Banking Products &

Operations
Session3

Small and Medium Enterprise Sector

& Commercial Banking

Personal Banking

Banking Accounts Personal

Banking
Types of Accounts :
No Frill account
- No minimum balance, restricted no. of free transactions, debit card,
cheque book facility,
Internet banking , mobile banking

Savings accounts
- Minimum balance, ATM Debit cards, cheque book, other facilities , internet
banking, mobile banking , Wallet Banking etc

Salary Account
-

Savings account linked to direct salary credit from employers (Opened

from Corporates , Commercial establishments for their employees), some
banks give Overdraft on Salary accounts & credit cards as additional
facility.

Account Opening Minimum

Requirements

KYC Address / ID Proof / Photos

Reference with existing ac holders
Minimum Balance requirements
Nomination
Request for other facilities Cheque
book, internet banking, mobile
banking, wallet banking

Savings Deposits

Fixed Deposits
-Short term & Long term

Recurring Deposits (monthly savings)

Tax Saving deposits
Linked deposits accounts with
savings acs

Personal Banking - Lending

Personal Loans (Unsecured)

Home Loan (Secured)
Loan for purchasing sites (for building houses)
Loan Against Properties (Secured)
Gold Loan (Secured)
Loan against Securities (Secured)
- Loan against shares, debentures, term deposits,

Overdraft against fixed deposits (Secured)

Overdraft for salary accounts (Unsecured but linked
to employment)
Loan on Credit Cards(Unsecured)

Personal Banking - Lending

contd.
Personal Loans (Unsecured) /Credit Cards
Credit Check with Credit Rating Agencies
CIBIL : (Credit Information Bureau of India Ltd)
- CIBIL collects and maintains records of an
individuals payments pertaining to loans and credit
cards. These records are submitted to CIBIL by
member banks and credit institutions, on a monthly
basis. This information is then used to create Credit
Information Reports (CIR) and credit scores which
are provided to credit institutions in order to help
evaluate and approve loan applications.

Credit Rating CIBIL-Credit

Rating

Personal Banking - Lending

contd.
CIBILRating of above 750 is preferred
by most banks for Personal Loan &
other unsecured Lending (loans)

Cashless banking & Payment

Systems

Debit Cards: (Master / Visa) with Chip & Pin Security facility
Linked to savings / current account
Also called a cheque card
Money is debited from the account as soon as the money is
withdrawn or spent
- Cash withdrawal at ATMs / online payment / Payment at point of
sale
- Chip & PIN Added security (4 digit PIN verification at POS)
- Online Payment Security : Password encryption / PIN / CVV
/Mobile OTP (one time password)
- Verified by Visa
- Cash withdrawal limits at ATM
- Expiry date
- Add on Security devices

Cashless banking & Payment

Systems
Credit Cards (Master / visa)
Credit cards are lines of credit. When you use a credit card, the
issuer puts money toward the transaction. This is a loan you are
expected to pay back in full (usually within 30 days), unless you
want to be charged interest.

Issued based on credit rating and requirements

Online transactions / POS / Cash withdrawal
Credit card bills to be paid as per billing cycle
Security New Chip & PIN POS PIN to be
updated by the user /Verified by visa
Cash withdrawal limits
Credit Card linked with commercial establishments.

Sample Debit / Credit Card

Backside of the card

Prepaid Cards
Prepaid Card:( (also Gift Cards)

Cardholders can use prepaid cards to pay various

merchants payments and e-Commerce transaction. Some
cards can also be used for withdrawing cash at ATMs.
Cardholders can make purchases or get cash when they
need it rather than carrying large sums of cash.
Access to funds on a prepaid card is protected by a PIN at
ATMs and cardholder's signature and at merchant locations.
A prepaid card can be replaced on request, if lost or stolen.
Better financial management
For people without a bank account, prepaid cards provide
the convenience and security of a card product without
requiring an existing banking relationship or credit history.

Internet Banking
Internet banking portal provides personal banking services
that gives customers complete control over all banking
demands online.
Banks provide log in id & Password. Some banks provide
additional security features devices, OTP for secured online
banking
Separate password for log in and online transaction is
provided.
Generally there are no charges for internet banking as this
facility saves cost for the bank
Customer can do most transactions now days through online baking.
transfer of funds, application of loans, ordering of cheque books, raising of complaints,
bill payments etc

Security : Other than Password protection, add on security devices , OTP,

other Security protection varies from bank to bank.

Telephone Banking
Telephone banking is a service
provided by a bank that enables
customers to perform a range of
financial transactions over the
telephone, without the need to visit
a bank branch or automated teller
machine.

Telephone Banking
Telephone Banking makes it easy for
customers to manage their money
whenever they want.
The automated service (IVR)
Interactive Voice Responsive system
is simple to use.
Banks follow strict verification
process before they transact any
business.

Mobile Banking
Mobile Banking Service over
Application/ Wireless Application
Protocol (WAP)
The service is available on java enabled
/Android mobile phones (with or without
GPRS) /i-phones where the user is required
to download the application on to the
mobile handset. The service can also be
availed via WAP on all phones (java/non
java) with GPRS connection.

Functionalities in Mobile banking

Funds transfer (within and outside the bank)

Immediate Payment Services (IMPS):
Enquiry services (Balance enquiry/ Mini
statement)
Cheque book request
Demat Enquiry Service
Bill Payment (Utility bills, credit cards,
Insurance premium), Donations,
Subscriptions
Mobile /DTH Top up

Mobile Banking Service over SMS:

The service is available on all phones.

Ordinary SMS charges are applicable.
The following functionalities are available:
Enquiry Services (Balance Enquiry/Mini
Statement)
Prepaid Mobile / MobiCash wallet Top up
DTH Recharge
IMPS Fund transfer (Mobile number & MMID
and Account Number & IFS Code)
Change MPIN
IMPS Merchant payments

Payment / Transfer facilities

NEFT:
National Electronic Funds Transfer (NEFT) is a nationwide payment system facilitating one-to-one funds
transfer.
Under this Scheme, individuals can electronically
transfer funds from any bank branch to any individual
having an account with any other bank branch in the
country participating in the Scheme.
Transfer timing :Monday to Saturday -(Except 2nd and
4th Saturday) 8:00 AM to 6:30 PM
Maximum up to Rs 10 Lakh with varying charges

Payment / Transfer facilities

RTGS :
The acronym 'RTGS' stands for Real Time Gross
Settlement, which can be defined as the continuous (realtime) settlement of funds 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.

RTGS contd
The RTGS system is primarily meant
for large value transactions.
The minimum amount to be remitted
through RTGS is Rs 2 lakh. The
maximum limit is Rs 10 lakh per day.
Amount above Rs 2 lakh upto Rs 5
lakh - Rs 25 + Service Tax
Amount above Rs 5 lakh upto Rs 10
lakh - Rs 50 + Service Tax

Payment / Transfer facilities

IMPS:
The IMPS (Immediate Payment Service) from transfer funds instantly
and securely.
You can send money Netbanking on an internet-powered laptop or
PC. Transfer funds from your bank account to any bank account.
The beneficiary account is credited immediately when a fund transfer
request is made
This service is available 24x7, throughout the year including Sundays
and any bank holiday.
IMPS service can be used to transfer funds anytime, from anywhere
using internet banking, mobile banking.
For transfer through mobile, MMID (Mobile Money Identification
number is required)
Through Internet : up to Rs 2 Lakhs Through Mobile : Up to Rs
10,000/-

IFSC code
Indian Financial System Code (IFS Code) is an
alphanumeric code that uniquely identifies a bankbranch participating electronic funds transfer system.
This is an 11-character code with the first four
alphabetic characters representing the bank name,
and the last six characters (usually numeric, but can
be alphabetic) representing the branch.
The fifth character is 0 (zero) and reserved for future
use. Bank IFS Code is used by the NEFT & RTGS
systems to route the messages to the destination
banks/branches.
Format of IFS Code is mentioned below

MICR Code

It stands for Magnetic Ink Character

Recognition. This number helps a
bank to recognize the bank and
branch that issued the cheque.
Cheques are sorted through a
cheque reading machine which uses
this number to identify the bank and
branch a cheque belongs to.

MICR code in Cheque

Bancassurance
The bank insurance model (BIM), also
sometimes known as bancassurance, is the
partnership or relationship between a bank
and an insurance company whereby the
insurance company uses the bank sales
channel in order to sell insurance products,
an arrangement in which a bank and an
insurance company form a partnership so
that the insurance company can sell its
products to the bank's client base.

Bancassurance contd.
BIM allows the insurance company to maintain smaller direct
sales teams as their products are sold through the bank to
bank customers by bank staff and employees as well.
The bank and the insurance company share the commission.
Insurance policies are processed and administered by the
insurance company.
This partnership arrangement can be profitable for both
companies. Banks can earn additional revenue by selling the
insurance products, while insurance companies are able to
expand their customer base without having to expand their
sales forces or pay commissions to insurance agents or
brokers.
Life /Non-Life (General Insurance Products) are sold

Some of the insurance products sold

in banks
Life Term insurance
Medical Insurance / Overseas Medical
Insurance
Vehicle Insurance (two / car / Tractor)
Fire Policy (for Home / Apartments)
Personal Accident Policy
Investment linked insurance policies
Professional Indemnity Policies

Foreign Currency Services

Buying / Selling of Foreign Currencies
Quotes : Bid / Ask Eg: EUR/USD: .9726 / .9731
The first component (before the slash) refers to the
BID price (what you obtain in USD when you sell EUR).
In this example, the BID price is .9726.
The second component (after the slash) is used to
obtain the ASK price (what you have to pay in EUR if
you buy USD).
In this example, the ASK price is .9731.
The difference between the bid and the ask price is
referred to as the spread.

Foreign Exchange Services

Outward Remittance in form of
Foreign currency
Demand drafts and Wire transfer,
Travel Card, Foreign Currency Notes
and Travelers Cheques.

Foreign Currency Services Rates

sample

Investment & Trading Services:

Investments in Mutual Funds

Retail Sale of Gold coins
Gold Deposit Scheme (GDS) is in the nature
of a fixed deposit in gold. The customers
can deposit their idle gold under GDS which
will provide them safety, interest earnings,
tax benefits and a lot more.
Bonds
Share trading

Stock / Commodity trading related

Demat account:
In India, shares and securities are held electronically
in a dematerialized (or "Demat") account, instead
of the investor taking physical possession of
certificates.
A Dematerialized account is opened by the investor
while registering with an investment broker (or subbroker).
To avail the services of a depository an investor is
required to open a Beneficial Owner (BO) account
with a Depository Participant (DP) of any depository.

What is a depository?
A depository is an organisation which
holds securities (like shares,
debentures, bonds, government
securities, mutual fund units etc.) of
investors in electronic form at the
request of the investors through a
registered Depository Participant.
It also provides services related to
transactions in securities.

Bank Account & Depository Analogy

Understand how the demat account works:

Understand how the demat account works contd.

Central depository: There are two

depositories in India the CDSL and NSDL.
They hold all the demat accounts. The central
depository holds details of your shareholding
on your behalf like banks.
Unique ID: Each demat account has a unique
number for identification purposes. This is the
number you need to provide for transactions.
The number will help the exchange and
companies identify you and credit the shares
in your account.

Understand how the demat account works contd.

Depository participants:
Access to the central depository is provided by the Depository
Participants or DPs. They act as the intermediary between the
central depository and the investor. DPs could be banks,
brokers or financial institutions that are empowered to offer
demat services. Your Bank Subsidiary could be one such
Depository Participant (DP). You open a demat account or a
Beneficial Owner (BO) accounts with a DP, who will provide
you a unique access to the central depository.
Portfolio holding:
The demat account holds all your securities. So, whenever you
check your account, you can see your portfolio holding and its
details. These are updated automatically every time you
conduct a transaction be is buying or selling a security.

Opening a Demat account

Benefits of a 3 in 1 Demat Account

Stock trading requires three different
accounts:
A Bank account to allocate and
receive money.
A Trading Account to buy and sell
shares and
A Demat Account where these shares
are held.

Relationship Between Demat & Trading Account

You can only store or rematerialize (convert back from

electronic to physical form) securities in your Demat account.
For buying and selling shares, you need to have a Trading
account. In other words, a Demat account is like a storage
facility while a Trading Account is the transacting medium to
buy and sell shares.
Trading account is the only medium through which you will be
able to sell the shares that you are holding in a Demat
account.
Since the process of opening a trading account is simple, you
can easily understand how to operate your own account and
even learn to plan to trade shares in the near future.

Trading Account functions

The trading account is the intermediary between your
Bank account and your Demat account when buying and
selling shares in the share market and is handled by the
Depository Participant or the stockbroker that you have
chosen.
For buying shares, the Trading account takes money from
your Bank account and buys shares which are then
transferred to your Demat account.
For selling shares, the Trading account takes shares from
the Demat account and sells them in the stock market.
The capital generated is then sent to your Bank account.

Investment Services - ASBA

ASBA account for IPO(Initial Public
Offer) - Application Supported by
Blocked Amount
is a process developed by the India's
Stock Market Regulator SEBI for
applying to IPO.
In ASBA, an IPO applicant's account
doesn't get debited until shares are
allotted to them.

Process for Submitting Bid Through ASBA Mechanism

Submission of ASBA Physically or Electronically to SCSB

Blocking the Application Amount by SCSB in Specified Account

Application Money to be Blocked until finalization of Allotment

Uploading the Application Data by SCSB in the Electronic

Bidding System

On Allotment, Unblocking the Relevant Bank Account and

Transfer of Requisite Amount Issuers Account

47

NRI - Definition
An Non Resident Indian (NRI) is an Indian Citizen
who resides in India for less than one hundred &
eighty two days during the course of the preceding
financial year, or
who has gone out of India or who stays outside India
for the purpose of employment, or
who has gone out of India or who stays outside India
for carrying on business or vocation outside India, or
who has gone out of India or who stays outside India
for any other purpose indicating his intention to stay
outside India for an uncertain period.

PIO stands for Person of Indian

Origin
A citizen of a foreign country (other than a
citizen of Bangladesh or Pakistan) is a PIO
if he/ she at any time held an Indian
passport; OR
he/ she or either of his/ her parents or
either any of his/ her grandparents was a
citizen of India;
OR he/ she is a spouse (not being a citizen
of Bangladesh or Pakistan) of an Indian
citizen or (a) or (b) above.

Double Tax Avoidance Agreement (DTAA)

In case of cross border transactions, the

income may be taxed in the home country
(basis tax residency) as well as source
country (where income is earned) leading
to double taxation of the same income.
In order to avoid this double taxation of
income, the home and the source country
mutually enter into tax treaty generally
known as DTAA.

NRI Services related

NRI account
Foreign Currency Account
NRI savings / Deposit accounts
NRI Remittances SWIFT / Wire
transfer
Foreign Currency draft / Cheque
deposits
NRO accounts
NRE accounts

NRO account
NRO accounts may be opened / maintained in the
form of current, savings, recurring or fixed deposit
accounts.
These are Rupee accounts opened for the purpose
of depositing income earned in India once you move
overseas.
These accounts can be held jointly with NRI and /or
indian residents
Opening of NRO accounts in the name of
individuals/ entities of Pakistan nationality/
ownership, entities of Bangladesh ownership
requires prior approval of Reserve Bank of India.

NRO account contd.

The funds, in this account, cannot be repatriated
outside India without prior permission of RBI.
Interest, earned on these accounts, is, however,
eligible for repatriation outside India, net of Indian
taxes .
The general rate of withholding tax for NRO interest
on savings and deposits is 30% (plus applicable
surcharge and cess). In case the customer has a
valid Tax Residency Certificate (TRC), Form 10F and
PAN , the benefit of DTAA can be extended and a
lower rate of withholding tax will be applicable.

NRE Accounts
NRE accounts may be opened/ maintained in the
form of savings, current, recurring or fixed deposit
accounts.
These accounts are opened for the purpose of
depositing income earned overseas.
The funds held in these accounts can be remitted
back overseas freely subject to terms and conditions
of the resident country.
Income from interest on balances held in NRE
accounts is exempt from Income Tax in India.
Likewise balances held in such accounts are exempt
from wealth tax.

Difference between NRE / NRO

accounts
NRE account is freely repatriable
(Principal and interest earned) while
the NRO account has restricted
repatriability i.e permitted
remittance allowed from NRO is up to
USD 1 million net of applicable taxes
in a financial year after giving
undertaking along with a certificate
from a chartered accountant.

Difference between NRE / NRO

accounts
Tax Treatment: NRE account is Tax
free (no Income tax, wealth tax and
gift tax) in India. On the other hand
the interest earned in NRO account
and credit balances are subject to
respective income tax bracket and
are also subject to applicable wealth
and gift tax.

Difference between NRE / NRO

accounts
Deposit and Withdrawal of
Funds:You can deposit funds from a
foreign country (in foreign currency) in
both NRE and NRO accounts, but funds
originating from India (in Indian rupees)
can only be deposited in an NRO account
and cannot be deposited in an NRE
account. Withdrawals from both NRE and
NRO accounts can only be made in INR.

Difference between NRE / NRO

accounts
Flow of Funds:In an NRE account,
repatriation is allowed outside India in any
currency.
Transfer:An NRE account allows you to
transfer funds to another NRE account as
well as to an NRO account.
You can transfer funds from an NRO to
another NRO account, but you cannot
transfer funds from an NRO account to an
NRE account.

Difference between NRE / NRO

accounts
Joint Accounts: Two NRIs can open both an
NRE joint account or an NRO joint account.
However, you cannot open an NRE joint
account with a resident Indian. This facility
is available only with an NRO joint account.
Motive or Purpose: An NRE account helps
you transfer funds to India earned abroad
and maintain them, While NRO accounts
helps maintain regular flow of income
earned in the form of rent, pensions, or
dividends from India.

Difference between NRE / NRO

accounts
Effect of Exchange Rate
Fluctuations:
NRE accounts are exposed to two
kinds of exchange loss, namely
day-to-day fluctuations in the
value of INR and conversion loss.
NRO accounts are not at such
risk.

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Private banking and Wealth

Management
Private banking is banking, investment and
other financial services provided by banks to
high-net-worth individuals who enjoy high
levels of income or invest sizable assets.
- Investment Solutions
- Real Estate Solutions
- Investment Banking Solutions
- Banking Products
- Insurance
- Gold related investment services

Video Banking for HNI

Customers