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BANKER`S

DIGEST

Banker’s Digest 2012

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“In today’s environment, hoarding knowledge ultimately erodes your power. If you know something very important, the way to get power is by actually sharing it”.

Joseph Badaracco

Human Assets play vital role in service organizations and they need to be converted into Knowledge Assets through harnessing appropriate skills/knowledge on an ongoing basis to remain competitive in the dynamic environment. Banks being the service sensitive organizations, the Bankers need to abreast with latest developments in the industry as well as with the features of the various products/services that are being offered to customers from time to time for effective marketing to achieve the corporate goals. In this endeavor, I have been undertaking the compiling activity and releasing the “Banker’s Digest” every year for the benefit of Andhra Bank staff since 2007. Sixth edition of Banker’s Digest is released duly covering the important guidelines / circulars issued by RBI and Bank up to 31st January 2012. All possible care is taken to provide error free information, however, readers may note that the information given herein is merely for guidance and reference and they need to refer the relevant circulars for full details. I express my sincere thanks to friends and colleagues for their active support in encouraging the idea and contributing the required resources for release of Banker’s Digest in time. I solicit your views on the content and quality of the topics for further improvement.

Email - [email protected] / Mobile 9490213002

Wish you all the Success

Date: 31.01.2012 N S N Reddy


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Index

No Topic Page nos.

1 Current Topics - Banking & Finance 3 2 Financial Inclusion 4 - 13 3 Interest Subvention Schemes 14 - 16 4 Alternate Delivery Channels 17 - 19 5 Micro Credit / SHG 20 -21 6 Micro, Small and Medium Enterprises 22 - 24 7 KYC / AML 25 - 27 8 NRIs – Bank Products / Services 28 - 34 9 NPA & Prudential Norms 35 - 37

10 Risk Management (Basel-I, II & III) 38 - 41 11 Customer Service & BCSBI 42 - 44 12 Right to Information Act 2005 45 - 46 13 SARFAESI Act & Banking Ombudsman 47 - 48 14 Union Budget 2010-11 & RBI Credit Policy 49 - 51 15 Andhra Bank – Mile Stones 52 16 Logo / Corporate Slogan 53 - 54 17 Performance Highlights – March 2011 55 18 Deposit Schemes & Guidelines 56 - 66 19 E-Products 67 - 72 20 Credit Cards 73 -76 21 Fee Based Products 77 - 81 22 Ratio Analysis 82 - 84 23 Loan Policy – Guidelines 85 - 96 24 Bank Guarantees & Letter of Credit 97 - 101

25 Priority Sector – Revised Guidelines 102 - 105 26 Agriculture & Allied Activities - Products 106 - 115 27 Retail Loans (Housing / Education / Auto) 116 - 128 28 Impaired Asset Study – Guidelines 129 29 Corporate Debt Restructuring (CDR) 130 30 One Time Settlement Schemes (OTS) 131 – 133 31 Funds Transfer – Domestic/Abroad 134 – 136 32 Clean Note Policy & Cash Management 137 – 139 33 AB Products - Service Charges 140 – 144 34 Compensation Policy 145 35 Inspection & Audit 146 – 147 36 Welfare & Other Schemes 148 – 155 37 Recalled Questions / Question Bank 156 – 183 38 Banking Statistics – At a glance 184


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Current Topics – Banking & Finance

Indian Rupee Symbol: After years of missing unique identity, India got a distinct symbol to distinguish from Pakistan, Nepal, Srilanka and Indonesia countries whose currencies are designated as Rupee or Rupiah which is similar to our currency i.e. Rupee. Further, now Indian rupee joined the select club of currencies such as the US Dollar, Euro, British Pound and Japanese Yen that have a clear distinguishing identity. Though the symbol is not be printed or embossed on currency notes or coins, it would be included in the Unicode Standard and major scripts of the world to ensure that it is easily displayed and printed in the electronic and print media. After incorporation in the global and Indian codes, the symbol would be used by all individuals and entities within and outside the country. The new symbol portrays the nation's strength & stability, both politically and economically and acts as Brand Ambassador. The new symbol is also considered as a step towards internationalization of Indian Rupee and paves the way to achieve full capital account convertibility shortly.

It is the Indian domestic card payment network set up by National Payments Corporation of India (NPCI) at the behest of banks in India. This project was conceived by Indian Banks Association and had the approval of Reserve Bank of India. The objectives are to:

Reduce overall transaction cost for the banks in India. Develop appropriate products to meet the financial inclusion needs. Provide card payment service option to many banks with simplified norms. Build environment to keep the payment information within the country. Migrate cash transactions to electronic payments system.

Currently the merchant fee is significantly high ranging from 1 to 1.50% on account of inbuilt charges of VISA / Master and Banks. The Rupay system will also lower the cost of the transactions for shops that are reluctant to use the electronic mode of payment on which they currently lose their margin. Reserve Bank approval has already been received for NPCI to approach banks for issuance of RuPay cards for acceptance at ATMs and micro-ATMs. Once POS acceptance and e-commerce infrastructure is ready, NPCI would approach for final approval for rolling out RuPay cards that would be accepted on all channels. The Logo is a coinage which indicates coming together of ‘Rupee’ and ‘Payment’ to announce the launch of a new world-class retail payment system in India. The orange and green arrows indicate a nation on the move and a service that matches its pace. The Indian colors connote that it’s deeply rooted in India. The color blue stands for tranquility and peace which is precisely the sense that people must get from the brand ‘RuPay’. The bold and unique typeface grants solidity to the whole unit and symbolizes a stable entity.

Aadhaar Project: The Unique Identification Authority of India (UIDAI) was established by Government of India with an objective to implement Multipurpose National Identity Card or Unique Identification Card (UID Card) in India. It is aimed to issue a unique identification number to all Indian residents with intent to eliminate duplicate/fake identities and to put hassle-free, cost effective verification / authentication system in place thereby to save considerable resources of various User Departments as well as beneficiaries at large. Central / State Governments and Public Sector Banks are acting as Registrars for AADHAAR project. The Registrar or its agents collect details of Demographic information and Biometric details such as Facial Image (Photo), Finger Prints (10) and iris scan of the applicant to establish individual’s uniqueness. De-duplication exercise ensures that nobody gets more than one number and in case a person already enrolled approaches the registrar, his


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biometric parameters will be run through the database and if matches his application will be rejected right away. Any location which is equipped with a mobile phone and a fingerprint reader will be able to act as an authentication point and confirms the identity of the person online. It is a 12 digit identity code and will remain a permanent identifier. At present, Government is reimbursing an amount of `50/- to the Registrars for each successful enrolment. UID project gives a big push to the government’s financial inclusion agenda and provides strong foundation to deliver better services and to improve the operational efficiency of the system. Cheque Truncation System (CTS): Electronic image of cheque is transmitted through a secured route from presenting bank to clearing house and clearing house to paying bank instead of moving paper cheque. The electronic images will be added a digital signature of presenting bank for the purpose of ensuring uniqueness of images. The prerequisite for CTS is that the participating banker should be a member of the Indian Financial Network (INFINET). The benefits of CTS are:

Speed up the collection of cheques and thereby enhances customer service. Shorten the clearing cycle and minimizes the cost of collection of cheques. More secure since there is no movement of instruments which eliminates the

scope of presentment of lost instruments thereby averts the element of fraud risk in clearing operations.

Enable the banks to have faster reconciliation of inter/intra bank accounts. Saves considerable man-hours to the banks since the captured images move

online and no data entry is required at branches/process centers. CTS enabled the banks to improve operational efficiency by enhancing the speed of clearing cycle in most cost effective manner without compromising the security aspects of all the concerned. At present, CTS is operational at New Delhi (National Capital Region) and Chennai. RBI directed all banks to issue cheques confronting to CTS-2010 standard with uniform features not later than 1st April 2012 in northern and southern grids and across the country by 30th September 2012. The introduction of new cheque standards was warranted on account of several developments such as growing use of multi-city and payable at par cheques, increasing popularity of speed clearing and implementation of grid based cheque truncation system for image based cheque processing etc. Swavalamban Scheme: The New Pension System (NPS) is an attempt towards providing adequate retirement income to every citizen of India. It is aimed to inculcate the habit of saving and is designed to enable the subscribers to make optimum decisions regarding their future (retirement) through systematic savings plan. Government of India announced ‘Swavalamban Yojana’ in the year 2010, where government has made a provision to pay an incentive of `1000 per year (for a period of four years from 2010 to 2014) to every NPS account opened subject to the minimum contribution of `1000 and maximum `12000 per annum. The age of the subscriber should be between 18 to 60 years. However, undischarged insolvent and unsound individuals are not eligible to avail the scheme. The subscriber is required to invest minimum 40% accumulated savings to purchase a life annuity from any IRDA regulated insurance company, in case where he opts for exit at the age of 60. If the subscriber prefers to exit before 60 years, he is required to invest minimum 80% of accumulated savings in annuity policy. In such an unfortunate event, option will be available to the nominee to receive 100% of the NPS pension wealth in lump sum. Nominee is also having option to continue with the NPS subject to fulfillment of KYC norms. However, the exit would be subject to the overriding condition that the amount of pension wealth to be annuitised should be sufficient to yield a minimum amount of `1000 per month. If not, the percentage of pension wealth to be annuitised would be increased so that the pension amount becomes `1000 per month, failing which the entire pension wealth would be subject to annuitisation. This minimum pension ceiling may be revised from time to time.


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Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI): It is a government company licensed under section 25 of the Companies Act 1956, has been incorporated to operate and maintain the Central Registry under the provisions of SARFAESI Act 2002. The objective of CERSAI is to prevent frauds in loan cases involving multiple lending from different banks on the same immovable property. Under this, the lenders should file details of the charge over any property with CERSAI within 30 days from the date of creation. The Central Registry is also an important for the development of the home loan market as lenders can now be sure that the property offered as a security has a clear title. Unlike CIBIL, where borrower information is accessible only by lenders, the records maintained by the Central Registry will be available for search by any lender or any other person. The scheme is operational w.e.f. 31.03.2011 where central database will contain details of all properties against which loans have been advanced by Banks / Financial Institutions International Financial Reporting Standards (IFRS): At present, the accounting and disclosure systems are not only well laid out but also well designed to suit to the requirements of all the stakeholders. However, convergence to IFRS will require significant alterations to financial accounting and reporting processes and systems. This is in fact a move towards a single set of high quality global accounting standards which transforms the landscape of accounting into a significantly new design that has important practical implications. The potential benefits of an integrated global capital market regulated by a single world-wide financial reporting language would be long lasting and it is a big step towards improving the efficiency of international capital markets. Regulators will benefit from greater consistency and quality of information. It also enhances the communication of the Bank’s financial results and position together with other performance indicators to analysts, investors, customers as well as other stakeholders. It also benchmarks the entity against its global peer group gaining a broader and deeper understanding of its relative strengths by looking beyond the country and regional bench marks. It is proposed that the Corporates are to be moved to IFRS in a phased manner as under: Companies that are part of the nifty or listed overseas or with a net worth of

over `1000 crore are expected to move to IFRS starting from April 2012 onwards.

Companies with a net worth `500 crore and above, all banks and large Non Banking Finance Companies (NBFC) from April 2013 onwards.

Starting April 2014, listed companies with a net worth of less than ` 500 crore, NBFCs with a net worth of over `500 crore and urban cooperative banks with net worth of ` 200-300 crore would be required to shift to IFRS.

The unlisted companies with a net worth of under `500 crore and urban cooperative banks with a net worth of below `200 crore are not required to adopt IFRS.

Deregulation of SB Interest Rates: As per RBI guidelines banks are free to determine their savings bank deposit interest rate with effective from 25.10.2011 subject to the following two conditions viz., First, each bank will have to offer a uniform interest rate on savings bank deposits up to `1 lakh, irrespective of the amount in the account within this limit. Second, for savings bank deposits over 1 lakh, a bank may provide differential rates of interest, if it so chooses. However, there should not be any discrimination from customer to customer on interest rates for similar amount of deposit. Deregulation of NRE/NRO Interest Rates: As per recent RBI guidelines, banks are free to determine their interest rates on both savings deposits and term deposits of maturity of one year and above under NRE/NRO deposits w.e.f. 16.12.11. However, interest rates offered by banks on the said deposits cannot be higher than those offered by them on comparable domestic rupee deposits.


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Branch Authorization Policy: The opening of branches by domestic scheduled commercial banks (other than RRBs) in Tier-1 centres (population of one lakh & above as per Census 2001) will continue to require prior permission of the Reserve Bank. While issuing such authorization, the Reserve Bank will continue to factor in, among others, whether at least 25 per cent of the total number of branches to be opened during a year is proposed to be opened in unbanked rural centres. However, domestic scheduled commercial banks are permitted to open branches at all centres other than Tier-1 without permission from RBI, subject to reporting. Government desires to have bank branches at all villages where the population is 10000 & above and also in the villages having population is 5000 & above and where there is no bank branch within a radial distance of 5 KMs by September 2012. Cheque / Draft validity: As per RBI guidelines, the validity period of Cheque/Draft is limited to 3 months instead 6 months with effect from 01.04.2012.

Base Rate: Banks are not allowed to lend below Base Rate w.e.f. 01.07.2010 except certain categories such as Differential Rate of Interest (DRI) advances, Loans to bank’s own employees, Loans to bank’s depositors against their own deposits, loans to tribals/physically challenged persons, Interest Subvention Schemes viz., Crop loans, Export credit and Restructured loans. The final lending rates include the Base Rate plus variable or product specific operating expenses, credit risk premium and tenor premium. However, Banks may charge interest a the rates prescribed under SHG schemes, National Schedule Tribes Finance and Development Corporation (NSTFDC) and National Handicapped Finance and Development Corporation (NHFDC) to the extent refinance is available. Banks are required to fix Base Rate duly taking Cost of Deposits / Funds, Negative carry in respect of CRR and SLR, Unallocated Overhead Costs and Average Return on Net Worth in to consideration.

Corporate governance is the system by which companies are directed and controlled by the Management in the best interest of all stakeholders with greater transparency and better and timely financial reporting. It encompasses commitment to values / ethical business conduct to maximize shareholder values on a sustainable basis, while ensuring fairness to all stakeholders including customers, employees, investors, vendors, Government and society at large. Sound corporate Governance is therefore critical to enhance and retain investors` trust. Ethical leadership is need of the hour to conduct the business on sound lines. What is ethical but not legal should not be done and at the same time what is legal but not ethical should not be practiced. Corporate Governance in the Public Sector cannot be avoided and for this reason it must be embraced. Good Corporate Governance, Good Government and Good Business go hand in hand. Openness, integrity and accountability are the key elements of Corporate Governance for any corporate entity. Whistle Blower Policy: In compliance with listing agreement relating to Corporate Governance, all banks are required to have a Whistle Blower Policy to enable the staff to inform the unethical behavior, actual or suspected fraud or violation of law or improper practice of the staff members of all cadres, direct to the Board of the Bank without informing their superiors. The employee shall make a written disclosure to the Audit Committee of the Bank in a closed/secured envelope along with supportive documents. The identity of the complainant will not be revealed. In case where the complainant is being victimized for filling a complaint, the complainant can approach CMD/ED for redressal. It provides protection to the Whistle Blowers from unfair termination / harassment from the superiors. Audit Committee of the Bank reviews the Whistle Blower mechanism at regular intervals. Reverse Mortgage: The genesis of Reverse mortgage can be traced to developed countries where Silver Line segment (people above 65 years group) constitutes major chunk of population on account of higher standards of living, better access to health care and higher life expectancy. The ever-rising cost of living and health care


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has prompted Banks/Financial Institutions to introduce the Reverse Mortgage in the US, UK and Australia. It works like a traditional mortgage loan, but only in reverse direction. Under this borrower does not make regular payments to a lender; instead he receives payments from the lender. It supplements the income of the Senior Citizens, particularly to those whose pension or income is low. Instead of being dependent on their children/relatives for monetary support, this would be an ideal option for elderly people to continue with a graceful lifestyle. The borrower need not repay the loan during their life time and can also continue to live in their house during their life time. Thereafter, the legal heirs have the option to repay the bank loan and redeem the property. Otherwise, the bank will sell the property and liquidate the loan. The scheme is gaining momentum slowly. Core Banking Services (CBS): It is an integrated solution where entire data of branches is stored in a central server and all the transactions of the branches will be done through this server. Under CBS, branches would be doing only the transaction entries and processing will be done by the central server. All back office activities such as Interest calculations, Levying Service Charges, Parameter Setting / Updation, Generation of Reports / Returns, Providing MIS, Start of Day and End of Day operations are undertaken by the central server. The customer’s data in a centralized server can be accessed from various outlets at various geographical centers. It enables the bank to provide triple “A” services (Any Branch, Any Time, Any Where) to the customers through Multiple Delivery Channels viz., Branches, ATMs, Mobile, Lobby, Corporate Terminals, Kiosks and Internet Banking. It enabled the banks to introduce technology embedded value added products besides implementing Data Warehousing, Data Mining and Customer Relationship Management concepts. CBS is an opportunity to banks to improve customer service as well as operational efficiency of the banks. However, it is an imperative for banks to have a re-look to the existing systems and procedures to suit the changed environment. Virtual Banking: Indian banking industry is witnessing an unprecedented competition and to stay ahead, Banks are coming up with plethora of services to lure customers. Services like 24 hour banking, Service at door step, Telephone banking, Internet banking, Extended Business Hours, Speedy processing are only a few to mention. Greater part of today's bank transactions take place somewhere else other than in branch premises. This shows the growth of "virtual" banks in India. Virtual banks are now seen as an answer to the challenge of designing a new service channel that is fully secure, functional and which customers can readily learn to use and trust it. Virtual banking a powerful "value added" tool and it has become the focal point for banks to attract and retain customers. Though, the aim of these services is to satisfy customers, there is a need to understand customer awareness, perception and importantly the level of satisfaction. Proxy Banking - Indian villages were miles away from basic financial products such as mutual funds, insurance, equity trading etc., which is evident from the facts that only 21% of rural households have access to credit from a formal source, 58% of rural households still do not have bank accounts, 70% of marginal farmers do not have deposit account. Only 1% rural house-holds rely on a loan from a financial intermediary. Further, the sanction of loans takes undue long time and involves costs ranges to 10 to 20 per cent of the loan amount. Further, the sanction of loans takes undue long time and involves costs ranges to 10 to 20 per cent of the loan amount. These are required to be covered through branchless banking i.e. Proxy Banking as it is a potential segment for banks to market financial products. Thanks to Internet Kiosk and the ATM duo which has made it possible for rural India. The Proxy Banking is an innovative approach and it definitely paves the way to extend better banking services to the rural India, which is need of the hour.


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Shadow Banking is relatively a new concept and it refers to the Non Banking Financial Institutions that perform some banking functions other than accepting deposits from public and relatively unregulated or under-regulated compared to banks. These typically include, pension funds, investment banks, hedge funds, money market funds, finance, leasing and factoring companies, asset management companies etc. Shadow banking institutions are typically intermediaries between investors and borrowers. For example - there is an institutional investor like a pension fund who is willing to lend money and another corporate who is looking for funds to borrow. The shadow banking institution will channelise the funds from the investor to the corporate entity. The regulators across the globe are now working in tandem to look into and understand the activities of the shadow banking system and bring them too under regulation so as to possibly prevent another global financial crisis in future. Shadow banking has become the financial regulatory buzzword of 2011.

Doorstep Banking: Extending Banking services like pick up of cash, instruments and delivery of cash etc., to Corporate Customers / Government Departments / PSUs / Individual Customers at their place through Employees / Agents is called Doorstep Banking. However, banks are not allowed to extend such services to Individual Customers. Cash collected from the customer should be acknowledged by issuing a receipt on behalf of the bank. Cash collected from the customer should be credited to the customer’s account on the same day or next working day, depending on the time of collection. Doorstep services should be offered only to KYC compliant customers and the charges should be prominently indicated on brochures. It is a win-win situation for both customers and banks. Outsourcing helps not only in focusing on the core activities, but also reduces the total cost of ownership by reducing the capital investment in developing infrastructure. Shell Bank is a bank which is incorporated in a country where it has no physical presence and is unaffiliated to any regulated financial group. These banks are not permitted to operate in India. Banks should be extremely cautious while continuing relationships with respondent banks located in countries with poor KYC standards and countries identified as 'non-cooperative' in the fight against money laundering and terrorist financing. Banks should ensure that their respondent banks have anti money laundering policies/procedures in place and apply enhanced 'due diligence' procedures for transactions carried out through the correspondent accounts. Securitization is an effective tool to reduce the mismatches in the maturities of assets and liabilities. It is a financing technique that involves pooling and re-packing of illiquid financial assets in to marketable securities. The process consists of 6 players viz., Borrowers, Lending Banker (who becomes an originator for the Securitization transaction), Special Purpose Vehicle (SPV), Credit Rating Agency, Investors and Service Providers. The process of securitization involves identification of financial assets, rating of these assets by the rating agency, creation of a SPV for handling the securitization transaction, assignment of future receivables in favour of the SPV, issuance of marketable securities based on these underlying financial assets and selling the same to the investors. The service providers recover the amount periodically and remit to the SPV and who in turn pass the benefit to the investors. Commercial Paper (CP): It is a short-term instrument to enable non-banking companies to borrow short-term funds through liquid money market instruments. CPs is therefore part of the working capital limits as set by the maximum permissible bank finance (MPBF). CP issues are regulated by RBI Guidelines issued from time to time stipulating term, eligibility, limits and amount and method of issuance. CP can be issued for maturities between a minimum of 7 days and a maximum up to one year from the date of issue. The maturity date of the CP should not go beyond the date up to which the credit rating of the issuer is valid. CP can be issued in denominations of `5 lakh and multiples thereof. Amount invested by a single investor should not be less than `5 lakh (face value). It is mandatory for CPs to be credit rated. It attracts stamp duty.


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Certificates of Deposits (CDs): It is a negotiable money market instrument and issued in dematerialized form or as a Usance Promissory Note, for funds, deposited at a bank or other eligible financial institutions to raise short-term resources within the umbrella limit fixed by RBI. CDs may be issued at a discount on face value. CDs differ from term deposit as they involve the creation of paper, and hence have the facility for transfer and multiple ownerships before maturity. Banks use the CDs for borrowing during a credit pickup, to the extent of shortage in incremental deposits. Minimum amount of a CD should be one lakh and in multiples thereof. The maturity period of CDs should be not less than 7 days and not more than one year. However FIs are allowed to issue CDs not exceeding 3 years from the date of issue. Banks have to maintain the appropriate reserve requirements (CRR/SLR) on the issue price of the CDs. It attracts stamp duty. Banks/FIs cannot grant loans against CDs. Mutual Funds are associations or trusts of public members who wish to make investments in the financial instruments or assets of the business/corporate sector for the mutual benefit of its members. Mutual Funds are required to be registered with SEBI, which is regulating the securities market. Mutual Funds are beneficial to their members in reducing risks and maximizing income by proper selection of financial instruments, which will bring income flow in the form of dividends as well as in the form of capital appreciation. The various types of funds are such as Open/Close-ended, Diversified, Sector, Index, Tax Saving, Debt, Income, Liquid, Money Market, Gilt and Balanced funds. Credit Information Bureau India Limited (CIBIL): It is a repository of information, which contains credit history of commercial and consumer borrowers. It is India’s first credit information bureau and provides the information to its members in the form of Credit Information Report (CIR). CIR of a customer will provide the list of loans availed by him from various Financial Institutions/Banks along with past payment history and overdues, if any. It enables the banks to take informed decisions while according credit sanctions. Obtaining CIR from CIBIL is mandatory before sanctioning credit limits to borrowers. Members are provided access to CIBIL to generate CIR and CIBIL levy charges for the same. Wilful Defaulters: As per RBI guidelines, a Wilful Defaulter would be deemed to have occurred, where the unit has defaulted in meeting its payment / repayment obligations to the lender even when it has capacity to honour the said obligations or where the unit has not utilized the finance for the specific purpose for which finance was availed of but has diverted the funds for other purposes or disposed of or removed the movable fixed assets or immovable property offered for the purpose of securing a term loan without the knowledge of the Bank/Lender. The classification of the borrower as Willful defaulter is vested with Committee at Head Office. However, the borrower will be given reasonable time for making submission to the committee. RBI advised all Banks/Financial Institutions not to extend any additional credit facilities to the Wilful Defaulters and they are debarred from floating new ventures for a period of 5 years from the date RBI publication and also liable for criminal proceedings for breach of trust, cheating and wrong certification under IPC. Factoring and Forfeiting: Factoring is a method where by the factor undertakes to collect the debt assigned by exporter where as international forfeiting is a method whereby the exporter sells the export bills to the forfeiter for cash. Forfeiting is resorted to for export of capital goods on medium terms and long-term credit, whereas the factoring is mainly short-term trade finance. In respect of forfeiting, the guarantee by the importer's banker is normally insisted upon whereas in factoring such guarantee by the importers banker is usually not stipulated. Forfeiting is without recourse to the seller (exporter), while factoring is undertaken both with and without recourse to the seller.


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External Commercial Borrowings (ECB): It is the borrowings by the Corporates and Financial Institutions from International markets. ECBs include Commercial Bank loans, Buyer’s Credit, Supplier’s Credit, Securitized Instruments such as Floating Rate Notes, Fixed Rate Bonds etc. ECBs are usually available at interest rate of 100 to 300 basis points above LIBOR (London Inter Bank Offered Rate). American Depository Receipt (ADR): It is a negotiable certificate of ownership in the shares of non-American Company that trades in an American Stock Exchange. ADRs make it convenient for Americans to invest in foreign companies as ADRs carry prices and dividends in dollars, and can be traded on the US stock exchanges like the shares of US based companies. Global Depository Receipt (GDR): These are the instruments through, which the Indian companies raise their resources from international markets. It is a negotiable certificate issued by a depositary company (normally an investment bank) representing the beneficial interest in shares of another company whose shares are deposited with the depository. It is a Dollar denominated instrument, traded on Stock Exchange in Europe or USA or both and represents publicly traded specified number of local currency equity shares of the issuing Company. Special Drawing Rights (SDR): Created in 1967 to augment international liquidity. It is the International Monetary Fund’s own currency. The value of SDRs is set relative to a basket of major currencies. It is used only among governments and IMF for balance of payments settlement. Foreign Direct Investment (FDI): An investment which is made directly on the production facilities (either by buying a company or by establishing new operations of an existing company) of a country by a foreign source, usually a foreign company. These investments are more enduring than foreign investment in shares and bonds. Hot Money: Money held in one currency that is liable to switch to another currency, in a flash, in response to better returns or in apprehension of adverse circumstances. Such a flight of money might cause the currency’s exchange rate to plunge. Derivatives: A credit derivative derives its value from the credit quality of the underlying loan or bond or any other financial obligation of an underlying company. The underlying asset can be equity, index, foreign exchange (forex), commodity or any other asset. Derivative products initially emerged as hedging devices against fluctuations in commodity prices and commodity-linked derivatives remained the sole form of such products for almost three hundred years. The financial derivatives have become very popular in the recent years. Credit Derivatives are financial instruments designed to transfer credit risk from the person / entity exposed to that risk to a person / entity who is willing to take on that risk. SWAP refers to exchange of one asset or liability for a comparable asset or liability for the purpose of lengthening or shortening maturities or raising or lowering coupon rates to maximize revenue or minimize financing costs. This may entail selling one securities issue and buying another in foreign currency; it may entail buying a currency on the spot market and simultaneously selling it forward. There are various types of SWAPs such as Equity swap, Currency swap, Credit swaps, Commodity swaps, Interest rate swaps etc. These can be used to create unfunded exposures to an underlying asset since counterparties can earn the profit or loss from actions in price without having to post the notional amount in cash or collateral. Swaps can be used to hedge certain risks such as interest rate risk or to wonder on changes in the expected direction of underlying prices.


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Futures & Options: An agreement to buy or sell a fixed quantity of a particular commodity, currency or security for delivery on a fixed date in the future at a fixed price. Unlike an ‘option’, a ‘futures’ contract involves a definite purchase or sale and not an option to buy or sell. It may entail potential unlimited loss. However, Futures provide an opportunity to those who must purchase goods regularly to hedge against changes in prices. An arrangement where the rate is fixed in advance for the purchase or sale of foreign currency at a future date is called forward contract. Option - It is a contract, which gives the holder the right but not the obligation. A call and put option is a right to buy and sell the underlying product respectively. Hedging - Reducing or eliminating the market risk in a position by entering into transactions that offset the existing risk positions. Inflation: It is termed as the continual rise in the general level of prices. It is commonly expressed as an annual percentage rate of change on an index number. Hyperinflation: An express growth in the rate of inflation whereby, money loses its value to the extent where other mediums of exchange like barter or foreign currency come into vogue. Stagflation: A condition in the economy that is characterized by the twin economic problems viz., slow economic growth and rising prices. Stagnation: It is a period during which economy does not grow or grows very slowly. As a result, unemployment increases and consumer spending slows down. Deflation: A sustained fall in the general price level of goods and services, usually accompanied by fall in output and jobs. Recession: A phase of dismal economic activity, usually accompanied by rising unemployment. It is defined by two successive quarters of negative GDP growth and is considered to have a cyclic character. An imminent global recession is likely as signs of dismal economic performance are being witnessed. Devaluation: A fall in the fixed official rate at which one currency is exchanged for another in a fixed exchange rate system. While it is mostly by a deliberate act of government policy, in recent years, financial speculation has also been identified as a responsible factor. Demonetization: Withdrawal of currency from circulation with an aim to strike at counterfeiting of currency and unaccounted money. In 1978, currency notes of denomination of `1000/-, `5000/- and `10000/- were demonetized. Tier - I & II capital consists of Paid up Equity Capital + Free Reserves + Balance in Share Premium Account + Capital Reserves (surplus) arising out of sale proceeds of assets but not created by revaluation of assets MINUS Accumulated loss + Book value of Intangible Assets + Equity Investment in Subsidiaries+ Innovative Perpetual Debt instruments. Tier - II consists of Cumulative perpetual preferential shares & other Hybrid debt capital instruments + Revaluation reserves + General Provisions + Loss Reserves (up to maximum 1.25% of weighted risk assets) + Undisclosed Reserves + Subordinated Debt + Upper Tier-II instruments. Subordinated Debt: These debts are unsecured and subordinated to the claims of all the creditors. To be eligible for Tier-II capital the instruments should be fully paid, free from restrictive clauses and should not be redeemable at the instance of holder or without the consent of the Bank supervisory authorities. Subordinated debts usually carry a fixed maturity. They will have to be limited to 50% of Tier-I capital.


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Adjusted Net Bank Credit (ANBC) denotes Net Bank Credit plus investments made by banks in non-SLR bonds held in HTM category. However, investments made by banks in the Recapitalization Bonds and Inter-bank exposures will not be taken into account for the purpose of priority sector lending targets/sub-targets.

Repo is a money market instrument, which enables collateralized short term borrowing through sale operations in debt instruments. It is also called a ready forward transaction as it is a means of funding by selling a security held on a spot (ready) basis and repurchasing the same on a forward basis. Generally, repos are done for a period not exceeding 14 days. Repo rate is the rate at which banks borrow rupees from RBI and a reduction in Repo rate helps the banks to get funds at a cheaper rate and increase in Repo rate makes the borrowing more expensive. Reverse Repo is the mirror image of a repo. Under reverse repo, securities are acquired with a simultaneous commitment to resell. Hence whether a transaction is a repo or a reverse repo is determined only in terms of who initiated the first leg of the transaction. When the reverse repurchase transaction matures, the counter-party returns the security to the entity concerned and receives its cash along with a profit spread. Reverse Repo rate is the rate at which RBI borrows money from banks. An increase in Reverse Repo rate can cause the banks to transfer more funds to RBI and similarly reduction of rate may dampen the interest of the banks to lend to RBI. Liquidity Adjustment Facility (LAF): It is a mechanism for liquidity management through combination of repo operations, export credit refinance facilities and collateralized lending facilities, supported by open market operations of the RBI at set interest rates. RBI manages its liquidity in the market through the operation of LAF as part of its monetary policy and money supply targets. It undertakes reverse repo transactions to mop up liquidity and repos to supply liquidity in the market. The LAF transactions are currently being conducted on overnight basis. Call Money Markets: Call and notice money market refers to the market for short term funds ranging from overnight funds to funds for a maximum tenor of 14 days. Under Call money market, funds are transacted on overnight basis where as in case of notice money market; funds are transacted for the period of 2 days to 14 days. Coupon Rate: It is a rate at which interest is paid, and is usually represented as a percentage of the par value of a bond. It refers to the periodic interest payments that are made by the borrower (who is also the issuer of the bond) to the lender (the subscriber of the bond) and the coupons are stated upfront either directly specifying the number (e.g.8%) or indirectly tying with a benchmark rate (e.g. MIBOR+0.5%). Zero Coupon Bond / Deep Discount Bond: The bond is issued at a discount to its face value, at which it will be redeemed. When such a bond is issued for a very long tenor, the issue price is at a steep discount to the redemption value. The effective interest earned by the buyer is the difference between the face value and the discounted price at which the bond is bought. The essential feature of this type of bonds is the absence of intermittent cash flows. Reserve Money (M0): Currency in circulation + Bankers’ deposits with the RBI + ‘Other’ deposits with the RBI = Net RBI credit to the Government + RBI credit to the commercial sector + RBI’s claims on banks + RBI’s net foreign assets + Government’s currency liabilities to the public – RBI’s net non-monetary liabilities. M1 - Currency with the public + Demand deposits with the banking system + ‘Other’ deposits with the RBI. M2 - M1 + Savings deposits with Post offices. M3 - M1+ Time deposits with the banking system = Net bank credit to the Government + Bank credit to the commercial sector + Net foreign exchange assets of the banking sector + Government’s currency liabilities to the public – Net non-monetary liabilities of the banking sector. M4 - M3 + Deposits with post office (excluding NSCs).


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Financial Inclusion

Financial Inclusion is the delivery of banking services at an affordable cost to the vast sections of disadvantaged and low income group. As banking services are in the nature of public good, it is essential that availability of banking and payment services to the entire population without discrimination is the prime objective of the public policy. It means not only to extending banking facilities to rural people but also to provide at their convenient time and location. RBI envisages all villages with a population of at least 2000 should have access to banking by 2013.

No Frill Accounts: With a view to achieving greater financial inclusion, RBI directed the banks to make available basic banking services to the needy people either through No Frills or with Nil balance account without any service charges. However, the restrictions on transactions and amount are to be made known to the depositors transparently.

Simplified KYC Norms: In order to ensure that persons belonging to low income group both in urban and rural areas do not face difficulty in opening the bank accounts due to the procedural hassles, the 'KYC' procedure for opening accounts for those persons who intend to keep balances not exceeding `50000/- in all their accounts taken together and the total credit in all the accounts taken together is not expected to exceed `100000/- in a year has been simplified to enable those belonging to low income groups without documents of identity and proof of residence to open banks accounts. However, these accounts need to be introduced by the existing KYC compliant customer who had satisfactory dealings with the bank for at least six months. Photograph of the customer who proposes to open the account and his address need to be certified by the introducer.

Opening a no frills account with simplified KYC norms is only the first step in building the relationship which would require sustained efforts on the part of Banks as well as Customers to achieve the objective of Financial Inclusion. However, in rural areas customers cannot be expected to come to branches in view of opportunity cost and Time and hence banks will have to reach out through a variety of technology driven delivery channels such as ATMs, Bio-metric ATMs, Mobile ATMs, Smart Cards and use of Post offices.

Low Cost ATMs: The presence of ATMs mostly found in Metro/Urban centers and banks are not keen to install at Rural/Semi Urban centers in view of high investment and low transaction volume. Deployment of low cost ATMs at Rural/SU centers with basic features (cash withdrawal, balance enquiry etc.,) enables the customers to have access to cost effective convenient banking.

Biometric ATMs: The penetration of ATMs into Rural / Semi-urban areas may not serve the purpose unless it is put to use by both Literate and Illiterates. The existing ATMs are not being used optimally by rural folk on account of PIN and Password related issues. Introduction of Biometric ATMs enables the illiterate and semi-literate customers to avail ATM facilities on par with literate customers. Under this, Thumb impression of the cardholder will be scanned and transfer the same to central server as one time measure. While swapping the card customer is required to keep thumb on the slot, system verifies the finger print and allows access to his account/s.

Mobile ATMs are designed for providing ATM facility to the rural folk as well as other customers. The Van would move at the pre-determined places and also accessible to Biometric card holders. It can also be used for opening of accounts during the visits to the rural areas.


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All the above initiatives warrant the banks to invest substantial amount on infrastructure besides recurring expenditure. There is an urgent need to bank on alternatives to overcome the said constraints and to extend branch less banking to achieve desired goal. Business Correspondent (BC): Banks are able to extend the following basic banking services to the people residing in unbanked areas across the country through BCs using Information Communication Technologies. This model enables greater rural outreach to improve the business volumes. RBI permitted the BCs to undertake services such as Collection/payment of small value deposits, Disbursal of small value loan amounts, Collection of loan installments, Receipt and delivery of small value remittances and Sale of micro insurance/mutual fund products/pension products/other third party products. The BC model allows the bank to use third parties (Individuals/associations/ institutions/corporates) to extend the said services. Though, individuals/associations are allowed to act as BCs, banks are keen to use the services of corporates on account of their capacity to make huge investments and their ability to scale-up operations. Further, they are expected to handle business continuity issues more effectively besides providing single point of contact for banks. Under this, the user is required to open account with a Bank and franchised to BC for the purpose of extending approved services. BCs use biometric smart cards, in which customer data including finger prints are stored and works on PoS machines with key management. Technology plays an important role to establish link between the Customer, BC and Bank for seamless operations. Normally the operations of BC should be within 30 KMs of base branch located in Rural/Semi-Urban/Urban areas and it is 5 KMs in case of Metro areas. However, the distance criteria may be relaxed with prior approval from DCC/SLBC. RBI has permitted Banks to collect reasonable service charges from the customer in a transparent manner considering the profile of the clientele to whom banking services are being delivered through the BC model. However, no fee shall be collected directly by the BCs from the customers. Technology plays an important role to establish link between the User, BC and Bank for seamless operations duly protecting the interest of all the concerned. Business Facilitators (BF) Model envisages the use of intermediaries by the banks to provide Non Financial Services to the public such as creating awareness about banks’ products/services, identification of borrowers / processing of applications, post sanction monitoring and follow-up etc.

Ultra Small Branches: Recently, the Government has directed banks to set up “Ultra Small” branches in all villages under financial inclusion scheme by March 2012, typically in a premises spread 100 to 200 sft. It aims to provide a wide range of banking services, including credit transactions, in villages where only cash transactions are being provided by BCs. A designated officer will visit the village on a prefixed date and time every week with laptop and will be connected to Bank’s central server (CBS).

The envisaged project definitely paves the way to create ample employment opportunities and it provides an opportunity to the banks to improve retail business. The ability of the banks in positioning the model and the agility of the BCs in adoption of the approach will play key role in making the project a grand success. Let us hope that the dream of the nation i.e. “financial independence” comes true in the ensuing years through the innovative BC model with the active participation of the Banks and the associated entities.

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Interest Subvention Schemes

1. Short Term Agricultural Credit: In order to provide short term credit (Crop Loans, PAGCC, Kisan Vikas Cards, Rythu Mitra Groups, Joint Liability Groups, Agricultural Gold Loans and Working Capital Loans financed to Fisheries) to the farmers at reasonable interest rate, Government of India announced a scheme of Interest Subvention in the year 2006. Under this, farmer receives short term credit at 7% p.a. from the date of disbursement to the end of the respective season with an upper limit of `3 lakh on the amount. However, Agricultural Medium Term Loans are not covered under this scheme. Government will provide Interest Subvention to the banks viz., PSBs, RRBs, and Farmers Service Co-operative Societies, on the amounts financed to farmers (short term) at the following rates:

Banks lending to short term agricultural credit are eligible to claim 2% Interest Subvention from Government of India for short term crop loans disbursed in year 2011-12. Branches are required to submit claim half-yearly (September 2011 & March 2012) for reimbursement of interest subvention amount from RBI. Further, farmers are eligible for another 3% interest subvention who repays the loan promptly. This additional subvention is available to Public Sector Banks on the condition that the effective rate of interest on short term production credit up to `3 lakh for such farmers will be 4% p.a. At present, the interest subvention (including prompt payment) available to the farmers availing short term production credit up to 3 lakh is 5% p.a. (Cir 360 Ref 19/30 dated 12.01.2012)

2. Export Credit: Government is providing interest subvention at 2% p.a. to all Scheduled Commercial Banks in respect of rupee export credit (Pre & Post shipment) extended to Handicrafts, Handlooms, Carpets and Small & Medium Enterprises (SME) units. However, the interest rate charged by the banks on export credit should not fall below 7% p.a. after taking the said Interest Subvention in to account. The above subvention is valid up to 31.03.2012. Branches should submit the interest claim to Head Office every quarter along with External Auditor Certificate. (Cir.no.234 Ref 26/38 dated 15.10.2011)

3. Micro & Small Enterprises: Paavala Vaddi Scheme was introduced for the benefit of Micro & Small Enterprises set up in AP State except in the Muncipal Corporation limits of Hyderabad, Vijayawada and Visakhapatnam. The scheme is applicable to the term loans availed on fixed capital investment by the eligible new Micro and Small Enterprises on or after 01.04.2008. More than 75% of the plant and machinery should be new and not second hand. Under the scheme, interest charged over and above 3% p.a. (i.e. 10% - 3% = 7%) will be reimbursed to the group at half yearly intervals. However, the maximum reimbursement is restricted to 9% p.a. The benefit is available for a period of 5 years i.e. up to the first half of 6th year or till the closure of term loan, whichever is earlier. However, this benefit is available to only those accounts, which in regular in payment of principal and interest. It is applicable to one-time payment accounts also. (Cir.no.333 Ref 52/2 dated 18.12.08)

4. Housing Loans: The objective of the scheme is to provide interest subsidy on housing loan as a measure to generate additional demand for credit and to improve affordability of housing to eligible borrowers in the middle and lower income groups. The scheme is expected to provide relief to prospective home owners and improve home ownership in the specified target segment. Interest subvention of 1% will be available on housing loans up to `15 lakh to individuals for construction/purchase of a new house or extension of an existing house, provided the cost of construction / price of the new house/extension does not exceed `25 lakh. All loans sanctioned and disbursed on or after 01.10.2009 are eligible for the said interest subsidy. It will applicable to the first 12 installments of all such loans sanctioned and disbursed during the currency of the scheme and will be computed for 12 months on the


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disbursed amount. The subsidy amount will be adjusted upfront in the principal outstanding, irrespective whether the loan is on fixed or floating rate basis. The interest subvention is applicable for the eligible borrowers for one housing unit only. The scheme will be implemented through Scheduled Commercial Banks. However, Non Resident Indians for construction of farm houses and staff members of the banks are not eligible for interest subsidy under this scheme. The scheme will remain in force up to 31.03.2012. (Circular no.187 Ref 53/06 dated 19.08.2010)

5. Educational Loans – Interest Subsidy: India is one of the few countries having large pool of young people, which is an opportunity to the country provided these Human Assets are converted into Knowledge Assets. Providing proper education to the students is a prerequisite to achieve the desired goal. The poor financial background of the students is one of the major constraints for the students aspiring for higher studies. In the recent budget, it is envisaged to ensure technical/professional education to all the deserving students by providing required financial support by way of Interest subsidy. In the above backdrop, Government of India has launched a scheme “Central Scheme to provide Interest Subsidy (CSIS)” to provide interest subsidy during the period of moratorium i.e. course period plus one year or six months after getting job, whichever is earlier, on loans taken by students belonging to Economically Weaker Sections (EWS) from scheduled banks under Educational Loan scheme of the Indian Banks Association, for pursuing any of the approved course of studies in technical and professional streams, from recognized institution in India. The benefits of the scheme would be applicable to those students belonging to EWS with annual gross parental/family income upper limit of `4.5 lakhs per year from all sources. The interest subsidy shall be available to the eligible students only once, either for the first graduate degree course or post graduate degree/diplomas in India. Interest subsidy shall however be admissible for integrated courses (graduation plus post graduate). The scheme shall be applicable from the academic year 2009-10 starting 01.04.2009. Any amount disbursed before the academic year 2009-10 would not be considered for Interest Subsidy under the said scheme. Canara Bank is the Nodal Bank for the scheme for release of interest subsidy to the banks on yearly/half-yearly basis as decided by the Government of India. In order to claim the interest subsidy from Nodal agency, bank branches are required to obtain income proof certificate from appropriate authority as decided by state government and agreement with borrower/parents. (Cir.no.236 Ref 53/10 dated 24.09.2010) 6. SHG Loans: AP State Government introduced “Vaddi Leni Runalu” scheme with effective from 01.01.2012 for all repayments made after that date for the outstanding SHG Bank loans, including any fresh loans given thereafter. The interest incentive will be available only to those accounts who repay the loans regularly. The incentive will be released directly to the credit of SHG account once in Half-year. (Cir.no.346 Ref 19/29 dated 05.01.2012)

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Alternate Delivery Channels Hitherto, Branches are only the strategic outfits (Delivery Channels) to achieve the corporate objectives and the customers are required to visit the branches invariably at the specified timings to complete their transactions. Extending service to the customers round the clock without presence of physical branch is called as “Alternate Delivery Channels”. IT revolution has changed the rules of the game and led to introduction of innovative delivery channels to overcome time and geographical constraints and to render cost effective value added services to the customers through Automated Teller Machines, Tele Banking, Lobby / PC Banking, Mobile Banking and Internet Banking etc. Adoption of new delivery channels has become order of the day for banks to survive in the competitive environment to meet the emergent expectations of the customers besides achieving the optimum utilization of resources. At present, banks are issuing ATM/Debit cards to the customers on opening of the account itself. The convenience coupled with cost effectiveness has enabled the cardholders to use the card extensively for all their retail payments. ATM is an electronic device, which acts as an independent banker without any human intervention. ATM provides round the clock service throughout the year (24X7X365) to the customers. It is a value-added service since customer can visit the ATM at his convenience time to complete his transaction. Through ATMs, Bank can penetrate into new areas without opening physical bank branches. It is most cost effective since the investment and operational cost are low when compared to traditional Branch Banking. ATMs extend services such as Cash Withdrawal, Balance Enquiry, Cash/Cheque Deposit, Funds Transfer, Bill Payments, Payment of Direct Taxes, Mobile Recharge, Mobile Banking Registration etc.

In the past, banks used to levy charges for using their ATM Network by other bank cardholders. In order to facilitate the cardholders RBI has issued guidelines to all banks not to levy service charges on ATM transactions of Savings Bank Cardholders. However, Other Bank Cardholders are allowed to withdraw cash on our ATMs up to `10000/- per transaction and the maximum number of transactions allowed are 5 per month at free of charge. The number of free transactions shall be inclusive of all types of transactions, financial or non-financial. With this, the customer of a Bank has become customer of all Banks, which has paved the way for Any Bank Banking. With effect from 01.02.2011, the cardholder needs to enter password for each financial transaction on ATM.

Complaint Resolution: The revised guidelines has led to increased volume on ATM Network leading to deficiency in service on account of technology issues and the resolution is taking undue long time, which is causing concern to the customers and regulators. In the above backdrop, RBI issued the following directives to all banks: ATM failed transactions are to be resolved within a maximum period of 7

working days from the date of receipt of the customer complaint. In case of delay in resolution of the complaint within 7 working days, the

bank shall pay compensation of `100/- per day, to the aggrieved customer and shall be credited to the customer’s account automatically on the same day when the bank affords the credit for the failed ATM transaction.

However, the cardholder (customer) is entitled to receive such compensation for delay, only if a claim is lodged with the issuing bank within 30 days of the date of the transaction.

White Label ATMs: The RBI has decided to allow white-label ATMs, permitting third-party service providers to set up more ATMs in off-premises areas, which include residential complexes, hospitals, tourist destinations, bus stops and railway stations. These ATMs would not belong to any bank in particular but will be owned as


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well as maintained by independent service providers. This initiative will enable the excluded segments to avail ATM services as at present majority ATMs are confined to Urban/Metro areas only. However, service provider levy charges which are to be either bear by the Bank or the customer.

Mobile Banking: The mobile-phone revolution that is transforming the world could also turn into a banking revolution. Banks have been exploring the feasibility of using mobile phones as an alternative channel of delivery of banking services. The swift growth in number of Mobile users and wider coverage of mobile phone networks has made this channel an important platform for extending banking services to customers. Today, the number of Mobiles in India crossed 800 million and this number is expected to reach 1000 million by next year.

The Inter Bank Mobile Payment Service (IMPS) has enabled the bank customers to transfer funds across banks instantaneously using Mobile. When a customer pays cash to the shopkeeper to recharge his m-account, it is like depositing cash in a virtual account. The customer can withdraw cash, too. The shopkeeper will transfer money from the customer's m-account to his own, and then pay hard cash to the customer. This can be extended to the payment of bills. Mobile phones transfer money faster and cheaper than the postal system, using the shopkeeper network. At present, Mobile Banking is providing the Bill payment and Funds Transfer facility besides information services (balance enquiry, cheque status etc.,) to the customers. A mobile phone user communicates with a merchant and makes an economic transaction (e.g., buying a ticket from an airline over the phone). The merchant obtains the phone number of the customer and initiates the m-payment transaction request stating the amount for which payment is required. The customer confirms the request and authorizes payment. Service Provider receives the authorization and verifies the authenticity of the customer. The recent guidelines issued by RBI on Mobile Banking are as under: RBI approval is required to extend mobile banking services. All the transactions/services should be in Indian currency only. Cross-border

transfers through mobile banking are strictly prohibited and the operating banks have to be based, licensed and supervised in India.

Registered customers can only avail this facility from banks. For financial services one time registration should be done through a signed document.

Hitherto, RBI stipulated a transaction limit `50000/- per customer per day (which includes purchase of goods and services). However, RBI has removed the cap w.e.f. 22.12.2011, now banks may place per transaction limits based on their own risk perception with the approval of its Board.

Banks may put in place end-to-end encryption of the mobile PIN number (mPIN) for better security.

Banks should file Suspected Transaction Report (STR) to Financial Intelligence Unit-India (FID-IND) for mobile banking transactions, similar to normal banking transactions.

Mobile banking is very advantageous compared to other delivery channels as it is easy to use and affordable to customers besides providing real time information to customers. Mobile Banking gives the banks an opportunity to expand their customer base without incurring additional infrastructure costs. It would also help in financial inclusion as it would provide a large number of un-banked people access to banking services. Banks could save a huge amount of money on card issuance and merchant acquiring with zero point of sale cost. Mobile Banking is the hottest area of development in the banking sector and is expected to replace the credit/debit card system in future. The increased phase of mobile usage is going to place our country on the top in the Asia Pacific region in the ensuing years.

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Plastic Money

Credit cards: The concept of credit card was used in 1950 with the launch of charge cards in USA by Diners Club and American Express. Credit card became more popular with use of magnetic strip in 1970. The first Credit Card was issued in 1981 and Gold Card in 1986 by VISA. Credit cardholder need not carry cash and purchase goods and services at any approved Merchant Establishments/Point of sale Terminals by tendering the card duly signing the charge slip. Further, cardholders can make online purchases through internet using the card and PIN. Added to this, cardholder can withdraw cash at any ATM across the globe. However, cash advance attracts charge i.e. transaction fee as well as service fee/interest charge. Debit cards known as check cards look like Credit cards or ATM cards. It operates like cash or a personal check. Debit cards are different from credit cards. Credit card is a way to "Pay Later" whereas debit card is a way to "Pay Now." In case of debit card, bank account of the customer will be debited immediately on completion of transaction. Debit cards are accepted at many locations, including retail stores, petrol pumps, and restaurants. The liberalized norms coupled with ease of usage have led to increase debit card base over the years. Of late, banks are consciously driving the customers to alternate delivery channels by issuing debit cards on the day of opening of the account itself to reduce the work load and to enable them to pay focused attention on core banking activities. Charge Card: Charge card is like any Credit or Debit Card. These cards neither offer revolving credit like the Credit Card nor debit the account instantaneously like Debit Card. However, the cardholder is required to settle the bill in full by the due date each month. Charge cards make a good option to develop financial discipline which likely to enable the cardholders to improve their credit history. Further, charge card offers a dynamic limit, while rewarding good payment behaviour. Prepaid Card: A prepaid card looks like a credit card and works like a debit card. These cards resemble credit and debit cards in appearance and allow users to load any amount up to `50000/- and can be used at any ATM/Point of Sale Terminal. On use of card, funds are directly debited from the card. Cardholders preload the cards with funds via a cash deposit or wire transfer. There are no finance fees or interest payments as charges are deducted from the prepaid balance. It is an opportunity for people who have had little or no access to the mainstream financial system by loading funds onto a prepaid card. It is a secure and convenient alternative to cash. Various types of Prepaid Cards are - Re-loadable Cards (value is replenished once it is used), Disposable Cards (discarded once the value is used), Closed Cards can be used for a specific purpose (Phone Cards) and Open Cards (multi purpose). Re-loadable cards are most popular among “under-banked” individuals, or those who tend not to possess conventional bank accounts. It is estimated that smart card has a potential of 100 billion market in India, once the government decides to route cash transactions through prepaid cards. However, the revenue sharing is a cause of concern to the issuing banks since the majority of income is going to intermediaries. Hope the initiatives of the regulator and banks will definitely paves the way to move to cashless society in the ensuing years. The existing identification modes used in new delivery channels has a major drawback as it recognize the PIN but not the person. Some times, it leads to impersonation and may cause financial loss. To overcome the problem, biometric technologies such as Fingerprint Recognition, Face Recognition, Voice Authentication, Hand Geometry, Retinal Scanning, Iris Scanning and Signature Verification have come in to force. Whenever the user access to delivery channel, it verifies with the server and deliver the service if found correct.


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Micro Credit / SHG

Micro Credit is defined as provision of thrift, credit and other financial services and products of very small amount to the poor in rural, semi-urban and urban areas for enabling them to raise their income levels and improve living standards. Banks have discretion to devise appropriate loan and savings products and the related terms and conditions including size of the loan, unit cost, unit size, maturity period, grace period, margins, etc. Such credit covers not only consumption and production loans for various farm and non-farm activities of the poor but also include their other credit needs such as housing and shelter improvements. Banks, NBFCs, NGOs and other institutions/organizations are allowed to undertake activities relating to Micro Credit in India. The introduction of the ‘Self Help Groups (SHG)’ format and the nationalized banks’ lending system helped accentuate the importance of the same.

SHG is a registered or unregistered group of micro entrepreneurs having homogenous social and economic background voluntarily, coming together to save small amounts regularly, to mutually agree to contribute to a common fund and to meet their emergency needs on mutual help basis. The group members use collective wisdom and peer pressure to ensure proper end-use of credit and timely repayment thereof. It is aimed to inculcate saving habit and encourage thrift to undertake lending among the members. In the process, it boost the confidence to carryout the activities with ease and paves the way for self-reliance. The membership of the group could be between 10 to 25 members. If more than 20 members are there, the group should be registered.

Pre-requisites for financing: Groups with 6 months of savings, regular meetings, regular thrift habit and habituated internal lending and ‘A’ or ‘B’ rating as per Critical Rating Index are eligible for bank finance. Dose Period Regular loan Debt Swapping* Housing

First

Having regular savings at least for 6 Months

4 times of savings / corpus or `50000/- whichever is higher

Minimum `25000/- or 50% regular loan limit whichever is higher subject to extent of debt.

`20000/- per member subject to maximum of `100000/- per group

Second

Minimum of 12 Months from the date of availment of first dose of finance.

Rural SHGs: 10 times of savings / corpus or `100000/- whichever is higher. In case of Urban SHGs, the eligibility is 1.50 lakh.

Minimum `50000/- for rural SHGs and `75000/- for urban SHGs or 50% regular loan limit whichever is higher subject to extent of debt.

Third & onwards

Minimum of 18 months from the date of availment of Second dose of finance.

Eligibility as per Micro Credit Plan (MCP)

40% of MCP or to the extent of debt whichever is lower subject to maximum of `200000/-

* Andhra Bank is extending credit facility to SHG Groups for the purpose of Debt Swapping under the scheme called “AB Mahila Soubhagya”. However, for Rural SHGs - the maximum amount allowed to each SHG Group is `1.75 lakhs, `2.50 lakhs and `5 lakhs under First, Second and third dose respectively; and for Urban SHGs, the maximum amount allowed to each SHG Group is `1.75 lakhs, `3.25 lakhs and `5 lakhs under First, Second and third dose respectively.


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Corpus includes Balance amount in SB account, Amount held as cash with authorized persons, Amount lent internally among members, Amount received as interest on loans from members, Any other contribution received by the group like Grants, Donations and fund provided by Government Debt Swapping: Financing to the group members for repayment of loans availed by them from non-institutional lenders i.e. Private Money lenders. It is only one time measure. Interest Rate: The applicable interest rate for SHGs is Base Rate + 4% irrespective of the amount of finance. State government is providing interest subsidy to SHGs which are prompt in repayment of loan installments to Banks. It is called “Paavala Vaddi” scheme which means 25 paise interest, which amounts to 3% p.a. Amount of interest charged over and above 3% p.a. will be reimbursed to the group at half yearly intervals. The reimbursement is to be credited to group’s savings bank account, but not to the SHG loan account. With effect from 01.01.2012, AP State Govt. reimbursing the full interest for the SHG loans who repay the loans promptly. Society for Elimination of Rural Poverty (SERP): The introduction of SERP is aimed at strengthening of SHG Bank Linkage program and to augment credit flow in orderly manner in the State of Andhra Pradesh. Our Bank entered MOU with SERP to undertake initiatives such as capacity building, rating of SHGs, preparation of Micro Credit Plan, activating community based recovery mechanism, imparting training to improve book keeping etc. (Cir.no.268 Ref 19/15 dated 25.10.2010) Non Banking Finance Companies – Micro Finance Institutions (NBFC-MFI): RBI has set up a sub-committee under the chairmanship of Sri. Y H Malegam to study and suggest measures to mitigate the concerns over the functioning of the MFI registered with RBI as NBFCs. In the above backdrop, RBI allowed set up of NBFC-MFI to undertake lending activity provided the minimum net owned funds should be `200 lakhs for the companies registered in North Eastern Region and `500 lakhs at other places. These institutes are not allowed to accept deposits. The capital adequacy ratio shall not be less than 15% of its aggregate risk weighted assets. Interest on individual loans will not be exceed 26% per annum and calculated on a reducing balance basis. Processing charges shall not be more than 1% of gross loan amount. NBFC-MFIs shall ensure code of conduct and systems are in place for recruitment, training and supervision of staff. Further, the recovery of loans normally be made at central designated place. Field staff shall be allowed to make recovery at the place of residence or work of the borrower only if they fail to appear at central designated place on two or more successive occasions. Bank loans to NBFC-MFIs will be eligible for priority sector status provided they lend to “Qualifying Assets”, which are to satisfy the following conditions. Loan disbursed by an MFI to a borrower with a rural household annual income

not exceeding `60000/- or urban & semi-urban household income not exceeding `120000/-.

Loan amount not to exceed `35000/- in the first cycle and `50000/- in subsequent cycles.

Tenure of the loan not to be less than 24 months for loan amount in excess of `15000/- without prepayment penalty.

Loan to be extended without collateral. Loan to be repayable by weekly, fortnightly, monthly installments as per the

choice of the borrower. Aggregate amount of loan, given for income generation, not to be less than

75% of the total loans given to MFIs.

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Micro, Small and Medium Enterprises (MSME)

The Small enterprises contribute nearly 40% of the country’s industrial output and offer the largest employment after agriculture. Therefore, this sector presents an opportunity to the country to harness its local competitive advantages for achieving global dominance. In recognition of these aspects, Government of India enacted the MSMED Act in the year 2006. In accordance with the provisions of the act, the activities of MSME are broadly classified into Manufacturing Enterprises and Service Enterprises. Manufacturing Enterprises are those which are engaged in manufacturing or production of goods. These are defined in terms of investment in Plant & Machinery. Recently, activities such as Seed Processing (for genetic enhancement) involving collection of germplasm, cleaning, gravity separation, chemical treatment etc., and Composite unit in Poultry with Chicken (Meat) Processing are treated as Manufacturing units under MSME. Service Enterprises are the enterprises engaged in providing or rendering of services. These are defined in terms of investment in Equipment. Recently activities such as Medical Transcription Service, Production of TV serials / program, Ripening of Raw Fruits under controlled conditions and Service Rating Agency are treated as Service Enterprises under MSME. The modified definitions of Micro, Small and Medium Enterprises are as under:

(` in lakhs)

No Category Investment in Plant & Machinery / Equipment

Manufacturing Service 1 Micro Enterprise Up to 25 Up to 10 2 Small Enterprise above 25 & up to 500 above 10 & up to 200 3 Medium Enterprise above 500 & up to 1000 above 200 & up to 500

Small Enterprises: It includes all loans given to micro and small (manufacturing) enterprises engaged in manufacture / production / processing / preservation of goods, and micro and small (service) enterprises engaged in providing or rendering of services which include small road & water transport operators, small business, Professional & Self-employed persons and other service enterprises. Indirect finance to small enterprises shall include finance to any person providing inputs to or marketing the output of artisans, village and cottage industries, handlooms and co-operatives of producers in this sector. As per recent RBI guidelines - Loans granted to private retail traders with credit limits not exceeding `20 lakh and loans to retail traders dealing in essential commodities (fair price shops) and consumer co-operative stores without any ceiling in credit limit are eligible for classification under Micro (service) or small (service) depending on investment in equipment criteria as mentioned above. Medium Enterprises: Enterprises engaged in manufacture / production / preservation of goods and whose investment in plant and machinery should be as per above said guidelines. Bank`s lending to medium enterprises will not be included for the purpose of reckoning under priority sector.

Interest rates are charged as per rates prevailing at the time and are subject to change from time to Time. Rate of Interest is determined as per credit rating system for loans above `10 lakhs as per Internal Credit Risk Assessment Model.

No collateral security or third party guarantee is insisted for loan up to `5 lakh and for Tiny Sector up to `25 lakh based on the good track record and financial position of the borrowing unit.


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Banks may fix self set target for growth in advances to SME Sector in order to achieve a minimum 20% year on year growth in credit to SMEs with the objective to double the flow of credit to the SME sector within a period of 5 years. Further, banks should ensure that - 40% of the total advances to small enterprises sector should go to micro

(manufacturing) enterprises having investment in plant and machinery upto `5 Lakh and micro (service) enterprises having investment in equipment upto `2 Lakh.

20% of the total advances to small enterprises sector should go to micro (manufacturing) enterprises with investment in plant and machinery above `5 Lakh and up to `25 lakh, and micro (service) enterprises with investment in equipment above `2 Lakh and up to `10 Lakh. Thus 60% of MSE advances should go to the Micro Enterprises.

Further, banks are advised to Achieve a 20 percent year-on-year growth in credit to Micro and Small

enterprises to ensure enhanced credit flow. Allocate of 60% of MSE advances to the Micro Enterprises is to be achieved in

stages viz., 50% in the year 2010-11, 55% in the year 2011-12 and 60% in the year 2012-13.

Achieve minimum 10% growth in number of Micro Enterprise accounts. Pay focused attention in opening of more MSE branch offices at different MSE

clusters and each lead bank of a district may adopt atleast one MSE cluster.

Banks are mandated not to accept collateral security in case of loans up to `10 lakhs extended to units in the Micro and Small Enterprises sector and all such loans are to be covered under Credit Guarantee Scheme. (Cir.no.054 Ref 52/11 dated 31.05.2010). Women entrepreneurs will be given further interest rebate of 0.50% irrespective of credit rating and size of the unit. Composite loan (Term Loan and Working Capital) up to `100 lakhs should be processed under single window concept. Units undergoing technology up-gradation are eligible for 15% Credit Linked Capital Subsidy Scheme (CLCSS). Units engaged in food processing are eligible for subsidy 25% of unit cost with maximum of `50 lakhs and units are located at difficult areas (J&K, HP, Sikkim, Andaman, NE States and tribal development project areas) are eligible for 33.33% with maximum of `75 lakhs.

Communication of the bank's decision regarding the credit assistance is done promptly. No loan application is rejected with out approval of the next higher authority. The time norms for disposal of loan applications are as under: No Sanctions falling under To be disposed with in 1 Branch powers One week 2 Zonal Office powers Two weeks 3 Head Office powers (CMD) 30 days 4 Head Office - Management Committee 45 days

Cir.no.227 Ref 26/34 dated 12.10.2011


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Credit Guarantee Fund Scheme for Micro and Small Enterprises Salient features: It provides guarantee coverage in respect of credit facilities sanctioned to the accounts up to `100 lakhs to new or existing Micro and Small enterprises without any collateral security and/or third party guarantees. All Micro enterprises up to ` 10 lakh (except) Retail Trade are to be covered under this scheme. Eligible Accounts: All MSE units classified under Manufacturing, RTO, Business Enterprises, and Professional & Self Employed are eligible for coverage. i) Micro Enterprises: Manufacturing units with investment in Plant & machinery up to `25 lakh and servicing units with investment in equipment up to `10 lakh are eligible for the coverage. ii) Small Enterprises: Manufacturing units with investment in Plant & machinery above `25 lakhs and up to `5 crore and servicing units with investment in equipment above `10 lakhs and up to `2 crore are covered under this scheme. The trust shall provide guarantee as under:

Category Maximum extent of guarantee where credit facility is Up to `5 lakhs Above `5 & up to

`50 lakhs Above `50 to `100 lakhs

Micro Enterprises

85% of amount default or subject to maximum of `4.25 lakhs

75% of amount default or subject to maximum of `37.50 lakhs

`37.50 lakhs plus 50% of amount in default above `50 lakhs subject to overall ceiling of `62.50 lakhs

Women Enterpr. / Units located in NE region (Other than credit facility up to `5 lakh to micro enterprises)

80% of the amount in default subject to maximum of `40 lakhs

`40 lakhs plus 50% of amount in default above `50 lakhs subject to overall ceiling of `65 lakhs.

Others 75% of the amount in default subject to maximum of `37.50 lakhs

`37.50 lakhs plus 50% of amount in default above `50 lakhs subject to overall ceiling of `62.50 lakhs

One time Guarantee Fees: For credit facility up to `5.00 lakhs - Guarantee fee 1% and for credit facility above `5 lakhs - Guarantee fee 1.50%. However, in case of credit facility up to `50 lakhs to the units located in North Eastern Region, the Guarantee fee is 0.75% p.a. Annual service fee payable for credit facility up to `5 lakh is 0.50% p.a. and for credit facility above `5 lakh is 0.75% p.a. The fee is to be calculated on sanctioned limit as on 31st March of preceding year and the fee collected is to be paid on or before 31st May every year.

Period of guarantee cover: Term loan - Sanctioned period of repayment; Working Capital – Maximum 5 years. (Cir. no.360 Ref 52/07 dated 10.01.2011)


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Know Your Customer (KYC)

The Reserve Bank of India had issued guidelines on Know Your Customer (KYC) standards and Anti Money Laundering Measures (AML) to setout procedures to verify bonafide identification of individual/corporate applicants for opening of an account and to define procedures to monitor the transactions in the accounts with due diligence as well as to specify the procedures to report the suspicious nature transactions to regulators on an ongoing basis. The concept of KYC should be adopted by collecting full information in respect of identify of the prospective customer, type of transactions to be conducted, sources of funds and other relevant matters at the entry level itself and before allowing opening of account for any applicant. The policy guidelines are applicable not only to new accounts but also to the existing accounts. The guidelines are applicable to all types of deposit and advance accounts as well as new technology products such as Credit, Debit, Smart, Add-on cards. The standards enable the banks to insulate themselves from unscrupulous participants to avert misuse/ undue advantage of system. The following are the key elements of the policy. i) Customer Acceptance Policy (CAP): Bank should obtain prescribed application from the applicant along with the documents and information that are required as per constitution, risk perception, banking practices, legal requirements as well as guidelines issued by RBI from to time. Banks should not open accounts in the name of Anonymous or fictitious/benami names and Terrorist organizations notified under POTA. ii) Customer Identification Procedure (CIP): It means collecting information relating to identity, activity, location of the person desiring to open an account in single name or in joint names and verifying the information collected using reliable, independent source documents, data or information. Further, photo identity (Passport, PAN Card, Voter’s Identity Card, Driving License with Photo, Identity Card, Letter from employer) is a must. In case of legal person/entity (Partnership/ company/trust/club/association/other legal body), branch should obtain sufficient data/information and documents to verify the legal status of the applicant. In case where employer certificate/letter is obtained, branch is required to take atleast one of the officially valid documents as stated above. With regard to proprietary concerns, any registration/licensed document issued by the central/state governments will be accepted as CIP. Address proof: Branches are advised to obtain any one of the documents such as Electricity Bill, Telephone Bill, Ration Card, Bank Account Statement, Letter from employer (subject to satisfaction). In case of foreign tourists, copies of passport containing identification particulars and address may be accepted as documentary proof for both identification and address.

Though, the objective of KYC is to prevent/detect financial frauds, money laundering and suspicious activities, opening of accounts with banks duly fulfilling the KYC norms is causing hardships to the common persons. To address the associate issues and to enable the prospective customers (low-risk) to open accounts with banks with ease, RBI has clarified as under:

Banks can accept utility bill (Telephone/Electricity Bill) or any other

document acceptable to the branch to fulfill the address proof while opening accounts.


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Branch to obtain identity document along with declaration from the person (Father/Mother/Spouse/Son/Daughter) with whom the prospective customer is staying.

However, in case of small value accounts (balance not exceeding `50000/- and total credits not exceeding `100000/- per annum), branches are allowed to open accounts without insisting for proof of identification/address after obtaining introduction from another account holder. With regard to the migratory workers, branches to open accounts by obtaining photo and permanent residential address with introduction. Now, “Aadhaar” number issued by the Unique Identification authority of India (UIDAI) as an “officially valid document” to satisfy the KYC norms for opening bank accounts. However, banks must satisfy themselves about the current address of the customer by obtaining required proof of the same as per extant guidelines. iii) Due Diligence: All the forms and documents submitted by the applicant while opening of the account are to be verified by the officer with the originals to ensure that the identification and address of the applicant is correct. Further, the officer should satisfy with the identity and legal existence of the applicant and note the same in the interview cum due diligence form. Further, the guidelines also stipulate sending a letter to the customer in the prescribed format on the same day of opening of the account. Branch to classify the accounts into Low, Medium and High Risk categories based on the risk perception while opening of accounts and further reviewed once in 6 months. As per the existing guidelines, customer identification data (including photos) is to be updated once in 5 years in case of Low Risk Category Customers and once in 2 years in case of Medium and High Risk category customers. Monitoring of transactions: Banks are expected to fix threshold limit and monitor the transactions closely and ongoing basis. It covers the following aspects: Transactions exceeding threshold limit for different categories of accounts.

Very high turnover inconsistent with the size of balance in the account.

Large amount of cash transactions in the account.

High Risk Accounts.

Transactions in NRE accounts and Foreign Inward and Outward Remittances.

Periodical review of risk categorization of accounts.

Reporting of the transactions to appropriate law enforcing authority.

With the introduction of telephone and electronic banking, increasingly accounts are being opened by banks for customers without the need for the customer to visit the bank branch. In such cases, apart from applying the usual customer identification procedures, there must be specific and adequate procedures to mitigate the higher risk involved. Certification of all the documents presented may be insisted upon and, if necessary, additional documents may be called for. In such cases, banks may also require the first payment to be effected through the customer's account with another bank which, in turn, adheres to similar KYC standards. In the case of cross-border customers, the bank may have to rely on third party certification/introduction.

Money Laundering: It is the process of transferring illegitimate money into legitimate money. It is put through a cycle of transactions or washed so that it comes out the other end as legal or clean money. In other words, the source of illegally obtained funds is obscured through a succession of transfers and deals in order that those same funds can eventually be made to reappear as legitimate income. It normally follows from such activities as human trafficking, sale of narcotic drugs, illegal dealings in arms and ammunition etc. It is a threat to the national


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security and economic activity as it often associates with the financing of terrorism and also evasion of taxes. To combat the menace of money laundering, Government of India introduced “Prevention of Money Laundering Act, 2002” and the objectives are as under: To prevent, combat and control money laundering. To confiscate and seize the property obtained from the laundered money. To deal with any other issue connected with money laundering in India.

Banks are required to report the following type of transactions to the Financial Intelligence Unit (FIU), New Delhi. Report Nature of Transactions

Cash Transaction Reports (CTR)

i) All cash transactions of the value of more than `10 lakhs. ii) Series of cash transactions integrally connected to each other, which have been valued below `10 lakhs where such series of transactions have taken place within a month and aggregating `10 lakhs. iii) All cash transactions where forged or counterfeit notes or bank notes have been used as genuine and where any forgery of a valuable security has taken place.

Suspicious Transaction Report (STR)

i) Large cash transactions ii) Multiple accounts under same name iii) Frequent conversion of currency from small to large denomination notes iv) Placing funds in FD and using them as security for more loans v) Large deposits immediately followed by wire transfers

Counterfeit Currency Report (CCR)

As and when counterfeit currency is found at branch/currency chest, the same is to be informed to FIU and Reserve Bank of India immediately.

Adherence to AML policies and procedures should also enhance the fraud prevention measures that banks take to protect themselves and their genuine customers from losses. (Circular no.268 Ref 44/28 dated 17.11.2008) Preservation of Records: As per Prevention of Money Laundering (Amendment) Act 2009, branches are required to preserve all the transactions for at least 10 years from the date of transaction between the Bank and the client along with the necessary records. Similarly, they need to preserve all the KYC documents obtained at the time of opening and during the course of business relationship for a period of 10 years after the business relationship ended. Money Mules: An individual with bank account is recruited to receive cheque deposits or wire transfers and then transfer these funds to accounts held on behalf of another person or to other individuals. The fraudsters adopt variety of methods including spam e-mails, advertisements on genuine recruitment web sites, social networking sites, instant messaging and advertisements in newspapers. Many times the address and contact details of such mules are found to be fake and making difficult for enforcement agencies to locate the account holder. RBI advised the banks to strictly adhere to the guidelines on KYC/AML/CFT to protect our customers from misuse by such fraudsters. (Cir.no.334 Ref 27/41 dated 16.12.2010)

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Non Resident Indians - Products

Non-Resident Accounts can be opened and maintained by Person Resident outside India, Non-Resident Indians (NRI) and Persons of Indian Origin (PIO). Person Resident outside India means a person who is not resident in India. It also defined as a person who has gone out of India, or who stays outside India for the purpose of employment, carrying on business or vocation or for any other purpose under the circumstances indicating an uncertain period of stay. Person includes Individual, HUF, Firm, Company and Association. Non-Resident Indian means a person resident outside India, who is a citizen of India or is a person of Indian Origin. Persons who visit India for temporary visit are treated as Non-Resident Indian. Students going abroad for studies are treated as Non-Resident Indians. Person of Indian Origin: A Foreign Citizen (Other than citizen of Pakistan or Bangladesh) is deemed to be a person of Indian Origin if, He/She at any time held an Indian Passport or He/She or either of their Parents or Grand Parents was citizen of India by

virtue of the constitution of India or Indian Citizen Act 1955 or He/She is a spouse of Indian Citizen or a person referred as above.

N R O – Non Resident Ordinary Account

Who Can Open Any NRI (Individuals of Bangladesh/Pakistan Nationality require approval from RBI) Singly or Jointly with Residents

Nomination Nominee can be a Resident or a Non Resident. Claim Settlement – Resident Nominees – In INR, NRI Nominee – Repatriable to that Country as per RBI Norms.

Repatriation

Remittances of Balances held in NRO accounts can be allowed up to USD one million per financial year, for all bona fide purposes to the satisfaction of Authorized Dealer(AD)

Foreign Tourists visiting India – the balance amount in the account (other than local credits) can be repatriated at the time of departure from India provided the account has been maintained for a period not exceeding six months.

Type of account Current, Savings, Recurring, Term Deposits. Period of Deposits As applicable to Domestic Deposits. Rate of Interest As applicable to Domestic Deposits. Deposit Loans As applicable to Domestic Deposits. Foreign Currency Loans Not Permitted. Margin As applicable to Domestic Deposits. Interest on Loans Dep. Rate + 2 %.

Applicability of Local Taxes

TDS on Int. earned @ 30% + Edn. Cess + Service Tax., including Interest on SB Deposits, irrespective of the amount of Interest. Wealth Tax, as applicable.

Transfer of funds Not permitted to NRE / FCNR accounts Premature Cancellation of Deposits As applicable to Domestic Deposits.


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N R E – Non Resident External Rupee account

Who Can Open Any Non Resident Indian (Individuals of Bangladesh / Pakistan Nationality require approval from RBI) Singly or Jointly with Non Residents only

Nomination Nominee can be a resident or a Non Resident. Claim Settlement – Resident Nominees – In Indian Rupee Non Resident Nominee – Repatriable as per RBI Norms.

Repatriation Balances in the account are Fully Repatriable. Type of account Current, Savings, Recurring, Term Deposits. Period of Deposits Term Deposits – Minimum one year and Maximum 10 years.

Rate of Interest Saving Deposits – Deregulated – At present 4.0 % Term Deposit - At present One Year 9.40%, > 1 Year & up to 2 Years 9.25% and Above 2 years 9% w.e.f. 01.01.12

Rupee Loans Permitted to Account Holder & Third Parties subject to the maximum of `100 lakhs.

Deposit Loans Permitted to Account Holder & Third Parties subject to the maximum of `100 lakhs.

Margin 15% Interest on Loans Dep. Rate + 2 %. Applicability of Local Taxes

No TDS on Int. earned. No Wealth Tax. Free from all Taxes

Transfer of amount to other types

To NRO –permitted To FCNR –permitted

Premature Cancellation

Penalty 1% on premature cancellation is applicable. No Interest is payable, incase of cancellation before 1 year. Conversion from NRE to FCNR or vice versa, before maturity is subject to Penalty. No penalty in case the amount is placed in RFC.

Foreign Currency Non Resident account – F C N R (B)

Who Can Open Any Non Resident Indian (Individuals of Bangladesh / Pakistan Nationality require approval from RBI) Singly or jointly with another Non Resident only.

Nomination Nominee can be a resident or a Non Resident. Claim Settlement – Resident Nominees – In Indian rupees Non Resident Nominee – Repatriable as per RBI Norms.

Designated Currency

Pound Sterling (GBP), US Dollar (USD), Euro (EUR), Australian Dollar (AUD), Canadian Dollar (CAD), Japanese Yen (JPY), Swiss Franc (CHF), Danish Kronor (DKK), Newzeland Dollor (NZD), Swedish Kronor (SEK)

Repatriation Fully Repatriable without any limits. Foreign Currency Exchanger Risk

No Exchange Risk to the customer, in case of repatriation, as account is maintained in Foreign Currency only.

Type of account Term Deposits only (FDR / Reinvestment) Period of Deposits Minimum one year and Maximum 5 years

Rate of Interest

Linked to LIBOR. Term Deposits with a cap not exceeding Libor + 100 basis points. 360 days is taken for a year for the purpose of interest calculation. Simple interest is paid for one year deposit. However, compound interest (half-yearly, 180 days) is paid for deposits beyond one year.

Rupee Loans Permitted to Account Holder & Third Parties subject to the maximum of `100 lakhs.

Deposit Loans Permitted to Account Holder & Third Parties subject to the maximum of `100 lakhs, or Foreign Currency equivalent to `100 lakhs.

Applicability of Taxes No TDS on Interest earned and No Wealth Tax. Amount Transfer Permitted to NRO and NRE accounts A/c can be opened at Designated branches. (C Category Branches) Premature Cancellation No interest payable and no SWAP cost to be recovered for


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the deposits up to USD 10000 or equivalent, where the deposit is cancelled before the expiry of one year. However, SWAP cost to be recovered in case of deposits above USD 10000 or its equivalent. Cancellation of the deposit for the purpose of renewal in the same currency, same type of deposit/RFC, no SWAP cost is to be recovered. If the deposit is cancelled after one year, applicable rate is to be paid without Penalty. If the withdrawal for any other reason applicable interest with 1% penalty is to be levied.

Note: All branches are authorized to accept FCNR (B) deposits. Since the exchange risk is borne by the bank, branches are required to report all FCNR transactions (openings, closures, interest payments, transfers etc.,) to Investment & International Banking Division (IIB), Mumbai on the same day.

Cir.no.406 Ref 15/16 dated 25.02.2011

R F C - Resident Foreign Currency Accounts

Who Can Open Non Resident Indians (NRI) returning to India who have been NRIs for a continuous period of not less than one year. NRIs returning to India for permanent stay in India

Sources of funds

Foreign Exchange received as pension / superannuation / other benefits from employers abroad. Realization of assets held abroad. Foreign Exchange acquired as gift or inheritance from person who was a NRI. Foreign Exchange acquired or received or any income arising or accruing there on which is held outside India by any person in terms of general or specific permission granted by RBI.

Joint Accounts With another eligible person/s. Types of accounts Savings, Current, Term Deposits. Period of Term Dep. As applicable to FCNR B Accounts. Min 1 year Max 5 years

Currency Pound Sterling, US Dollar, Euro, Australian Dollar, Canadian Dollar

Nomination Nominee can be a resident or a Non Resident. Claim Settlement – Resident Nominees – In Indian rupees Non Resident Nominee – Repatriable as per RBI Norms.

RFC Domestic Account

Who Can Open Any person resident in India

Sources of funds

Foreign Exchange acquired in the form of currency notes, bank notes, cheques, drafts, and travellers cheques.

Payment / honorarium / gift for services rendered in India / abroad.

Unspent amount of foreign exchange acquired by him from an authorized person for travel abroad.

Gift from close relatives as defined in sec. 6 of the company act 1956.

Proceeds of Insurance policy claims / maturity / surrender values settled in foreign currencies.

Joint Accounts Not permitted Types of accounts Current Account Period of Term Dep. Term Deposits are not permitted to be opened

Currency Pound Sterling, US Dollar, Euro, Australian Dollar, Canadian Dollar

Interest No Interest is payable since it is a Current Account Loan & Over drafts Not permitted.


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Exchange Earners Foreign Currency Accounts (EEFC)

Who Can Open

A person Resident in India may open, hold and maintain foreign currency account to be known as EEFC account. All Categories of Foreign Exchange Earners are allowed to credit up to 100% of their Forex earnings to EEFC Account.

Purpose

Authorized Dealers (AD) are allowed to open, hold and maintain foreign currency denominated accounts for the purpose of transacting foreign exchange business and other matters of the account holder. The accounts can be maintained with one or more ADs.

Currency The account may be maintained in the currency of the remittance or any other permitted currency at the option of the depositor.

Credit facility No credit facility, either fund based or non-fund based should be permitted against the security of the balances held in the EEFC accounts.

Type of account

EEFC accounts should be in the form of non-interest bearing current accounts only. Cheque book facility is permitted.

Interest No Interest is payable

Nomination Nomination facility is permitted like any domestic account. Nominee can be Resident Indian only

Limit up to which foreign currency may be credited

A person resident in India may credit to the EEFC account 100% from out of the foreign exchange earnings

Permissible credits to EEFC accounts

Inward remittance through normal banking channels, other than the remittance received pursuant to any undertaking given to the Reserve Bank or which represents foreign currency loan raised or investment received from outside India, or those received for meeting specific obligations by the account holder. Payment received in foreign exchange by a unit in Domestic Tariff Area (DTA) for supplying goods to a unit in Special Economic Zone out of its foreign currency account. Payment received by an exporter from an account maintained with AD for the purpose of counter trade, in accordance with the approval granted in terms of regulation 14 of FEMA (Export of goods & Services) Regulations 2000.

Advance remittances received by an exporter towards export of goods / services. Payments received towards export of goods/ services from India, out of funds representing repayment of state credit in USD held in the account of Bank for foreign economic affairs, Moscow with an AD in India.

Professional Earnings including Director's fees, consultancy fees, lecture fees, honorarium and similar other earnings received by a professional by rendering services in his individual capacity.

Interest earned on the funds in the account. Re credit of unutilized foreign currency earlier withdrawn from the account. However, the amount withdrawn in rupees shall not be eligible for conversion into foreign currency and for re-credit to the account.

Amount representing repayment of loans/ advances granted to the account holder's importer customer.


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Representing the disinvestments proceeds received by the resident account holder on conversion of shares held by him to ADRs / GDRs under the sponsored ADR / GDR scheme approved by the Foreign Investment Promotion Board of Govt. of India.

Permissible debits to EEFC account

Payment outside India towards any current account transactions in terms of FEMA Current Account Transaction Rules 2000 and towards a capital account transaction Permissible under FEMA (Permissible Capital Account Transactions) Regulations 2000. Payment in foreign exchange towards cost of goods purchased from 100% EOU or a Unit in EPZ / STP / Electronic Hardware Technology Park. Payment of Customs Duty in accordance within the provisions of Export Import Policy of Central Government for the time being in force.

Trade related loans/ advances, by an exporter holding such account to his importer customer outside India subject to compliance with FEMA (Borrowing & Lending in Foreign Exchange) Regulations 2000.

Payment in foreign exchange to a person resident in India for supply of goods / services including payment for airfare and hotel expenditure. Branches may permit their export constituents to extend trade related loans / advances to overseas importers out of their EEFC balance without any ceiling subject to compliance of provisions of Notification no. FEMA 3 / 2000 as amended from time to time.

Branches may permit exporters to repay packing credit advances whether availed in rupee or in foreign currency from balances in their EEFC accounts and / or rupee resources to the extent exports have actually taken place.

The balances in EEFC accounts may be allowed to be credited to NRE / FCNR – B account at the option / request of the account holders consequent upon change of their residential status to Non – Resident.

Conversion into Rupee Funds

There is no restriction on withdrawal in rupees of funds held in EEFC account. Branches should send the request to Investment & International Banking (IIB), Mumbai by e-mail / fax, for conversion of rupee funds and can take the conversion rate along with reference no.

Loans to NRIs – Against Deposits: Advances against FCNR/NRE deposit to the depositor himself should be granted only under his specific request and after verifying the authenticity of the signature of the depositor. Loans can be granted for any purpose, (except for the purpose of relending or carrying on agriculture/plantation activities or for investment in real estate business) including direct investment by way of capital contribution to Indian firm/companies and for acquisition of residential flats/houses on non-repatriable basis. In case of loans to third parties against NRI deposits, normally the relative documentation should be done at the branch from where the loan is being sought by the NRI depositor. The loan should be granted only when the depositor himself executes the loan documents in the presence of the bank officials and witness acceptable to the bank. Advances to third parties against such deposits should not be granted on the basis of Power of Attorney. The maximum loans/advances that can be sanctioned / renewed either to the depositors or to third parties is restricted to `100 lakhs against NRI deposits. The loan amount is to be credited only to NRO account of the depositor but not to any other account. Advances granted can be repaid by foreign inward remittances, or


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transfer from NRE/FCNR accounts, or maturity proceeds of the deposit, or local rupee sources held in NRO account. The interest rates to be levied on such loans are as under:

No Category Interest Rate

1 Loan to depositor and repayment through inward remittance or adjustment of deposit or transfer of funds from NRE/FCNR deposits

Deposit Rate + 2%

2 Loans to depositor – Repayment by rupee funds in NRO accounts Deposit Rate + 3%

3 Loans to third parties – Repayment by rupee funds (less than one year) Base Rate + 5%

4 Loans to third parties – Repayment by rupee funds (one year & above and up to 3 years)

Base Rate + 5.75%

In case the rate of interest payable on NRE/FCNR deposit held as security is Nil due to premature closure before the expiry of minimum period i.e. one year, the rate of interest on the loans against such deposit is Base Rate + 7%. (Circular no.109 Ref 26/27 dated 30.06.2010) Liberalized Remittance Scheme: RBI introduced the scheme as a step towards further simplification and liberalization of the foreign exchange facilities available to resident individuals. As per the Scheme, resident individuals may remit up to USD 200000 per financial year (April to March) for any permitted capital and current account transactions. This limit also includes remittances towards gift (USD 5000 per remitter/donor per annum) and donation (USD 5000 per remitter/donor per annum) by resident individual. Under the Scheme, resident individuals can acquire and hold immovable property or shares or debt instruments or any other assets outside India, without prior approval of the Reserve Bank. Individuals can also open, maintain and hold foreign currency accounts with banks outside India. In addition, the existing facility of release of exchange by Authorized Dealer up to USD 10000 or its equivalent in a financial year for one or more private visits to any country will continue to be available on a self declaration basis. It is mandatory to have PAN number to make remittances under the Scheme.

Diamond Dollar Account Scheme in terms of which firms and companies dealing in purchase/sale of rough or cut and polished diamonds/precious metal jewellery plain, minakari and/or studded with/without diamond and/or other stones, with a track record of at least 2 years in import/export of diamonds/coloured gemstones/ diamond and coloured gemstones studded jewellery/plain gold jewellery, and having an average annual turnover of ` 3 crore & above during preceding three licensing years, are allowed to open Diamond Dollar Accounts (DDA). RBI issue DDA on a case-to-case basis, subject to the following terms and conditions:

Opened in the name of the exporter and maintained in US Dollars only. It should be in the form of current account and no interest should be paid on

the balance held in the account. No intra-account transfer should be allowed between the DDAs. Not permitted to open and maintain more than 5 DDAs. The balances held in the accounts shall be subject to CRR SLR requirements. Exporter firms and companies maintaining foreign currency accounts (excluding

EEFC accounts) are not eligible to open Diamond Dollar Accounts. The permissible credits in the accounts are amount of pre-shipment and post-shipment finance availed in US Dollars; Realisation of export proceeds from shipments of rough, cut, polished diamonds and diamond studded jewellery; and Realisation in US Dollars from local sale of rough, cut and polished diamonds. The permissible debits in the accounts are Payment for import/purchase of rough


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diamonds from overseas/local sources; Payment for purchase of cut and polished diamonds, coloured gemstones and plain gold jewellery from local sources; Payment for import/purchase of gold from overseas / nominated agencies and repayment of USD loans availed from the bank. Transfer to rupee account of the exporter. Investment opportunities to NRIs: The permitted investment opportunities to NRIs in India are Government Securities, Company Deposits, Units of Mutual Funds, Company Shares/Debentures, Immovable property and Loans to residents. The investment can be under repatriation or non-repatriation basis. However, NRIs are prohibited from making investments in any entity, which is engaged in the activities such as Chit funds, Nidhis, Agricultural or Plantation activities, Real Estate business, Construction of Farm Houses without RBI`s permission. Whenever the investments are allowed with repatriation benefits, the funds for the purpose should be received by inward remittances from abroad or from investor’s NRE/FCNR accounts. While funds in NRO accounts could be used in respect of investments on non-repatriation basis.

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Non Performing Assets / Prudential Norms

A strong banking sector is important for flourishing economy. The failure of the banking sector may have an adverse impact on other sectors. High level of Non Performing Assets (NPA) suggests low credit quality and warrants high provisioning, which has direct bearing on profitability and net-worth of banks and value of shareholders. The increased incidence of NPA is one of the major concerns of Indian Banks in the recent years. An asset is classified as NPA, if due in the form of principal and interest are not paid by the borrower for a period of 90 days. If any advance or credit facility granted by banks to a borrower becomes non-performing, then the bank will have to treat all the advances/credit facilities granted to that borrower as non-performing without having any regard to the fact that there may still exists certain advances / credit facilities having performing status. Category Treated as NPA if:

Term Loan Interest and/or installment of principal remain overdue for a period of more than 90 days

Overdraft/ Cash Credit (OD/CC) accounts

1) The account remains out of order i.e., if the liability exceed limit/DP continuously for 90 days. If liability is within limit/DP, but there are no credits continuously for 90 days or credits are not enough to cover interest debited during the same period. 2) Drawings are allowed on DP calculated on stock statement older than three months continuously for a period of 90 days 3) Regular/adhoc credit limits have not been reviewed/renewed within 180 days from due date/date of adhoc sanction.

Agricultural Loans

A Loan is granted for short duration crops will be treated as NPA, if the installment of principal or interest thereon remains overdue for two crop seasons. A loan granted for long duration crops will be treated as NPA, if the installment of principal or interest thereon remains overdue for one crop season. “Long duration” crops would be crops with crop season longer than one year and crops which are not “long duration” crops would be treated as “short duration” crops. The crop season for each crop, which means the period up to harvesting of the crops raised would be determined by the SLBC in each state. In respect of agricultural loans which are not linked to harvesting season, term loans given to non agriculturists, identifications of NPAs would be done on the same basis as non–agricultural advances i.e. 90 days delinquency norm.

Bills Purchased / Discounted

Bill remains overdue for a period of more than 90 days.

Other a/cs Any amount to be received remains overdue > 90 days. Potential NPA (PNPA): are those accounts showing overdues and irregularities persist beyond 30 days. These are also known as Border line Performing Assets. Date of NPA: It is the date on which the overdues or the irregularities cross 90 days or the date on which the account comes under Income Recognition norms. Overdue: Any amount due to the bank under any credit facility is ‘overdue’ if it not paid on the due date fixed by the bank. Net NPA=Gross NPA – (provisions held towards NPAs + Balances in Interest Sundry Suspense A/c + part payments received in suit filed accounts and kept in Sundry Suspense.+ claims received from ECGC/CGC and kept in Sundry Suspense a/c).


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Income recognition: The policy of income recognition has to be objective and based on the record of recovery. Income from nonperforming assets (NPA) is not recognized on accrual basis but is booked as income only when it is actually received. However, interest on advances against term deposits, NSCs, IVPs, KVPs and Life policies may be taken to income account on the due date, provided adequate margin is available in the accounts. Reversal of Income: If an account becomes NPA for first time during the year the unrealized interest that was taken to P&L account on accrual basis pertaining to the current year as well as pertaining to the preceding year, if any, shall also be reversed. This will apply to Government guaranteed accounts also.

Valuation of Security for provisioning purposes: In cases of NPAs with balance of Rs.5 crore and above stock audit at annual intervals by external agencies and collaterals such as immovable properties charged in favour of the bank should be got valued once in two years by valuers approved by the Board.

Asset classification: Banks are required to classify non-performing assets further into the following three categories based on the period for which the asset has remained nonperforming and the reliability of the dues: i) Substandard Assets: A substandard asset would be one, which has remained NPA for a period less than or equal to 12 months. It indicates credit weakness and scope for loss if deficiencies are not corrected. ii) Doubtful Assets: An asset would be classified as doubtful if it has remained in the substandard category for a period of 12 months. iii) Loss Assets: A loss asset is one where loss has been identified by the bank or internal or external auditors or the RBI inspection but the amount has not been written off wholly. It is considered as uncollectible and it is not warranted to continue as bankable asset since there is little scope for salvage or recovery value. Multiple Limits/Branches: Facilities granted by a bank to a borrower will have to be treated as NPA (except bills discounted under LC) if any one facility of the borrower becomes NPA. Uniform lowest classification shall be accorded to all facilities. In case of credit facilities for a borrower at more than branch, the principal branch shall decide the NPA status.

Advances under consortium arrangements: Asset classification of accounts under consortium should be based on the record of recovery of the individual member banks.

Accounts where there is erosion in the value of security: Where there are potential threats for recovery on account of erosion in the value of security or non-availability of security, asset should be straightaway classified as doubtful or loss asset as appropriate.

Advances against Term Deposits, NSCs, KVPs, IVPs and LIC policies need not be treated as NPAs. Advances against gold ornaments, government securities and all other securities are not covered by this exemption.

Loans with moratorium for payment of interest: In the case of bank finance given for industrial projects or for agricultural plantations etc. where moratorium is available for payment of interest, payment of interest becomes 'due' only after the moratorium or gestation period is over.


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Agricultural Advances: In cases of conversion or re-schedulement short term production loan as a relief measure, the term loan as well as fresh short-term loan may be treated as current dues and need not be classified as NPA. Government guaranteed advances: Advances under this category, though overdue may be treated as NPA only when the Government repudiates its guarantee when invoked. However, interest can be recognized only on recovery basis not on accrual basis. State Government guaranteed advances would attract asset classification and provisioning norms if interest and/or principal or any other amount due to the bank remains overdue for more than 90 days. Availability of security / Net worth of borrower/ Guarantor: The availability of security or net worth of borrower/ guarantor should not be taken into account for the purpose of treating an advance as NPA or otherwise, as income recognition is based on record of recovery. Post-shipment Supplier's Credit: To the extent Export Credit Guaranteed amount is received from the EXIM Bank, the advance may not be treated as a nonperforming asset for asset classification and provisioning purposes. Ever greening: Rescheduling of a loan without assessing the viability of the activity for the purpose of avoiding an account becoming NPA. Provisioning norms: Status Provision to be made

Standard 0.25% on Direct advances to agriculture and SME sectors. 1.00% on Commercial Real Estate 0.40% on all advances other than stated above

Sub-Standard 25% on unsecured exposures (20% in case of infra loans) 15% on other loans

Doubtful

Unsecured portion: 100% Secured portion: if asset remained in doubtful <= 1 year 25% If asset remained in doubtful - 1 to 3 years 40% If asset remained in doubtful > 3 year 100%

Loss At 100% on the outstanding

Note: 2% provision on recast loans in standard assets for first 2 years.

Unsecured Exposure is one where realisable value of tangible security, as assessed by the bank/approved valuers/RBI inspecting officers, is not more than 10 percent, abintio, of the outstanding exposure (funded and non-funded).

However, the following are the exempted categories from provisioning norms:

Advances against term deposits, NSCs eligible for surrender, IVPs, KVPs and life policies.

Advances granted under rehabilitation packages approved by BIFR / Term lending institutions.

Advances covered by CGTSI guarantee - No provision need be made towards the guaranteed portion. The outstanding in excess of the guaranteed portion should be provided.

Advances covered by ECGC /DICGC guarantee - provision should be made only for the balance in excess of the amount guaranteed by the Corporation.

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Risk Management - Basel-I, II & III The growing sophistication in banking operations, online electronic banking, improvements in information technology etc, have led to increased diversity and complexity of risks being encountered by banks. These risks can be broadly grouped into Credit Risk, Market Risk and Operational Risk. These risks are interdependent and events that affect one area of risk can have ramifications for a range of other risk categories. Basel-I Accord: It was introduced in the year 2002-03, which covered capital requirements for Credit Risk. The Accord prescribed CRAR of 8%, however, RBI stipulated 9% CRAR. Subsequently, Banks were advised to maintain capital charge for Market Risk also. Basel-II New Capital Accord: Under this, banks have to maintain capital for Credit Risk, Market Risk and Operational Risk w.e.f 31.03.2007. The New Capital Accord rests on three pillars viz., Minimum Capital Requirements, Supervisory Review Process & Market Discipline. The implementation of the capital charge for various risk categories are as under:

Risk Area Approach With Effect From Credit Risk Standardized Approach 31.03.2008 Market Risk

Standardized Duration Method

For HFT & Others 31.03.2005 For HFT & Others + AFS 31.03.2006

Operational Risk Basic Indicator Approach 31.03.2008 Analysis of the bank's CRAR under both Basel-I and Basel-II guidelines should be reported to the Board at quarterly intervals.

Internal Ratings Based (IRB) Approach: Under this approach, banks must categorise the exposures into broad classes of assets as Corporate, Sovereign, Bank, Retail and Equity. The risk components include the measures of the Probability of Default (PD), Loss Given Default (LGD), Exposure at Default (EAD) and Effective Maturity (M). There are two variants i.e Foundation IRB (FIRB) and Advanced IRB. Under FIRB, banks have to provide their own estimates of PD and to rely on supervisory estimates for other risk components (like LGD, EAD) while under Advanced IRB; banks have to provide their own estimates of all the risk components. It is based on the measures of Expected Losses (EL) and Unexpected Losses (UL). Expected Losses are to be taken care of by way of pricing and provisioning while the risk weight function produces the capital requirements for Unexpected Losses.

Market Risk: It is a risk pertaining to the interest rate related instruments and equities in the Trading Book i.e AFS (Available For Sale) and HFT (Held for Trading) positions and Foreign Exchange Risk (including open positions in precious metals) throughout the bank (both banking & trading books). There are two approaches for measuring market risk, which are as under:

i) Standardised Duration approach: The minimum capital charge is expressed are - Specific Risk is akin to credit risk and the capital charge for specific risk is designed to protect against the adverse movements in the price of an individual security owing to factors related to the individual issuer. General Market Risk charge is designed to capture the risk of loss arising from changes in the market interest rates. The capital charge for Market Risk will be the sum of the capital charges for Specific Risk & the General Market Risk. Capital charge for specific Risk is to be calculated based on the charge relevant to the nature of the investment (based on residual maturity


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for Banks). The capital charge is to be calculated based on the Market Value, Modified Duration & assumed change in the yield of each individual security. ii) Internal Models Approach (IMA): Under IMA, banks have to move over to Value at Risk (VaR) method for calculating the capital charge for market risk instead of Modified Duration used in Standardised approach. RBI has already specified the time line for implementation of IMA. Banks are gearing themselves up to meet the data and software requirements of the advanced approach.

Operational Risk: Banks have to maintain capital charge for operational risk under the new framework and the approaches suggested for calculation of the same are: i) Basic Indicator Approach: Under this approach, banks must hold capital equal to 15% of the previous three years average positive gross annual income as a point of entry for capital calculation. ii) The Standardized Approach: Under this approach, banks’ activities are divided into eight business lines. The capital charge for each business line is calculated by multiplying the gross income by a factor (denoted by beta) assigned to that business line. The total capital charge is calculated as the three year average of the simple summation of the regulatory capital charges across each of the business lines in each year. The details of the business lines and the beta factors are as under –

Business Line Beta Factor Corporate Finance(1)/Trading & sales(2)/Payment & Settlement(5) 18% Commercial Banking (4) / Agency Services (6) 15% Retail Banking (3) / Asset Management (7) / Retail brokerage (8) 12%

iii) Advanced Measurement Approach (AMA): For adopting this approach, supervisory approval is a must. Under this approach, the regulatory capital requirement will equal the risk measure generated by the bank’s internal operational risk measurement system using certain quantitative and qualitative criteria. Tracking of internal loss event data is essential for adopting this approach. When a bank first moves to AMA, a three-year historical loss data window is acceptable. The capital requirement would be substantially lower if we adopt AMA based historical loss data. RBI advised all banks to maintain capital charge for Operational Risk as per the Basic Indicator Approach.

Pillar 2 – Internal Capital Adequacy Assessment Process (ICAAP): Under this, the regulator is cast with the responsibility of ensuring that banks maintain sufficient capital to meet all the risks and operate above the minimum regulatory capital ratios. RBI also has to ensure that the banks maintain adequate capital to withstand the risks such as Interest Rate Risk in Banking Book, Business Cycles Risk, and Credit Concentration Risk etc. For Interest Rate Risk in Banking Book, the regulator may ensure that the banks are holding sufficient capital to withstand a standardized Interest Rate shock of 2%. Banks whose capital funds would decline by 20% when the shock is applied are treated as ‘Outlier Banks’. The assessment is reviewed at quarterly intervals.

Pillar 3 – Disclosure Requirements: It is aimed to encourage market discipline by developing a set of disclosure requirements which will allow market participants to assess the key pieces of information on the capital, risk exposures, risk assessment processes and hence the capital adequacy of the institution. Banks may make their annual disclosures both in their Annual Reports as well as their respective websites. Banks with capital funds of `500 crore or more, and their significant bank subsidiaries, must disclose their Tier-I Capital, Total Capital, total required capital and Tier-I ratio and total capital adequacy ratio, on a quarterly basis on their


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respective websites. The disclosures are broadly classified into Quantitative disclosures and Qualitative disclosures and classified into the following areas:

Area Coverage

Capital Capital structure & Capital adequacy Risk Exposures & Assessments

Qualitative disclosures for Credit, Market, Operational, Banking Book interest rate risk, equity risk etc.

Credit Risk General disclosures for all banks. Disclosures for Standardised & IRB approaches.

Credit Risk Mitigation Disclosures for Standardised and IRB approaches. Securitisation Disclosures for Standardised and IRB approaches.

Market Risk Disclosures for the Standardised & Internal Models Approaches.

Operational Risk The approach followed for capital assessment. Equities Disclosures for banking book positions Interest Rate Risk in the Banking Book (IRRBB)

Nature of IRRBB with key assumptions. The increase / decrease in earnings / economic value for upward / downward rate shocks.

Time lines for implementation of Advanced Approaches by Indian Banks:

Risk Area Approaches Earliest date RBI date

Credit Risk Internal Rating Based (IRB) Approaches viz., Foundation and Advanced 01.04.12 31.03.14

Market Risk Internal model Approach (IMA) 01.04.10 31.03.11

Operational Risk

The Standardized Approach (TSA) 01.04.10 30.09.10

Advanced Measurement Approach (AMA) 01.04.12 31.03.14

The Basel-II norms are much better than Basel-I since it coveres operational risk. However, risks such as Reputation Risk, Systemic Risk and Strategic Risk (the risk of losses or reduced earnings due to failures in implementing strategy) are not covered and exposing the banks to financial shocks. As per Basel all corporate loans attracts 8 percent capital allocation where as it is in the range of 1 to 30 percent in case of individuals depending on the estimated risk. Further, group loans attract very low internal capital charge and the bank has a strong incentive to undertake regulatory capital arbitrage to structure the risk position to lower regulatory risk category. Regulatory capital arbitrage acts as a safety valve for attenuating the adverse effects of those regulatory capital requirements that activity’s underlying economic risk. Absence of such arbitrage, a regulatory capital requirement that is inappropriately high for the economic risk of a particular activity could cause a bank to exit that relatively low-risk business by preventing the bank from earning an acceptable rate of return on its capital. Nominally high regulatory capital ratios can be used to mask the true level of insolvency probability. For example – Bank maintains 12% capital as per the norms risk analysis calls for 15% capital. In a regulatory sense the bank is well capitalized but it is to be treated as undercapitalized from risk perspective.

Basel-III is a comprehensive set of reform measures developed to strengthen the regulation, supervision and risk management of the banking sector. The new standards will considerably strengthen the reserve requirements, both by increasing the reserve ratios and by tightening the definition of what constitutes capital.


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Recently, RBI issued draft guidelines on Basel-III Capital Regulations and the major highlights are:

Minimum Capital Requirements

Core capital must be at least 5.5% of risk-weighted assets (RWAs); Tier 1 capital must be at least 7% of RWAs; and Total capital must be at least 9% of RWAs.

Capital Conservation Buffer: The capital conservation buffer in the form of Common Equity of 2.5% of RWAs. Transitional Arrangements: It is proposed that the implementation period of minimum capital requirements and deductions from Common Equity will begin from January 1, 2013 and be fully implemented as on March 31, 2017. Capital conservation buffer requirement is proposed to be implemented between March 31, 2014 and March 31, 2017.

The implementation schedule indicated above will be finalized taking into account the feedback received on these guidelines.

Instruments which no longer qualify as regulatory capital instruments will be phased-out during the period beginning from January 1, 2013 to March 31, 2022.

Enhancing Risk Coverage: For OTC derivatives, in addition to the capital charge for counterparty default risk under Current Exposure Method, banks will be required to compute an additional credit value adjustments (CVA) risk capital charge. Leverage Ratio: The parallel run for the leverage ratio will be from January 1, 2013 to January 1, 2017, during which banks would be expected to strive to operate at a minimum Tier 1 leverage ratio of 5%. The leverage ratio requirement will be finalized taking into account the final proposal of the Basel Committee. Basel-III proposes to increase Core Tier-1 capital, the least risky form of capital, from 2% to 7% of their risk-weighted assets. Taking conservation buffer and counter cyclical buffer in to account, banks will need to maintain 13% capital of which Tier-1 capital is expected around 11%. The above measures aim to: Improve the banking sector’s ability to absorb shocks arising from financial

and economic stress, whatever the source Improve Risk Management and Governance Strengthen banks’ transparency and disclosures

The revised leverage ration would limit banks to lending 33 times of their capital, which represents a cap on bank risk irrespective of the impact from the higher capital numbers.

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Customer Service & BCSBI

The Government and the regulator (RBI) have been emphasizing the importance and the need to extend speedy, efficient, fair and courteous customer service in banking industry. In this direction, the following committees were set up: 1975 – Talwar Committee 1990 – Goiporia Committee 2004 – Tarapore Committee 2006 – Working group under chairmanship of Sri.N Sadasivan In addition to the guidelines framed based on the recommendations of the committees, RBI had been giving instructions to banks as and when required. Over the years, the customer service in banks has improved considerably with the introduction of technology based products. Further, the Government of India introduced the concept of Citizens’ Charter at all bank branches with an objective to exercise in setting benchmarks for prompt delivery of banking services, including the pricing thereof. In the year 2010, RBI constituted a committee under the chairmanship of Sri.M.Damodaran to look into the customer service aspects in Banks. The recommendations of the committee are as under: Bank should offer a basic bank account with privileges such as certain number

of transactions, cheque facility, ATM/Debit Card etc., without any prescription of minimum balance.

The Passbook/Statement of accounts should indicate the account number,

name, address and ID of the customer, MICR Code, IFSC Code, Toll free customer care number, Ombudsman contract details, instrument number and payee name on all debit entries and the full details of TDS (Gross Interest credited and TDS debited).

Before marking the account as inoperative, the banks must intimate the

account holder by SMS. Banks should introduce Uniform Account Opening forms and Account Number Portability across the banks.

Banks should take Unique Identification Number (issued under Aadhar

project) as KYC compliance for opening of accounts. The term deposit renewal notices should be sent to customers preferably in

electronic form. A single Form 15G/H linked to a customer ID across the branches in a bank should be issued.

Service charges should be reasonable. No charges are to be levied on Non-

Home Branch transactions. The users of electronic bank platforms for making collections may offer small

discounts to their customers to favour electronic payments. Cheque Drop Box should provide receipt / acknowledgement along with the

image of the cheque. Reason for penal interest on loan accounts, rate of interest charged should be

mentioned in Passbook/Statement of Account. Banks must ensure that loan statements are issued to the borrowers

periodically giving full details including demand, repayments, interest component and charges.


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The title deeds should be returned to the customers within a period of 15

days after the loan closure. Bank should provide Most Important Terms and Conditions (MITC) of the

product explicitly in Arial font and size 12 for better readability. All home loans should permit a switchover between fixed to floating or vice-

versa at least once during the loan tenure at an appropriate and reasonable fee. Home loans backed by insurance products, the procedure should be explained upfront to the customers.

Banks should provide prioritized service to the senior citizens/physically

handicapped persons. Banks should put a system in a place for Automatic updation of the customers

to the senior citizen category based on the date of birth. Pensioner may be allowed to submit the annual life certificate at any of the

branches of the bank. Bank should make arrangements to disburse pension to sick and disabled pensioners at their door steps.

SHG members should not be forced to take insurance products.

Banks should ensure that at least one of the staff members in Tribal / North-

East areas is conversant with local language. The staff manning positions in Customer Service Departments in banks should

receive specialized training so that customer complaints are professionally handled.

With regard to “one-man branches” – Banks should place Proper systems for

safety of cash and also continuity of services in case of leave etc. In case of frauds in the accounts of the customers, bank is required to credit

the amount to their accounts after obtaining due affidavit. Banks should put in place secure systems like Multi-factor Authentication to

minimize the fraud instances. Frauds involving cloned cards, unauthorized online transactions, ATM

transactions not done by the customers etc., can not be valid transactions as they are not authorized by the customers. The onus should be on the bank to prove that the customer has done the transaction.

Banks to install CCTV at all ATMs. For Debit/Credit cards at POS, PIN based

authorization should be made mandatory. Free SMs/e-mail alerts should be sent for every transaction in operative

account / credit cards. Banks should ensure that ECS Mandate Management System is working

effectively to comply with the mandate given by the customer. For transaction deficiencies, there should be in-built mechanism to pay

compensation to the customers. Bank should provide for online registration of grievance in its website.


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Banking Codes and Standards Board of India (BCSBI) RBI has set up BCSBI with an objective of evolving standards for bank services to depositors, borrowers and common persons at affordable and reasonable price and monitoring the same in effective manner. It covers -

Deposit Accounts (Current / Savings / Recurring / Term / PPF) Collection of cheques, Lockers, Safe custody services DD/PO/TT/NEFT/RTGS, Government transactions and Pension payments Demat Accounts, Equity and Government Bonds Loans and Advances Foreign Exchange / Money Changing Card products (Credit / ATM / Debit / Smart)

It is an independent and autonomous watchdog to monitor and ensure that the services are delivered as promised. Banks are required to register themselves with BCSBI as members and have the code of commitment to customers adopted by their respective Boards. BCSBI has revised “The Code of Bank’s Commitment to Customers” and the important changes are as under:

Advise the customer about change in minimum balance to be maintained in Savings/Current accounts 30 days in advance during which period, no charges will be levied for non-maintenance of the higher minimum balance prescribed.

Provide an option to customer for giving nomination at the time of account opening itself with due acknowledgement. On request from the depositor name of the nominee will also be indicated on the Passbook / Term Deposit Receipt.

Acknowledge receipt of loan applications and convey in writing the reasons for rejection of loan.

Return all documents / securities title deeds to mortgaged property to the borrower within 15 days from the full payment of the dues, without waiting for request from the borrower.

Compensate the customers for delayed collection of cheques without waiting for a request from customer.

No charges will be levied for activation of a inoperative account. In case a credit facility / credit card is issued without customer’s consent and

charges levied for the same would be reversed along with compensation. Fair Practices code for Lender’s liability: Loan application forms should be comprehensive to include information about rate of interest, interest application intervals, penal interest, processing charges, up-front fee, prepayment charges etc. Loan applications are to be processed within reasonable time and communicate the terms and conditions in writing to the borrowers. Banks should give notice to the borrower about the subsequent changes in interest rate / charges, if any. Credit Card - Fair practices: All credit card issuers should provide Most Important Terms and Conditions (MITC) to customers and prospective customers. MITC should include information such as admission fee; cash advance charges, default charges, annualized percentage rate and grace period. Further, card issuers should maintain “Do Not Call Registries” and should not provide unsolicited calls/SMS/Cards/Credit facilities unilaterally. Card issuing banks are responsible for any omission or commissions of their agents (Sales / Marketing / Recovery agents). Selling third party financial products/services: Of late, all banks are undertaking selling of Mutual Funds and Insurance policies of other institutions to their customers to earn other income. In order to curb mis-selling of financial products and services and ensure transparency, RBI advised banks to disclose to their customers details of the commissions and other fees received by them while selling Mutual Funds and Insurance policies of other Banks/Institutions.


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Right to Information Act 2005 The Government of India has enacted the Right to Information Act, 2005, which has come into effect from October 12, 2005. This Act is meant to give to the citizens of India access to information under control of public authorities to promote transparency and accountability in these organizations. However, this mechanism is meant for seeking information only and not for making complaints. Under this Act, Citizens of India will have the right to make the request for information in writing, clearly specifying the information sought. The application should accompany a fee of `10/- either in cash or DD/PO. The application for request should give the contact details (postal address, telephone number, fax number, email address) so that the applicants can be contacted for clarifications or the information. All organizations are required to appoint Chief Public Information Officer to deal with requests for information. Hence, Banks also obliged to provide the following information to members of public on request. The particulars of the organization, functions and duties. The powers and duties of its officers and employees.

The procedure followed in the decision making process, including channels of

supervision and accountability. Norms set by the Bank for the discharge of its functions.

Rules, regulations, instructions, manuals and records, held by the Bank or

under its control or used by its employees for discharging its functions. Particulars of any arrangement that exists for consultation with, or

representation by, the members of the public in relation to the formulation of its policy or implementation thereof.

List of Boards, Councils, Committees and other bodies consisting of two or

more persons constituted as its part or for the purpose of its advice, and as to whether meetings of those boards, councils, committees and other bodies are open to the public, or the minutes of such meetings are accessible for public.

A directory of its officers and employees.

Monthly remuneration received by its officers and employees, including the

system of compensation as provided in its regulations. The budget allocated to each of its agency, indicating the particulars of all

plans, proposed expenditures and reports on disbursements made. Particulars of recipients of concessions, permits or authorizations granted. Details in respect of the information, available to or held by it, reduced in an

electronic form.

The Right to Information Act, 2005 under Sections 8 and 9 exempt certain categories of information from disclosures. These include – Disclosure of which would prejudicially affect the sovereignty and integrity of

India, the security, strategic, scientific or economic interests of the State. Relation with foreign State or lead to incitement of an offence.


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Information which has been expressly forbidden to be published by any court

of law or tribunal or the disclosure of which may constitute contempt of court. Disclosure of which would cause a breach of privilege of Parliament or the

State Legislature. Information including commercial confidence, trade secrets or intellectual

property, the disclosure of which would harm the competitive position of a third party, unless the competent authority is satisfied that larger public interest warrants the disclosure of such information.

Information available to a person in his fiduciary relationship, unless the

competent authority is satisfied that the larger public interest warrants the disclosure of such information.

Information received in confidence from foreign Government.

Disclosure of which would endanger the life or physical safety of any person

or identify the source of information or assistance given in confidence for law enforcement or security purposes.

Information which would impede the process of investigation or apprehension

or prosecution of offenders. Cabinet papers including records of deliberations of the Council of Ministers,

Secretaries and other officers. Information which relates to personal information the disclosure of which has

no relationship to any public activity or interest, or which would cause unwarranted invasion of the privacy of the individual.

Under the Act, the citizen has the right to appeal if he is not satisfied with the information provided by the organization or its decision not to provide the information requested for. In case where he is not satisfied with Appellate Authority, he can appeal to Central Information Commission. Role of Banks under RT Act: All Public Sector Banks are covered under this act and they are required to furnish the information sought by the citizens of India. Branch Managers are designated as Central Assistant Public Information Officers (CAIPO) and they have to forward the requests received to the Zonal Managers concerned, who are designated as Central Public Information Officers (CPIO). The ultimate responsibility lies with CPIO to get the matter expedited within stipulated time of 30 days. While disposing off the request under RTI Act, CPIO is required to mention clearly the time limit of 30 days and address of the Appellate Authority to the complainant. The Appellate Authority is the Senior Central Public Information Officer, who will be one of the General Managers at Head Office.

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SECURITISATION AND RECONSTRUCTION OF FINANCIAL ASSETS AND ENFORCEMENT OF SECURITY INTEREST ACT – 2002 (SARFAESI)

SARFAESI enables the banks to seize and sell the properties secured to the bank without the intervention of courts resulting in realization of the amount due in NPA accounts and reduction of NPAs. Securitisation means acquisition of financial assets by any securitisation company or reconstruction company from any originator, whether by raising of funds by such securitisation company or reconstruction company from qualified institutional buyers by issue of security receipts representing undivided interest in such financial assets or otherwise. Security Interest means right, title and interest of any kind whatsoever upon property, created in favour of any secured creditor (Bank) and includes any mortgage, charge, hypothecation, assignment other than those specified in Sec.31 of the Act. Enforcement of secured interest means seizure and sale of the properties secured without intervention of the court. Procedure: As per the act, officers with a rank of Chief Manager and above are empowered to act as Authorized Officer to initiate proceedings which includes issue of notices, taking possession of the property and sale of property. Branches have to identify the NPA account borrowers to whom the notices are to be issued under Sec. 13(2) of the Act. However, the following are the exceptions provided under Sec.31 of the SARFAESI Act: Where the outstanding liability in the account does not exceed Rs 1.00 lakhs Any security interest created in agriculture land Pledge of movables / Lien on any goods Amount due is less than 20% of the principal amount and interest Creation of Security Interest in any Air Craft / Vessel Any conditional sale, hire purchase or lease or any other contract in which no

security interest is created Any right of unpaid seller / Any properties not liable for attachment /sale

under section 60 Civil Procedure Code. The prerequisite should be that such notice should be issued one month after identification of NPA. Notice should be issued to borrower/mortgagor advising them to pay the entire amount due with in 60 days from the date of receipt of the notice. If the borrower is a body corporate notice shall be sent to registered office or any of the branches. If there are more than one borrower notice shall be sent to each one of them. If the borrower avoids notice, the same may be served by publishing in two leading Newspapers (English and Vernacular language). On expiry of 60 days notice period and on default of the payment, possession shall be taken of the property mentioned in Sec.13 (2) notice and the notice of the same shall be give to the borrower and general public. If the possession is handed over by the borrower without any resistance, the following procedure should be adopted. If possession of immoveable property is taken the same has to be published

in two newspapers – English and vernacular Language. The Possession of moveable property may be taken by taking inventory in the

presence of two witnesses. Authorized Officer shall keep the property either in his own custody or in the

custody of any person authorized or appointed by him who shall take as much care of the property in his custody as an owner of the property. Insurance of secured assets and their valuations are to be done before sale of seizure of


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secured assets. Security agents can be engaged while seizing the secured assets.

Authorized Officer may sell the secured assets of which the possession is taken by obtaining quotations from the parties; by inviting tenders from the public; by holding public auction; by private sale. Auction notice is to be kept on the bank’s website.

If sale is by inviting tenders from the public or public auction the same has to be published in two news papers viz., English and another in Vernacular language.

Sale can be affected only after issuing 30 days notice to the borrower / mortgagor. If the property is subject to speedy decay the Authorized Officer may sell it immediately.

The authorized Officer cannot sell the property less than the reserve price. If the entire liability of the bank is not cleared after affecting the measures

under the Act, the bank is to file a suit or application before the court or DRT for recovery of the balance amount of loan.

In the accounts where the borrower failed to honour his commitment under the compromise/OTS, then compromise/OTS permitted should be withdrawn before initiating action under the Ordinance.

In case of resistance from the borrower to hand over the possession of assets, such resistance should be recorded in the presence of two witnesses and application should be made under Sec.14 of the act to Chief Metropolitan Magistrate/Dist. Magistrate seeking their assistance for taking possession of secured assets.

Banking Ombudsman (BO) Scheme started in July 1995 but revamped in the 2006 to enlarge its extent and scope of the authority and functions to specifically cover redressal of grievances against deficiency in banking services, including a variety of banking products / services, such as loans and advances, credit cards, non-payment / inordinate delay in the payment or collection of cheques, drafts, bills, issue of draft to customers, non-adherence to the prescribed working hours by branches etc. BO undertakes the cases where the value of dispute does not exceed `10 lakhs. Under the scheme the complainants will be able to file their complaints in any form including online i.e. email. Currently BO offices are functioning at 15 offices across the country. Normally, the territorial jurisdiction is limited to one state. The complainant is required to take up the matter with the concerned branch for redressal of the grievance and wait for 30 days. If it is not addressed in time he can approach the BO. He should not have filed a complaint before any other forum or court or consumer forum or arbitrator on the same subject matter and be pending when he approaches the B.O. The complaint will be processed without any fee. On receipt of the complaint, notice will be sent to the bank advising the bank to settle the grievance within fifteen days from the date of receipt of the notice or else submit version and also attend a conciliation meeting at the office of the BO. If the grievance is not settled by conciliation, it will be taken up for passing an award. The complainant will have to accept award within fifteen days of receipt of the award. The time limit for implementation of award is 30 days from the date of such receipt of acceptance letter. However, Bank can file a review petition before Reviewing Authority i.e. Deputy Governor of RBI. Compensation for mental agony, reputation loss will become a matter of subjectivity and will not be considered as per the provisions of the Scheme.

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Union Budget – 2011-12 Finance minister Pranab Mukherjee presented to Parliament India's budget for the coming financial year beginning 01.04.2011. Background: Food inflation remains a concern. Current account deficit situation poses some concern. Must ensure that private investment is sustained. Economy back to pre-crisis trajectory. Development needs to be more inclusive. Economy expected to grow at 9 percent. Inflation seen lower in the financial year 2011-12

Budget – Highlights: a) Taxes Standard rate of excise duty held at 10 percent; no change in CENVAT rates. Personal income tax exemption limit is raised to `1.80 lakh from `1.60 lakh

for individual tax payers. For senior citizens, the qualifying age reduced to 60 years and exemption limit raised to `2.50 lakh. Citizens over 80 years to have exemption limit of `5 lakh. To reduce surcharge on domestic companies to 5 percent from 7.5 percent. A new revised income tax return form 'Sugam' to be introduced for small tax papers.

Iron ore export duty raised to 20 percent. Nominal one per cent central excise duty on 130 items entering the tax net. Basic food and fuel and precious stones, gold and silver jewellery will be

exempted. Peak rate of customs duty maintained at 10 per cent in view of the global

economic situation. Basic customs duty on agricultural machinery reduced to 4.5% from 5%. Service tax widened to cover hotel accommodation above `1,000 per day, A/C

restaurants serving liquor, some category of hospitals, diagnostic tests. Service tax on air travel increased by `50 & `250 for domestic and

international travel in economy class respectively. However, on higher classes, it will be ten per cent flat.

b) Subsidies bill in 2011-12 seen at 1.44 trillion rupees Food subsidy bill is expected at 605.7 billion rupees Fertiliser subsidy is expected at 500 billion rupees Petroleum subsidy bill is expected at 236.4 billion rupees State-run oil retailers to be provided with 200 billion rupee cash subsidy.

c) Fiscal deficit is seen at 4.6 percent of GDP in 2011-12. d) Spending - Total expenditure is expected at 12.58 trillion rupees and Plan expenditure will be around 4.41 trillion rupees in 2011-12 (up 18.3 percent). e) Revenue Gross tax receipts seen at 9.32 trillion rupees. Non-tax revenue seen at 1.25 trillion rupees. Corporate tax receipts seen at 3.6 trillion rupees. Customs revenue seen at 1.52 trillion rupees. Service tax receipts seen at 820 billion rupees.


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f) Disinvestment in 2011-12 is seen at 400 billion rupees. Government committed to retaining 51 percent stake in public sector enterprises. g) Borrowings - Net market borrowing for 2011-12 seen at 3.43 trillion rupees, down from 3.45 trillion rupees in 2010-11. Gross market borrowing for 2011-12 is expected at 4.17 trillion rupees. h) Policy reforms

To create infrastructure debt funds. To boost infrastructure development with

tax-free bonds of 300 billion rupees. Food security bill to be introduced this year. To permit SEBI registered mutual funds to access subscriptions from foreign

investments. Raised foreign institutional investor limit in 5-year corporate bonds for

investment in infrastructure by $20 billion. Setting up independent debt management office; Public debt bill to be

introduced in parliament soon. Bills on insurance, pension funds, banking to be introduced.

i) Agriculture

Farm loans at 4 percent. Removal of supply bottlenecks in the food sector will be in focus in 2011-12 Green Revolution waiting to happen in eastern region. To raise target of credit flow to agriculture sector to 4.75 trillion rupees. 3 percent interest subsidy to farmers in 2011-12. Cold storage chains to be given infrastructure status. Capitalization of National Bank for Agriculture and Rural Development

(NABARD) of 30 billion rupees in a phased manner. To provide 3 billion rupees for 60,000 hectares under palm oil plantation. Actively considering new fertiliser policy for urea. Food storage capacity to be augmented - 15 more mega food parks to be set

up in 2011-12. Comprehensive policy for development of Public Private Partnership model. Farmers need access to affordable credit. Necessary to accelerate production of fodder.

j) Other initiatives Government to move towards direct transfer of cash subsidy for kerosene,

LPG and fertilisers. Five-fold strategy against black money; 13 new double taxation avoidance

agreements; foreign tax division of CTBT strengthened; strength of Enforcement Directorate increased three-fold.

Bill to be introduced to review Indian Stamp Act. Mortgage risk guarantee fund to be created for economically weaker sections. Housing loan limit for priority sector lending is raised to ` 25 lakh.

RBI Credit Policy – May 2011: The objective of the policy is strongly rein inflation by curbing demand-side pressures.

i) Hike of Savings Bank interest rate: RBI has increased the interest rate that banks have to pay us on our savings bank deposit to 4% from 3.5%. However, the deregulation of SB Interest rate is yet to be finalized. It is a boon to the depositors and additional burden to the Banks, result into stress on Net Interest Margin (NIM).


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ii) Hike in Repo and Reverse Repo rates: RBI has increased 50 basis points both on Repo and Reverse Repo taking the rate to 7.25% and 6.25% respectively. The direct effect on the common man hence will be in the fact that this will help in putting a rein on the ever increasing inflation seen in the last few years. This could be reflected in the interest rates on retail loans in the medium term.

iii) Relief for borrowers of MFIs: RBI has clearly stated that the interest rates on loans given by banks to Micro Finance Institutions should be at a rate not more than 26% in case they want to be classified as priority sector loans. There is also a stringent “qualifying asset” criteria stipulated which will help in ensuring that there is no recurrence of an Andhra Pradesh like scenario repeated.

iv) Net Banking and Mobile Banking: RBI has shown a strong will to increase the coverage of Internet and mobile based services given by banks and other non-bank entities. Transactions limits have been revised for mobile based transactions, improvement to coverage of NEFT and migrating credit card infrastructure to a system where chip based and pin based cards are expected.

v) Provisions on Advances: The provisioning requirements on certain categories of non-performing advances and restructured advances are changed as under: No Category Provisioning 1 Substandard (Secured) 15% 2 Substandard (Unsecured) 25% 3 Doubtful (Secured) up to 1 year 25% 4 Doubtful (Secured) 1 to 3 years 40% 5 Restructured (Standard) First 2 years 2%

vi) Cap on Liquid Schemes: Investment by banks in liquid schemes of debt oriented mutual funds will be subject to a prudential cap of 10% of their net worth as on 31st March of previous year. Banks which are having excess of the 10% limit will be allowed to comply with this requirement in six months’ time. vii) Financial Inclusion: A broad goal driving financial inclusion initiative is to provide banking access to all villages with population of over 2000 by March 2012. There are 72,800 villages identified as falling into this category. RBI advised banks to ensure that at least 25% of the new branches being opened during this year are located in tier-5 and tier-6 centres. Impact: Repo rate being the effective policy rate, the increase of 25 basis points is expected to be transmitted to the banking industry in the form of higher cost of funds. Accordingly, lending rates are expected to increase further by 50 bps over the next few months. Hike in deposit rates and relatively lower increase in lending rates would exert pressure on the net interest margin of the banks in the coming quarters. RBI Mid-Quarter Policy Review – Dec`11: Repo rate kept unchanged at 8.50% and Reverse Repo steady at 7.50%. The rate decisions were in line with the market expectation. Marginal Standing Facility now available at 9.50%. CRR kept unchanged at 6.00%. GDP growth has come down to 6.9% in Q2, largely on account of sharp moderation in industrial growth. Inflation continues to be one of the dominant macroeconomic concerns and is currently above the RBI’s comfort level. However, the headline WPI inflation rate has moderated to 9.1% driven largely by primary food articles inflation. In the face of steep depreciation of Rupee, several measures were taken to attract inflow of US Dollars, including increased limit on FII investment in government and corporate bonds. The inflation risk remains high and it could quickly recur and the rupee remains under stress.

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Andhra Bank - Milestones

Andhra Bank was founded by ardent freedom fighter and a grate intellectual and multifaceted genius, Dr.Bhogaraju Pattabhi Sitaramayya. Andhra Bank was registered on 20th November 1923 and commenced business on 28th November 1923. The Milestones of Andhra Bank are as under:

Year Event 1923 Commenced operations at Machilipatnam 1943 Attained status of Scheduled Bank 1964 Opened 100th Branch and attained the status of “A” class Bank 1964 Amalgamation of Bharat Laxmi Bank with Andhra Bank 1969 Largest Private Sector Bank in the country 1969 Bank was entrusted with “Lead Bank” responsibility in five districts 1976 Bank opened its 500th Branch 1980 Nationalization of the Bank 1981 Sponsored the first Regional Rural Bank (Rushikulya Grameena Bank) 1981 First Bank in India to introduce “Credit Cards” 1983 Diamond Jubilee Celebrations & surpassed Business of ` 1750 crore 1984 Became convenor of “State Level Bankers Committee” in AP State 1988 Introduced Insurance Linked Savings Deposit Scheme (Abhaya) 1989 Bank opened its 1000th Branch 1997 Surpassed `10000 crore mark in Total Business 1998 First Bank to introduce farmer friendly “Kisan Credit Card” (AB Pattabhi Card) 2001 Initial Public Offer (IPO) 2002 Introduction of New Delivery Channel - First Networked ATM 2003 Achieved 100% “Branch Computerization”

2005 Banking Technology Award for use of IT for customer service in Semi-Urban and Rural areas by IDRBT, Hyderabad

2006 Follow-on Public Offer (FPO) 2006 First Representative Office abroad (Dubai) 2006 Banking Technology Award 2006 for Payment Initiatives from IBA 2006 Conducted BANCON 2006 “Inclusive Growth – A New Challenge” 2007 Ranked 532 among Top 1000 Banks in the world 2008 Opened Representative Office at New Jersy, USA 2009 100% implementation of “Core Banking” 2009 Crossed ` 1 lakh crore Total Business 2009 Entered Joint Venture with “IndiaFirst Life Insurance Company Limited” 2010 Crossed ` 1000 crore Net Profit 2010 Best Bank Award for “Quality of Assets”, “CAMEL Rating” and “Mid-size” Bank

2010 Andhra Bank, Bank of Baroda & Indian Overseas Bank has entered into a tie up for setting up a banking subsidiary in Malaysia “INDIA INTERNATIONAL BANK (MALAYSIA) BHD” and is in the process of commencing business

2011 Best Bank and Financial Institution Awards by CNBC TV18 - “Editorial Board Roll of Honour“ under Mid-sized Banks Category


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LOGO

TOGETHERNESS IS THE THEME

The Symbol of Infinity denotes a Bank that is prepared to do any thing, to go to any lengths, for the customer The Blue pointer on the top represents the philosophy of a Bank that is always looking for growth and newer directions. The Key hole represents Safety and Security The Chain indicates togetherness The colours Red and Blue denote dynamism and solidity

Vision

Statement Andhra Bank Envisions to be a Trustworthy, Efficient & Strong Bank committed to increasing our Market Share

By generating innovative Customer-Centric services and products Igniting the Passion and Creative talents in Human resource Leveraging Technology to expand the clientele & deliver Quality and Value Leading to Customer Delight

Mission Statement

Andhra Bank will …. Amplify the front line capabilities to Serve Customers Develop Processes leveraging Technology Dynamically locate & empower People Fast-cycle knowledge into innovative Products Create Possibilities to reach the business goals & position the Bank as a rising star in the Financial Horizon


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Corporate Slogan

With the implementation of 100% Core Banking, a customer is no more a just a Branch Customer but a Bank Customer. One door opens to all branches and the Bank functions as one Branch. In order to leverage Core Banking and take us forward we need a new Corporate Slogan announcing that we have arrived to make a difference

and catering to all the needs of the customers. Our new Corporate Slogan is a visual and word combination. The visual is the ENTER key of the computer key board. It is perhaps the most used key in the world. The

key is universal and easily identifiable. The key depicts Tech Savvy Character of the Bank. The words “all your needs” are simple & straight forward. The combination of Visual and Words is an initiation to Bank with us.

The corporate slogan finds place in all our advertisements and communications internally and externally.

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Financial Results March 2011 - Highlights

No Business Parameters ` Crores 1 Deposits 92156 2 Advances 72154 3 Total Business 164310 4 Corporate / Mid Cap. / Large Advances 38710 5 Agriculture Advances 10369 6 Retail Credit 10479 7 MSME 11105 8 Other Advances 1491 9 Gross NPA 996 10 Net NPA 274 11 Net Interest Income 3221 12 Other Income 897 13 Operating Expenditure 1705 14 Operating Profit 2413 15 Net Profit 1267

No Important Ratios (%) 1 CASA Deposits 29.06 2 CD Ratio 78.46 3 Cost of Deposits 5.90 4 Cost of Funds 5.45 5 Yield on Advances 11.16 6 Yield on funds 8.92 7 Net Interest Margin (NIM) 3.80 8 Return on Assets (ROA) 1.36 9 Cost to Income Ratio 41.40 10 Standard Assets to Gross Advances 98.62 11 Gross NPA to Gross Advances 1.38 12 Net NPA to Net Advances 0.38 13 Provision Coverage Ratio 83.94 14 Capital to Risk weighted Assets Ratio (CRAR) 14.38 i) Tier-I 9.68 ii) Tier-II 4.70

Important Initiatives:

Number of Business Delivery Channels stood at 2676 (1632 Branches, 25 Extension Counters, 38 Satellite Offices and 981 ATMs)

Introduced transaction based Mobile Banking (mPAY) for transfer of funds from Mobile to Mobile and mobile to account.

Initiated steps for implementation of Financial Inclusion Plan at 1144 villages through Business Correspondents by 31st March 2012.

Bank has launched a customer friendly initiative involving complaint Redressal mechanism through Mobile SMS (9666606060) called “UPSET”

Bank entered tie-up with Bank of Baroda and Indian Overseas Bank to set up Banking Subsidiary named “India International Bank (Malaysia BHD)” in Malaysia and it is in the process of commencing business.

Received five awards viz., Banking Excellence Award for the Best Public Sector Banks from State forum of Banker`s Club, Kerala, MSME National Award for the outstanding performance in PMEGP Scheme, Best Bank (Mid-size) Award by Business world, Best Bank (CAMEL Rating) by The Analyst and Best Bank for the Quality of Assets by Business Today.


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Deposits - New Schemes

Banks have been introducing various innovative deposit schemes to provide value added services to the customers with an objective to retain existing clientele and to expand the base further. Besides extending existing generic deposit products such as Current, Savings, Recurring, Fixed and Kalpataruvu deposits, Bank introduced many new deposit schemes in the recent past and the brief details of the schemes are furnished here under: AB-Freedom (Flexi) Deposits: The scheme provides features of both Savings and Term Deposits to the customers. When SB account is opened, Fixed and Reinvestment deposit accounts also will get opened for the customer with the same account number but without any balance. All individuals (single/joint), Clubs, Associations, Trusts, Hospitals, Schools and colleges are eligible to open Flexi accounts. However, special minors are not allowed to open accounts under this scheme. Minimum balance prescribed for AB Freedom SB account is `5,000/- and the minimum period of deposit is 15 days and maximum period is 12 months for FDs/RIP Deposits. The customer is required to specify tenor option while opening the account. In case where the customer do not exercise option, system takes 15 days for FD and 6 months for RI as default tenor. The rate of interest is as applicable to domestic term deposits. The depositor can choose either FDR or Reinvestment deposits. The depositor can change his choice from FDR to Reinvestment Deposit or vice versa for the future bunches of units to be opened. Whenever, the balance in the SB account exceeds `5000/-, system transfers the balance in to Fixed or Re-investment Deposit with a minimum deposit of `5000/- or multiples thereof. Similarly, whenever the customer presents a cheque in excess of SB balance, system cancels the term deposits (`1000/- or multiples thereof) to meet the requirement. No penalty for premature withdrawal of deposit units under this scheme. After cancellation of units in a bunch of units, the remaining units will continue to earn interest at the contracted rate. No deposit loan is allowed against Flexi Deposits. Deposit Receipts will not be issued for the units opened under the scheme. Statements will be issued for SB as well as Fixed Deposit/ Reinvestment Deposit transactions. (Circular no. 159 Ref 44/20 dated 27.08.08 & Cir.no.381 Ref 27/55 dated 07.02.11) AB Premium Current Account: In order to provide value added services to the Business community, Bank introduced special deposit scheme in the month of October 2008. The salient features of the scheme are as under:

It is meant for Current Deposit Accounts. Minimum Balance – `100000/-. Free Cheque Book Facility (including Multi City Cheques). No Folio and Transaction Charges. Any Branch Banking and Instant Funds Transfer. 50% concession in Service Charges for Funds Remittance. Balance in excess of `200000/- can be converted as Term Deposits (in

units multiple of `10000/-) subject to the guidelines as applicable to AB Freedom (Flexi) Deposit Scheme.

It helps the branches to improve the CASA Deposits. (Circular no.238 Ref 44/30 dated 16.10.2008)


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“AB Super Salary SB Account” – The existing scheme of “AB Privilege Corporate Salary SB Account” is re-launched with the following features:

All salaried staff of any company/organization drawing salaries through our Bank.

The Average Minimum Balance of `5000/- should be maintained except when the account is in debit balance.

No Ledger Folio / Transaction charges. Personalized Debit Card will be issued on specific request of the customer. Free ATM/Debit Card (for first year). Free Credit Card / Demat Account / Internet Banking / Online Trading

(conditions apply). Free Remittance up to `25000/- per month. Free Statement of Account – Once in a month. Free issue of Cheque Books (50 leaves in a year). Free Multicity Cheques at select centers (Monthly Avg. Credit Balance

`50000/-). NEFT/RTGS - Two transactions are free of cost in a month. Scheme provides for conversion of balance in excess of `10000/- as

Term Deposits (units multiples of `5000/-) with Sweep and Reverse Sweep facility as in the case of AB Freedom (Flexi) Deposit Scheme.

Similarly, the scheme also provides for Temporary Overdraft facility equivalent to the latest Net salary drawn by the account holder at Base Rate + 7.50%. These two options are mutually exclusive. In other words, where the account holder opts for Overdraft facility, he/she cannot avail the flexi deposit option facility. (Cir. no.351 Ref 27/21 dated 01.02.10)

AB Recurring Deposit Plus Scheme: This scheme is meant to built-up corpus fund for individuals / firms / institutions / companies through regular monthly deposits over a period of time to meet their future financial requirements. The salient features of the scheme are as under:

Depositor has an option to choose a core installment between `100/- to `100000/- and further he has option to deposit any amount not exceeding 10 times of core installment.

Minimum period of deposit is 6 months and maximum period is 60 months.

No penalty for late payment of installments. Interest is calculated on daily products i.e. minimum balance available

between 10th and last day of the month. No penalty for premature withdrawal. However, in case of RD account

closed within 6 months, penalty @ 0.50% on the balance outstanding subject to a minimum of `50/- and maximum of `500/-.

Depositor can remit monthly installment at any branch of Andhra bank without any charges.

Interest accrued is exempted from Tax Deduction at Source (TDS). Transfer of accounts between the branches is not allowed.

The other guidelines (Nomination, Payment of maturity amount, Claims etc.,) that are applicable to existing RD Scheme holds good to AB RD Plus scheme also. (Circular no.081 Ref 44/09 dated 20.06.2009)


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AB Grama Kranthi Savings Account: It is a new scheme with a built-in overdraft facility of `500/-, aimed at to offer basic banking services to the financially excluded sections of the society using Smart Card and Biometric authentication technologies through Business Correspondents. No minimum balance and no service charges are applicable. Simplified KYC norms are applicable. No cheque book and ATM/Debit cards will be issued. Overdraft facility of `500/- would be extended immediately on opening the account and the interest rate is Base Rate+3.5%. (Cir.no.319 dated 06.12.10 & 364 Ref 19/20 dt.14.01.11). Deposits – Other Existing Schemes AB Easy Savings (ABESB): This scheme caters to all sections of population especially those belonging to low income group who are not able to produce documents such as identity proof and address proof as required under KYC guidelines. As per RBI directions, Banks are required to adopt simplified procedure to open SB accounts. Minimum balance stipulated for opening of SB account is `5/-. All individuals who are eligible to open normal SB accounts can open No frills accounts subject to introduction from another account holder who complied KYC norms. The introducer's account with the bank should be at least six month old and should show satisfactory transactions. Photograph of the customer who proposes to open the account and also his/her address needs to be certified by the introducer OR any other evidence as to the identity and address of the customer to the satisfaction of the bank. These accounts do not attract service charges / penal charges. No cheque book shall be issued. Drawals from account shall be permitted only through numbered withdrawal forms accompanied by passbook. AB Easy Savings accounts are not eligible for ATM/Debit Cards and ABB facility. Once the balance in the account exceeds `50000/- or total credits in the account exceeds `100000/- in a year, no further transactions will be permitted in the account. The customer has to close the account and open normal saving account fulfilling the complete KYC procedure. (Circular no.444 Ref 51/31 dated 26.03.2008) AB Easy Savings for Students – SB Easy Social Welfare (ABESW): These accounts are specially meant for students who are eligible for scholarships (post metric) as approved by the Government of AP. Students who fulfills the criteria can open No Frill account with Zero Balance. Simplified account opening procedure is adopted and the opening forms are to be attested by the respective Principal of the College. On opening of accounts, Government makes arrangements to transfer the scholarship / fee reimbursement amounts to the respective accounts. No withdrawals are allowed at the branch counters. The account holders are provided with ATM card to withdraw the scholarship amount. No passbook or cheque book will be issued. Government agreed to reimburse `40/- per account to the respective Branch/Bank who undertakes this activity. It is an opportunity to the bank to cross sells Education Loans which improves the brand image in the market. AB Tax Saver: It is a term deposit (Fixed/Reinvestment) scheme earns interest as well as tax benefits under Section 80 C. It is meant for individuals and HUF (only Income Tax Assesses with PAN). Deposit can be opened in single/joint accounts. In case of joint accounts, tax benefit is available only to the first holder of the deposit. Minimum deposit is `100/- and Maximum amount allowed is `100000/-. The minimum period of deposit is 5 Years. It earns interest as applicable to five year deposit. Declaration is to be obtained from the first depositor that the total deposits under this scheme at various bank branches do not exceed `100000/- during the year. No nomination can be made in respect of a term deposit applied for and held by or on behalf of a minor. Deposit receipt shall bear the name, address, PAN and signature of the depositor. No deposit loan or no lien to any other loan. No premature cancellation. (Circular no.431 Ref 51/30 dated 13.03.08)


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Capital Gains Scheme: The scheme is aimed at Income Tax Assesses to extend relief of tax on long-term capital gains for different assets provided the assesses purchase another specified assets within a certain time frame. The assesses are eligible for exemption under section 54, 54B, 54D, 54F or 54G of the IT Act 1961. All branches except Rural Branches can open SB and Term Deposit (FD/KTD) accounts of the said category depositors. Accounts should be opened in individual names only and no joint accounts are allowed. No cheque book is issued to SB accounts. Depositors are required to submit withdrawal form along with form “C” to withdraw amount from the account. Similarly, Term Deposit funds can not be directly paid to depositor and they should route through respective SB account only. To close account, depositor has to submit application in form “G” along with written approval from the assessing officer having jurisdiction of the depositor. Deposit loans are not allowed and no lien should be allowed on the said accounts. (Circular no.453 Ref 44/25 dated 16.01.2006) AB Money Time – Monthly Income Deposit: It is like any other Fixed Deposit but the minimum deposit is `25000/- and in multiples of `1000/- thereafter. Deposits will be opened for a normal period (For example 12 / 24 / 36 / 60 months) plus 3 months extra. Interest will not be paid for the first 3 months and will be added back to the principal amount and the monthly interest on the aggregate deposit amount (i.e., Principal + first 3 month’s interest) will be paid thereafter on discounted basis. Monthly interest will be credited to the operative account automatically by the system. (Cir no. 270 Ref 51/19 dated 19.10.2006) AB Double Deposits: It is a reinvestment deposit scheme intended to the depositors who would like grow the amount double after a specific period to meet their future requirements. All constituents, who are eligible to invest under existing KTD scheme, are eligible to open AB Double Deposit scheme. The minimum amount of deposit is stipulated as `1000/- and in multiples thereof. (Circular no. 143 Ref 44/17 dated 06.08.2008). Tax Deduction at Source (TDS) All Term Deposits attracts Tax Deduction at Source (TDS) where the interest income exceeds `10000/- in a financial year. However, TDS is exempted to the individual depositors who submits 15G (whose age is below 65 years) and 15H (whose age is above 65 years) stating that their total income from all sources including the interest on bank deposits is well within the taxable income limit. Branch should obtain 15G/15H in triplicate and return one copy to the customer as acknowledgement and it should bear round seal of the branch. As per recent Income Tax guidelines, all depositors invariably submit PAN failing which the interest income on such term deposits attracts TDS @20% with effective from 01.04.2010. (Cir.no.313 Ref 55/27 dated 01.12.2010 & 436 Ref 55/38 dated 29.03.2011)

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Public Provident Fund Scheme (PPF)-1968

Tenure 15 years.

Limit of Subscription

Amount not less than `500/- and not more than `70000/- in a year in one lump sum or in installments not exceeding twelve in a year.

Rate of interest 8.0%-Compounded annually or as prescribed in the Official Gazette published by the GOI from time to time. Interest is paid on funds deposited before 5th of every month.

Mode of holding Any individual on his behalf or on behalf of a minor of whom he is Guardian or HUF or an association of persons or body of individuals. NRI's cannot open accounts under this scheme.

Tax treatment The entire amount deposited in to PPF during the financial year is treated as deductible Under Sec.80C of ITR Act.

Transferability Yes. Can be transferred inter Bank and intra Bank. Nomination Nomination facility is available.

Withdrawal facility Any time after the expiry of five years starting from the end of the year in which the initial subscription was made. Only one withdrawal is permitted in a year.

Loan facility & Repayment

Permitted with the following limits. Period Shall not exceed After one year 25% of the amount at credit After four years 50% of the amount at credit

Repayable with in 36 months from the first day of the month following the month in which the loan is sanctioned.

Extension of a/c 5 years at the option of the subscriber.

Closure of account After the expiry of 15 years from the end of the year in which the initial subscription was made.

Senior Citizen Savings Scheme (SCSS)-2004

Tenure of the scheme 5 years which can be extended by 3 more years Rate of interest 9 per cent per annum Frequency of computing interest Quarterly Taxability Interest is fully taxable Whether TDS is applicable Yes, Tax will be deducted at source Investment to be in multiples of `1000/- Maximum investment limit ` 15 lakh

Minimum eligible age for investment

60 years (55 years for VRS optees). However, age limit is not applicable to Defence Service personnel.

Premature withdrawal facility Available after one year of holding but with penalty Transferability feature Not transferable to others

Nomination Available

Modes of holding Accounts Can be held both in single or joint holding modes. Joint holding is allowed but only with spouse

Applicability to NRI, PIO and HUFs Non resident Indians, Persons of Indian Origin and Hindu Undivided Family are not eligible to open an account under the scheme.

Transfer of account Transfer of account from one deposit office to another in case of change of residence is permitted

Bank earns a commission @ `45/- per transaction on PPF and SCSS. (Cir.no.244 Ref 51/18 dated 20.10.2011)


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Insurance Linked Deposit Schemes Abhaya Savings Bank (ASB): ASB scheme is in force since 1988. This scheme is having features of Savings Bank coupled with insurance coverage (Group Janata Personal Accidental Insurance Cover). It is meant for all individual depositors, specially those whose lives are exposed to accidental risks on account of their profession / employment / occupation. M/s.United India Insurance Company is undertaking the risk coverage. Individuals and Joint Account holders can open. All Joint accountholders are compulsorily covered. Age - 5 to 70 years. Accidental Insurance cover is available to all depositors. `25000/- for death / total disability and `12500/- for partial disability. Premium – `9/-; Service charge – `10/- + ST. Insurance year - 1st Sep to 31st Aug. Nomination holds good for deposit balance and the insurance claim. Joint accountholders can specify their nominees separately. Abhaya Savings Plus: ASB Plus scheme was introduced in our bank in the year 2006. It is meant for all individual depositors, especially those whose lives are exposed to accidental risks on account of their profession / employment / occupation. Individuals and Joint Account holders can open. All Joint accountholders are compulsorily covered. Age: 5 to 70 years. Cover: Group Janata Personal Accidental Insurance Cover. `50000/- for death / total disability and `25000/- for partial disability. Premium – `18/-; Service charge – `18/-+ Service Tax. Insurance year - 1st Nov to 31st October. United India Insurance Company is undertaking the risk coverage. Nomination holds good for deposit balance and the insurance claim. Joint accountholders can specify their nominees separately. Abhaya Gold Savings (ABG): This scheme was introduce in the year 1996. Individuals and joint account holders are eligible. All joint account holders are compulsorily covered. Age – 5 to 70 years. It is a Group Personal accident Insurance Policy. M/s. United India Insurance Company is undertaking risk coverage. Death / Total Disability – `1.00 lakh. Partial disability – `50000/-. Premia `45/- and Service Charge `25 + Service Tax. Insurance year - 1st November to 31st October. Separate nomination for insurance claim. Joint accountholders can give separate nominations for the insurance amount. Insured Current Deposits (ICD): Individuals, Joint A/cs, HUF, Sole Proprietors, Partnership Firms, Ltd Cos., having CD/ODCC/Pattabhi Agricard accounts. However, office bearers of clubs / societies / trusts / associations and account holders of inoperative accounts are not eligible to join in the scheme. The age of the account holder should be in the range of 5 to 70 years. ICD covers risk against accident (death / disability). It also includes snakebite, electrocution, food poisoning, riots etc., United India Insurance Company covers the risk upto one lakh for death/total disability and `50000/- for partial disability. Insurance year - 21st February to 20th February. Premia – `36/- per person per annum to be collected. Branch also collects administration charges of `30/- per person per annum and service charges thereon.


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AB Jeevan Abhaya (ABJ): This scheme was launched in the year 2002. It is a Savings Bank account that provides Life and Accidental death cover on payment of nominal premium and simple health declaration. No medical examination is required. Individuals in the age group of 18 to 55 years can open this account. SB opening form can be used. The present premium rates are as under: Age Group Premium Administrative charges 18 to 35 Years `235/- `40/- 36 to 50 years `407/- `40/ 51 to 55 Years `805/- `40/

*exclusive service charges The insurance period is 1st Dec to 30th November. The risk is covered by IndiaFirst Life Insurance Corporation Limited (IFLIC) and the amount of coverage is `1 lakh in case of normal or accidental death. Joint accountholders can be covered by opening a joint account and by paying the applicable Premia. All accounts opened under AB Super Salary (SB account) scheme will be covered under this scheme. (Circular no. 294 Ref 51/25 dated 16.11.2010) AB Kiddy Bank Scheme (Kids Khazana): Bank has re-launched the earlier the earlier Kiddy Bank scheme under the new brand name “AB Kiddy Bank Scheme” in the year 2007. It is meant for minors (even 1 day old minor) represented by Guardians or by the minors themselves who have completed the age of 10 years. All existing Kiddy bank accounts can be converted. Minimum balance to be maintained is `100/-. Kid and parent/guardian (aged up to 70 years) both are covered under Accidental Insurance. Accidental insurance coverage is available up to one lakh for the kid and the parent/guardian. Insurance Premia is `32/- per annum (31st of October). Bank service charges of `20/- + Service Tax. The risk is covered by United India Insurance Company. Free Doll. Educational Grant of `5000/- (for age up to 10 years) / `10000 (for age of 11-18 years) as per the age of the child in case of accident risk of the parent in addition to accidental sum of `100000/-.

Insurance Schemes at glance (Amount in lakhs)

Deposit Age Comp Accidental coverage

Insurance year Charges* ICD 5 to 70 United

India 1.00 21st Feb to 20th

Feb `36 + `30

ASB 5 to 70 -do- 0.25 1st Sep to 31st Aug `9 + `10 ASB + 5 to 70 -do- 0.50 1st Nov to 31st Oct `18 + `18 ABG 5 to 70 -do- 1.00 1st Nov to 31st Oct `45 + `25 ABJ 18 to 55 IFLIC 1.00$ 1st Dec to 30th Nov `40/-

Kids Khajana

1 day to 18 years United 1.00 1st Nov to 31st Oct `32 + `20

*exclusive service charge, which is 10.30% w.e.f 01.10.2009 $ ABJ covers both Life and Accidental death. The premium depends on the age of the insured


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Insurance Linked Schemes - Guidelines

Remittance of Premium: Insurance premium should be debited to the respective account on the date of opening of the account. The premium should be sent to nodal branch on 1st of the succeeding month along with the details of accounts to which the premium pertains. Claims: Intimation of death of an account holder must be accepted in writing only. Claim intimation shall be sent to insurance company with in 90 days from the date of accident / death and claims forms duly filled in with all the enclosures shall be submitted to the Insurance Company within 180 days (from the date of accident / death). The settlement of claim is at the sole discretion of the insurance company. The Bank will act only as a facilitator. Claim forms may be submitted to the insurance company either directly or through the bank. Documents to be submitted along with the claim forms are as under:

In case of death In case of disability Death Certificate Photograph of the disability Postmortem report with inquest report Disablement certificate issued by doctor FIR of police / Final Investigation Report Bank's certificate of remittance of premium Nominee's name Any other relevant document Bank' s certificate of remittance of premium

Police Report

Any correspondence with Insurance Company/Claimant must be done only through Registered Post Acknowledgement Due. All new accounts, a lien of 45 days imposed for claims arising on account of Natural Death from the date of opening of account. However, Lien clause is not applicable in case of claims due to Accidental Deaths. Deposit Schemes – Discontinued: Branches are not permitted to accept fresh deposits under the following deposit schemes since they are discontinued by the Bank.

AB Excel AB Super AB Supreme AB Jeevan Prakash AB Jeevan Prakash Plus Sulabh Stock Invest Samkshema Home Loan Mediclaim AB Pattabhi AB 400 AB Pattabhi Plus (w.e.f.18.06.11) AB Power (500/1000 days)

However, the existing deposit accounts under the above schemes will continue till maturity.

***


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Deposits – General Guidelines

Opening of Bank Accounts: Branch Manager/authorized officer is empowered to allow new customers into bank's fold. New accounts should be opened with cash remittance. In special cases, accounts can be opened with deposit of cheques drawn on our Bank, for which the applicant should be the first payee and his identity should be beyond doubt. Branch is required to take the following precautions: Photos of accountholders (for accounts with cheque facility only) or

authorized signatories should be obtained. Branch to obtain declaration in either Form 60 or Form 61 from the persons

who are opening accounts and not furnishing PAN details. Cheque books should be issued for a newly opened account only after

complying with all the formalities. Conduct of the account should be monitored at least for an initial period of 6 months.

Staff members are permitted to open accounts only at the branch where they are working and eligible for preferential interest rate (1% extra). This facility is also available to retired staff and spouse of a deceased staff member. Staff members are not permitted to give introduction to new account holders (except in case of close relatives) in view of the KYC norms.

Term Deposits: The minimum period of Term Deposit is 15 days. However, branches can accept term deposit for 7 days also provided the amount of deposit should be `1.00 lakh and above. The maximum period should not exceed 10 years except in case court deposits / minor deposits as special case. Payment is to be made by way of credit to the operative account / DD / Pay Order, if the aggregate amount of deposits together with interest held by the depositor exceeds `20000/-. Any instruction pertaining to the benefit of survivorship on term deposits would come into force only on or after the due date of the deposit. No loan or overdraft should be sanctioned against the term deposits placed at other branches / term deposits of other banks. Branches to seek prior approval from General Manager (Planning), Head Office for accepting any domestic term deposit of `100 lakhs & above either for renewal / fresh deposit. Premature cancellation of term deposits: Unless specified otherwise in the scheme, Depositor is having discretion to cancel the deposit at any time during the currency of the deposit. The penalty for premature cancellation of deposits is 1% i.e. applicable interest rate (as on the date of original deposit) for the period minus 1%. However, no penalty is to be levied for individual deposits / joint accounts where the deposit is less than ` 1 lakh; in case of corporate deposits the limit is less than `100 lakhs and contracted period up to 90 days. Loans against Term Deposits: Deposits loans attract 2% higher interest than the term deposit applicable rate. However, where the rate of interest payable on term deposit held as security is “Nil” due to cancellation of the deposit before expiry of “minimum period” prescribed for the deposit, interest to be charged is BMPLR + maximum spread.


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Savings Bank Accounts – Payment of Interest: Banks are paying interest on SB accounts @4.0% p.a. on Daily Products on half-yearly basis viz., September & March of every year. The interest calculated will be credited to the respective accounts by 5th of succeeding month i.e. October & April. The new system will come into force w.e.f. 01.04.2010. (Cir.no.381 Ref 27/26 dated 25.02.2010) Premature renewal of term deposits: The penalty for premature closure would not apply if the deposit is prematurely closed for availing the benefit of enhanced rates of interest provided the amount is deposited under the enhanced rates for a further period which is longer than the remaining period of the cancelled deposit. The rate applicable for the expired period would be the contracted rate or applicable rate for the period for which the deposit has run with the bank whichever is less. If a prematurely renewed deposit is withdrawn before the expiry of the deposit, it will amount to premature withdrawal of the original deposit and will attract penalty from the date of original deposit. Overdue Deposits: Branches transfer the matured term deposits to overdue deposit head on an ongoing basis and these deposits forms part of demand deposits. Payment of interest on overdue term deposits is as under: i) Renewal of an overdue deposit or a portion thereof is to be done 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 deposit so renewed shall be the appropriate rate of interest for the period of renewal as prevailing on the date of maturity. ii) In case of overdue deposits where the overdue period exceeds 14 days and if the depositor places the entire amount of overdue deposit or a portion thereof as a fresh term deposit, branches should apply the rate of interest that is appropriate for the period for which the deposit is renewed prevailing on the date of renewal or the rate existing on the date of maturity whichever is less. (Cir.no.97 Ref 44/6 dated 30.05.2005). However, branches are advised to pay interest at Savings Bank Rate on maturity proceeds of term deposits withdrawn, without being renewed, after the due date by the depositors. (Circular no.366 Ref 44/47 dated 12.01.2009) Inoperative Accounts: Savings as well as Current account should be treated as Inoperative / Dormant if there are no transactions in the account for over a period of two years. For the purpose of classifying as above, both the type of transactions (Debit/Credit) induced at the instance of customers as well as third party should be considered. However, charges levied or interest credited should not be considered. Operations in such accounts may be allowed after due diligence i.e. ensuring genuineness of the transaction, identify verification and signature verification. Before converting the account in to Inoperative, notice is to be issued to the depositor. The conversion may be postponed to another one year, in case depositor undertakes to route the transactions in to the account. (Circular no.247 Ref 44/33 dated 24.10.08) Unclaimed Deposits: In respect of operative accounts (CA/SB), in which there are no customer transactions for the last 10 years are treated as unclaimed deposits. With regard to term deposits, which remained unpaid even after 10 years of maturity are treated as


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unclaimed deposits. As per Banking Regulation Act 1969, Branches to submit details of unclaimed deposits to Head Office on 31st Dec of every year for onward submission to RBI. Recently, RBI has directed banks to disclose the list of unclaimed and inoperative deposit account holders, in a bid to help some claimant trace their deposits. The RBI has told banks to disclose on its website names of the account holders and their address. In case the accounts are not in the name of individuals, RBI has said that the bank should provide the names of individuals authorized to operate the accounts. Banks are also required to inform public on its website about the process that they will have to follow to make a claim on deposit. Banks are advised to complete the process by the end June 2012. Nomination facility: The act came into force from 29.03.1985 as per section 45 ZA to 45 ZF of the Banking Reg. Act, 1949. As per the act, account holder can nominate any body of his choice as nominee to receive money from the bank in case of death of the depositor. Nomination facility is available to all types of deposit accounts (including joint

accounts E or S), safe deposit lockers and safe custody articles. However, this facility is available only to the accounts of Individuals in their individual capacity. The nominee can be any individual including illiterates, minors. If a minor is nominated, a guardian who will act on behalf of the minor is also to be specified in the nomination. However, nominations cannot be made in favour of joint names / Bodies (institutions / trusts etc). The only exception is safe deposit lockers hired jointly; there can be more than one person as nominee. In case of illiterate account holders, branch to obtain two witnesses while accepting nomination. Consent of nominee is not mandatory.

The Nomination facility is available only for deposit accounts and not for loan

accounts including credit balances in ODCC accounts. Nomination made in respect of a term deposit will continue to be in force

even on renewal of such deposit unless the nomination is specifically cancelled or changed. The customer has option to change nomination any number of times during the currency of the deposit. The rights of nominee arise only after the death of the depositor.

As per the recent guidelines, the name of the nominee is to be printed on the

Passbook / Term Deposit Receipt at the specific request of the depositor. Branch should take witness of Magistrate / Judicial Officer or an Officer of

Central Govt. or State Government or an Officer of a Bank or two persons acceptable to the Bank for settlement of claims under nomination.

Deceased Deposits – Payment of deposit amount/Interest: Legal heirs / representatives / nominees of the deceased are eligible to receive the principal as well as interest thereon at contracted rate. However, no penalty will be in case of premature cancellation of deceased deposits. SB interest will be paid on maturity value from the due date of the deposit to the date of settlement to the legal heirs of the deceased. In the case of balances lying in current account standing in the name of a deceased individual depositor / sole proprietor concern, interest shall be paid from the date of death till the date of repayment to the claimants at the rate of interest applicable to savings deposits as on the date of payment.

***


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E-Products

RBI has been playing an important role in the area of national payment system, which is the backbone of economic activity and has taken several initiatives for a safe, secure, sound and efficient payment system in India. Last one decade witnessed spurt in electronic payments due to increased adoption of technology and regulatory guidelines. The evolution of e-payment systems in India are: Speed Clearing: Banks as part of their normal banking operations undertake collection of cheques/drafts deposited by their customers drawn on local banks as well as on banks located at other centers. The cheques drawn on local banks will be presented in clearing and the outstation cheques will be sent to other centers for collection. Though, the time for collection with regard to outstation cheques has come down, still the collection process is taking 7 to 14 days since cheques need to move physically from presentation centre to drawee centre. In order to reduce the collection time, RBI has introduced Speed Clearing where in cheques/drafts drawn on outstation are treated on par with local cheques and presented in the local clearing provided the presentment location is MICR/ECCS centre and the destination bank branch is under CBS platform. However, Government cheques are not eligible for collection under Speed Clearing. Drawee bank debits the account online without movement of cheque and sends the proceeds to the collecting bank. Under Speed Clearing, it would be realised on T+1 or 2 basis i.e. within 48 hours. No charges should be levied for cheques up to `1 lakh. However, collecting branch can levy `1.50/- per thousand for cheques/drafts of above one lakh with a maximum of `2000/-. However, the facility of immediate credit would not be applicable to cheques collected under speed clearing arrangements. (Cir.no.259 Ref 55/20 dated 19.10.10 & Cir.no.79 Ref 27/09 dated 15.06.11) Electronic Clearing System (ECS): The introduction and increased adoption of ECS - Credit i.e. Single Debit - Multiple credits, helped large corporate bodies to pay their dividend, interest and refunds electronically on the due date, which is very cost effective to corporates and its customers. Similarly, the utility bodies are now in a position to collect their bills through ECS Debit (Multiple Debits – Single Credit) right on the due date. The entire process including passing the credits to the beneficiaries’ accounts take only one day, which is convenient and cost effective to both banks and customers. Any Branch Banking (ABB): Under CBS, Branch customer has become Bank customer and they are allowed to approach any branch across the country for deposit of cheque or cash and withdrawal of cash or transfer of money. Branches are not allowed to undertake cash transactions beyond `49999/- and no cash payment will be made to third party (bearer). However, payment to third party up to `20000/- is allowed to NRE / NRO accounts and branch should ensure identity of the bearer while making payments. (Cir.no.083 Ref 55/06 dated 16.06.2011) AB Real Time (Real Time Gross settlement - RTGS): RBI launched RTGS for instant transfer of funds across the banks (`200000/- & above) across the banks within India. It offers a powerful mechanism for limiting settlement and systemic risks in the inter-bank settlement process. It enables in expediting the settlement, control and governance mechanism in the banking system. Funds will be transferred electronically and credited to the beneficiary accounts instantaneously. It saves lot of time and paper work and cost effective since the service charges are low. Up to `5 lakhs `25/- + applicable time varying tariff subject to max. of `30/- Above `5 lakhs `50/- + applicable time varying tariff subject to max. of `55/-


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The timings for customer payments are 9 AM to 4.30 PM on Monday to Friday and 9 AM to 1.30 PM on Saturday. Similarly, for inter bank payments; the timings are 9 AM to 6 PM on Monday to Friday and 9 AM to 3 PM on Saturday. Transfer of funds below `200000/- are not allowed under RTGS. (Cir.no.293 Ref 55/24 dated 16.11.2010) AB Xpress (National Electronic Funds Transfer - NEFT): For the benefit of retail customers, RBI introduced NEFT scheme and it is launched in our bank with brand name AB Xpress. Under this, funds can be transferred across the banks instantaneously. There is no cap on minimum and maximum amount for NEFT. The present service charges (w.e.f 15.11.2010) are as under: No Range of amount Service charges 1 Up to ` 1 lakh ` 5 plus service tax 2 Above ` 1 lakh & up to ` 2 lakhs ` 15 plus service tax 3 Above ` 2 lakhs ` 25 plus service tax

The timings of NEFT are 9 AM to 7 PM from Monday to Friday and it is 9 AM to 1 PM on Saturday. Customer is required to furnish IFSC Code number of the Bank Branch and correct account number of the beneficiary for smooth transfer of funds under RTGS/NEFT (Cir.no.278 Ref 55/22 dated 02.11.2010) Multi City Cheque facility (MCC): In order to provide value added service to the existing customers, Bank introduced MCC facility facilitating the customers to issue at par cheques to their clientele, so that the proceeds of the cheque gets credited to the payee account at any of our branches across the country. It is a best facility available for our valued customers who are holding Saving Banks account with a minimum balance of `10000/-, Current account with a minimum balance of `50000/- and SOD/COD with a sanctioned limit of `50000/- subject to satisfactory dealings with the branch. Bank levy a charge of `5/- per MCC cheque leaf. This facility is an opportunity to the branches to improve low cost deposits (CASA), which facilitates the Bank to show better Net Interest Margin, which is need of the hour. (Circular no.307 Ref 51/16 dated 11.10.05 & Cir.no.142 Ref 51/09 dated 21.07.06) Non-Personalized Debit Cards (NPDC): Post CBS environment has enabled the bank to issue NPDC to the customers on the opening day of the account itself. Bank has taken this initiative to render faster customer service and to provide Any Time Banking through ATM network across the country. Branch delivers the card along with PIN. The card will be activated within 48 hours of the issue. It is a tool to branches to attract new customers besides retaining the existing clientele for further business development. The cards can be used on any ATM across the country to avail the following services with free of charge. Balance Enquiry / Mini Statement Cardholders are allowed to withdraw cash up to `25000/- per day. However,

with regard to purchase of goods and services the daily limit is fixed `40000/- Credit Card holders having VISA/Master affiliation can avail cash advance

facility from any of our ATMs across the country. Funds Transfer from one account to another account of the cardholder. Cardholders can donate funds to various trust schemes of Tirumala Tirupathi

Devastanam as per their convenience using E-Hundi option. Cardholder has an option to make payment of Andhra Bank credit cards

bills/dues from any ATM of our Bank. Our Bank cardholders can avail Mobile Recharge facility. mPAY registration for our customers. Extending facility of booking of Rail Tickets and Air Tickets (Kingfisher

airways) through ATMs.


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SMS Alerts: Bank has launched Mobile Banking Services through SMS alerts - Push to the registered customers. A customer has an option to register for Mobile Banking facility at branch or ATM or Internet. All Savings and Current Account holders who owns mobile are eligible to avail the following services at free of cost. Savings Bank transactions of `100 and above Current and Overdraft transactions of `25000/- & above ATM / Internet Banking irrespective of the amount All Credit Card transactions Cheque Returns / Cheque Book Issue Term Deposit Due date Balance for any transaction at end of the day for Current/ODCC accounts.

A mobile registered customer has an option to enquire Balance Enquiry, Last Five Transactions and Cheque Status Enquiry through SMS alerts - Pull. However, the service provider (Mobile Company) levy charge @ `3/- per request to the customer. Mobile Banking (mPAY): Bank is providing SMS based mobile alerts to the registered customers to keep them informed of various transactions that occur in their accounts. Further, bank is also using the SMS media to send specific or common messages/information to the customers. In order to meet the customer expectations, Bank has introduced mPAY which provides the customers a secure and convenient means of banking from anywhere and at anytime. Under this, customers can check their account balances, view mini account statement, know cheque status, note stop payment of cheques, make donations and transfer funds (Mobile to Mobile and Mobile to Account) on press of button. All Savings Bank and Current account holders having ATM/Debit card are eligible to avail this facility. Customer has an option to link any one account (CASA group) connected to the card with the mobile number. Customer intending to avail mPAY facility should possess mobile handset Java enabled or Windows Mobile 5.0 & above model or Windows Mobile Professional model with activated GPRS (General Packet Radio Service). Customer can register for mPAY through any of our ATMs across the country. It is hassle-free paperless process and upon registration, customer receives a registration slip which contains the default application password and MPIN. The maximum transaction limit is fixed as `10,000/- per day. At present, Bank is extending the said services free of cost. (Cir.no.220 Ref 55/18 dated 10.09.10)

Internet Banking: Our bank introduced Internet Banking with AB INFI-net brand name in the year 2008. Bank is extending the following facilities to the registered customers (Individuals and Corporate) free of cost:

Account Balance Enquiry Account Statement view / Printing / Downloading Request for Cheque Book / Term Deposit Online TAX payment (e-tax) Online IPO - Applications Supported by Blocked Amount (ASBA) Credit Card Bill payment Funds Transfer - Registered customer has an option to transfer balances

between linked operative accounts of the same customer across the branches and also undertake third party transfers from his/her account to any other operative account of Andhra Bank.

Transfer of funds across the Banks through NEFT is allowed on Internet. The default limit set for retail customers is `50000/- per day. However, branches can recommend for higher limits to Head Office depending on the request of the customers.

On receipt of Internet Banking application from the retail customers, branch should enter the details such as account number, mobile number and e-mail of the


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customer in the system for registration. Internet Processing Center, Koti, Head Office directly sends User ID & Login Password to the customer and transaction password will be sent to the branch for onward submission to the customer with due acknowledgement. However, branches to continue to forward the Internet requests from corporate customers to Head Office for approval. (Cir.no.304 Ref 55/19 dated 15.12.09 & Cir.no.263 Ref 55/21 dated 23.10.10) Personalized Cheque Books: In order to meet the discerning expectations of the customers, Personalized Cheque Book facility is introduced at all important centers across the country. Cheque book indents will be processed online and delivered to branches through courier. All cheque leaves bear branch address and name of the customer, which provides value addition to the customers. Applications Supported by Blocked Amount (ASBA): ASBA is an alternative payment method (optional) for IPO application where the IPO bidding amount remains in investors account, but blocked by the bank until allotment is done. Technically there is no refund process for this kind of payment option as only the required money for allocated shares is withdrawn from the investors account. As companies cannot list their shares before completing the refund process, ASBA enables the listing process faster. It is made mandatory for non-retail investors also to apply only through ASBA w.e.f. 02.05.2011. Designated branches accept IPO bids at cut-off price and they can also apply through Internet Banking. Investor receives the acknowledgement from the bank along with the IPO Application Number. Revision and cancellation of bids are permitted till the issue closure date and time. System marks lien and investor is not allowed to withdraw the money in locking period. The investor continues to earn interest on the application money. Registrar transfers the allocated shares to investor’s Demat Accounts. No charges will be levied to the investors for this service. Registered Internet customers are now can avail ASBA facility online. It is an opportunity to branches to improve low cost deposits and non-interest income since bank earns commission on each application received under ASBA. (Cir.no.333 Ref 55/30 dated 16.12.2010) Dematerialization (Demat) signifies conversion of physical form of securities in to electronic form and the converted securities will be credited to customer account with Depository Participant (CDSL/NSDL). This can be used for shares, bonds and Mutual funds. Now, it is mandatory that the investor should have Demat account to subscribe IPO/FPO. An individual resident, Non-Resident Indian, Foreign National, HUF, Trusts, Societies, Corporate Bodies, Overseas Corporate Bodies, Financial Institution, Foreign Institutional Investors,, Mutual Funds, Banks, can open Demat account. The benefits associated are - Faster settlement cycle, Elimination the risk of bad delivery, No stamp duty, Easy for the banks to lend against shares, Eliminate delays, thefts, interceptions and fake certificates and Online credit of Bonus/Rights/Split shares. Our Bank is offering value added service with a brand name “AB Demat” to facilitate the investors to have hassle-free, fast and accurate electronic transactions. Submission of application along with photograph, address proof and Bank account details are the prerequisites to open demat account. Nomination facility is available. Investor has the option to freeze/defreeze the securities. The service charges are as under: No Service Charges (Exclusive service tax) 1 Agreement charges Actuals as per state laws 2

Annual Membership charges Individuals `300/- Corporates `750/- No charges for staff accounts.

3 Demat charges

`2/- per certificate + mailing charges `20/- in India and `500/- for foreign address

4 Remat Charges `15/- for every 100 securities or part thereof. 5 Transaction Fee 0.04% of market value or minimum of `20/- 6 Pledge – Creation/closure `50 /- per instruction


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Branches are allowed to sanction credit limits against pledge of approved and unencumbered shares, Debentures, Mutual Fund units, which are in demat form. The margin required is 50% on the market price or 52 week low whichever is low. However, the maximum limit that can be allowed is ` 20 lakhs only. (Cir. no. 70 Ref 51/3 dated 10.06.09)

AB e-trade (Online Trading): The scheme is meant for the customers who are interested to carry stock market operations (Buying/Selling) at his convenience. It offers the depositor to trade from his residence or office or while on move through Internet. The salient features of the product are as under: It is also called as 3-in-1 account since it integrates Bank Account, Demat

Account and Broking Account of the depositor. Individual or Joint Account, HUF/Trusts, Corporates etc., who are eligible to

open Current / Savings accounts can open AB e-trade account. However, the style and form of account holders in demat account should be the same as in bank account.

The existing KYC guidelines are to be followed strictly while opening AB e-trade account at the branch.

This facility is being offered in tie-up arrangements with M/s.Religare Securities Limited (RSL).

Once the account is opened, account holder is required to register with RSL to undertake online trading duly indicating the scheme viz., R-Ace, R-ACE Lite and R-Ace Professional.

RSL sends the Login ID and Password to enable the customer to have access to the website for trading.

In case of purchase of stocks, his account will be debited with the value of the stocks purchased plus brokerage/service charges and the said stocks will be transferred to his demat account.

Similarly, in case of sale of stocks, demat account will be debited with the number of stocks sold and the proceeds will be credited to his bank account after deducting brokerage/charges.

In order to protect the customers from fraudulent transfers, customers have an option to mark lien so that no debit operations are allowed in demat account. It is a unique feature available in our product.

Brokerage charges levied by RSL is ` 0.05% for intra day transactions and 0.50% for other transactions i.e. delivery.

It enables the bank to improve low cost deposits besides earning fee based income through maintenance charges/transaction charges. (Cir no.70 Ref 51/3 dt.10.06.09) Tele Banking – Call Center: Bank has launched Tele Banking & Call Center to provide information to the registered customers about their accounts through Interactive Voice Response (IVR). Further, it enables the customers to have desired information without visiting the branch personally. IVR is available round the clock throughout the year including Sundays and Holidays where as Call Center services are available from 8 am to 8 pm on all days except on Sundays and National Holidays. Call center is providing the enquiry related services such as Balance Inquiry, Interest Rates, Product features etc., pertains to deposit and advance accounts. Caller is required to contact Toll Free Number 1800-425-1515 for the above information. However, the caller needs to furnish Customer ID and Personal details to know his account related information. Besides the above, Call Center disseminate information of various products of our Bank through Customer Service Executives to the registered customers as well as other customers/general public. Bank is not levying any charges for the said services.


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Upset” service: In order to minimize the customer complaints and to match the customer expectations, bank has launched technology embedded service “Upset” proactively wherein customers can send their grievance through SMS direct to HO for immediate resolution. The salient features of the product are: The aggrieved customer is required to type the word Upset in his/her mobile and

forward the same through SMS to 9666606060. On receipt of SMS, the service provider sends acknowledgment to the

complainant and routes all inbound SMS received to Customer Service Department, HO on daily basis. In turn, Customer Service Department calls back the customer to elicit the details of the grievance/complaint and forwards the same to the concerned branch/office through email for doing the needful.

Branch/Office is required to initiate necessary steps to resolve the grievance duly following the extant guidelines and furnish the information through email to [email protected] on the same day.

The status of complaint/grievance will be informed to the complainant within 48 hours by the Customer Service Department, Head Office.

The newly introduced service ‘Upset’ is an opportunity to the bank to receive the expectations of the customers online and enables the bank to initiate necessary steps for speedy Redressal of the Grievances. (Cir.no.275 Ref 34/03 dated 29.10.2010) Cash Transactions – Computer Generated Receipt: The most happening of customer interaction in the bank branches are at the cash counters and customers/public likely to take impulse decisions based on the service experience at these touch points. In order to improve the customer service at cash counters further and to avert avoidable complaints pertaining to cash related issues, all branches are advised to issue computer generated receipt for all customer related cash transactions. These receipts do not require any signature since they are system generated. It is the responsibility of the respective branches to ensure that the Cash Receipt Printers are kept in working condition along with required stationery. However, in the event of absence of cash receipt printers or printers going out of order, for the reasons beyond the control of the branches, branch may issue manual counter-foil/acknowledgement, as an exceptional case. However, such counter-foils are to be countersigned by another officer apart from the signature of the staff receiving such cash. Branches are advised to display prominently near the cash cabin stating that customers are advised to demand system generated cash receipt only and it should also be mentioned that complaints made on pass book with manual entries and cash receipts issued manually will not be entertained by the bank. (Cir.no.208 Ref 55/17 dated 06.09.10 & cir.no.209 Ref 55/17 dated 20.09.10)


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Credit Cards RBI initiated steps to popularize Credit Cards to encourage alternate payment system in the country to minimize the risks associated with traditional modes of payments such as cash/cheque/Demand Draft etc. Of late, credit card has become one of the means to make payments by majority of house-holds and it is no longer a status symbol. Buy Now - Pay Later concept is attracting and popularizing the credit cards in the market. It is easy to carry with a limit and hassle free payment system. Cardholders undertake purchase of goods and services without carrying currency and make payment at a later date. In a way, Banks are extending short term unsecured personal loans by issuing Credit Cards to their customers. Card business augments other income of the banks through annual subscription, service charges and interchange fee. The salient features of credit cards offered by our bank are furnished here under (cir.no.92 Ref 5/1 dated 28.06.11).

Description VISA Classic Master Card

VISA Gold Card Master Card Electronic /VISA Gold & Classic (Against Deposit)

Eligibility: Cards are issued to

Customers/Non Customers and Resident Indians

Non resident Indians also

Income: Salaried Class: Gross Net Others :

`15000/- p.m `8000/- p.m `180000/- p.a

`20000/- p.m `10000/- p.m `240000- p.a

Minimum Deposit: Master Card Electronic: `10000 VISA Gold: `67000 VISA Classic: `33500

Annual Subscription: Annual Subscription for subsequent years is waived in case the usage in the previous year

No Annual subscription in the First Year

`18000/-

`23000/-

Master Card Electronic / Classic/Master:`18000/-

Gold: `23000/-

Failure of the above: For main cards For add on cards

`550/- `200/-

`1000/- `400/-

Master Card Electronic `200/- `150/-

(For VISA Classic/Gold as applicable to general category)

Validity: Globally Valid Cash Advance Charge

3% 3% 2%

Accidental Insurance

`2.00 lacs `5.00 lacs Not available for Master Card Electronic

Sanctioning Authority

Branch Manager – For customers with satisfactory track record at least for 6 months. AGM/DGM (Second Line executive at Zonal Office) – For non customers and customers with operations of less than 6 months.

Other conditions: 1. Two recent Passport size colour photographs 2.Residence Proof & Photo Identification Telephone / Gas / Electricity Bill / passport / Driving License etc 3. Proof of Income: a) Salaried Class: Copies of latest salary slip and Form 16/IT Returns b) For Others: Copies of two years IT Returns filed with computation sheets. 4.Copy of PAN Card 5.Rating Sheet in the prescribed format with recommendation

1. Two recent photos 2.Copy of deposit receipt duly marking lien on the face of Deposit Receipt 3.System generated print out of lien marking of deposit.


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AB VISA Platinum Credit Card

Eligibility Criteria Major, Resident & NRIs Age Limit in years 21-70 Income Eligibility `5.00 lacs per annum Cards Against lien on Deposit with 25% margin and without insistence of Income Proof and Scoring model

`1,00,000/- Deposit amount

Minimum Card Limit `75,000 Add on cards Up to 2 cards-Spouse, children and Parents Validity of the card 4 years Roll over facility 5 % Validity Global

Accident Insurance coverage `10.00 lacs to the Main cardholder and `5.00 lacs to the Add-on Cardholder

Baggage Insurance `25,000 (Maximum) Lost card Insurance `1,50,000 (Maximum) Cash Advance Limit 50% Fee & Charges

Annual subscription `1000 & `400 for cards against Deposits Annual subscription is waived in the first year and not levied if usage in the previous year is

`30,000 or 18 Transactions in a year

Add on cards `300 Lost card charges `300 Lost card Replacement charges `200 Charge slip request charges `100 Transaction charges at Railways on the amount of charge slip

2.50%

No Surcharge on fuel purchase per day & Surcharge over & above prescribed limit is

`2,000 2.50%

Foreign Currency Markup 3.00% Temporary enhancement Charges per occasion

`200

Hot listing charges `200 Cash advance charges 2.00% Service Charges If MPD Paid 1.50%

If MPD not Paid 2.95% Late Payment Fees Outstanding upto `5,000 `200 Between `5001 to `15,000 `300 Between `15,001 to `25,000 `400 Above `25,001 `600 Transaction fee: Transaction Type Fee Cash withdrawals/balance enquiry from Andhra Bank ATMs/Branches

Nil

Cash withdrawals from other Bank ATMs/Branches

`50/- for VISA Cards `70/- for Master Cards

Balance enquiry at other Bank ATMs `30/- per transaction

Transactions at Petrol Stations 2.5% of the transaction amount subject to a minimum of `10/- per transaction

Purchase of Railway Tickets 2.5% on the charge slip amount Lost/Broken/Hot listing charges `200/-


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Issue of Cards to Borrowers: Visa Gold cards are Issued to the Borrowers who are enjoying a Limit of `10.00 lacs and above which are secured and Performing; Free Accidental insurance up to `5 lacs is available. Card details are to be noted in the documents after sanction. Maximum Card limit is `50,000/-, however, Higher Limits are considered on submission of Income Proof. Credit Scoring Model: Card limit is fixed based on the rating arrived using Credit Scoring Model, which covers six important factors pertaining to the applicant such as Own House, Employment/Occupation, Proven income, Bank Account, Age and Risk category (KYC norms). The minimum marks to be scored for eligibility and process the application are 18 at the branch level. Zonal Manager may improve overall scoring by not more than 2 points, depending on merits of individual case while recommending. Where the score ranges 18 to 22 points, the cardholder is eligible for Base limit. Higher limit may be considered by the sanctioning authority where the score is above 22. Corporate Cards: Banks are issuing Corporate Cards to the companies registered under Companies Act 1956 and whose net worth should be minimum of `25 lakhs. The cards will be issued to the Executives / Officers / Employees of the company. No admission fee and the annual subscription fee is `2000/-. The aggregate limits under various cards issued to a company should not exceed 25% of its net worth subject to a maximum of `50 lakhs in total and not exceeding `10 lacs per card. Companies availing credit facilities with Banks/DFIs are only eligible except where 100% liquid security is offered as guarantee by way of lien on deposits / Govt. Securities for the Corporate Credit Card limits. In case of non-customers, they are required to produce status reports from their Financing Banks / Development Finance Institutions etc while submitting the application for Corporate Cards. Company is required to submit copies of Memorandum & Articles of the company, Board Resolution, Last two years audited balance sheet, 2 colour Photographs of the card Applicants and undertaking letter to the branch for sanction of corporate credit cards. Zonal Managers are empowered to sanction the Corporate Cards. Credit Cards - Highlights (Circular no.102 Ref 05/01 dated 08.07.09) Cards are issued to our Customers generally. Service charges at 2.50%, which is one of lowest in the Industry. Global validity on Visa Gold card and Visa Electron Debit card. Free Accidental Insurance coverage to the Main and Add on cardholder

excluding cards against Deposits. Free Credit period of 21 to 51 days even under roll over facility. Cash Advance up to 50% of the Base Limit. No Annual subscription in the First year and shall be waived in the

subsequent years if card used for stipulated minimum amount. Highly secured payment for Internet usage through VBV (Verified by VISA)

and Msecure (Verified by MASTER).

Pre Paid Acquisition (PPA) Advance: It is a facility of funding to the Merchant Establishments against future card receivables to meet their short-term requirements. The minimum amount of loan shall be `10 lakhs and maximum of `10 crore against 100% collateral for loans up to `100 lakhs and for loans above `100 lakhs and up to `500 lakhs the collateral requirement is 75% and for loans beyond `500 lakhs requires 50% collateral. However, the advance amount should not exceed immediate preceding 12 months aggregate business turnover of the Merchant Establishment on cards. Normally, the loan is repayable within 24 months. The interest rate to be levied on PPA advances is Base Rate + 5%. The sanctioning authority for PPA advance is Head Office. (Cir.no.43 Ref 26/7 dated 23.05.2011)


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Prepaid Cards: In order to provide further value added services to the customers / public, bank has launched two types of prepaid cards viz., Gift Card and International Travel Card on 30.09.2011 and the salient features of the said products are as under (Cir.no.218 Ref 5/2 dated 30.09.2011): Gift Card

Gift cards are available for denominations starting from `250/- to `50,000/-.

All ELBs, VLBs and select Large Branches are allowed to issue Gift cards.

The Card is valid in India and valid for ONE year from the date of purchase

Cards are Non-Relodable and not enabled for cash withdrawals

Branch issue cards with a service charge `25/- for the cards value up to

`1000/- and `50/- for cards beyond `1000/-

Wide acceptance in all Master Card affiliated merchants for transactions at

POS (Merchants), Online (Internet) and IVR (Mobile/Phone) payments

Customer will be provided with PIN for POS transactions to prevent misuse.

SMS alerts are sent for all transactions at Free of cost

Locking/Unlocking of card Account is enabled to the cardholder

No charges for Balance enquiry and Mini statement at Andhra Bank ATM

Cardholders can access the card information through Internet login

Lost/Stolen/Damaged Card Replacement at any Branch with charges

International Travel Card The Travel cards are accepted in all countries except India, Nepal and Bhutan

Travel cards are issued under USD, Euro and GBP currencies

Cards are enabled for transactions at POS Merchants. POS and ATM usage

require PIN for secured transactions

Travel cards are available from USD 200 to the maximum eligibility under

FEMA guidelines

Validity period of the card is 2 years from the date of issue

Cards are re-loadable from any select Branch

The Welcome Kit contains Two cards. Incase the existing card is misplaced /

damaged, the Second card can be Activated after Blocking the Primary card.

Unique feature of Locking/unlocking the card Account through IVR or through

Website self care portal system

An exclusive Internet login provided in the Website for balance enquiry,

viewing transactions etc.

No charges for Balance enquiry and Mini statement at Andhra Bank ATM

Withdrawal of cash at ATM is permitted in the upcountry at local currency

***


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Fee Based Income - Products

In the present deregulated competitive environment, Banks are facing difficulties in retaining / improving profits since there is pressure on Net Interest Margin (NIM). In order to cope up the demand, Banks are focusing their attention on other services to improve the bottom line. Banks are entering into ancillary services in a big way. To augment other income, our Bank is undertaking five activities viz., Selling of Mutual Funds, AB Arogyadaan, Bancassurance schemes, Sale of Gold Coins and Liability Insurance/Asset Insurance.

I. Mutual Funds are associations or trusts of public members who wish to make investments in the financial instruments or assets of the business/corporate sector for the mutual benefit of its members. Mutual Funds are launching various schemes with different investment objectives from time to time to suit the requirement of the investors. Mutual Funds are beneficial to their members in reducing risks and maximizing income by proper selection of financial instruments, which will bring income flow in the form of dividends as well as in the form of capital appreciation. Our Bank has entered agreement with Mutual Funds viz., Principal Mutual Fund (PNB), SBI Mutual Fund, TATA Mutual Fund, UTI Mutual Fund, Kotak Mutual Fund, Reliance Mutual Fund, Sundaram BNP Paribas Mutual Fund, LIC Mutual Fund, Birla Sun Life Mutual Fund and Baroda Pioneer Mutual Fund for distribution of their products. It is a win-win situation to the Banks and customers since banks are providing value added services to the customers and it is a source of other income to the Banks. II. AB Arogyadaan: It is a group Mediclaim Insurance Scheme, which takes care of the hospitalization expenses, issued as a Floater Policy, in association with M/s. United India Insurance Company Limited. There are two plans viz., Plan-I covers a policy of four (1+3) consisting of Policy Holder, Spouse and 2 dependent children and Plan – II covers a family policy of SIX (1+5) consisting of Policy holder, Spouse, two dependent children and parents (father & mother). Dependent mean “male child - below 26 years and unmarried female child”. It is a Floater Policy, any one member or all the members put together can avail hospitalization benefits (Room, Boarding, Nursing, Surgeon/Consultant fee, Diagnostic charges etc.) during the policy period. M/s. Good Health Plan Limited is acting as Third Party Administrator (TPA) and issue photo identity cards direct to the policy holders in Metro/Urban/Semi-Urban areas and with regard to other centers the cards will be sent to the respective branches. Policy holders are eligible to avail cash less treatment at networked hospitals and incase of non-networked hospitals, they may pay bills first and then claim reimbursement from TPA. The entry age is up to 60 years for fresh proposals and on renewal coverage is up to 80 years. Risk will be covered based on sum assured ranging from one lakh to five lakh. Policy is valid for one year, however 15 days grace period is allowed for payment of premium. The annual premium payable by the customer is depending on the Sum Insured. Policy holder is to pay a nominal service charge i.e. `55/- (includes service tax) to the branch. The premium paid under the Scheme is eligible for IT relief under section 80D. The first 30 days of joining the scheme is treated as waiting period and policy holder is not entitled for reimbursement of hospitalization charges in the said period. However, this condition does not apply in case of accidental hospitalization. Settlement of the claims is the sole responsibility of M/s.United India Insurance Company. The contract is between the insurer (insurance company) and the insured (individual) and not between the Bank and insured. Bank acts as facilitator only. (Cir. No.056 Ref 51/06 dated 31.05.2010)


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III. Bancassurance (Life): Andhra Bank is the Corporate Agent for M/s. IndiaFirst Life General Insurance Company Limited and providing various insurance products to the customers of the Bank as well as General Public w.e.f. 01.01.2010. Bancassurance (Non-Life): Bank is undertaking marketing of non-life policies issued by M/s.United India Insurance Co. Limited to customers as well as general public through selected branches. The important policies are Standard Fire & Special Perils Policy, House Holders Insurance Policy, Shop Keepers Policy, UNI Care Policy, Electronic Equipment Insurance Policy and Contractors All Risk Insurance Policy. Besides the above, branches can also undertake insurance of loan assets (Primary and Collateral securities) with M/s. UII, so that branches can protect the loan assets against risk and earn income through commission. All insurance proposals processed should bear bank Code 920100 to receive eligible commission. IV. Sale of Gold Coins: Gold has become a preferred choice of investment for a large number of investors across the globe in general and India in particular. In order to provide the desired services to the customers and to improve the non-interest income, our bank has entered the business of selling the famous Swiss 999.9 fine gold in round shaped coins of 2 grams, 4 grams, 5 grams, 8 grams and 10 grams denominations in the first phase. All gold coins are embossed with the logo of our bank on one side and our name & weight of the coin on the other side. A pre-requisite for selling of gold coins is to obtain VAT/CST license. All branches are allowed to sell gold coins. Branch receive price quote every day from IIB, Mumbai. Branch will get an income of `100/- per gram as commission. No sale is to be effected against “Credit card” for purchase of coins. However, branches can grant loan against Gold Coins under Gold Loan Scheme. Non-customers - For purchases up to the value of `20000/- no documents are required except an application form. Identity proof is required for purchases above `20000/- and up to `49999/-. Cash for `50000/- and above cannot be accepted from non-customers. For customers - For purchases below `50000/- no documents are required except an application form and cash can be accepted. For purchases of `50000/- and above PAN Card copy is required and payment is through a cheque. (Circular no.341 Ref 51/22 dated 24.12.2008) V. Liability Insurance: In order to survive in the competitive world, financial institutions are offering innovative retail loan products to the customers. In this direction, Banks have made the loan procedures easy, offering competitive interest rates and building value-additions in their loan products by providing insurance cover (Accident & Life) to the borrowers. Retail loans (Housing, Vehicle, Education etc) involve huge sums and remains in existence for longer periods as compared to the other loans. These loans being one of the essential social needs with emotional and psychological attachment, the family need to continue the asset even in case of any unfortunate event to the borrower. Andhra Bank is providing cover to Housing / Vehicle / Education loan borrowers in association with India First Life Insurance Corporation (IFLIC) under Group Mortgage Redemption Assurance. The borrowers can avail this facility at their option and it is not compulsory. The intending borrowers opting for the risk cover have to submit Consent-cum-Authorization and Simple Health Declaration Form. Covering the borrowers under this policy helps the bank in reduction of default risk in case of unfortunate event to the borrower. Besides earning commission on Insurance Premia collected, bank charges `55/- (including service tax) per applicant towards service charges. It is also providing a potential avenue for earning fee-based income to the Bank. The features of the scheme are as under:


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Features Particulars

Eligibility

All new and existing borrowers between 18 to 65 years of age for Housing Loans / Education Loans Vehicle Loans. Coverage is available for Joint Borrowers of Housing Loans and Vehicle Loans. In case of Joint Borrowers, any one of the borrower will be covered provided “No Objection Letter” is obtained from the other borrower (s). Age Proof - Copy of Date of Birth Certificate / Passport / Voter’s ID / PAN Card / School Certificate etc. To arrive the correct age for the purpose of calculation of premium, Age as on last birthday should be considered.

Maximum Cover

Up to `50 lakhs & `20 lakhs for Housing and Vehicle loan borrowers respectively. In case of Education Loans in India, the maximum coverage available is `10 lakhs and `20 lakhs for abroad studies. However, the policy is covered with the sanctioned limit or the liability as on date, whichever is lower.

Amount payable by Insurance company

Outstanding indebtedness of the borrower to the Bank which means the amount outstanding in the loan account on the date of entry in to the scheme for the first year and for subsequent years the indebtedness as reduced by the amount deemed to have been repaid through EMI towards the liquidation of the Principal and Interest on such loan. The amount shall not include the default in payment, if any.

Recovery of short fall amount

In case the amount of claim settled by the insurance company falls short of the liability outstanding in the loan account, the short fall should be paid by the joint borrowers / co-obligants / guarantors / legal heirs of the borrower.

Premium

One time Single Premium. The premium will be calculated based on sanctioned limit / liability, age of the borrower and repayment period of the loan. However, in case of existing borrowers, outstanding liability and Residual Repayment Period as on the date of the policy is to be taken into consideration while calculating premium amount.

Foreclosure of the Loan

On request of the borrower, LIC will refund the Proportionate premium basing on the Residual Repayment Period.

Termination of cover

The insurance cover for a borrower is terminated once the borrower attaining the maximum permissible age (65 years for Housing Loan, 60 years for Education & Vehicle loans) or on expiry of repayment period of the loan or on complete repayment of the loan before the due date.

(Cir.no.041 Ref 51/05 dated 20.05.2010)


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IndiaFirst Life Insurance Company Limited (IFLIC)

Bank has entered into Insurance joint venture with Bank of Baroda and Legal & General Group plc with 30%, 44% and 26% stake respectively and offering the following schemes.

No Salient Features IndiaFirst Smart Save IndiaFirst Young India

1 Target Group

It is a simple structured Unit Linked Plan meant for long term protection and savings.

Customers with young children to impart quality education to them.

2 Entry Age 18 to 60 Years 18 to 55 Years

3 Term 15, 20 and 25 Years. Single Premium the term is 15 Years.

10, 15, 20 and 25 Years.

4 Minimum Invest. i) Regular Premium `12000/- p.a. `12000/- p.a. ii) Limited Premium `15000/- p.a. NA iii) Single Premium `45000/- NA 5 Maximum Invest. No limit 6 Payment options Half-yearly / Yearly – SIP facility is available 7 Fund options Debt, Equity, Balanced, Index and value Fund. 8 Sum Assured

i) Regular & Limited premium

Higher of {105% (premium paying term x annualized premium) or (10 x annualized premium)}

ii) Single Premium For age < 45 years – 125% of premium and for age >=45 years – 110% of premium

NA

9 Withdrawals Minimum withdrawal is `5000/-

Maximum withdrawal – 25% of the fund value, only if the fund is left with a minimum balance equal to 110% of annual premium after withdrawal. In case of single premium – the fund value after the withdrawal should not be less than `45000/-

10 Tax Benefit on Premium invested – Section 80C and Maturity benefits received – Section 10 (10D)

11 Death Benefit The fund value or the sum assured whichever is higher is paid to the family/nominee.

IndiaFirst Secure Save Plan: It is a traditional insurance cum savings plan which enables the customer to build their savings systematically by paying regular premium based on income and sum assured chosen. The minimum age at entry of life insured is 5 years and maximum age is 65 years as on last birthday. However, the minimum age stipulated for policy holder is 18 years, in case where the policy is taken for minors. The minimum plan period is 10 years and maximum 30 years. The investor has choice to choose payment mode Monthly/Half-yearly/Yearly. The plan offers as maturity benefit, basic sum assured along with simple reversionary bonus and terminal bonus declared by the company from time to time, will be paid to the policy holder at the end of the plan term. However, in case of death, the sum assured will be paid along with simple reversionary bonus accumulated till death, to the nominee. Premium paid and benefits are eligible for tax benefits under sec 80C up to ` 1 lakh from taxable income. (Cir.no.412 Ref 51/29 dated 01.03.2011) Bank has entered MOU for distribution of Life Insurance products of the Joint Venture Company as their Corporate Agents and bank earns commission on the policies mobilized/sold. (Circular no. 214 Ref 51/15 dated 08.09.2010)


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IndiaFirst Money Back Health Insurance Plan: IFLIC has launched this product on 26th May 2011. It provides both a wide, comprehensive health insurance cover to the family and also an excellent investment opportunity to systematically save, earn market returns. The salient features of the plan are as under: (Cir.no.106 Ref 51/05 dated 06.07.2011)

No Salient Features IndiaFirst Money Back Health Insurance Plan

1 Target Group Policy holder can opt for the scheme for self, self, spouse, parents and children (maximum 2)

2 Entry Age & Maximum age at maturity

Primary Life Assured – 18 to 60 years – Max. – 70 years Spouse & Parents – 18 to 65 years – Max. 75 years Children – 90 days to 24 years – Max. 25 years

3 Sum assured Individual – Minimum 1.50 lakh & Max. 5 lakh Family Floater – Minimum 1.50 lakh & Max. 10 lakh

4 Minimum Invest.

i) Regular Premium Age Minimum Maximum Up to 45 years `10000 `33300 46 years 60 years `14200 `47600

ii) Single Premium Up to 45 years `30000 `100000 46 years 60 years `37500 `125000

Note – In case of spouse, children and parents, the policy holder need to pay additional premium as under

Type Minimum Maximum Regular premium `900 `47500 Single premium `9400 `475500

5 Payment options Yearly 6 Fund options Debt, Equity, Balanced, Index Tracker and value Fund. 7 Withdrawals No withdrawal is followed before 5 years.

8 Hospital claim

Minimum 24 hours hospitalization required. 30 days waiting period except in case of accidents. Hospitalization of the insured upto 1% of the annual sum assured with maximum limit of `5000/- per day. ICU/ICCU expenses are covered up to 2% of the annual sum assured or `10000/- per day whichever is less. More than 3400 network hospitals across 20 states.

9 Maturity Benefit / Death Benefit

The Primary Life Assured will receive the accumulated fund value. In case of death of Primary Life Assured, the amount will be paid to nominee and the policy terminates for all other life assured members. However, in case of death of other assured member, the plan will continue to be in force for remaining members.

10 Tax Benefit on Premium invested – Section 80C and Maturity benefits received – Section 10 (10D)

11 Commission to Bank 10% of premium paid in first year and 1% thereafter in case of Regular Premium accounts and 2% of premium for Single Premium accounts.

12 Third Party Administrator (TPA) E-Meditek Services Limited.

Abhaya First Wealth Pack: It is a four-in-one product which provides Savings Bank account with life insurance, recurring deposit facility, ULIP equity option and group life term plan with life insurance coverage in case of unfortunate death of the account holder. The first two products are of Andhra Bank and other two products are of IFLIC. The product is available in three denominations viz., Silver (`25000), Gold (`50000) and Platinum (`100000/-). Cir no.359 Ref 51/23 dated 12.01.2012.


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Ratio Analysis Financial statements and their analysis: The statement which provides us the financial position of a Balance Sheet are called “Finance Statements”, which includes:

Trading Account (in case of Manufacturing concerns) Profit & Loss Account Balance Sheet Cash Flow Statement Funds Flow Statement

The analysis of Balance Sheet is a process of bringing down the difficult matter into a simple and easily understandable one. To have a clear understanding of the financial position of the Business concern, at least three years financial statements are to be ascertained. They provide us treasure of information. Balance Sheet of a business concern shows the strength of the concern on a given date but not reveal the current state of affairs of the concerns. Balance Sheet is having certain limitations, because it does not disclose the critical factors, such as Managerial Efficiency, Technical competence, Marketing capabilities and Competition in the market. Ratio means a comparison of two items which are having cause and relationship. Ratios can be expressed in percentage or in number of times. Depending upon the nature, the ratios are broadly classified in to four categories viz., Liquidity Ratios, Leverage Or Solvency Ratios, Activity Ratios and Profitability Ratios.

I. LIQUIDITY RATIOS: These Ratios helps to find out the ability of the business concern to pay the short term liability of its liquidity. Any adverse position in liquidity leads to sudden fall of the unit. i) Current Ratio: Current Ratio denotes the capacity of the business concern to meet its current obligation out of the realisable value of the Current Assets. Current Ratio = Current Assets / Current Liabilities. Term Loan installments falling due for payment in next 12 months are to be taken as Term Liability for the purpose of calculation of Current Ratio /MPBF. Inter-corporate deposits are to be treated as Non-Current Assets. Ideal Current Ratio is 2:1. Acceptable Ratio as per our Loan Policy guidelines is 1.33:1 for the limits enjoying above `6.00 crores and 1.15:1 for the business concerns availing limits of below `6.00 crores. Any deviation below the required ratio requires ratification of Higher Authority. ii) Quick Ratio Or Acid Test Ratio: This ratio is a comparision of Quick Assets to Current Liabilities. Quick Assets mean the assets which have instant liquidity of the business concern. Though the Inventory and Prepaid expenses are part of Current Assets, it may be difficult to sell and realize the inventory. Hence, Inventory and Prepaid expenses are to be excluded for arriving the Quick Asset Ratio.

Current Assets – (Inventory+Prepaid Exp) Quick Ratio or Acid Test Ratio = ----------------------------------------------

Current Liabilities

Ideal Quick Ratio is 1:1. Current Ratio is always to be read along with Quick Ratio. A fall in the Quick Ratio in comparison to the Current Ratio indicates high inventory holdings.


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II. LEVERAGE AND SOLVENCY RATIOS: These Ratios helps to find out the Long Term Financial stability of the business concern i) Debt Equity Ratio: Long Term Debt / Equity Here, Equity refers Tangible Net worth. The Ideal ratio is 2:1 and the higher may also be considered as safe. ii) Debt Service Coverage Ratio: It helps to know the capacity of the firm to repay the Long Term Loan Instalment and Interest. Ideal DSCR is 2:1. The higher the DSCR, we may fix the lower repayment period. As per our loan policy guidelines, the DSCR 1.20:1 is also can be considered where fixed income is generated, such as Rent Receivables etc.

Net Profit After Tax + Depreciation +Int. on TL DSCR = ------------------------------------------------------------- Int. on TL + Instalment on TL

iii) Fixed Assets Coverage Ratio (FACR): This ratio indicates the extent of Fixed assets met out of long term borrowed funds. Ideal Ratio is 2:1 Net Block FACR = --------------------------- (Net Block means Total Assets– Depreciation) Long Term Debt iv) Interest Coverage Ratio:

EBIDT Interest Coverage Ratio = --------------- Interest

Where EBIDT is Earning Before Interest, Depreciation and Tax. This ratio indicates the interest servicing capacity of the unit. Higher the ratio has probability of non-servicing of interest and hence avoidance of slippage of asset. III. ACTIVITY RATIOS: i) Inventory Turnover Ratio: Inventory constitutes raw material, work in process, finished goods etc. The ratio is arrived by dividing Inventory by average monthly Net sales to arrive at inventory levels in number of months. Lower the ratio, the faster the movement of inventories and Higher the ratio slower the movement of inventories. It also indicates the time taken to replenish the inventories. Separate parameters are laid down for fabrication units & seasonal industries (maintaining peak level inventories as at March) where operating cycle is longer compared to other businesses and others

Inventory x (RM+WIP+FG) x 12 (OR ) Cost of Goods Sold Net Sales = Average Stock ((Opening Stock+Closing stock)/2) ii) Debtors Velocity Ratio: Debtors

------------ x period Credit sales

Lower the collection period indicates efficiency in realization of receivables and vice-versa.


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iii) Creditors Velocity Ratio: Trade Creditors

---------------------- x period Credit Purchase

Higher velocity denotes that the company is enjoying credit from its suppliers and it has bearing on Maximum Permissible Bank Finance (MPBF) iv) Assets Turnover Ratio:

Net Sales ASSET TURNOVER RATIO=-----------------------------

Total Operating Assets Total Operating Assets= Total Assets – Intangible Assets. Higher the ratio indicates favorable situation of optimum utilization of all the fixed assets. IV. PROFITABILITY RATIOS: i) Gross Profit Ratio -> Gross Profit/Net Sales*100 Gross Profit Ratio indicates the manufacturing efficiency and Pricing policy of the concern. Higher percentage indicates higher sales volume, better pricing of the product or lesser cost of production ii) Net Profit Ratio: Net Profit After Tax ----------------------------------- X 100 Net Sales

Overall profitability and the extent of non-business income.

A decline trend is a pointer to some unhealthy development unless the company had made usurious profits in the past and has consciously decided to reduce its profits by lowering the prices of its product. iii) Return on Equity: Net Profit After Tax ----------------------------------- X 100 Tangible Networth

***


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Loan Policy Guidelines The objective of Loan Policy is to ensure balanced growth of credit across various sectors and to avert credit to undesirable sectors. It is aimed at to improve the credit off-take with quality with minimum risk and maximize profits. Further, it enables the bank to continue to maintain thrust to priority sector advances in consonance with Govt. of India / Reserve Bank of India guidelines. The exposure norms as per the existing policy of the Bank are as under: No Category Norms 1 Single Borrower 15% Bank’s capital fund* 2 Single Borrower–Infrastructure 20% Bank’s capital fund 3 Group 40% Bank’s capital fund 4 Group – Infrastructure 50% Bank’s capital fund 5 NBFC 10% Bank’s capital fund 6 NBFC – Infrastructure 20% Bank’s capital fund 7 NBFC - Asset Finance Company 15% Bank’s capital fund 8 NBFC - Asset Finance Company - Infrastructure 20% Bank’s capital fund 9 Public Limited companies (widely held) 15% Bank’s capital fund 10 Public Limited companies (widely held) – Group 40% Bank’s capital fund 11 Public Limited companies (widely held) - Infra 50% Bank’s capital fund *Bank’s Capital Fund = Tier-I & II Capital as per audited balance sheet of the previous year. Single Borrower threshold limit & Substantial Exposures Limit can be exceeded by Management Committee/Board. (Circular no.041 Ref 26/11 dated 11.05.2007 & Cir.no.86 Ref 26/14 dated 17.06.2011) Maximum Exposure / Prudential limits: (Crores)

No Category Maximum prudential limit Entity Group accounts

1 Individual / Proprietary concern 20 30 2 Partnership 30 40 3 Limited Liability Partnerships 5 10 4 HUF 10 5 Trusts / Societies / Associations 20 30 6 Private Limited Companies 80 100 7 Public Limited Companies (closely held) 100 120 8 Film Industry (Per party) Max – 6 parties 4 9 Infrastructure Project (Per project) 500 10 Construction Contractors 15 times of Net owned funds Note: The maximum limit is to be restricted to the said limits or 6 times of net worth of the concern as per the Latest Audited Balance Sheet, which ever is less. However, in case of Individual / Proprietary / Partnership / HUF / Trusts / Societies / Associates the limit can be sanctioned to `60 crores by CMD/ED. Non Funded Limits - Maximum Exposure / Prudential norms: No Category Maximum 1 BGs (including Letter of Comfort /

Letter of Undertaking) 3 times of Net Worth of the Bank

2 BGs to Banks / FIIs / Others 10% of Bank’s capital funds (Tier-I capital) 3 Letter of Credit 2 times of Net Worth of the Bank 4 Bills discounted (IDBI/SIDBI) 1% of Net Worth of the Bank 5 Foreign Exchange Commitments Equal to the Net worth of the Bank


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Substantial Exposure Limits Single borrower threshold limit will be `750 Crores.

Substantial Exposure Limit – The sum total outstanding of all the borrowal

accounts where the single borrower exposures is in excess of `550 crore shall not exceed `20000 crore.

The following internal exposure limits are fixed to specific industries/sectors in addition to the above exposure limits.

Industry / Sector Exposure Ceilings

Fund Based Non Fund Based Power 17.50% 15.00% Hospitals 2.00% 1.50% Educational Inst. 1.50% 1.00% Roads, Bridges & Rail 10.00% 7.50% Ports & Airports 3.00% 1.00% Other Infra sectors 8.00% 2.00% Over all Exposure to Infra 42.00% 28.00%

Similarly, the ceiling is fixed as 5% for Non Fund Based limits to NBFCs. Administrative clearance from H.O is required for credit facilities to Trust & HUF borrowal accounts for the first sanction. For subsequent renewals & enhancements it is not required provided there is no change in the composition / activity of HUF / Trust. The extent up to which Interest & Non-interest bearing Unsecured Loans (from promoters, friends and relatives) can be treated as Quasi Capital/Net Worth for exposure norms is 50% and 100% respectively. Capital Market Exposure: Funded & Non-funded facility to Stock Brokers including its associates/inter connected companies subject to

a) 20% of Net Worth of the Bank as per the last audited balance sheet (on solo/consolidated basis) after netting exposure to Loans and advances to Individuals, Loans & advances to corporates for meeting promoter’s contribution & Loans to individuals for investment in IPOs/ESOPs.

b) For Individuals `20.00 crore, For Partnership firms `30 crore and for Private and Public Sector Companies it is `80 crore and `100 crore respectively subject to 6 times of Net worth of the borrower for Individual, Partnership & Private Ltd. Companies. (Cir.47 Ref 26/9 dated 27.05.11)

Exposure ceilings - Exemptions Loans & Advances against security of bank’s own term deposits and LCs / BGs

covered by 100% cash margin. Food Credit. Rehabilitation of Sick / Weak Industrial units: Existing / additional credit facilities

(including funding of interest and irregularities) granted to weak / sick industrial units under rehabilitation packages.

Govt. of India Guaranteed accounts where principal & interest are fully guaranteed.

Bills purchased/negotiated/discounted under LC (where the payment to the beneficiary is not made under reserve.)


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Maximum repayment period allowed for the following Term Loans

No Category Credit Rating Repayment with in

CRS/CRAS CRRM 1 Infrastructure A+++ / A++ A++ 15 Years including gestation 2 Infrastructure A+ / A&B A+,A,B++ 12 Years including gestation 3 RTO Loans A+++ / A++ A++ 6 Years including holiday 4 RTO Loans A+ / A&B A++ 5 Years including holiday 5 Other TLs A+++ / A++ A++,A+A,B++ 7 Years excluding holiday 6 Other TLs C B+, B 5 Years excluding holiday

Due Diligence Report – Conducting due diligence is a prerequisite for all new borrowal accounts (`100 lac & above) by the branch. It helps the branch to assess the credit worthiness of the prospective borrower and risks involved in the proposal. The report covers the details of the prospective borrower / Promoters / Partners / Directors, details of associate and group concerns and details of market enquiries about the new borrower and the associate/sister/group concerns. Due diligence is to be done by Zonal Office in case of accounts of `300 lac and above. However, branches to obtain Credit Investigation Report for all advance accounts irrespective of the credit limits sanctioned. However, Agrl, Weaker and Govt. Sponsored accounts upto a limit of `25 lakh are exempted from the purview of Credit Investigation. (Cir.no. 6 Ref 26/03 dated 07.04.2010) TURNOVER METHOD: (for WC limits up to & inclusive of `6.00 Crore)

A. Accepted Projected Sales Turnover B. 25% of Sales Turnover C. Margin @ 5 % of Sales Turnover D. Actual NWC available as per latest Audited Balance Sheet E. B-C F. B-D G. M.P.B.F = E or F, whichever is less.

INVENTORY METHOD: (For WC limits up to & inclusive of `6.00 Crore)

A. Total Current Assets B. Current Liabilities (other than Bank Borrowings) C. Working Capital Gap = A - B D. Margin @ 13% of Projected Current Assets E. Actual NWC available as per latest Audited Balance Sheet F. C-D G. C-E H. M.P.B.F = F or G, whichever is less.

INVENTORY METHOD: (For Working Capital limits above `6.00 Crore)

A. Total Current Assets B. Current Liabilities (other than Bank Borrowings) C. Working Capital Gap = A – B D. Margin @ 25% of Projected Current Assets E. Actual NWC available as per latest Audited Balance Sheet F. C-D G. C-E H. B.F = F or G, whichever is less.

Note: If actual NWC is less than required margin, the borrower has to bring in the short fall and sanctioning authority has to ensure the same. Maximum Working Capital credit limit up to which Turn Over method can be

extended is `6 Crores.


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Assessment system under which seasonal industries can be financed is Cash Budget System.

The past inventory levels shall be the basis for accepting future projections in the build up of Current Assets and Other Current Liabilities. However the sanctioning authority will have flexibility to accept higher levels provided there is enough justification on a case to case basis.

Minimum acceptable Current Ratio in case of working capital credit facility up to `6 Crore when assessed as per Turnover Method or Inventory Method is 1.15.

Minimum acceptable Current Ratio in case of Working Capital credit limit of above `6 Crore is 1.33.

Maximum acceptable level of Total Debt- Equity Ratio is 6. Maximum permissible Gearing Ratio while assessing the eligibility for non-

funded limits is 10. Standard average DSCR specified for all Term Loans is 1.50 to 2.00. However,

in case of assured source of income, it can be taken as 1.20. Lower DSCR can be accepted for Rural Godowns.

Working Capital Limits – Renewal - For "A” and above rated accounts it is 24 months with yearly review. Others 12 months.

Penal interest – Non submission of data for review/renewal:

For the first 3 months of the overdue period Penal interest of 1% Beyond 3 months of overdue period till submission of all the required data / information

Penal interest of 2%

Stock Statement/Book Debts:

All borrowers availing working capital limits are required to submit stock

statement as on the last Friday of the month before 10th of succeeding month. Penal Interest of 1% for the period of default on working capital

outstanding. The minimum working capital limit to accept Book Debts as security is above

`5 lakh. Book Debt statement is to be certified by the borrower every month and it

should be certified by a Chartered Accountant every quarter. MSOD

All accounts with working capital limit of `100 Lakh & above from the Banking

system is required to submit MSOD. MSOD is to be submitted on or before 15th of next month. Penal interest of 1% to be charged in case of accounts with fund based

working capital limits of `100 lakhs & above for the period of default. QIS II is a Quarterly Statement showing the performance during the quarter. Time stipulation for the submission of QIS II is within six weeks from the close of the quarter. Cut-off limits for obtention of QIS form II.

Funded working capital limits of above `6.00crore (A & above rated) “C” rated accounts, with fund based working capital limits of `1.00 crore

and above “B”(CRS/CRAS)& B++(CRRM) rated accounts, with fund based working

capital limits of `2.00 crore and above QIS III is a Half-yearly Operating and Funds-Flow statement. Time stipulation for the submission of QIS III is within two months from the close of the half year. Cut-off limits for obtention of QIS form III.


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Funded working capital limits of `3.00 cr and above (A and above rated) C”(B+ & B under CRRM) rated accounts, where fund based working capital limits of `1.00 crore and above

“B”(B+ under CRRM) rated accounts, where fund based working capital limits of `2.00 crore and above

Penal interest @ 1% p.a for one full quarter on the working capital outstanding will be levied for non submission of QIS II/III. However, maximum over all penal interest chargeable in an account for any reason should not exceed 2% p.a. Margins & Securities: Bank Guarantees - Value of Agricultural Land and/or Rural Buildings should not exceed 30% of total collateral security requirement in case of new accounts and 50% in case of existing accounts that too in states where there is no ban on acceptance of agricultural land as security for non-agricultural purposes. Loans against NSCs/KVPs - 75% of the purchase value plus accrued interest of NSCs / KVPs is eligible for bank finance. However, the loans should be extended only where the date of maturity is less than 3 years from the date of finance except where the facility of premature cancellation/surrender value is available. Book Debts: The margin required for financing against book debts is 50% and in case of MSME it is 30%. However, sanctioning authority can reduce margin to 25% on book debts of Government departments. While arriving Drawing Power, only Book Debts 90 days and below are to be taken in to consideration. With regard to MSME advances the stipulation is 180 days & below. Security Norms – Crop Loans / Agriculture Term Loans: Hypothecation of Crops/Assets financed is only be treated as security for loans up to `50000/- and for loans beyond `50000/- and up to one lakh, branches to obtain co-obligation / third-party guarantee. However, in case of loans above one lakh, 100% collateral security in the form mortgage of land / creation of charge is required.

Third party Collateral norms: Borrowers are required to furnish the collateral securities in the form of immovable or movable properties as per the loan policy guidelines of the bank. In the cases where the borrowers are not having sufficient / adequate properties, the properties of third parties who are near relatives, friends etc. are being accepted as collateral security. However, in view of the risks involved in accepting the collaterals from third parties, now the branches are advised to obtain administrative clearance from the next higher sanctioning authority for all loans except loans against Bank Deposits. Third Party means any person other than the borrower, borrower’s spouse, father, mother, son and daughter, partner of the firm or Directors of the Company or Trustees of a Trust. While accepting third party collateral security, a savings account has to be opened in the name of the party depositing title deeds with due KYC compliance. An attested photo should be kept along with RF 255. Branch Managers or authorized officer should visit independently, unaccompanied by the borrowers or their representatives and make their own enquiries about ownership and valuation from the neighbours/office bearers of the resident’s society, if any. The first visit should be along with the borrower and a certificate to this effect is to be kept on record along with the loan document. (Cir.no.231 Ref 26/36 dated 13.10.2011)


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Unit Inspections & Audits:

No Account Type Periodicity Cash Credit Limits

1 Below `50 lakhs Bi-monthly by branch 2

`50 lakhs & above Once in a month by Officer & once in a quarter by Manager / Stock Audit by Concurrent Auditor

3 `100 to `200 lakhs

Once in a month by Officer & once in a quarter by Manager / Stock Audit by Concurrent Auditor. Once in a year by Inspector of Branches.

4

`200 to `300 lakhs

Once in a month alternatively by Officer/Branch Manager/Concurrent Auditor; Short Inspection by Concurrent Auditor/IOB once in a year; Stock & Receivable Audit once in a year.

5 Above `300 lakhs

Once in a month by ZO officials (Technical Officer/Senior Manager-Credit) or CM/SM heading branches.

6 Other than Cash Credit

Once in a quarter by an Officer; Once in half year by the Manager.

Stock Audit is to be done for all Cash Credit Accounts with limits of `50 Lakh & above by the Concurrent Auditor. Short Inspection is applicable to Advances of `100 lakhs & above. Short Inspection will be conducted by Concurrent Auditors/Inspectors of Branches. In case of Fresh Advances, Short inspection is to be conducted within 3 months from the date of first disbursement. In case of Existing Advances, the periodicity is once in a year preferably six months after the regular inspection of the branch. Stock & Receivable Audit - Minimum Cash Credit Limit for conducting audit is `2.00 Crore. Accounts for which conducting “Stock & Receivable Audit” is applicable:

C – Rated Accounts `2 Cr. & above(with min. of 50% fund based limits) B – Rated Accounts `3 Cr. & above(with min. of 50% fund based limits) A – Rated Accounts `5 Cr. & above(with min. of 50% fund based limits) NPA Accounts With balances of `5 Crore & above New/Take-over accounts < 3 years

Where Working Capital Limits enjoyed are `2 Crore & above irrespective of Credit Rating.

To all accounts W.C. Limits of `10 crore & above (fund based and non fund) irrespective of rating.Cir.311 ref 26/37 dt 16.11.06

Audit is to be done by a firm of practicing Chartered / Cost Accountants once in a year and review should be done by Zonal Office. (Cir. no.463 ref 26/83 dated 31.3.2009) Pre-sanction Unit Inspection report is to be done preferably by Manager himself within in one month of disbursement of loan. However, it is to be done before sanction of Fresh / Renewal / Enhancement of the limits. Credit Rating:

Credit Rating is required for Small Loans of above `2 Lakh and below `5

Lakh – Fund and Non-Funded (SSI, RT, BE, PSE, RTO) Credit Rating System (CRS) for Fund Based Limits of `5 Lakh & above

but less than `50 Lakh Credit Risk Assessment System (CRAS) for both Fund Based and Non-

Fund based Limits of `50 Lakh & above up to `500 lakh


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Credit Rating Model for New units without Audited Balance Sheet for Limits of `5 Lakh & above but less than `50 Lakh.

Credit Rating Model for New units without Audited Balance Sheet for Limits of `50 Lakh & above up to `500 lakh

Credit Risk Rating Model for credit limits of above Rs 500 lakh (fund & non-fund based) is applicable.

Risk Rating Model is to be applied for Stand alone Term Loans of `5 Lakh & above. As per CRS/CRAS/CRRM (as applicable) at the time of half yearly / annual review basing on latest Audited Balance Sheet and pricing shall be reset as per the credit rating so arrived at by the sanctioning authority.

CRS/CRAS is applicable for the borrowal accounts with both working capital and term loan limits under the industry / business / trade / agriculture segments including import and export proposals. Rating is required for non-fund based limits also. However, it is not applicable to Professionals.

Interest Rate as per Credit Rating finalised by the sanctioning authority is applicable for advances of above `10 Lakh. However, interest rates of import/export credit shall be fixed as stipulated by RBI/Bank from time to time but not as per CRS/CRAS/CRRM rating.

CRS is applicable for Rice Mill accounts with limits of above `10 Lakh irrespective of any upper limit.

A+ & above rated Rice Mills have a concession of 50% of the processing Charges on fund based working capital limits and 0.50% of interest. For agriculture segment – Credit rating is required for firms/corporate

borrowers with above `5 lakh limit and `25 lakhs & above for Individuals and non-corporate borrowers.

However, DWCRA / SHGs / IRDP / SGSY / SCAP / STAP / FSCS / LAMPS / Cold Storages, Rural Godowns Scheme / storages financed under capital investment subsidy scheme of NABARD are exempted from the above rating. Review of Accounts:

Parameter Periodicity of Review Time of review

Reviewing Authority

Term Loans up to `5 lakh

Yearly

During III Quarter

of the financial year

Branch

Manager Housing Loans Education Loan Deposit Loans TL/DPG above `5 lakh and below `100 lakh

Yearly

During III Quarter of the financial year

Sanctioning Authority

Large Borrowal A/cs of `100 lakh & above

Half Yearly Every 6 months

(Cir.no.062 Ref 26/11 dated 04.06.2011) Audited Balance Sheet of the latest financial year shall be the basis for arriving at the various financial parameters at the time of renewal / sanction under CRAS / CRS/CRRM. In the absence of audited balance sheet of the latest financial year, the least of ratings arrived based on the latest provisional balance sheet OR last audited balance sheet shall be awarded. In such cases, the audited balance sheet for the latest financial year is to be obtained within 6 months to finalise credit rating and re-fix interest accordingly. If the audited balance sheet of the latest financial year is not submitted within 6 months from the date of closure of financial year for arriving at credit rating in case of fund – based advances of `100 lakh & above, additional interest of 1% is to be charged for the non-submission period.


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Renewal of ‘C’ rated accounts (B under CRRM) under the branch/zonal office powers shall be considered by Zonal Manager & DGM as II level official at ZO. At HO respective sanctioning authorities can renew the “C” Rated A/cs. For Enhancement one level higher to the sanctioning authority upto GM (Credit). ED/CMD is empowered to sanction enhancements under their delegated powers the limits. For D rated limits renewal/review powers are with one level higher to the sanctioning Authority.(Cir.274 ref.26/35 dt.11.11.2008). Working Capital Term Loans for Traders & small units:

Maximum limit up to which Working Capital Term Loans can be sanctioned

to Traders and Small Units is `10 lakhs. Permissible repayment period of Working Capital Term Loan to Traders

and Small Units is 60 equal monthly installments. Periodicity for obtaining Stock-Statements in case of WCTL to Traders and

Small Units is once in a quarter. Margin on Primary Security in case of WCTL to Traders and Small Units is

10% for limits up to `5 lakhs and for others it is 25%. The units are to be inspected once in a Quarter. Collateral Security is to be obtained minimum of 125% of the value of

Limit.

Financing of Poultry Units: New Borrowers intending to establish a poultry unit having satisfactory net worth shall only be considered. Established units owning sheds, cages and poultry equipment, which approach the bank for short-term finance, can be considered now. Collateral norms for existing a/cs with minimum 3 years satisfactory track record continues to be 100% and for new farmers/units the collateral norm is 150% of the loan amount. (Cir no 412 Ref 26/55 Dt. 12.02.2007)

Legal Audit: All new/ renewal borrowal accounts with aggregate credit limits of `25 lakh and above are covered under Legal Audit. From limits of `25 lakhs to `100 lakhs empanelled Advocate who has not given legal opinion or Law Officer at Zonal Office. For limits above `100 lakhs law officer at ZO has to conduct the legal audit. It covers other aspects such as documents relating to Primary & Collateral securities. Legal Audit is to be completed before release of loan amount. After the completion of Legal Audit, permission from Zonal Office is required, in respect of the borrowal accounts with aggregate credit limits of `50 lakh & above (fund based & non fund based inland and foreign business limits) for release of sanctioned limits. Loan Delivery System - Borrowal accounts with fund based working capital credit limits of `10 Crore and above from the banking system. The total disbursement for WCDL and Cash Credit should not exceed 80% and 20% of the sanctioned limits. However funds can be released either as Cash Credit or as Demand Loan basing on the request of the borrower. Take over of accounts: Norms for take over of accounts from Banks or FIs: The account should be a Standard Asset with Positive Net Worth & profit

record. P & C Report - Obtention of P & C Report is mandatory preferably before

sanction, if not feasible before disbursement. Account Statement - The account copies of all the borrowal accounts with

the present bankers/financial institution shall be obtained at least for the last 12 months (revised from the earlier guideline of 6 months) and ensure that the conduct of the a/c is satisfactory and no adverse features are noticed. In case of stand alone term loans, the copies of the A/c statement of Current Account or any other operative a/c maintained by the borrower with the present bankers shall be obtained and studied for the last 12 months and


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ensure that the conduct of the account is satisfactory and no adverse features are noticed.

Existence & Previous profit track record - i) In existence for a minimum of 3 years with Audited B/S ii) Profit making in preceding 2 years & iii) Availing Credit facilities with the previous Banker at least for 3 years.

Enhancement on Existing Limits with the present Banker: i) Enhancement not beyond 50% ii) No further Enhancement/ Additional Limits till one year or next ABS, whichever is earlier.

TOL/TNW should not exceed 4:1 in case of takeover accounts. Group Accounts - In case of having Sister / Associate concerns, Groups

consolidated position has to be examined. Branches should ensure that

Assessment is to be made independently as per our Loan Policy guidelines.

Administrative clearance is to be obtained from Zonal Office / Head Office.

To take all existing securities and to complete the documentation expeditiously duly complying with our loan policy guidelines on takeover norms, compliance, legal audit, permission for release of limit etc.

While other bank is taking over our borrowal account, Branches are advised to inform adverse features if any, in the conduct of the accounts to the transferee bank duly obtaining permission from competent authority for issuing P & C Report. (cir.no.040 Ref 26/6 dated 20.05.2011)

Trust Receipt Financing: A Trust Receipt is a bridging loan that provides a buyer with financing to settle goods imported on sight terms. Under a Trust Receipt, the applicant pledges the imported goods in favour of the Bank. This means that the borrower takes possession of the imported goods, but holds them in trust for the Bank. When the goods are sold, he has to use the proceeds of the sale to repay the Bank. As security, the goods title will be vested with the Bank, and the borrower will undertake to hold the documents, the goods and the sale proceeds in trust for the Bank. Trust Receipt usually comes together with Import Letter of Credit or Import Collection Bill Service. Corporate Loans are sanctioned to meet margin requirement for Working Capital, Margin for Long Term Project Finance, commitment of the Corporate or for any other purpose related to the financial needs of the company. However, corporate loans should not be extended to meet the financial commitments of sister concerns. Maximum repayment period for a Corporate Loan is 60 Months.

Valuation of Properties – All properties mortgaged to the Bank are to be valued before disbursement of loans. The frequency of valuation of properties by approved engineer for fund & non funded working capital limits including Non Performing and Suit filed accounts is 2 years. However, Branch Manager is allowed to value Agricultural lands up to `5 lacs, Above `5 lacs should be valued by RDO and countersigned by Manager. In case of vacant sites up to `25,000 Branch Manager is empowered to undertake valuation. Properties of 50 crore and above, the valuation is to be done by minimum two independent valuers (chartered engineers) and the lower of the two valuations shall be taken into consideration The valuation report should bear additional details such as longitude and latitude of the property, distress value of the property along with market value, address of the property with photo, particulars of electricity bill payments and other taxes paid on property as proof of ownership, nearest landmark, deviations in construction, if any. Revised format is to be submitted with effect from 14.12.2011 (Cir 317 Ref 26/52 dated 14.12.2011)


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Restructure of Advance Accounts: Restructuring would normally involve modification of terms of the advances / securities, which would generally include, among others, alteration of repayment period / repayable amount / the amount of installments / rate of interest (due to reasons other than competitive reasons). It is applicable to all type of credit facilities including working capital limits extended to Industrial Units, provided they are fully covered by Tangible Securities. No account will be taken up for restructuring by the banks unless the financial viability is established and there is a reasonable certainty of repayment from the borrower, as per the terms of restructuring package. The viability should be determined by the banks based on Return on Capital Employed, Debt Service Coverage Ratio, Gap between the Internal Rate of Return and Cost of Funds etc., on case-by-case depending merits of the account. Any restructuring done without looking into cash flows of the borrower and assessing the viability of the projects/activity financed by banks would be treated as an attempt at ever greening a weak credit facility and would invite supervisory concerns/action. The accounts not considered viable should not be restructured and banks should accelerate the recovery measures in respect of such accounts. Restructuring of advances could take place either before commencement of commercial production/operation; or after commencement of commercial production / operation but before the asset has been classified as Sub-standard or Doubtful. Upon restructuring, the accounts classified as 'standard assets' should be immediately re-classified as Sub-standard assets. Accounts which have been classified as non-performing assets upon restructuring would be eligible for up-gradation to the 'standard' category after observation of 'satisfactory performance' during the 'specified period'. Any additional finance to the account may be treated as 'standard asset', up to a period of one year after the first interest / principal payment, whichever is earlier, falls due under the approved restructuring package. However, in the case of accounts where the pre-restructuring facilities were classified as 'sub-standard' and 'doubtful', interest income on the additional finance should be recognized only on cash basis. If the restructured asset does not qualify for up gradation at the end of the above specified one year period, the additional finance shall be placed in the same asset classification category as the restructured debt. Accounts that are restructured for the second time or more on account of natural calamities would retain in the same asset classification category on restructuring. Hence, restructured accounts on account of natural calamities would not be treated as second restructuring. (Cir.no.269 Ref 19/16 dated 25.10.2010) Disbursement of Term Loan by way of reimbursement to the borrower: It shall be permitted by the sanctioning authority, provided: Such reimbursement is within 12 months from the date of purchase /

acquisition of the assets. It should be supported by satisfactory proof of investment / source of funds

supported by Invoice/receipt/voucher followed by auditor’s certificate. Such funds should have been remitted through a bank account.

Penal interest on over due limits: First 3 months from the due date of the credit facility Penal interest of 1% Beyond 3 months from the due date of the credit facility till submission of renewal application with full information

Penal interest of 2%

Adhoc Limits - Branch can allow adhoc limits maximum of 3 times during the validity period of the Working Capital Limit. The maximum period for which adhoc limit can be sanctioned is 3 months. Branch Managers (I, II & III) do not have any powers to allow Adhoc limits for the sanctions made by higher authorities except in case of ‘A’ & above rated Micro, Small Enterprises borrowers. Up to 20% of the


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Working Capital facility can be allowed as adhoc to the eligible accounts. The Adhoc limit shall be regularized on or before due date either by adjustment or by considering the need based regular limits where the Adhoc limit is also reckoned. The concept of Adhoc Limit is not applicable to Non-funded limits. The details of Adhoc limits allowed within the discretionary powers are to be reported in ADA - IX along with monthly sanctions. Excess Drawals: The general guidelines for allowing Excess Drawals / Adhoc limits are as under: The account should be standard performing one and allowed to the borrowers

enjoying regular sanctioned limits. Both adhoc and excess drawals should not be allowed simultaneously. Branches are allowed to extend excess drawals up to 20% of regular limit or

beyond the powers of specified for the branch manager as delegated powers the branch has to obtain prior approval from controlling office.

Excess drawals should be allowed only to meet the urgent business requirements such as payment of wages or urgent cash purchases, etc.

The maximum period for which Excess Drawals can be sanctioned is for a period not exceeding 15 days.

Excess Drawals shall be allowed in a Working Capital account not more than 6 times during the validity period of the working capital limit.

Branch should obtain a letter from the constituent requesting for the Excess Drawal facility specifying the amount; purpose and the time limit.

Excess Drawals/Adhoc limits attract 2% additional interest. No adhoc limits are allowed in case of SOD against Real Estates. - ADHOC Not

permitted. However, Excess Drawls can be allowed. Excess drawals are to be reported in ADA - X along with monthly sanctions.

Temporary Over Draft is a facility by which a constituent is permitted to draw money from his Current Account in excess of his credit balance. TOD facility can be allowed only six times in a year in an account. TODs can be allowed in SB accounts with satisfactory transactions up to `1000/- per account subject to a total amount of `10,000/-.TODs allowed at the Branch as part of specially launched schemes. TODs should not be allowed in accounts of our staff members. The Current Account holder should have undoubted reputation, integrity and satisfactory transactions in the account for a minimum period of six months. Branch should obtain a letter from the constituent requesting for the TOD facility specifying the amount; purpose and the period for which the facility is required. Discretionary powers of Branch Managers for allowing TODs are JM-I 5000, MM-II `10000, MM-III `25000, SM IV `100000 and SM V `200000. All TODs allowed are to be reported in ADA-XI every month to ZO. When the TOD is allowed beyond discretionary powers, the compliance is to be prepared and a copy of it should be enclosed to the letter seeking confirmation.

Recovery Agents: In order to address the issue of mounting NPAs as well as resource constraints, bank has framed a policy to engage Recovery / Asset Investigation Agents to help the branches. All NPA accounts (including technical written-off accounts) with Real Account outstanding of `5 lakhs and above and which are more than 2 years old will be entrusted to the Recovery Agents. However, in exceptional cases the mandatory period of 2 years can be waived. The agency should be either Partnership or Corporate entity with required expertise to handle NPA accounts. The agents appointed under this scheme are required to be complied BCSBI code and Bank’s Model Code of conduct for collection of dues and repossession of secured assets. However, the agency shall not have any right to sub-delegate or appoint any sub-agent. The engagement of agent is account specific and for a specified period only. Bank also engaging the services of Investigation Agents for the purpose of locating the whereabouts of borrowers/guarantors or details of assets other than charged /


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mortgaged to the bank to expedite the process of recovery of suit filed accounts. (Cir. no.343 Ref 45/09 dated 27.01.10 & Cir.no.244 Ref 45/11 dated 01.10.10)

Trade Credit refers to credits extended for imports directly by the overseas bank, and financial institutions for original maturity of less than three years.

Suppliers’ Credit relates to credit for imports in to India extended by the overseas supplier.

Buyers’ credit refers to loans for payment of imports into India arranged by the importer from a bank or financial institution outside India for maturity of less than three years. Issue of Letter of Comfort /Letter of Undertaking/ Guarantee is applicable for Buyers’ Credit.

Other miscellaneous: The Cost/Capacity of proposed second hand machinery shall not exceed 25%

of total Cost/Capacity of machinery of the proposed scheme stipulated margin on second hand machinery is 50%.

Sensitivity Analysis is made mandatory in respect of all Term Loans of `50 lakh & above.

Sanctioning authority can allow credit limit beyond 10% increase over the eligible amount as per Scale of Finance in case of PAGCC.

Advances with aggregate credit facilities (both Fund & Non-fund put together) of `1 Crore & above are subjected for Half-yearly review of large borrowal accounts. The review is to be done within 6 to 9 months from the date of first sanction / renewal of credit facilities.

Financing second hand vehicle under RTO loans is not allowed.


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Bank Guarantees & Letter of Credit Bank Guarantee: As a part of Banking Business, Bank Guarantee (BG) Limits are sanctioned and guarantees are issued on behalf of our customers for various purposes. The guarantees comprise both performance guarantees and Financial Guarantees depending on the purpose i.e. for EMD, Mobilization advance, Procurement of Material etc. Though, BG facility is a Non-fund Facility, it is a firm commitment on the part of the Bank to meet the obligation in case of invocation of BG. Hence, monitoring of Bank Guarantee portfolio has attained utmost importance. The purpose of the guarantee is to be examined and it is to be spelt out clearly if it is Performance Guarantee or Financial Guarantee. Due diligence of client shall be done, regarding their experience in that line of activity, their rating/grading by the departments, where they are registered. In case of Performance Guarantees, banks shall exercise due caution to satisfy that the customer has the necessary experience, capacity and means to perform the obligations under the contract and is not likely to commit default. The Financial Indicators / Ratios as per Banks Loan Policy guidelines are to be satisfactory. The position of receivables and delays if any, are to be examined critically, to understand the payments position of that particular activity. The financial position of counter party, type of Project, value of Project, likely date of completion of Project as per agreement are also to be examined. The Maturity period, Security Position, Margin etc. are also to be as per Policy prescriptions and are important to take a view on charging BG Commissions. Branches shall use Model Form of Bank Guarantee Bond, while issuing Bank Guarantees in favour of Central Govt. Departments/Public Sector Undertakings. Any deviation is to be approved by Zonal Office. It is essential to have the information relating to each contract/project, for which BG has been issued, to know the present stage of work/project and to assess the risk of invocation and to exercise proper control on the performance of the Borrower. It is to be ensured that the operating accounts of borrowers enjoying BG facilities route all operations through our Bank accounts. To safeguard the interest of the bank, Branches need to follow up with the Borrowers and obtain information and analyse the same to notice the present stage of work/project, position of Receivables, Litigations/Problems if any leading to temporary cessation of work etc. (Cir.no.309 Ref 26/60 dated 30.11.2010) Letter of Credit: A Letter of Credit is an arrangement by means of which a Bank (Issuing Bank) acting at the request of a customer (Applicant), undertakes to pay to a third party (Beneficiary) a predetermined amount by a given date according to agreed stipulations and against presentation of stipulated documents. The documentary Credit are akin to Bank Guarantees except that normally Bank Guarantees are issued on behalf of Bank’s clients to cover situations of their non performance whereas, documentary credits are issued on behalf of clients to cover situation of performance. However, there are certain documentary credits like standby Letter of Credit which are issued to cover the situations of non performance. All documentary credits have to be issued by Banks subject to rules of Uniform Customs and Practice for Documentary Credits (UCPDC). It is a set of standard rules governing LCs and their implications and practical effects on handling credits in various capacities must be possessed by all bankers. A documentary credit has the seven parties viz., Applicant (Opener), Issuing Bank (Opening of LC Bank), Beneficiary, Advising Bank (advises the credit to beneficiary), Confirming Bank - Bank which adds guarantee to the credit opened by another Bank thereby undertaking the responsibility of payment / negotiation / acceptance under the credit in addition to Issuing Bank), Nominated Bank - Bank which is nominated by Issuing Bank to pay/to accept draft or to negotiate, Reimbursing Bank - Bank which is authorized by the Issuing Bank to pay to honour the reimbursement claim in settlement of negotiation / acceptance / payment lodged with it by the paying/negotiating or accepting Bank.


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Types of Letter of Credit Revocable Letter of Credit - is a credit which can be revoked or cancelled or amended by the Bank issuing the credit, without notice to the beneficiary. If a credit does not indicate specifically it is a revocable credit the credit will be deemed as irrevocable in terms of provisions of UCPDC terms.

Irrevocable Letter of credit – is a firm undertaking on the part of the Issuing Bank and cannot be cancelled or amended without the consent of the parties to letter of credit, particularly the beneficiary.

Payment Credit – is a sight credit which will be paid at sight basis against presentation of requisite documents as per the terms of LC to the designated paying Bank.

Deferred Payment Credit – is a usance credit where payment will be made by designated Bank on respective due dates determined in accordance with stipulations of the credit without the drawing of drafts.

Acceptance Credit - is similar to deferred credit except for the fact that in this credit drawing of a usance draft is a must.

Negotiation Credit - can be a sight or a usance credit. A draft is usually drawn in negotiation credit. Under this, the negotiation can be restricted to a specific Bank or it may allow free negotiation whereby any Bank who is willing to negotiate can do so. However, the responsibility of the issuing Bank is to pay and it cannot say that it is of the negotiating Bank.

Confirmed Letter of Credit – is a letter of credit to which another Bank (Bank other than Issuing Bank) has added its confirmation or guarantee. Under this, the beneficiary will have the firm undertaking of not only the Bank issuing the LC, but also of another Bank. Confirmation can be added only to irrevocable and not revocable Credits.

Revolving Credit – is one where, under the terms and conditions of the credit, the amount is revived or reinstated without requiring specific amendment to the credit. The basic principle of a revolving credit is that after a drawing is made, the credit reverts to its original amount for re-use by beneficiary. There are two types of revolving credit viz., credit gets reinstated immediately after a drawing is made and credit reverts to original amount only after it is confirmed by the Issuing Bank.

Installment Credit – calls for full value of goods to be shipped but stipulates that the shipment be made in specific quantities at stated periods or intervals.

Transit Credit – When the issuing Bank has no correspondent relations in beneficiary country the services of a Bank in third country would be utilized. This type of LC may also be opened by small countries where credits may not be readily acceptable in another country.

Reimbursement Credit - generally credits opened are denominated in the currency of the applicant or beneficiary. But when a credit is opened in the currency of a third country, it is referred to as reimbursement credit.

Transferable Credit – Credit which can be transferred by the original beneficiary in favour of second or several second beneficiaries. The purpose of these credits is that the first beneficiary who is a middleman can earn his commission and can hide the name of supplier.


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Back to Back Credit – is also called countervailing credit. Under this the credit is opened with security of another credit. Thus, it is basically a credit opened by middlemen in favour of the actual manufacturer/supplier.

Anticipatory Credit - Under this payment is made to beneficiary at pre-shipment stage in anticipation of his actual shipment and submission of bills at a future date. But if no presentation is made the recovery will be made from the opening Bank.

Red Clause Credit - it contains a clause providing for payment in advance for purchasing raw materials, etc.

Green Clause Credit – is an extended version of Red Clause Credit in the sense that it not only provides for advance towards purchase, processing and packaging but also for warehousing & insurance charges. Generally money under this credit is advanced after the goods are put in bonded warehouses etc., up to the period of shipment.

Bill of Lading: It should be in complete set and be clean and should generally be to order and blank endorsed. It must also specify that the goods have been shipped on board and whether the freight is prepaid or is payable at destination. The name of the opening bank and applicant should be indicated in the B/L.

Airway Bill: Airway bills/Air Consignment notes should always be made out to the order of Issuing Bank duly mentioning the name of the applicant.

Insurance Policy or Certificate: Where the terms of sale are CIF the insurance is to be arranged by the supplier and they are required to submit insurance policy along with the documents. Invoice: Detailed invoices duly signed by the supplier made out in the name of the applicant should be called for and the invoice should contain full description of goods, quantity, price, terms of shipment, licence number and LC number and date.

Certificate of Origin: Certificate of origin of the goods is to be called for. Method of payment is determined basing on the country of origin.

Inspection Certificate: Inspection certificate is to be called for from an independent inspecting agency (name should be stipulated) to ensure quality and quantity of goods. Inspection certificate from the supplier is not acceptable.

Lloyds Certificate: Shipments should be made only by Conference Vessels, which are in the approved list of Lloyds Register of Shipping and classified as Lloyds 100 A1 or its equivalent classification. Age of the vessel should not be more than 25 years and it should be seaworthy.

Other documents: Any other documents required by the applicant, such as weight certificate, packing list, quality certificates should be mentioned in the application.

LoC/LoU is issued for making payment of Import Bills received either under FLC or on collection basis for imports made into India in favour of Overseas Bank or Financial Institution outside India to the extent of US $ 20 million or its equivalent per transaction. The period of such LoC / LoU / Guarantee has to be co-terminus with the period of credit, reckoned from the date of shipment. No roll-over/extension will be permitted beyond the permissible period. The precautions & Conditions for issuance of LOC/LOU are:

The facility may be considered in cases where there is mismatch between cash flows to meet the FLC commitment on the due date.


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At any point of time the liability under FLC, FIBC and LoC/LoU/Guarantee put together shall not exceed the sanctioned FLC limit.

The stocks procured under FLC/Letter of Comfort are to be deducted to ensure Working Capital limits are fully secured by adequate Drawing Power.

Multi currency option is not available to the importer.

In case the import is made on collection basis, branch should ensure strict compliance of KYC/AML regulations.

Commission to be collected upfront @ 0.50% per quarter or part thereof for the specified period of liability i.e. actual validity period of LOC / LOU / Guarantee.

Importer is required to pay all-in-cost (with a ceiling over 6 months LIBOR minus 200 basis points) to the Overseas Bank / FI outside India. All-in-cost includes arranger fee, upfront fee and management fee. (Circular no.289 Ref 26/60 dated 02.12.2009)

General Guidelines: LC is to be opened for our own customers known to be participating in the trade. The importer should have Import Export (IE) code number allotted by Director General of Foreign Trade. The importer should have adequate sanctioned limits and/or funds provision for clearance of goods. Exchange control copy of license to be obtained in case of the item of import falls under negative list. If the import is freely permissible obtain a declaration from the importer to that effect. Import LCs is to be advised through our Foreign Correspondents. Date of dispatch of goods should be after the date of opening of the LC. When the LC is opened against third party licence, the applicant should hold a proper letter of authority issued by the import licence holder along with the exchange control copy of the licence. The description of goods, validity for shipment, country of shipment and origin are as per the provisions of Policy/Licence etc. Branch is required to obtain confidential report on the overseas seller at the time of opening of LC in case where the value of LC is $ 25000 and above, however, in case of borrowers with credit rating of A+ the limit is above USD 1 lac. Confidential report is a must in case where the importer dealings with the branch are less than 1 year irrespective of the value. LC should be opened only in favour of overseas supplier/manufacturer or shipper of goods and not in favour of the applicant himself or his nominee. Terms of shipment such as FOB/C&F/CIF etc are to be clearly mentioned. For C&F and FOB, applicant should hold insurance cover note/policy in the joint names of the Bank and the Opener. The policy should cover at least 110% of the CIF value, and is valid for entire shipment period. Usance period should not exceed 180 days. LC should not be opened for import of goods from banned countries. LC should be signed by two officers, where the value of LC is `10000 and above, where it is not issued through SWIFT. LC should invariably contain a clause that the credit is subject to the provisions of UCPDC 600 and URR 725 LC should stipulate a condition that the shipments should be made only by conference vessels, which are on the approved list of Lloyds or any certificate to show that the vessel is seaworthy & not more than 25 years old. LC should insist for an inspection certificate issued by a well known international Inspection Agencies. Last date of shipment should be within the validity of Licence. Goods are to be consigned only in the name of LC opening bank and never directly to the buyer. Similarly Documents of title to goods should be required to be sent only to the LC opening Bank but not to the importer directly. The origin of the goods is to be specifically mentioned in the application. No onerous clause is incorporated in the LC, which is detrimental to the interest of the Bank. Payment to be claimed only against presentation of full set of documents. Currency in which payment for import is to be made is in accordance with the permitted methods of payment.


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Simple Mortgage: A simple mortgage does not involve giving the possession of the mortgagor's property to the mortgagee. It is under mutual agreement that in case of non-payment by the mortgagee to the mortgagor within the specified time, the mortgagee can cause the mortgaged property to be sold in accordance with law and have the sale proceeds adjusted towards the payment of the mortgage money.

Mortgage by Conditional Sale: This type of mortgage entails the apparent sale of property by the mortgagor to the mortgagee on a conditional basis, that on default by mortgagor, the sale shall become absolute and complete. If the mortgagor repays his loan, the sale shall become null and void.

Usufructuary Mortgage: It is a mortgage, by an express or implied term gives possession to the lender and gives him rights to accrue the rents or income coming from that property as repayment for interest and mortgage money till the time repayment is complete. There is no time limit for payment of the mortgage money.

English Mortgage: The mortgagor transfers the mortgaged property to the mortgagee in entirety. However there is a condition that on complete repayment of the repayment money, he will re-transfer the property back to himself.

Reverse Mortgage: Reverse mortgage involves lending money to senior citizens against mortgage of their property (house) and there is no need of repaying the same. The loan is awarded as a lump sum amount or as monthly installments. In the event of death of the mortgagor, the property goes into the possession of the mortgagee.

Anomalous Mortgage: A mortgage that does not fall under the purview of any of the mortgage types is called an anomalous mortgage.

Conditions attached with mortgage: While mortgaging property, only legal rights are transferred to the mortgagee but not the possession. An instrument of mortgage deed is mandatory. On sale of a mortgaged property, the mortgage flows along with the property.


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Priority Sector - Guidelines

i) Agriculture - Direct Finance to Agriculture includes:

Finance to individual farmers (including Self Help Groups - SHGs or Joint Liability Groups – JLGs) for Agriculture and Allied Activities such as dairy, fishery, piggery, poultry, bee-keeping, etc.

Short-term loans for raising crops, i.e. for crop loans, which include traditional/non-traditional plantations and horticulture.

Advances up to `10 lakh against pledge/hypothecation of agricultural produce (including warehouse receipts) for a period not exceeding 12 months, irrespective of whether the farmers were given crop loans for raising the produce or not.

Working capital and term loans for financing production and investment requirements for agriculture and allied activities.

Loans to small and marginal farmers for purchase of land for agricultural purposes.

Loans to distressed farmers indebted to non-institutional lenders, against appropriate collateral or group security.

Loans granted for pre-harvest and post-harvest activities such as spraying, weeding, harvesting, grading, sorting, processing and transporting undertaken by individuals, SHGs and cooperatives in rural areas.

Finance to others like corporate, partnership firms and institutions for Agriculture and Allied Activities such as dairy, fishery, piggery, poultry and bee-keeping. Further, loans granted for pre-harvest and post harvest activities such as spraying, weeding, harvesting, grading, sorting and transporting; and 1/3rd of loans in excess of one crore in aggregate per borrower for agriculture and allied activities are treated as direct agriculture advances.

Indirect finance to agriculture includes lending to

Food and agro-based processing units with investments in plant and machinery up to `10 crore.

Purchase and distribution of fertilisers, pesticides, seeds, etc. Purchase and distribution of inputs for the allied activities such as cattle feed,

poultry feed with loan amount up to `40 lakh. Lending to dairy segment (including procurement, storage, processing,

collection, transportation etc.,) primarily benefits small/marginal farmers and tiny units.

Setting up of Agri clinics and Agribusiness Centers. Hire-purchase schemes for distribution of Agrl. Machinery and implements. Primary Agrl. Credit Societies (PACS), Farmers’ Service Societies (FSS) and

Large sized Adivasi Multi Purpose Societies (LAMPS) for lending to farmers. Cooperative societies of farmers for disposing of the produce of members. Construction/running of storage facilities (warehouse, market yards, godowns

etc.,), including cold storage units irrespective of their location. Custom Service Units managed by individuals, institutions or organizations

who maintain a fleet of tractors, bulldozers, well-boring equipment, threshers, combines, etc., and undertake work for farmers on contract basis.

Dealers in drip irrigation/sprinkler irrigation system/agricultural machinery, irrespective of their location, subject to a ceiling `30 lakh per dealer.

Commission Agents in rural/semi-urban areas functioning in markets/ mandies for extending credit to farmers, for supply of inputs as also for buying the output from the individual farmers/SHGs/JLGs.


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National Co-operative Development Corporation, NBFCs for lending to individual farmers or their SHGs/JLGs.

NGOs/MFIs for lending to individual farmers or their SHGs/JLGs. RRBs for lending to agriculture and allied activities sector. Overdrafts, up to `25000 (per account), granted against ‘no-frills’ accounts in

rural and semi-urban areas. Further, Credit outstanding under General Credit Cards (GCC) and deposits

placed in RIDF with NABARD by banks on account of non-achievement of priority sector lending targets/sub-targets are treated as indirect finance to agriculture.

Note: Loans sanctioned to NBFCs for on-lending to individuals or other entities against gold jewellery are not eligible for classification under agriculture sector. (Cir.no. Ref 19/26 dated 28.02.2011) ii) SME - Small Enterprises: It includes all loans given to micro and small (manufacturing) enterprises engaged in manufacture/production/processing / preservation of goods, and micro and small (service) enterprises engaged in providing or rendering of services which include small road & water transport operators, small business, Professional & Self-employed persons and other service enterprises. Indirect finance to small enterprises shall include finance to any person providing inputs to or marketing the output of artisans, village and cottage industries, handlooms and co-operatives of producers in this sector. Medium Enterprises are those engaged in manufacture / production / preservation of goods and whose investment in plant and machinery should be as per above said guidelines. Bank’s lending to medium enterprises will not be included for the purpose of reckoning under priority sector. Manufacturing Enterprises are those engaged in manufacturing or production of goods. These are defined in terms of investment in Plant & Machinery. Service Enterprises are the enterprises engaged in providing or rendering of services. These are defined in terms of investment in Equipment. The modified definitions of Micro, Small and Medium Enterprises are as under:

No Category Investment in Plant & Machinery / Equipment

Manufacturing Service

1 Micro Enterprise Up to `25 lakhs Up to `10 lakhs

2 Small Enterprise `25 to `500 lakhs `10 to 200 lakhs

3 Medium Enterprise `500 to `1000 lakhs `200 to 500 lakhs

Indirect finance to the small (manufacturing as well as service) enterprises sector include credit to: Persons/co-operatives involved in assisting the decentralized sector (Artisans, village and cottage industries) in supply of inputs and marketing of output. Loans granted by banks to NBFCs for lending to small and micro enterprises. Special bonds issued by NABARD for financing exclusively non-farm sector are

to be classified as indirect finance. The deposits placed with SIDBI by foreign banks, having offices in India, on

account of non-achievement of priority sector lending targets/sub-targets would be eligible for classification as indirect finance.

All advances granted to units in the Khadi and Village Industries Sector, irrespective of their size of operations, location and amount of original investment in plant and machinery. Such advances will be eligible for consideration under the sub-target (60 per cent) of the small enterprises segment within the priority sector.


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iii) Retail Trade shall include retail traders/private retail traders dealing in essential commodities (fair price shops), and consumer co-operative stores etc with credit limits not exceeding `20 lakhs. iv) Micro Credit : Provision of credit and other financial services and products of very small amounts not exceeding `50000 per borrower, either directly or indirectly through a SHG/JLG mechanism or to NBFC/MFI for on-lending up to `50000 per borrower, will constitute micro credit. v) Education loans: Education loans include loans and advances granted to only individuals for educational purposes up to `10 lakh for studies in India and `20 lakh for studies abroad, and do not include those granted to institutions. vi) Housing loans: Loans up to `25 lakh to individuals for purchase/construction of dwelling unit per family, (excluding loans granted by banks to their own employees) and loans given for repairs to the damaged dwelling units of families up to `1 lakh in rural and semi-urban areas and up to `2 lakh in urban and metropolitan areas. vii) Weaker Sections: Loans to the following categories are treated as weaker sections: Small and marginal farmers with land holding of 5 acres and less, and

landless labourers, tenant farmers and share croppers. Artisans, village and cottage industries where individual credit limits do not

exceed `50000/-. Beneficiaries under SGSY/ SC&ST/ DRI / SJSRY / Liberation and Rehabilitation

of Scavengers (SLRS) / SHG schemes. Loans granted to persons from minority communities for the said purposes.

viii) Differential Rate of Interest Scheme (DRI): The target stipulated for lending under DRI scheme is 1% of previous year total advances of the Bank. The existing loan limit is increased from `6500/- to `15000/- and the housing loan limit is also increased from `5000/- to `20000/-. The borrower’s family income eligibility criteria is revised to `18000/- & `24000/- p.a. for Rural & Semi-Urban/Urban areas respectively. At least two third of DRI advances should be granted through rural/semi-urban branches. 40% of DRI advances should go to SC/ST. 2/3rd of total DRI lending is to be routed through Rural and Semi Urban branches. Branches can assist the handicapped/disabled persons for acquiring aids, appliances and equipment needed especially by students for pursuing studies and vocational training – example Braille Typewriters for blind etc. (Cir. no.299 Ref 28/7 dated 23.11.2010). ix) Agricultural Labourer: Land holding up to 0.50 acre of land or having a home-stead; should have income of more than 50% by way of agricultural wages. x) Marginal/Small farmer: In order to classify the farmer under Marginal / Small farmer category, the land holding should not be more than the following: Category Irrigated Land Holding Un-irrigated Land Holding Marginal 1.25 Acres Or 2.5 Acres Small 2.50 Acres Or 5.0 Acres Others Above 2.50 Acres Or Above 5 Acres

xi) Credit flow to SC/ST: RBI has issued the following instructions/directives to the banks on the credit flow to SC/ST (Circular no.207 Ref 28/08 dated 01.10.08)

Scheme Reservation / Relaxation DRI 40% of Advances. Land holding criteria is not applicable SGSY 50% of the families assisted

SJSRY Credit to be extended to the extent of their strength in the local population PMRY 22.50% of Advances. Age relaxation – 10 Years


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Collateral security norms: No collateral security/Guarantee is required for agriculture loans (Hypothecation of crops/assets for crop loans/Agricultural Term Loans) up to and inclusive `50000/-. In addition to hypothecation of Crops and/or Assets, Co-obligation and Third party guarantee is to be obtained where the loan amount is above `50000/- and inclusive of `100000/-. Collateral security is to be obtained in the form of mortgage of lands where the loan amount exceeds `100000/. Margin/security should not be insisted for Agriculture loans up to `100000/- as per the recent RBI guidelines. (Cir.no.107 Ref 19/06 dated 30.06.10). No collateral security or third party guarantee is insisted for SME loans up to Ten lakhs and for Tiny Sector up to Twenty five lakhs based on the good track record and financial position of the borrowing unit. Priority Sector - Targets & Sub-targets:

Category Domestic commercial banks

Priority Sector

40 per cent of Adjusted Net Bank Credit (ANBC) or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher.

Agricultural advances

18 per cent of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher.

Of this, indirect lending in excess of 4.5% of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher, will not be reckoned for computing performance under 18 per cent target. However, all agricultural advances under the categories 'direct' & 'indirect' will be reckoned in computing performance under the overall priority sector target of 40 per cent of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher.

Small Enterprise advances

Advances to small enterprises sector will be reckoned in computing performance under the overall priority sector target of 40 per cent of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher.

Micro enterprises within Small Enterprises sector

40 per cent of total advances to small enterprises sector should go to micro (manufacturing) enterprises with investment in plant & machinery up to `5 lakh and micro (service) enterprises having investment in equipment up to `2 lakh; 20 per cent of total advances to small enterprises sector should go to micro (manufacturing) enterprises with investment in plant & machinery above `5 lakh and up to `25 lakh, and micro (service) enterprises with investment in equipment above `2 lakh and up to `10 lakh. (60% small enterprises advances should go to the micro enterpr).

Export credit Not a part of priority sector for domestic commercial banks.

Weaker sections

10 per cent of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher.

Differential Rate of Interest Scheme

1 per cent of total advances outstanding as at the end of the previous year. It should be ensured that not less than 40 per cent of the total advances granted under DRI scheme go to SC/ST. At least two third of DRI advances should be granted through rural and semi-urban branches.

Foreign Banks – priority sector advances is stipulated as 32 per cent of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher. In case of Small Enterprises it is 10 per cent of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher. The target for export credit is 12 per cent of ANBC or credit equivalent amount of Off-Balance Sheet Exposure, whichever is higher.


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Agricultural Lending Products

I. Direct Agriculture

i) Pattabhi Agri credit Card (PAGCC / Kisan Credit Card): Bank has introduced this product in the year 1998 to meet the production and consumption credit requirements of the farmers. Loan amount is arrived for both the seasons Kharif (Financing from 1st April to 30th September) and Rabi (Financing from 1st October to 31st March) based on scale of finance approved by District level technical committee. Branches are allowed to consider additional finance to the extent of 20% over and above the scales of finance to meet post harvest, consumption and other contingencies of the farmer. It is a revolving credit and valid for a period of 3 years subject to annual review. The due date for the loan is 12 months in case of short duration crops and 18 months with regard to long duration crops. Accidental insurance coverage is available up to `50000/- to the farmer. (Cir.no.49 Ref 19/5 dated 27.05.2011) ii) Kisan Green Card: The facility of extending the production credit along with investment credit considering the consumption needs of the farmer is provided under this scheme. Existing PAGCC loan holders having three years satisfactory track record with own land are eligible under this scheme. The value of the agricultural land to an extent of 50% is considered as limit and this limit also includes PAGCC limit sanctioned to the farmer already. The facility includes both crop production needs and also investment needs like purchase of any farm implements, other farm inputs and draught animals or dairy animals. Hence this facility comprehensively covers all the needs of the farmer including his consumption needs also. Minimum limit is `25000 and max is `5 lacs. iii) Kisan Sampathi (Produce Marketing loans) aims at preventing distress sale of the farmers’ agricultural produce. The crops that can be financed under this scheme include Paddy, Ground nut, Bengal gram, Turmeric, Maize, Millets, Yam, Black and Green gram. Bank sanctions loan amount based on the 75% of procurement prices or the minimum support prices issued by Govt. from time to time. Bank entered into an agreement with NCMSL (National Collateral Management Service Ltd) for extending produce loans up to `10 Lakh without collateral security provided the produce is stored at Central Ware House / State Ware House / Food Corporation of India / NCMSL approved ware Houses and branch should obtain personal guarantee of two persons. In case where produce stored with the cultivator, loan up to `2 lakh can be sanctioned with out collateral security, however, branch should take personal guarantee of the borrower. For loans beyond `2 lakh branches should obtain collateral security with value not less than 100% of bank loan component. These loans are to be repaid within 12 months. Interest Rate for loans up to `2 lakh – Base Rate and loans above `2 lakh and up to `10 lakh – Base Rate + 0.50% (cir.no.379 Ref 19/21 dated 07.02.11 & cir no.7 Ref 19/1 dated 08.04.2011) iv) Gold Loans: Loans are sanctioned for agricultural purposes on pledging gold ornaments. The unforeseen short term debt requirements of the farmers are covered in this loan. It is a short term loan repayable in one year or in commensuration with crop harvesting season. These loans attract interest rate that is being charged to short term agriculture production loans. The maximum loan amount that can be allowed shall be lowest of the following (Cir.no.124 Ref 26/29 dated 17.07.2010) a) Amount of the loan applied for b) Eligible amount arrived as permissible scale of finance of crops and the extent of land for each crop as declared by the applicant c) 85% of the value of gold ornaments as certified by the Appraiser d) Amount eligible as per “Rate of Advance (per gram)” stipulated by the bank from time to time.


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v) Kisan Chakra: Under the scheme, Vehicle loans are given to farmers for supporting transport facilities. Two-wheeler loans up to `40000 and four-wheeler loans up to `3 lakh can be sanctioned under this category. Loans to the children of farmers having 2 acres of wet land or 5 acres of dry land are eligible.85% of onroad price of vehicle is sanctioned to small and marginal farmers where as 75% is sanctioned to Other farmer. Loan should be repayable in 5 years either yearly or half yearly or quarterly as per the cropping pattern and income generation of the farmer. vi) Kisan Bandhu (Finance to Tractors): Bank entered MOUs with all leading tractor manufacturers for financing to Tractors. The borrower should have 3 acres of wet/double cropped land or 6 acres of dry/single cropped land. No collateral security is to be insisted for loans up to `3.5 lakh. Finance can also be extended for second hand tractors aged up to 7 years. At present 7 companies’ viz., Eicher, Mahendra & Mahendra, Bajaj Tempo, TAFE, New Holland, HMT and International Tractors, and the dealer will offer one additional free service during the first year. Margin: For small/Marginal farmers - 15%. For others – 25%. Rate of Interest – Base Rate + 3.75 + Term Premia. Minimum of 1000 working hrs per year on own farm/customer land should be ensured. Under this scheme power tillers are also sanctioned to the farmers having 1 acre of wet land or 2 acres of dry land.Minimum working hours are 600. Collateral security is not required for the loans up to `1 lakh. vii) Finance to Horticulture: National Horticulture Board (NHB) is providing 20% of unit cost as subsidy subject to maximum of `25 lakhs. The activities covered under this program are Grape, Mango, Sweet orange, Lime, Banana, Amla, Pomegranate and other horticulture activities. The farmer is required to receive Letter of Intent (LOI) from the NHB and avail loan from Banks within 12 months and claim subsidy. The subsidy is to be kept as Back End subsidy. The subsidy component is 20% in case of Medicinal plantations provided by National Aromatics Board, Hyderabad. vii) Finance to Land Purchase: Up to max of ` 2 lakh Loan is sanctioned to small and marginal farmers for purchasing agril land meant for cropping purpose as per last 5 years registration value. ix) Mandal Mahila Samakhyas consists of maximum 500 SHGs as members covering 20 to 30 Village Organisations (VOs) operating in a mandal. VOs/SHG Federation/MMS are to be registered under AP Mutually Aided Cooperative Societies Act 1995 to avail finance from Banks subject to fulfilling the following: Minimum two years of existence with audited balance sheet “A” rating by External Agency i.e. Chartered Accountant The maximum eligible amount is 10 times of the Networth of VOs (savings

contributed by each SHG to VOs on monthly basis, interest earned on savings and internal lending, revolving fund if any) or 80% of Micro Credit Plan (MCP) whichever is lower subject to borrowing clause incorporated in the byelaws.

x) Rythu Mitra Groups (RMG): Optimum size is 15 farmers. Marginal, Small and tenant farmers can become members of the group. Objective of RMG is to provide technology transfer, market information and credit facilities to the farmers. Quantum of eligible finance is 20 times of corpus of the group. Finance can be provided for crop production. The maximum finance is `7.5 lakhs subject to scale of finance as per land holdings of each member of the group and not exceeding `50000/- per member. No collateral security up to `5 lakhs. Govt. of AP provides subsidy for term lending taking by RMGs who undertake Dairy, Input Dealers/fertilizers and Compost Pit/Vermi Compost activities. However, the maximum unit cost is `1 lakh and the maximum subsidy available is `25000/-.


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xi) Joint Liability Groups (JLG): Tenant farmers with minimum 4 – 5 people (members of existing RMGs or freshers) can form as group under JLG. The members of JLB should be from the same socio economic status living in the same village and carrying the similar activity (For example – cultivation). The acreage of the members should not be more than 2.5 acres in case of irrigated land and 5 acres in case of dry land. Banks can extend maximum credit facility for crop production to each member is `25000/- against group guarantee of the members of the group. II. Indirect Finance to Agriculture

Kisan Vivek - Finance to Agri Clinics / Agri Business Centers (ACABC): Agri Clinics are envisaged to provide expert advice and services to farmers on various technologies including soil health, cropping practices, plant protection, crop insurance, post harvest technology and clinical services for animals, feed and fodder management, prices of various crops in the market etc. which would enhance productivity of crops/animals and ensure increased income to farmers. Agri Business Centres are commercial units of agri ventures established by trained agriculture professionals. Such ventures may include maintenance and custom hiring of farm equipment, sale of inputs and other services in agriculture and allied areas, including post harvest management and market linkages for income generation and entrepreneurship development. The above schemes are open to the following categories of candidates: Graduates / Diploma / Post Graduate Diploma in agriculture and allied

subjects; Graduates / Post Graduation in Biological Sciences Degree courses recognized by UGC having more than 60 percent of the

course content in Agriculture and allied subjects. Diploma/Post-graduate Diploma courses with more than 60 percent of course

content in Agriculture and allied subjects, after B.Sc. with Biological Sciences. Plus two (Inter) Agriculture related courses with at least 55% marks.

Project cost ceilings `20 lakh for individuals; `25 lakh in case of extremely successful candidate and `100 lakh for a group project (minimum five individuals). No margin is required for loans up to `5 lakh and 10% margin is required for loans beyond `5 lakh. No collateral is required for loans up to `5 lakh. The repayment period will be in the range of 5 to 10 years (inclusive gestation period). The borrowers are eligible for 36% composite subsidy which will be back-ended with 3 years lock-in period. However, it is 44% for Women/SC/ST and candidates from NE and Hilly States. NABARD provides 100% refinance. (Cir.no.197 Ref 19/15 dated 10.09.11) Dairy: Lending to dairy industry which includes procurement, storage, processing, transportation etc., primarily benefits small/marginal farmers and tiny units. Andhra Bank Rural Credit Card (ABRCC): A scheme to provide hassle free credit to customers having more than 3 years banking with branches/having sizable deposits - based on the assessment of income and cash flow of house holds. The limit should not exceed 20% of eligible production credit and/or 20% of annual income of the applicant from know sources or `25000 which ever is less. It is overdraft/ cash credit limit for 3 years with no end use stipulation and every year the account is to be brought into credit. Maximum limit is `25000. Entire credit outstanding under ABRCC shall be treated as Indirect Finance to agriculture. Surya Shakthi Scheme: Under this scheme, banks are financing for Solar Water Heater systems. The rate of interest charged for these loans is BMPLR. Interest subsidy is available. The net interest rate should not exceed 2% for individuals, 3% for institutions and 5% for industrial/commercial organizations. The interest subsidy


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is to be claimed upfront within 180 days from the date of loan. The margin requirement is 15% and repayment period 5 years. Kisan Samraksha (Rural Godowns): The objective of the scheme is creation of scientific storage capacity with allied facilities in rural areas to meet the requirements of the farmers for storing farm produce, processed farm produce and agricultural inputs. This scheme is meant for construction of Godowns in Rural areas only (not in municipal areas) with capacity ranging from 100 metric tons to 10,000 metric tons. The project can be undertaken by individuals, farmers, growers, Partnership / proprietary firms, SHGs, NGOs, Companies, Corporations, Co-operatives and Local Bodies. Govt. of India through Directorate of Marketing and Inspection (DMI) and NABARD administers Capital Investment Subsidy Scheme. Government of India provides 25% of unit cost as subsidy subject to maximum of `46.87 lakhs in case of farmers and with regard to others the eligible subsidy is 15% of unit cost subject to maximum of `28.12 lakhs. Subsidy of 33.33% in case of Women, SC, ST, SHG, Co-operative societies and projects located in North Eastern states with a maximum of `62.50 lakhs. For Godowns up to 1000 tonnes capacity –Project cost as appraised by financing Bank or actual cost or `3500/- per MT of storage capacity which ever is lower. For Godowns exceeding 1000 MT capacity –Project cost as appraised by bank or actual cost or `3000/- per MT of storage capacity, whichever is low. For NE region/hilly areas, normative cost will be `4000/-per MT or as appraised by Bank/financial institution, which ever is lower irrespective of Godown capacity. The rate of interest for units up to 10000 MT is Base Rate + 1.25 + TP and in case of other units (> 1000 MT units), the interest rate is Base Rate + 2.50 + TP. No collateral is required up to 200 MT capacities. In case of above 200 MT capacities, collateral not required if Tie-Up with FCI/SWC/CWC is there. If there is no tie-up, 100% collateral security besides mortgage of the godown site is required if there is no tie-up. Normally, the margin stipulated is 25% of the unit cost and 10% where tie-up with FCI/CWC/SWC is available. The loan is repayable with in 7 years with maximum gestation period of 2 years. NABARD reimbursing 1.50% interest rebate to the borrowers who repay the loans as per schedule based on the bank certificate (Circular no.298 Ref 19/25 dated 01.12.2011) AB Kisan Rakshak: The objective of the scheme is to provide Bank credit to the indebted farmers to repay loans taken from non-institutional lenders i.e., private money lenders. It covers the Existing farmer borrowers of the bank, who have been regular in repaying loans with interest in the past, except on occasions when they could not do so on account of factors beyond their control and non-borrower farmers in the service area of the bank branch also. The eligible finance under this scheme for the existing crop loan borrowers is 50% of Pattabhi Agri Card sanctioned limit subject to a maximum `50,000/- (or) to the extent of debt whichever is lower. The maximum limit allowed to new borrowers is `25000/- (or) to the extent of debt which ever is lower. The loan amount should be released by way of Cheque/Demand Draft/Pay Order to the creditors who lent money to the farmer against the discharge of the financial instrument. The discharged instrument should be kept along with the documents. The rate of interest is Base Rate + 2.50% + TP. The loan is repayable in 7 years with a gestation period of one year. The yearly installment in Term Loan should be recovered along with Pattabhi Agri Card Loan i.e., on or before 30th June of every year or marketing the produce which ever is earlier. No collateral security is required for the aggregate limit of `100000/- and if it exceeds, branch to obtain collateral security with value equivalent to bank loan shall be offered. AB Kisan Pragathi: To meet the need based miscellaneous expenditure connected to farming & allied activities, a new scheme "AB KISAN PRAGATHI" has been introduced. The scheme aims at providing hassle free credit to the farmer in the areas where it is difficult to assess the small credit requirement in strict banking terms towards cost incurred like Land leveling, bunding, contour formation, land reclamation; purchase agricultural implements like sickles, harrows, Cultivators, seed


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drills etc; purchase plant protection equipment like sprayers, dusters and power Sprayers etc; repairs for the existing agricultural implements and plant Protection equipment, to grow live hedge, coconut, teak, vegetable cultivation on bunds etc; small repairs to the existing minor irrigation structures like wells, tube wells, electric motors and pump sets, oil engines, replacement of pipelines, etc; working capital requirements of existing livestock like dairy, sheep, goat, backyard poultry etc. The maximum finance, `10,000/- (or) to the extent of crop loan limit, can be extended on the basis of self declaration. Loan should be repayable in 5 annual installments. It attracts interest at Base Rate + 2.75% + TP. However, overdue installment attracts compound Interest. Margin - 15% of the proposed requirement towards the miscellaneous activities mentioned in the self declaration. Security - The existing norms of agriculture loans are equally apply to this scheme. (Cir.no.046 Ref 19/02 dated 22.05.2010) National Agricultural Insurance Scheme (NAIS): It is operated by Agriculture Insurance Company of India Limited, New Delhi. In consultation with State Level Coordination Committee of State Government, identifies notified crops district-wise and also premium rates. This scheme is operating on Village as unit for insurance coverage in specified crops like paddy and mandal-wise for other crops. Coverage of crops under crop insurance is District specific but not uniform for all districts in the state. However, Mandal is taken as unit in case of Rabi season. SLBC: The SLBC comprises of representatives of all Commercial Banks and Chairmen of Regional Rural Banks operating in the state. Representatives of the state Cooperative banks, Reserve Bank of India, NABARD shall also be invited to attend the meetings of the committee. The level of participation is the Zonal/Regional heads of banks stationed at the state headquarters, for expeditious decision-making. The activities of SLBC are as under:

Take up issues raised by member banks or State Government authorities. Liaison with the state government authorities in the matters relating to the implementation of Lead Bank Scheme/Government sponsored schemes.

Analyze the deposits and advances of banks and review the credit deployment position for improving it wherever, it is unsatisfactory.

Consolidate all the District Credit Plans and prepare State Credit Plan, launch and monitor the progress of its implementation.

Review the progress made under various Government sponsored programmes of poverty alleviation through Lead Dist. Managers.

Maintains liaison with Government departments on behalf of Banks in the State and represent problems of the member Banks to the Govt. for solution.

Lead Bank: The main object of the scheme is a planning exercise for providing credit to develop banking in Rural and semi urban areas and extension of credit to neglected areas for balance regional development of district as a unit. Our Bank is having Lead Bank responsibilities in Six Districts in the country, of which four are in Andhra Pradesh viz. Srikakulam, East Godavari, West Godavari, Guntur and the other two districts are in Orissa (Ganjam and Gajapathi) Service Area Approach is applicable only to implement Government sponsored schemes. Banks are free to lend to any area under other schemes subject to obtaining No Objection / No Due Certificate from the banks operating in the command area. Banks should not insist for No Objection Certificate for agricultural loans up to `50000/- to existing farmers and should obtain the self declaration of not having any loan from other banks. Banks as per RBI guidelines should also not to charge any such fee for giving any no objection certificate/ no due certificate to farmers.


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Channel Financing is a new approach or system supporting business by a realignment of existing products, delivery process, procedures and organization structures so as to provide a comprehensive solution to the working capital requirements of an entity. It aims at extending working capital finance to authorized suppliers / dealers, whose small businesses are connected to large companies as suppliers/dealers in the business of the entity. Channel Finance provides credit facility to the suppliers of the Corporate for the supplies made is called as ‘Supplier Finance’. Similarly credit facility is provided to the dealers for the goods delivered by the corporate called as ‘Dealer Finance’. Supplier Finance: Bank pays amount directly to the main operative account of the supplier as per advise of the corporate by discounting the bills with maximum of 180 days tenor and the same will be recovered from Corporate on respective due dates. If the supplier is enjoying working capital limits with another banker, the amount shall be credited to the account maintained with the said bank. An undertaking letter is to be obtained from the Corporate to pay the amounts on the due dates of bills discounted by our Bank. Alternatively, wherever feasible, Post dated cheques of the main operative account are to be obtained from the Corporate to enable the Bank to realize the dues on the respective due dates of the bills. Dealer Finance: In case sanction of Bill facility to the Dealer as per referral letter of Corporate and agreed by the dealer(s), a suitable Bill discounting limit is assessed and post dated cheques are obtained from the dealer(s). The particulars of deliveries of the final products to the respective dealers are provided to the Bank with supporting documents such as invoices, bills of exchange and other documents evidencing delivery of goods to the dealers. The payment is made by the Bank to the credit of main operative account of the Corporate and the same will be recovered from the dealers on the respective due dates of the bills. If the Corporate is enjoying working capital limits with another banker, the amount shall be credited to the account maintained with the said bank.

Type Supplier Finance / Dealer Finance

Eligibility Criteria

Sponsoring Corporate can be a Manufacturing unit, Wholesale dealer of goods, Distributor of Goods or Provider of services, approved by Head Office with A and above rating under CRS/CRAS and B++ under CRRM. In case of external rating it should be minimum A2 rating (CRISIL or equilant). Corporate / Supplier in existence for minimum 3 years with good track record.

Assessment / Loan / Margin

Based on the quantum of supply / sales for the last 12 months and the period of credit terms between supplier and the Corporate or 20% of total amount of transactions projected between corporate and Supplier, whichever is less. Minimum loan `25 lakh and maximum `500 lakh with 10% margin.

Tenor Maximum 180 days

Security Primary – DA Bills drawn by the suppliers duly accepted by the corporate. Collateral - 25% of the limit in the form of semi urban / urban property or liquid securities.

Interest Rate Up to 45 days – Base Rate + 0.50% > 45 & up to 90 days – Base Rate + 1.75% > 90&up to 180 days – Base Rate + 2.75%

Others The finance made would not be included for MPBF calculations All other loan policy guidelines are applicable

Cir.no.271 Ref 26/45 dated 14.11.2011


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Government Sponsored Schemes Prime Minister Employment Generation Programme (PMEGP) Prime Minister’s Employment Generation Programme (PMEGP) by merging the two schemes that were in operation till 31.03.2008 namely Prime Minister’s Rojgar Yojana (PMRY) and Rural Employment Generation Programme (REGP) for generation of employment opportunities through establishment of micro enterprises in rural as well as urban areas. The Scheme will be implemented by Khadi and Village Industries Commission (KVIC) and the details are as under:

Category

Project Cost

Borrower contribution

Subsidy

Urban Rural General 10% 15% 25% Special (SC/ ST/OBC/Minorities/Women/ Ex-servicemen / Physically handicapped/ NER / Hill and Border areas etc.)

05%

25%

35%

The maximum cost of the project/unit admissible under manufacturing sector

is `25 lakh. The maximum cost of the project/unit admissible under business/service

sector is `10 lakh. The balance amount (excluding MM/subsidy) of the total project cost will be

provided by Banks as term loan Eligibility Conditions of Beneficiaries Any individual, above 18 years of age There will be no income ceiling for assistance for projects under PMEGP. For setting up of project costing above `10 lakhs in the manufacturing sector

and above `5 lakhs in the business/service sector, the beneficiaries should possess at least VIII standard pass educational qualification.

Assistance is available only for new projects under the PMEGP. Self Help Groups (including those belonging to BPL provided that they have

not availed benefits under any other Scheme) are also eligible for assistance under PMEGP.

Institutions registered under Societies Registration Act 1860; Production Co-operative Societies, and Charitable Trusts. Existing Units (PMRY / REGP or any other scheme of Central / State Government) and the units that have already availed Government Subsidy under any other scheme of Government of India or State Government are not eligible.

To claim Margin Money (Subsidy), the borrower is required to submit caste/community certificate or relevant document issued by the competent authority. In case of institutions, a certified copy of the bye-laws is required.

Project cost will include Capital Expenditure and one cycle of Working Capital. Cost of the land should not be included in the Project cost. Projects costing more than `5 lakh, which do not require working capital, need clearance from controlling office. PMEGP is applicable to all new viable micro enterprises, including Village Industries projects except activities indicated in the negative list of Village Industries. Existing/old units are not eligible. Only one person from one family is eligible for obtaining financial assistance for setting up of projects under PMEGP. The ‘family’ includes self and spouse.


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No collateral security will be insisted upon by Banks in line with the guidelines of RBI for projects involving loan upto `10 lakhs in respect of the projects cleared by the Task Force. The borrower is required to undergo EDP training at least 2 weeks duration. Thereafter, the bank will release first installment of the Bank Finance to the beneficiary. The margin money (subsidy) is to be kept in Term Deposit for three years at branch level in the name of the beneficiary/Institution. No interest will be paid on the TDR and no interest will be charged on loan to the corresponding amount. Repayment schedule may range between 3 to 7 years after an initial moratorium as may be prescribed by the concerned bank/financial institution. Swarnajayanti Gram Swarojgar Yojana (SGSY) It is a Scheme which is a restructure of the erstwhile schemes like IRDP, TRYSEM, DOWCRA, SITRA, GKY & MWS etc., with the objective to bring the assisted poor rural families above poverty line. The identification of the borrowers will be done by Grama Sabha. Productive and viable activities under Agriculture & ISB are eligible under this scheme with 50% coverage by SC/ST, 40% coverage by women and 3% to Physically Handicapped borrowers. The unit cost should be as per NABARD guidelines. SHG – `25000 revolving fund – `10000 will be given by DRDA to the bank as subsidy. Successful SHG may get 2nd subsidy of `20000/-. No interest is to be charged on subsidy amount received. Subsidy admissible is @ 30% or maximum `7500/- (For SC/ST- 50% or maximum `10000) & for groups -50% or maximum `1.25 lac (for MI no ceiling). For all individual loans exceeding one lakh and group loans exceeding `10 lakh, in addition to primary security such as hypothecation/mortgage of land or third party Guarantee as the case may be, suitable margin money/other collateral security in the form of insurance policy; marketable security/deeds of other property etc. may be obtained .The upper ceiling of ` 10 lakh is irrespective of the size of the group or prorate per capita loan to the group while deciding the limit for collateral security, the total project cost. The repayment period - minimum of 5 years and branches should ensure that repayment not to exceed 50% of incremental income. In the event of unfortunate / untimely death of the borrower, LIC make payment of `6000/- for natural death and `12000/- for accidental death to the legal heirs of the borrower. III Swarna Jayanti Shahari Rojgar Yojana (SJSRY) The objective of the scheme is to address Urban poverty alleviation, the scheme seeks to provide gainful self-employment to the urban poor (living below the urban poverty line) either unemployed or under employed, through setting up of self-employment ventures or provision of wage employment. Urban Poor below poverty line, SC/ST proportion to their population, Women -30% & physically handicapped-3%. No minimum Qualification. The scheme has components such as Urban self Employment Programme (USEP), Urban Women Self-help Programme (UWSP), Skill Training for Employment promotion amongst Urban Poor (STEP-UP), Urban Wage Employment programme (UWEP), Urban Community Development Network (UCDN).


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USEP Operational details in regard to Self-Employment Individual through setting up of Micro-Enterprises

USWP - Operational details in regard to self-employment (group) through setting up of Micro-Enterprises

STEP-UP, UWEP & UDCN - Inputs under the scheme would be delivered both through the medium of community structures to be set up along with Urban Local Bodies (ULBs) like Community Development Society-CDS/ town-Urban Poverty Alleviation-UPA Cell.

1 Identification Survey by ULB 2

Eligibility

Urban poor (unemployed / under employed) living below the poverty line, in any city/town. Minimum 18 years at the time of applying for Bank Loan. Should not be a defaulter to any nationalized bank / financial institution / cooperative bank. Residing in the town for at least three years.

3 Nature of Activities

Town services requiring no special skills / Micro-manufacturing units requiring skills. Assistance should also be made available under agricultural and allied activities / small scale services/small business activities

4

Project Cost

The maximum unit project cost for individual cases can be `2 lakh. If two or more eligible persons join together in a partnership, the project with higher costs would also be considered provided share of each person in the project cost is ` 2 lakh or less.

5

Subsidy

Subsidy would be provided at the rate of 25% of the project cost subject to a ceiling of `50,000/- per beneficiary. In case more than one beneficiary join together and set a project under partnership, subsidy would be calculated for each partner separately.

6 Margin Money

Each beneficiary is required to contribute 5% of the project cost as margin money in cash.

7 Interest Interest applicable to priority sector. 8 Collateral No collateral is required. 9 Repayment Repayment schedule ranges from 3 to 7 years after initial

moratorium of 6 to 18 months as decided by Bank.

1 Identification Survey by ULB

2 Eligibility

Urban poor women living below the poverty line, in any city/town with preference performing urban women SHGs. Minimum number of women in a group is five. 18 years at the time of the group applying for Bank Loan. Should not be a defaulter to any nationalized bank/financial institution/cooperative bank.

3 Activity Any group activity/enterprise development for income generation by the urban poor women

4 Subsidy Subsidy would be provided at the rate of 35% of the project cost subject to a ceiling of ` 3 lakh or ` 60,000/- per beneficiary.

5 Margin Money Groups may be encouraged to contribute 5% of the project cost as margin money in cash.

6 Interest Interest applicable to priority sector. 7 Collateral No collateral is required.

8 Repayment Repayment schedule ranges from 3 to 7 years after initial moratorium of 6 to 18 months as decided by Bank.


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Differential Rate off Interest (DRI) The income criteria to eligible for DRI loan is `18,000/- pa in Rural areas and `24000/- in Urban areas. With regard to farmers, the land holding should not exceed one acre wet land or 2.5 acres dry land. However, it is not applicable to SC/ST borrowers. The unit cost is `15000/- for general purposes but it is `20000/- for Housing Loans to SC/ST borrowers. The repayment of the loan ranges from 3 to 5 years. These loans attract interest @ 4% p.a. The target for the banks is 1% of previous year advances, of which 40% should go to SC/STs & 2/3rd through Rural/Semi-urban branches. Self Employment scheme for rehabilitation of Manual Scavengers (SRMS) The objective of the National Scheme for Liberation and Rehabilitation of Scavengers and their dependents is to liberate them from their existing hereditary and obnoxious occupation of manually removing night soil and filth and to provide for and engage them in alternative and dignified occupations. The Scheme would cover primarily all scavengers belonging to Scheduled Castes community. Scavengers belonging to other communities would also be covered. The scheme covers rural and urban areas and the identification will be done by Ministry of Social Welfare & National SC/ST financial development corporation. The beneficiaries are eligible for term loan up to ` 5 lakh and Micro finance up to `25000/- is allowed without any margin. The loans sanctioned under this scheme are eligible for subsidy @ 50% for the projects where the unit cost is up to `25000/- and 25% for projects above `25000/- with minimum of `12500 and maximum of `20000/-. Rate of Interest – For loans up to `25000 @ 4% for women; others 5%. For loans above `25000/-, the interest rate is @ 6% p.a.

Rajiv Gruha Kalpa Scheme

EWS house in urban areas. Income range is minimum `2,000/- per month and maximum `36, 000/- per

annum Unit Cost of `75, 000/- with 10% margin from borrower with Bank loan of

`67,500 per house. 10% increase in unit cost is permitted. Site will be allotted by Govt. of A.P. at free of cost. Interest Rate 8% fixed

Valmiki Ambedkar Awas Yojana (VAMBAY)

Housing Finance Scheme was launched in Andhra Pradesh on 01.11.2002 with an objective to provide shelter or upgrade the existing shelter for people below the poverty line and EWS in urban slums. The ultimate objective of the Scheme is to have "Slum Less Cities". The funding pattern is 50% Government, 40% bank Loan and 10% Borrower Margin. These loans attract interest @ 10% p.a. Tripartite agreement between Beneficiary Bank & APSHCL.

***


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Retail Loans

EDUCATIONAL LOANS STUDIES IN INDIA

Eligibility Secured admission through test/selection process Age Criteria 12-30 yrs. Course All courses including schooling Loan Amount Need based genuine expenditure related to the course Maximum Loan `10.00 Lac (Max.2 Loans)

Margin Up to `4 L Above `4 Lac Nil 5 %

Repayment 5-7 Yrs

Gestation period 1 Year after completion of course or 6 Months after getting job whichever is earlier.

Security / Guarantee Up to `4 Lac-Parents co-obligation. Above `4 & up to 7.5 Lac- Satisfactory third party guarantees. Above `7.5 Lac - Collateral security of suitable value & Co obligation of parents

Rate of Interest

Up to 4 Lac – Base Rate + 2.75 Above 4 Lac – Base Rate + 4.50 Staff Children – Base Rate + 2.75 (Irrespective of limit) Simple interest during course & gestation period

Penal Interest 2% for limit above 2.00 Lakh Concessions 0.50% in interest rates for Girl students Exemptions Processing/ Administrative/ Upfront fee/ Pre-payment Charges

EDUCATIONAL LOANS

STUDIES ABROAD

Eligibility Secured admission in overseas institution Age Criteria 17-35 yrs Course Graduation and above Loan Amount Need based genuine expenditure related to the course Maximum Loan `20 Lac

Margin Up to `4 Lac Above `4 Lac Nil 15%

Repayment 5-7 Yrs


Security / Guarantee Up to `4 Lac-Parents co-obligation. Above `4 & up to 7.5 Lac- Satisfactory third party guarantees. Above `7.5 Lac - Collateral security of suitable value & Co obligation of parents

Rate of Interest

Up to 4 Lac – Base Rate + 2.75% Above 4 Lac – Base Rate + 4.50% Staff Children – Base Rate + 2.75%% (irrespective of limit) Simple interest during course & gestation period

Penal Interest 2% for limit above 2.00 Lakh Concessions 0.50% in interest rates for Girl students Exemptions Processing /Administrative/ Upfront fee/ Pre-payment Charges


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EDUCATIONAL LOANS

PREMIER MANAGEMENT INSTITUTIONS

Eligibility Secured admission in 25 Premier management institutions selected.

Nodel Branch Each institution is attached with one Branch for speedy sanction of loan.

Age Criteria 12-30 yrs Course Management /Technical/ Professional courses Loan Amount Need based genuine expenditure related to the course Maximum Loan ` 10.00 Lac Margin 10% Repayment 5-7 Yrs Gestation period 6 Months after getting job whichever is earlier. Security/Guarantee Guarantee of earning parents / Guardian Rate of Interest

Base Rate + 1.25% Staff Children – Base Rate + 2.75%% (irrespective of limit) Simple interest during course & gestation period

Panel Interest 2% for limit above 2.00 Lakh Concessions 0.50% in interest rates for Girl students Exemptions Processing /Administrative/ Upfront fee/ Pre-payment Charges Note: Bank is extending education loans (maximum of `20 lakhs) to the students seeking admissions into ISB, Mohali & IIM, Trichy at Base Rate + 1.25% (for female Base Rate + 0.75%) without insisting for collateral security. However, 50% collateral is required for loans granted to IIM, Trichy. (Cir.no.182 Ref 53/08 dated 23.08.11)

EDUCATIONAL LOANS Commercial Pilot Training

Eligibility Secured admission in Flying training Institutes approved by DGCA & Reputed Abroad Institutes.

Age Criteria 12-30 yrs Course SPL PPL & CPL Courses

Loan Amount Need based & Max. of Inland -10 Lacs & Abroad -20 Lacs

Maximum Loan First year fee reimbursement should not be considered

Margin As in the case of Studies India & Abroad schemes

Repayment 5-7 Yrs


Security / Guarantee As in case of Studies India & Studies Abroad scheme

Sufficient Insurance coverage for the life of the student.

Rate of Interest

Up to 4 Lac–Base Rate + 2.75%; > 4 Lac–Base Rate + 4.50% Staff Children – Base Rate + 2.75%% (irrespective of limit) Simple interest during course & gestation period

Panel Interest 2% for limit above 2.00 Lakh Concessions 0.50% in interest rates for Girl students Exemptions Processing/ Admn./ Upfront fee/ Pre-payment Charges


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EDUCATIONAL LOANS ABCALS

Eligibility Permanent employees of reputed organization. Age Criteria Balance service not less than 10 yrs. Course Higher studies/Skills Loan Amount Need based genuine expenditure related to the course Maximum Loan `7.5 Lac Margin 10% Repayment 60EMI Gestation period One month Security 100 % Collateral Guarantee Not to be insisted Rate of Interest Base Rate + 4% Panel Interest 2% for limit above 2.00 Lakh Concessions 0.50% in interest rates for Girl students Exemptions Processing / Admin. / Upfront fee / Pre-payment Charges

AB PROFESSIONAL LOAN

In order to provide simple and hassle free credit facilities to the professionals, Bank introduced a new scheme i.e. AB Professional on 30.01.2012 and the salient features of the scheme are as under: (Cir 377 Ref 53/18 dated 30.01.2012)

Eligibility: All Practising Chartered Accountants, Architects, Engineers, Valuers, Management / Financial Consultants, Company Secretaries, Cost Accountants etc., are eligible under this scheme. Individuals, Firms, Limited Liability Firms, Companies or Societies engaged in rendering professional services should be an assessee under income tax at least for the last two years and be a registered member with their respective professional Association/Board/Body.

Purpose of the Loan: To establish/renovate the office premises, Furnishing of office premises, purchase of Tools, Equipments & Books, Expenses relating to travel for professional purposes, Working Capital for carrying out day to day operations. Branches can sanction Term Loan, Overdraft or combination of both depending on the purpose of the loan. The maximum amount allowed under this scheme is `10 lakhs. Discretionary powers to branch managers are given to sanction 10 lakh under Term Loan, except JM-I where the powers are given up to 5 lakh only.

Security: Hypothecation of existing movable assets and asset/s purchased out of loan and also obtain post dated cheques for initial 18 months. The loans are to be covered under CGTMSE compulsorily. However, CGTMSE premium to be borne by the borrower

Assessment of loan amount: Term Loan - 75% of the cost of asset proposed to be purchased. Working Capital Limit - 75% of the revenue expenditure of the previous year as per Profit and Loss account. Total exposure should not exceed 2 times of average annual income of preceding two years.

Rate of Interest: Base Rate + 3.25 (At present it is 14%). Loan attracts 0.50% processing / upfront charges.

Repayment Period: Not exceeding 60 monthly installments with a maximum repayment holiday of 1 year for principal & interest for term loans and one year for working capital limits.


119

HOUSING LOANS (General Housing Finance)

Eligibility

In any area like Rural, semi urban, urban, Metro etc. Individual either singly or jointly with spouse & Children –Sanction at Branch level. With other blood relations- Sanction at HO level.

Purpose Construction or Purchase of house / Extension / Renovation/ Repairs to existing house

Age Criteria Borrower - 21-65 yrs. Independent House - Below 25 Yrs / Flat - Below 20 Yrs

Co-applicant Spouse of the applicant

Loan Amount

48 times of Monthly gross salary / 4 times of Annual income or 75% Cost of construction / 85% of Out-right Purchase, whichever is less. 50% of expected rental income can be added to income to arrive at more eligibility

Maximum Loan Rural- `25 Lac, Semi-urban- `75 Lac. Urban- `150 Lac, Metro- `250 Lac

Take home pay 30 % Repayment Max. 20Yrs.

Gestation period 18 Months (24 Months in case of housing board) from disbursement of first installment or immediately after completion of house / taking possession

Repairs/Renovation Up to 5yrs- 2.0 Lac; Above 5 & up to 25 years 8 Lacs Security House/Flat to be constructed / purchased Guar/Co obligation Co-ob/ Satisfactory third party guarantee may be stipulated Classification Up to 25 Lac - Priority# Above 25 Lac -Non Priority

Rate of Interest

Repayment Up to 5 Yrs > 5 & 10 Yrs > 10 Yrs. Below 20 lakh BR + 0.50% BR + 1.00% BR + 1.25% 20 to 30 lakh* BR + 0.50% Above 30 lakh* BR + 1.00%

Processing Charges 0.50% of loan amount subject to maximum of `10000/- At the time of processing loan application

Administrative Charges

Up to 10 Lac `100, Above 10 L& upto15 L- `150/- Above 15 Lacs `250/- Per quarter

Pre-payment charges

2% flat on pre-paid amount, where the repayment is fixed beyond 36 months. However, charges may be waived, incase the payment is from own savings / windfall gains.

# Up to 1.00Lac in R/SU & <2.00 Lac in U/ Metro areas to be treated as Priority. *Above 20 lakh loans require minimum score of 60 as per New Rating Sheet (Cir.no.364 Ref 53/17 dated 16.01.2012) Interest Subsidy Scheme for Housing the Urban Poor (ISHUP) is introduced by Government of India with an objective to enable the Economic Weaker Sections (EWS) and Lower Income Group (LIG) segments in the urban areas to construct or purchase houses by providing an interest subsidy of 5% on loan amount of maximum `1.00 lakh. The scheme is in effect from 26.12.2008 and will close in 2012. EWS and LIG are defined as households having an average monthly income up to `5,000 and `5,001 to `10,000 respectively. The borrowers under the scheme must have a plot of land for the construction or have identified a purchasable house. The preference under the scheme should be given to SC/ST/Minorities/Women/ persons with disabilities in accordance with their population in the total population of the area as per 2001 census. The scheme will provide a subsidized loan for 15-20 years for a maximum amount of `1 lakh for an EWS individual for a house at least of 25 sq. mts, and `1.60 lakh for a LIG individual for a house at least 40 sq.mts, will be admissible.


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However, subsidy will be given for loan amount up to ` 1 lakh only. (Cir.no.316 Ref 28/09 dated 04.12.2010)


121

HOUSING LOANS Golden Jubilee Rural Housing Finance

Eligibility

In rural areas & Towns having population not more than 50000 as per census 1991. Individual either singly or jointly with spouse & Children –Sanction at Branch level. With other blood relations- Sanction at HO level.




Loan Amount

48 times of Monthly gross salary / 4 times of Annual income or 75% Cost of construction / 85% of Out-right Purchase, whichever is less. 50% of expected rental income can be added to income to arrive at more eligibility

Maximum Loan No maximum limit Take home pay 30 % Repayment Max. 15 Yrs.


Repairs/ Renovation

Max. 0.50 Lac

Security Where mortgage of primary security is not feasible, other securities can be accepted.

Guarantee/ Co obligation

Co-obligation/ Satisfactory third party guarantee may be stipulated

Classification Priority (Irrespective of loan amount

Rate of Interest

Repayment Up to 5 Yrs > 5 & 10 Yrs > 10 Yrs. Below 20 lakh BR + 1.25% BR + 1.50% BR + 1.75% 20 to 30 lakh* BR + 0.50% Above 30 lakh* BR + 1.00%

Processing Charges

0.50% of loan amount subject to maximum of `10000/- At the time of processing loan application


Up to 10 Lac `100, Above 10 Lac & upto15 Lac Rs 150/- Above 15 Lacs 250/- Per quarter

Pre-payment charges

2 % flat on pre-paid amount, where the repayment is fixed beyond 36 months. However, charges may be waived, incase the payment is from own savings / windfall gains.

*Above 20 lakh loans require minimum score of 60 as per New Rating Sheet (Cir.no.364 Ref 53/17 dated 16.01.2012)


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HOUSING LOANS Non-Resident Indians – General

Eligibility

Non-resident Indians & Persons of Indian origin Individually or jointly with resident close relatives Persons of Indian origin and residents of Pakistan, Bangladesh, Srilanka, Afghanistan, China, Nepal & Bhutan have to obtain prior permission from RBI




Loan Amount

48 times of Monthly gross salary/4 times of Annual income or 75% Cost of construction/85% of Out-right Purchase, whichever is less. 50% of expected rental income can be added to income to arrive at more eligibility

Maximum Loan Max. of ` 250 Lac Take home pay 30 %

Repayment Max. 20Yrs. Installment shall be paid by remittances outside India or out of funds in his NRE, FCNR Accounts or out of rental income.


Repairs/ Renovation

Up to 5yrs- `2 lac and Above 5 & up to 25 years `8 lac.

Security House/Flat to be constructed / purchased plus Lien on other assts in India


Resident close relative as Co-obligant / Guarantor

Classification Non Priority (Irrespective of loan amount)

Rate of Interest

Repayment Up to 5 Yrs > 5 to 10 Year Above 10 Yrs. Below 20 lakh BR + 1.25% BR + 1.50% BR + 1.75% 20 to 30 lakh* BR + 0.50% Above 30 lakh* BR + 1.00%

Processing Charges



Up to 10 Lac `100, Above 10 L& upto15 L-Rs 150/- Above 15 Lacs 250/- Per quarter

Pre-payment charges




123

HOUSING LOANS Non-Resident Indians – DUBAI

Eligibility

Non-resident Indians residing in Dubai, UAE & Sharajah, Individually or jointly with resident close relatives NRI account holders and valued constituents with minimum of one year of abroad service Investment in Immovable property in India by NRI is subject to FEMA guidelines.

Purpose Construction or Purchase of House / Sites



Loan Amount

HOUSE -48 times of Monthly income or 80% Cost of construction/ Purchase, whichever is less. SITE - 12 times of Monthly income or 80% Cost of site, whichever is less.

Maximum Loan Max. of ` 250 Lac Take home pay 30 %

Repayment Max. 20 yrs for House, 36 Months for Site Installment shall be paid by remittances outside India or out of funds in his NRE, FCNR Accounts or out of rental income.

Gestation period 18 Months for Construction 3 Months for Purchase of house / Site

Repairs/ Renovation

Up to 5yrs- 2.0 Lac. Above 5 & up to 25 yrs.-8.0L

Security House/Flat to be constructed / purchased plus Lien on other assts in India


Resident close relative as Co-obligant / Guarantor

Classification Non Priority (Irrespective of loan amount)

Rate of Interest

Up to 5 Yrs > 5 to 10 Year Above 10 Yrs. Up to 5 Yrs Below 20 lakh BR + 1.50% BR + 1.75% BR + 1.25% 20 to 30 lakh* BR + 0.50% > 30 lakh* BR + 1.00%

Processing Charges



Up to 10 Lac `100, Above 10 L& upto15 L-Rs 150/- Above 15 Lacs 250/- Per quarter

Pre-payment charges




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AUTOMOBILE LOAN

Eligibility Any individual having minimum gross Income of `1.0 Lac-pa for 4 W, `60000/- pa for 2W & `40000/- pa for battery operated e-bikes

Loan amount

4 Wheeler - NEW - Least of Road price minus margin or 3 yrs. gross income. USED- (Not more than 3 years old) - Least of 60% of garage value or 3yrs.gross income. Max. of `5.00 Lac. 2 Wheeler - NEW- Road price minus margin with a Max. of `60000/- Road Price- Invoice price, Registration, Life Tax, Insurance & accessories up to `5000 for 4 W & `1000 for 2 W. Margin: Salaried class with salary deduction - 15%; SME/Corporate borrowers with standard assets with B rating & above: 15% and Other borrowers 20%

Security Hypothecation of vehicle purchased Guarantee/ Co obligation Good third party guarantee acceptable to the Bank.

Net Pay 40% after proposed installment Repayment 4 W- New-12-72 EMI - 4 W- Used-60EMI - 2 W- 12-60EMI

Interest

4 W- BR+1.50%* Term Premia 0.25% for loans repayable > 36 months 2 W- BR+4.25% Term Premia (TP) of 0.25% Extra for loans repayable beyond 3 Yrs

Pre-payment charges


* Special campaign up to 31st March 2012

AB VANITHA VAHAN

Eligibility

Salaried/ professional & self employed Women having min. gross Income of `1.0 Lac pa for 4W - `60000 pa for 2W & `40000/- pa for battery operated e-bikes. 50% of Husband's salary will be taken for computing eligibility provided he is working and stands as Co-obligant.

Loan amount

4 Wheeler - NEW - Least of Road price minus margin or 3 yrs. gross income. USED- (Not more than 3 years old) - Least of 60% of garage value or 3yrs.gross income. Max. of `5.00 Lac. 2 Wheeler - NEW- Road price minus margin with a Max. of `60000/- Road Price- Invoice price, Registration, Life Tax, Insurance & accessories up to `5000 for 4 W & `1000 for 2 W. Margin: Salaried class with salary deduction 15%; SME/Corporate with standard assets with B rating & above 15% and other borrowers 20%

Security Hypothecation of vehicle purchased Guarantee/ Co obligation

Father /Husband of the applicant or suitable third party guarantee.

Net Pay 40% after proposed installment Repayment 4 W- New-12-72 EMI - 4 W- Used-60EMI - 2 W- 12-60EMI

Interest*

4 W-BR+1.50%; Term Premia (TP) of 0.25% Extra for loans repayable beyond 3 Yrs. 2 W-Up to 36 months-BR+3.75%; Above 36 months- BR+4.00+0.25 (0.5% Concession for prompt repayment as back end.)

Pre-payment charges


* Special campaign up to 31st March 2012


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VEHICLE LOAN-MOU-M/S GENERAL MOTORS INDIA & TATA MOTORS LTD

Eligibility Borrower should have salary account with our Bank or installment shall be remitted by employer. For other customers with satisfactory dealings for the last 12 months, we may relax the above condition.

Income Gross annual Income shall be not be less than `2.00 Lacs for Cars

Loan amount 80 to 85% of the Road Price or 3 years Gross Income, whichever is lower

Margin Salaried class with salary deduction 15%; SME/Corporate borrowers with standard assets with B rating & above 15% and Other borrowers 20%

Security Hypothecation of vehicle purchased Guarantee/ Co obligation

Good third party guarantee acceptable to the Bank.

Repayment Maximum 5 yrs. and normally 3 years only. Interest* Base Rate + 1.50%. TP - 0.25% for loans repayable >3 Yrs. Proc. charges `1000/- for loans above `75000/-

Pre-payment charges


* Special campaign up to 31st March 2012 Clean Loan

Eligibility Any individual having repayment capacity. Age not above 75yrs in case of Pensioners & 55 yrs in case of LIC Agents.

Loan amount

Salaried Persons: Fresh- 8 Times. Max. of `1.00 Lac. Renewals -10 Times. Max. of `1.50 Lac 8 Times of gross salary by ZO level. NonSalaried – ZO Sanction - 2 Times of avg. annual income Max 0.50 lac Pensioners - 8 Times of monthly Pension Max.1.00 Lac. LIC Agents - 2 Times of average of last 3 yrs. annual renewal Commission for IT Assesses and 50% of average of 3Yrs. annual renewal Commission for Non IT Assesses. Max 2 Lac

Security NIL Renewals After payment of 1/3rd regular installments


Good third party guarantee acceptable to the Bank. (Incase of Clean loan to Pensioners- Nominee of the pensioner/ family pensioner shall join as Co obligant / Guarantor. In case of Clean loan to LIC Agents- Spouse or one of the family members and one LIC Agent.

Net Pay 40% after proposed installment

Repayment Maximum of 60 EMI (In case of Pensioners aged above 65 yrs. & LIC Agents-36 EMI)

Interest Base Rate+7%. Term Premia (TP) 0.25% for loans repayable > 3 Yrs

Consumer Loan

Eligibility Any individual having repayment capacity. (Non-Salaried persons- Minimum Income `30000/- pa

Loan amount

Equal to 10 Months gross salary- 40 % on annual Income in case of non-salaried persons or 75% of cost of articles, whichever is lower.

Security Hypothecation of goods purchased Guarantee/co-oblig Good third party guarantee acceptable to the Bank. Net Pay 40% after proposed installment Repayment Max.60EMI Interest

Base Rate+7.50% Term Premia (TP) of 0.25% Extra for loans repayable beyond 3 Yrs


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LOANS AGAINST GOVT. SECURITIES

Eligibility Employees/ Pensioners / Professional & Self-employed holding Govt. securities (except IVPs)

Purpose Not specific

Loan amount

Equal to 75% of purchase value of security including Accrued interest / Surrender value of LIC Policies. Securities where premature cancellation is not available, the date of maturity should be less than 3 years from the date of finance.

Margin / Security 25 % margin and pledge of receipts. Guarantee/co-oblig Limit above `50000/- Co obligation is required Repayment Max.60EMI Interest

Base Rate+4.0% Term Premia (TP) of 0.25% Extra for loans repayable beyond 3 Yrs

Processing & Upfront Fees Nil Non Agricultural Gold Loans (AB Swarna Loan Scheme): Bank is paying focused attention on lending against gold as this segment is safe and source of high yielding advance. (Cir.no.363 Ref 53/16 dated 16.01.2012) Category Rate per gram I. Hallmarking Gold

22 Carat (Hallmarking 916) `1650/- per gram or 80% of the market value of gold whichever is less

21 Carat (Hallmarking 875) `1600/- per gram or 80% of the market value of gold whichever is less

II. With out Hallmarking Gold

22 Carat `1600/- per gram or 80% of the market value of gold whichever is less




III. Gold Coins

999.9 purity `1700/- per gram or 80% of the market value of gold whichever is less. (Our Bank / Other Bank Coins)

916 purity (22 Carat) `1550/- per gram or 80% of the market value of gold whichever is less

Loan is to be sanctioned for productive purposes and consumption purposes such as meeting marriage/medical/educational expenses and other expenses of like nature may also be sanctioned subject to the rules in force. Loans should not be extended for speculation/money lenders. Minimum amount of loan is `300/-. The loan should be repayable with in 12 months. The interest rate is 12.90% p.a., if the loan is repaid within 6 months and where it is beyond 6 months interest @ 14.75% p.a. Loans should not be allowed against non-ornamental gold or ornaments of fineness less than 19 carat. Loans can be allowed against gold coins sold by banks. Ornaments subjected to domestic wear and tear only should be accepted. New ornaments should not be accepted unless branch is satisfied with the trustworthiness of the customer. Ornaments with large percentage of stones or other extraneous material should be avoided. As a rule, ornaments like Kante, Addiga, Nagaram, Ragidi should not be accepted. Very small ornaments also should not be accepted. Right relinquishing letter is to be obtained from owner of the ornaments if any names are there on the ornaments. Gold coins of our Bank with tamper proof Assay certificate intact need not be appraised. (Cir.no.215 Ref 53/08 dated 08.09.2010)


127

Liquid Gold Scheme (SOD against Gold Ornaments)

Purpose of the loan

Secured Overdraft against gold jewellery shall be encouraged to individuals/firms who are small players in Industry, Service and Business sectors up to `10 lac without submission of financial statements. However, pawn brokers are not eligible for finance under this scheme.

Amount Minimum limit ` 2 lac, Maximum limit ` 10 lac. Calculated as per eligibility per gram as per HO guidelines issued from time to time. At present, it is 75% of appraised value.

Loan Period 24 months and can be renewed. Rate of interest Base Rate + 6.25% (At present 15.25%)

Appraising Charges

1% of loan amount with a minimum of `10/- Out of which: 0.35% to appraiser with Min. `3/- - 0.65% to branch P& L Account. Minimum `7/-

Premature closure Allowed. No prepayment charges. Nomination Not available

Other conditions Commitment Charges @ 2% p.a. on the unutilized portion of the limits, if the limits are not utilized for at least 75% in any quarter. Branch to levy `300/- for partial delivery of ornaments.

(Cir.no.311 Ref 26/61 dated 30.11.2010) AB Doctor +

Eligibility Individuals, Partnership firms/ Ltd co. /Trusts. Key promoters should be qualified Medical practitioner and Doctors

Purpose

To purchase equipments, Vehicles, Ambulance, medical software, Setting up clinics, to travel abroad to attend seminars, to Meet domestic expenses, any other activity related to medical profession.

Loan amount Priority Sector - Rural & S/U- 15 Lac with sub-limit of `3 Lac for WC; Urban- 10 Lac with sub-limit of `2 Lac for WC. Non-Priority - Rural – No, SU - 25 Lac and Urban - 50 Lac

Margin Margin: 20% (No margin for travel abroad and to meet domestic exp.)

Security Collateral security of 50% of loan amount by way of EM of immovable property or lien on NSC/KVP/LIC etc.

Guarantee/Co-oblig Third party guarantee Repayment Max. Of 60EMI or 20EQI - Gestation- 6 Months

Interest Priority Sector- Base Rate+4.75% - Non- Priority Sector-Base Rate + 5.50%. TP - 0.25% extra where the repayment is beyond 36 months.

Processing& Upfront 0.50% Mortgage Loan

Eligibility Any individuals holding house/flat in their/spouse/Major children's names. Age-21-60 yrs. Above 60 yrs, jointly with spouse or major children.

Loan amount 18 Times of gross pay/ pension and for Non-salaried persons- depending on the repayment capacity assessed on the basis of IT returns/ Assessment order or Max. of 50% of value of the property.

Security Mortgage of House/Flat Guarantee/ Co obligation

Good third party guarantee acceptable to the Bank.

Net Pay 40% after proposed installment Repayment Maximum of 60 EMI Interest Base Rate + 6.5% + Term Premia for loans repayable > 3 Yrs


128

Rent Receivable

Eligible Borrowers Individuals, Sole Proprietorship, Partnership Firms, Public Limited Companies, Private Limited Companies, Trusts etc., owning properties including landlords of our branch premises.

Eligible Properties Unencumbered Residential/commercial Properties at Urban / Metro areas. In case of Semi-urban areas, premises let out to banks may be considered.

Eligible Tenants

Reputed Public Sector, Multinational undertakings, Embassies/consulate offices of foreign countries, Banks, National/International Airlines etc. In case of Private Sector Organizations, the Net Worth of the organisation should be above 5 crore.

Purpose

Closure of the loan availed for development/construction of the property. In case where the property is constructed with own sources, limits can be considered for the expansion / development of existing business.

Loan amount

Minimum loan ` 25 lakhs and the maximum loan is ` 5 & ` 10 crore for individual and other borrowers respectively. In case of proposals from land lords of our bank premises, the stipulation for minimum loan amount is relaxed to `5 lakhs. However, limits beyond ` 10 crores falls under MC powers.

Margin 15% of rent receivable towards maintenance and 25% of margin in collateral security of NSCs, Deposits etc.

Security

Equitable mortgage of the property of the value not less than 150% of the loan. However, in case of deficit, liquid securities such as NSCs, Bank Deposits etc., can be accepted with 25% margin.


One Co-obligation / Guarantor. However, no Co-obligation / Guarantor for our Bank premises.

Repayment

84 Months (120 months in case of leased premises of our branches) or unexpired certain lease period whichever is less after making adjustments for TDS, Property Tax and 15% rent towards maintenance.

Interest Base Rate + 5% + 0.25% (TP) Pre-payment 0.50% on outstanding liability for the unexpired period Proc & Upfront Fees 1% of the limit sanctioned plus service tax. (Cir.no.44 Ref 26/08 dated 23.05.2011)

AB ANAND JEEVAN (Cir 334 Ref 26/56 dated 28.12.11)

Eligibility Single or Jointly with spouse; Age - First borrower -Above 60 Years, Spouse- Above 55 Yrs.

Purpose To meet any genuine needs.

Loan amount

90% of realizable value of House /Flat i.e. 70% of Market value. Min. `5 Lac. Max.`100 Lac. Loan installment payable to the borrower in Monthly, Quarterly, and Lump sum @ `198/-, 588/- & 8335/-respectively per lac for loan tenor of 15 years (max). Lumpsum maximum `15 lac only

Margin Not Applicable.

Security Equitable Mortgage of House/Flat, against which loan is sanctioned. (To be registered with Sub- Registrar)

Guarat/co-obligant Borrower has to execute a Will

Repayment Payable in Lump sum after the last surviving Borrower dies or opt to sell the home or permanently moves out the home.

Interest 10.75% Fixed (ROI will be reset at the end of every 3 years})

Pre-payment Allowed without any charges. Processing& Upfront No


129

AB Equipment Finance: Bank introduced a scheme to purchase New equipment like JCBs, Excavators, Concrete Batch Mixing Plants, Lifts, Steel scaffolding Material etc., to meet the needs of Service Industry including Civil Contractors/Builders. The nature of facility is Term Loan. All the existing borrowers with 2 years satisfactory dealings and in case of others, minimum 3 years experience in the respective field with profit track record are eligible for the above facility. Maximum amount of loan to be disbursed is 90% of the cost of the machinery/equipment. Interest rate for existing borrowers is Base Rate + 3.75% and for new borrowers it is Base Rate + 4.50%. Repayment should be within 24 to 60 months. Wherever the repayment is beyond 36 months, the loan attracts additional interest of 0.25% towards Term premia. Collateral security need not be insisted for both existing and new borrowers. However, suitable co-obligation / guarantee shall be obtained. Processing charges are to be collected @ 0.25% of loan amount. Zonal Managers are authorized to sanction loans under the scheme even for the borrowers enjoying limits under HO powers. (Cir.no.92 Ref 26/21 dated 01.07.09) Liberalized Trade Finance: All existing traders (Individual, Proprietary, Partnership and limited companies) in operational area of the branch/Trade Finance Centers Preferably with Sales Tax Registration Certificate whether maintaining account with the branch or not are eligible for working capital credit under Liberalized Trade Finance scheme. Branches can sanction loans as per the eligibility of the borrower subject to a maximum of `100 lakhs. In case of WCTL, the maximum loan is `10 lakhs only. Loans up to 50 lakhs & 100 lakhs attract a spread of 4% & 5% respectively. Audited balance sheet need not be insisted for limits below `10 lakhs. However, it is mandatory for the borrower whose turnover exceeds `40 lakhs per annum. The collateral security norms for the limits up to `10 lakhs are as under: Age of the business Collateral Security Remarks Less than 5 years 100% However, in case where the limits

are beyond `10 lakhs, branch to obtain 125% of limit as collateral

5 to 10 years 75% Above 10 years NIL Note: All term loans where the repayment is fixed beyond 36 months attract prepayment charges @ 2% on the advanced payments made. Similarly, all term loans are to be levied with the following Processing and administrative charges

Loan Amount Processing Charges (One time)

Administrative Charges (Once in a quarter)

Up to 0.25 lakhs `150 `50 > 0.25 – 2.00 lakhs `300 `75 > 2.00 lakhs `300 per lac or part thereof `100

Credit Rating for Personal Banking Schemes: In order to have better credit risk management system, Bank decided to have regular rating for Clean Loans (Contingency), Personal Loans (Consumer), Vehicle Loans, Housing Loans and Mortgage Loans. For all new loans the rating is based on important parameters such as Age, Qualifications, Residence, Stay, Transferability, Employment/Profession, Gross Income, Spouse employment, No. of dependants, dealings with the bank, Net Take Home Pay, Loan recovery mechanism, Loan Repayment History, Margin contribution and Networth. The prospective borrower is expected to score minimum of 40 marks out of 100 marks to entertain the credit proposal. All existing personal banking schemes of the branches are subjected for annual review during the month of December every year duly taking parameters such as Availability of the borrower, Transferability of employment, Loan Recovery Mechanism, History of Repayment of existing loans, availability of securities (primary/collateral). (Circular no.163 Ref 26/34 dated 06.08.2010)


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Impaired Asset Study Policy Lending is an integral part of bank business. Borrower is expected to use the funds for the purpose for which availed and pay interest and installments regularly. Some times, default may arise due to business cycles, changed environment, mismanagement and other external factors. Whenever a borrowal account slips to Non-Performing Category, the account needs to be examined closely for analyzing the systematic deficiencies if any, which has resulted in the failure of account. The Objective of IAS will be to identify the causative factors for failure of the account and to take appropriate corrective action for minimizing, if not eliminating systemic or human failures. The exercise of Impaired Asset Study (IAS) would be primarily to look into reasons for the failure of an advance account and to look into Staff accountability aspects to know the acts of Commission and Omission of the staff that might have contributed to such failure. In the above backdrop, Bank has revised the policy guidelines and salient features of the policy are as under:

IAS has to be conducted for all the accounts that have slipped to NPA irrespective of the amount of the loan. IAS should be taken up as soon as an account slips to NPA Category. The study should be initiated within 30 days from the date of slippage and the process of IAS Study shall be completed within 120 days from the date of slippage. All IAS Reports, where vigilance angle is observed shall be referred to CVO for his scrutiny to decide on vigilance angle. All IAS Reports on Quick Mortality shall be referred to CVO for his scrutiny to decide on vigilance angle. As a general guideline, IAS should be taken up as soon as an account slips to NPA Category. The study should be initiated within 30 days from the date of slippage and the process of IAS Study shall be completed within 120 days from the date of slippage. Borrowal accounts with real account balance of above `25.00 lac Sanctions made by officers in the rank of AGM and above IAS conducted under Special Reports and IAS conducted in the case of Quick Mortality Accounts

NPA – Real Account Competent Authority

I. Loans sanctioned by Scale-IV & below Upto `2.00 lac Zonal Committee consisting of

Zonal Manager, second line official & vigilance official.

> `2.00 lac and upto `25.00 lac.

> `25.00 lac and upto `100.00 lac II. Sanctions by official in the rank of AGM Upto `100 lac GM(CMRD) at Head Office

> `100 lac

GMs committee at HO consisting of GM (CMRD), GM (Inspection), GM (RMD) & GM (Operations). Minimum quorum shall be three.

The revised policy will be applicable for the accounts slipped to NPA on or after 01.04.2011 (Cir.no.095 Ref 26/15 dated 29.06.11)


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Corporate Debt Restructuring (CDR) The objective of the CDR framework is to ensure timely and transparent mechanism for restructuring the corporate debts of viable entities facing problems, outside the purview of BIFR, DRT and other legal proceedings, for the benefit of all concerned. In particular, the framework will aim at preserving viable corporates that are affected by certain internal and external factors and minimize the losses to the creditors and other stakeholders through an orderly and coordinated restructuring programme. The scheme will not apply to accounts involving only one financial institution or one bank. The CDR mechanism will cover only multiple banking accounts / syndication / consortium accounts of corporate borrowers with outstanding fund-based and non-fund based exposure of `10 crore and above by banks and institutions. However, there is no requirement of the account/company being sick, NPA or being in default for a specific period before reference to the CDR system. Three-tier structure is in place for CDR system viz., CDR Standing Forum and its Core Group, CDR Empowered Group and CDR Cell. i) CDR Standing Forum provide an official platform for both the creditors and borrowers (by consultation) to amicably and collectively evolve policies and guidelines for working out debt restructuring plans in the interests of all concerned. ii) CDR Empowered Group consider the preliminary report of all cases of requests of restructuring, submitted by the CDR Cell. After the Empowered Group decides that restructuring of the company is prima-facie feasible and the enterprise is potentially viable in terms of the policies and guidelines evolved by Standing Forum, the detailed restructuring package will be worked out by the CDR Cell in conjunction with the Lead Institution. iii) CDR Cell undertakes the initial scrutiny of the proposals received from borrowers / creditors to decide whether rehabilitation is prima facie feasible. If found feasible, proceed to prepare detailed Rehabilitation Plan with the help of creditors and, if necessary, experts to be engaged from outside. If not found prima facie feasible, the creditors may start action for recovery of their dues. CDR-1 system is applicable only to accounts classified as 'standard' and 'sub-standard'. CDR-2 system is applicable to the accounts where the projects have been found to be viable but classified under ‘doubtful’ category provided minimum of 75% of creditors (by value) and 60% creditors (by number) satisfy themselves of the viability of the account and consent for such restructuring. Reference to Corporate Debt Restructuring System could be triggered by any or more of the creditor who have minimum 20% share in either working capital or term finance, or by the concerned corporate, if supported by a bank or financial institution. However, in case of suit filed accounts at least 75% of the creditors (by value) and 60% of creditors (by number) shall consent for the proposal. CDR is a non-statutory mechanism which is a voluntary system based on Debtor-Creditor Agreement (DCA) and Inter-Creditor Agreement (ICA). The sub-standard/doubtful accounts which have been subjected to restructuring would be eligible to be upgraded to the standard category only after the specified period, i.e. one year after the date when first payment of interest or of principal, whichever is earlier, falls due under the rescheduled terms, subject to satisfactory performance during the period.

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Comprehensive Corporate Compromise Policy (CCCP)

Prompt recovery of loans and advances not only increases liquidity and profitability but also keeps funds cycle moving by continuous lending for the development of the economy. Compromise Policy is a step in this direction. The compromise should be a negotiated settlement under which it should be ensured to recover its dues to the maximum extent possible with a minimum sacrifice.

The important aspect in connection with settlement proposals is the concept of opportunity cost of funds. The opportunity cost of funds in hand vis-à-vis that of funds, which could come in hand at a later period should be calculated to establish a comparative advantage of 'now or later'. The guiding factors for a compromise settlement are: Balance outstanding in the account (real account) as on date of NPA. Provision held in the account. Market value of the securities and time taken for realizing it. Reasons for failure i.e. factors beyond borrower's control like natural.

Calamities. Present status of the account and the amount that can be recoverable.

Our Bank introduced a Comprehensive Corporate Compromise Policy (CCCP) and the salient features of the policy are furnished here under: These guidelines are applicable to NPAs and Technically Written-off

accounts including Credit Card dues. The account should have been classified as Substandard asset as at the end

of previous quarter for settlement. All the limits enjoyed by the borrower either with the same branch or with different branches are also settled simultaneously.

Impaired Asset Study (IAS) is to be conducted as per guidelines. It also covers dues of employees/officers who cease to be in service on

account of retirement/death/resignation/dismissal/discharge/compulsory retirement may be treated on par with general public.

Compromise settlement may be entered with willful defaulters/fraudulent borrowers without prejudice to the criminal case against the borrower and those cases of compromise settlement should be vetted by Management Committee / Board of the Bank.

Bank may also entertain compromise proposal from the borrowers (in justifiable cases) on whom SARFAESI notices are served for taking possession of securities, provided the borrower comes forward for a compromise proposal.

Committee approach is to be adopted while according compromise approvals. The committee should give justifying reasons for consideration of the compromise while referring the proposal to the competent authority for consideration.

An official who has sanctioned a particular loan, which has become NPA shall not participate in the compromise committee meeting where the proposal relating to that loan is under consideration for settlement.

Administrative clearance is required from Head Office, where the write-off exceeds 25% of real account balance in case of Sub-standard NPA accounts. However, this is not applicable with regard to Doubtful / Loss category accounts.


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In order to have uniform approach, the shadow accounts is to be reworked out as under: Category Calculation Accounts with limits above `2 lakhs

Real account balance + Interest at prevailing PLR from time to time on simple basis from the date of NPA, until the preceding the month + any other charges.

Accounts with limits up to `2 lakhs

Real account balance + Interest at contractual rate from time to time on simple basis from the date of NPA, until the preceding the month + any other charges.

In case of suit filed accounts, suit expenses are to be included. However, where the suits are decreed, it should be as below: Category Calculation Accounts with limits above `2 lakhs

Decreed Amount + Interest at prevailing PLR from time to time on simple basis or decretal rate, whichever is lower, from the date of decree, until the preceding the month + any other charges.

Accounts with limits up to `2 lakhs

Decreed Amount + Interest at contractual rate from time to time on simple basis or decretal rate, whichever is lower, from the date of decree, until the preceding the month + any other charges.

The Net Present Value of the compromise amount as well as realizable value of securities may be arrived as under:

A - Fair Market value of the security B - Less: Costs / Expenses for realization of securities C - Total value (A-B) D - Net Present value of (C) discounted at existing PLR for simple 5 Years E - Total amount of compromise - Payment of compromise amount due on (where payable in installments) F - Net Present Value of the compromise amount discounted at existing PLR Simple for the period of payment It should be ensured that Net Present Value of the compromise amount discounted at existing PLR simple i.e. F should generally be not less than the Net Present value of the realizable value of securities i.e. D.

Mode of Payment: As far as possible, before entertaining the proposal, it should be ensured that the borrower makes upfront payment of at least 10% of compromise amount. Payment of compromise amount within 30 days is desirable. If not a reasonable 90 days time may be given to the borrower for full payment in 2 to 3 installments. Depending on the case, borrower request for making payment within 12 months may be considered on the condition that 25% of compromise amount (including upfront amount) and the balance amount along with interest @ PLR simple) from the date communication of compromise till the date of final payment. However, in any case the repayment period of compromise amount should not exceed 18 months. Branches are required to communicate in writing to the borrower the terms and conditions of the compromise approved and the date on which the compromise gets lapsed in case of failure of the borrower to pay the compromise amount in full. Proportionate release of securities could be considered on case-to-case basis. Branch should obtain commitment letter from the borrower that the sale proceeds are to be credited to the compromise account. (Circular No.404 Ref 45/11 dated 20.02.2008).


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One Time Settlement (OTS) Schemes OTS for Small Loans: All NPA accounts, including Sub-standard and technically written-off accounts, with real account / technically written-off balance of `2.00 Lacs & below as on 31.03.2011 under Govt sponsored schemes and retail segment loans are covered under this scheme. However, the scheme shall not cover cases of fraud and decreed accounts. It shall also not cover accounts backed by liquid securities or salary undertaking letters. The scheme is now made non-discretionary and non-discriminatory. Settlement amount is linked to the date of NPA as under:

Date of NPA Settlement amount formula

Real a/c balance of below `1 lakh

Real a/c balance of `1 lakh & above and up to `2 lakh

01.04.10 to 31.03.11 75% amount in default 80% amount in default 01.04.08 to 31.03.10 70% amount in default 75% amount in default 01.04.06 to 31.03.06 65% amount in default 70% amount in default On or after 31.03.06 60% amount in default 65% amount in default Technical w/off a/cs 45% amount in default 45% amount in default Amount in default = Real account balance as on date of NPA + CGTMSE/ECGC claim received and appropriated Minus recoveries after date of NPA

Cash discount of 10% on the settlement amount is available where the borrower pays the amount in full at a time. Sanctioning authority of OTS proposal is Branch Manager and reviewing authority is Zonal Manager. The settlement amount arrived at as above, should be paid in one lump sum amount without interest within 30 days of sanction or in installments within 60 days, by collecting at least 25% of the settlement amount as down payment on case to case basis. This scheme is operative up to 31.03.2011. (Cir.no.66 Ref 45/02 dated 10.06.2011) OTS for MSME Loans: It is devised for settling bad loans under NPA / technically written off accounts of above `2 lacs and up to `10 crore under MSME category. Scheme covers all small NPA / Written-off accounts with real account / technically written-off balance of above `2.00 lacs and up to `10 Crore as on 31.03.2010. Small loans up to `2 lacs under Micro, Small Enterprise segment classified as Sub-standard assets as on 31.03.2010, which are not covered under the small loans OTS scheme, are covered under the present MSME OTS scheme. Suit filed accounts irrespective of stage of suit. The scheme will not cover cases of Fraud, Malfeasance, Wilful default, Decreed accounts by courts and Cases where settlement has been confirmed by Lok Adalat. The settlement under OTS is applicable as per formula given under:

Category Settlement formula

Sub-Standard Assets Amount in default + 6% simple interest from the date of NPA on reducing balances

Doubtful Assets Amount in default Loss Assets 90% of amount in default Tech. Written off 90% of amount in default

Amount in default=Real a/c as on date of NPA minus recoveries after date of NPA However, in case of loan accounts with real liability of `10 lacs and above as on the date of NPA, the formula will be as above or Net Present value (NPV) of available securities (Primary as well as Collateral) and securities attached by the court before judgment whichever is higher. If the settlement amount is negative as per above formula, a nominal amount of `1000/- is to be collected from such borrowers towards full and final settlement of account. Sanction powers are given to Zonal Manager/Head Office. Cash discount of 10% on the settlement amount is available where the borrower pays the amount in full at a time. This scheme is operative up to 31.03.11. (Cir.nos. 329 Ref 45/8 dated 08.01.10 & 243 Ref 45/10 dated 01.10.10)


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Funds Transfer Products - Abroad

Funds Transfer Products – Abroad: Informal unregulated systems of money transfer like hand delivery by Hawala or Hundi played significant role till mid 1990s. NRIs preferred these channels as the transfer of funds is fast and cost effective (no charges/commission) when compared formal channels i.e. Banks and Financial Institutions. However, it is observed that such informal businesses are gradually declining, with more and more banks and other intermediaries entering into this field. The important channels are:

Western Union Money Transfer: In order to extend speedy transfer of funds from abroad, Our Bank entered agreement with Western Union Money Transfer Company to act as agent for payment of Inward Remittances. Select branches of the Bank are provided with PC, which is connected to WUMT network. Transfer of funds is instantaneous and not location specific i.e. Beneficiary can withdraw funds from any location (WUMT agents across the Globe). Any single remittance under this scheme shall not exceed $ 2500 or its equivalent. The maximum number of remittances in a year is 12 per recipient. While making payment, bank is required to verify the details of the remittance furnished by the beneficiary with that of available on the system and obtain Xerox copy of the approved document (Passport, Driving License, PAN, Credit Card etc.,) as a measure of proper identification. In case, the Inward Remittance is beyond `50000/-, the payment should be made by way of DD/PO or through account. All charges should be borne by the remitter. It is simple and hassle free system of funds transfer across the globe. However, it is expensive when compared to traditional mode of transfers. Society for Worldwide Interbank Financial Telecommunications (SWIFT): Banks are offering this facility to NRIs and their family members for transfer of funds from abroad to India through NOSTRO account. The remitter abroad is required to furnish the information such as Correspondent Bank Name, Currency, SWIFT Code, NOSTRO Account No. of the Beneficiary Bank and Beneficiary Account No. Remittance through SWIFT takes 3 to 4 working days and the charges are reasonable (approx. 6% of the value of the remittance) and out of pocket expenses (around `300/-) provided Remitter Bank and Beneficiary Bank is the same or remittance is effected through Correspondent Bank Branch. Additional charges are levied if the remittance is through any other mode mentioned above. Remittance proceeds will be credited to the beneficiary accounts duly converting the foreign currency in to Indian Rupees. Banks are required to have proper mechanism in place to retransmit funds from SWIFT Regional Processing Centre to Beneficiary Branches. Speed Remittance Facility: Andhra Bank entered an agreement for Speed Remittance Facility with UAE Exchange Centre, Abu Dhabi with an objective to extend value added service to Gulf NRIs in remittance of funds to India. Under this scheme, Gulf NRIs deposit the funds with UAE Exchange branches in Middle East Countries to the credit of either their accounts or their relative/friends accounts in India. UAE Exchange passes the data to IIB, Mumbai electronically on the same day, which in turn send the credits to the various branches across the country through E-BA1 on the next day. The remitter is required to furnish the correct name of the branch and beneficiary name and account number for immediate credit and to avoid delay/complaints. (Circular no.219 Ref 15/10 dated 18.09.2007). Cheque Mail Box Facility: NRIs in United States of America (USA) can now send the remittances to the credit of their or their family member accounts (joint) by way of cheques without any delay. NRIs can now deposit their personal cheques in a local Post Box of Bank of America in USA and get proceeds credited in Indian Rupees in Andhra Bank Account very fast. It saves the time since the cheque need not travel


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from USA to India and back. It is cost effective. However, the beneficiary of remittance should be complied with KYC guidelines. The procedure is as under:

Remitter is required to draw a cheque on any of the Local Banks in USA in

favour of "Andhra Bank" duly furnishing the beneficiary details such as branch name, 15 digit account number and name of the beneficiary in deposit slip. However, the remitter is required to submit undertaking letter as one time activity for the first time of activity.

Mail it either by First class mail or Courier through Fedex, DHL or local courier to the address give below:

First Class Mail Courier

Andhra Bank(Mumbai) P.O.Box 841810 DALLAS, TX 75284-1697 USA

BANK OF AMERICA LOCK BOX SERVICES LOCK BOX 841810 1950 N. STEMMONS FREEWAY, STE 5010, DALLAS, TX 75207USA

The cheque sent will be presented in Local clearing by Bank of America and

provisional credit will be given to Bank account after two business days. The Credit will be processed by our International Division at Mumbai and

passed on to the beneficiaries account as per Deposit Slip. The credit given by Bank of America is a Provisional Credit. Hence, the

beneficiary needs to wait for a period of 12 days from the date of credit from our International Division.

Under this facility, the remittance charges are low comparatively other mode of transfer of funds. The charges for cheque mail box facility is as below:

Cheque amount Charges including Postage

Up to USD 1000 USD 4.00 > USD 1000 upto USD 3000 USD 5.00 > USD 3000 upto USD 5000 USD 7.00 > USD 5000 upto USD 10000 USD 8.00 Above USD 10000 USD 10.00

NRE-Wire: A wire transfer allows transfer of money from bank account abroad to India in 48 hours. The remitter is required fill the complete transaction and handover the Remittance Confirmation Page to the bank, which will transfer money from remitters` bank account to the other bank account for a fee. It has option to remit funds to any NRE savings or deposit account in India from any account overseas with out any limit on remittance. It offers best Exchange Rate. Remittance from abroad involves conversion of currency (foreign currency to Indian Rupees), where exchange rate plays an important role. To arrive at the total cost of the remittance, it is necessary to know the exchange rate applied to the conversion at the remitters` end or while making payment to the beneficiary in India. The remitting agency adds a margin over the inter-bank rate while quoting the price to the remitter. Such margins will vary depending on the uncertainty about the inter bank rates available to the remitting agency. Normally, the margin will be around 0.25% to 1%.

AB Speed way: It is a Speed, efficient, secure, web based, completely online Forex Remittance product. To avail this facility, the overseas remitter need to complete the under mentioned one time registration process. Step-1: The user need to register giving the details called for on logging in. Further, user to furnish email ID at the time of registration and further process has to be through the link given therein. Step-2: The registration process involves the verification of the bank account given by the remitter by initiating a sub-dollar (Less than one Dollar amount) debit to the account number given. The customer has to confirm the amount reported after


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verifying from his Bank account. This verification process normally takes 2 to 3 business days to complete. Step-3: On completion of the said process, the remitter can log in any time (day/night) and remit the amount to the credit of beneficiaries’ accounts in any of Andhra Bank branches in India. The remitter need to click www.andhrabank.in which redirects to a secure URL http://abspeedway.andhrabank.in. Under this, NRIs residing anywhere in USA are allowed to remit money to account holders of Andhra Bank in India. Further, the remitter can add any number of beneficiaries for one remittance. Like wise he can also set up more than one funding account to do his remittance by way of transfer from his bank accounts in USA. Once the remittance is affected, the amount will be held by our correspondent bank till Day 3 for processing and confirmation and will be credited to our Nostro A/c on Day 4. Bank releases the credit to the beneficiary on the day 5 excluding holidays and Saturdays in both the countries. The limit for remittance under this scheme is as under:

Minimum amount - Nil Maximum amount per day (for verified users) – USD 10,000 Maximum amount per month – USD 15,000 Maximum amount per annum – USD 100,000

Charges: The amount remitted less USD 4 (irrespective of amount remitted) and plus `10/- towards charges will be credited to the beneficiary’s account at the prevailing exchange rates on that day of credit. (Cir.no.206 Ref 15/09 dated 01.09.2010)

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Cash Management – Guidelines

Clean Note Policy: The usage of stapling is causing mutilation of notes and shortening the life of the currency. RBI prohibited the banks from stapling currency notes under section 35A BR Act with an objective to provide clean notes to public. As per policy, Banks should Issue clean notes to the public and accept small denominations such as `1/,

`2/- & `5/-. Not issue number cut notes to public. Any deviation in this regard attracts

penalty. Desist from writing anything whatsoever on the Bank Notes. Educate the customers and members of the public in this regard. Ensure sorting all notes by branches and only Clean Notes/issuable notes are

put into circulation amongst general public. Ensure that branches are not hoarding any Fresh Notes and coins and to be

distributed to the customers. Counterfeit Notes: In order to combat the menace, RBI has issued guidelines to all Banks/Financial Institutions on detection and impounding of counterfeit notes. It is necessary that Currency notes received are carefully examined and impound counterfeit

notes wherever detected to curb circulation of such notes to public. Counterfeit Notes detected shall be branded with a stamp (size of 5 cm x 5

cm) “Counterfeit Bank Note” with branch/office name, date and signature. Branch/Office is required to issue acknowledgement to the tenderer of

counterfeit note. The acknowledgement is to be signed by the tenderer of counterfeit notes and counter cashier with details such as serial number, denomination and number of pieces.

FIR is required to be filed in case where the counterfeit notes found are five pieces and above in a single transaction and acknowledgement is to be obtained from the concerned police authorities. However, in other cases, a consolidated report is to be sent to Police once in a month.

All Counterfeit Notes received back from police authorities are to be preserved in the safe custody of the branch / office for a period of 3 years. Thereafter, these notes are to be sent to the concerned issue office of RBI with full details.

In no case, the Counterfeit Notes should be returned to the tenderer or destroyed by the bank branches / treasuries.

Banks should put in place adequate safeguards / checks before loading currency notes in ATMs.

(Circular no.93 Ref 55/6 dated 03.07.09 – Master Circular on Detection and Impounding of Counterfeit Notes & Cir. No. 159 Ref 55/12 dated 08.08.2011)


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Cash Remittances: Cash movement takes place from one branch to another branch and branch to currency chest and vice versa on a regular basis. Branches / Offices are required to be adhered the following guidelines since it is an important and sensitive one. The guidelines are as under: Remittance Staff / Security Personnel to be accompanied

Below `50 lakh One Clerk / Officer, 1 Sub-staff and 1 Security Guard (if available at the branch)

> `50 lakh & < `100 lakh One Officer, 1 Sub-staff and 2 Armed Guards ` 100 lakh & above One Officer, 1 Sub-staff and Armed Police Escort

Security Escort for cash remittances by Cash Vans Up to `200 lakh To be escorted by 2 Bank Guards > `200 lakh & up to `1000 lakh To be escorted by 3 Bank Guards

General Precaution in Remittances: Remittance is to be done in Cash Van or Four Wheeler Vehicles. Cash Van

must have Alarm system and Fire Extinguishers. Avoid Three Wheeler Vehicles. Two Wheeler Vehicles should not be used. Cash Remittance may be done on foot provided the distance is short (within

the complex) and the remittance must not be over `2 lakhs. Cash must be carried in Steel Boxes only. Armed Guard must sit in front. Remittance is to be done during Day time only. Probationary Officers are not to be detailed for cash remittance. In case of non availability staff, a clerk can be substituted for sub-staff and an

offer for a clerk. (Cir. no.267 Ref 22/01 dated 11.11.2011) Surprise Verification of Cash at Branches: All Branch Heads should carry out verification of cash of their respective branches every month, at different dates of the month with total confidentiality. The verification should also be rotated every month i.e. once before commencement of office hours, another time at the middle of the day and some times at the close of the office hours. Besides the above, branches are subject to surprise verification of cash by controlling offices once in a quarter. Surprise verification report shall cover the aspects such as maintenance of Cash Movement / Key Movement / Cash Discrepancy Registers, maintenance of cash beyond retention limit, maintenance of Bait Money and shortage/excess of cash, if any. Wherever cash position is in excess of Cash Retention Limit, the entire cash on hand should invariably be verified by the Branch Manager and necessary endorsement should be recorded thereof. (Cir no. 325 Ref 55/24 dated 21.12.2011) Incentives & Penalties: RBI introduced scheme in the month of September 2008 for providing incentives to banks for extending enhanced services in the area of mutilated/soiled notes & coin distribution and levying penalties for deficiency in providing services to members of the public. No Activity Incentives 1 Adjudication of Mutilated Bank Notes `2/- per piece

2 Exchange of Soiled Notes One rupee per packet in `5/- `10/- `20/- and `50/- denomination

3 Distribution of Coins over the counter `25/- per bag.

4 Establishment of coin vending machines

Capital Cost-Urban/Metro Centers 50% - Rural & SU centers 75% Operational cost @ `25 per bag.

Bank is passing the incentive received from RBI to the concerned branches/currency chests. (Circular No. 188 Ref 55/11 dated 23.09.2009)


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Scheme on Penalties (Circular no.164 Ref 55/12 dated 06.08.2010)

Activity Penalties Shortage in soiled note remittances and currency chest balances

`50/- per piece in addition to the loss (shortage) in case of notes in denomination up to `50/-. However, for notes in denomination of `100/- and above, the penalty is equal to the value of the denomination per piece in addition to the loss.

Counterfeit notes detected in soiled note remittances and currency chest balances

Equal to the value of the counterfeit note in addition to the loss.

Mutilated notes detected in soiled note remittances and currency chest balances

`50/- per piece irrespective of the denomination.

Non compliance of operational guidelines such as non-functioning of CCTV, non utilization of NSMs and keeping branch cash / documents in strong room.

`5000/- for each irregularity. Penalty will be enhanced to `10000/- in case of repetition.

Violation of any term of agreement with RBI or deficiency in service in currency area as detected by RBI officials viz., i) Non issue of coins over the counter to any member of public, despite having stock. ii) Refusal to exchange soiled notes all bank branches / adjudicate mutilated notes (Currency Chest branches) tendered by any member of public. iii) Not conducting surprise verification of chest balances, at least at bimonthly intervals by officials unconnected with the custody thereof. iv) Denial of facilities/services to linked branches of other banks. v) Non acceptance of lower denomination notes (`10/- `20/- and `50/-) tendered by members of public and linked bank branches. vi) Detection of mutilated / counterfeit notes in ‘reissuable’ packers prepared by the chest.

`10,000/- for any violation of agreement in this regard/deficiency of service `5.00 lakhs in case there are more than 5 instances of violation by the branch. The same will be placed in public domain.

RBI during their Incognito visits to Branches may levy penalty with regard to non adherence of above guidelines and the same will be recovered from the officials responsible for such lapses. Hence all branches have to follow the laid down norms scrupulously without any deviation.

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AB Products – Service Charges

Bank is levying the following service charges w.e.f. 01.10.2009 (Cir.no.169 Ref 44/19 dated 09.09.2009 & Cir.no.79 Ref 27/09 dated 15.06.2011) No

Category / Type

Service Charges Non-Individuals

Individuals Pensioners/ Sen.Citi./Indiv. in Rural Areas

1 Cheque Issue / Return Cheque Book – SB `2.50 per leaf (25 leaves free in a year) Cheque Book - CD `3/- per leaf (No free cheque leaves) Cheque Stop payment – Per leaf `60/-

Max.`250/- `55/- Max.`225/-

`50/- Max.`200/-

Cheque Return - Inward CD cheque – Up to `20000/- `100/- `75/- `50/- SB cheque – Up to `20000/- `75/- `60/- `40/- CD cheque – Above `20000/- `200/- `150/- `100/- SB Cheque – Above `20000/- `100/- `80/- `60/- Cheque Return - Outward `100/- plus other bank charges, if any plus out of

pocket expenses. 2 Balance Enquiry for an item more

than 12 months old – Per item `115/- per item

`110/- per item

`100/- per item

3 Account closure SB (closed within 12 months) `200/- `150/- `100/- SB (closed after 12 months) `100/- `80/- `60/- CD (closed within 12 months) `500/- `350/- `250/- CD (closed after 12 months) `300/- `200/- `150/- No account closure charges for AB Easy accounts (No frills account) 4 Signature verification (per attestn) `125/- `110/- `100/- 5 No Due Certificate (No charges for

weaker section loans) `150/- `125/- `100/-

6 Passbook / Statement charges Issue of Balance Certificate `100/- per certificate Duplicate Passbook / Statement

with latest balance only `15/- per Passbook/Statement

Duplicate Passbook / Statement with previous entries only

Passbook - `75/- plus additional `50/- per bunch of every 40 entries. Statement – `25/- for each 40 entries.

7 Collection of local cheques (Other than clearing cheques) SB Group Accounts `50/- `35/- `30/- CD Group Accounts `100/- `80/- `60/- 8 Collection of Cheques - Others No out of pocket expenses should be levied Up to `5000/- SB accounts – `25/- - Other accounts `50/- `5001 to 10000/- `50/- for all accounts. `10001 to `100000/- `100/- for all accounts. Above `100000/- `2/- per ‘000 with a maximum of `3000/- 9 Safe Custody Charges Scrips `100/- per scrip per annum Sealed cover `500/- per sealed cover per annum Sealed Boxes 20x20x20 c.m. `500/- per annum

30x30x30 c.m. `600/- per annum


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No Category / Type

Service Charges Non-Individuals

Individuals Pensioners/ Sen.Citi./Indiv. in Rural Areas

10 Inward/Outward Bills Up to 1000/- `60/- plus out of pocket expenses Above 1000/- up to 5000/- `80/- plus out of pocket expenses Above 5000/- up to 10000/- `100/- plus out of pocket expenses Above 10000/- up to 1.0 lakh `9/- per thousand plus out of pocket expenses Above 1.0 lakh up to 10 lakh `8/- per thousand plus out of pocket expenses Above 10 lakh `7/- per thousand plus out of pocket expenses

11 Issuance of DD/TT/PO Up to 1000/-

`30/- `20/- `15/-

>1000/- to < 5000/- `25/- `20/- >5000/- to < 10000/- `30/- `25/- >10000/- to < 1 lakh `2.50 per

thousand `2.25 per thousand

`1.75/- per thousand

>1 lakh to < 10 lakhs `2.25 per thousand

`2.00 per thousand

`1.50/- per thousand

>10 lakhs and above `2 per thousand

`1.50 per thousand

`1.25 per thousand

Maximum commission `20000/- `18000/- `15000/- Cancellation of DD/TT/PO `100/- per instrument Duplicate DD/TT/PO `100/- per instrument DD/PO Revalidation `100/- per instrument.

12 Standing instructions (SI) Noting charges `25/- Transfer between accounts No charges Other standing instructions Remittance charges plus out of pocket expenses Nonexecution of SI–Insufficient bal. `100/-

13 Folio charges – CD & ODCC accounts (Quarterly)

`80/- for every 40 entries after availing free entries referred as below

Free entries are allowed per quarter for the accounts where the average credit balance in the account is above

Balance up to `25000/- Nil >`25000/- up to `50000/- 60 >`50000/- up to `1 lakh 100 >`1 lakh up to `2 lakhs 400 Above `2 lakhs No charges

Note: No free entries to C & IFD accounts. 14 Inoperative Accounts – Service Charges (Yearly)

SB Group Accounts `50/- per quarter in Rural areas and `100/- per quarter at all other places.

Current Accounts `200/- per quarter Cir.no.79 Ref 27/09 dated 15.06.2011

No Category / Type

Service Charges Non-Individuals Individuals Pensioners/

Sen.Citi./Indiv. in Rural Areas

15 Cash handling charges Cash receipts under CD and ODCC accounts Up to one bundle No charge More than one bundle `100/- per bundle maximum of `10000/- Note: OD a/cs of existing/retired staff are exempted from cash handling charges

16 Addition/Deletion of names `100/- 17 Change in Operation instructions `100/- 18 Record copy of cheque/DD/PO `100/- per item


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Minimum Balance violation charges: The minimum balances stipulated for deposit accounts (Current and SB group accounts) are as under:

No Category Rural SU Urban Metro 1 CD & ICD 1000 2000 3000 5000 2 SB with Cheque Book 250 250 500 500 3 SB without Cheque Book 100 250 250 500 4 ASB with Cheque Book 300 500 500 500 5 ASB without Cheque Book 150 250 250 300 6 Abhaya Gold / Abhaya Jeevan 1000 7 ASB plus- Cheque book 400 500 500 500 8 ASB plus - without cheque book 200 300 300 300 9 Kids Khazana 100

The mode of calculation of minimum balance is based on Quarterly Average Balance (QAB) in the account. Non maintenance of QAB attracts the following penal charges as per circular no.169 Ref 44/19 dated 09.09.2009. Category Charges Current Accounts `200/- per quarter AB Premium Current Account `400/- per quarter

Savings Bank Accounts `100/- quarter - Metro/Urban/SU areas `50/- per quarter - Rural areas

AB Privilege SB Accounts `150/- per quarter Safe Deposit Lockers: The rents on lockers have been revised as under w.e.f 01.10.2009. (Cir.no.170 Ref 44/20 dated 09.09.2009)

Locker Type Metro Urban S.Urban / Rural A & A1 1000 900 750

B 1100 950 800 C 1150 1000 900 D 1250 1100 1000

E & H1 2000 1500 1300 F 2200 1800 1600 G 2500 2000 1800 H 5000 4000 3000 L 6000 5000 4000

Other conditions: Rentals for built-in lockers shall be 25% more than the rents noted above. The locker operations are restricted to 10 in a quarter. Any operation beyond 10 in a quarter attracts a charge of `50/- per transaction. A concession of 20% in rent is allowed to our existing and retired staff members. Note: All the above service charges attract tax @ 10.30% with effective from 01.10.2009. (Circular no.169 Ref 44/19 dated 09.09.2009) i) Purchase of Local cheques against clearing: At par for salaries cheques of employees of Central/State government and

Public Sector Units maintaining SB accounts with our Bank. Cheques presented by Rice Millers – Applicable cash credit interest rate to the

respective Rice Mill accounts. With regard to others – Interest @ 15.50% p.a.

ii) Purchase of cheques other than local cheques: The charges are 40 paise for every `100/- besides applicable collection charges. If the cheque is returned unpaid, Base Rate + Spread @6.50% is to be collected. (Cir.no.109 Ref 26/27 dt. 30.06.10)


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E-Products – Service charges No Category Service charges 1 RTGS – Outward

Above `2 lakh & up to `5 lakhs `25/- + applicable time varying tariff subject to a maximum of `30/- per transaction

Above `5 lakhs

`50/- + applicable time varying tariff subject to a maximum of `55/- per transaction

2 NEFT (AB Xpress) Up to `1 lakh `5/- per transaction. Above `1 lakh & up to `2 lakhs `15/- per transaction. Above `2 lakhs `25/- per transaction. 3 Electronic Clearing Services (ECS) Registration of ECS `100/- Cheque Return charges (ECS Debits) `100/- per debit 4 Speed Clearing Up to & inclusive of `1.00 lakh No charge Above `1.00 lakh `1.50/- per `000 with a max. of `2000/-

Speed clearing return charges Up to `10000/- ` 50/- Up to `10000/- to `1.0 lakh `100/- Above `1 lakh `150/-

5 Any Branch Banking (ABB) Cash withdrawals by self No charges for cash transactions up to

`50000/- Cash deposits by self Cash remittances by others i) Up to `1000/- `10/- ii) `1001/- to `50000/- `2/- per thousand Non cash transactions i) Up to `1.00 lakh No charges ii) Above `1.00 lakh `50/- per transaction 6

Deposit of clearing instruments at non-home branch drawn on non-CBS branch / other banks

SB Accounts – No charge CD Accounts – No charge up to `1.00 lakh and `50/- per instrument for `1.00 lakh & above.

7 Multi City Cheques (MCC) `5/- per leaf. 8 ATM / Debit Card Annual maintenance charges `75/- per annum at the start of second year Transactions on our ATMs No charges

Transactions on other Bank ATMs `20/- per transaction. However, no charge will be levied for 5 transactions in a month for SB accounts.

Re-issuance (lost/misplaced/damaged) `200/- w.e.f. 01.07.11 9 SMS Push Alerts / Pull Alerts Push – Free. Pull – `3/- per request*

10 Internet Banking No charges * Service provider levy charges


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Processing Charges: The processing charges are as follows: I. Working Capital Limits (Fund & Non-Fund Based) Up to `25000/- `150/- > `25000/- & up to `2 lac `300/- Above `2 lac `300 per lac or part thereof with a

maximum of `30 lac. However, Rice Mills with credit rating of A+ are exempted from processing charges II. Loans against Shares & Securities `300/- per lac III. Mortgage Loans 1% of the loan amount IV. Rent Receivables Minimum `5000/- or 1% of the loan

whichever is higher. Branches have to collect 25% of the normal processing/upfront fee in advance for new accounts involving fund / non fund based credit limits of more than `2 lacs. If the loan is sanctioned, this amount will be adjusted against processing charges/upfront fee to be collected at the time of disbursement of limits. In cases where borrowers come into our fold through Loan Syndicate or on taking a share under consortium arrangement, processing charges/upfront fee shall be collected on the share allocated to our Bank at the time of documentation or at the time of disbursement of limits in line with other member banks.

Upfront Fees: 1% of the term loan amount is to be collected for all categories of borrowers and no ceiling is prescribed for collection of upfront fee on term loans. Concession/Waiver of Processing Charges/Upfront fee: Powers are delegated for permitting concession/waiver up to 50% of processing charges/upfront fee to ED. Powers for permitting concession/waiver up to 100% of processing charges/upfront fees are vested with CMD for all accounts including MC sanctions. (Cir.no.5 Ref 26/02 dated 07.04.2010) Commitment charges are to be levied for term loans of above `5 crores at 1% p.a. for delay in draw down schedule beyond one month. Similarly, working capital limits of `1 crore and above to all corporate borrowers shall be levied @ 0.50% p.a. commitment charges (exclusive of overall ceiling of 2% penal/additional interest) on the unavailed portion of fund based working capital limits subject to a tolerance level of 20% i.e. the utilization of the limit shall not be less than 80% of the sanctioned limit. However, limits sanctioned to Sick/weak units, export credit, banks, public sector undertakings and seasonal industries are exempted from commitment charges. (Cir. no.143 Ref 26/29 dated 25.07.2007) Pre-closure charges are to be levied on Term Loans (repayable beyond 36 months) @ 2% flat on the pre-paid loan amount. However, Education, Housing, SHG, Govt. sponsored scheme loans are exempted from levy of the said charges (Circular no.5 Ref 26/3 dated 08.04.2008).


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Compensation Policy

Providing better and timely service to the customers is a prerequisite for banks since their survival and growth crucially depends on the clientele base. Despite best efforts, some times, omissions and commissions may creep in which may lead to inconvenience to the customers. In order to protect the interest of the customers, banks formulated compensation policy based on the principles of transparency and fairness in the treatment of customers. The expected action and compensation payable to the customers in the event of deficiency of service are as under: Category Compensation payable

Unauthorized / Erroneous debits

Bank should reverse the amount immediately and compensate the customer to the extent of financial loss incurred such as interest or service charges. In case the unauthorized debit is on account of third party, customer should be compensated up to `50000/- or actual debit amount whichever is less.

ECS Debits – Execution failure

Bank should compensate the customer to the extent of financial loss incurred along with service charges, if any.

Stop payment - Payment of cheques

Where the cheque is paid despite stop payment instructions, bank should reverse cheque amount along with charges, if any, with value date within 2 days of the intimation.

Unsolicited Credit Cards – Levy of charges

Bank should reverse the charges immediately and also pay a penalty without demur amounting to twice the value of the charges reversed.

Collection of foreign cheques / currencies - Undue delay

Delay up to 14 days SB Interest + 0.25% simple interest Delay 15 to 45 days SB Interest + 0.50% simple interest Beyond 45 days SB Interest + 0.75% simple interest

Payment of interest on delayed collection of outstation cheques

SB interest rate for the delay period (Metro - 7 days, State Capitals – 10 days and other places – 14 days). Applicable term deposit rate where the delay is beyond 45 days. Term Deposit rate plus 2% interest in case where the delay is beyond 90 days. Applicable loan interest rate is to be paid where the outstation cheques are meant for credit of loan/overdraft accounts. In case the delay is beyond 90 days, applicable interest rate on loans plus 2% to be paid.

Cheques/instruments lost in transit / in clearing or paying bank branches

The fact should be informed to the customer immediately and provide the required assistance to obtain duplicate instrument from the drawer of the instrument. The compensation policy that is applicable to ‘Collection of outstation cheques’ is equally applicable to this category of customers.

RTGS/NEFT/ECS Applicable Repo Rate plus 2% to be paid for delayed period.

Delay in settlement of wrong ATM Debits

In case where the compliant is not resolved within 12 working days from the date of complaint made by the cardholder, bank should pay `100/- per day.

Violation of the code by Banks` Agent

Bank shall take appropriate steps to investigate the complaint and to compensate the customer for financial loss, if any.

Delay in payment of Relief / Savings Bonds

SB Rate

The above initiatives will definitely paves the way for better service and the instances of referring the customer grievances to Ombudsman or any other forum will come down to a grater extent. (Cir.no.105 Ref 34/1 dated 22.06.07 & Cir.no.455 Ref 34/20 dated 31.03.2008)


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Inspection & Audit The overall objective of internal Audit and Inspection is to aid the Bank’s Management in achieving efficiency and effectiveness in all its operations. The focus of internal inspection/audit is to identify measure, control and mitigate the various inherent business, control, and internal risks. The types of inspections and its periodicity are furnished here below: No Inspectio

n Periodicity Coverage

1

Branch Inspection

Depending on Risk rating of the branch in previous inspection: Low Risk – 15 months; Medium Risk and above – 12 months (irrespective of size of the branch)

Total Functioning of Branches

2

RBIA

Along with regular Inspection of the branch

Risk profile of the branches covering following risk parameters: Business Risks viz., Credit Risk, Earnings Risk, Liquidity Risk, Physical & Environmental Risk and Operational Risk Control Risks viz., Internal control Risks (credit/non-credit), Compliance Risk and Technology Risk

3

Surprise Verification of Cash

Quarterly

Cash, Long outstanding items in Sundry Debtors / Sundry Creditors / Sundry Suspense / CRA /Items-in-transit, Remittances to branches, Long outstanding CBPs / IBRs / OBC, Maintenance of Security items and gold loans at random

4 Verification Audit

For C & D rated branches within 6 months from the date of completion of inspection. For High Risk and above rated (under RBIA) branches – within 60 days from the date of completion of inspection.

To ensure improvement in areas where branch lost marks under rating parameters. To ensure improvement in risk status to Medium/Low Risk by verifying the points where branch got ‘0’ marks or low marks. Ver-Audit is to be done by Senior Manager and above working in Controlling Office. The report is to be submitted to HO (Ins Dept) for review.

5 Short Inspection

After 6 Months from last inspection

For Borrowal accounts with aggregate limits `100.00 lakhs and above

6 SIFA Once in a year Total Functioning of Controlling offices

7

Concurrent Audit

Monthly

All day – today transactions at the branch. As per RBI guidelines, 50% of Aggregate Deposits, 50% of Advances of Total Advances of the bank are to be covered. Branches will be identified by H.O for Concurrent Audit every year.

The existing RBIA template is revised segregating the Risks in two viz., Business Risks and Control Risks.


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Business Risks covers Credit Risk, Earning Risk, Liquidity Risk, Physical and Environment Risk and Operational Risk. The maximum marks allotted under each category are as under:

Business Risk - Category Marks Credit Risk 175 Earning Risk 105 Liquidity Risk 50 Physical & Environmental Risk 30 Operational Risk 140 Total 500

Control Risks covers Internal Control Risk (Credit Area), Internal Control Risk (Non Credit Area), Compliance Risk and Technology Risk. The maximum marks allotted under each category are as under:

Control Risk - Category Marks Internal Control Risk – Credit Area 254 Internal Control Risk – Non Credit Area 126 Compliance Risk 70 Technology Risk 50 Total 500

Rating matrix as under:

Risk Based Internal Audit ( RBIA) separate for both Business Risks & Control Risks

Composite Rating

Score Rating Score Rating 70% & Above Low Risk 90% & above Excellent 50% to <70% Moderate Risk 80% to < 90% Very Good (A)

Below 50% High Risk 60% to < 80% Good (B) 40% to < 60% Satisfactory (C) < 40% Unsatisfactory (D)

The Branch which secures Medium Risk rating both under Business Risks and Control Risks will place itself in High Risk level in the Risk Matrix. High Risk branches under RBIA and C & D rated branches under overall rating are subjected to verification audit. (Cir.no.073 Ref 02/01 dated 14.06.2010) Closure of Inspection Reports: First Compliance to be submitted to Controlling office within 2 weeks from the date of completion of Branch Inspection. The report should be closed within 3 Months from the date of completion of Inspection.

***


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Guide to Staff – Welfare/Other Schemes

Bank has been extending various facilities/financial assistance under different schemes from time to time for the benefit of staff members and the gist of such schemes is furnished here under: 1) Reimbursement of Expenses incurred towards Food and Beverages: All employees on the rolls of the Bank including Part Time Sweepers on graded scale wages are covered under the scheme. Bank reimburses `300/- per month to employees, who attends office for more than 10 days in a month, towards Food and Beverages expenses. The amount is to be claimed before the end of succeeding month to which it relates and no arrears will be paid. (Cir.no.555 Ref 20/100 dated 29.03.08)

2) Subsidized Canteen: Bank is providing subsidized canteen facility to the employees where the staff strength exceeds 50. The subsidy is being paid to the canteen contractor @ `30/- per employee per month at Hyderabad and `25/- per employee per month at other centers.

3) Incentives for Excellence in Education to the Children of Employees: Bank is providing cash incentive every year to the children of employees (maximum of two) to encourage them for further studies. It covers all children who are studying First Standard to Post Graduation. However, this scheme is applicable to only those children who are wholly dependent and whose age is below 25 years. The quantum of incentive per annum per child is as under:

No Standard Incentive amount 1 First Standard to SSC (X or equivalent) 2000 2 Intermediate (XI & XII classes) 2500 3 Graduation to Post Graduation 4000

To claim the incentive, eligible employees are required to submit application (April to December) along with proof of pass and continuation of studies to the branch/office for onward submission to controlling office for sanction. Courses pursued under Distant Education mode or in a Foreign Country are not covered under the scheme. (Cir.no.118 Ref 03/24 dated 12.07.10)

4) Merit Awards to the Children of Employees: In order to encourage meritorious students among the children of staff, Bank introduced Zone-wise Merit Award Scheme. Head office is also considered as a separate zone for this purpose. Merit Awards will be given for Boys and Girls separately for four categories viz., Officers, Clerks, Sub-staff and PTS. Zonal office will call applications every year. Students who have passed the examinations conducted during March to August are eligible to apply for awards. The toppers of each group will be given the following cash incentives.

(Amount in `)

Rank VII Class SSC/SSLC/HSC Intermediate

MPC/BZC Comm./Arts First 800 900 1000 1000 Second 700 800 900 900 Third 600 700 800 800 Fourth 500 600 700 700

(Cir.no.555 Ref 20/100 dated 29.03.08)


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5) Andhra Bank Employees Group Insurance Scheme – Payment of Premium: Bank entered agreement with LIC of India to cover the life risk of all the employees and the relevant premium is being born by the Bank. The premium calculated for all employees who are on rolls as on the last working day of February every year and paid to LIC. The amount of coverage is as under:

No Cadre Risk coverage 1 JM-I to General Manager 375000 2 Clerks 200000 3 Sub-staff / Part Time Sweeper (Full wages) 100000 4 Part Time Sweeper (3/4 wages) 75000 5 Part Time Sweeper (1/2 wages) 50000 6 Part Time Sweeper (1/3 wages) 33000

6) Holiday Homes: All employees (including retired employees) of the bank, who are proceeding on holiday or leave, can avail Holiday Home facility with nominal rate at 15 centers viz., Bangalore, Bhubaneshwar, Chennai, Goa, Haridwar, Jaipur, Ooty, Manali, Mysore, New Delhi, Shirdi, Tirupathi, Tirumala, Varanasi and Gagtok. At present the tariff for the room is `10/- per day in case of Officer Staff and `5/- per day in case of Award Staff. The maximum stay allowed is 4 days only. However, it is restricted to maximum of 2 days with regard to stay at centres like Bangalore, Chennai, Mysore, Shirdi and Varanasi. Employees desirous of availing the facility are required to send an application through Branch/Office to Staff Welfare Department, Head Office for allotment of room. (Cir.no.118 Ref 03/24 dated 12.07.10)

7) General Health Check-up: All staff members/spouse who are on the rolls of the Bank and who have completed 40 years of age are eligible to claim for reimbursement of expenses for general health check-up subject to maximum of `2500/- in Metros and `2000/- at other places. However, additional reimbursement of expenses for Mammography test subject to maximum of `600/- is available to all eligible women employees / spouse of employees’ (who have completed 40 years) w.e.f. 24.03.2006. The reimbursement of expenses is subject to production of relevant receipts/bills of approved Hospitals/Diagnostic centers. This scheme is applicable to spouse of the staff members also. This facility can be availed by the eligible staff once in 2 years. (Cir.no.346 Ref 3/45 dated 26.12.2008) 8) Eye Check-up & Spectacles: All staff members who are on the rolls of the Bank are eligible to claim reimbursement of expenses for Eye Check-up and purchase of spectacles subject to maximum of `1000/-. This is a one time reimbursement in the entire service. (Cir.no.555 Ref 20/100 dated 29.03.2006)

9) Hospitalization Expenses – Major ailments: Reimbursement of hospitalization expenses for major ailments (By-pass surgery, Angio-plasty, Kidney transplantation, Cancer, Gastro enterology, Brain Surgery and Orthopedic surgery and other rare and costly ailments approved by HO) over and above IBA package will be reimbursed subject to maximum of `100000/- under Staff Welfare Schemes. However, the difference in sanctioned amount and the amount claimed by the employee should be above `25000/-. All staff members and their dependants are covered under this scheme. (Cir.no.191 Ref 3/29 dated 23.09.09) 10) Mentally retarded children – Financial Relief: An amount of `10000/- per annum will be paid to the staff whose children are mentally retarded till the child attain the age of 25 years. (Cir.no.413 Ref 20/72 dated 29.02.2008) 11) Physically Challenged Employees / Children: All staff members who submit disability certificate are eligible to avail this facility. Under this scheme bank reimburse an amount not exceeding `10000/- and `15000/- for purchase of Wheel chair/Crutches and Artificial Limb/Hearing Aid respectively. Bank reimburses the


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amount once in 5 years in case of Wheel Chair/Crutches and once in 2 years in case of Artificial Limb / Hearing Aid. The above reimbursement is also available to the spouse / children of staff who are physically challenged. (Cir.no.413 Ref 20/72 dated 29.02.08 & Cir.no.191 Ref 3/29 dated 23.09.09)

12) Group Personal Accident Insurance (GPA): Bank has taken Group Accident policy from M/s.United India Insurance Company Limited to cover the employees against risks round the clock. It covers death, permanent disablement and partial disablement. The risk coverage of various categories is as follows:

No Category Coverage (` in lakhs) 1 CMD 10.00 2 Executive Director 8.00 3 General Managers 7.00 4 Deputy General Managers 6.00 5 Asst. General Managers 5.00 6 Chief Managers 4.00 7 Senior Managers 3.00 8 Deputy Managers 2.00 9 Asst. Managers 1.50 10 Clerks / Pilots / Drivers 1.00 11 Sub-staff (including PTS/Security guards) 0.50

13) Group Savings Linked Insurance Scheme (GSLI): Employees (except sweepers on consolidated wages/contract employees) in the age group of 18 to 60 are entitled to become members of the scheme. Bank collects monthly contributions and remits to LIC of India. The monthly contribution includes two components viz., Savings & Insurance Premia in the ratio of 70:30. The saving component earns interest @ 8% p.a. and will be paid to the employee/legal heirs when the scheme comes to an end due to retirement/resignation/demise of the employee. The monthly premium payable and risk coverage of various categories is furnished here under:

No Category Monthly Premium

(Savings plus Risk) Sum assured

1 Scale IV & above 127.50 120000 2 JM-I to MM-III 95.63 90000 3 Clerks 63.75 60000 4 Sub-staff (including PTS) 31.88 30000

In case of expiry of an employee due to accident, double the sum assured will be paid by LIC of India. (Circular no.113 Ref 20/23 dated 09.07.2008)

14) Liability Insurance: It covers the lives of the employees to the extent of liabilities outstanding in Housing / Vehicle Loan as on 31st March every year and also on fresh disbursal by IFLIC of India. Premium is payable by the employee to the debit of respective loan accounts and the details of the coverage is as under:

Category Coverage Insurance Premia

Housing Loans

Liability as on 31st March every year subject to maximum of `20 lakhs (inclusive of addl.HL).

`4.70 per thousand per annum or maximum of `9400/-

Vehicle Loans

Liability as on 31st March every year subject to maximum of `4.50 lakhs & `0.60 lakh for four & two wheeler loans respectively.

`3.86 per thousand per annum or maximum `1351/- for 4 wheeler & `232/- for 2 wheeler

(Cir.no.426 Ref 3/77 dated 19.03.2011)


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15) Furniture – Maintenance Charges: Officers who have availed the residential furniture facility are eligible to claim reimbursement of maintenance charges incurred on declaration basis after 3 years of purchase @ 5% of the original cost of the items every year. However, items like mattresses and pillows are not covered under the scheme. (Cir no.20 Ref 3/06 dated 21.04.2010) 16) Silver Jubilee Awards: Employees who have completed 25 years of service are honoured by presentation of an award with a cost not exceeding to `2000/- and the same is to be presented in a staff meeting at branch/office.

Facilities to Retired (Superannuation) Employees: Besides terminal benefits (Pension / PF / Gratuity / Leave encashment etc.,) the retired employees are entitled to avail the following benefits / facilities from the Bank:

1. Memento/Gift on the day of Retirement on superannuation: In recognition of the service rendered by the employees (including PTS) Bank is presenting a Memento/Gift worth `10000/- on the eve of retirement from service. (Cir.no.555 Ref 20/100 dated 29.03.2006)

2. Reimbursement of Transport Charges: Employees who retire on superannuation are eligible to claim reimbursement of transport charges (luggage) incurred on account of shifting of luggage from the office where he took retirement to the place of permanent settlement in India by submitting TA Bill. Employee is eligible to claim all expenses on par with normal transfer TA Bill except DA.

3. Retention of Residential Furniture: Officers who availed residential furniture can retain the items on retirement by paying the following amounts to the Bank. (Cir.no.20 Ref 3/06 dated 21.04.2010)

Age of the furniture Amount to be paid

Below 5 Years Where the cost is `5000/- or less - 50% of original cost or book value whichever is higher and where it is >`5000/- present book value is to be recovered.

5 Years & < 7 Years 40% of original cost or book value whichever is higher. 7 Years & above 25% of original cost or book value whichever is higher.

4. Holiday Homes: Bank is extending Holiday Home facility to the retired employees also. Retired employees can avail this facility at select centers with nominal rate. At present the tariff for the room is `10/- per day in case of Officer Staff and `5/- per day in case of Award Staff. The maximum stay allowed is 4 days only. However, the maximum stay is restricted to 2 days at important locations. For allotment of rooms they need to submit application to Staff Welfare Department, Head Office. (Cir.no.555 Ref 20/100 dated 29.03.08)

5. Hospitalization Scheme for retired employees on super annuation: Bank is reimbursing medical expenditure incurred on surgery of major ailments to the tune of `2.5 lakhs for self and `1.5 lakhs for spouse with a margin of 10% and 25% for self and spouse respectively. However, in case of cancer treatment (without surgery) the reimbursement is allowed up to `100000/- per year. (Cir.no.413 Ref 20/72 dated 29.02.2008) 6. Additional Interest Rate: All retired/resigned employees are eligible for 1% additional interest on the deposits made by them under Savings and Term Deposits. Further, they are also eligible for Senior Citizen interest rate (0.50% extra) besides staff interest rate. (Cir.no.04 Ref 3/1 dated 05.04.2011)


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Guide to Bereaved Families

Taking care of family members is the sacred responsibility of the family head and he is expected to take all possible care so that the spouse/children should not to face financial problems even in his absence i.e. untimely demise. Bank has been extending various facilities/benefits to the bereaved families through different schemes. Hence, staff and their family members are necessarily to have an idea of these schemes and the associated benefits thereon. The nominees/legal heirs are entitled to avail the following financial benefits/facilities from Bank and other organizations:

1) Family Pension: In case of an employee who opts for pension and expired after completion of 7 years of service, higher family pension equal to 50% of pay last drawn by the deceased employee or twice the ordinary rate of family pension whichever is less is payable.

2) Provident Fund: The actual contribution made by the employee/bank, and interest thereon, which includes Voluntary Provident Fund. However, PF Loan, if any, will be adjusted from the above contributions.

3) Gratuity: Employee is eligible for 15 days for every completed 26 working days and accordingly the eligible amount will be paid subject to the ceiling, if any. This amount will be paid immediately. 4) Future Service Gratuity Insurance: Bank has taken master policy for the said purpose. In case of death of any employee, Bank submits the claim to LIC and the same will be paid to the nominees of the deceased on receipt of claim amount from LIC. Normally, the settlement of claim takes 3 to 6 months. (Cir.no.360 Ref 20/62 dated 01.01.2008) 5) Leave Encashment: Bank pays the amount for the unavailed Privileged Leave, if any, subject to maximum of 240 days. The last drawn salary is the basis for calculation and payment. 6) Exgratia: Bank pays an amount of `1.50 lakh towards exgratia to the families (Nominees/Legal heirs) of the employee who die in harness. Advance amount of `25000/- will be paid immediately to meet the funeral related expenses and the same will be adjusted from the exgratia amount. (Cir.no.413 Ref 20/72 dt.29.02.08) 7) Financial Aid to Bereaved Families of the Employees who die in harness (FABF): It is a voluntary contributory scheme and the interested employees can become member of the scheme by submitting option-cum-nomination letter to Head Office. The members are required to contribute `10/-, `6/- and `4/- for officers, clerks and sub-staff respectively for each death. The average amount payable under the scheme is around `50000/-. (Cir.no.560 Ref 20/112 dated 09.03.2004 & Cir.no. 143 Ref 3/28 dated 23.07.2010) 8) Educational Grant to the children: The children of the deceased are entitled to claim reimbursement of `2000/- for X class, `2500/- for Intermediate and `4000/- for Graduation/Post Graduation for each child every year subject to maximum of two children. However, they are eligible to avail this facility only up to the age of 25 years or superannuation date of the deceased whichever occurs earlier. The application is to be forwarded through the branch where the deceased employee worked. (Cir. no.555 Ref 20/100 dated 29.03.2006) 9) Residential Furniture: Family of the deceased is allowed to retain the furniture provided by the bank under Officers Residential Furniture Scheme without payment of any amount/charges to the bank. (Cir.no.131 Ref 4/1 dated 20.06.2005)


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10) Leased Accommodation: Family members of the deceased employee are entitled to retain the quarters till completion of the succeeding month or current academic year whichever occurs later. 11) Reimbursement of Transport Charges: Family members are eligible to claim reimbursement of transport charges (luggage) incurred on account of shifting of luggage from the place of work of the deceased to the place of permanent settlement in India by submitting TA Bill and they are entitled to claim all expenses and the TA Bill is treated on par with normal transfer TA Bill except Dearness Allowance.

12) Group Savings Linked Insurance Scheme (GSLI): Bank collects monthly contributions from the members and remits to LIC of India. The monthly contribution includes two components viz., Savings & Insurance Premia in the ratio of 70:30. In case of death on account of accident, LIC pays the double the amount of assured. Bank submits the claim to LIC as per the eligibility. The monthly premium payable and risk coverage of various categories is furnished here under:

No Category Premium (M) Sum assured 1 Scale IV & above 127.50 120000 2 JM-I to MM-III 95.63 90000 3 Clerks 63.75 60000 4 Sub-staff (including PTS) 31.88 30000

13) Compensation & Reward for resisting crime against Bank: To protect the interest of the family members of the employee who dies on account of resisting crime against bank, the following amounts will be paid to the bereaved family.

No Facility Remarks 1 Compensation

on death JM-I to MM-III Officers - ` 3 lakhs SM IV & above officers - ` 5 lakhs

2 Pay & Allowances

Bank continues to pay last pay drawn by the deceased officer, till one of the children attains age of 21 years or normal retirement age of the deceased whichever is earlier.

3 Educational Exp.

Up to Degree for children.

4 Employment Family member subject to eligibility. In case of survival – Cash reward of `50000/- will be paid besides eligible for out of turn promotion or advance increment or Special Leave.

14) Special Grant of exgratia: Bank is paying `1000/- per month to the spouse of the deceased, who retired on or before 31.12.1985 and had rendered at least 25 years of continuous service prior to their reaching the age of superannuation and are not getting any pensionary benefits from the Bank. (Cir.no.249 Ref 20/41 dated 10.10.2006) 15) Liability Insurance: All liabilities of staff members under Housing and Vehicle loans are insured and bank claims the amount from LIC of India in case of death of the employee and adjust the same to the respective loan accounts. The maximum coverage for Housing and Vehicle loans is `20 lakhs and `4.50 lakhs respectively. However, in case of two wheeler the maximum coverage available is `60000/- only. (Cir.no.438 Ref 3/67 dated 15.03.09) 16) Other reimbursemens: The family members of the deceased are entitled to claim the reimbursement of News Paper, Conveyance and Refreshments of the current month/quarter and arrears if any from the branch.


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17) Appointment of dependant of the deceased: Bank may consider the appointment of one of the dependants of the deceased employee, who expired while performing official duty as a result of violence, terrorism, robbery or dacoity. However, this is applicable only to those deceased employees who have completed 5 years of service or before reaching the age of 30 years, whichever is later. The appointment shall be made only in the clerical and sub-staff cadre. 18) Group Insurance Scheme (CODST): This is a Group Policy taken by the Bank with LIC to cover the lives of the employees of the Bank with the following coverage.

No Category Coverage 1 Officers (JM-I to SM-VII) 375000 2 Clerks 200000 3 Sub-staff 100000 4 PTS – ¾ wages 75000 5 PTS – ½ wages 50000 6 PTS – 1/3 wages 33000

19) Group Personal Accident Insurance (GPA): Bank has taken Group Accident policy from M/s.United India Insurance Company Limited to cover the employees against risks round the clock. It covers death, permanent disablement and partial disablement. The risk coverage of various categories is as follows:

No Category Coverage (`lakhs) 1 CMD 10.00 2 Executive Director 8.00 3 General Managers 7.00 4 Deputy General Managers 6.00 5 Asst. General Managers 5.00 6 Chief Managers 4.00 7 Senior Managers 3.00 8 Deputy Managers 2.00 9 Asst. Managers 1.50 10 Clerks / Pilots / Drivers 1.00 11 Sub-staff / PTS/Security guards 0.50

20) Scheme of payment of ex-gratia in lieu of appointment of dependants on compassionate grounds: This scheme is applicable to employees who die in harness and employees who seek premature retirement due to incapacitation before reaching the age of 55 years. Bank grants ex-gratia to the family of the eligible employee subject to the ceilings specified below, provided the monthly income of the family from all sources is less than 60% of the last drawn salary (net of the taxes) of the employee:

Officers `8 lakhs Clerks `7 lakhs Sub-staff `6 lakhs

The dependents should make an application within 6 months from the date of the death of the employee. The ex-gratia amount in eligible cases will be paid within 3 months of receipt of application, if the same is complete in all respects. (Cir.no.517 Ref 3/31 dated 06.03.2006)


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Other Institutions / Organizations

1) Surety Loan: In case where the deceased employee availed loan from Andhra Bank Employees Co-operative Bank Limited, the balance under Thrift and MMBF contributions are adjusted to surety loan and the remaining balance will be written-off through insurance cover. The family members need not to pay liability under surety loan of Andhra Bank Employees Co-operative Bank. In case where there are no outstanding dues by the member, a sum of `20000/- will be paid to the nominee or dependants.

2) Andhra Bank Officers` Federation is extending exgratia of `50000/- to the family members of the deceased officer. However, this scheme is meant for those officers who are members of the federation only. (Federation cir.no.4/SW/2007 dated 17.01.2007)

3) Insurance Claims: The family members of the deceased are entitled for the sum assured mentioned below provided the deceased maintains/avails the accounts/facilities.

No Account / Product Coverage Remarks 1 AB Visa Platinum 1000000 Accidental Death 2 AB Gold Card 500000 Accidental Death 3 AB Classic Card 200000 Accidental Death 4 Abhaya 25000 Accidental Death 5 Abhaya Savings Plus 50000 Accidental Death 6 Abhaya Gold 100000 Accidental Death 7 AB Jeevan Abhaya 100000 Natural / Accidental Death

Note: Claims will be settled by the respective insurance companies as per the eligibility and Bank acts as facilitator only. Important Points: All staff members should ensure that nomination is submitted for Pension,

PF, Gratuity, FABF, GSLI, Credit card, Andhra Bank Employees Co-operative Bank, Insurance Linked Accounts etc., to avoid delay in settlement of claims.

Branch/Office to communicate the demise of the employee to Welfare Department, Head Office, Andhra Bank Employees Co-operative Bank, Credit Card Department etc., immediately.

Branch/Office to submit the death certificate of the deceased to Head Office

to settle terminal benefits (Pension, PF, Gratuity etc.,) immediately. In case of accidental death, branch to should send death certificate along with copy of FIR/Post Mortem Report.

Wherever the deceased staff member has not submitted nomination, the

branch/office has to obtain claim forms from the legal heirs as per the procedure laid down for payment of amounts by Bank. However, in such cases, the claims will be settled only at HO.

With regard to Abhaya, Abhaya Plus, Abhaya Gold and Abhaya Jeevan, the

claim is to be submitted at the respective branches where the deceased maintained said accounts.

Any expenditure under staff welfare has to be claimed before the expiry of

the following financial year failing which the same stands lapsed. ***


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Question Bank / Recalled Questions

1. As per the bank's policy, valuation of single property of `50 crore & above, valuation reports shall be obtained a) From minimum of two independent valuers (chartered engineers) and the lower of two valuations shall be taken into consideration for determining the value of the property. b) From minimum of two independent valuers (chartered engineers) and the average of two valuations shall be taken into consideration for determining the value of the property. c) From a independent valuer (chartered engineers) 2. The following advances are not covered under WTPCG. Which is not correct? a) Advances granted for exports made on deferred terms of payment, turnkey projects, construction works and service contracts b) Advances grated to Government Companies c) Advances granted against exports against export orders d) Advances granted by OBUs, SEZ, EPX e) Advances granted to exporters against their export entitlements like CCS/DDB 3. As per loan policy of the bank, internal exposure ceiling for off balance sheet commitments for Bank Guarantees is ……….. of net worth of bank a) 2 times b) 3 times c) 5 times d) 4 times e) None 4. Failure of internal systems, processes and people is a a) Credit Risk b) Market Risk c) Liquidity Risk d) Operational Risk e) Technology Risk 5. Abhaya Savings Bank Account – Min. & Max. age for opening of the account a) 0 & 70 years b) 0 & 65 years c) 5 & 70 years d) 5 & 65 years e) 5 & 60 years 6. As per the banks loan policy advance against book debts should not exceed ……. % of working capital limits. a) 10% b) 50% c) 25% d) 100% e) no such ceiling 7. The difference between the selling rate & buying rate of foreign exchange is called a) Exchange Margin b) Exchange Spread c) Exchange Profit d) Dealers Spread 8. PCFC advance generally allowed for a maximum period of a) 360 days b) 270 days c) 180 days d) 90 days e) no such limit 9. TDS deducted by bank, is to be remitted to Income Tax authorities within. a) within 15 days from the date of deduction b) within 7 days from the date of deduction c) within 15 days in the succeeding month d) within 10 days in the succeeding month e) within 7 days in the succeeding month 10. All the systems in Office building are inter-connected is called as a) Wide area network b) Intra departmental network c) Satellite link d) Local area network


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11. Companies resort for Commercial Paper since they are a) Long Term Low Cost funds b) Short Term High Cost funds c) Long Term High Cost funds d) Short Term Low Cost funds e) None 12. Customer of your branch (above 65 years) placed a term deposit and requesting you to exempt it from TDS since his total income including interest on deposit is below the taxable income, which form you obtain. a) Form G b) Form H c) a or b d) No form is required e) None 13. Borrowers availing crop loans up to 3 lakh in the year 2012 are eligible for interest subvention of …….. besides incentive of ………. for prompt repayment. a) 1% & 3% b) 2% & 1% c) 3% & 1% d) 2% & 3% e) None 14. Validity of a cheque for 6 months is defined in ……….Act a) Indian Contract Act b) B R Act c) Negotiable Instruments Act d) RBI Act e) Not defined in any Act 15. To consider housing loan, the age of building shall not be more than a) 10 years b) 5 years c) 20 years d) 15 years e) 25 years 16. Bank is required to submit XOS statement to RBI, in respect of a) Foreign exchange transactions b) Import transactions c) Overdue export bills d) Overdue import bills e) FCNR accounts 17. Facilities available to AB Grama Kranthi Savings Account are a) Inbuilt overdraft b) No minimum balance c) No service charge d) a & b e) All 18. A counterfeit note is impounded by the branch at the time of receipt of cash. The acknowledgement has to be signed by a) Cashier b) Manager c) Cashier and remitter d) Casher and Manager e) Cashier if remitter refused to sign the acknowledgement 19. CDR-1 system is applicable only to accounts which are under a) Standard b) Sub-standard c) Doubtful d) a & b e) All 20. LC stipulates last date of shipment as 21.10.2011 and last date of negotiation as 21.11.2011. The documents tendered by customer shows that the actual date of shipment is 18.10.2011. In this case the documents can be negotiated on or before. a) 21.10.2011 b) 11.11.2011 c) 18.11.2011 d) 21.11.2011 e) 30.1.2011 21. For transfer of funds through NEFT (National Electronic Fund Transfer) and minimum and maximum amount that can be transferred are a) `1,000 and maximum `5 lacs b) `1,000 and maximum no limit c) `5,000 and maximum `1 lacs d) No minimum & maximum amount e) None of the above.


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22. A term deposit of NRO can be accepted for a minimum period of a) 1 year b) 2 years c) 6 months d) 7 days e) 3 years 23. Payment of installments should commence with in …… months from the date of restructure of loan. a) one month b) 3 months c) 6 months d) 9 months e) 12 months 24. When can a Bank review its Investment Portfolio (HTM)? a) Half-yearly 30th sep & 31st Mar b) Half-yearly 30th June & 30th December c) Yearly – Jan to December d) Yearly – First Quarter e) None 25. Zonal Offices/Branches have to seek prior permission from Treasury, Mumbai a) For accepting fresh deposits of `15 lacs and above b) For accepting fresh deposits of `1 crore and above c) For accepting fresh deposits of `5 crores and above d) For accepting/renewal of deposits of `5 crores and above e) For accepting/renewal of deposits of `1 crore and above

26. As per the loan policy of the bank, for conduct of stock and receivables audit, one of the following statements is wrong. a) Can not be conducted by Statutory Audit b) Can not be conducted by Concurrent Auditor c) Can not be conducted by firm of practicing Chartered Accountants/Cost Accountants d) A FCA of the firm of chartered accountants should have a minimum practice of 5 years e) A firm need not have any minimum practice 27. What is the first item of sequence to be followed in risk management? a) Monitoring b) Measurement c) Identification d) Mitigation e) None of the above 28. Bank can not proceed against the borrower under SARFAESI Act where

a) Security is agril. land b) Liability is less than 1 lac c) Liability is less than 20% of the principal d) Pledge of movables e) All of the above

29. As per RBI guidelines on Disclosure norms (disclosures to be made at the footnote of Balance sheet), which one of the following is not true?

a) Movement of NPAs b) Large exposure - Deposit/advances c) Capital structure & Capital adequacy d) Industry-wise distribution exposure e) Market Risk in Trading Book

30. Rural branch visit by Zonal Office should be done once in a

a) Month b) Quarter c) Half-year d) Year e) None 31. A cheque is received by the branch for payment issued by one of the customers. In the meanwhile a request is received by a public prosecutor informing that the customer who issued the cheque is imprisoned for criminal activity and directs the branch not to make payment of the cheque. a) Branch should not make the payment b) Branch should ask for a order of the court regarding imprisonment of the customer c) Branch should insist written request from the public prosecutor d) Branch can make the payment.


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32. With regard to lockers, which of the following guideline is not issued by the RBI? a) Branches are to link the allotment of lockers to placement of fixed deposits b) To ensure prompt payment of locker rent, branch are to obtain a Fixed Deposit which would cover 3 years rent and charges for breaking open the locker c) Branch Manager can allot the 1/3rd of vacant lockers d) Wait list of lockers need not be maintained. 33. Within the bank's aggregate capital market exposure of ………of its net worth the bank's direct investment in shares/convertible bonds/debentures, units of equity oriented mutual funds/Venture Capital funds should not exceed ……..of its net worth. a) 40% & 15% b) 30% & 15% c) 40% & 20% d) 80% & 50% e) No ceiling 34. As per the compensation policy of the bank with regard to collection of foreign cheques, bank shall pay compensation @ …….. to the customer if the delay is beyond 45 days. a) SB Interest b) Term Deposit Rate c) Base Rate d) SB Interest + 0.75% e) None 35. Official Language Implementation Committee meetings are to be held in Region A once in ……. a) Two months b) Three months c) Six months d) Twelve months e) None 36. In terms of direction of RBI & IBA on simplified procedure for settlement of claims preferred by the legal heirs of the deceased constituents, bank has to settle the death claims involving amount upto Rs……… a) `10000 b) `50000 c) `100000 d) `25000 e) None 37. Credit Card holders are required to pay annual subscription of ` …… & ` ……… for Classic/Master Card & Gold Card respectively provided if the cardholders not achieved the stipulated minimum card spend.

a) `550 & `1000 b) `500& `1000 c) `750& `1000 d) `1000 & `1000 38. CDR mechanism, which of the following is not correct. a) Multiple Bank Accounts b) `10 crores & above c) Fund & Non-fund based d) Preserving viable corporates e) Account should be NPA 39. Branches can negotiate bills drawn under LC for non-constituents, if a) LC is restricted to our bank only, subject to the condition that the Proceeds will be remitted to the regular banker of the beneficiary b) LC is not restricted and proceeds will be remitted to the beneficiary c) LC bearing the clause without recourse d) None 40. X depositor approached the branch with term deposit receipt of `2 lakhs which was due in the year 2008 and not interested for renewal of the matured deposit and requesting for payment of interest for overdue period. How do you act? a) No interest will be paid since the deposit is not renewed b) Term Deposit applicable interest at the time of maturity will be paid for the overdue period c) Interest rate at the time of maturity or at the time of renewal whichever is lower will be paid for overdue period d) SB interest will be paid for the overdue period


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41. HO interest subsidy for branches under transfer pricing for priority sector advances for rural and urban branches. a) 1% b) 2% c) 3% d) 5% e) None 42. RBI imposing penalty on Currency Chests for incorrect reporting of daily cash position because a) It is causing financial loss to RBI b) To inculcate discipline c) Non adherence of Owners` instructions d) None of the above 43. To be eligible for classification under priority sector, the ceiling prescribed for dealers in irrigation equipment is. a) `10 lakhs b) `20 lakhs c) `30 lakhs d) `40 lakhs e) No limit 44. Right of Set-off refers to a) Marking of lien in deposit account of the borrower b) Transfer of term deposit balance, which is due for maturity in the next year to borrower account for adjustment of overdues c) Transfer of Savings Bank balances to borrower account for adjustment of overdues in loan account of the depositor d) b & c e) None 45. A term deposit of `50000/- in the name of individual with one year tenor is cancelled prematurely. The penalty for premature closure is…. a) 0.50% b) 1.00% c) 1.50% d) 2.00% e) No charges 46. In case of BLD deposit, the balance outstanding in the deposit is to be informed to the depositor once in a …… a) Every Day b) Weekly c) Fortnightly d) Monthly e) Half-yearly 47. Under ABJ, no claim is entertained for the first …..days from the entry date except for the reason of cause of death due to the accident. a) 30 days b) 45 days c) 60 days d) 90 days e) 180 days 48. Maximum Project cost under USEP of SJSRY for individual borrower a) 1 lakh b) 2 lakh c) 5 lakh d) 10 lakh e) 50000 49. A bank can prefer appeal on the award passed by Banking Ombudsman within 6 months from the date of a) Passing Award b) Accepting the Award by the complainant c) Receipt of the copy of the Award d) None of the above 50. Current Account is treated Inoperative/Dormant where there are no transactions in the account for the last a) 6 months b) 12 months c) 18 months d) 24 months e) 36 months


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51. Which of the following is treated as indirect finance to agriculture?

a) Purchase and distribution of inputs for the allied activities such as cattle feed, poultry feed with loan amount up to `100 lakh b) Dealers in drip irrigation/sprinkler irrigation system/agricultural machinery, irrespective of their location with a loan amount up to `40 lakh per dealer c) Food and agro-based processing units with investments in plant and machinery up to `10 crore d) b & c e) None

52. What is the standard provision on the assets other than SME/Agriculture? a) 0.25% b) 0.40% c) 0.50% d) 1.00% e) Nil 53. A customer's cheque realized for `2 lacs is credited to his account by mistake as `2000. Subsequently cheque presented for `20000 returned unpaid by the bank. What is the responsibility of the banker? a) Bank to pay damages to the customer b) Not responsible c) Customer to ensure balance before issuing the cheque d) None of the above 54. Which of the following statement is not correct with regard to RTGS? a) Meant for Two lakh & above remittances only b) Remittance should be through account transfer only c) Maximum charges should not be more than `50 per remittance d) Charges to be collected from the Beneficiary only 55. Power of Attorney was granted by a customer for a period of 12 months to X. The customer wants to revoke it after 6 months. What are the options available to the Branch? a) It should be revoked only after 12 months b) Yes he can revoke at any time c) Revoked with the consent of the power of attorney holder d) Yes he can revoke with the consent of the Banker e) None 56. Authorized Dealers are allowed to open EEFC account in the name Foreign Exchange Earners with ………. of their foreign exchange earnings. a) 75% b) 80% c) 90% d) 100% e) None 57. Complement of staff for cash remittance of above `20 lac & up to `50 lac a) Officer and Clerk b) Officer and Armed Guard c) Officer, Clerk and Sub-staff d) Officer, Clerk and Armed Guard e) Officer/Clerk, Sub-staff and Armed Guard 58. Which of the following are exempted from levying penalty for late payment of installments under Recurring Deposit Plus scheme a) Senior Citizen b) Staff Account c) Deposit beyond 5 years d) Accounts with one lakh & above e) All 59. AB easy savings deposit – minimum deposit. a) No minimum b) `5 c) `100 d) `500 e) `1000 60. Illiterate account – Nomination. Which statement is correct? a) Can extend in favour of literate only b) Nomination facility is not available c) Consent from Nominee is required d) Witness is a must e) None


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61. SARFAESI – sale notice to debtor by creditor within how many days?

a) 30 Days b) 60 Days c) 45 Days d) 90 Days e) None

62. The company has its registered office in Mumbai and its factory is at Kolkatta. The Company has availed credit facilities from banks branch in Hyderabad. The equitable mortgage of company's immovable property is to be created at a) Mumbai b) Kolkata c) Hyderabad d) Any notified place in India e) None 63. A cheque signed by the director as authorized signatory of a company is presented for payment but at the same time branch received information about the death of the director. Branch to a) Pay the cheque as he signed in fiduciary capacity b) Stop payment c) Pay cheque on receipt of confirmation from the company d) None

64. PMEGP cost of project for loans under manufacturing …… and for Business/Service sectors…….

a) `15 lakhs & 10 lakhs b) `20 lakhs & 15 lakhs c) `25 lakhs & 15 lakhs d) `25 lakhs & 10 lakhs e) None

65. Periodicity of submission of detailed stock statement & abridged statement incase of OCC accounts of above one lakh and below 5 lakh limits.

a) Every month b) Once in a Quarter c) Abridged – once in a month & detailed once in quarter d) Abridged once in quarter & detailed once in Half-year e) None

66. The entry age for Liability Insurance of Housing Loans, Education Loans and Vehicle Loans are a) 18 to 60 years b) 18 to 65 years c) 18 to 70 years d) 21 to 65 years e) None

67. Banks are required to pay DICGC fee on a) Monthly basis b) Quarterly basis c) Half-yearly d) Yearly e) None

68. Exposure to single/group borrower up to 5% is to be provided after-

a) Borrower consent to disclose the same in notes to account in Bank’s annual report b)Approval of Board c) Charging additional interest @2% d) a & b e) a, b & c 69. Composite loan limit of ….. can be sanctioned by banks to enable the MSME enterprises to avail of their working capital limit requirements through single window a) 25 lakhs b) 50 lakhs c) 100 lakhs d) 150 lakhs e) None

70. Amount allowed to be transferred abroad by any resident without RBI permission for purchase of fixed assets in a financial year. a) One million US Dollors b) Two million US Dollors c) Three Million US Dollors d) Two lakh US Dollors e) None

71. Family Income criteria (per annum) for DRI loans in Rural & Urban areas. a) 18000/- & 24000/- b) 15000/- & 24000/- c) 18000/- & 36000/- d) 24000/- & 36000/- e) None


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72. What is the floor limit (Min & Max) in case of CRR?

a) 3% & 10% b) 3% & 15% c) 5% & 10% d) No limit e) None

73. Safest money market instrument.

a) Commercial Paper b)Treasury Bill c) Certificate of Deposit d) a & b e) None

74. Subordinated debt instruments are to be limited to ….. of Tier I together with other components of Tier II should not exceeds …. of Tier I capital a) 100% & 50% b) 50% & 50% c) 50% & 100% d) No limit e) None 75. DICGC covers

a) Credit balance in cash credit account b) Overdue term deposit c) Deposits of central / state govts. d) a & b e) a, b & c

76. Photographs / signatures can be converted into electronic form through

a) Printer b) Pen Drive c) CPU d) Scanner e) Web Camera

77. For arriving eligible amount under rent receivable, branch to take 84 months rent or residual period lease period rent whichever is less duly deducting….

a) TDS b) Service Tax c) Professional Tax d) 15% towards maintenance e) all

78. Crossed cheque, presented over the counter through the authorized agent of collecting banker for his valued customer for cash payment. Will you pay? a) Bank can pay b) Payment can not be made since it is a crossed cheque c) Payment can be made on cancellation of crossing duly signed by the drawer d) None

79. Proprietor of a firm executed Power of Attorney to B. Cheque signed by Power of Attorney Holder for payment after the death of the proprietor. Will you pay? a) Yes b) No c) Will be paid with the consent of legal heirs of the deceased d) None

80. Banks are required to submit return “Unclaimed Deposit” every year in the month of ……. within days from the close of the reporting month.

a) March & 30 days b) December & 30 days c) December & 15 days d) March & 15 days e) None

81. Banks to maintain SLR as per

a) Section 24 of BR Act b) Section 42 of BR Act c) Section 42(1) of RBI Act d) Section 24 of RBI Act e) None 82. Competent authority to write-off loans given to Directors is

a) Board b) Management Committee c) Chairman & Managing Director d) Reserve Bank of India e) None


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83. Under Financial Inclusion Plan of the bank, the agents appointed by the bank to collect money and make payments to the depositors are called as

a) Branch Managers b) Business Correspondents c) Business Facilitators d) b & c e) None

84. Floating Provisions can be added to Tier-II capital up to __% of RWA

a) 1% b) 1.25% c) 1.50% d) 1.75% e) None

85. What is the maximum loan amount to EWS & LIG under ISHUP scheme?

a) 1 lakh & 1.60 lakh b) 0.50 lakh & 1 lakh c) 1 lakh & 2 lakh d) No limits e) None

86. In case where counterfeit note is found at the branch, FIR is to be filed by a) Remitter b) Cashier c) Beneficiary whose account the amount is to be credited d) Receiving Bank Branch e) None

87. Relation ship between Customer & Banker in case of Safe custody of articles

a) Lessor&Lessee b) Prinicpal&Agent c) Bailor&Bailee d) Assignor&Assingee e) None

88. Which of the following is not an Operational Risk?

a) People Risk b) Technology Risk c) System Risk d) Liquidity risk e) None

89. Truncated cheque means

a) Shared Clearing b) Cheques presented will be processed by the depositing branch itself c) Physical movement of instruments from branch to clearing house d) Movement of electronic image instead of physical movement of instruments e) None

90. Provision on Standard Advances to be shown under which head of Balance sheet of the bank

a) Advances & Other Assets b) Provisions & Other Assets c) Liabilities d) Provisions & Other Liabilities e) None

91. As per RBI guidelines, if Bill discounted became NPA, the income already booked but not realized is to be

a) Reversed b) Need not be reversed but 50% provision is to be made c) Need not be reversed but 100% provision is to be provided d) None

92. What is the maximum loan amount that can be given under Small Manufacturing Units under MSME?

a) 100 lakh b) 200 lakh c) 300 lakh d) 500 lakh e) No limit

93. Insurance cover available under AB Platinum & Visa Gold? a) `1 & `2 lakhs b) `5 & `2 lakhs c) `5 & `10 lakhs d) `10 lakhs and `5 lakhs 94. What is the age criterion for individuals to open New Pension System (NPS)? a) No age limit b) 10 to 60 years c) 18 to 60 years d) above 60 years e) None


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95. Innovative Perpetual Debt Instrument should not exceed …. of Tier-I Capital and the investments by FIIs should not exceed …. a) 10% & 49% b) 15% & 55% c) 15% & 49% d) 20% & 49% e) None 96. The settlement formula under Comprehensive Corporate Compromise Policy (CCCP) for accounts above `2 lakh is

a) Real Account + Simple interest (contractual) till repayment b) Real Account + Simple interest (PLR) till repayment c) Real Account only d) 90% of Real Account balance 97. SOD against gold ornaments, if not utilized fully, what are the commitment charges for how much period? a) 1% p.a. on the unutilized portion of the limit b) 2% p.a. on the unutilized portion of the limit c) 0.50% per quarter, on the unutilized portion of the limits, if the limits are not utilized for at least 75% in any quarter d) No commitment charges e) None 98. As per AML norms, banks are required to preserve records…… a) 3 years from the date of cessation of transaction b) 5 years from the date of cessation of transaction c) 10 years from the date of cessation of transaction d) No time limit 99. Interest subsidy is available to all eligible Educational Loan Borrowers for a period of a) First one Year b) First Two Years c) During Study Period d) Till closure of the loan e) None 100. What is the amount and period allowed for farmers to avail loans against pledge of agricultural produce? a) `5 lakhs & 6 months b) `10 lakhs & 12 months c) `10 lakhs & 6 months d) No limit on amount but should be repaid within 12 months e) None 101. A customer with a bearer cheque came for withdrawing the amount of cheque for `4000/-. The counter clerk expressed that the amount is not sufficient to pass the cheque as the balance is short by `700/-. The bearer of the cheque deposited `700/- and withdrawn the amount. Further account holder objected for revealing the balance in the account. In such a situation what is his liability? a) It is the responsibility of the customer to maintain sufficient balance in the account while issuing cheque and hence bank is not liable b) Any body can deposit amount in any account and bank has no right to stop such credits c) Bank paid the cheque amount to the bearer since the instrument is in order in all respects d) Bank is not in order in disclosing the account balance to the bearer of the instrument and hence liable for damages e) None 102. LC states ‘about’ in case of amount, what does it indicate? a) 5% b) 10% c) 20% d) 25% e) None


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103. Unspent foreign currency should be submitted with in how many days after returning to India? a) Retain any amount of foreign currency b) Returned to AD within 90 days c) Allowed to retain $5000 US Dollars d) Need to return unspent foreign currency within 180 days, if the amount exceeds $2000 US Dollars e) None of the above 104. The minimum education qualification stipulated for borrower availing credit limit of `15 lakhs under PMEGP. a) Intermediate (10+2) b) 10th Standard c) 8th Class d) None 105. The risk involved in Business Correspondent Model is a) Credit Risk b) Operational Risk c) Reputation Risk d) Default Risk e) No Risk is involved 106. Single and Group borrower exposure norms are a) 10% & 20% b) 20% & 40% c) 15% and 40% d) 15% & 20% e) None 107. Banks are required to provide provision towards operational risk a) 10% of Gross Income b) 15% of Gross Income of the last 2 years c) 15% of Gross Income (average of last 3 years) d) 15% of Net profit e) None 108. As per AML/KYC norms, review of accounts, customer identification of data is to be updated once in ….. years & ….. years for Low and Risk and High Risk Category accounts. a) 2 years & 1 year b) Once in two years c) 5 years & 2 years d) 2 years & 5 years e) None 109. Joint account operated either or survivor, the number of nominees can be a) Joint depositors are allowed to nominate one each b) Only one nominee is allowed c) No nomination facility is available for Joint Accounts d) None 110. Premium payable on pre-shipment and post shipment whole turnover post shipment packing credit. a) 5 & 10 ps per month b) 5.50 & 6.00 ps per month c) 6.00 ps per month d) 6.00 & 5.50 ps per month e) None 111. Short term crop loan treated as NPA if it remains unrecovered for a) One Crop Season b) Two Crop Seasons c) One Crop Season + 90 days d) Existing NPA norms that are applicable for Term Loans e) None 112. For appealing to DRT, the borrower need to deposit a) 25% of suit amount b) 10% of suit amount c) 15% of suit amount d) No deposit required e) None 113. Women granted a loan of `80 lakhs under CGTMSE, what is the amount of claim in case of default? a) `40 lakhs b) `52.50 lakhs c) `60 lakhs d) `64 lakhs e) None


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114. Banks can extend Education loans to the students to pursue studies in India and Abroad with a maximum amount of a) `5 & `10 lakhs b) `10 & `20 lakhs c) `10 lakh for studies in India and no cap for studies abroad d) 80% of education cost without any cap on maximum loan e) None 115. As per RBI guidelines, Branch to issue to SB account holders a) Pass Book b) Account Statement c) a & b d) None 116. Post dated cheque presented in clearing paid by the bank and at the same time another cheque presented was returned as there is no sufficient balance in the account. Customer claimed for damages. What is the liability of the bank? a) Bank can make payment of post dated cheque, if the instrument is otherwise in order b) Bank is not in order in making payment of post dated cheque c) It is the responsibility of the depositor to mention correct date while issuing cheque and hence banker is not liable d) Issuing cheque without adequate balance is the responsibility of the customer and hence banker is not liable e) None 117. At present, Banks are required to maintain SLR at a) 20% b) 24% c) 24.50% d) 25% e) None 118. The minimum …… should be maintained on daily basis. a) 50% of eligible CRR b) 70% of eligible CRR c) 80% of eligible CRR d) 100% of eligible CRR e) None 119. Nominee obtains payment in the capacity of a) Owner b) Beneficiary c) Agent d) Trustee e) None 120. Staff should present in the branch 15 minutes before commencement of business hours, this is applicable to a) All Branches b) Rural Branches only c) Urban & Metro Branches d) No such stipulation e) None 121. Once the guarantor repays the loan and he attains the status of a) Debtor b) Creditor c) Agent d) Right of subrogation e) None 122. The present rate of service tax including cess is a) 12.36% b) 12% c) 10.30% d) 10% e) None of the above 123. Banks obtain photograph at the time of opening of the account with a view to a) Avoid benami accounts b) Verify the identity of the customer c) Verify with police records d) a & b e) a to c 124. Service charges levied are to be displayed by the bank in a) Bank’s own Website b) RBI Website c) Branch Premises d) IBA Website e) a to c


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125. The form SDF is used for exports where a) Custom office is not computerized b) Custom office is computerized c) Software d) Sent by Post e) None of the above 126. Banks to submit Wilful Defaulters list to a) RBI with all accounts irrespective of liability b) CIBIL c) RBI where the liability is `25 lacs & above d) Banking Division, New Delhi e) None of the above 127. Banks are required to submit CTR (Cash Transaction Report) to ------- within ----- of succeeding month. a) FIU, 30 days b) FIU, 15 days c) FIU, 7 days d) RBI, 7 days e) RBI, 15 days 128. Premium payable on deposit insurance on every `100 per annum is a) 10 paise b) 5 paise c) 25 paise d) 50 paise e) None of the above 129. Bank introduced e-trade (online trading) in association with a) NSE b) CDSL c) M/s.Religare Securities Ltd. d) M/s.Karvy Securities e) None 130. Who is not eligible to convert general crossing to special crossing? a) Holder b) Drawer c) Payee d) a & b e) None of the above 131. Banks can create assignment on a) Book Debts b) Stocks c) Land & building d) Deposits e) Immovable 132. Banks are required to preserve old records as per a) BR Act b) RBI Act c) Indian Contract Act d) NI Act e) Evidence Act 133. Tax Deduction at Source (TDS) is exempted to a) Savings b) Fixed c) NRE/FCNR d) Recurring e) a, c & d 134. Which statement is not correct with regard to advances against shares? a) Maximum loan allowed is `10 lacs against physical shares b) Maximum loan allowed is `20 lacs against demat shares c) Margin requirement is 50% for physical shares & demat shares d) None of the above

135. Garnishee order is not applicable a) Credit balance in SB b) Credit balance in CD c) Credit balance in Cash Credit account d) Term Deposits in the Joint names e) None of the above 136. What is the Minimum and maximum period for fixed deposit of five lakh? a) 7 days & 10 years b) 15 days & 10 years c) 15 days & 5 years d) discretion of the bank e) None of the above 137. The method of interest booking on agriculture advances is a) Monthly b) Quarterly c) Half-yearly d) Yearly e) None


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138. RBI injects liquidity through a) Increase Bank Rate b) Reduction of Repo Rate c) Reduction of Reverse Repo d) Increase CRR e) Increase SLR 139. Provisioning norms are not applicable to loans sanctioned to a) Agriculture b) Exports c) DRI d) Govt. Sponsored Schemes e) Against Deposits 140. As per Basel-II norms, banks to move to new approach to assess Operational Risk with effective from 01.04.2010 a) Standardized Duration b) Standardized c) Internal Rating Based d) Internal Model e) None of the above 141. Fixed Deposit is maturing on Sunday. It shall be deemed to be payable on a) Monday b) Immediate succeeding working day c) Preceding Day i.e. Saturday d) a & b e) None of the above 142. What is the maximum amount that can be allowed to Software Development under priority sector? a) `10 lacs b) `20 lacs c) `100 lacs d) Not eligible to cover under priority 143. Exporter may avail pre-shipment credit at the request of the issuing bank on the basis of a) Green Clause Credit LC b) Revocable LC c) Red Clause LC d) Back to Back LC 144. A person appointed by the court to look after the properties of the insolvent person is called a) Administrator b) Liquidator c) Assignee d) Attorney e) None of the above 145. Clayton’s rule applies to a) Deposit Accounts b) Demand Loans c) Term Loans d) Overdrafts / Cash credits e) None of the above 146. Percentage of DRI advances should go to Rural/Semi Urban Branches. a) 50% b) 25% c) 66.66% d) 75% e) None of the above 147. What is the maximum amount Branch can extend instant credit to the customers against outstation cheques? a) `15000 at all Branches b) `25000 in Urban/Metro Branches c) `10000 at all Branches d) Discretion of the Branch Manager e) None 148. Which of the following statements are not correct with regard to MSME? a) Investments in Plant & Machinery is to be taken as criteria for Manufacturing Enterprises b) Investment in Equipment is to be taken as criteria for Service Enterprises c) No collateral security or third party guarantee is required for loans up to `5 lakhs d) No collateral security or third party guarantee is required for loans up to `25 lakhs in case of Tiny Sector e) None of the above


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149. UCPD guidelines are issued by a) FEDAI b) RBI c) Ministry of Finance d) IBA e) ICC Paris 150. One of your SB account holder requested to include his wife and daughter as nominees after one year opening of the account. Will it be accepted? a) It can be accepted since the nominees are the family members of the depositor b) Can not be considered since the request is not received at the time of opening of account c) Can be considered with 50% share each d) Nomination should be made only in favour of single name. Hence can not be considered e) None of the above 151. What is the relationship between the Bank and Overdraft Customer where the account is showing credit balance? a) Creditor & Debtor b) Principle & Agent c) Trustee & Beneficiary d) Debtor & Creditor e) None of the above 152. What is the maximum period for which FCNR deposit can be opened? a) One Year b) Two Years c) Three Years d) Five Years e) Ten Years 153. Which of the following can not be a nominee? a) Illiterate Person b) Minor c) NRI d) HUF e) None of the above 154. In case of dishonour of cheques on financial grounds, the holder is required to issue notice to the drawer within … days to claim remedy under section 138 of NI Act a) 7 Days b) 30 Days c) One Year d) Three Years e) None of the above 155. Bank has right to cancel the allotment of locker, if the customer does not operate or surrender within ………. despite notice sent to the locker holder. a) Three Years b) Five Years c) Ten Years d) Banks discretion e) None 156. Borrowers who are having satisfactory dealings with bank for a minimum period of ………. Years are allowed to avail LUCC facility. a) 5 Years b) 3 Years c) 2 Years d) 1 Year e) None of the above 157. Statement is not true with regard to AB Swarnabharana scheme? a) Purchase of Gold / Gold ornaments by Women only b) The minimum loan amount is `20000/- and the maximum loan is `2 lac c) No collateral security is required for any amount d) Maximum repayment period is 60 months e) Co-obligation of father/husband or suitable third party guarantee is required. 158. The applicable cheque book charges for Current Account is a) `2 per leaf b) `3 per leaf c) `3 per leaf in MICR center and `2 per leaf in Non MICR center d) 25 free cheque leaves and `3 per leaf thereafter e) None 159. High Debt Service Coverage Ratio (DSCR) indicates a) Unable to meet the installment obligations b) Able to meet payment of installments comfortably c) Liquidity problem d) a & c e) None of the above


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160. X Company approached the Bank for sanction of working capital limit of `800 lakhs and the Current Ratio of the company is 1.15:1. What is the course available to the branch? a) Proposal can be considered as the current ratio is acceptable b) Proposal can be declined since current ratio is below 1.33:1 c) Advise the company to increase capital to bring the current ratio to 1.33:1 d) Proposal is to be referred to next Higher Authority for sanction e) None of the above. 161. Which of the following statement is not true with regard to Capital Gains Deposit Scheme? a) Income Tax Assesses who are eligible for exemption under section 54 of the IT Act are alone can open account with Banks b) Accounts can be opened under Savings, Fixed and Term Deposits c) Cheque book can be issued to eligible accounts. d) No lien or deposit loan is allowed against such deposits e) None of the above 162. Which of the following features are not applicable to AB Tax Saver Scheme? a) Tax exemption is available for the deposit amount under section 80C of IT Act b) Period of deposit is allowed up to 5 Years c) TDS is applicable, if interest payment is above `10000/- in a financial year d) Maximum amount of deposit allowed is `5 lakhs e) c & d 163. A fall in Quick Ratio in comparison with Current Ratio indicates a) High Inventory Holdings b) Low Inventory Holdings c) Decrease in Current Liabilities d) None of the above 164. Financial statements includes a) Balance Sheet b) P & L c) Cash & Funds Flow d) a & b e) a, b & c 165. Banks are permitted to take over borrowal accounts from other Banks & Financial institutions provided a) Account should be Standard Asset with positive net worth b) Copy of the borrowal account for preceding 6 months is to be obtained c) P&C report is to be obtained from other bank before disbursement d) Branch to take approval from next sanctioning authority e) All above 166. The guidelines on extending Adhoc Limits to the borrowers are a) Allowed in fund and non-fund based limits b) Can be allowed maximum of 3 times during the validity of limit and the maximum period allowed is 3 months for each adhoc limit c) Adhoc Limit can be allowed up to 20% of the sanctioned working capital limits to all eligible borrowers d) a & b e) b, c & d 167. Which of the following statement is not true with regard to TOD? a) Can be allowed in Savings Bank Account b) Can be allowed in Current Deposit Account c) Can be allowed only 3 times in a account in a year d) Should not be allowed in staff accounts e) None of the above 168. The eligible criteria for sanction of Tractor Loans under Kisan Bandhu scheme is a) 3 Acres of Wet / Double cropped land b) 6 Acres of Dry / Single cropped land c) Minimum of 2000 working hours per year on borrower land d) a & b e) b & c


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169. The applicable net interest rate on loans sanctioned under Surya Shakthi Scheme is a) 2% for individuals b) 4% for institutions c) BMPLR for industrial & commercial organizations d) a & b e) None of the above 170. With regard to lending to farm sector, the guidelines on obtention of No Due / No Objection certificate are a) Banks should not insist for the above certificate for loans up to `50000/- b) No charges are to be levied for issuance of certificate c) Self declaration from the farmer is to be obtained d) All above e) None of the above 171. AB Speed way is meant for a) Inward remittances from Middle East Countries b) High Value remittances within India c) Inward & Outward Remittances from/to USA d) Inward Remittances from USA only e) None of the above 172. RBI extending incentives to Banks for the following services a) Adjudication of Mutilated Bank Notes b) Exchange of Soiled Notes c) Distribution of Coins over the counter d) Establishment of Coin vending Machines e) All above 173. What charges the bank levy to the Current Account customers for non maintenance of Quarterly Average Balances? a) Metro/Urban Branches - `300/- Per Quarter b) Rural / Semi Urban Branches – `250 per quarter c) `200/- per quarter irrespective of branch location d) a & b e) No charges 174. Scheme of payment of ex-gratia in lieu of appointment of dependents on compassionate grounds for officers is a) Minimum of `500000/- b) Maximum of `800000/- c) Maximum of `700000/- d) Maximum of `600000/- 175. Statements which is not true with regard to Locker operations? a) The rent for “A” type locker is `1000/- p.a. at all branches b) Rentals for in-built lockers shall be 25% more than the approved rents c) Levy additional charge of `50/- per transaction where the operations are beyond 10 in a quarter d) Staff /Retired staff hiring the lockers eligible for 20% concession in rent e) None 176. GSLI scheme covers risk (other than accident) of General Manager Cadre up to a) `150000/- b) `120000/- c) `100000/- d) `90000/- e) `60000/- 177. Branch sanctioned OCC limit of `10 lakhs against hypothecation of stocks worth `15 lakhs with 30% margin. What would be the notional drawing power when the present value of stocks is `20 lakhs? a) `10 lakhs b) `14 lakhs c) `20 lakhs d) `10.50 lakhs e) None 178. Which of the following documents do not attract stamp duty? a) Promissory Note b) Mandate c) Power of Attorney d) Form-A e) None


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179. The funds available under short term sources is greater than short term uses, which indicates a) Low Current Ratio b) High Debt Equity Ratio c) Higher Current Ratio d) Low Debt Equity Ratio e) None 180. What would be the applicable interest rate payable to the legal heirs of the deceased on overdue period of matured Term deposit, if not renewed? a) SB Interest Rate b) Contracted Interest rate of matured deposit c) Simple interest applicable to FD for the period the deposit remained with bank after maturity d) Applicable FD interest will be paid if renewed for further period e) No interest 181. Stamped receipt is to be obtained for all cash transactions of above a) `100/- b) `500/- c) `1000/- d) `2000/- e) `5000/- 182. The net of Exports & Imports and the services including foreign inward remittances forms part of a) Balance of Payments b) Capital Account c) Current Account d) Trade Surplus e) Invisibles 183. Banks are empowered to take possession of securities (other than rural properties) under provisions of……………Act, when the borrower fails to repay the loan as per the agreement. a) Indian Contract Act b) Revenue Recovery Act c) DRT Act d) SARFAESI Act e) Banking Regulation Act 184. What is the net interest rate (Interest Rate minus Interest Subvention) applicable for short term agriculture production loans (Crop Loans) up to `3 lacs for the year 2010-11? a) Base Rate b) Base Rate – 1% c) 10% d) 8% e) 7% 185. Base Rate of the Banks will be fixed by a) Indian Banks Association b) Reserve Bank of India c) Planning Department of the Bank d) Asset Liability Committee (ALCO) e) Discretion of the Bank 186. While renewing the credit limits of the company, you find that the Debt Equity Ratio is 3 compared to that of 2.5 in the previous year. It indicates a) Increase of Profit enabled the Company to add to Reserves b) Decrease of Debt Burden on the Company c) Adverse Impact on Profit on account of increased interest burden d) None of the above 187. Banking Codes and Standards Board of India (BCSBI) deals with a) Inspection & Audit of Banks b) Funds & Investments in Banks c) Sanctioning of Loans d) Customer Service e) Banking Ombudsman 188. Banks can issue draft against accepting cash up to a) `50000/- b) `20000/- c) `100000/- d) `49999/- e) Any amount


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189. How long the counterfeit notes can be kept with the bank after having reported to police. a) 30 days b) 1 Year c) 2 Years d) 3 Years e) None 190. Banking Correspondents are allowed to undertake financial services within the radius of ……… & ………. in case of Rural / Semi-urban & other areas respectively. a) 5 KMs&2 KMs b) 30 KMs&5 KMs c) 15 KMs&5 KMs d) 15 KMs&10 KMs e) No limit 191. What is the insurance coverage available to the borrowers for natural death and death due to accident under SGSY scheme? a) `6000 & `12000 b) `5000 & `10000 c) `6000/- only d) `10000/- e) None 192. Having furnished PAN, NRO Term deposit attracts TDS on interest income at a) 10% b) 20% c) 30% d) 10.30% e) 30.90% 193. Which of the following component is not required to be taken in to consideration while arriving Base Rate? a) Cost of deposits/funds b) Negative carry cost of CRR/SLR c) Unallocated overheads d) Average return on Networth e) Base Rate of Peer Banks 194. Branches should keep the PMEGP backend received in ……… and should be adjusted to the loan account only after completion of ……… months. a) Fixed Deposit & 36 months b) Savings Deposit & 36 months c) Savings Deposit & 24 months d) Fixed Deposit & 24 months e) None 195. Garnishee order is by _____ and the customer and bank relation_____to it. a) Income Tax Authorities & Debtor and Creditor b) Police & Debtor and Creditor c) Court & Judgment Debtor and Judgment Creditor d) Court & Judgment Creditor and Judgment Debtor e) None 196. Under AB Gramakranthi Savings accounts, which of the following statement is not correct? a) Accounts can be opened with introduction b) No service charges to be levied c) Built-in overdraft facility (`500/-) d) Balance should not exceed 50000/- e) Eligible for Cheque Book / Debit cards 197. Call Money Market interest are linked with a) Bank Rate b) Repo Rate c) Reverse Repo Rate d) Market forces e) None 198. Income eligibility criteria for Visa Gold and Platinum cards are a) 2 lakh & 3 lakh per annum b) 2.4 lakh & 5 lakh per annum c) 3 lakh & 5 lakh per annum d) 5 lakh & 7.5 lakh per annum e) None 199. Firm X and Y are having accounts with Bank and the both the firms are represented by A, B and C as partners. Firm X showing a debit balance of 2.20 lakh and there is a credit balance of 3 lakh in Firm Y. Bank adjusted the debit balance of X account with available balance in Y account.


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a) Branch can exercise right of set-off b) Right of set-off can not be exercised as the accounts are different c) Right of set-off can be exercised by issuing a notice d) None 200. Transaction Password relates to a) Core Banking b) ATM operations c) Internet Banking d) Tele banking e) None 201. Nomination in respect of the following is to be witnessed by two persons. a) All deposit accounts b) Deposit accounts where the nominee is a minor c) Physically challenged accounts d) Thumb impression accounts (illiterate) e) None 202. Eligible properties under Rent Receivables scheme, which one of the following statements is not correct? a) Residential / Commercial properties at Metro / Urban areas b) Premises letout to banks located in rural areas c) The property shall be unencumbered with clear and marketable title in favour of owner d) Legal opinion from approved legal advisor shall be obtained e) Valuation of property shall be got done by approved engineer of the bank 203. When the contents of the Negotiable Instrument are modified by the drawer, it is treated as a) Forgery b) Fraud c) Material alteration d) suppression of facts e) None 204. Liability Insurance scheme covers a) Education Loans b) Housing Loans c) Vehicle Loans d) a & b e) All 205. Housing Loan of `80 lakh where the LTV is below 75%, it attracts Risk weight @ a) 75% b) 100% c) 125% d) 150% e) 175% 206. A cheque was issued for `8000/- leaving blank space both at figures and words column, and the bearer of cheque made it `80000/- and withdrew amount. Customer made a claim for `72000/- against the bank.

a) Bank to reimburse the amount since the cheque was issued for `8000/-only b) Customer is liable since he is negligent having left blank space at figures and words column c) Bank and Customer equally responsible d) Bank to file case against the bearer for making alternations of cheque e) None 207. The least discussed aspect by a financial analyst while appraising proposal a) Ratio Analysis b) Economic conditions c) Technical aspects d) Managerial aspects e) Marketing aspects 208. Which of the following is part of Tier-I capital? a) Cumulative Perpetual Preferential Shares (CPPS) b) Subordinate Debt c) a & b d) Perpetual Non-cumulative Preferential Shares (PNCPS) e) Revaluation Reserves 209. Exercise of nomination by the depositor a) Optional to the depositor b) Mandatory in case of single named accounts c) Mandatory in case of joint accounts d) Mandatory for locker accounts e) None


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210. Which of the following is exempted from NPA provisioning? a) Loans against Deposits b) Loans guaranteed by State Govt. c) Loans guaranteed by Central Govt. d) Loans against NSCs e) Loans against Govt. Securities 211. In case of deceased borrower, what is the extent of liability of the legal heirs? a) Limited to the extent of property inherited b) Not liable at all c) Unlimited and unconditional d) 50% of liability e) None 212. X introduced for opening the account of Y. What is the responsibility of X in case of fraud committed by Y? a) To be reimbursed fully b) No responsibility c) 50% of loss d) Assist the bank in identifying the account holder e) None 213. Under ‘Whistle Blower’ the information can be directly submitted to

a) Board b) Audit Committee of the Board c) Management Committee d) Central vigilance Commission e) Reserve Bank of India 214. The maximum loan can be sanctioned under DRI (including Housing) a) `12500/- b) `25000/- c) `15000/- d) `20000/- for SC/ST e) c & d 215. Preservation time for applications of closed accounts a) 3 years b) 5 years c) 10 years d) Permanent e) None 216. Foreign tourist who visits India can hold US dollars (currency) maximum of a) 1000 b) 2000 c) 3000 d) 5000 e) None 217. Why Banks prefer to reverse the contra entry immediately on expiry of Bank Guarantees? a) To avert claim from beneficiary b) To avert maintenance of CRAR c) To avert provisioning d) To improve profit e) None

218. Prepayment charges to be collected for loans against Rent Receivables.

a) 2% irrespective of tenor b) 1% for loans above 3 years c) 2% for loans with repayment period of above 3 years d) No prepayment charges e) None

219. The interest rate on NRE deposits is fixed based on

a) LIBOR + 100 basis points b) LIBOR + 75 basis points c) LIBOR + 175 basis points d) Discretion of the Bank e) None

220. Loans sanctioned to………, are exempted from exposure ceilings.

a) Priority Sector b) Export c) State/Central Government d) Real Estate e) None 221. RD Plus Scheme - Which statement is not correct?

a) Interest is exempted from TDS b) Flexible payment of installments c) Interest calculation method as to that of Savings Bank Deposit d) No penalty for premature cancellation for below one year e) Loan against deposit is available


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222. Delay in collection of cheque > 90 days, bank to pay Interest at applicable

a) SB Interest b) Term Deposit Interest c) Term Deposit Interest + 2% d) BMPLR e) No interest

223. Payment of FD beyond `20000/- in cash is violation of IT rules and attracts

a) Penalty & Imprisonment b) Penalty – Double the amount c) Penalty – Not more than deposit amount d) No penalty

224. On receipt of possession notice (SARFASEI) issued by the Bank, if the borrower raises objection, the same should be replied within a) 7 days b) 10 days c) 15 days d) 30 days e) None

225. Can a Private Limited company join as a partner in a partnership firm? a) Yes b) No c) Yes with limited liability d) None

226. What is the limitation period for public to approach Consumer forum for redressal of their grievances against Bank?

a) No limitation period b) One year from cause of action c) Two years from cause of action d) Ten Years from cause of action e) None

227. When PMEGP subsidy can be adjusted to loan account? a) At the request of the borrower before closure of the account b) After 3 years provided if there are no recoveries in the account c) Discretion of the Bank d) A & B e) None

228. Account opened in the name of A&B jointly and nomination is given in favour of ‘C’ . Branch received request from the nominee for payment of deposit as ‘A’ expired. What is the course of action?

a) 50% of deposit can be paid to the nominee b) Nominee has no right since other joint depositor is alive c) Amount will be paid to nominee with the consent of legal heirs of ‘A’ d) Nomination facility is not available to Joint accounts e) None

229. Cheque signed by the drawer as “R N Das” instead full signature and paid in due course. Drawer demands for return the amount as signature differs. a) Bank is liable to pay the amount to the customer since the payment made is not in due course as signature on the cheque differs from specimen signature on record. b) Bank is not liable on the ground that the amount was paid to the customer and the contention of the customer is not tenable since it is not a forgery. C) Bank to share 50% of the amount since there is negligence on the part of the official passed the cheque. d) None of the above

230. What is the discount for inclusion of Subordinate Debt under Tier-II capital where the Sub-ordinate Debt maturity is less than18 months?

a) 50% b) 60% c) 70% d) 80% e) None

231. Account is classified as NPA for non-submission of stock statement within …………days.

a) 30 days b) 60 days c) 90 days d) 120 days e) 180 days


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232. Powers to write-off operational losses (fraud cases) of `200 lakhs? a) General Manager b) Executive Director c) Chairman & Managing Director d) Management Committee of the Board e) Board

233. Loans for Commercial Real Estate include ______________ a) Plantations b) Housing c) Special Economic Zones d) Construction of Malls e) Hotels & Restaurants

234. What is the time limit to furnish the requested information under Right to Information Act (RTI) and what is the penalty for non-compliance of the said norm? a) 30 days & `100 per day b) 60 days & `100 per day c) 30 days & `250 per day maximum of `25000/- d) 60 days & `250 per day e) None

235. Received request from your borrower for a loan of `300 lakhs for purchase of equipment @ 12% interest repayable in 60 months. The estimated Net Profit and depreciation is `100 and `20 lakhs respectively. What is the DSCR?

a) 1.20 b) 1.30 c) 1.50 d) 1.62 e) 1.75

236. What is the maximum claim under ABJ and the Insurance Period ----? a) `50000/- & Calendar Year b) `100000 & Financial Year c) `100000/- & 1st December to 30th November d) `200000/- & 1st December to 30th November e) None 237. Liability Insurance claims occurring within --- days of date of debit of premium to the loan account are not payable except for death due to accidents. a) 10 Days b) 30 Days c) 45 Days d) 90 Days e) None 238. Loans to food and agro-based processing units with investments in plant and machinery up to ------ is treated as priority sector advance. a) 1 crore b) 5 crore c) 10 crore d) 50 crore e) None 239. Which of the following statement is not correct with regard to recently introduced system of computer generated acknowledgement for cash receipts at the branches? a) Dispensation of counter-foil b) Applicable to receipts of below `50000 only c) Acknowledgment is to be signed by the cashier only d) Applicable to Deposit accounts only e) None 240. After taking possession of the immovable property, copy of the possession notice is to be published in two local newspaper not later than ----- days a) 7 days b) 15 days c) 30 days d) 60 days e) None 241. Interest Subsidy on Housing Loans (1%) for the first year is available provided the loan amount does not exceed ------ and cost of house should be within ------ a) 10 lakhs & 15 lakhs b) 10 lakhs & 20 lakhs c) 15 lakhs & 25 lakhs d) 10 lakhs & No cap e) None


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242. Commission on receipts relating to Govt. Business a) 25 per transaction b) 30 per transaction c) 45 per transaction d) 60 per transaction e) 0.50% of the transaction or 45 whichever is higher 243. Minimum and Maximum period of Certificate of Deposits a) 15 days&1 year b) 30 days&1 year c) 7 days&1 year d) 7 days & no limit e) None 244. Customer does not keep Cheque book under lock and key. One cheque was stolen and forged and payment made against the same. a) Customer is liable since he is negligent b) Bank is not liable as the cheque was stolen c) Bank is liable since the payment is made on forged signature d) None 245. Loans not exempted from Base Rate Purview? a) Consortium Advance b) Deposit Loans c) Export Credit d) Loans to staff members e) None 246. Under UCP 600, bank can accept/reject documents within maximum of --- days. a) 5 Banking days b) 7 days c) 10 days d) 15 days e) None 247. Margin on loan against FCNR (B) --- if the maturity period is less than one year and ---- the maturity period is more than one year a) 15% & 25% b) 10% & 20% c) 5% & 10% d) 25% irrespective of tenor of the deposit e) Discretion of the Bank 248. Visually challenged persons are allowed to avail the following banking facilities? a) Cheque Book b) Debit Card c) ATM Card d) Locker e) All 249. Customer Service Standing Committee Meeting does not cover a) Customer Grievances b) Staff matters c) Credit d) New Products e) B,C & D 250. In case of payment of Fake DD, who has to lodge complaint with police, when it is identified as fake upon presentation – as per recent IBA guidelines? a) Issuing Bank b) Collecting Bank c) Purchaser of the Draft d) Beneficiary e) Paying Bank 251. When Current Liabilities are more than Current Assets …. a) Interest burden is less b) Company can meet its obligations c) Company may not meet its obligations d) Increased Networth e) None 252. Why ‘A/c Payee’ cheques are to be credited the payee’s account only. a) To get protection under section 131 of NI Act b) To comply KYC guidelines c) To comply RBI guidelines d) To avert fraudulent conversions e) C & D 253. Cap on Rate of Interest on FCNR deposits a) LIBOR+1.25% b) LIBOR+1% c) LIBOR+2% d) LIBOR – 0.50% e) LIBOR – 0.75%


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254. In case of “Paripasu” what charge the subsequent creditor enjoys? a) Equal charge b) First charge c) No charge d) Second charge e) None 255. Current Assets 48 lakh, Networking Capital 12 lakh. What is the Current Ratio? a) 1.20 b) 1.10 c) 1.33 d) 1.45 e) None 256. Minimum score is required (out of 30) to issue Platinum Credit Card? a) 12 b) 18 c) 22 d) 24 e) None 257. Form to be obtained for cancellation of Nomination. a) DA-1 b) DA-2 c) DA-3 d) DA-4 e) None 258. What is the CGTMSE Fee payable for accounts sanctioned with credit limits of below `5 lakh to units located at other than North Eastern region? a) 0.75% b) 0.50% c) 1.25% d) 1.50% e) 1.00% 259. Break Even Point means a) Sales equal to Fixed Costs b) Sale proceeds matches to Variable Costs c) The sale proceeds will take care of fixed as well as variable costs d) Sales equal to Fixed costs + Variable costs + Minimum profit e) None 260. Housing Loan up to ……… is treated as Priority Sector. a) 10 lakh b) 25 lakh c) 40 lakh d) All housing loans e) None 261. Nominee can exercise his right a) During the tenure of deposit b) On maturity of deposit c) Any time since he will be treated as joint depositor d) He has no right on deposit since it is in the name of the depositor e) On the death of the depositor 262. In case fake note is found, branch should not a) Return to the remitter b) Destroy the note c) File FIR d) a & b e) None 263. Provision to be maintained on substandard assets which are fully secured. a) 15% b) 20% c) 30% d) 5% e) 10% 264. Loans to staff which are backed by terminal benefits attracts Risk Weights a) 0% b) 5% c) 10% d) 20% e) 50% 265. Balances under Cash Reserve Ratio (CRR) earn interest @.... a) 3% p.a. b) Applicable SB Interest Rate c) 5% p.a. d) No interest e) None


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Question Bank - Key

No Ans. No Ans. No Ans. No An

s. No Ans. No Ans. No Ans.

1. a 41. d 81. a 121. d 161. c 201. d 241. c 2. e 42. b 82. d 122. c 162. d 202. b 242. c 3. b 43. c 83. b 123. d 163. a 203. c 243. c 4. d 44. c 84. b 124. e 164. e 204. e 244. c 5. c 45. e 85. a 125. b 165. e 205. c 245. a 6. b 46. d 86. d 126. c 166. e 206. b 246. a 7. a 47. b 87. c 127. b 167. c 207. b 247. a 8. c 48. b 88. d 128. a 168. d 208. d 248. e 9. e 49. a 89. d 129. c 169. a 209. a 249. a 10. d 50. d 90. b 130. e 170. d 210. a 250. e 11. d 51. c 91. a 131. a 171. d 211. a 251. c 12. b 52. a 92. e 132. a 172. e 212. d 252. a 13. d 53. a 93. d 133. e 173. c 213. b 253. b 14. d 54. d 94. c 134. c 174. b 214. e 254. a 15. e 55. b 95. c 135. d 175. a 215. c 255. c 16. c 56. d 96. b 136. a 176. b 216. d 256. b 17. e 57. e 97. c 137. a 177. a 217. b 257. b 18. e 58. e 98. c 138. b 178. b 218. e 258. e 19. d 59. b 99. a 139. e 179. a 219. d 259. c 20. b 60. d 100. b 140. b 180. a 220. c 260. b 21. d 61. a 101. d 141. b 181. e 221. d 261. e 22. d 62. c 102. a 142. d 182. c 222. c 262. d 23. e 63. a 103. d 143. a 183. d 223. c 263. a 24. e 64. d 104. c 144. b 184. e 224. d 264. d 25. b 65. c 105. b 145. d 185. d 225. c 265. d 26. c 66. b 106. c 146. c 186. c 226. b 266. 27. c 67. c 107. c 147. a 187. d 227. b 267. 28. e 68. b 108. c 148. e 188. d 228. b 268. 29. b 69. c 109. b 149. e 189. d 229. b 269. 30. b 70. d 110. c 150. d 190. b 230. a 270. 31. d 71. a 111. b 151. d 191. a 231. d 271. 32. a 72. d 112. a 152. d 192. e 232. e 272. 33. c 73. c 113. e 153. d 193. e 233. d 273. 34. d 74. c 114. c 154. b 194. a 234. a 274. 35. b 75. a 115. c 155. a 195. d 235. c 275. 36. c 76. d 116. b 156. c 196. e 236. c 276. 37. a 77. e 117. b 157. e 197. d 237. e 277. 38. e 78. a 118. b 158. b 198. b 238. c 278. 39. a 79. b 119. d 159. b 199. b 239. b 279. 40. d 80. b 120. a 160. d 200. c 240. c 280.


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Descriptive Questions 1. What is Speed Clearing and how it works? 2. What are the activities that a Business Correspondent can undertake under Financial Inclusion? 3. Recent RBI guidelines on failed ATM transactions. 4. M & N are the directors of a company and either of them can operate the account. Both of them quarreled and requested the branch not to honour the signature of the other director to operate the account. How you deal the case as a branch manager? 5. X, borrowal accout is showing outstanding liability of 50 lakh, which is under doubtful category of 1 to 3 years. Out of 50 lakh, the secured portion is 40 lakh. What is the provision requirement for the year 31.03.2011. 6. What are the salient features of AB – Tax saver scheme and how does it differ from ordinary term deposit. 7. What are the housing loans that can be classified under Priority Sector? 8. Strategies to reduce PNPAs / Overdues. 9. You are posted as manager to a branch where complaints from the customers are more. What steps you would take to reduce the complaints? 10. Write a brief note on how the Ombudsman deals with customers grievances? 11. What is Cheque Truncation scheme (CTS) and guidelines on CTS standards? 12. Guidelines on opening of accounts of physically challenged persons (Blind, Deaf, Dumb etc) and the risks associated thereof. 13. Define Money Laundering and explain the role of banks to deal with PML guidelines and penalties thereof. 14. As per RBI guidelines, what is the percentage of Weaker Section advances to the total Priority Sector? Name five categories belonging to Weaker Sections. 15. What are the innovative strategies that a branch can adopt to attract ladies of a town to mobilize 400 accounts? 16. A cheque issued to X was wrongly credited to Y. Y withdrawn the amount and closed the account. As a Branch Manager, how you deal with the case? 17. “A” stood as guarantor for loan given to “B”. When Bank proceeds against “A”, he objects with the reason that Bank has not acted properly since “B” sold the hypothecated assets to X. How to deal with the case? 18. What is Repo Rate? What is the impact of the recent RBI changes in Repo and Reverse Repo rates? How it is different from other RBI controls? 19. What are the penalties under section 138 of N.I.Act in case of dishonor of cheque for insufficient funds? 20. You have granted a Cash Credit limit of `5.00 lacs against hypothecation of stock of worth `8.00 lacs. Branch insisted for insurance of entire stocks i.e. `8.00 lacs


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whereas the customer insisting for insurance of the stocks to the extent of limit sanctioned i.e. `5.00 lacs only. Explain the reasons for your stand. 21. Your Branch is a Loss making branch. How will you turn it into profit making branch. Discuss. 22. Write a note on the provisions in Sec.138 of the N.I. Act viz. penalties in case of dishonor of cheques for insufficient of funds in the account.

23. What are the various types of facilities which have been specifically exempted by RBI from credit exposure ceilings stipulated for single borrower and group borrowers?

24. How you celebrate Silver Jubilee function of the branch? 25. Income Tax Dept. came for seizure of locker. What is the procedure to be followed? 26. How Internet Banking is going to help Customers and Banks? 27. Our ATMs are being used by other Bank Card holders. Is it drain on our resources or beneficial to our Bank? 28. Name the deposit schemes where the interest is exempted from TDS? 29. Salient features of Swavalambana Scheme (New Pension Scheme).


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Banking Statistics at Glance

No. Major Indicators Number As on 1 No. of Schedule Commercial Banks 80 31.03.11 2 No. of Bank Branches 76696 31.03.11 3 No. of ATMs 75178 31.03.11 4 Aggregate Deposits (Crores) 5616432 31.03.11 5 Bank Credit (Crores) 4298704 31.03.11 6 Credit Deposit Ratio (%) 76.54 31.03.11 7 Forex Reserves (Crores) 1409102 29.07.11 No Macro Rates Percentage 1 Bank Rate (w.e.f. 14.02.12) 9.50 2 IDBI Minimum Term Lending Rate (w.e.f. 30.01.04) 10.25 3 Saving Bank Rate (w.e.f.03.05.11) 4.00 4 Cash Reserve Ratio (w.e.f. 28.01.12) 5.50 5 Statutory Liquidity Ratio (w.e.f. 18.12.10) 24.00 6 Repo Rate (w.e.f. 25.10.11) 8.50 7 Reverse Repo Rate (w.e.f. 25.10.11) 7.50 8 Marginal Standing facility (w.e.f.25.10.11) 9.50 No Andhra Bank – Interest Rates Percentage 1 Deposit Rate (1 year to 3 years) w.e.f. 01.11.11 9.40 2 Base Rate (w.e.f. 01.08.11) 10.75 3 BMPLR (w.e.f. 01.08.11) 15.00