A Summer Training Report

On
Banking Operations
(Punjab & Sind Bank)
Submitted in partial fulfillment of the requirements for the award of the degree of
Of
Guru Gobind Singh Indraprastha University, Delhi

Guide:

Submitted by:

Ms. Yamini Soi

Shweta Kaushik
Roll No.:06612201709
Semester- 5

Delhi College of Advanced Studies

B-7, Shankar Garden, Vikas Puri,
New Delhi 110018

Certificate
I, Ms. Shweta Kaushik, Roll No. 06612201709 certify that the Summer Training Report
(Paper Code 311) entitled Banking Operations is done by me and it is an authentic
work carried out by me at Punjab & Sind Bank. The matter embodied in this has not been
submitted earlier for the award of any degree or diploma to the best of my knowledge and
belief.

Signature of the Student

Date:
Certified that the Summer Training Report (Paper Code 311) entitled Banking
Operatiions done by Ms Shweta Kaushik, Roll No. 06612201709 is completed under my
guidance.
Signature of the Guide
Date:
Name of the Guide: Yamini Soi
Designation:
Countersigned
Prof. (Dr.) J.P. Varshney)
Director

Acknowledgement

I have taken efforts in this project. However, it would not have been possible without the
kind support and help of many individuals. I would like to extend my sincere thanks to all
of them.
I am highly indebted to my mentor Mr. Deepak Rastougi, Sr. Manager of Punjab & Sind
Bank for their guidance and constant supervision as well as for providing necessary
information regarding the project & also for their support in completing the project. I
would like to express my gratitude towards my parents for their kind co-operation and
encouragement which help me in completion of this project. I would like to express my
special gratitude and thanks to industry persons for giving me such attention and time.
My thanks and appreciations also go to my Faculty guide Ms. Yamini Soi in developing
the project and people who have willingly helped me out with their abilities.
I thanks Prof. (Dr.) J.P.Varshney (Director) of Delhi College Of Advance Studies for
giving me this opportunity.

(Shweta Kaushik)

Contents
S.no

Topic

Certificate

Acknowledgement

List of Tables

List of Abbreviations

Chapter -1 Profile of the PSB

Page no

About PSB

History of PSB

Introduction of PSB

Vision and mission of PSB

Sources of Data Collection

Chapter -2 SWOT Analysis of PSB

Strengths and Weaknesses of PSB

Opportunities and Threats that PSB Faces

Fair Best Practices/ USP

Chapter -3 Conceptual Framework

Common area of customer banker Relationships

Safe deposit lockers

Deposit Schemes

Various FD schemes of the bank

RTGS ( Real Time Gross Settlement)

NEFT (National Electronic Fund Transfer)

KYC (Know Your Customer)

Guidelines of KYC

Loans and Advances

Chapter-4 Lesson Learnt

Values and Experience Learnt

Limitations

Recommendations/Suggestions

Conclusion

Bibliography

List of Tables
Table no.

Title

Page no.

1.

Saving Bank Account

2.

Current Account

3.

Term Deposit Account

4.

Rate of interest

5.

Service Charges of RTGS

6.

Service Charges of NEFT

List of Abbreviations
S. no.

Abbreviated Name

Full Name

1.

PSB

Punjab & Sind Bank

2.

SB

Saving Bank account

3.

CA

Current account

4.

RBI

Reserve Bank of India

5.

RTGS

Real Time Gross Settlement

6.

NEFT

National Electronic Funds Transfer

Chapter-1
Profile of Punjab & Sind Bank
About the PSB

Punjab and Sind Bank (A Govt. Of India Undertaking), 24 west Patel Nagar,
New Delhi-28

Telephone no.: 011-25768831, 25738372

email: cmd@PSB.co.in

Website: www.PSBindia.com.

History of the PSB

It was in the year 1908, when a humble idea to uplift the poorest of poor of the land
culminated in the birth of Punjab & Sind Bank with the far-sighted vision of luminaries
like Bhai Vir Singh, Sir Sunder Singh Majitha and Sardar Tarlochan Singh. They enjoyed
the highest respect with the people of Punjab.

The bank was founded on the principle of social commitment to help the weaker section
of the society in their economic endeavours to raise their standard of life.

Decades have gone by, even today Punjab & Sind Bank stands committed to honor the
social commitments of the founding fathers.

Introduction
PSB is a Government Bank of India undertaking. This bank is nationalized on 15th
April, 1980. This provides banking services to their customers like loan, lockers
and other facilities. This organization performs all financial activities. This operates the
Banking and Finance sector. The bank was founded on the

principle of

social

commitment to help the weaker section of the society in their economic endeavors
to raise their standard of life and to strive to achieve excellence in Customer
Service.

Segment of PSB: Individual and industrial banking in Punjab

Target group: All age and earning groups.

Positioning: Complete banking solutions.

Vision & Mission of PSB

Corporate Vision
PSB envisions emerging as a strong vibrant Bank through synchronization of the
human, financial and technological resources.

Corporate Mission

To put in place the effective Risk Management and Internal Control

Systems.

To adopt and operationalise high-level technology standards.

To strive to achieve excellence in Customer Service.

To achieve the highest standards of transparency and accountability in the

conduct of banking business.

To adopt professional approach in effectively managing financial as well

as non-financial risks.

To maximize profitability and profits of the Bank with due compliance of

prudential guidelines.

To maximize competitive risk adjusted return on capital, through planned

reduction in the average cost of funds, increased yield on advances and
investments besides reduction in cost of operations.

Product Range of Bank

The product range of the bank or services provided by the bank are:
1. Saving bank account
2. Current account
3. Term deposit account
4. Safe deposit lockers
5. Deposit schemes: Saving bank (SB), Recurring deposit (RD), Fixed deposit
(FD)
6. RTGS
7. NEFT
8. Credit cards, Debit cards, Smart cards, Gift cards
9. Loans and Advances

Source of Data Collection:

The basic objective of the project is to study the patterns of respondents. Both primary
and secondary data will be used in order to analyze the aspect.

A project methodology tells us what we have to do, to manage our projects from start to
finish. It describes every step in the project life cycle in depth, so we know exactly which
tasks to complete, when and how. Whether we are an expert or a novice, it helps us to
complete tasks faster than before.

In Primary data collection, we collect the data our self using methods such as interviews
and questionnaires. The key point here is that the data we collect is unique to us and our
research and, until we publish, no one else has access to it.

Secondary data is data taken by the researcher from secondary sources, internal or
external. The researcher must thoroughly search secondary data sources before
commissioning any efforts for collecting primary data. Secondary data is of two kinds,
internal and external. Secondary data whether internal or external is data already
collected by others, for purposes other than the solution of the problem on hand.

Secondary data is data which has been collected by individuals or agencies for purposes
other than those of our particular research study.

No marketing research study should be undertaken without a prior search of secondary

sources (also termed desk research). There are several grounds for making such a bold
statement.

Secondary data may be available which is entirely appropriate and wholly

adequate to draw conclusions and answer the question or solve the problem.
Sometimes primary data collection simply is not necessary.

It is far cheaper to collect secondary data than to obtain primary data. For the
same level of research budget a thorough examination of secondary sources can
yield a great deal more information than can be had through a primary data
collection exercise.

The time involved in searching secondary sources is much less than that needed to
complete primary data collection.

Secondary sources of information can yield more accurate data than that obtained
through primary research. This is not always true but where a government or
international agency has undertaken a large scale survey, or even a census, this is
likely to yield far more accurate results than custom designed and executed
surveys when these are based on relatively small sample sizes.

It should not be forgotten that secondary data can play a substantial role in the
exploratory phase of the research when the task at hand is to define the research
problem and to generate hypotheses. The assembly and analysis of secondary data
almost invariably improves the researcher's understanding of the marketing
problem, the various lines of inquiry that could or should be followed and the
alternative courses of action which might be pursued.

Secondary sources help define the population. Secondary data can be extremely
useful both in defining the population and in structuring the sample to be taken.
For instance, government statistics on a country's agriculture will help decide how

to stratify a sample and, once sample estimates have been calculated, these can be
used to project those estimates to the population.

Chapter-2
SWOT Analysis
SWOT analysis of Punjab and Sind Bank:
Strengths and weaknesses of PSB
Strengths:
1. Schemes for rural sector.
2. Tie-ups with Auto sector firms like TATA Motors and Maruti.
3. Active in various Government schemes facilitation.
4. Have around 1000 branches across India and 400 branches in India.
Weaknesses:

1. Less penetration in the urban areas

2. Inadequate advertising and branding as compared to other banks

Opportunities and Threats that the Bank faces:

Opportunities
1. Small scale business banking across India.
2. Expansion in other countries for international banking.
3. Installation of more ATMs and better customers services.

Threats
1. Economic crisis and economic fluctuations.
2. Highly competitive environment.
3. Stringent Banking Norms by the RBI and the Government.
Competitors

1. Indian Bank

2. Andhra Bank

3. Canara Bank

4. SBI

5. Allahabad Bank

6. IDBI

Fair Banking Practices

We request you as our customers to please note the following duties to enable us
to serve you better.

Ensure safe custody of cheque book and pass book.

Preferably use reverse carbon while writing a cheque.

Issue crossed/account payee cheques as far as possible.

Check the details of the cheque, namely, date, amount in words and
figures, crossing, etc., before issuing it. As far as possible, issue cheques
are rounding off the amount to nearest rupee.

Not to issue cheque without adequate balance, maintain minimum balance

as specified by the Bank.

Send cheques and other financial instruments by Registered Post or by

courier.

Bring pass book while withdrawing cash from Saving Bank account
through withdrawal slip. Get pass book updated from time to time.

Use nomination facility in all deposits accounts & locker facility.

Note down account numbers, details of FDR, locker numbers, etc.,

separately.

Inform change of address, telephone number etc., to the Branch.

Inform loss of demand draft, fixed deposit receipt, cheque leave(s) /book,
key of locker, etc., immediately to the Branch.

Avail standing instructions facility to repeat transactions.

Provide feedback on our service.

Pay interest, installments, locker rent and other dues on time.

Avail services such as ATM, EFT, etc., if offered by the branch.

Bring any deficiency in services to the notice of the Branch Manager.

Not to sign blank cheque(s). So also do not record your specimen

signature either on pass book or on cheque book.

Not to introduce any person, who is not personally known to you for the
purpose of opening account.

Not to bribe any staff member, to avail corruption free service.

USP: Commitment to help the weaker section of the society.

Chapter-3
Conceptual Framework

Common area of customer banker relationships:

1. Saving bank account:
Table no.1:

(i)

These accounts are designed to help the individuals (personal customers) to inculcate habit of
saving money and to meet their future requirement of money. The amount can be
deposited / withdrawn from these accounts by way of cheques / withdrawal slips. The
withdrawals are restricted to 50 entries each half-year in the S.B. Account.

(ii)

Saving Bank accounts are very popular. These accounts can be opened by eligible
person(s) and certain organization(s) / agencies as approved by the Reserve Bank of India
(RBI).

(iii)

These accounts are designed to help the individuals (personal customers) to inculcate habit of
saving money and to meet their future requirement of money. The amount can be
deposited / withdrawn from these accounts by way of cheques / withdrawal slips. The
withdrawals are restricted to 50 entries each half-year in the S.B. Account.

(iv)

We are required to obtain two recent photographs of the person(s) opening the account,
as per R.B.I. directives.

(v)

We are required to obtain Permanent Account Number (PAN) or alternatively obtain

declaration in Form No. 60 or 61 as per the Incom e Tax Act (vide Section 139 A) from

the person(s) opening the account.

(vi)

We provide to the prospective customers details of the documents required for

identification of the person(s) opening the account in addition to satisfactory introduction.
Documents normally accepted are the current, gas / telephone / electricity bill / ration card
/ voter's identity card / driving license / passport, etc.

(vii) You are required to maintain certain minimum balance in the account, as specified by
the Bank from time to time, separately for computerized and non-computerized Branches
and also depending on, whether account holder wants to avail the cheque book facility
or not. Non-compliance of this would attract service charges. Interest at 3% p.a. is
processed rate, as perpresently paid on half yearly basis depending on minimum balance
between the 10th day and last day of the months, provided it works out to minimum
Re. 1/(viii) Cheques, dividend warrants drawn in the name of account holder(s) will only be
collected through this account. Financial instruments endorsed in favour of the account
holder(s) will not be collected through savings bank account.
(ix)

Get your passbook updated on presentation legibly with full entries. If the number of
entries to be made is large, kindly leave the passbook against receipt showing the date
when it can be collected back. You can obtain the statement of account indicating full
details by 5th of every month in case you have not been issued a passbook.

(x)

You can obtain a new cheque book when your requisition slip appears next in the
current cheque book.

(xi)

For more details, please contact our Branch to serve you better.

2. Current account
Table no.2:

(i)

Current Accounts can be opened by individuals, partnership firms, private

and public limited companies, HUFs /specified associates, trusts, etc.

(ii)

As required by law, while opening this account, we satisfy ourselves about

the identity, including verification of address, of a person(s) seeking to open
an account to assist in protecting the right of customer(s) and ourselves
against fraud and other misuses of the banking system.

(iii) We also require a satisfactory introduction of the person(s) opening the

account by a person acceptable to the Bank and will require to obtain two
recent photographs of the person(s) opening/operating the account, as per
RBI directives.
(iv) You are required to give Permanent Account Number (PAN) or alternatively
obtain declaration in Form No. 60 or 61 as per the Income Tax Act (vide
Section 139A) from the person(s) opening the account (i.e. including partners
of Registered/Unregistered partnership as also Registered / Incorporated bodies
/ companies).
(v)

We provide to our prospective customers details of the documents/required

for identification of

the person(s) opening the account in addition to

satisfactory introduction. Documents normally accepted are the current,

gas/telephone/electricity

bill/ration

card/voter's

identity

card/driving

licence/passport, etc.
(vi) Minimum balance as stipulated from time to time is required to be
maintained and no interest is paid on credit balances kept in current
account.
(vii) Services charges are levied for:
o Ledger folio used
o Cheque Books issued
o Non-maintenance of minimum balance.
o Return of cheques etc.
o Other facilities as required by the Current Account Customer.
(viii) For

opening

special

types

of

current

accounts

like

for

Executors

Administrators, Trustees, Liquidators, etc., the Branch Manager may be

contacted who will help in opening these type of accounts.
(ix) As per RBI directives, the applicant (i.e. account opener) should declare in
the account opening form or separately that he is not enjoying any Credit
facility with any Bank and if he does enjoy any facility/facilities he should
declare full particulars therefore indicating the name of the Bank and name
of the Branch, wherefrom he has availed these facilities.

3. Term Deposit accounts:

Table no.3:

(i)

We have tailored various deposit schemes to suit the needs and expectations
for investing in every walk of life, which are prominently displayed at our
branches for your convenience. We welcome you to seek more details and
shall also be glad to assist in the area of investment in various deposit
schemes vis-a-vis your requirement.

(ii)

Term Deposit accounts can be opened by individuals, partnership firms,

private and public limited companies, HUFs/specified associates, etc.

(iii) As required by law, while opening this account, we satisfy ourselves about
the identity, including verification of address, of a person(s) seeking to open
an account, to assist in protecting the prospective customer(s), members of
the public and ourselves against fraud and other misuses of the banking
system.
(iv) We require a satisfactory introduction of the person(s) opening the account
by a person acceptable to the Bank and will obtain two recent photographs
of the person(s) opening the account, as per R.B.I. Directives.
(v)

We also require to obtain Permanent Account Number (PAN) or alternatively

obtain declaration in Form No. 60 or 61 as per the Income Tax Act (vide
Section 139 A) from the person(s) opening the account.

(vi) Premature withdrawals are allowed, unless specified otherwise, at the rate of
interest applicable for the period, for which the deposit has run or the

contracted rate whichever is lower, subject to penalty, if any prescribed by

the Bank. No interest will be paid on premature withdrawals of deposit
which has remained with the Bank for less than 15 days. For more details
of interest rates, please contact our Branch Manager.
(vii) Generally loans/overdrafts against deposits are allowed, except on Certificates
of Deposit (CD). Such loans are sanctioned by charging interest at rates
directed by RBI from time to time or as prescribed by the Bank and
automatic renewal of FDRs are also available. Interest on overdue deposit is
paid , if the deposit is renewed, as decided by the Bank from time to time.
(viii) Interest on deposits is

payable either monthly at discounted value or

quarterly or compounded quarterly (i.e. reinvestment of interest) or on the

date of maturity at the option of the depositor as applicable under particular
deposit scheme.
(ix) Interest on Bank deposit is exempted from Income Tax upto a limit,
specified by Income Tax authorities from time to time, as per Govt. norms.
(x)

We accept the declaration in Form No. 15 H preferably at the commencement

of the Financial year for receiving interest on deposits without deduction of
tax.

(xi) We issue TDS Certificate for tax deducted, within time schedule as per law.
(xii) Transfer of funds on maturity of terms deposits as well as periodical interest
on such deposits to another branch of the Bank is done at par.

Safe Deposit Lockers:

The facility of Safe Deposit Lockers is an ancillary service offered by our Bank.
The Branches offering this facility will indicate/display this information at a
prominent place.

The major aspects governing the services are :

A locker may be hired by an individual (not minor) firms, limited

companies, specified associations and societies etc. except blind persons.

Nomination facility is available to individual hirer of Safe Deposit locker.

Loss of key should be immediately informed to the Branch and customer

will be charged for break-opening of the Locker. Lockers are available in
different sizes.

Lockers are rented out for a minimum period of one year as per bank's
policy. In case of overdue rent, the Bank will charge penalty as decided
from time to time.

With standing instruction, the rent may be paid from the deposit account
of the hirer.

We will issue locker only to properly introduced persons.

We reserve our right to break open the locker if the rent is not paid
inspite of giving notices as per the Bank rules and recover charges thereof.

Deposit Schemes:
1. Saving Bank
A. Saral Savings Scheme
Under the RBI direction to achieve greater financial inclusion Bank has since
introduced a no frill deposit account named as "SARAL SAVINGS SCHEME",
that would make accessible banking to vast section of society, which has been
deprived of the banking facilities till date. Basic feature of the account shall be
as under :1. Such accounts shall remain operative even when these have Zero balance &
can be opened in any branch of the bank
"Saral Savings Account" can be opened with the initial deposit of Rs100/- and
thereafter the balance may go below Rs 100/- and will continue to be operative
with even zero balance, unless the account holder request to close the account.
No charges shall be levied in this regard.
2. Target Customers

Landless labour / Artisans in the rural areas / House wives not having
regular income.

Casual labour / Daily wage earners in construction / Industries etc. earning

small amount daily.

Students having no sound financial background, having no resources and

least chances of the saving opportunities.

Similar other segments of society who do not have regular employment

and permanent residential occupancy.

These accounts shall come under the category of the normal saving bank
account, once the balance is enough to qualify under KYC norms.

This product is not for Non Resident Indians, Trusts, Societies etc.

The account can be opened by filling up of usual Saving Bank Accounts

Opening forms and self verified photograph to be attached.
3. Introduction of the account.
An account holder qualifying KYC norms whose account is at least six
month old with satisfactory operations may introduce the account.
Or
Any other evidence as to the identity and address of the customer to the
satisfaction of branch incharge.
4. Operational Stipulation:

Cheque Book will not be issued to this account holder, however on

requisition loose cheque may be issued . Manager cheque / Demand Draft /
MT may be issued on request of the account holder after satisfaction that
transaction is genuine but each instrument not to exceed Rs 3000/-. Usual
bank charges to be levied for issue of these instruments.

Number of withdrawals permitted -- 'FIVE' in a month and 'TWENTY' per

half year.

For each transaction account holder has to come personally to the

branch.

Persons above the age of 15 and below 18, who is able to read and write
may open such account only in his / her own name or jointly with any

person / guardian. In such account guidelines shall be same as applicable on

savings bank account. Interest is payable at the rate applicable as per
saving bank account. However no interest is payable until the balance in
the account is Rs 500/-.

Credit balance in account is not expected to exceed Rs 50000/- OR the

total credits are not expected to exceed Rs100000 /- in a year , if KYC
norms not complied with. No further transaction will be permitted till
compliance of KYC norms if at any point in all his accounts balance
exceeds Rs 50000/- ( Fifty Thousand) or total credits in the account exceeds
Rs 100000/-(One Lac) no further transaction will be permitted till
compliance of KYC norms .

No Collection of cheque is permitted in these accounts. However, if any

cheque is brought for collection then customer is to satisfy KYC norms.
Normally transfer and clearing is not allowed.

Exception

However, if Branch Manager is fully satisfied, such collection / transfers

may be allowed up to Rs 3000/- per instrument but not more than six
such transactions in a year.

In such cases Branch Manager has to certify having satisfied himself

about the genuiness of the transaction before allowing such transaction.

Saving Bank account

Such accounts can be opened by Individuals (singly or jointly), Associations, clubs,

educational institutions.

Minimum Balance in Account

I) Where cheque Book is not issued Rs . 500/Computerized Branches
II) Where cheque Book is issued Rs. 1000/Non Computerized

I) Where cheque Book is not issued Rs. 250/-

Branches

II) Where cheque Book is issued Rs. 500/I) Account with or without cheque Book facility Rs.

Rural Branches
100/Maximum balance

+ Any Amount can be deposited.

Rate of Interest / Eligibility for payment of interest:

Table no.3:
Rate of Interest

Payment schedule

3.5% or such rate as prescribed by Payable on half yearly rest on Daily

the RBI from time to time.

product basis from 1st April 2010

2. Recurring Deposit Schemes

Who can open an account:

An individual who is not insolvent or insane, can open an account singly

or jointly.

A minor can open Saving bank Account and the same can be operated by
the natural guardian or by minor himself / herself, if he / she is above the
age of 10 years. The account can also be opened jointly.

On attaining majority, the erstwhile minor should confirm the balance in

his / her account and if the account is operated by the natural guardian /
guardian, fresh specimen signature of erstwhile minor duly verified by the
natural guardian / guardian would be obtained and kept on record for all
operational purpose.

Such accounts can be opened by Individuals (singly or jointly), a firm,

company, club, Association, Institution, Govt. or Semi Govt. Body, Cooperative societies, religious and charitable institutions etc.
Minimum deposit in the Account - Minimum of Rs. 10/Maximum deposit in the Account - Maximum of any amount per month.
Minimum and Maximum tenure
Minimum tenure - Minimum period six months.
Maximum tenure - Maximum 10 years.

Rate of Interest

As per rate applicable to fixed Deposit for the respective maturity period.
Periodicity of Interest

The interest is compounded at quarterly intervals but paid along with

principal at the time of maturity of deposit.

3. Fixed Deposit Scheme

Who can open an account:

An individual who is not insolvent or insane, can open an account singly

or jointly.

A minor can open Saving bank Account and the same can be operated by
the natural guardian or by minor himself / herself, if he / she is above the
age of 10 years. The account can also be opened jointly.

On attaining majority, the erstwhile minor should confirm the balance in

his / her account and if the account Is operated by the natural guardian /
guardian, fresh specimen signature of erstwhile minor duly verified by the
natural guardian / guardian would be obtained and kept on record for all
operational purpose.

Such account can be opened in the name of individuals (singly or jointly,

Minors (through their guardians) firms, corporate bodies, trusts, Regd.
Associations, Joint Hindu family firms and public undertakings.

Nomination facility is available for depositors

Senior Citizens

The Senior Citizes shall be given an addiotional rate of 0.50% on any

amount over and above the mentioned rates for deposits with maturity
period 91 days & above for fresh and renewed deposits.

Staff / Ex-staff members

Ex -staff Members are eligible for 1 % extra rate of interest, however,

please note that if the Ex-Staff Member is also a Senior Citizen, he will
also be eligible for additional interest applicable to Senior Citizen shown as
above.

Various Fixed Deposit Schemes of the Bank

1) Fixed Deposit Scheme Ordinary

Under this scheme any sum can be placed for any fixed period ranging from 15
days to 120 months and the interest accrued can be withdrawn at the quarterly
intervals.
Minimum period of 7 days also permissible ( conditions apply ).
2) Saving with Smile Deposit Scheme

It is a reinvestment plan deposit scheme, under which compound interest is

paid.

The interest is compounded at quarterly intervals but paid along with

principal at the time of maturity of deposit.

Any amount of deposit shall be accepted under this scheme for a minimum
period of 36 months and a maximum period of 120 months.

3) Short Term Deposit Scheme

It is a reinvestment deposit scheme under which the depositor can place the
funds for short period and still can reap the benefits of compound interest.

Any amount of deposit shall be accepted under this scheme for a minimum
period of 6 months and a maximum period of 36 months

4) Capital Gain Deposit Scheme

This is a scheme under which the tax payers can avail of benefits of exemption from
Capital gains, only if the amount of Capital gains or the net consideration is deposited in
Public Sector Banks on or before their due date of filling the income tax return. (Subject
to conditions as contained in relevant provisions of I.Tax Act 1961,) as amended from
time to time.

5) Harhi Savni (Rabi Kharif) Jama Yojna

Harhi savni (Rabi Kharif) Jama Yojna is a unique scheme offered by Punjab &
Sind Bank to its farmer friends.

The scheme is specially designed to help the farmers to invest their surplus funds
at the time of each harvesting.

The scheme also provides flexibility in depositing the installments with minimum
of Rs.1000/-- and in multiples thereof to any amount.

The deposit of installments is correlated with the harvesting of Hari (Rabi) / Savni
Kharif) crops and is required to be deposited each year before 30th June and 31st
December every year.

6) PSB Fixed Deposit tax Saver Scheme

Bank has formulated Fixed Deposit Scheme for Tax Saving under Section 80 C (2) of the
Income Tax Act, 1961.

Real Time Gross Settlement (RTGS)

Service charges for RTGS
(i) Outward Remittance :
Table no.5:
Rs. 1 lac to Rs. 2 lakh

---

Above Rs.2 lac to 5 lacs

Rs. 25/- Per Transaction

Above Rs.5 lacs

Rs. 50/- Per Transaction

(ii)Inward Remittance: NIL

National Electronic Funds Transfer (NEFT)

RBI has introduced this funds transfer systems called RBI-NEFT System.
This is an Inter-bank electronic funds transfer system to facilitate an efficient,
secure, economical, reliable and expeditious transfer of funds and clearing in the
Banking sector in India. The account holders with the branch can use the NEFT
facility which is available between all the Cities and the designated branches of
Banks in India.

NEFT settlement takes place 11 times a day during the week days (9.00 am, 10.00
am, 11.00 am, 12.00 noon. 1.00 pm, 2.00 pm, 3.00 pm and 4.00 pm, 5.00 pm,
6.00 pm, 7.00 pm) and 5 times during Saturdays (9.00 am, 10.00 am, 11.00 am,
12.00 noon and 1.00 pm)

No Minimum or Maximum amount stipulation for NEFT transactions

At present this facility is available at the following branches whose IFSC codes
are also mentioned alongside.

Service charges for NEFT

(i) Outward Remittance :
Table no.6:
Up to Rs 1 Lac

Rs. 5/- Per Transaction

Above Rs. 1 lac to Rs.2lac

Rs. 15/- Per Transaction

Rs.25/-

Above Rs 2.00 Lac

(Service tax & Education Cess extra)

(ii)Inward Remittance: NIL

Know Your Customer (KYC)
Know Your Customer (KYC) is the due diligence and bank regulation that financial
institutions and other regulated companies must perform to identify their clients and
ascertain relevant information pertinent to doing financial business with them. In the
USA, KYC is typically a policy implemented to conform to a customer identification
program mandated under the Bank Secrecy Act and USA PATRIOT Act. Know your
customer policies are becoming increasingly important globally to prevent identity theft
fraud, money laundering and terrorist financing.

Beyond name matching, a key aspect of KYC controls is to monitor transactions of a

customer against their recorded profile, history on the customers account(s) and with
peers.
Banks doing KYC monitoring for anti-money laundering (AML) and checks relating
to combating the financing of terrorism (CFT) increasingly use specialized transaction
monitoring software, particularly names analysis software and trend monitoring software.
The generated alerts identify unusual activity which is then subject to due
diligence or enhanced due diligence (EDD) processes that use internal and external
sources of information on the subject, including the internet. This helps to determine
whether a transaction or activity is suspicious and requires reporting to the authorities. In
the US, it would require Suspicious Activity Reporting (SAR) filing to Financial Crimes
Enforcement Network (FinCEN). In the UK, it would require a report to Serious
Organized Crime Agency (SOCA). In Canada KYC is monitored and managed by
the Financial Transactions and Reports Analysis Centre of Canada also known
as FINTRAC
KYC

has

different

connotations

and

the

definition

above

is

from

an AML/CFT perspective.
Know Your Customer processes are also employed by regular companies of all sizes, for
the purpose of ensuring their proposed agents', consultants' or distributors' antibribery compliance. Banks, insurers and export credit agencies are increasingly
demanding that customers provide detailed anti-corruption due diligence information, to
verify their probity and integrity.

Some specialist consultancies help multinational companies and SMEs conduct Know
Your Customer processes when entering new markets.

Guidelines on Know Your Customer norms And Anti-Money Laundering

Measures

1. 'Know Your Customer' Standards

The objective of KYC guidelines is to prevent banks from being used, intentionally or
unintentionally, by criminal elements for money laundering activities. KYC procedures
also enable banks to know/understand their customers and their financial dealings better
which in turn help them manage their risks prudently. Banks should frame their KYC
policies incorporating the following four key elements:

i.

Customer Acceptance Policy;

ii.

Customer Identification Procedures;

iii.

Monitoring of Transactions; and

iv.

Risk management.

For the purpose of KYC policy, a Customer may be defined as:

a person or entity that maintains an account and/or has a business relationship

with the bank;

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

beneficiaries of transactions conducted by professional intermediaries, such as

Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the law,
and

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 as a single transaction.

2. Customer Acceptance Policy (CAP)

Banks should develop a clear Customer Acceptance Policy laying down explicit criteria
for acceptance of customers. The Customer Acceptance Policy must ensure that explicit
guidelines are in place on the following aspects of customer relationship in the bank.

i.

No account is opened in anonymous or fictitious/ benami name(s);

ii.

Parameters of risk perception are clearly defined in terms of the nature of business
activity, location of customer and his clients, mode of payments, volume of
turnover, social and financial status etc. to enable categorization of customers into
low, medium and high risk (banks may choose any suitable nomenclature viz.
level I, level II and level III ); customers requiring very high level of monitoring,
e.g. Politically Exposed Persons (PEPs as explained in Annex I) may, if
considered necessary, be categorized even higher;

iii.

Documentation requirements and other information to be collected in respect of

different categories of customers depending on perceived risk and keeping in
mind the requirements of PML Act, 2002 and guidelines issued by Reserve Bank
from time to time;

iv.

Not to open an account or close an existing account where the bank is unable to
apply appropriate customer due diligence measures i.e. bank is unable to verify
the identity and /or obtain documents required as per the risk categorization due to
non cooperation of the customer or non reliability of the data/information
furnished to the bank. It may, however, be necessary to have suitable built in
safeguards to avoid harassment of the customer. For example, decision to close an
account may be taken at a reasonably high level after giving due notice to the
customer explaining the reasons for such a decision;

v.

Circumstances, in which a customer is permitted to act on behalf of another

person/entity, should be clearly spelt out in conformity with the established law
and practice of banking as there could be occasions when an account is operated
by a mandate holder or where an account may be opened by an intermediary in
the fiduciary capacity and

vi.

Necessary checks before opening a new account so as to ensure that the identity
of the customer does not match with any person with known criminal background
or with banned entities such as individual terrorists or terrorist organizations etc.

Banks may prepare a profile for each new customer based on risk categorization. The
customer profile may contain information relating to customers identity, social/financial
status, nature of business activity, information about his clients business and their
location etc. The nature and extent of due diligence will depend on the risk perceived by
the bank. However, while preparing customer profile banks should take care to seek only
such information from the customer which is relevant to the risk category and is not

intrusive. The customer profile will be a confidential document and details contained
therein shall not be divulged for cross selling or any other purposes.

For the purpose of risk categorization, individuals ( other than High Net Worth) and
entities whose identities and sources of wealth can be easily identified and transactions in
whose accounts by and large conform to the known profile, may be categorized as low
risk. Illustrative examples of low risk customers could be salaried employees whose
salary structures are well defined, people belonging to lower economic strata of the
society whose accounts show small balances and low turnover, Government departments
& Government owned companies, regulators and statutory bodies etc. In such cases, the
policy may require that only the basic requirements of verifying the identity and location
of the customer are to be met. Customers that are likely to pose a higher than average risk
to the bank may be categorized as medium or high risk depending on customer's
background, nature and location of activity, country of origin, sources of funds and his
client profile etc. Banks may apply enhanced due diligence measures based on the risk
assessment, thereby requiring intensive due diligence for higher risk customers,
especially those for whom the sources of funds are not clear. Examples of customers
requiring higher due diligence may include (a) non-resident customers, (b) high net worth
individuals, (c) trusts, charities, NGOs and organizations receiving donations, (d)
companies having close family shareholding or beneficial ownership, (e) firms with
'sleeping partners', (f) politically exposed persons (PEPs) of foreign origin, (g) non-face
to face customers, and (h) those with dubious reputation as per public information
available, etc.

It is important to bear in mind that the adoption of customer acceptance policy and its
implementation should not become too restrictive and must not result in denial of
banking services to general public, especially to those, who are financially or socially
disadvantaged.

3. Customer Identification Procedure (CIP)

The policy approved by the Board of banks should clearly spell out the Customer
Identification Procedure to be carried out at different stages i.e. while establishing a
banking relationship; carrying out a financial transaction or when the bank has a doubt
about the authenticity/veracity or the adequacy of the previously obtained customer
identification data. Customer identification means identifying the customer and verifying
his/ her identity by using reliable, independent source documents, data or
information. Banks need to obtain sufficient information necessary to establish, to their
satisfaction, the identity of each new customer, whether regular or occasional, and the
purpose of the intended nature of banking relationship. Being satisfied means that the
bank must be able to satisfy the competent authorities that due diligence was observed
based on the risk profile of the customer in compliance with the extant guidelines in
place. Such risk based approach is considered necessary to avoid disproportionate cost to
banks and a burdensome regime for the customers. Besides risk perception, the nature of
information/documents required would also depend on the type of customer (individual,
corporate etc.). For customers that are natural persons, the banks should obtain sufficient
identification data to verify the identity of the customer, his address/location, and also his
recent photograph. For customers that are legal persons or entities, the bank should (i)

verify the legal status of the legal person/ entity through proper and relevant documents
(ii) verify that any person purporting to act on behalf of the legal person/entity is so
authorized and identify and verify the identity of that person, (iii) understand the
ownership and control structure of the customer and determine who are the natural
persons who ultimately control the legal person. Customer identification requirements in
respect of a few typical cases, especially, legal persons requiring an extra element of
caution are given in Annex-I for guidance of banks. Banks may, however, frame their
own internal guidelines based on their experience of dealing with such persons/entities,
normal bankers prudence and the legal requirements as per established practices If the
bank decides to accept such accounts in terms of the Customer Acceptance Policy, the
bank should take reasonable measures to identify the beneficial owner(s) and verify
his/her/their identity in a manner so that it is satisfied that it knows who the beneficial
owner(s) is/are. An indicative list of the nature and type of documents/information that
may be relied upon for customer identification Procedure.

4. Monitoring of Transactions

Ongoing monitoring is an essential element of effective KYC procedures. Banks can

effectively control and reduce their risk only if they have an understanding of the normal
and reasonable activity of the customer so that they have the means of identifying
transactions that fall outside the regular pattern of activity. However, the extent of
monitoring will depend on the risk sensitivity of the account. Banks should pay special
attention to all complex, unusually large transactions and all unusual patterns which have
no apparent economic or visible lawful purpose. The bank may prescribe threshold limits

for a particular category of accounts and pay particular attention to the transactions which
exceed these limits. Transactions that involve large amounts of cash inconsistent with the
normal and expected activity of the customer should particularly attract the attention of
the bank. Very high account turnover inconsistent with the size of the balance maintained
may indicate that funds are being 'washed' through the account. High-risk accounts have
to be subjected to intensified monitoring. Every bank should set key indicators for such
accounts, taking note of the background of the customer, such as the country of origin,
sources of funds, the type of transactions involved and other risk factors. Banks should
put in place a system of periodical review of risk categorization of accounts and the need
for applying enhanced due diligence measures. Banks should ensure that a record of
transactions in the accounts is preserved and maintained as required in terms of section
12 of the PML Act, 2002. It may also be ensured that transactions of suspicious nature
and/ or any other type of transaction notified under section 12 of the PML Act, 2002, is
reported to the appropriate law enforcement authority.

Banks should ensure that its branches continue to maintain proper record of all cash
transactions (deposits and withdrawals) of Rs.10 lakh and above. The internal monitoring
system should have an inbuilt procedure for reporting of such transactions and those of
suspicious nature to controlling/ head office on a fortnightly basis.

5. Risk Management

The Board of Directors of the bank should ensure that an effective KYC programme is
put in place by establishing appropriate procedures and ensuring their effective
implementation. It should cover proper management oversight, systems and controls,

segregation of duties, training and other related matters. Responsibility should be

explicitly allocated within the bank for ensuring that the banks policies and procedures
are implemented effectively. Banks may, in consultation with their boards, devise
procedures for creating Risk Profiles of their existing and new customers and apply
various Anti Money Laundering measures keeping in view the risks involved in a
transaction, account or banking/business relationship.
Banks internal audit and compliance functions have an important role in evaluating and
ensuring adherence to the KYC policies and procedures. As a general rule, the
compliance function should provide an independent evaluation of the banks own policies
and procedures, including legal and regulatory requirements. Banks should ensure that
their audit machinery is staffed adequately with individuals who are well-versed in such
policies and procedures. Concurrent/ Internal Auditors should specifically check and
verify the application of KYC procedures at the branches and comment on the lapses
observed in this regard. The compliance in this regard may be put up before the Audit
Committee of the Board on quarterly intervals.

Banks must have an ongoing employee training programme so that the members of the
staff are adequately trained in KYC procedures. Training requirements should have
different focuses for frontline staff, compliance staff and staff dealing with new
customers. It is crucial that all those concerned fully understand the rationale behind the
KYC policies and implement them consistently.

6. Customer Education

Implementation of KYC procedures requires banks to demand certain information from

customers which may be of personal nature or which has hitherto never been called for.
This can sometimes lead to a lot of questioning by the customer as to the motive and
purpose of collecting such information. There is, therefore, a need for banks to prepare
specific literature/ pamphlets etc. so as to educate the customer of the objectives of the
KYC programme. The front desk staff needs to be specially trained to handle such
situations while dealing with customers.
7. Introduction of New Technologies Credit cards/debit cards/smart cards/gift
cards

Banks should pay special attention to any money laundering threats that may arise from
new or developing technologies including internet banking that might favour anonymity,
and take measures, if needed, to prevent their use in money laundering schemes.

Many banks are engaged in the business of issuing a variety of Electronic Cards that are
used by customers for buying goods and services, drawing cash from ATMs, and can be
used for electronic transfer of funds. Further, marketing of these cards is generally done
through the services of agents. Banks should ensure that appropriate KYC procedures are
duly applied before issuing the cards to the customers. It is also desirable that agents are
also subjected to KYC measures.

8. KYC for the Existing Accounts

Banks were advised vide our circulars DBOD.AML.BC.47/14.01.001/2003-04,

DBOD.AML.129/14.01.001/2003-04 and DBOD.AML.BC.No.101/14.01.001/ 200304 dated November 24, 2003, December 16, 2003 and June 21, 2004 respectively to
apply the KYC norms advised vide our circular DBOD. No. AML.BC.18/ 14.01.001/
2002-03 dated August 16, 2002 to all the existing customers in a time bound manner.
While the revised guidelines will apply to all new customers, banks should apply the
same to the existing customers on the basis of materiality and risk. However, transactions
in existing accounts should be continuously monitored and any unusual pattern in the
operation of the account should trigger a review of the CDD measures. Banks may
consider applying monetary limits to such accounts based on the nature and type of the
account. It may, however, be ensured that all the existing accounts of companies, firms,
trusts, charities, religious organizations and other institutions are subjected to minimum
KYC standards which would establish the identity of the natural/legal person and those of
the 'beneficial owners'. Banks may also ensure that term/ recurring deposit accounts or
accounts of similar nature are treated as new accounts at the time of renewal and
subjected to revised KYC procedures.

Where the bank is unable to apply appropriate KYC measures due to non-furnishing of
information and /or non-cooperation by the customer, the bank may consider closing the
account or terminating the banking/business relationship after issuing due notice to the
customer explaining the reasons for taking such a decision. Such decisions need to be
taken at a reasonably senior level.

9. Applicability to branches and subsidiaries outside India

The above guidelines shall also apply to the branches and majority owned subsidiaries
located abroad, especially, in countries which do not or insufficiently apply the FATF
Recommendations, to the extent local laws permit. When local applicable laws and
regulations prohibit implementation of these guidelines, the same should be brought to
the notice of Reserve Bank.

10. Appointment of Principal Officer

Banks may appoint a senior management officer to be designated as Principal Officer.

Principal Officer shall be located at the head/corporate office of the bank and shall be
responsible for monitoring and reporting of all transactions and sharing of information as
required under the law. He will maintain close liaison with enforcement agencies, banks
and any other institution which are involved in the fight against money laundering and
combating financing of terrorism.

Loans and Advances

The term loan refers to the amount borrowed by one person from another. The amount
is in the nature of loan and refers to the sum paid to the borrower. Thus. from the view
point of borrower, it is borrowing and from the view point of bank, it is lending. Loan
may be regarded as credit granted where the money is disbursed and its recovery is
made on a later date. It is a debt for the borrower. While granting loans, credit is given
for a definite purpose and for a predetermined period. Interest is charged on the loan at
agreed rate and intervals of payment. Advance on the other hand, is a credit facility
granted by the bank. Banks grant advances largely for short-term purposes, such as
purchase of goods traded in and meeting other short-term trading liabilities. There is a
sense of debt in loan, whereas an advance is a facility being availed of by the borrower.
However, like loans, advances are also to be repaid. Thus a credit facility- repayable in
instalments over a period is termed as loan while a credit facility repayable within one
year may be known as advances. However, in the present lesson these two terms are used
interchangeably.
Utility of Loans and Advances
Loans and advances granted by commercial banks are highly beneficial to individuals,
firms, companies and industrial concerns. The growth and diversification of business
activities are effected to a large extent through bank financing. Loans and advances
granted by banks help in meeting short-term and long term financial needs of business
enterprises. We can discuss the role played by banks in the business world by way of
loans and advances as follows :-

Loans and advances can be arranged from banks in keeping with Loans and
Advances: 61 the flexibility in business operations. Traders, may borrow money
for day to day financial needs availing of the facility of cash credit, bank
overdraft and discounting of bills. The amount raised as loan ma y be repaid
within a short period to suit the convenience of the borrower. Thus business may
be run efficiently with borrowed funds from banks for financing its working
capital requirements.

Loans and advances are utilized for making payment of current liabilities, wage
and salaries of employees, and also the tax liability of business.

Loans and advances from banks are found to be economical for traders and
businessmen, because banks charge a reasonable rate of interest on such
loans/advances. For loans from money lenders, the rate of interest charged is very
high. The interest charged by commercial banks is regulated by the Reserve Bank
of India.

Banks generally do not interfere with the use, management and control of the
borrowed money. But it takes care to ensure that the money lent is used only for
business purposes.

Bank loans and advances are found to be convenient as far as its repayment is
concerned. This facilitates planning for future and timely repayment of loans.
Otherwise business activities would have come to a halt.

Loans and advances by banks generally carry element of secrecy with it. Banks
are duty-bound to maintain secrecy of their transactions with the customers. This
enhances peoples faith in the banking system.

Borrowing Rate and Lending Rate

People make their funds available to the banks by depositing their savings in various
types of accounts. In other words, bank funds mainly consist of deposits from the public,
though banks may also borrow money from other institutions and the Reserve Bank of
India. Banks, thus mobilizes funds through its deposits. On public deposits the banks pay
interest at and the rate of interest vary according to the type of deposit. The borrowing
rate refers to the rate of interest paid by a bank on its deposits. The rates which the banks
allow depend upon the nature of deposit account and the period for which the deposit is
made with the bank. No interest is generally paid on current account deposits. The rate is
relatively lower on savings account deposits. Higher rates ranging from 6% to 12% per
annum are paid on Fixed deposit accounts according to the period of deposit.Loans and
Advances: 63 Banks also borrow from other institutions as well as from the Reserve
Bank of India. When the Reserve Bank of India lends money to commercial banks, the
rate of interest it charges for lending is known as Bank Rate.
The rate at which commercial banks make funds available to people is known as
Lending-rate. The lending rates also vary depending upon the nature of loans and
advances. The rates also vary according to the purpose in view. For example if the loan is
sanctioned for the purpose of activities for the development of backward areas, the rate of
interest is relatively lower as against loans and advances for commercial/business
purposes. Similarly for smaller amounts of loan the rate of interest is higher as compared
to larger amounts. Again lending rates for consumer durables, e.g. loans for purchase of
two-wheelers, cars, refrigerators, etc. are relatively higher than for commercial
borrowings.

However, the Reserve Bank of India from time to time announces changes in the interestrate structure to regulate the lending of funds by banks. Different rates of interest are
prescribed for various categories of advances, such as advances to agriculture, small scale
industries, road transport, etc. Graded rates of interest are prescribed for backward areas.
Lower rate is normally charged from agencies selling food-grains at fixed price through
Govt. approved outlets. Lastly, lower rate of interest is charged for loans granted to
persons belonging to weaker sections of the society.
Lending of Money
You have noted in the earlier lessons that commercial banks lend money in four different
ways: (a) direct loans, (b) cash credit, (c) overdraft, and (d) discounting of bills. These
are briefly discussed below:
1. Loans
Loan is the amount borrowed from bank. The nature of borrowing is that the money is
disbursed and recovery is made in instalments. While lending money by way of loan,
credit is given for a definite purpose and for a pre-determined period. Depending upon
the purpose and period of loan, each bank has its own procedure for granting loan.
However the bank is at liberty to grant the loan requested or refuse it depending upon its
own cash position and lending policy. There are two types of loan available from banks:
(a) Demand loan, and
(b) Term loan

(a) A Demand Loan is a loan which is repayable on demand by the bank. In other words,
it is repayable at short-notice. The entire amount of demand loan is disbursed at one time
and the borrower has to pay interest on it. The borrower can repay the loan either in lump
sum (one time) or as agreed with the bank. For example, if it is so agreed the amount of
loan may be repaid in suitable installments. Such loans are normally granted by banks
against security. The security may include materials or goods in stock, shares of
companies or any other asset. Demand loans are Loans and Advances:: 65 raised
normally for working capital purposes, like purchase of raw materials, making payment
of short-term liabilities.
(b) Term Loans: Medium and long term loans are called term loans. Term loans are
granted for more than a year and repayment of such loans is spread over a longer period.
The repayment is generally made in suitable installments of a fixed amount. Term loan is
required for the purpose of starting a new business activity, renovation, modernization,
expansion/ extension of existing units, purchase of plant and machinery, purchase of land
for setting up of a factory, construction of factory building or purchase of other
immovable assets. These loans are generally secured against the mortgage of land, plant
and machinery, building and the like.
2. Cash credit
Cash credit is a flexible system of lending under which the borrower has the option to
withdraw the funds as and when required and to the extent of his needs. Under this
arrangement the banker specifies a limit of loan for the customer (known as cash credit
limit) up to which the customer is allowed to draw. The cash credit limit is based on the

borrowers need and as agreed with the bank. Against the limit of cash credit, the
borrower is permitted to withdraw as and when he needs money subject to the limit
sanctioned.
It is normally sanctioned for a period of one year and secured by the security of some
tangible assets or personal guarantee. If the account is running satisfactorily, the limit of
cash credit may be renewed by the bank at the end of year. The interest is calculated and
charged to the customers account. Cash credit, is one of the types of bank lending
against security by way of pledge or /hypothetication of goods. Pledge means66 ::
Business Studies bailment of goods as security for payment of debt. Its primary purpose
is to put the goods pledged in the possession of the lender. It ensures recovery of loan in
case of failure of the borrower to repay the borrowed amount. In Hypothetication,
goods remain in the possession of the borrower, who binds himself under the agreement
to give possession of goods to the banker whenever the banker requires him to do so. So
hypothetication is a device to create a charge over the asset under circumstances in which
transfer of possession is either inconvenient or impracticable.

3. Overdraft
Overdraft facility is more or less similar to cash credit facility. Overdraft facility is the
result of an agreement with the bank by which a current account holder is allowed to
draw over and above the credit balance in his/her account. It is a short-period facility.
This facility is made available to current account holders who operate their account
through cheques. The customer is permitted to withdraw the amount of overdraft allowed

as and when he/she needs it and to repay it through deposits in the account as and when it
is convenient to him/her.
Overdraft facility is generally granted by a bank on the basis of a written request by the
customer. Sometimes the bank also insists on either a promissory note from the borrower
or personal security of the borrower to ensure safety of amount withdrawn by the
customer. The interest rate on overdraft is higher than is charged on loan. The following
are some of the benefits of cash credits and overdraft :(i) Cash credit and overdraft allow flexibility of borrowing,which depends upon the need
of the borrower.
(ii) There is no necessity of providing security and documentation again and again for
borrowing funds.
(iii) This mode of borrowing is simple and elastic and meets the short term financial
needs of the business.Loans and Advances :: 67
(iv) Discounting of Bills Apart from sanctioning loans and advances, discounting of bills
of exchange by bank is another way of making funds available to the customers. Bills of
exchange are negotiable instruments which

enable

debtor s

to discharge their

obligations to the creditors. Such Bills of exchange arise out of commercial transactions
both in inland trade and foreign trade. When the seller of goods has to realise his dues
from the buyer at a distant place immediately or after the lapse of the agreed period of
time, the bill of exchange facilitates this task with the help of the banking institution.

Banks invest a good percentage of their funds in discounting bills of exchange. These
bills may be payable on demand or after a stated period. In discounting a bill, the bank
pays the amount to the customer in advance, i.e. before the due date. For this purpose, the
bank charges discount on the bill at a specified rate. The bill so discounted , is retained
by the bank till its due date and is presented to the drawee on the date of maturity. In case
the bill is dishonoured on due date the amount due on bill together with interest and other
charges is debited by the bank to the customers account.
Long-term and Short-term Loans
Commercial banks grant loans for different periods-long, short and medium term for
different purposes.
1. Short-term loans
Short term loans are granted by banks to meet the working capital needs of business. The
working capital needs refer to financial needs for such purposes as, purchase of raw
materials, payment of wages, electricity bill, taxes etc. Such loans are granted by banks to
its borrowers to be repaid within a short period of time not exceeding 15 months. Short
term loans are normally granted against the security of tangible assets like goods in stock,
shares, debentures, etc. The rate of interest charged on short term loans ranges from 12%
to 18% p.a.
2. Long-term Loans
Medium and long term loans are generally known as term loans. These loans are
granted for more than 15 months. In case of medium term loan, the period ranges from 15

months to less than 5 years. Medium term loans are generally granted for heavy Loans
and Advances::69 repairs, expansion of existing units, modernization/renovation etc.
Such loans are sanctioned against the security of immovable assets. The normal rate of
interest ranges between 12% to 18% depending upon the period, purpose, nature and
amount of the loan. Though banks may grant long term loans, they avoid granting loan
for more than 5 years.

Chapter-4
Lessons Learnt
Values and Experience Learnt
The main activities of a commercial bank include acceptance of deposits, that is
mobilization of funds, and lending these funds to people who require it for various
purpose. On the deposits received the bank pays interest to the depositors at a specified
rate. This is known as the Borrowing Rate. When the Reserve Bank of India lends
money to commercial banks, the rate of interest it charges is known as Bank rate. The
other important activity of a bank is that of granting loans and advances to the public.
The rate of interest at which commercial banks lend money to the people is known as
Lending rate. The borrowing rates and lending rates are subject to change from time to
time.
There are four different ways of lending money by banks; viz. (a) Direct loans; (b) Cash
credits; (c) Overdraft, and (d) discounting of bills. Bank loans may also be classified into
3 categories i.e. Shortterm loan, medium term loan and Long-term loan. Short-term loans
are granted by banks to meet the working capital needs of business. Medium term loans
and long-terms loans are generally known as Term loans.
These loans are granted for more than one year for heavy repairs, expansion of units,
modernization/renovation etc. Such loans are sanctioned against the security of
permanent, immovable assets.

To ensure the safety of the funds lent, banks require the security of tangible assets owned
by the owner, both in the case of short-term and term loans. Unsecured loans are those
granted against the personal 74 :: Business Studies security of the borrowers. There are
various types of securities which are acceptable by banks against loans and advances. For
getting a loan sanctioned by any bank, one has to apply for it with relevant documents.
The bank verifies the application and determines the creditworthiness of the applicant. If
it is feasible, the loan is sanctioned. After the sanction of loan the borrower has to enter
into an agreement with the bank regarding terms and conditions of the loan.
The last step is to arrange for the security for the loan granted by bank. After completing
these formalities the borrower is allowed to draw money against the loan.

Limitations of PSB
Limitations of PSB branching out abroad:
During the early years it was not very easy for an Indian bank to open overseas branches,
though the Reserve Bank of India was vested with the powers to allow them to open
overseas branches. Policymakers took into account a number of factors and not all of
which are purely commercial.

The process required RBI to consult a number of departments within its own organisation
and other ministries through the nodal finance ministry.

Given the multiple considerations, RBI did not attempt to frame any definitive policy or
guidelines in regard to the opening of branches or offices abroad by Indian banks till
almost the onset of the 1980s, according to the notings in the third volume of the Reserve
Banks history.

Many banks which attempted to open offices overseas did not get the regulators nod. In
196364, Punjab National Bank as well as Bank of India applied for opening offices in
the United States but RBI did not grant them permission on the ground that requests
could in turn come from US banks to open offices in India.

In 1964, Bank of India sought permission to open offices at Hamburg, Dusseldorf and
Milan but these requests too were turned down on the ground of possible application of
the reciprocity principle, which, at that time, was considered undesirable from the

exchange control angle, i.e., having to permit remittance of profits by branches of foreign
banks as well as from the point of view of its adverse effect on the expansion of business
of Indian banks within India.

Three major elements influenced the Reserve Banks policy towards Indian banks
opening offices abroad till the early 1970s. First, there was the question of foreign
exchange for meeting the capital requirements and other expenses connected with the
setting up of an overseas offices. Given the scarcity of foreign exchange reserves, RBI
and the government were concerned about the foreign costs.

Second, there was the issue of business potential. This was related to the number of
persons of Indian origin residing in the country in question. The perception was that the
branch or office abroad would grow in size if it was supported by a large number of
ethnic Indians. Third, there was the principle of reciprocity

Recommendations and Suggestions

This project would start with understanding the basic financial structure of the bank. It
would then go on understanding the working capital in detail. This project would also
highlight the practical aspects, my experience and key learning derived from it. Key
issues found in this practical exposure will be analyzed and discussed. This project will
help one understand the basic aspects of corporate finance. The readers will come to
know about Punjab and Sind Bank. The various product and services offered by the bank
will be discussed. The typical uses of operation management are as follows:

To set basic framework of operation management in the organization.

To serve as the basis of operation management efficiency and effectiveness so

that the appraisals of the operation management can be used for identify areas
where developments efforts are needed.

It will also be required to find out the operation management capability and
causes of good or bad performance.

Provide information to assist in the operation management decisions.

Operations function is one of 3 primary functions within a business: Finance,

Marketing and Operations.

So, the students should be sent to the PSB for the summer training in the future. It helps
in increasing the self-confidence and improvement in common banking operational skills.

Conclusion
People form an integral part of the organization. The efficiency and quality of its people
determines the fate of the organization. Hence choice of right people and placing them at
right place becomes essential. Hiring comes at this point of time in the picture. Hiring is a
strategic function for HR department. Recruitment and selection form the process of
hiring the employees. Recruitment is the systematic process of generating a pool of
qualified applicant for organization job. The process includes the step like HR planning
attracting applicant and screening them. This step is affected by various factors, which
can be internal as well as external. The organization makes use of various methods and
sources for this purpose. Selection is carried from the screen applicant during the
recruitment process. There is also some specific process is involved. By the way of
conducting preliminary interview and conducting the various tests, if required reference
check and further final interview is conducted. During the process there are certain
difficulties and barriers that are to be overcome. Different organization adopts different
approaches and techniques for their employees.

Bibliography
Books:

Jack R. Meredith; Patrick R. McMullen, Operation Research Management.

K.C. Arora, Production and Operations Management

Websites:

www.psbindia.com

www.rbi.org.in

www.training-classes.com

www.greenwood.com

www.referenceforbusiness.com