kyc, internal control and preventive vigilance

8/11/2019 KYC, Internal Control and Preventive Vigilance

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Study Material on

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KYC, Internal Control &Preventive Vigilance

IT 1581

STAFF TRAINING COLLEGEBANGALORE


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Staff Training College

No.29, K.R. Road

BANGALORE : 560 004

V K Shuk la

General Manager and Principal Dated: 02ndApril 2012

FOREWORD

My dear col leagues,

Hearty welcome to this program on KYC, Internal Contr ol and Preventive Vigilance.

The Banking Industry right from the commencement of its banking activities has witnessed a

transition phase often found to be vulnerable for attacks from criminal elements because of

technological advancements and instantaneous access to information. People have several

resources to plan to build up unhealthy banking activities with ill motives to deceive the Bank.

Hence in the present Banking scenario compliance to KYC norms and its effective

implementation before entertaining any request for opening of new accounts and sanction of

any loan / limits is treated as an essential factor which will go a long way in curtailing the

untoward incidences in the banking industry. It is therefore essential to have full knowledgeabout the customers to safeguard the interest of the Bank. At the same time, it is also necessary

to have an apt attention on our Internal Control with special reference to Bank securities and

also maintenance of cordial working atmosphere at the place of work. Further there is also need

to be vigilant against such fraudulent attempt being made by criminal elements which should be

borne in mind from the preventive vigilance angle.

This comprehensive study material will give an insight into the whole gamut of the concept on

KYC, Internal Control and Preventive Vigilance and I am sure that the contents will benefit all

the readers.

Wish you all the best,

V K Shukla

General Manager and Princ ipal


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STAFF TRAINING COLLEGE, BANGALORE

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CONTENTS

SL NO PARTICULARS PAGE NO.

1 KYC / AML 02

2 RTI ACT 2005 13

3 The Banking Ombudsman Scheme, 2006 15

4 Compliance 19

5 Internal Control and House Keeping 24

6 CASHFeatures of genuine Notes 36

7 Facility for Exchange of notes and coins 38

8 Detection and Impounding of Counterfeit Notes 41

9 Prevention of Frauds 44

10 Preventive Vigilance 48

11 Banking Codes and Standards Board of India 53

12 G L Concepts 74

13 CBS Reports 78

14 R B I A 87

15 Government Business 93


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CHAPTER - 1

Know Your Customer and Anti Money Laundering

KYC should be the core feature of Banks Risk Management and control procedure and be

complemented by regular compliance reviews, internal audit and IS audit. As the Customer is

the central theme to KYC norms, the guidelines are listed with the definition of Customer takingprecedence. The objective of KYC guidelines is to prevent Bank from being used, intentionally

or unintentionally, by criminal elements for money laundering activities.

CUSTOMER: Definition: For the purpose of KYC, a "Customer" may be defined as:

A person or entity that maintains an account

One on whose behalf the account is maintained (i.e. beneficial owner).

beneficiaries of transactions conducted by professional intermediaries, such as stock

brokers, chartered accountants, solicitors, etc. as permitted under the law

Any person or entity connected with a financial transaction which can pose significant

reputational or other risks to the Bank, say, a wire transfer or issue of a high value demand draft

or a single transaction. KYC norms are applicable for:

Deposit accounts (All time and demand deposits)

Borrowal clients (Individual and corporate) (Cir 286/2004, 282/2006, 82/2008)

Safe deposit lockers. (Cir 53 /2006)

Money changing transactions (ID Cir 22/2008)

Non resident investor making Foreign Direct Investment (Id 42/2008)

All importers / Exporters

RTGS / NEFT / Nepal remittance scheme Banking correspondents & facilitators

Mobile Banking

Credit / debit / gift / smart cards and marketing agents thereof.

Risk Perception in respect of Customer: Low Risk Customers (Level 1 custom ers):

a) Salaried employees b) Government Departments

c) Regulatory and Statutory bodies, etc. d) Government owned companies

e) People belonging to lower economic strata of the society

Proper introduction, identification and verification of proof of address would suffice for KYC

requirements.

Medium Risk Customers (Level 2 custom ers): (a) High net worth individuals (b) Non-

Resident customers (c) Blind and Pardhanishin woman


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Higher due diligence is required which includes customers background, nature and location of

activity, country of origin, source of funds and his/her client profile, etc..

High Risk Customers (Level 3 customers):

a) Trusts, charities, NGOs and organizations

receiving donations

e) Companies having close family

shareholding or beneficial ownership

b) Politically exposed persons (PEPs) of

foreign origin

f) Accounts under Foreign Contribution

Regulation Act

c) Accounts of non-face-to-face customers, g) Those with dubious reputation as per

public information available

d) Firms with sleeping partners h) High Networth NR Accounts

i) Bullion Dealers (Including Sub-Dealers) &

Jewelers (Cir 6/2011)

Higher due diligence is required which includes customers background, nature and location of

activity, country of origin, source of funds and his client profile, etc.

The categorization of customers under risk perception is only illustrative and not exhaustive.

The branches to categorise according to the risk perceived by them. As per RBI guidelines

review of risk category should be carried out once in 6 months.

For further details regarding INDICATIVE LIST OF HIGH & MEDIUM Risk Customers/Product &

Services/ Geographies please refer Cir No. 333/2011.

MONEY LAUNDERING: Definition

Section 3 of The Prevention of Money Laundering Act, 2002 (PMLA) defined as "Whoever

acquires, owns, possesses or transfers any proceeds of crime; or knowingly enters into any

transaction which is related to proceeds of crime either directly or indirectly or conceals or aids

in the concealmentof the proceeds or gains of crime within India or outside India commits the

offence of money laundering."

The essential ingredients are: a) a crime has been committed b) there are proceeds of or gains

from the crime; and c) There is a transaction in respect of the proceeds of the gains.

Punishment under PMLA: with rigorous imprisonment for a term not less than 3 years and may

extend to 7 years.

Punishment under Narcotic Drugs and Psychotropic Substance: upto 10 years instead of 7

years

Know Your Customer" Standards: The four main pillars on which the KYC norms of the

Bank rests are:


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a) Customer Acceptance Policy b) Customer Identification Procedures

c) Monitoring of Transactions d) Risk Management

1. Customer Acceptance Policy - Proper Introduction of accounts:

Proper introduction is to be ensured.

The introducer should have maintained a satisfactorily operated account at least for the past12 months prior to the date of introducing the new account.

If an existing A/c holder intends to open another A/c with a different branch, care should be

exercised and the guidelines mentioned Manual of Instruction on CASA should be adhered

to.

Send Thanks Giving letter in NF.154 should to both the introducer and the new A/ct holder.

This is equally applicable in case of conversion of individual deposit account to joint

accounts also

Wherever Thanks giving letter in NF 154 sent is returned undelivered, branches should

immediately take appropriate action to safeguard the interest of the Bank. Branches can

mark High Severity memo in option CIM 13 (or) BA437 in CBS (Cir No 86/2012) Opening a new A/c should be authorized only by the Manager.

In case of joint account, specimen signature card should be obtained separately and the

mode of operation should be noted in red ink on the top of the card and should be checked

and initialed by the Supervisor

Ensure while accepting the cheque for collection, the name mentioned in the challan and

name of the beneficiary of the instrument are same.

Prior permission from consortium is required for opening of Current A/c by non consortium

Bank.

Accounts under Foreign Contribution Regulation Act,1976 (FCRA): Certain categories of

individuals and organizations (such as an association having a definite cultural, economic,

educational, religious or social programme, Trust/NGO/CHARITIES/ (Cir No. 356/2009)) are

required to obtain prior permission from the Central Government (Secretary, Ministry of Home

Affairs, GOI, New Delhi) to receive "Foreign Contributions" or accept "Foreign Hospitality" and

such receipts/acceptance require reporting to the Government as per the Act.

Individuals/Organizations who cannot receive foreign contributions : candidate for

election , correspondent, columnist , cartoonist, editor, owner, printer or publisher of a registered

newspaper, judge, Government servant or employee of any corporation, member of any

legislature, political party or office bearer thereof.

2. Customer Identification Procedure

Need for photographs and address confirmation: Obtain Pass port size/stamp size

photograph of the depositors / NRI depositors.


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Obtain photographs of the authorised signatories in case of minors, joint accounts, partnership

accounts, accounts of societies, clubs, associations, public/private limited companies, HUF,

trusts, etc. In case of Letter of authority holders duly attested by the depositors.

In case of change in the authorised signatories, countersignature by the competent authorities

of the concerned institutions/ organizations on the photos of the new signatories to be obtained.

Documents that are normally relied upon as proof of customers address: A Xerox copy

of any of the following documents duly verified with originals should be obtained.

Accounts of ind iv iduals

a) Driving License

b) PAN / Voters identity card

c) Identity Card containing the address

issued by the employer

d) Original letter of introduction from the

existing Banke) Arms license issued by Government

authority with photograph of applicant

f) Pension book issued Government Of

India with photograph of applicant

containing name, address and validity

period

g) Freedom fighters pass issued by Home

Ministry of GOI with photograph of

applicant

h) Ration Card also (175/09)

i) AADHAR

j) Passport

k) Rent receipt

l) Telephone/Electricity Bills

m) Municipal/Assessment Order

n) Income Tax Assessment Order

o) Latest statement of account from a creditcard issuing company

p) Latest premium receipt from any life

insurance company

q) Current lease Agreement or leave and

license agreement for flat/house

r) Certificate from the ward officer maintaining

election roll, certifying the address of the

applicant

s) Latest certificate from the post office

confirming the address of the applicant

t) Any other document or proof to the

satisfaction of the Manager

u) NREG CARD (42/2011)

Accounts o f companies:

a) Copy of Certificate of incorporation and

M / A and A / A

b) Resolution of the Board of Directors

c) Copy of PAN allotment letterd) Address proof

e) Identification of the person who operate the

account

f) Power of Attorney granted to its managers,

officers or employees to transact businesson its behalf


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Accounts of Partnersh ip f i rms

Registration certificate, if registered

Partnership deed

Identification all partners

Address proof of the firm

Power of Attorney granted to a partner

or an employee of the firm to transact

business on its behalf

Identification of POA Holder

Accounts o f trus ts and foundations

Certificate of registration, if registered

Power of Attorney to transact business on its behalf

Any officially valid document to identify the trustees, settlers, beneficiaries and those holding

Power of Attorney, founders/managers/directors and their addresses

Resolution of the managing body of the foundation/association

Telephone bill

Proprietary concern :

i) Proof of the name, address and activity of the concern, like registration certificate (in the

case of a registered concern), certificate / licence issued by the Municipal authorities under

Shop & Establishment Act, sales and income tax returns, CST / VAT certificate, certificate /

registration document issued by Sales Tax / Service Tax / Professional Tax authorities, Licence

issued by the Registering authority like Certificate of Practice issued by Institute of Chartered

Accountants of India, Institute of Cost Accountants of India, Institute of Company Secretaries of

India, Indian Medical Council, Food and Drug Control Authorities, etc.

ii) Any two of the cited documents would suffice. These documents should be in the name ofthe proprietary concern.

The Bank shall treat the information collected from the customer for the purpose of

opening of account as confidential and not divulge any details thereof for cross selling

or any other purposes.

As per RBI guidelines banks should periodically update the customer identification data

(including photo) as below:

Once in 5 years for low risk category customers &

Once in 2 years for high & medium risk categories.

Where Bank finances clients for purchase of landed property or for purchase of flats from

individuals, it is advisable to carry out KYC procedures on such sellers of the property also, in

addition to the existing pre sanction guidelines relating to KYC. (Cir.153/11)


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3. Monitoring of Transactions

A close and intelligent watch over the newly opened accounts, especially during the first six

months is to be exercised in allowing operations therein, particularly, those involving huge

deposits and withdrawals.. Transactions disproportionately large to the occupation or line of

business of the account holder may be enquired from them.

DDs for Rs.50, 000/- & above should be issued only by debit to the customers account or

against cheques or other instruments tendered by the purchaser and not against cash payment.

Payment of DDs for Rs.50,000/- and above, should be made through banking channels and not

in cash.

Monitoring of cash withdrawal and deposits of Rs.10 lakhs and above in deposit

accounts, Cash Credit Account , OD account etc. :

To comply with RBI guidelines, all our branches are requested to record the Cash deposits andcash withdrawals for Rs.10 lacs & above in deposit accounts and also in all other accounts like

overdraft, cash credit etc., in a register. A fortnightly statement furnishing the details of

transactions so recorded, to be submitted to ROs concerned.

While furnishing the information, branches are required to undertake due diligence in

respect of proper identification of customers as well as unusual transactions in the

accounts.

Monitoring Large Value Transactions

In addition to regular monitoring of operations in cash credit/overdraft accounts, a scrutiny ofeach drawal of Rs.25 lacs and above is to be made in case of all large borrowal accounts and

ensure before allowing such drawal that the amount is drawn for purposes for which credit

facility has been sanctioned.

RBI has forwarded a copy of Ministry of External Affairs order dated November 4, 2011

published in the Gazette of India on implementation of United Nations Security Council

Resolution 1929(2010). RBI has advised that utmost care should be taken to ensure to cross

check all account opening applications and transactions carried out in the existing accounts with

the list of individuals/entities enlisted in the Gazette and report those accounts to Reserve Bank

of India and Financial Intelligence Unit- India which bear resemblance with the individuals /

entities listed therein. ( CIR 54/2012)

4. Risk Management

The inadequacy or absence of KYC may lead to reputational, operational, legal and

concentration risks and in turn may result in significant financial cost to the Bank as well as the


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need to divert considerable management time and energy to resolving problems that arise. It is

worth noting that all these risks are interrelated.

In case party does not co-operate for complying KYC guidelines, the account to be closed after

giving due notice. (175/09).

If existing account holder becomes a politically exposed person (PEP) on a later date, he / she

should be subjected to due diligence as per PMLA 2009 (21 OF 2009) WEF 01.06.2009

(328/09).

RBI has stipulated 100% KYC compliance for all accounts. Branches to examine KYC

compliance of all existing accounts and identify KYC non-compliant accounts.

The accounts which still remain KYC non-compliant because of the non submission of

documents by the customers have to be monitored and followed up for compliance at the time

of subsequent operations in the accounts, by maintaining remarks in the system

The risk categorisation of accounts are to be reviewed with enhanced due diligence measures

in case of high-risk category customers periodicity of not less than once in six months. Tocomply with this instruction, following are advised:

Review risk categorisation of accounts once in SIX months as on 15thof May and November

at base branch.

Alert report generated by the system to be reviewed on daily basis.

In CBS modification of Risk Category to be done by Fast Path CIM50.

Threshold Limit: The customer has to mention the anticipated level (turnover) of

activity/threshold limit of transaction intended in his account. This will be the maximum limit for

each transaction. The threshold limit has to be incorporated in the account master. In CBS

environment Fast Path 8051 for new CASA account opened and for existing or for modification

in FP CH021.

The system will generate report of transactions that exceed threshold limits during the day end

process and the same is to be scrutinised by the branch-in charge.

List of terrorist Individuals and organizations updated consolidated list available in CANNET

(30/09):

Other Guidelines

Record keeping

Basel Committee on banking supervision requires that financial institutions should maintain, for

at least five years, all necessary records on transactions, both domestic and international, to

enable them to comply swiftly with information requests from the competent authorities. Such


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records must be sufficient to permit reconstruction of individual transactions so as to provide, if

necessary, evidence for prosecution of criminal behaviour.

Records of transactions to be maintained for at least ten years from the date of transaction,

instead of ten years from the date of cessation of transactions, and records pertaining to

identification of the customer and his address to be preserved for at least ten years after the

business relationship is ended.

In the event of an existing customer subsequently becoming a politically Exposed Person (PEP)

the decision to continue the business relationship has to be taken by branch head in branches

headed by Scale IV and above. For all other branches, the decision is to be taken by the

executive overseeing MIPD & PP Section of the respective Circle Office.

Maintenance of records of transactions (nature & value)(172/2010):

(1) The following types of record of transaction shall be maintained as per Rule 3 of PMLA

Rule:

(A) all cash transactions of the value of more than rupees ten lakhsor its equivalent in foreign

currency;

(B) all series of cash transactions integral ly con nected to each other which have been

valued below rup ees ten lakhs or its equivalent in foreign currency where such series of

transactions have taken place within a month;

(BA) all transactions involving receipts by non-prof i t organisations of value more than

rupees ten lakh, or its equivalent in foreign currency;

(C) all cash transactions where forged or cou nterfeit currency notes or bank notes havebeen used as genuineor where any forgery of a valuable security or a document has taken

place facilitating the transactions;

(D) all suspic io us transactions whether or not made in cashand by way of

(i) deposits and credits, withdrawals into or from any accounts in any currency maintained by

way of : a) cheques including third party cheques, pay orders, demand drafts, cashiers cheques

or any other instrument of payment of money including electronic receipts or credits and

electronic payments or debits, or (b) travellers cheques, or (c) transfer from one account within

the same banking company, financial institution and intermediary, including from or to Nostro

and Vostro accounts, or (d) any other mode in whatsoever name it is referred to;

(ii) credits or debits into or from any non-monetary accounts such as d-mat account, security

account in any currency maintained;


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(iii) money transfer or remittances in favour of own clients or non-clients from India or abroad

and to third party beneficiaries in India or abroad including transactions on its own account in

any currency by any of the mode specified in Cir 172/2010

(iv) loans and advances including credit or loan substitutes, investments and contingent liability

by way of subscription to debt instruments such as commercial paper, certificate of deposits,

purchase and negotiation of bills, cheques and foreign exchange contracts, currency, interest

rate and commodity and other derivative instrument, LCt, standby LC, BF, comfort letters,

solvency certificates and any other instrument for settlement and/or credit support;

(v) Collection services in any currency by way of collection of bills, cheques, instruments or any

other mode of collection in whatsoever name it is referred to."

(vi)Attempted transactions by Customers are to be reported under Suspicious Transaction

Reports (STRs) even if the transactions are not completed by Customers irrespective of the

amount of the transaction (314/2011)

Not reporting the suspicious transactions is a serious offense and can land the bank and branch

in-charge into trouble. Non reporting of such suspicious transactions will be treated as a major

misconduct and will invite disciplinary action.

The Circle Heads and the Overseeing Executives should also randomly check / verify the cash

transactions / reporting of suspicious transactions by the branches during their periodical branch

visits and confirm that branches are adhering to the guidelines issued by the Bank in their

Branch Visit reports. (397/2009).

Vide Cir.16/2012 dt 12/01/12 existing system of processing of STR alerts has been modified wef

01/02/2012 as follows:

1. Circle Offices to centrally process the alerts pertaining to their branches and escalate

suspicious transactions, if any, to KYC Cell, Inspection Wing, HO for review and submission of

STRs to FIU-IND, Delhi.

2. The Managerin-charge of BS&IC Section at Circle would be the Anti Money Laundering

Officer (AMLO). The Executive overseeing BS&IC Section would be the Money laundering

Reporting Officer (MLRO)

3. KYC Cell, Inspection Wing, HO would review the alerts escalated by the Circles as suspicious

transactions and submit STRs wherever required to FIU-IND (as per existing guidelines)

Circle Office to ensure the followings:


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BS&IC Section, Circle Office, which is presently monitoring AML alerts, to start processing

STR alerts pertaining to their branches from 01/02/2012.

Circle Offices to nominate AMLO and Officer/s to form the AML team, to assist the

AMLO/MLRO (Overseeing Executive). The details of such persons nominated is to be

informed to KYC Cell, Inspection Wing, H.O.

BS&IC Section to place an Office Note/Report to the Circle Head before 5th of the

succeeding month, on the status of the alerts generated, dropped and escalated to H.O

during the previous month, for his review.

A report of dropped STRs and escalated STR alerts is to be preserved at Circle Office in

the System.

Circles to ensure that the alerts are attended / processed on daily basis and there shall not

be any pending position or backlog at any point of time at Circle level


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Financial Action Task Force (FATF)

(IO/17/2012)

I. The Financial Action Task Force (FATF) is the global standard setting body for anti-money

laundering and combating the financing terrorism (AML/CFT).II. In order to protect the international financial system from Money Laundering (ML) /

Financing Terrorists (FT) risks and to encourage greater compliance with the Anti Money

Laundering (AML) / Counter Financing Terrorists (CFT) standards, the FATF identifies

countries / jurisdictions that have strategic deficiencies and works with them to address

those deficiencies that pose a risk to the international financial system.

III. The FATF reviews the countries /jurisdictions on the basis of their level of commitment in

combating money laundering /financing terrorist activities.

IV. The list of countries/jurisdictions are reviewed and updated periodically by FATF and

communicated to member countries.

V. FATF has classified countries /jurisdictions broadly under following three categories:

A. List of countries / jurisdictions in respect of which FATF member countries are called

upon to apply counter measures to protect international financial system,

B. Countries / jurisdictions with strategic AML/CFT deficiencies that have not made sufficient

progress in addressing the deficiencies or have not committed to an action plan developed with

the FATF to address the deficiencies. The FATF calls on its members to consider the risks

arising from the deficiencies associated with each jurisdiction in respect of following countries

and

C. Countries / jurisdictions which have strategic AML/CFT deficiencies for which they havedeveloped an action plan with the FATF. While the situations differ among each jurisdiction,

each jurisdiction has provided a written high-level political commitment to address the identified

deficiencies.

Branches/offices are advised not to allow any remittance directly or indirectly to the non co-

operative countries mentioned in para V (A), under the Liberalized Remittance Scheme made

available to resident individuals.

WE SHOULD EXERCISE MORE CAUTION WHILE HANDLING TRANSACTIONS

INVOLVING COUNTRIES LISTED BY FINANCIAL ACTION TASK FORCE (FATF) AND

TAKE INTO ACCOUNT RISKS ARISING FROM DEFICIENCIES IN AML/CFT REGIME OFTHESE COUNTRIES .


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CHAPTER2

RIGHT TO INFORMATION ACT, 2005

1) The RTI Act has come into force from 15.06.2005

2) Public Information Officer means an Officer designated by the Bank under the Act to

provide information to the public.

3) All our Branch Heads are designated as Assistant Public Information Officers to

receive the RTI application and to forward the same to the Public information Officers of

the Circle as per Section 5 (2) of RTI Act, 2005 (HO cir 336/2010).

4) Information under the Act means any material in any form, including records, memos, e-

mail, opinions, advices, press release, circulars, orders, log books, contracts, reports,

papers, samples, models, data materials held in electronic format

5) Who are entitled to the Right to Information I under the RTI Act?

Any citizen of India to get the Right to Information

6) A person who desires to obtain any information under the Act, shall make a request in

writing or through electronic meansaccompanied by requisite fees (Rs.10/- as per HO

Cir.336/2010). If oral request is given, reasonable assistance to be given to the person to

reduce the same in writing.

7) The applicant is not required to furnish any reasons for requesting the information.

8) If the information sought pertains to other Circle Office, same is to be transferred

concerned office immediately but not later than 5 days.

9) Time period of disposal of application: Expeditiously but not later than 30 days from the

date of receipt of such request. Otherwise it shall be deemed to be refused. Later such

information shall be given free of cost.

10) The aggrieved person may prefer an appeal within 30 daysfrom the date of receipt of such

decision to the Chief Information Officer appointed at HO who will be Appellate Authority.

Second appeal may be preferred within 30 days of receipt of such decision from AA to

Central Information Commission.

11) The Public Information Officers at Circle Offices to dispose of the RTI applications received

at their office and by the branches coming under their jurisdiction at their level itself without

referring to PIO at RIA Section at Head Office for vetting the draft replies.

12) Penalty Rs.250 /- per day max. of Rs. 25000/-

13) No suit, legal proceeding etc can be initiated against any person for anything done or

intended to be done in good faith under the RTI Act or any rules made there under.


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OTHER GUIDELINES (HO Cir 336/2010 dt. 24.09.2010)

All Canara Bank branch Heads are nominated as Assistant Public Information Officers

(APIO) to receive the RTI application.

The Application should be to forward to the PIO of the concerned CO within 2 days fromthe date of receipt

Fee ofRs.10/- received may be credited to their Commission Misc account and the fact of

the receipt of the RTI application fee should be informed to the PIO in their forwarding

letter to the Circle Office.

Applicants belonging to BPL category are exempted from paying application fees. A copy of

the BPL/Antyodaya ration card issued by the competent authority may be insisted to waive

the application fee.

RTI reply should contain Clause (mandatory) relating to preferring an appeal before

Appellate Authority if the person is not satisfied with the reply

The reply to the applicant should be sent under the signature of the PIO duly mentioning

the name of the PIO and his / her designation.

If the party's request letter is in vernacular language of the region, the reply may be given in

that vernacular language. For RTI application in Hindi, reply should be in Hindi only.

Such of the applications wherein the information sought by the applicant relates to Policy

matter or held by the concerned Wing at Head Office and where PIO feels specific

guidance from H.O. is needed, may be sent to PIO, RIA Section, S P & D Wing, Head

Office, Bangalore within 7 days from the date receipt for getting the contents of the draft

reply and to reply to the applicant within the time frame under RTI Act. 2005.

If the applicant has not submitted the RTI application fee in the prescribed mode (Cash

against receipt/DD/PO/Indian Postal Order) such applications are to be retuned back to

the applicant requesting him / her to submit the RTI application afresh along with the fee in

the prescribed mode of payment.

Where the information sought for concerns the life or liberty of a person, the same shall be

provided within forty eight hours of the receipt of the request.

The intervening period between the dispatch of the said intimation and payment of fees

shall be excluded for the purpose of calculating the period of thirty days for furnishing the

information as referred to in the RTI Act, 2005.

PIOs should submit monthly statement and one Annual Statement of RTI applications received

and disposed and fee collected to RIA Section, SP&D Wing, Head Office, Bangalore in the

prescribed format to enable the Head Office to send a consolidated statement to the

Ministry of Finance, Government of India on or before 15th of every month


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CHAPTER 3

THE BANKING OMBUDSMAN SCHEME, 2006

Objects:

To enabling resolution of complaints relating to certain services rendered by banks and to

facilitate the satisfaction or settlement of such complaints.

The RBI to appoint Chief General Manager or General Manager to be known as Banking

Ombudsmen (BO) for a period of not more than 3 years and The RBI specify the territorial limits

to which the authority of each BO appointed shall extend.

The RBI to specify the location of the office of the BO. The BO may hold sittings at such places

within his area of jurisdiction as may be considered necessary and proper by him in respect of a

complaint or reference before him.

POWERS AND JURISDICTION The BO shall :

receive and consider complaints relating to the deficiencies in banking or other services

filed on the grounds mentioned hereunder and

facilitate their satisfaction or settlement by agreement or through conciliation and mediation

between the bank concerned and the aggrieved parties or by passing an Award in

accordance with the Scheme.

GROUNDS OF COMPLAINT

(1) Any person may file a complaint with the BO having jurisdiction on any one of the following

grounds alleging deficiency in banking including internet banking or other services.

(a) non-payment or inordinate delay in the payment or collection of cheques, drafts, bills

payment of inward remittances etc.;

(b) non-acceptance, without sufficient cause, of small denomination notes/coins tendered for

any purpose, and for charging of commission in respect thereof;

(c) failure to issue or delay in issue of drafts, pay orders or bankers cheques;

(d) non-adherence to prescribed working hours ;

(e) failure to provide or delay in providing a banking facility (other than loans and advances)promised in writing by a bank or its direct selling agents;

(f) delays, non-credit of proceeds to parties' accounts, non-payment of deposit or non-

observance of the Reserve Bank directives, if any, applicable to rate of interest on deposits

in any savings, current or other account maintained with a bank ;


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(g) complaints from Non-Resident Indians having accounts in India in relation to their

remittances from abroad, deposits and other bank related matters;

(h) refusal to open deposit accounts without any valid reason for refusal;

(i) levying of charges without adequate prior notice to the customer;

(j) non-adherence by the bank or its subsidiaries to the instructions of Reserve Bank on

ATM/Debit card operations or credit card operations/ the provisions of the Code of BCSBIand as adopted by the bank

(k) non-disbursement or delay in disbursement of pension (to the extent the grievance can be

attributed to the action on the part of the bank concerned, but not with regard to its

employees);

(l) refusal to accept or delay in accepting payment towards taxes, as required by Reserve

Bank/Government; or refusal to issue or delay in issuing, or failure to service or delay in

servicing or redemption of Government securities;

(m) forced closure of deposit accounts without due notice or without sufficient reason or refusal

to close or delay in closing the accounts;

(n) non-observance of Reserve Bank guidelines on engagement of recovery agents by banks;

(o) any other matter relating to the violation of the directives issued by the Reserve Bank in

relation to banking or other services.

(2) A complaint on any one of the following grounds alleging deficiency in banking service in

respect of loans and advances may be filed with the BO having jurisdiction:

(a) non-observance of RBI Directives on interest rates/ RBI guidelines on engagement of

recovery agents by Banks/ any other guidelines by RBI;

(b) delays in sanction, disbursement or non-observance of prescribed time schedule for disposal

of loan applications;

(c) non-acceptance of application for loans without furnishing valid reasons to the applicant; and

(d) non-adherence to the provisions of the fair practices code for lenders as adopted by the

bank or Code of Bank's Commitment to Customers, as the case may be;

(3) The BO may also deal with such other matter as may be specified by the RBI from time to

time in this behalf.

PROCEDURE FOR FILING COMPLAINT:

1. make a complaint in writing or through electronic mode (a printout shall be taken on the

record of the BO) by any aggrieved person or through his authorized representative (other

than an advocate), alongwith copies of documents to the BO comes under concerned

jurisdiction. The complaints received by GOI or RBI will also forwarded to BO for redressal.


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Complaints relating operations of credit cardsand other types of serviceswith centralized

operations, shall be filed before the BO within whose territorial jurisdiction the billing address

of the customer is located.

2. The complaint shall be in the prescribed form stating clearly:

a. the name and the address of thecomplainant,

b) the name and address of the branch or

office of the bank against which the

complaint is made,

c) the facts giving rise to the complaint,d) the nature and extent of the loss caused

to the complainant, and

e) the relief sought for.

3. No complaint to the BO shall lie unless:-

(a) (i) the complainant had made a written representation to the bank earlier and rejected

the same or

(ii) the any reply is received within a period of 1 month after the bank received his

representation or

(iii) the complainant is not satisfied with the reply given by the bank;

(b) the application is made withing one year from the date of receipt of reply or one year one

month from the date of representation to the Bank and no reply is received for the same.

(c) the complaint does not pertain to the same cause of action, for which any proceedings

before any court, tribunal or arbitrator or any of the forum is pending or a decree or Award or

order has been passed by any such court, tribunal, arbitrator or forum;

(d) the complaint is not frivolous or vexatious in nature; and

(e) the complaint is made before the expiry of the period of limitation for such claims.

SETTLEMENT OF COMPLAINT BY AGREEMENT:

Depending upon circumstances the BO shall send a copy of complaint to Bank and

endeavour to promote a settlement of the complaint by agreement between the complainant

and the bank through conciliation or mediation. The proceedings before the BO shall be

summary in nature.

AWARD BY THE BANKING OMBUDSMAN

1. If it is not settled by agreement within a period of 1 month from the date of receipt of the

complaint or such further period as the BO may, pass an Award or reject the complaint

2. The award contains the direction/s to the bank for specific performance of its obligations / the

amount, if any, to be paid by the bank by way of compensation for any loss.


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CHAPTER4

COMPLIANCE (270/2011)

I. INTRODUCTION

1.1. The environment in which banks operate requires familiarity with a growing number of

complexities of regulations, as well as increasing risk management. Banking has witnessed a

sea change worldwide during the last couple of decades. Some of the major changes witnessed

are:

a) Diversification of business lines within large groups as a consequence of partnerships and

expanding business geographies.

b) Multi-faceted expansion of activities of financial institutions necessitating adherence to

diverse legal / regulatory requirements.

c) Growth of complex banking products and new sophisticated instruments over recent years.

Also, increase in the number of structured finance deals, such as third party securitization

etc.

d) Increase in the range of products on offer for various categories of customers.

e) Widening of the geographical area in which banks are operating and accepting risks.

f) Increase in the number of economic agents with whom banks have to deal with and recent

trend towards outsourcing of banking activities.

g) Fierce competition amongst banks, resulting in further profitability constraints.

1.2. The overall outcome has been an increase in and diversification of the risks faced by

banks, against the background of continually evolving legislation. As a consequence, banks are

required to exercise a very high degree of vigilance, so as to ensure that their operations

comply with the relevant rules and standards.

1.3. The Basel Committee on Banking Supervision (BCBS) document on Compliance Function

(April 2005) essentially articulates that Compliance function in banks is one of the key elements

in the Banks' corporate governance structure. The compliance function in banks has to beadequately enabled and made sufficiently independent.

1.4. Keeping the above aspects, RBI had issued the final guidelines on 20.04.2007 vide

DBS.CO.PP.BC.6/11.01.005/2006-07 dated 20.04.2007, advising the banks for its

implementation within a time frame of 6 months from the date of the circular.


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II. COMPLIANCE FUNCTION - DEFINITION

2.1. Reserve Bank of India defined Compliance Risk as:

"The risk of legal or regulatory sanctions, material financial loss or loss to reputation a bank may

suffer as a result of its failure to comply with laws, regulations, rules, related self-regulatory

organization standards and codes of conduct applicable to its banking activities".

Compliance risk can be broadly classified into Legal, Regulatory and Reputation Risks.

2.2. Legal Risk :

Legal Risk is the risk arising from failure to comply with statutory or regulatory obligations. Legal

Risk arises from uncertainty due to legal actions or uncertainty in the applicability or

interpretation of contracts, laws or regulations.

Legal Risk arises from the potential that unenforceable contracts, lawsuits or adverse judgments

can disrupt or otherwise negatively affect the operations or condition of a banking organization.Legal Risk may expose the bank to fines penalties or punitive damages resulting from

regulatory actions, as well as private settlement.

2.3. Regulatory Risk:

Regulatory Risk refers to the potential consequences to the general public and the bank of non-

compliance with the regulation. Factors under this risk include financial harm to consumers;

legal, reputation and financial harm to a bank; new laws, regulations, or amendments thereof;

historical industry compliance; and the burden of corrective action, including potential civil and

financial liability. The risk inherent in the consumer protection laws and regulations fluctuates in

relation to changes in legislation, or market and public policy considerations. In establishing or

evaluating a compliance program, the regulation risk that accompanies theproducts is also

considered.

2.4. Reputation Risk:

Reputation Risk is the risk that gives negative publicity regarding bank's business practices,

which shall lead to a loss of business, revenue or involve the bank in litigation.

3OBJECTIVE OF THE COMPLIANCE POLICIES:

3.1. The objectives of Compliance Policy are to help maintenance of Bank's reputation and thus

meet the expectations of its customers, the markets, other stakeholders and society as a whole.


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3.2. Objectives of Compliance Policy include the following:

Strict adherence to all statutory guidelines issued by various regulatory bodies and Bank's

internal policies and Fair Practices Code.

Observing proper standards of market conduct.

Managing conflicts of interest.

Treating customers fairly.

Ensuring the suitability of customer advice.

Prevention of money laundering and terrorist financing.

Meeting the provisions of tax laws.

Establish a proactive compliance risk management culture comprehensively to

cover the entire gamut of banking activities. Lay down and develop consistent

qualities in evolving policies, procedures and guidelines relating to identification,

measurement and management, monitoring, controlling and reviewing of Compliance Risk.

Establish an efficient monitoring mechanism by setting up standards to test compliance by

performing sufficient and representative compliance testing to ascertain the level of

compliance and to take measures to improve the same on an ongoing basis.

Review the Policy from time to time to keep pace with the changing standards prevailingworldwide to keep the policy effective. To periodically monitor the compliance level so as

to ensure that the Bank's compliance is well met as regards guidelines / laws of RBI / other

regulatory / Bank's internal requirements.

The objective of Compliance Policy shall be to go even beyond legally binding necessities,

but to embrace standards of high integrity and ethical conduct.

4COMPLIANCE FUNCTIONS

4.1. Compliance Function is defined as "an independent function that identifies, assesses,

advises, monitors and reports on the bank's compliance risk i.e., the risk of Legal or Regulatory

sanctions, financial loss or loss to reputation a bank may suffer as a result of its failure to

comply with all applicable laws, regulations, codes of conduct and standards of good practice".

Compliance Laws, Rules and Standards have various sources as below:

Primary legislation, rules and standards issued by State / Central Government authorities

where banking is involved.

Guidelines / instructions issued by Reserve Bank of India / other regulatory bodies.

Rules followed on account of market conventions including codes / practices promoted by

recognized State / Central Chambers of Commerce and Industries body.

Internal guidelines issued by the Bank from time to time, Best Practice Codes etc. Internal

Codes of conduct applicable to the staff members of the Bank.

Though it is difficult to measure or quantify the gains on account of compliance function, the

repercussions of ineffective compliance management or compliance errors will definitely expose

an organization to fines from monetary authority, civil money penalties through litigations faced

due to non-compliance and will ultimately lead an organization to diminished reputation before


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the public, reduced shareholder value, limited business opportunities, reduced expansion

potential and lack of enforceability of contract against others.

4.2.The Compliance shall ensure strict adherence to all statutory, regulatory provisions

contained in various legislations such as:

Banking Regulation Act

Reserve Bank of India Act

Foreign Exchange Management Act

Prevention of Money Laundering Act

Right to Information Act (RTI)

Income Tax Act

Service Tax Act

Labour Act

Consumer Protection Act

Negotiable Instruments Act Banking Ombudsman Scheme

Security & Exchange Board of India

(SEBI)

Indian Banks Association (IBA)

Foreign Exchange Dealers' Association of

India (FEDAI)

Fixed Income Money Market & Derivatives

Association of India (FIMMDA)

Insurance Regulatory Development

Authority (IRDA)

Central Vigilance Commission (CVC)

Banking Code & Standards Board of

India (BCSBI)

Goiporia Committee

Ghosh Committee

Institute of Chartered Accountants of

India (ICAI)

Stock Exchanges

Mandatory disclosures

Any other regulatory / statutory law, rule

or standards

The Compliance Function shall also include specific areas such as prevention of money

laundering and terrorist financing and may extend to tax laws that are relevant to the structuring

of banking products or customer advice.

Letters received in Hindi are to be replied in Hindi- Compliance of Rule 5 of O L Rules

1976 (Cir 250/2010)

Compliance Function also includes adhering to Internal guidelines / Norms such as:

Various internal policies and guidelines issued by the Bank from time to time.

Fair Practices Code

Time norms (customer service).

Compliance of redressal mechanism on customer complaints.

Compliance of redressal mechanism on shareholders' complaints. Code of conduct for employees.

Good Banking Code.

Corporate Governance requirement.

Any other internal guidelines / norms requiring compliance.


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b. Compliance Officer Role & Responsibility: Responsible for meeting the compliance

areas of the business units and submission of various reports, as devised by the Compliance

Department of the Bank at HO for periodical monitoring of the compliance function.

Implementation of compliance instructions.

Wherever the level of compliance is not achieved as per benchmark set by the Regulator /

Bank, steps shall be initiated for meeting the compliance level.

To maintain relationship with other risk management functions within the Bank and with the

internal audit / inspection function.

In cases where compliance responsibilities are to be carried out by staff in different

departments within the same business unit / administrative unit, the Compliance Officer shall

decide how these responsibilities are to be allocated among the departments.

Compliance Officers shall have access to information necessary to carry out his / her

responsibilities and it is the duty of the Bank's staff to co-operate in supplying thisinformation.

Compliance Officers shall be in a position to devote sufficient time for monitoring and

directing the Bank's compliance activities.

Due weightage shall be given during performance appraisal of staff for ensuring compliance

to various regulatory / internal guidelines issued by the Bank from time to time.

IV. IMPLEMENTATIONREPORTING FRAME WORK: Certificate by the branches and other

operating units for compliance to various Regulatory / Internal guidelines is to be submitted on

monthly basis to CO / HO compliance department within 2 / 5 days of closure of month

It is to be noted that Non adherence to Regulatory/Statutory guidelines/ provisions would invite

levying of penalty/penal interest by the Regulators. Such instances of penalty need to be

disclosed in the Annual Report of the Bank and thus would lead to Reputation Risk for the Bank.

To ensure strict Compliance to various Regulatory/Statutory /Internal Laws, rules, guidelines

etc a check list on various aspects of Deposits/Advances/Foreign Exchange /KYC & AML

activities/ Tax Matters is evolved from Compliance Angle and the same is enclosed in Annexure

to this Circular421/2009 dated 04.12.2009. The check list is only illustrative but not exhaustive.

Due weightage is also given to Compliance in Risk Based Internal Audit.

The check list provided can also be used by the branches for self inspection on monthly basis.

Any Non Adherence to Regulatory/Statutory/ Internal Regulations/Guidelines would amount a

Compliance Breach and all major Compliance Breaches would be placed before the Top

Management/Board.


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CHAPTER5

INTERNAL CONTROL AND HOUSE KEEPING

INTERNAL CONTROL

Internal control is the integration of the activities, plans, attitudes, policies and efforts of the

people of an organization working together to provide reasonable assurance that the

organization will achieve its objectives and mission.

Thus, Internal Control establishes that:

Affects every aspect of an organization : all its people, processes and infrastructure;

Is a basic element that permeates an organization, not a feature that is added on;

Incorporates the qualities of good management;

Is dependent upon people and will succeed or fail depending on the attention people give to

it;

Is effective when all of the people and the surrounding environment work together;

Provides a level of comfort regarding the likelihood of achieving organizational objectives;

and

Helps an organization achieve its mission.

PURPOSE OF INTERNAL CONTROL

While the overall purpose of internal control is to help an organization achieve its mission,

internal control also helps an organization to:Promote orderly, economical, efficient and effective operations, and produce quality products

and services consistent with the organizations mission.

Safeguard resources against loss due to waste, abuse, mismanagement, errors and fraud

Promote adherence to laws, regulations, contracts and management directives.

Develop and maintain reliable financial and management data, and accurately present that data

in timely reports.

The internal Control Act provides that, the top executive is responsible for establishing the

organizations system of internal control, and is also responsible for

(1) Establishing a system of internal control review

(2) Making management policies and guidelines available to all employees, and

(3) Implementing education and training about internal control and internal control evaluations.

To the extent that the top executive authorizes other managers to perform certain activities,


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those managers become responsible for those portions of the organizations system of internal

control.

The law further requires the head of the organization to designate an internal control officer who

reports to him or her. Drawing on knowledge and experience with internal control matters, the

internal control officer is critical member of the management team who :

Assists the agency head and other management officials by evaluating and improving the

effectiveness of the internal control system. While the internal control officer has

responsibility for both implementing and reviewing the organizations internal control efforts,

the organizations managers are still responsible for the appropriateness of the internal

control system in their areas of operation.

The internal control officer helps specific procedures and requirements; the effectiveness of

these procedures and requirements must be audited by someone who was not involved in

the process of putting them into place.

Evaluating the effectiveness of the system of internal control. This individual must be

independent of the activities that are audited. For this reason, in most instances, the

internal auditor cannot properly perform the role of internal control officer. Internal control and housekeeping are the parameters used to judge the health of an

organization apart from others such as business level, NPA level etc. Any growth in

business should not be at the cost of quality.

Effective internal control and housekeeping ensures that quality is maintained. Keeping this

in view, due weightage is being given to internal control and house keeping aspects.

GENERAL :Importance to be given to the following areas

1. Ambience - Maintenance of premises - Banking hall, toilets, stock room, old record room,

branch vehicles.

2. Maintenance of Computers, Calculators, Alarms Maintenance of relevant service contracts

information.

3. Maintenance of cash cabins, counters, manager's cabins (from security angle and as a

facilitator of movement of slips, movement of staff).

4. Control over security items including balancing; for recording balancing of security items

Preserve Balancing book in Double lock/strong room.

5. No Irregularities in staff matters / LFC / TA / Medical Bills etc.

6. Watch over the financial overtones of staff members.

7. Review of everyday Day book slips.

8. Ensuring balancing on due dates/checking balancing at random and ensuring supervisor's

signature in the balancing books; Ensure preparation and submission of returns and

statements (practical aspect prioritization). .

9. Ensure NIL leakage of income.

10. Control over each item of expenditure. .


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be sent to the account holder by Regd. AD., thanking him for reviving the account.

Acknowledgement received is to be kept safely.

13. correct reporting of inspection rectifications.

14. Attend on top priority to reconciliation of inter-branch/inter bank transactions and attending

to IBAR queries.

ADVANCES: Ensure the following:

1. Pre-sanction and post sanction inspection

2. Adequate follow up measures

3. Verification of hypothecated / pledged goods / control over godown keys at regular intervals

4. No Favourtism in granting loans

5. Sanction within delegated powers

6. Discount of bills with proper documents or movement of goods

7. Proper application of interest

8. Verification of original documents and obtention or photographs.

9. Obtention of proper documentation.

10. Follow up of Stock Statements etc., and Regulation of Drawing limits.

11. Gold Jewellery to be apprised in the branch premises by the appraiser and gold ornaments

are to be placed in the cloth bags under the supervision of the key holders.

12. Watch over the business dealings and also the operations in the account.

13. Follow up overdue Bills/Returned Bills.

14. Follow up for lien noting in case of vehicle loans and advances against shares.

15. Watch over share price movements regarding accounts where shares are taken as

securities. Scrutiny of Title Deeds and Land Records. Ownership of securities offered.

Valuation of securities by approved valuers.

16. Ensure availability/Renewal of Insurance of all the goods pledged or hypothecated to the

Bank.

17. Ensure noting of lien in case of loans against deposits. In case of big branches, where the

departments are handled by different persons, verify proper authorization.

18. A Register to be maintained to record the income leakage reported in RI/ C Audit/Income

Audit etc. The book to be got updated & held by Branch-incharge

DESTRUCTION OF OLD RECORDS :

Segregate and list the old record to be destructed inNB 29 during November every year.Forward the list to premises section for their permission before 7th of December with a

certificate to the effect that records have completed retention period and obtain

permission. No records relating to disputed matters are to be included.


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Arrangements are to be made for destruction through approved agents or merchants.

Amount received by disposal of records is to be credited to commission MR and a

certificate is to be sent to P & D Sec, CO

NB 29 register for 'Records inward and destroyed' should be preserved permanently.

ITEM PERIOD OF PRESERVATION

Register for Mortgages and Charges Permanent

Claim Appln on account of deceased A/c

holders

21 years

Records relating to disputes or litigations

pending in the court of law

20 years after the disputes are over.

All deposit account Opening forms/Cards 20 years from the date of closure of A/c

Sectional Circulars/Circulars 10 years

Memos 4 years

Deposit / Advances / Registers /Ledgers 20 years from the date of closure of last

account or last operation in last o/s a/cReturns to a) External Agencies

b)Internal ReturnsCopies at branches

20 years

Control returns3 years

Statistical returns5 years

Cir 154/2008: In view of the changed scenario, branches/ offices are advised to revert back to

the earlier system of preservation of other records, viz.,

A period of 8 years prescribed for specified records and registers, where customers/third

party transactions are recorded.

A period of 5 years for specified records and registers, where the transactions are internal

in nature.

A period ranging upto 5/3/1 year/s for records and registers for which preservation period is

not prescribed by statute and the transactions can be tracked with the help of details

available in other records having longer period of preservation

SCRUTINY OF IMPORTANT STATEMENTS : Branch has to take the print out from the

system and scrutinize the PRR 5, 5A and 6:

PRR5&5A: PRR 5 & 5A - to Branch Adjustment Account. Due on the last day of the month.

o BARs pertaining to Cash remittances & Funds transfer outstanding beyond 7 are to be

reported.


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o Initiate steps after a reasonable period of time for obtaining the IBA from the responding

branch. .

o Take the help of controlling office, if IBA is not received in time.

o Ensure that the entries do not outstand beyond 30 days.

PRR6: -Sundry Asset account. Due as on the last day of the month.

o All entries outstanding beyond 30 days, excluding the exempted items, are to be

reported.

o Entries such as premises/quarters rent advance, advance paid to electricity board etc.

are exempted from reporting.

o All others are of temporary nature and are to be wiped off periodically.

o Wherever permission is required from higher authority for adjustment, the same should

be taken up promptly.

o Ensure that entries are not remaining in the books beyond 90 days otherwise NPA

provision will attract.

PRR 14: Banker's account is maintained by the branches for both cash management and funds

management. Balancing is to be taken as on the last day of the month and it is to be

reconciled with the banker's statement.

Debits in the Bankers statement other than cheques issued should be adjusted

immediately. These can be in the nature of clearing house rent, charges for funds

transfer, etc.

Entries not pertaining to us must be taken upimmediately with the banker and rectified.

PRR 18: Nil Balancing / inconsistency report to be ensured. The balancing reports of each head

must be preserved serially for verification by the inspecting officers. To be submitted

monthly as on last day to the controlling office.

PRR 18A:In order to avoid income leakage, interest checking is a must and the position of the

same is reflected in the monthly statement PRR 18A.

PRR43: Statement on SL and other liabilities. Due as on the last Friday of the month.

o Review of the entries regularly, especially those under' for want of particulars' and

ensure that they are wiped off within a reasonable time.

o All debits must be authorized by the branch head only.

STEPS TO BE TAKEN TO PREVENT INCOME LEAKAGE

The income leakage arises on account of short collection of interest, commission and other

legitimate income, non-collection of various service charges and excess payment of interest.

We have to ensure a system by which these calculations are found correct and no legitimate

income to the Bank is lost. Such a system has to take care of the following items. The list is not

exhaustive. Any item by which bank can earn legitimate income shall find a place.


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1) Ensure maintenance of a Register for monitoring, calculation, application and checking of

interest on various deposits, loans and bills accounts.

2) Ensure checking of interest on deposits, loans and bills accounts.

3) Verify Accounts closed before maturity as regards interest payment.

4) Verify the interest rate quoted and maturity value calculations in deposit accounts.

5) Commission at appropriate rates as advised in circulars etc, to be collected on DDs, Fast

collection services etc. and also on ISCs, IBCs, guarantees.

6) Charges for solvency certificates, Rentals on Safe Deposit lockers, Safe Custody etc;

7) Verify commission paid to NNND agents.

8) Collection of Service Charges for return of cheques in operative accounts SB/ CA, OD etc.

9) Collection of service charges for closure of SB accounts before one year.

10) Collection of TOD interest in SB/CA.

11) Collection of service charges on standing instructions.

12) Collection of service charges for issue of duplicate DDs, duplicate / passbooks etc.

13) Verification of the Parcel Received Register and VPL. Register with reference to amounts

credited in the cash department.

14) Recover the cost of stamped Agreement from the borrower.

15) Verify collection of folio charges etc., - CA / OD Accounts.

16) Verify ISC/OSC Registers particularly with reference to commission and interest,

demurrage etc.

17) Collect cable charges, teleqrarn and telephone charges wherever applicable

18) Breaking open of lockers - collection of charges.

19) Verify debits in commission and interest paid accounts to ensure genuineness of entries

and arithmetical accuracy.

20) Ensure collection of Differential interest whenever Rate of interest changes in respect of

loans.

21) Ensure collection of penal interest on delayed submission/non-submission of stock

statements /QOS statements.

22) Ensure collection of correct service charges in respect of godown inspection.

23) Ensure collection of appropriate amount of processing charges.

24) Review the Guarantee Register with reference to Commission, Protective clause etc.

25) Interest at applicable rates for withdrawals permitted against cheques to be sent in clearing.

26) Ensure collection of interest on the short collections noticed till the date of actual realization.

27) Verify the plaints in suit filed accounts with reference to Ledgers and ensure whether

interest up to the date of filing suit is covered in plaint.

28) Verify fees paid to the advocate, Any other charges paid to the Advocate in . connection

with legal proceedings may also be seen.


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29) Verify the recovery of differential amount where monthly interest was being paid on Fixed

Deposits and such deposits being closed before maturity.

30) Ensure proper application of Rate of interest.

31) Ensure proper aggregation of limits for arriving at proper Rate of interest Collection of

overdue interest, penal interest.

32) In computer system ensure change in parameters whenever there is change in ROI.

33) Do not pay interest on ineligible SB Accounts

34) Ensure that appropriate interest is collected on FCLR.

35) Ensure collection of commission and lead bank fees in case of consortium advances.

36) Ensure claiming turnover commission for Government transactions.

37) Preservation/Generation/verification of interest dumps.

SECURITY ITEMS

Cheques, DDs etc, and operation in Bankers Accounts.

1) Ensure proper assessment of requirements of security items and indent on Stationery

Sections. Security items cannot be borrowed from other branches.

2) Verify the inward stock of security items with reference to the invoices of the

supplier/stationery sections, as to the quantity and the branch name. Each and every leaf

has to be checked in loose quantities. In case of sealed packets, the serial number printed

on the labels should be verified.

3) Entries in the security items register NB 58 to be initialed by both the key holders.

4) Security items should not be kept open at the counter. They are to be kept in a single lock

box and items are taken out only at the time of use.

5) Request for small amounts of DDs a mini interview of the purchaser to be conducted.

6) Ensure punching of proper hole.

7) Ensure use of ultra violet lamp as per norms.

8) While making payment of DDs ensure proper contra transactions and verify the signature of

the concerned supervisors.

9) Ensure the "informatory Confirmation" is sent to the drawee branch/place where the

individual draft issued is Rs. 10 lakhs and above.

10) DDs for Rs. 1 lakh and above should be signed by two officers. Where two officers are not

available, issue of DD is restricted to less than Rs. 1 lakh.

11) DD/PO of Rs.20000/- and above are to be issued invariably with a/c payee crossing (Cir

No. 339/2011)


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12) Bankers Accounts to be operated jointly by 2 PA holders where the withdrawal (including

cash) is above Rs. 50,000/-, If there is only one PA holder, then by the single PA holder

subject to prior approval of MIPD & PP Section. CO.

13) Security items which are required for the use at counters are to be kept in a box. The box is

to be kept in DL overnight

14) The Staff member who is dealing with security items should hand over them to the

supervisor/officer if he leaves the seat.

15) Supervisor while authorizing issue of cheque books should ensure that the serial order is

maintained.

16) While issuing cheque books against cheque requisition slip, genuineness of the signature of

the account holder to be ensured and also to be ensured that whether the requisition slip

is out of the cheque book issued to the account holder earlier or not.

17) Instruments whenever required are to be screened under Ultraviolet lamp. In case of

electricity failure/equipment going out of order, the same is not recorded in a note book

required to be maintained.

18) Cheque books against letter of request are not to be issued to third persons

19) Signatures on the instruments are to be verified/verified properly with the specimen lodged,

while passing for payment

Additional precautions for Term Deposit Receipts:

20) At the end of the day, all the unused deposit receipts are to be collected from the staff and

verified.

21) Ensure all used DRs are properly accounted for.

22) Supervisor of Deposit Section to verify leaf by leaf the DRs received in the morning andensure correctness

Precaution regarding DD items:

23) DD leaves of Rs.10 lacs and above are to be kept in DL only and required quantity to be

taken out as and when necessary recording in a separate register under authentication.

24) DDs of Rs. 1 lac and above and up to 10 lac are to be kept with the supervisor of the DD

department and Issued to clerks against relative challan noting the number on the challan.

25) Records are to be made in security item movement register in case of other DD leaves.

26) Particulars of DD received are to be acknowledged by the counter clerk after verification

and he has to hold it under lock and key when not in use, hand them over at the end of the

day against acknowledgement.


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Balancing of Security Items:

21) As on the last day of Calendar Quarter

22) In case of DDs 1 lac and above, last day of every month

23) Term Deposit Receipts - monthly by verifying leaf by leaf

24) Balancing to be taken in NB 13 with numbers of existing stock.

25) A certificate in NB 13 signed by joint custodians to be given which is to be verified by

inspecting officers.

26) A certificate to that effect is to be given in PRR 18 every month

27) Security items pertaining to other branches should not be used.

System of verification of security items on receipt of stock:

28) Parcels are to be taken delivery from the transporters without delay.

29) Parcels should be opened immediately in presence of joint custodians of security items. '

30) Security items are to be bifurcated into:

a) High Risk Security items (HRS I).

DDs of 1 lakh and above (TL and OC series)

Branch advices Foreign Currency Travelers cheques (FCTCs).

Foreign Currency Demand drafts.

b) Low Risk Security items (LR S I).

DDs less than 1 lakh

Cheques and Deposit receipts.

31) High Risk Security items are to be verified leaf by leaf and ensure accuracy before sending

acknowledqment.

32) In case of LRS I, number of books in the packets are to be verified without opening the

same before sending acknowledgement.

33) If any packet is found tampered such packet is to be verified leaf by leaf.

34) Otherwise, at the time of issue to the counter, the verification leaf by leaf is to be done.


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35) If any leaf/book is found missing, at any stage, the matter is to be reported

36) immediately to CO and stationery section HO for further action.

Missing of Security Items:

a. If branch finds any of the security Item missing, report to RO/CO giving full particulars.

b. In case of lost/missing of DDs before issue please furnish

1. Printed SI.No. 2. Account field Code No. 3. ALPHA Code No.

c. In case of loss/missing of DD after issue in addition to above

a) Date of DD b) Amount of DD c) Name of the Payee

d. In case of loss of Cancard report to Cancard Division, P & D Wing, HO.

e. Record the details In the note book

f. If items are retraced:

1. not to put into use again.

2. treat the same as cancelled security item and record in NB 58

3. A certificate to P & S Section, CO under copy to Stationery Section, HO to be sent for having

retraced and treated as cancelled security item.

4. All the guidelines applicable to cancel security item should be followed.

SURPRISE VERIFICATION OF CASH AND SECURITIES

- Applicable to all Branches other than VLBs

- Br.Manager to conduct once in a month at irregular intervals in branches and extension

counters

- If branch Manager is one of the key holder, verification to be done by an Officer from

CO/Other branch officials nominated by CO

- Where surprise inspection is by CO nominated officials, once in a quarter at irregular

intervals.

AT EXTENSION COUNTER : Manager in charqe of base branch to conduct verification in

Extension Counters. A record of verification to be noted in last few pages of Cash Register(NB

9). Books of accounts and control on cheque books also to be verified and a certificate

submitted.

In VLBs: Chief Managers should authorize any of the functional Managers who is not a key

holder. At least once in 6 months Chief Manager to verify branch and Extension Counter

attached.


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Transmission of Cashguidelines

o Great Care and caution to be exercised

o Strong Steel trunks of good quality with secure locking system to be used

o Public conveyance or private conveyance preferably closed vehicle to be made us for

remittance

o Branches can make use of 2/3 wheelers and or private vehicles. If places are with in walking

vicinity, physically also

o Approval of CO needed for engaging Taxi

o Person through whom cash is transmitted should be a confirmed employee who does not

have any physical infirmities

Cash up to Rs.5000/- through Sub-staff

Cash above Rs.5000/- up to 25000/- by a person of clerk and above Cadre

Above Rs.25000/- in addition to a person of clerical cadre above, one more employee to

accompany Rs.20 lakh to 50 lakhs to be accompanied by at lease one armed guard

Above 50 lacs at least 2 armed guards, one with driver and another to sit with Cash.

SHORTAGE OF CASH

o In case of shortage of Cash - employee to reimburse and give an explanation

o If he/she is not in a position to make good, debit' SA-Cash Shortages" with his/her signature

on the back of debit slip

o Recovery as stipulated by DGM/GM of Circle with quarterly interest

o If shortage is Rs.l0000/- and above, investigation to be conducted invariably irrespective of

the fact of reimbursement

o If shortage is 2500/- and above but less than Rs.10000/- investigation at the discretion of the

DGM.

o As long as the shortage is recovered immediately and no malafide intention are attributed to

the concerned employee, the entrustment of cash duties to the same employee is left to the

discretion of the Branch Manager.

o The following cases where fraudulent intention is not suspected / proved at the time of

detection, the same will be treated as Fraud :

o a) Case of cash shortages more than Rs.10000/-o b) Case of cash shortages more than Rs.5000/- if detected by Management/auditor /

Inspecting Officers and not reported on the same day of occurrence by the persons

handling cash.


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CHAPTER 6

CASH

Features of genuine notes:

Water Mark: The Mahatma Gandhi Series of banknotes contain the Mahatma Gandhi

watermark with a light and shade effect and multi-directional lines in the watermark

window.

Security Thread: Rs.1000 notes contain a readable, windowed security thread alternatelyvisible on the obverse with the inscriptions Bharat (in Hindi), 1000 and RBI, but totally

embedded on the reverse.

- The Rs.500 and Rs,100 notes have a security thread with similar visible features and

inscription Bharat (in Hindi), and RBI. When held against the light, the security thread on

Rs.1000, Rs.500 and Rs.100 can be seen as one continuous line.

- The Rs.10, Rs.20 and Rs.50 notes contain a readable, fully embedded windowed security

thread. Notes issued prior to the introduction of the Mahatma Gandhi Series have a plain,

non-readable, fully embedded security thread.

Intaglio Printing: The portrait of Mahatma Gandhi, the bank seal, guarantee and

promise clause, Ashoka Pillar Emblem on the left, RBI Governor's signature are printed in

intaglio i.e. in raised prints, which can be felt by touch, in Rs.20, Rs.50, Rs.100, Rs.500

and Rs. 1000 notes.

Identification Mark: A special feature in intaglio has been introduced on the left of the

watermark window on all notes except Rs.10/- note. This feature is in different shapes

for various denominations ( Rs. 20 - Vertical Rectangle, Rs.50 - Square, Rs.100 -

Triangle, Rs.500 - Circle, Rs.1000-Diamond) and helps the visually impaired to identify the

denomination

See Through Register:See-through is a flower like design that renders additional security to

our notes. It is in the left side & above identification mark. The printing requires perfect

registration between front and back. Replication is difficult on commercial machines.

Micro-Lettering: This feature appears between the vertical band and Mahatma Gandhi

portrait. It contains the word RBI in Rs.10. The notes of Rs.20 and above also contain the

6) See Through Register7) Micro-Lettering

8) Latent Image9) Optical Fibres

10) Fluorescent Ink

1)Paper Quality2)Water Mark

3)Security Thread4) Intaglio Printing

5) Identification Mark


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denominational value of the notes in micro letters. This feature can be seen better under a

magnifying glass

Latent Image: On the obverse side of Rs.1000, Rs.500, Rs.100,Rs.50 And Rs.20 notes, a

vertical band on the right side of The Mahatma Gandhis portrait contains a latent

Image showing the respective denominational value In numeral. The latent image is visible

only when the Note is held horizontally at eye level.

Optical Fibres :This is a new security feature incorporated in the Rs.1000 and Rs.500

notes with revised colour scheme introduced during in November 2000. The numeral

1000 and 500 on the obverse of Rs.1000 and Rs.500 notes respectively is printed in

optically variable ink viz., a colour-shifting ink. The colour of the numeral 1000/500

appears green when the note is held flat but would change to blue when the note is held at

an angle.

Fluorescent Ink: Number panels of the notes are printed in fluorescent ink. The notes also

have optical fibres. Both can be seen when the notes are exposed to ultra-violet lamp

Rs.500/- Denomination Bank Note

Multidirectional Line

Antiscan lines

Window security thread

With clear text

OmronMicro text

RBI & 100

Latent

Image

SeeThrough

Identification

Mark

Fluorescent Ink

Numbering Optically variable ink

Itaglio Printing


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CHAPTER7

I. Facility for exchange of notes and coins

1. At bank branches

(a) All branches of banks in all parts of the country should provide the following customer

services:

(i) Meeting the demands for fresh / good quality notes and coins of all denominations,

(ii) Exchanging soiled notes, and

(iii)Accepting coins and notes either for transactions or exchange.

(b) All the designated bank branches (PRESNELTY CURRENCY CHEST) should provide

facility for exchange of damaged / mutilated notes.

(c) All currency chest branches of scheduled commercial banks should provide facility of

exchange of cut / soiled / mutilated notes / issue of coins to public without any

discrimination on all working days.

(d) None of the bank branches / staff should refuse to accept small denomination notes and / or

coins tendered at their counters.

As per RBI Act, no person is entitled as a right to recover from the Government of India or RBI

the value of any lost, stolen, mutilated or imperfect currency note of the GOI or banknote.

2. Liberalised definition of Cut Notes : The following types of soiled and cut notes should be

freely exchanged by all bank branches.

I. Single numbered notes Re 1/-, Rs.2/- & Rs.5/- : (a) Note presented should not be in

more than two pieces. No essential feature of the note should be missing. Both the pieces

should be of the same note.

II. Double numbered notesRs.10/