Banknotes received from banks and currency chests are examined and those fit for circulation are reissued and the others (soiled and mutilated) are destroyed so as to maintain the quality of banknotes in circulation. What is the role of Government of India? In terms of Section 25 of RBI Act, 1934 the design of banknotes is required to be approved by the Central Government on the recommendations of the Central Board of the Reserve Bank of India. The responsibility for coinage vests with the Government of India on the basis of the Coinage Act, 1906 as amended from time to time. The Government of India also attends to the designing and minting of coins in various denominations. Who decides on the volume and value of banknotes to be printed and on what basis? The Reserve Bank decides the volume and value of banknotes to be printed each year. The quantum of banknotes that needs to be printed, broadly depends on the requirement for meeting the demand for banknotes due to inflation, GDP growth, replacement of soiled banknotes and reserve stock requirements. Who decides on the quantity of coins to be minted? The Government of India decides the quantity of coins to be minted on the basis of indents received from the Reserve Bank. How does the Reserve Bank estimate the demand for banknotes? The Reserve Bank estimates the demand for banknotes on the basis of the growth rate of the economy, the replacement demand and reserve stock requirements by using statistical models/techniques. How does the Reserve Bank reach the currency to people? The Reserve Bank presently manages the currency operations through its 18 Issue offices located at Ahmedabad, Bangalore, Belapur, Bhopal, Bhubaneswar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Jammu, Kanpur, Kolkata, Mumbai, Nagpur, New Delhi, Patna, Thiruvananthapuram, one sub-office at Lucknow, a currency chest at Kochi and a wide net work of currency chests. These offices receive fresh banknotes from the banknote printing presses. The Issue Offices of RBI send fresh banknote remittances to the designated branches of commercial banks. The Reserve Bank offices located at Hyderabad, Kolkata, Mumbai and New Delhi (Mint linked Offices) initially receive the coins from the mints. These offices then send them to the other offices of the Reserve Bank. The banknotes and rupee coins are stocked at the currency chests

and small coins at the small coin depots. The bank branches receive the banknotes and coins from the Currency Chests and Small Coin Depots for further distribution among the public. What is a currency chest? To facilitate the distribution of banknotes and rupee coins, the Reserve Bank has authorised select branches of scheduled banks to establish Currency Chests. These are actually storehouses where banknotes and rupee coins are stocked on behalf of the Reserve Bank. As on June 30, 2006, there were 4428 Currency Chests and 4102 Small Coin Depots. The currency chest branches are expected to distribute banknotes and rupee coins to other bank branches in their area of operation. What is a small coin depot? Some bank branches are also authorised to establish Small Coin Depots to stock small coins. The Small Coin Depots also distribute small coins to other bank branches in their area of operation. What happens when the banknotes and coins return from circulation? Banknotes and coins returned from circulation are deposited at the Issue offices of the Reserve Bank. The Reserve Bank subjects these to processing, authenticates banknotes for their genuineness, segregates them into notes fit for reissue and those which are not, for cancellation. The banknotes which are fit for reissue are sent back in circulation and those which are unfit for reissue are destroyed by way of shredding after completion of examination process. Similarly, coins received back from circulation are either reissued or are sent to the Mints for melting. From where can the general public obtain banknotes and coins? Banknotes and coins can be obtained in exchange at any of the offices of the Reserve Bank and at all the designated branches of banks. C) Current Issues Is there a way to reduce dependence on cash? Cash continues to be the predominant payment means of transactions in India. A compositional shift is underway in the form of a gradual replacement of lower denomination banknotes by higher denomination banknotes, particularly Rs.100 and Rs.500. Instruments such as cheques, credit and debit cards, electronic funds transfer are at present supplementing the use of banknotes and as the use of these gains popularity, the growth rate of the demand for currency is expected to slow down. Steps taken to increase the supply of banknotes and coins. Several steps have been taken to augment the supply of banknotes and coins. Some of these are:

The existing banknote printing presses and the mints owned by the Government have been modernised. Bharatiya Reserve Bank Note Mudran (P) Ltd., was set up as a fully owned subsidiary of the Reserve Bank of India on February 03, 1995. Under its aegis two banknote printing presses with the state-of-the-art technology, one each at Mysore (Karnataka) and Salboni (West Bengal), commenced production from June 01, 1996 and December 11, 1996, respectively. To bridge the demand-supply gap, the Government had, as a one-time measure, imported banknotes, in the year 1997-98. Government of India had also imported rupee coins during 2000-2003 to supplement the supply of coins from the four mints. The overall position of both banknote and coin supply is comfortable now. The Regional Offices of RBI launched aggressive campaigns for providing exchange facility to the members of public.

Why are Re.1, Rs.2, Rs.5 banknotes not being printed? Volume-wise, the share of such small denomination banknotes in the total banknotes in circulation was very high but in terms of value they constituted a very small percentage. The average life of these banknotes was found to be less than a year. The cost of printing and servicing these banknotes was, thus, not commensurate with their life, and printing of these banknotes was, therefore, discontinued. These denominations were coinised. However, Rs.5 was re-introduced in 2001 to supplement the gap between the demand and supply of coins in this denomination. The printing of Rs.5 banknotes has been discontinued from the year 2005. D) Soiled and Mutilated Banknotes What are soiled, mutilated and imperfect banknotes? (i) "soiled note:" means a note which, has become dirty due to usage and also includes a two piece note pasted together wherein both the pieces presented belong to the same note, and form the entire note. (ii) Mutilated banknote is a banknote, of which a portion is missing or which is composed of more than two pieces. (iii) Imperfect banknote means any banknote, which is wholly or partially, obliterated, shrunk, washed, altered or indecipherable but does not include a mutilated banknote. Can soiled and mutilated banknotes be exchanged for value? Yes. Such banknotes can be exchanged for value. Where are soiled/mutilated banknotes accepted for exchange? All banks are authorized to accept soiled banknotes for full value. They are expected to extend

the facility of exchange of soiled notes even to non-customers. All currency chest branches of commercial banks are authorised to adjudicate mutilated banknotes and pay value for these, in terms of the Reserve Bank of India (Note Refund) Rules, 2009 How much value would one get in exchange of soiled banknotes? Soiled banknotes are exchanged for full value. How much value would one get in exchange of mutilated banknotes? A mutilated banknote can be exchanged for full value if, (i) For denominations of Re. 1, Rs. 2, Rs. 5, Rs. 10 and Rs. 20, the area of the single largest undivided piece of the note presented is more than 50 percent of the area of respective denomination, rounded off to the next complete square centimeter. (ii) For denominations of Rs. 50, Rs.100, Rs. 500 and Rs. 1000, the area of the single largest undivided piece of the note presented is more than 65 percent of the area of respective denomination, rounded off to the next complete square centimetre. Banknotes in denominations of Re. 1, Rs. 2, Rs. 5, Rs. 10 and Rs. 20, cannot be exchanged for half value. A mutilated banknote in denominations of Rs.50, Rs.100, Rs.500 or Rs.1000, can be exchanged for half value if, The undivided area of the single largest piece of the note presented is equal to or more than 40 percent and less than or equal to 65 percent of the area of respective denomination, rounded off to the next complete square centimetre. How much value would one get in exchange of imperfect banknotes? The value of an imperfect note may be paid for full value / half value under rules as specified for mutilated notes if, (i) the matter, which is printed on the note has not become totally illegible, and (ii) it can be satisfied that it is a genuine note. What types of banknotes are not eligible for payment under the Note Refund Rules? The following banknotes are not payable under the Reserve Bank of India (Note Refund) Rules 2009. A banknote for which:

the area of single largest undivided piece of note presented is less than or equal to 50% of area of the note for denominations of Re. 1, Rs. 2, Rs. 5, Rs. 10 and Rs. 20. the area of the single largest undivided piece of the note is less than 40 percent for denominations of Rs.50, Rs. 100, Rs. 500 and Rs. 1000.

A banknote which:

cannot be identified with certainty as a genuine note for which the Bank is liable under the Act, has been made imperfect or mutilated, thereby causing the note to appear to be of a higher denomination, or has been deliberately cut, torn, defaced, altered or dealt with in any other manner, not necessarily by the claimants, enabling the use of the same for making of a false claim under these rules or otherwise to defraud the Bank or the public, carries any extrinsic words or visible representations intended to convey or capable of conveying any message of a political or religious character or furthering the interest of any person or entity,

has been imported into India by the claimant from any place outside India in contravention of the provision of any law. What if a banknote is found to be non-payable? Non-payable banknotes are retained by the receiving banks and sent to the Reserve Bank where they are destroyed. E) Banknotes since Independence. i. Ashoka Pillar Banknotes: The first banknote issued by independent India was the one rupee note issued in 1949. While retaining the same designs the new banknotes were issued with the symbol of Lion Capital of Ashoka Pillar at Sarnath in the watermark window in place of the portrait of King George. The name of the issuer, the denomination and the guarantee clause were printed in Hindi on the new banknotes from the year 1951. The banknotes in the denomination of Rs.1000, Rs.5000 and Rs.10000 were issued in the year 1954. Banknotes in Ashoka Pillar watermark Series, in Rs.10 denomination were issued between 1967 and 1992, Rs.20 denomination in 1972 and 1975, Rs.50 in 1975 and 1981, and Rs.100 between 1967-1979. These banknotes are still found in circulation. The banknotes issued during the above period, contained the symbols representing science and technology, progress, orientation to Indian Art forms. In the year 1980, the legend "Satyameva Jayate", i.e., truth alone shall prevail was incorporated under the national emblem for the first time.

To contain the volume of banknotes in circulation, Rs.500, banknote was introduced in October 1987 with the portrait of Mahatma Gandhi and the Ashoka Pillar watermark. ii. Mahtma Gandhi (MG) Series 1996

The banknotes in MG Series 1996 are available in the denomination of Rs.5, (introduced in November 2001) Rs.10 (13-06-1996), Rs.20 (24-08-2001), Rs.50 (14-03-1997), Rs.100 (04-061996), Rs.500 (20-10.1997) and Rs.1000 (November 2000). All the banknotes of this series bear the portrait of Mahatma Gandhi on the obverse (front) side, in place of symbol of Lion Capital of Ashoka Pillar, which has also been retained and shifted on the same side. This means that these banknotes contain Mahatma Gandhi watermark as well as Mahatma Gandhi's portrait. Are there any special features in the banknotes of Mahatma Gandhi series- 1996? The Mahatma Gandhi series-1996 banknotes contained several special features vis--vis the banknotes issued earlier. These are i. Security thread: Rs.10, Rs.20 and Rs.50 notes contain fully embedded security thread. Rs.100, Rs.500 and Rs.1000 banknotes contain windowed security thread. This thread is partially exposed and partially embedded. When held against light, this thread can be seen as one continuous line. Other than on Rs.1000 banknotes, this thread contains the words 'Bharat' in the Devanagari script and 'RBI' appearing alternately. The security thread of the Rs.1000 banknote contains the inscription 'Bharat' in the Devanagari script, '1000' and 'RBI'. Latent Image: The vertical band next to the (right side) Mahatma Gandhis portrait, contains a latent image, showing the denominational value 20, 50, 100, 500 or 1000 as the case may be. The value can be seen only when the banknote is held horizontally and light allowed to fall on it at 45 ; otherwise this feature appears only as a vertical band. Micro letterings: This feature appears between the vertical band and Mahatma Gandhi portrait. It contains the word RBI in Rs.10. Notes of Rs.20 and above also contain the denominational value of the banknotes. This feature can be seen better under a magnifying glass. Identification mark: A special intaglio feature (raised printing) has been introduced on the left of the watermark window, on the obverse (front) on all banknotes except Rs.10/- banknote. This feature is in different shapes for various denominations (Rs.20-Vertical Rectangle, Rs.50Square, Rs.100-Triangle, Rs.500-Circle, Rs.1000-Diamond) and helps the visually impaired to identify the denomination

ii.

iii.

iv.

v.

Intaglio Printing: The portrait of Mahatma Gandhi, Reserve Bank seal, Guarantee and promise clause, Ashoka Pillar Emblem and RBI Governor's signature are printed in intaglio i.e. in raised prints in Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000 banknotes.

vi.

Fluorescence: The number panels of the banknotes are printed in fluorescent ink. The banknotes also have optical fibres. Both can be seen when the banknotes are exposed to ultraviolet lamp.

vii.

Optically Variable Ink: The numeral 500 & 1000 on the Rs.500 [revised colour scheme of mild yellow, mauve and brown] and Rs.1000 banknotes are printed in Optically Variable Ink viz., a colour-shifting ink. The colour of these numerals appears green when the banknotes are held flat but would change to blue when the banknotes are held at an angle.

viii.

Watermark: The banknotes contain the Mahatma Gandhi watermark with a light and shade effect and multi-directional lines in the watermark window.

iii) MG series 2005 banknotes MG series 2005 banknotes are issued in the denomination of Rs.10, Rs.20, Rs.50, Rs.100, Rs.500 and Rs.1000 contain some additional / new security features. The Rs.50 and Rs.100 banknotes were issued in August 2005, followed by Rs.500 and Rs.1000 denominations in October 2005 and Rs.10 and Rs.20 in April 2006 and August 2006, respectively. The additional / new security features in MG Series 2005 banknotes. i. Security Thread: The machine-readable security thread in Rs.10, Rs.20 and Rs.50 denomination banknotes is windowed on front side and fully embedded on reverse side. The thread fluoresces in yellow on both sides under ultraviolet light. The thread appears as a continuous line from behind when held up against light. Rs.100, Rs.500 and Rs.1000 denomination banknotes have machine-readable windowed security thread with colour shift from green to blue when viewed from different angles. It fluoresces in yellow on the reverse and the text will fluoresce on the obverse under ultraviolet light. Intaglio Printing: The portrait of Mahatma Gandhi, Reserve Bank seal, Guarantee and promise clause, Ashoka Pillar emblem, Governor's signature and the identification mark for the visually impaired persons are printed in improved intaglio. See through register: Half the numeral of each denomination (10, 20, 50, 100, 500 and 1000) is printed on the obverse (front) and half on the reverse. The accurate back to back registration makes the numeral appear as one when viewed against light. Water Mark and electrotype watermark: The portrait of Mahatma Gandhi, the multidirectional lines and an electrotype mark showing the denominational numeral 10, 20, 50, 100, 500 and 1000 appear in this section respectively in each denomination banknote and these can be viewed better when the banknote is held against light. Optically Variable Ink (OVI): The font size of the numeral 500 and 1000 in Rs.500 and Rs.1000 denomination banknotes is reduced, as compared to MG series banknotes issued in these denominations earlier in the year 2000. The colour of the numeral appears green when the banknote is held flat but would change to blue when the banknote is held at an angle. Dual coloured optical fibres, seen under UV lamp. Year of Printing: Year of printing appears on the reverse of the banknote

ii.

iii.

iv.

v.

vi.

vii. viii.

All these banknotes issued by the Bank are legal tender. The details are also available in the updated version of the Master Circular on Detection and Impounding of Counterfeit Banknotes- (2007). (Annex IV) Why was the change brought about? Central banks, the world over change the design of their banknotes and introduce new security features primarily to make counterfeiting difficult and to stay ahead of counterfeiters. India also follows the same policy. What is a "star series" banknote?

Fresh banknotes issued by Reserve Bank of India till August 2006 were serially numbered. Each banknote bears a distinctive serial number along with a prefix. The prefix consists of numeral and letter/s. The banknotes are issued in packets containing 100 pieces. The Bank has adopted the "STAR series" numbering system for replacement of defectively printed banknotes, at the printing presses. To begin with, this will be for banknotes of Rs.10, Rs.20 and Rs.50 denomination. The Star series banknotes are exactly like the existing Mahatma Gandhi Series banknotes, but have an additional character viz., a *(star) in the number panel in the space between the prefix and the number. The packets containing these banknotes will not, therefore, have sequential serial numbers, but contain 100 banknotes, as usual. To facilitate easy identification, the bands on such packets clearly indicate the presence of these banknotes in the packet.

F) Counterfeits / Forgeries How does one differentiate between a genuine banknote and forged / counterfeit banknote? The banknote on which the above explained features i.e., the features of genuine banknotes are not available / absent can be suspected to be a counterfeit banknotes and examined minutely. What are the legal provisions relating to printing and circulation of forged banknotes? Counterfeiting banknotes / using as genuine, forged or counterfeit banknotes / possession of forged or counterfeit banknote / making or possessing instruments or materials for forging or counterfeiting banknotes making or using documents resembling banknotes are offences under Sections 489A to 489E of the Indian Penal Code and are punishable in the Courts of Law by fine or imprisonment ranging from seven years to life imprisonment or both, depending on the offence. G) Clean Note Policy: Reserve Bank of India has been continuously making efforts to make good quality banknotes available to the members of public. To help RBI and banking system, the members of public are requested to ensure the following:

o o o

Not to staple the banknotes Not to write / put rubber stamp or any other mark on the banknotes Store the banknotes safely to prevent any damage

Q.1. What is Electronic Clearing Service (ECS)? Ans : ECS is an electronic mode of payment / receipt for transactions that are repetitive and periodic in nature. ECS is used by institutions for making bulk payment of amounts towards distribution of dividend, interest, salary, pension, etc., or for bulk collection of amounts towards telephone / electricity / water dues, cess / tax collections, loan installment repayments, periodic investments in mutual funds, insurance premium etc. Essentially, ECS facilitates bulk transfer of monies from one bank account to many bank accounts or vice versa. Q.2. What are the variants of ECS? In what way are they different from each other? Ans : Primarily, there are two variants of ECS - ECS Credit and ECS Debit. ECS Credit is used by an institution for affording credit to a large number of beneficiaries (for instance, employees, investors etc.) having accounts with bank branches at various locations within the jurisdiction of a ECS Centre by raising a single debit to the bank account of the user institution. ECS Credit enables payment of amounts towards distribution of dividend, interest, salary, pension, etc., of the user institution. ECS Debit is used by an institution for raising debits to a large number of accounts (for instance, consumers of utility services, borrowers, investors in mutual funds etc.) maintained with bank branches at various locations within the jurisdiction of a ECS Centre for single credit to the bank account of the user institution. ECS Debit is useful for payment of telephone / electricity / water bills, cess / tax collections, loan installment repayments, periodic investments in mutual funds, insurance premium etc., that are periodic or repetitive in nature and payable to the user institution by large number of customers etc. Q.3. At how many places in the country is ECS Scheme available? Ans : Based on the geographical location of branches covered, there are three broad categories of ECS Schemes Local ECS, Regional ECS and National ECS. Local ECS this is operating at 81 centres / locations across the country. At each of these ECS centres, the branch coverage is restricted to the geographical coverage of the clearing house, generally covering one city and/or satellite towns and suburbs adjoining the city. Regional ECS this is operating at 9 centres / locations at various parts of the country. RECS facilitates the coverage all core-banking-enabled branches in a State or group of States and can be used by institutions desirous of reaching beneficiaries within the State / group of States. The system takes advantage of the core banking system in banks. Accordingly, even though the inter-bank settlement takes place centrally at one location in the State, the actual customers under the Scheme may have their accounts at various bank branches across the length and breadth of the State / group of States. National ECS this is the centralized version of ECS Credit which was launched in October 2008. The Scheme is operated at Mumbai and facilitates the coverage of all core-banking enabled branches located anywhere in the

country. This system too takes advantage of the core banking system in banks. Accordingly, even though the interbank settlement takes place centrally at one location at Mumbai, the actual customers under the Scheme may have their accounts at various bank branches across the length and breadth of the country. Banks are free to add any of their core-banking-enabled branches in NECS irrespective of their location. Details of NECS Scheme are available on the website of Reserve Bank of India at http://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2345 . The list of centres where the ECS facility is available has been placed on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/ECSUserView.aspx?Id=26. Similarly, the centre-wise list of bank branches participating at each location is available on the website of Reserve Bank of India at http://www.rbi.org.in/scripts/ECSUserView.aspx?Id=27 ECS (CREDIT) Q.4. Who can initiate an ECS Credit transaction? Ans : ECS Credit payments can be initiated by any institution (called ECS Credit User) which needs to make bulk or repetitive payments to a number of beneficiaries. The institutional User has to first register with an ECS Centre. The User has to also obtain the consent of beneficiaries (i.e., the recipients of salary, pension, dividend, interest etc.) and get their bank account particulars prior to participation in the ECS Credit scheme. ECS Credit payments can be put through by the ECS User only through his / her bank (known as the Sponsor bank). ECS Credits are afforded to the beneficiary account holders (known as destination account holders) through the beneficiary account holders bank (known as the destination bank). The beneficiary account holders are required to give mandates to the user institutions to enable them to afford credit to their bank accounts through the ECS Credit mechanism. Q.5. How does the ECS Credit Scheme work? Ans : The User intending to effect payments through ECS Credit has to submit details of the beneficiaries (like name, bank / branch / account number of the beneficiary, MICR code of the destination bank branch, etc.), date on which credit is to be afforded to the beneficiaries, etc., in a specified format (called the input file) through its sponsor bank to one of the ECS Centres where it is registered as a User. The bank managing the ECS Centre then debits the account of the sponsor bank on the scheduled settlement day and credits the accounts of the destination banks, for onward credit to the accounts of the ultimate beneficiaries with the destination bank branches. Further details about the ECS Credit scheme are contained in the Procedural Guidelines and available on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/ECSUserView.aspx?Id=1. Q.6. What is a MICR Code? Ans : MICR is an acronym for Magnetic Ink Character Recognition. The MICR Code is a numeric code that uniquely identifies a bank-branch participating in the ECS Credit scheme. This is a 9 digit code to identify the location of the bank branch; the first 3 characters represent the city, the next 3 the bank and the last 3 the branch.

The MICR Code allotted to a bank branch is printed on the MICR band of cheques issued by bank branches. Q.7. How does a beneficiary participate in ECS Credit Scheme? Ans : The beneficiary has to furnish a mandate to the user institution giving consent to avail the ECS Credit facility. The mandate contains details of his / her bank branch, account particulars and authorises the user institution to afford credit to his / her account with the destination bank branch. Q.8. Is it necessary for user institutions to collect the mandates from beneficiaries? Ans : Yes, in addition to the consent of the beneficiaries, the mandate also provides important information related to bank account details etc. which are useful for the user institution to transfer funds to the right accounts . A model mandate form has been prescribed for the purpose and is available in the ECS Credit Procedural Guidelines. Q.9. Is there scope for the beneficiary to alter the mandate under the ECS Credit Scheme? Ans : Yes. In case the information / account particulars contained in the mandate undergo any change, the beneficiary has to notify the changes to the User Institution so that the correct information can be incorporated in its records. This will ensure that transactions do not get rejected at the beneficiarys bank branch due to inconsistencies/ mismatch in the data sent by the user institution. Q.10. Can ECS be used to transfer funds to Non Resident External (NRE) and Non Resident Ordinary (NRO) accounts? Ans: Yes. ECS can be used to transfer funds to NRE and NRO accounts in the country. This, however, is subject to the adherence to the provisions of the Foreign Exchange Management Act, 2000 (FEMA) and Wire Transfer Guidelines. Q.11. Will beneficiaries be intimated of credits afforded to their account under the ECS Credit Scheme? Ans : It is the responsibility of the user institution to communicate to the beneficiary the details of credit that is being afforded to his / her account, indicating the proposed date of credit, amount and related particulars of the payment. Destination banks have been advised to ensure that the pass books / statements given to the beneficiary account holders reflect particulars of the transaction / credit provided by the ECS user institutions. The beneficiaries can match the entries in the passbook / account statement with the advice received by them from the User Institutions. Many banks also give mobile alerts / messages to customers after credit of such funds to accounts. Q.12. What will happen if credit is not afforded to the account of the beneficiary? Ans: If a Destination Bank is not in a position to credit the beneficiary account due to any reason, the same would be returned to the ECS Centre to enable the ECS Centre to pass on the uncredited items to the User Institution through the Sponsor Bank. The User Institution can then initiate payment through alternate modes to the beneficiary. In case of delayed credit by the destination bank, the destination bank would be liable to pay penal interest (at the prevailing RBI LAF Repo rate plus two percent) from the due date of credit till the date of actual credit. Such

penal interest should be credited to the Destination Account Holders account even if no claim is lodged to the effect by the Destination Account Holder. Q.13. What are the advantages of the ECS Credit Scheme to the beneficiary? Ans : ECS Credit offers many advantages to the beneficiary

The beneficiary need not visit his / her bank for depositing the paper instruments which he would have otherwise received had he not opted for ECS Credit. The beneficiary need not be apprehensive of loss / theft of physical instruments or the likelihood of fraudulent encashment thereof. Cost effective. The beneficiary receives the funds right on the due date.

Q.14. How does the ECS Credit Scheme benefit User Institutions? Ans : User institutions enjoy many advantages as well. For instance,

Savings on administrative machinery and costs of printing, dispatch and reconciliation of paper instruments that would have been used had beneficiaries not opted for ECS Credit. Avoid chances of loss / theft of instruments in transit, likelihood of fraudulent encashment of paper instruments, etc. and subsequent correspondence / litigation. Efficient payment mode ensuring that the beneficiaries get credit on a designated date. Cost effective.

Q.15. Are there any advantages of the ECS Credit Scheme to the banking system? Ans : Yes, the banking system too benefits from ECS Credit Scheme such as

Freedom from paper handling and the resultant disadvantages of handling, presenting and monitoring paper instruments presented in clearing. Ease of processing and return for the destination bank branches. Smooth process of reconciliation for the sponsor banks. Cost effective.

Q.16. Is there any limit on the value of individual transactions in ECS Credit? Ans : No. There is no value limit on the amount of individual transactions. Q.17. What are the processing / service charges levied under ECS Credit? Ans : The Reserve Bank of India has deregulated the charges to be levied by sponsor banks from user institutions. The sponsor banks are, however, required to disclose the charges in a transparent manner. With effect from 1st July 2011, originating banks are required to pay a nominal charge of 25 paise per transaction to the Clearing house and destination bank respectively. Destination bank branches have been directed to afford ECS Credit free of charge to the beneficiary account holders.

ECS (DEBIT) Q.18. Who can initiate a ECS Debit transaction? Ans : ECS Debit transaction can be initiated by any institution (called ECS Debit User) which has to receive / collect amounts towards telephone / electricity / water dues, cess / tax collections, loan installment repayments, periodic investments in mutual funds, insurance premium etc. It is a Scheme under which an account holder with a bank branch can authorise an ECS User to recover an amount at a prescribed frequency by raising a debit to his / her bank account. The User institution has to first register with an ECS Centre. The User institution has to also obtain the authorization (mandate) from its customers for debiting their account along with their bank account particulars prior to participation in the ECS Debit scheme. The mandate has to be duly verified by the beneficiarys bank. A copy of the mandate should be available on record with the destination bank where the customer has a bank account. Q.19. How does the ECS Debit Scheme work? Ans : The ECS Debit User intending to collect receivables through ECS Debit has to submit details of the customers (like name, bank / branch / account number of the customer, MICR code of the destination bank branch, etc.), date on which the customers account is to be debited, etc., in a specified format (called the input file) through its sponsor bank to the ECS Centre. The bank managing the ECS Centre then passes on the debits to the destination banks for onward debit to the customers account with the destination bank branch and credits the sponsor bank's account for onward credit to the User institution. Destination bank branches will treat the electronic instructions received from the ECS Centre on par with the physical cheques and accordingly debit the customer accounts maintained with them. All the unsuccessful debits are returned to the sponsor bank through the ECS Centre (for onward return to the User Institution) within the specified time frame. For further details about the ECS Debit scheme, the ECS Debit Procedural Guidelines available on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/ECSUserView.aspx?Id=25 may be referred to. Q.20. What are the advantages of ECS Debit Scheme to the customers? Ans : The advantages of ECS Debit to customers are many and include,

ECS Debit mandates will take care of automatic debit to customer accounts on the due dates without customers having to visit bank branches / collection centres of utility service providers etc. Customers need not keep track of due date for payments. The debits to customer accounts would be monitored by the ECS Users, and the customers alerted accordingly. Cost effective.

Q.21. How does the ECS Debit Scheme benefit user institutions?

Ans : User institutions enjoy many benefits from the ECS Debit Scheme like,

Savings on administrative machinery and costs of collecting the cheques from customers, presenting in clearing, monitoring their realisation and reconciliation. Better cash management because of realisation / recovery of dues on due dates promptly and efficiently. Avoids chances of loss / theft of instruments in transit, likelihood of fraudulent access to the paper instruments and encashment thereof. Realisation of payments on a uniform date instead of fragmented receipts spread over many days. Cost effective.

Q.22. What are the advantages of ECS Debit Scheme to the banking system? Ans : The banking system has many benefits from ECS Debit such as

Freedom from paper handling and the resultant disadvantages of handling, receiving and monitoring paper instruments presented in clearing. Ease of processing and return for the destination bank branches. Destination bank branches can debit the customers accounts after matching the account number of the customer in their database and due verification of existence of valid mandate and its particulars. With core banking systems in place and straight-through-processing, this process can be completed with minimal manual intervention. Smooth process of reconciliation for the sponsor banks. Cost effective.

Q.23. Can the mandate once given by a customer be withdrawn or stopped? Ans : Yes. Any mandate in ECS Debit is on par with a cheque issued by a customer. The customer has to maintain adequate funds in his / her account with the destination bank branch to ensure the ECS Debit instructions are honoured when presented. In case of any need to withdraw or stop a mandate, the customer has to give prior notice to the ECS user institution well in time, so as to ensure that the input files submitted by the user do not continue to include the ECS Debit details in respect of the mandates withdrawn or stopped by customers. The process flow to be followed for withdrawing / stopping mandates is detailed in ECS Debit Procedural Guidelines. Q.24. Can a customer stipulate a ceiling on the amount of debit, purpose or validity period of the mandate under the ECS Debit Scheme? Ans : Yes. It is left to the choice of the individual customer and the ECS user to decide these aspects. The mandate can contain a ceiling on the maximum amount of debit, specify the purpose of debit and validity period of the mandate. Q.25. Is there any limit on the value of Individual transactions in ECS Debit? Ans : No. There is no value limit on the amount of individual transactions that can be collected by ECS Debit. Q.26. What are the processing / service charges levied under ECS Debit? Ans : The Reserve Bank of India has deregulated the charges to be levied by sponsor banks from user institutions.

The sponsor banks are, however, required to disclose the charges in a transparent manner. With effect from 1st July 2011, originating banks are required to pay a nominal charge of 25 paise and 50 paise per transaction to the Clearing house and destination bank respectively. Bank branches do not generally levy processing / service charges for debiting the accounts of customers maintained with them. Top Reserve Bank of India. All Rights Reserved. Q. 1. What is an Automated Teller Machine (ATM)? Ans1. Automated Teller Machine is a computerized machine that provides the customers of banks the facility of accessing their account for dispensing cash and to carry out other financial & non-financial transactions without the need to actually visit their bank branch. Q.2. What type of cards can be used at an ATM? Ans 2. The ATM debit cards, credit cards and prepaid cards (that permit cash withdrawal) issued by banks can be used at ATMs for various transactions. Q. 3. What are the services/facilities available at ATMs? Ans3. In addition to cash dispensing ATMs may have many services/facilities enabled by the bank owning the ATM such as:

Account information Cash Deposit Regular bills payment Purchase of Re-load Vouchers for Mobiles Mini/Short Statement Loan account enquiry etc.

Q.4. How can one transact at an ATM? Ans4. For transacting at an ATM, the customer inserts /swipes his/her Card in the ATM and entershis/herPersonal Identification Number(PIN) issued by his/her bank. Q.5. What is Personal Identification Number (PIN)? Ans 5. PIN is the numeric password which is separately mailed / handed over to the customer by the bank while issuing the card. Most banks require the customers to change the PIN on the first use. Q.6. Can these cards be used at any bank ATM in the country? Is the customer charged for the same? Ans 6. Yes. The cards issued by banks in India may be used at any bank ATM within India. However the savings bank account holders can transact a maximum of five transactions free at other bank ATMs in a month, which is inclusive of all types of transactions, financial and non-financial, beyond which the customer can be charged by

his/her bank. Q. 7. What step should the customer take in the event of one forgets PIN or if the card is sucked in by the ATM? Ans7. The customer may contact the card issuing bank and apply for a new PIN or retrieval/issuance of a new card. Q. 8. What should be done if card is lost/stolen? Ans 8. The customer may contact the card issuing bank immediately on noticing the loss so as to enable the bank to block the card. Q. 9. Is there any minimum and maximum cash withdrawal limit per day? Ans 9. Yes. broadly the withdrawal limits are set by the card issuing banks. This limit is displayed at the respective ATM locations. Q.10. What steps should a customer take in case of failed ATM transaction at other bank ATMs, where his account is debited? Ans 10. The customer should lodge a complaint with the card issuing bank at the earliest. This process is applicable even if the transaction was carried out at another banks ATM. Q. 11. Is there any time limit for the card issuing banks for recrediting the customers account for a failed ATM transaction indicated under Q No. 10? Ans 11. As per the RBI instructions (DPSS.PD.No. 2632/02.10.002/2010-2011 dated May 27, 2011), banks have been mandated to resolve customercomplaints by recrediting the customers account within 7 working days from the date of complaint. Q. 12. Are the customers eligible for compensation for delays beyond 7 working days? Ans 12. Yes. Effective from July 1, 2011, banks have to pay customers Rs. 100/- per day for delays beyond 7 working days. The compensation has to be credited to the account of the customer without any claim being made by the customer.If the complaint is not lodged within 30 days of transaction, the customer is not entitled for any compensation for delay in resolving his / her complaint. Q 13. What is the course of action for the customer if the complaint is not addressed by his/her bank within the stipulated time? Ans 13. The customer can take recourse to the local Banking Ombudsman in such situations. 1. What is Cheque Truncation?

Truncation is the process of stopping the flow of the physical cheque issued by a drawer at some point with the presenting bank en-route to the drawee bank branch. In its place an electronic image of the cheque is transmitted to the drawee branch by 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 branches, other than in exceptional circumstances for clearing purposes. This effectively eliminates the associated cost of movement of the physical cheques, reduces the time required for their collection and brings elegance to the entire activity of cheque processing. 2. Why Cheque Truncation in India? As explained above, Cheque Truncation speeds up the process of collection of cheques resulting in better service to customers, reduces the scope for clearing-related frauds or loss of instruments in transit, lowers the cost of collection of cheques, and removes reconciliation-related and logistics-related problems, thus benefitting the system as a whole. With the other major products being offered in the form of RTGS and NEFT, the Reserve Bank has created the capability to enable inter-bank and customer payments online and in near-real time. However, as cheques are still the prominent mode of payments in the country and Reserve Bank of India has decided to focus on improving the efficiency of the cheque clearing cycle, offering Cheque Truncation System (CTS) as an alternative. As highlighted earlier, CTS is a more secure system vis-a-vis the exchange of physical documents. 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. CTS, thus, has emerged as an important efficiency enhancement initiative undertaken by Reserve Bank in the Payments Systems area. 3. What is the status of CTS implementation in the country? The Reserve Bank has implemented CTS as a pilot project in the National Capital Region (NCR), New Delhi with effect from February 1, 2008. After migration of the entire cheque volume from MICR system to CTS effective from July 1, 2009, the traditional MICR-based cheque processing has been discontinued in NCR. Based on the advantages realised by the stakeholders and the experienced gained from the pilot roll-out in NCR, it has been decided to operationalise CTS across the country. Accordingly, CTS has been rolled out in Chennai w.e.f September 22,2011 with few banks. 4. What is the new approach to CTS implementation in the country? The new approach envisioned as part of the national roll-out is the grid-based approach. Under this approach the entire cheque volume in the country cleared across numerous locations will be consolidated into a much fewer number of five or six grids. Each grid will provide processing and clearing services to all the centres under its jurisdiction, which could involve an entire state or a group of contiguous states as well. Banks, branches and customers based at small / remote locations falling under the geographical jurisdiction of a grid would be benefitted,

irrespective of whether there exists at present a formal arrangement for cheque clearing or otherwise. The Chennai grid presently introduced and once fully operational, will not be confined to the city of Chennai alone, but will cover as many as 17 MICR centres and ECCS centres managed / operated by other banks as also areas where clearing infrastructure is unavailable in the states of Karnataka, Kerala and Tamil Nadu. 5. Is it possible to briefly explain the entire process flow in CTS? Yes. In CTS, the presenting bank (or its branch) captures the data (on the MICR band) and the images of a cheque using their Capture System (comprising of a scanner, core banking or other application) which is internal to them, and have to meet the specifications and standards prescribed for data and images. To ensure security, safety and non-repudiation of data / images, end-to-end Public Key Infrastructure (PKI) has been implemented in CTS. As part of the requirement, the collecting bank (presenting bank) sends the data and captured images duly signed and encrypted to the central processing location (Clearing House) for onward transmission to the paying bank (destination or drawee bank). For the purpose of participation the presenting and drawee banks are provided with an interface / gateway called the Clearing House Interface (CHI) that enables them to connect and transmit data and images in a secure and safe manner to the Clearing House (CH). The Clearing House processes the data, arrives at the settlement figure and routes the images and requisite data to the drawee banks. This is called the presentation clearing. The drawee banks through their CHIs receive the images and data from the Clearing House for payment processing. The drawee CHIs also generate the return file for unpaid instruments, if any. The return file / data sent by the drawee banks are processed by the Clearing House in the return clearing session in the same way as presentation clearing and return data is provided to the presenting banks for processing. The clearing cycle is treated as complete once the presentation clearing and the associated return clearing sessions are successfully processed. The entire essence of CTS technology lies in the use of images of cheques (instead of the physical cheques) for payment processing. 6. What type of cheques can be presented for clearing through CTS? All types of cheques can be presented for clearing through CTS. It is no different from the use of traditional clearing infrastructure for clearing paper cheques. Cheques presented as part of Speed Clearing are handled in CTS as well (for more details on Speed Clearing, the related FAQs may be referred to). Incidentally, given the fact that images of cheques (and not the physical cheques) alone need to move in CTS, it is possible for the removal of the restriction of geographical jurisdiction normally associated with the paper cheque clearing. For reaping this benefit , the concept of Grid-CTS clearing is being envisaged as part of roll-out of CTS at Chennai. Under the grid clearing, cheques drawn on centres included in the grid will be cleared as part of local clearing.

7. Will there be any change in the process for the customers? No. There is no change in the clearing process for customers. Customers continue to use cheques as at present, except to ensure the use of image-friendly-coloured-inks while writing the cheques. Of course, such of those customers, who are used to receiving the paid instruments (like government departments) would also receive the cheque images. Cheques with alterations in material fields (explained in detail later) are not allowed to be processed under the CTS environment. 8. What are the benefits of CTS to customers of banks? The benefits are many. With the introduction of imaging and truncation, the physical movement of instruments is stopped. The electronic movement of images of cheques speeds up the process of settlement and can facilitate reduction in the clearing cycles as well. Moreover, there is no fear of loss of instruments in transit. Further, limitations of the existing clearing system in terms of geography or jurisdiction can be removed, thus enabling consolidation and integration of multiple clearing locations managed by different banks with varying service levels into a nationwide standard clearing system with uniform processes and practices. CTS also benefits issuers of cheques. Use of images obviates the need to handle and move physical cheques at different points. The scope for frauds inherent in paper instruments is, thus, greatly reduced. The Corporates if needed can be provided with images of cheques by their bankers for internal requirements,if any. As only the images move, the time taken for receipt of paid cheques is reduced which also gives an early opportunity to the issuers of cheques to detect frauds or alterations, if any, in terms of what (and to whom it) was issued and what (by whom it) was realised. CTS brings elegance to the entire activity of cheque processing and clearing. Cheque frauds can be greatly reduced with introduction of minimum security features prescribed under CTS Standards 2010, such as embedded verifiable features such as bar-codes, encrypted codes, logos, watermarks, holograms, etc., for early interception of altered / forged instruments. Obviating the need to move the physical cheques is extremely beneficial in terms of cost and time savings. The benefits from CTS could be summarized as follows

Shorter clearing cycle Superior verification and reconciliation process No geographical restrictions as to jurisdiction Operational efficiency for banks and customers alike Reduction in operational risk and risks associated with paper clearing

9. If a customer desires to see the physical cheque issued by him for any reason, what are the options available? Under CTS the physical cheques are retained at the presenting bank level and do not move to the paying banks. In case a customer desires, banks can provide images of cheques duly

authenticated. In case, however, a customer desires to see / get the physical cheque, it would need to be sourced from the presenting bank, for which a request should be made to his bank. An element of cost / charge may also be involved for the purpose. To meet legal requirements, the presenting banks which truncate the cheques need to preserve the physical instruments for a period of 10 years. 10. How would be the uniqueness of a physical cheque be captured and imparted to the cheque image ? CTS in India mandates the use of prescribed image specifications only. Images that do not meet the specifications are rejected. As the payments are made on the basis of the images, it is essential to ensure the quality of the images. To ensure only images of requisite quality move in the CTS processing cycle, there is a rigorous quality check process at the level of the Capture Systems and the Clearing House Interface (of the presenting bank). The solution encompasses Image Quality Assessment (IQA) at different levels. The presenting bank is required to perform the IQA during the capture itself. Further IQA is done at the gateway before onward transmission to clearing house. The images are captured with digital signatures of the presenting bank and thereafter transmitted to the Clearing House and then to the paying banks. Further, the paying banks, if not satisfied with the image quality or for any other reason, can ask for the physical instrument to facilitate payment processing. Further, the new cheque standard "CTS-2010" prescribes certain mandatory and optional security features to be available on cheques, which will also add to the uniqueness of the images. 11. What are the image specifications in CTS in the Indian context? Imaging of cheques can be based on various technology options. The cheque images can be Black & White, Gray Scale or Coloured. These have their associated advantages and disadvantages. Black & White images are light in terms of image-size, but do not reveal all the subtle features that are there in the cheques. Coloured images are ideal but increase storage and network bandwidth requirements. Gray Scale images are mid-way. CTS in India uses a combination of Gray Scale and Black & White images. There are three images of each cheques that need to be taken - front Gray Scale, front Black & White and back Black & White. 12. How are the images of cheques taken ? Images of cheques are taken using scanners. Scanners also function like photo-copiers by reflecting the light passed through a narrow passage on to the document. Tiny sensors measure the reflection from each point along the strip of light. Reflectance measurements of each dot is called a pixel. Images are classified as black and white, gray-scale or colour based on how the pixels are converted into digital values. For getting a gray scale image the pixels are mapped onto a range of gray shades between black and white. The entire image of the original document gets mapped as some shade of gray, lighter or darker, depending on the colour of the source. In the case of black and white images, such mapping is made only to two colours based on the range of values of contrasts. A black and white image is also called a binary image.

13. How the image and data transmitted over the network is secured ? The security, integrity, non-repudiation and authenticity of the data and image transmitted from the paying bank to the payee bank are ensured using the Public Key Infrastructure (PKI). CTS is compliant to the requirements of the IT Act, 2000. It has been made mandatory for the presenting bank to sign the images and data from the point of origin itself. PKI is used throughout the entire cycle covering capture system, the presenting bank, the clearing house and the drawee bank. The PKI standards used are in accordance with the appropriate Indian acts and notifications of Controller of Certifying Authority (CCA) 14. What is Cheque Standardisation and what does CTS 2010 Standard mean ? Standardisation of cheque forms (leaves) in terms of size, MICR band, quality of paper, etc., was one of the key factors that enabled mechanisation of cheque processing. Over a period of time, banks have added a variety of patterns and design of cheque forms to aid segmentation, branding, identification, etc., as also incorporated therein a number of security features to reduce the incidence of cheque misuse, tampering, alterations, etc. Growing use of multi-city and payable-at-par cheques for handling of cheques at any branches of a bank, introduction of Cheque Truncation System (CTS), increasing popularity of Speed Clearing, etc., were a few aspects that led to prescription of certain minimum security features in cheques printed, issued and handled by banks and customers uniformly across the banking industry. A Working Group was set-up by RBI for examining further standardisation of cheque forms and enhancement of security features therein. Accordingly, certain benchmarks towards achieving standardisation of cheques issued by banks across the country have been prescribed like quality of paper, watermark, banks logo in invisible ink, void pantograph, etc., and standardisation of field placements on cheques. In addition, certain desirable features have also been suggested to be implemented by banks based on their need and risk perception. The set of minimum security features would not only ensure uniformity across all cheque forms issued by banks in the country but also help presenting banks while scrutinising / recognising cheques of drawee banks in an image-based processing scenario. The homogeneity in security features is expected to act as a deterrent against cheque frauds, while the standardisation of field placements on cheque forms would enable straight-through-processing by use of optical / image character recognition technology. The benchmark prescriptions are collectively known as "CTS-2010 standard". Indian Banks Association (IBA) and National Payments Corporation of India (NPCI) are coordinating with the banks on implementation of the new standard. Accordingly, the cheques issued are tested and certified by NPCI and only after such cerification the cheques would be issued to the customers. 15. What is the prescription relating to alterations / corrections on cheque forms ? The prescription on prohibiting alterations / corrections on cheques has been introduced to curtail cheque frauds on account of alterations in the various fields of cheques and to give protection to customers as well as banks. No changes / corrections can be carried out on the cheques (other than for date validation purposes, if required). For any change in the payees name, courtesy amount (amount in figures) or legal amount (amount in words), fresh cheque leaves should be used by customers. This would help banks in identifying and controlling fraudulent alterations.

This prohibition is applicable to cheques cleared under the image based Cheque Truncation System (CTS) and is effective from December 1, 2010. It is not applicable to cheques cleared under other clearing arrangements for the present. 16. What are the precautions required to be taken by the banks / customers to avoid frauds ? Banks / Customers should use "CTS 2010" cheques which are not only image friendly but also have more security features. Customers may request their banks for cheque forms that are compliant with the "CTS 2010" standard. They should preferably use dark coloured ink while writing cheques and avoid any alterations / corrections thereon. A new cheque should be used in the event of any alterations / corrections. Banks should exercise care while stamping the cheque forms, so that it does not interfere with the material portions such as date, payees name, amount and signature. The use of rubber stamps, etc, should not overshadow the clear appearance of these basic features in image. It is necessary to ensure that all essential elements of a cheque are captured in an image during the scanning process and banks / customers have to exercise appropriate care in this regard. 17. What are the modes in which banks can participate in CTS ? There are two modes in which banks may participate in CTS a. Direct membership: Banks may participate as direct member provided they have a settlement account with the settlement bank and have put in place necessary infrastructure for participating in CTS. b. Indirect / Sub-membership: Banks may become sub-members / indirect members of the direct members by using the infrastructure and / or settlement services of the direct members. The settlement for such indirect / sub-member could be done either directly (if such banks have settlement accounts with the settlement bank) or through the direct member through whom they are participating. 18. Is the infrastructure requirement for participating the CTS the same for all banks ? The infrastructure required at the banks end for participating in CTS are connectivity from the banks gateway to the Clearing House, prescribed hardware and software for the CTS application. RBI provides member banks with the CHI (software). Banks need to procure hardware and other software such as operating system, database and a bouquet of third party software for the CHI. They also need to procure the application software for their capture systems. The hardware requirement / sizing is based on the volume of cheques processed by banks. Based on the volume the CHI is categorised into four types and the hardware requirement is different for each category.

The bandwidth requirement for each bank is calculated based a number of factors like the peak inward and outward volume of the bank, average size of an image, efficiency factor of the network, etc. In addition, future requirements have been taken into consideration while calculating the bandwidth requirement. 19. Whether the Cheque Truncation System has legal sanction? With amendments in the Sections 6 and 1(4), coupled with the introduction of 81 A to the Negotiable Instruments Act, 1881, truncation of cheques is now legalized. 20. In case of need for any further clarifications, who can be approached for guidance ? For any further clarifications the Contact Persons are The General Manager, National Clearing Cell, Reserve Bank of India, 7th Floor, Tower 1, Jeevan Bharati Building, Connaught Place, New Delhi 110 001. The Chief Executive Officer, National Payment Corporation of India, C-9,8th Floor ,RBI Premises, Bandra-Kurla Complex, Bandra (East), Mumbai-400 051, 1. What happens if there are delays in cheque clearing? Local Cheques Local cheques are payable within the jurisdiction of the clearing house and will be presented through the clearing system prevailing at the centre. Credit arising out of local cheques shall be given to the customers account at the next day to the date of presentation in the clearing. Ideally, banks shall permit usage of the shadow credit afforded to the customer accounts immediately after closure of the relative return clearing on the next working day or maximum within an hour of commencement of business on the third working day from the day of presentation in clearing, subject to usual safeguards.. Outstation Cheques Maximum timeframe for collection of cheques drawn on state capitals/major cities/other locations are 7/10/14 days respectively. If there is any delay in collection beyond this period, you are entitled to interest at the rate specified in the Cheque Collection Policy of the bank. In case the rate is not specified in the Cheque Collection Policy, you are entitled to receive interest rate on Fixed Deposits for the corresponding maturity. Banks' cheque collection policy also indicates the limit up to which outstation cheques are given immediate credit. 2. What happens if cheques / instruments are lost in transit / in clearing process? If cheques are lost in transit or in the clearing process or at the paying bank's branch, the bank should immediately bring the same to your notice so that you can inform the drawer to record

stop payment and can also take care that other cheques issued by you are not dishonoured due to non-credit of the amount of the lost cheques / instruments. The onus of such loss does not lie with you, but the collecting banker. You are entitled to be reimbursed by the banks for related expenses for obtaining duplicate instruments and also interest for reasonable delays in obtaining the same. 3. My bank charges me a large sum of money for cheque collection. Is there any remedy? Local Cheque collection charges are decided by the concerned bank from time to time and communicated to customer as part of the Code of Banks Commitment to Customers. Banks cannot charge you more than the following for outstation cheques: Up to and including Rs.5000 Rs.25 per instrument + service tax; Above Rs.5000 and Up to and including Rs. 10,000 not exceeding Rs. 50 per instrument+ service tax; Above Rs. 10,000 and up to and including Rs. 1, 00,000 not exceeding Rs. 100 per instrument + service tax; Rs.1, 00,001 and above left to the banks to decide. No additional charges such as courier charges, out of pocket expenses, etc., should be levied. 4. My bank refuses to accept outstation cheques for collection. Is there any remedy? No bank can refuse to accept outstation cheques deposited by you for collection or refuse to offer its products to you. 5. Can I know a banks Cheque Collection Policy? Like in most countries, banks in India also are required to develop their own individual policy / procedures relating to collection of cheques. You are entitled to receive due disclosures from the bank on the bank's obligations and the customers' rights. Broadly, the policies formulated by banks should cover the following areas: Immediate credit for local/outstation cheques, Time frame for collection of local/ outstation instruments and Interest payment for delayed collection. The cheque collection policies of various banks are made available on the website of Reserve Bank of India under the link http://www.rbi.org.in/commonman/English/Scripts/ChequeCollectionPolicy.aspx Banks are obliged to disclose their liability to you by way of interest payments due to delays for non-compliance with the standards set by the banks themselves. You are eligible to be compensated by way of interest payment even if no formal claim is lodged by you. 6. How are banks supposed to disclose their policies?

As a customer you have the right to know the Cheque Collection Policy of the bank before entering into any transaction. The bank is obliged to disclose the amount up to which immediate credit of outstation cheque is offered in its Comprehensive Notice Board, which is to be displayed at each and every branch of the bank. The bank is also required to disclose its policy with regard to immediate credit for local / outstation cheques, time frame for collection of local/outstation instruments and policy for interest payment for delayed collection. The same will be available in the Information Booklets which should be available at all the bank branches. You are also entitled to ask the Branch Manager for a copy of the banks Cheque Collection Policy, if you so desire. Banks are also required to put up their Cheque Collection Policy on their websites. The cheque collection policies of various banks are made available on the website of RBI under the link mentioned in 5 above. 7. What are the other means of transfer of funds? They are RTGS (Real Time Gross Settlement) & NEFT (National Electronic Fund Transfer). For more details visit the FAQs on RTGS under the link http://rbi.org.in/scripts/FAQView.aspx?Id=65 and NEFT under the link http://rbi.org.in/scripts/FAQView.aspx?Id=60. 8. Am I entitled to receive an acknowledgement for cheque deposited in a bank for collection? Banks are required to provide both the cheque drop box facility and the acknowledgement facility at their collection counters. No bank branch can refuse to give an acknowledgement to the customer if the latter asks for the same while tendering cheque for collection at the bank branchs counter. 9. What do I do if I still have a grievance? If you have a complaint against a bank on any of the above grounds or if you have a complaint due to non-payment or inordinate delay in the payment or collection of cheques, you can lodge a complaint with the bank concerned. If the bank fails to respond within 30 days, you can lodge a complaint with the Banking Ombudsman. (Please note that complaints pending in any other judicial forum will not be entertained by the Banking Ombudsman). No fee is levied by the office of the Banking Ombudsman for resolving the customers complaint. A unique complaint identification number will be given to you for tracking purpose. (A list of the Banking Ombudsmen along with their contact details is provided in the Annex). Complaints are to be addressed to the Banking Ombudsman within whose jurisdiction the branch or office of the bank complained against is located. Complaints can be lodged simply by writing on a plain paper or online at www.bankingombudsman.rbi.org.in or by sending an email to the Banking Ombudsman. Complaint forms are available at all bank branches also.

Complaint can also be lodged by your authorised representative (other than a lawyer) or by a consumer association/forum acting on your behalf. If you are not happy with the decision of the Banking Ombudsman, you can appeal to the appellate authority in the Reserve Bank of India (Deputy Governor of Reserve Bank of India). Q.1. What is NEFT? Ans: National Electronic Funds Transfer (NEFT) is a nation-wide payment system facilitating one-to-one funds transfer. Under this Scheme, individuals, firms and corporates can electronically transfer funds from any bank branch to any individual, firm or corporate having an account with any other bank branch in the country participating in the Scheme. Q.2. Are all bank branches in the country part of the NEFT funds transfer network? Ans: For being part of the NEFT funds transfer network, a bank branch has to be NEFTenabled.The list of bank-wise branches which are participating in NEFT is provided in the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2009 Q.3. Who can transfer funds using NEFT? Ans: Individuals, firms or corporates maintaining accounts with a bank branch can transfer funds using NEFT. Even such individuals who do not have a bank account (walk-in customers) can also deposit cash at the NEFT-enabled branches with instructions to transfer funds using NEFT. However, such cash remittances will be restricted to a maximum of Rs.50,000/- per transaction. Such customers have to furnish full details including complete address, telephone number, etc. NEFT, thus, facilitates originators or remitters to initiate funds transfer transactions even without having a bank account. Q.4. Who can receive funds through the NEFT system? Ans: Individuals, firms or corporates maintaining accounts with a bank branch can receive funds through the NEFT system. It is, therefore, necessary for the beneficiary to have an account with the NEFT enabled destination bank branch in the country. The NEFT system also facilitates one-way cross-border transfer of funds from India to Nepal. This is known as the Indo-Nepal Remittance Facility Scheme. A remitter can transfer funds from any of the NEFT-enabled branches in to Nepal, irrespective of whether the beneficiary in Nepal maintains an account with a bank branch in Nepal or not. The beneficiary would receive funds in Nepalese Rupees. Further details on the Indo-Nepal Remittance Facility Scheme are available on the website of Reserve Bank of India at http://rbidocs.rbi.org.in/rdocs/content/pdfs/84489.pdf. Q.5. Is there any limit on the amount that could be transferred using NEFT? Ans: No. There is no limit either minimum or maximum on the amount of funds that could be transferred using NEFT. However, maximum amount per transaction is limited to Rs.50,000/- for cash-based remittances and remittances to Nepal.

Q.7. Whether the system is centre specific or has any geographical restriction? Ans: No. There is no restriction of centres or of any geographical area within the country. The NEFT system takes advantage of the core banking system in banks. Accordingly, the settlement of funds between originating and receiving banks takes places centrally at Mumbai, whereas the branches participating in NEFT can be located anywhere across the length and breadth of the country. Q.6. What are the operating hours of NEFT? Ans : Presently, NEFT operates in hourly batches - there are eleven settlements from 9 am to 7 pm on week days (Monday through Friday) and five settlements from 9 am to 1 pm on Saturdays. Q.7. How does the NEFT system operate? Step-1 : An individual / firm / corporate intending to originate transfer of funds through NEFT has to fill an application form providing details of the beneficiary (like name of the beneficiary, name of the bank branch where the beneficiary has an account, IFSC of the beneficiary bank branch, account type and account number) and the amount to be remitted. The application form will be available at the originating bank branch. The remitter authorizes his/her bank branch to debit his account and remit the specified amount to the beneficiary. Customers enjoying net banking facility offered by their bankers can also initiate the funds transfer request online. Some banks offer the NEFT facility even through the ATMs. Walk-in customers will, however, have to give their contact details (complete address and telephone number, etc.) to the branch. This will help the branch to refund the money to the customer in case credit could not be afforded to the beneficiarys bank account or the transaction is rejected / returned for any reason. Step-2 : The originating bank branch prepares a message and sends the message to its pooling centre (also called the NEFT Service Centre). Step-3 : The pooling centre forwards the message to the NEFT Clearing Centre (operated by National Clearing Cell, Reserve Bank of India, Mumbai) to be included for the next available batch. Step-4 : The Clearing Centre sorts the funds transfer transactions destination bank-wise and prepares accounting entries to receive funds from the originating banks (debit) and give the funds to the destination banks(credit). Thereafter, bank-wise remittance messages are forwarded to the destination banks through their pooling centre (NEFT Service Centre). Step-5 : The destination banks receive the inward remittance messages from the Clearing Centre and pass on the credit to the beneficiary customers accounts. Q.8. What is IFSC?

Ans : IFSC or Indian Financial System Code is an alpha-numeric code that uniquely identifies a bank-branch participating in the NEFT system. This is an 11 digit code with the first 4 alpha characters representing the bank, and the last 6 characters representing the branch. The 5th character is 0 (zero). IFSC is used by the NEFT system to identify the originating / destination banks / branches and also to route the messages appropriately to the concerned banks / branches. Q.9. How can the IFSC of a bank-branch be found? Ans: Bank-wise list of IFSCs is available with all the bank-branches participating in NEFT.List of bank-wise branches participating in NEFT and their IFSCs is available on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2009 .All the banks have also been advised to print the IFSC of the branch on cheques issued to their customers. For net banking customers many banks have enabled online search / pop-up of the IFSC of the destination bank branch. Q.10. What are the processing or service charges for NEFT transactions? Ans: The structure of charges that can be levied on the customer for NEFT is given below: a) Inward transactions at destination bank branches (for credit to beneficiary accounts) Free, no charges to be levied from beneficiaries b) Outward transactions at originating bank branches (charges for the remitter) - For transactions up to Rs 1 lakh not exceeding Rs 5 (+ Service Tax) - For transactions above Rs 1 lakh and up to Rs 2 lakhs not exceeding Rs 15 (+ Service Tax) - For transactions above Rs 2 lakhs not exceeding Rs 25 (+ Service Tax) c) Charges applicable for transferring funds from India to Nepal using the NEFT system (under the Indo-Nepal Remittance Facility Scheme) is available on the website of RBI at http://rbi.org.in/scripts/FAQView.aspx?Id=67 With effect from 1st July 2011, originating banks are required to pay a nominal charge of 25 paise each per transaction to the clearing house as well as destination bank as service charge. However, these charges cannot be passed on to the customers by the banks. Q.11. When can the beneficiary expect to get the credit to his bank account? Ans: The beneficiary can expect to get credit for the first nine batches on week days (i.e., transactions from 9 am to 5 pm) and the first four batches on Saturdays (i.e., transactions from 9 am to 12 noon) on the same day. For transactions settled in the last two batches on week days (i.e., transactions settled in the 6 and 7 pm batches) and the last batch on Saturdays (i.e., transactions handled in the 1 pm batch) beneficiaries can expect to get credit either on the same

day or on the next working day morning (depending on the type of facility enjoyed by the beneficiary with his bank). Q.12. Who should be contacted in case of non-credit or delay in credit to the beneficiary account? Ans: In case of non-credit or delay in credit to the beneficiary account, the NEFT Customer Facilitation Centre (CFC) of the respective bank can be contacted (the remitter can contact his banks CFC; the beneficiary may contact the CFC of his bank). Details of NEFT Customer Facilitation Centres of banks are available on the websites of the respective banks. The details are also available on the website of Reserve Bank of India at http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=2070 . If the issue is not resolved satisfactorily, the NEFT Help Desk (or Customer Facilitation Centre of Reserve Bank of India) at National Clearing Cell, Reserve Bank of India, Mumbai may be contacted through e-mail or by addressing correspondence to the General Manager, Reserve Bank of India, National Clearing Centre, First Floor, Free Press House, Nariman Point, Mumbai 400 021. Q.13. What will happen if credit is not afforded to the account of the beneficiary? Ans: If it is not possible to afford credit to the account of the beneficiary for whatever reason, destination banks are required to return the transaction (to the originating branch) within two hours of completion of the batch in which the transaction was processed. For example, if a customer submits a fund transfer request at 12.05 p.m. to a NEFT-enabled branch, the branch in turn forwards the message through its pooling centre to the NEFT Clearing Centre for processing in the immediately available batch which (say) is the 1.00 pm batch. If the destination bank, is unable to afford the credit to the beneficiary for any reason, it has to return the transaction to the originating bank, not later than in the 3.00 pm batch. On receiving such a returned transaction, the originating bank has to credit the amount back to account of the originating customer.To conclude, for all uncredited transactions, customers can reasonably expect the funds to be received back by them in around 3 to 4 hours time. Q.14. Can NEFT be used to transfer funds from / to NRE and NRO accounts? Ans: Yes. NEFT can be used to transfer funds from or to NRE and NRO accounts in the country. This, however, is subject to the adherence of the provisions of the Foreign Exchange Management Act, 2000 (FEMA) and Wire Transfer Guidelines. Q.15. Can remittances be sent abroad using NEFT? Ans: No. However, a facility is available to send outward remittances to Nepal under the IndoNepal Remittance Facility Scheme. Q.16. What are the other transactions that could be initiated using NEFT?

Ans: Besides personal funds transfer, the NEFT system can also be used for a variety of transaction including payment of credit card dues to the card issuing banks. It is necessary to quote the IFSC of the beneficiary card issuing bank to initiate the bill payment transactions using NEFT. Q.17. Can a transaction be originated to draw (receive) funds from another account? Ans : No. NEFT is a credit-push system i.e., transactions can be originated only to transfer / remit funds to a beneficiary. Q.18. Would the remitter receive an acknowledgement once the funds are transferred to the account of the beneficiary? Ans: Yes. In case of successful credit to the beneficiary's account, the bank which had originated the transaction is expected to send a confirmation to the originating customer (through SMS or email) advising of the credit as also mentioning the date and time of credit. For the purpose, remitters need to provide their mobile number / e-mail-id to the branch at the time of originating the transaction. Q.19. Is there a way for the remitter to track a transaction in NEFT? Ans: Yes, the remitter can track the NEFT transaction through the originating bank branch or its CFC using the unique transaction reference number provided at the time of initiating the funds transfer. It is possible for the originating bank branch to keep track and be aware of the status of the NEFT transaction at all times. Q.20. What are the pre-requisites for originating a NEFT transaction? Ans : Following are the pre-requisites for putting through a funds transfer transaction using NEFT

Originating and destination bank branches should be part of the NEFT network Beneficiary details such as beneficiary name, account number and account type, name and IFSC of the beneficiary bank branch should be available with the remitter For net banking customers, some banks provide the facility to automatically pop-up the IFSC once name of the destination bank and branch is highlighted / chosen / indicated / keyed in.

Q.21. What are the benefits of using NEFT? Ans: NEFT offers many advantages over the other modes of funds transfer:

The remitter need not send the physical cheque or Demand Draft to the beneficiary. The beneficiary need not visit his / her bank for depositing the paper instruments. The beneficiary need not be apprehensive of loss / theft of physical instruments or the likelihood of fraudulent encashment thereof.

Cost effective. Credit confirmation of the remittances sent by SMS or email. Remitter can initiate the remittances from his home / place of work using the internet banking also. Near real time transfer of the funds to the beneficiary account in a secure manner.

1. What is RTGS System? Ans. The acronym 'RTGS' stands for Real Time Gross Settlement, which can be defined as the continuous (real-time) settlement of funds transfers individually on an order by order basis (without netting). 'Real Time' means the processing of instructions at the time they are received rather than at some later time.'Gross Settlement' means the settlement of funds transfer instructions occurs individually (on an instruction by instruction basis). Considering that the funds settlement takes place in the books of the Reserve Bank of India, the payments are final and irrevocable. Q2. How RTGS is different from National Electronics Funds Transfer System (NEFT)? Ans. NEFT is an electronic fund transfer system that operates on a Deferred Net Settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place with all transactions received till the particular cut-off time. These transactions are netted (payable and receivables) in NEFT whereas in RTGS the transactions are settled individually. For example, currently, NEFT operates in hourly batches - there are eleven settlements from 9 am to 7 pm on week days and five settlements from 9 am to 1 pm on Saturdays. Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time Contrary to this, in the RTGS transactions are processed continuously throughout the RTGS business hours. Q3. Is there any minimum / maximum amount stipulation for RTGS transactions? Ans. The RTGS system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is ` 2 lakh. There is no upper ceiling for RTGS transactions. Q4. What is the time taken for effecting funds transfer from one account to another under RTGS? Ans. Under normal circumstances the beneficiary branches are expected to receive the funds in real time as soon as funds are transferred by the remitting bank. The beneficiary bank has to credit the beneficiary's account within two hours of receiving the funds transfer message. Q5. Would the remitting customer receive an acknowledgement of money credited to the beneficiary's account? Ans. The remitting bank receives a message from the Reserve Bank that money has been credited to the receiving bank. Based on this the remitting bank can advise the remitting customer that money has been delivered to the receiving bank.

Q6. Would the remitting customer get back the money if it is not credited to the beneficiary's account? When? Ans. Yes.It is expected that the receiving bank will credit the account of the beneficiary instantly. If the money cannot be credited for any reason, the receiving bank would have to return the money to the remitting bank within 2 hours. Once the money is received back by the remitting bank, the original debit entry in the customer's account is reversed. Q7. Till what time RTGS service window is available? Ans. The RTGS service window for customer's transactions is available from 9.00 hours to 16.30 hours on week days and from 9.00 hours to 13.30 hours on Saturdays for settlement at the RBI end. However, the timings that the banks follow may vary depending on the customer timings of the bank branches. Q8. What about Processing Charges / Service Charges for RTGS transactions? Ans With a view to rationalize the service charges levied by banks for offering funds transfer through RTGS system, a broad framework has been mandated as under: a) Inward transactions Free, no charge to be levied. b) Outward transactions Rs. 2 lakh to Rs. 5 lakh - not exceeding Rs. 30 per transaction. Above Rs. 5 lakh - not exceeding Rs. 55 per transaction. Q9. What is the essential information that the remitting customer would have to furnish to a bank for the remittance to be effected? Ans. The remitting customer has to furnish the following information to a bank for effecting a RTGS remittance: 1. 2. 3. 4. 5. 6. 7. Amount to be remitted Remitting customers account number which is to be debited Name of the beneficiary bank Name of the beneficiary customer Account number of the beneficiary customer Sender to receiver information, if any The IFSC Number of the receiving branch

Q10. How would one know the IFSC code of the receiving branch? Ans. The beneficiary customer can obtain the IFSC code from his bank branch. The IFSC code is also available on the cheque leaf. The IFSC code is also available on the RBI website

(http://rbidocs.rbi.org.in/rdocs/RTGS/DOCs/RTGEB1110.xls). This code number and bank branch details can be communicated by the beneficiary to the remitting customer. Q11. Do all bank branches in India provide RTGS service? Ans. No. All the bank branches in India are not RTGS enabled. As on September 29, 2011, there are more than 78,000 RTGS enabled bank branches. The list of such branches is available on RBI website at http://rbidocs.rbi.org.in/rdocs/RTGS/DOCs/RTGEB1110.xls Q12. Is there any way that a remitting customer can track the remittance transaction? Ans It would depend on the arrangement between the remitting customer and the remitting bank. Some banks with internet banking facility provide this service. Once the funds are credited to the account of the beneficiary bank, the remitting customer gets a confirmation from his bank either by an e-mail or sms. Q13. Whom do I can contact, in case of non-credit or delay in credit to the beneficiary account? Ans Contact your bank / branch. If the issue is not resolved satisfactorily, complaint may be lodged to the Customer Service Department of RBI at The Chief General Manager, Reserve Bank of India, Customer Service Department, 1st Floor, Amar Building, Fort, Mumbai 400 001 Or send email Q14. How can a remitting customer know whether the bank branch of the beneficiary accepts remittance through RTGS? Ans. For a funds transfer to go through RTGS, both the sending bank branch and the receiving bank branch would have to be RTGS enabled. The lists are readily available at all RTGS enabled branches. Besides, the information is available at RBI website (http://rbidocs.rbi.org.in/rdocs/RTGS/DOCs/RTGEB1110.xls). Considering that more than 74,000 branches at more than 20,000 cities/ towns / taluka places are covered under the RTGS system, getting this information would not be difficult. . What is RBI's role with regard to conduct of Government's banking transaction? In terms of Section 20 of the RBI Act 1934, RBI has the obligation to undertake the receipts and payments of the Central Government and to carry out the exchange, remittance and other banking operations, including the management of the public debt of the Union. Further, as per

Section 21 of the said Act, RBI has the right to transact Government business of the Union in India. State Government transactions are carried out by RBI in terms of the agreement entered into with the State Governments in terms of section 21 A of the Act. As of now, such agreements exist between RBI and all the State Governments except Government of Sikkim. 2. How does Reserve Bank of India discharge its statutory obligation of being 'Banker to Government'? Reserve Bank of India maintains the Principal Accounts of Central as well as State Governments at its Central Accounts Section, Nagpur. It has put in place a well structured arrangement for revenue collection as well as payments on behalf of Government across the country. A network comprising the Public Accounts Departments of RBI and branches of Agency Banks appointed under Section 45 of the RBI Act carry out the Govt. transactions. At present all the public sector banks and three private sector banks viz. ICICI Bank Ltd., HDFC Bank Ltd. and Axis Bank Ltd. act as RBI's agents. Only authorised branches of Agency banks can conduct Govt. business. 3. How payment into Government account is made? All monies for credit to Government account like taxes or other remittances can be made by filling the prescribed challans of the Government/Department concerned. These challans along with the requisite amount (by way of cash, cheque or DD) are required to be tendered with the authorised bank branches. 4. When is the receipted challan for payment made into Government Account made available? The receipted challans in case of cash tender are generally handed over to the remitter immediately across the counter. In case of payments made by cheque/DD, the receipted challan is issued only on realization of the instruments based on the clearing cycle of the local Clearing House. In all such cases, a paper token is issued to the depositor indicating the date on which the receipted challan will be ready for delivery. The receipted challan will have to be collected within 15 days from the date indicated on the paper token by surrendering the paper token. 5. What if the paper token is misplaced / lost? In case of loss of original token, on a specific request and on payment of prescribed fees, the receipted challan is issued. 6. What if the Receipted Challan is misplaced? No duplicate challan is issued under any circumstances. Instead, a 'Certificate of Credit' is issued on specific request with the requisite particulars and payment of prescribed fee. 7. What is the remedy if the cheque issued by Government is misplaced or lost in transit?

The payee of the cheque has to approach the cheque issuing authority and apply for a duplicate cheque explaining the circumstances under which the original cheque was lost or misplaced. After satisfying himself, the drawer may issue a letter to the payee bank requesting it to record STOP payment against the lost cheque. The bank thereafter checks whether the cheque is already paid. If not paid, it records 'STOP PAYMENT' order till the expiry of the validity of the cheque and issues a 'NON PAYMENT CERTIFICATE'. 8. Are Agency banks compensated for conduct of Central/State Government business? The accredited banks are paid remuneration by RBI for conduct of State/Central Government transactions. Such remuneration is called Agency Commission. The rates of agency commission applicable at present (from 1.7.2005) are as under: 1. Receipts : Rs. 45 per transaction 2. Pension Payments : Rs. 60 per transaction 3. Payments other than pension : 9 Paise per Rs.100/- turnover On-line Tax Accounting System (OLTAS) for Direct Taxes 9. What is OLTAS? It is a system introduced in April, 2004 for collection, accounting and reporting of the receipts and payments of Direct Taxes on-line through a network of bank branches. The tax payers data flow from banks directly to Tax Information Network (TIN) maintained by National Securities Depository Ltd. 10. What are the major changes envisaged? Under OLTAS, only a Single Copy Challan is used with a tear off portion for the Tax Payer. The three new single copy challan in use are as under: A common single copy Challan No. ITNS 280 for payment of Income Tax on Companies (Corporation Tax) and Income Tax (other than Companies). Challan No. ITNS 281 for depositing Tax Deducted at Source/Tax collected at source (TDS/TCS). It has two major Heads i.e. (a) 0020 for company deductees and (b) 0021 for noncompany deductees. Challan No. ITNS 282 for payment of Hotel Receipts Tax, Gift-Tax, Estate Duty, Expenditure Tax, Wealth Tax, Securities Transaction Tax and Other miscellaneous direct taxes. 11. Does a tax-payer get his copy of the challan? No. He only gets the tear-off portion from the challan from the bank after getting it duly stamped by the bank with a unique Challan Identification Number (CIN).

12. What is CIN? It is Challan Identification Number. It is a unique number containing the following information: (i) 7 digits BSR Code of the bank branch where tax is deposited (ii) Date of presentation of the challan (DD/MM/YY) (iii) Serial number of Challan in that branch on that day (5 digits) The CIN has to be quoted in the Income Tax Return as a proof of payment. CIN is also to be quoted in any further enquiry. 13. How to obtain the new Challans? The Challans are available on the website http://www.incometaxindia.gov.in. Challans are also available at the local Income Tax Offices and also with private vendors. 14. What would happen if theacknowledgement counterfoil is misplaced? Approach the bank where tax was deposited. The branch will issue a certificate after following certain procedures which contains payment particulars including CIN. 15. Can the Tax payer pay Direct/Indirect taxes through internet? Yes. Most of the banks are providing the facility to their customers. 16. Where can a tax-payer get the detailed procedure on OLTAS? Please visit http://www.incometaxindia.gov.in. 17. What is the new procedure for payment of direct taxes at banks? The authorised bank branches accept Direct Taxes by cash or cheque/demand draft drawn on the same branch or on other banks/branches with Single Challan. The bank immediately returns the tear off portion of the challan duly stamped with a unique Challan Identification Number (CIN) when the payment is made in cash. In the case of challans presented with cheque/demand draft drawn on other banks/branches, tear-off portion of the challan will be released to the tax-payer only after the realisation of the cheque/demand draft but tax shall be deemed to have been paid on the date of tender. 18. How does the new system benefit the taxpayer? The new system is of immense benefit to the common taxpayer. Now a single copy simplified Challan has to be filled up replacing the earlier quadruplicate Challan. Secondly, it would be possible to obtain an acknowledgement for taxes paid at your own bank branch immediately. Further, the acknowledgement counterfoil with the rubber stamp containing the Challan Identification Number (CIN) assures that the payment is properly accounted for. The Tax payer

can view the details of tax paid by him by logging on to http://tinnsdl.com and typing the unique CIN given by the bank. (For more details please visit NSDL Home page www.nsdl.co.in). Taxpayer is no longer required to attach copies/acknowledgement of challan with the Return. He should only mention the CIN details in the Income-tax Returns. 19. Can the tax-payer still use the old forms? No. Tax is accepted only with the new prescribed challan forms.