Professional Documents
Culture Documents
Kyc1 PDF
Kyc1 PDF
in Anti-Money
Laundering & Know
Your Customer
Version 1.0
(FOR Oct. 2016 & Jan 2017 Exam.)
COMPILED BY
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Govt.Link Cell, Nagpur 1|Page
About Certificate Examination in Anti-Money
Laundering & Know Your Customer Examination
IIBF AML & KYC Certificate Examination – OCT. 2016 & JAN 2017
OBJECTIVE
To provide advanced knowledge and understanding in AML / KYC standards and to
evelop the professional competence of employees of banks and financial institutions.
TYPES OF QUESTIONS
120 Objective Type Multiple Choice Questions - carrying 100 marks – 120 minutes and question will be
based on Knowledge Testing, Conceptual Grasp, Analytical / Logical Exposition, Problem Solving & Case
Analysis
A. MULTIPLE CHOICE ( Each Questions 0.5 Marks )– QUESTIONS & ANSWERS ( 70-74QUES )
B. MULTIPLE CHOICE – ( Each Questions 01 Marks )– PROBLEMS & SOLUTIONS (18-20QUES)
C. MULTIPLE CHOICE – ( Each Questions 02 Marks )– APPLIED THEORY – QUES. & ANS.
(10 -14 QUES)
D. MULTIPLE CHOICE – ( Each Questions 02 Marks )– CASE STUDIES & CASE LETS (PROBLEMS &
SOLUTIONS ) ( 12-15QUES )
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Govt.Link Cell, Nagpur 2|Page
Type – C : MULTIPLE CHOICE – APPLIED THEORY – QUES. & ANS
Financial Institution wish to have the money lent by them repaid in time. Secured advances sanctioned by
banks possess what kind of security ?
- Secured Advances have impersonal security i.e. Tangible Security
Type –D : MULTIPLE CHOICE – CASE STUDIES & CASE LETS (PROBLEMS & SOLUTIONS )
Economic development of a country to a large extent depends upon Agril. & Industrial sectors.
Development of agril. Depends upon irrigation facilities while industrial development on availability of
power,good transport and fast communication facilities. All these are called infrastructure. Read the caselet
& explain which industries constitute infrastructure ?
a. Energy, Transport & Communication
b. Irrigation, construction of bridges & dams over Rivers & stable govt. at Centre.
c. Availability of Funds for PMEGP , SJSRY & Indira Awas Yojana
Type of Questions – Basically four types of Multiple Choice Questions asked in Exam of
Which Type – A : Concept based Straight Questions ( 70-71 QUES - 0.5 MARKS EACH ) ;
Type – B : Problems & Solutions (20-25 QUES - 1.0 MARKS EACH); Type – C : Applied
theory based Questions (10-15 QUES - 2.0 MARKS EACH) ; Type – D : Case Study & Case-
lets based Questions ( 10-15 QUES - 2.0 MARKS EACH )
Revised Examination Fees inclusive SERVICE TAX @15% with effect from 01st Jun, 2016
(Examination Eligible for Members and Non-Members)
For For Non-
Sr. No. Name of the Exam Attempts
Members(Rs) Members(Rs)
Certificate Exam In
1 First Attempt 1150 1725
Aml/Kyc
Subsequent each attempt 1150 1725
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Govt.Link Cell, Nagpur 3|Page
Syllabus
The details of the prescribed syllabus which is indicative are furnished in this booklet. The
Institute however, also reserves to itself the right to vary the syllabus / rules / fee structure
from time to time. Any alterations made will be notified.
The Financial Action Task Force (FATF) - IBA Working Group - Software for AML
Screening ,Money Laundering and Correspondent Banking - Exchange Companies –
Foreign Branches
Customers - Qualitative data - Joint accounts - Minor accounts - KYC for existing
accounts - KYC for low income group customers.
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Govt.Link Cell, Nagpur 4|Page
PREVENTION OF MONEY LAUNDERING ACT (PMLA)
MONEY LAUNDERING
• Money laundering means acquiring, owning,possessing or transferring any proceeds of money of
crime or knowingly entering into any transaction related to proceeds of the crime either directly or
indirectly or concealing or aiding in the concealment of the proceeds or gains of crime, within or outside
India. It is a process for conversion of money obtained illegally to appear to have originated from
legitimate sources.
• Essential elements of money laundering (a) a crime is committed, (b) there are gains from the
crime, (c) proceeds have been received from crime and (d) there is some transaction in respect of
these proceeds or the gains.
Legal set up in India
• Indian Parliament passed 'The Prevention of Money Laundering Act 2002' during December 2002 for
prevention of money laundering.
• Enforcement Directorate is the designated authority to track cases of money laundering, which has
far more powers than what was available to ED under FERA.
The Prevention of Money Laundering Act, 2002 (PMLA) forms the core of the legal framework put in
place by India to combat money laundering. PMLA and the Rules notified there under came into force with
effect from July 1, 2005. Director, FIU-IND and Director (Enforcement) have been conferred with exclusive
and concurrent powers under relevant sections of the Act to implement the provisions of the Act. The
PMLA and rules notified thereunder impose obligation on banking companies, financial institutions and
intermediaries to verify identity of clients, maintain records and furnish information to PMLA defines money
laundering offence and provides for the freezing, seizure and confiscation of the proceeds of crime.
Applicability: Prevention of Money Laundering Act extends to the whole of India.
Offence of Money-Laundering (Section 3): Money Laundering has not been defined in the Act. However, as
per Section 3 of the Act, whosoever directly or indirectly attempts to indulge or knowingly assists or
knowingly is a party or is actually involved in any process or activity connected with the proceeds of crime
and projecting it as untainted property shall be guilty of offence of money laundering.
Punishment for Money Laundering (Section 4): Whoever commits the offence of money-laundering shall be
punishable with rigorous imprisonment for a term which shall not be less than three years but which may
extend to seven years and shall also be liable to fine which may extend to five lakh rupees. However, if the
proceeds of crime involved in money-laundering relates to any offence under the Necrotic Drug and
Psychotropic Substances Act, 1985, the maximum punishment could extend to 10 years.
Obligations of Banking Companies, Financial Institutions and Intermediaries of securities market: (Section
12): Every banking company, financial institution and intermediary shall -
(a) maintain a record of all transactions, the nature and value of which may be prescribed, whether
such transactions comprise of a single transaction or a series of transactions integrally connected to
each other, and where such series of transactions take place within a month;
(b) furnish informatiori of transactions referred to in clause (a) to the Director within such time as may
be prescribed;
( c ) verify and maintain the records of the identity of all its clients, in such a manner as may be prescribed. The
records of transactions as required under (a) and (b) shall be maintained for a period of ten years from the date of
transactions between the clients and the banking company or financial institution or
intermediary. The records referred to in clause (c) shall be maintained for a period of ten years from the date of cessation of
transactions between the clients and the banking company or financial institution or intermediary.
Accordingly, banks should maintain for at least ten years from the date of transaction between the bank and
the client, all necessary records of transactions, both domestic or international, which will permit
reconstruction of individual transactions (including the amounts and types of currency involved if any) so as
to provide, if necessary, evidence for prosecution of persons involved in criminal activity. Banks should ensure
that records pertaining to the identification of the customer and his address (e.g. copies of documents like passports,
identity cards, driving licenses, PAN card, utility bills etc.) obtained while opening the account and during the course
of business relationship, are properly preserved for at least ten years after the business relationship is ended.
The Director appointed by Central Government, may call for records and may make such inquiry or cause such
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Govt.Link Cell, Nagpur 5|Page
inquiry to be made, as he thinks fit. If the Director, finds that a banking company, financial institution or an
intermediary or any of its officers has failed to comply with the provisions contained in the Act, then, he may, levy
a fine on such banking company or financial institution or intermediary which shall not be less than ten thousand
rupees but may extend to one lakh rupees for each failure. The banking companies, financial institutions,
intermediaries and their officers shall not be liable to any civil proceedings against them for furnishing
information,
(iv) loans and advances including credit or loan substitutes, investments and contingent liability by
way of:
(a) subscription to debt instruments such as commercial paper, certificate of deposits, preferential
shares, debentures, securitized participation, interbank participation or any other investments in securities
or the like in whatever form and name it is referred to, or
(b) purchase and negotiation of bills, cheques and other instruments, or
(c) foreign exchange contracts, currency, interest rate and commodity and any other derivative
instrument in whatsoever name it is called, or
(d) letters of credit, standby letters of credit, guarantees, 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.
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Govt.Link Cell, Nagpur 6|Page
Information contained in Records: The records shall contain all necessary information specified by the
Regulator to permit reconstruction of individual transaction including* the following information:-
(e) the nature of the transactions;
(f) the amount of the transaction and the currency in which it was denominated;
(g) the date on which the transaction was conducted;
(h) the parties to the transaction."
Procedure for maintaining information: Every banking company, financial institution and intermediary,
as the case may be, shall maintain information in respect of transactions with its client in accordance
with the procedure and manner as may be specified by its Regulator including RBI, SERI or IRDA from
time to time. Every banking company, financial institution and intermediary is required to evolve an
internal mechanism for maintaining transactional details in such form and at such intervals as may be
specified by the Reserve Bank of India, or the Securities and Exchange Board of India, or the
Insurance Regulatory Development Authority as the case may be, from time to time. It shall be the
duty of every banking company, financial institution and intermediary, as the case may be, to observe
the procedure and the manner of maintaining information as specified by its Regulator.
Reporting to Financial Intelligence Unit — India: Banks are required to report information relating to
cash and suspicious transactions and all transactions involving receipts by non-profit organisations of
value more than rupees ten lakh or its equivalent in foreign currency to the Director, Financial
Intelligence Unit-India (FIU-IND). The Cash Transaction Report (CTR) for each month should be
submitted to FIU-IND by 15th of the succeeding month. All cash transactions, where forged or
counterfeit Indian currency notes have been used as genuine should be reported within seven
working days from the date of occurrence of such transactions. While filing CTR, details of individual
transactions below Rupees Fifty thousand need not be furnished. The Suspicious Transaction Report
(STR) should be furnished within 7 days of arriving at a conclusion that any transaction, whether
cash or non-cash, or a series of transactions integrally connected are of suspicious nature. Banks
should not put any restrictions on operations in the accounts where an STR has been made. Banks
and their employees should keep the fact of furnishing of STR strictly confidential. The report of all
transactions involving receipts by non- profit organizations of value more than rupees ten lakh or its
equivalent in foreign currency should be submitted every month to the Director, FIU-IND by 15th of
the succeeding month.
Verification of Records of Identity of Clients
Section 12 of the Prevention of Money Laundering Act, 2002 and rules thereunder require every
banking company, financial institution and intermediary to verify and maintain the records of the
identity of all its clients, in such manner as may be prescribed. Every banking company, financial
institution and intermediary shall at the time of commencement of an account-based relationship,
identify its clients, verify their identity and obtain information on the purpose and intended nature of
the business relationship. In all other cases, identity should be verified while carrying out (i)
transaction of an amount equal to or exceeding rupees fifty thousand, whether conducted as a single
transaction or several transactions that appear to be connected, or (ii) any international money
transfer operations. If it is not possible to verify the identify at the time of opening the account or
executing the transaction, the banking company shall verify the identity of the client within a
reasonable time after the account has been opened or the transaction has been executed. Every
banking company, financial institution and intermediary, as the case may be, shall determine whether
a client is acting on behalf of a beneficial owner , identify the beneficial owner and take all reasonable
steps to verify his identity. Beneficial -owner means the natural person who ultimately owns or controls
a client and or the person on whose behalf a transaction is being conducted, and includes a person
who exercise ultimate effective control over a judicial person... '
Documents needed for verification of various types of clients:
1. individuals: (a) One certified copy of an 'officially valid document' containing details of his identity
and address One recent photograph and such other documents including in respect of the nature
of business and financial status of the client as may be required by the banking company or the
financial institution or the intermediary. Photograph need not be submitted by a client who does
not have account-based relationship. Officially valid document means the passport, the driving
licence, the Permanent Account Number (PAN) Card, the Voter's Identity Card issued by the
Election Commission of India or any other document as may be required by the banking
company, or financial institution or intermediary. The Narega card and Adhar card issued by
UIDAI will also be officially valid documents.
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Govt.Link Cell, Nagpur 7|Page
2. Company: Certificate of incorporation; Memorandum and Articles of Association; A resolution from the
Board of Directors and power of attorney granted to its managers, officers or employees to transact on
its behalf; and an officially valid document in respect of managers, officers or employees holding an
attorney to transact on its behalf.
3. Partnership Firm: Registration certificate; Partnership deed; and an officially valid document in
respect of the person holding an attorney to transact on its behalf.
4. Trust Documents: Registration certificate; Trust deed; and an officially valid document in respect of the
person holding an attorney to transact on its behalf.
5. Association of Persons (ADP) or Body of Individuals (BOI):Resolution of the managing body of such
association or body of individuals; Power of attorney granted to him to transact on its behalf; an
officially valid document in respect of the person holding an attorney to transact on its behalf; and
such information as may be required by the banking company or the financial institution or the
intermediary to collectively establish the legal existence of such an association or body of
individuals.
A. Purpose
Banks and financial institutions (FIs) have been advised to follow certain customer identification procedure for
opening of accounts and monitor transactions of suspicious nature for the purpose of reporting the same to
appropriate authority. These ‘Know Your Customer’ (KYC) guidelines have been revisited in the context of the
recommendations made by the Financial Action Task Force (FATF) on Anti Money Laundering (AML) standards
and on Combating Financing of Terrorism (CFT). Detailed guidelines based on the recommendations of FATF and
the paper issued on Customer Due Diligence (CDD) for banks by the Basel Committee on Banking Supervision
(BCBS), with suggestions wherever considered necessary, have been issued. Banks/FIs have been advised to ensure
that a proper policy framework on ‘Know Your Customer’ and Anti-Money Laundering measures is formulated and
put in place with the approval of their Boards.
B. Application
Introduction
The objective of KYC/AML/CFT guidelines is to prevent banks/FIs from being used, intentionally or
unintentionally, by criminal elements for money laundering or terrorist financing activities. KYC procedures also
enable banks/FIs to know/understand their customers and their financial dealings better and manage their risks
prudently.
Definitions
Customer
For the purpose of KYC Norms, a ‘Customer’ is defined as a person who is engaged in a financial transaction or
activity with a reporting entity and includes a person on whose behalf the person who is engaged in the transaction or
activity, is acting.
Designated Director
“Designated Director" means a person designated by the reporting entity (bank, financial institution, etc.)
to ensure overall compliance with the obligations imposed under chapter IV of the PML Act and the Rules
and includes:-
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Govt.Link Cell, Nagpur 8|Page
• the Managing Director or a whole-time Director duly authorized by the Board of Directors if the
reporting entity is a company,
• the Managing Partner if the reporting entity is a partnership firm,
• the Proprietor if the reporting entity is a proprietorship concern,
• the Managing Trustee if the reporting entity is a trust,
• a person or individual, as the case may be, who controls and manages the affairs of the reporting
entity, if the reporting entity is an unincorporated association or a body of individuals, and
• such other person or class of persons as may be notified by the Government if the reporting entity
does not fall in any of the categories above.
Explanation. - For the purpose of this clause, the terms "Managing Director" and "Whole-time Director"
shall have the meaning assigned to them in the Companies Act
The KYC principles, were issued by RBI (August 2002) under Section 35 (A) of the Banking Regulation
Act, 1949. These related to identification and verification of depositors with the objective to prevent banks
from being used, intentionally or unintentionally, by criminal elements for money laundering activities. The
guidelines are applicable to all accounts including foreign currency accounts/ transactions.
Review of guidelines: The guidelines were revised (Nov 29, 2004) in line with recommendations made by
the Financial Action Task Force (FATF) on Anti Money Laundering (AML) standards and on Combating
Financing of Terrorism (CFT).
“Officially valid document” (OVD)
OVD means the passport, the driving licence, the Permanent Account Number (PAN) Card, the Voter's
Identity Card issued by the Election Commission of India, job card issued by NREGA duly signed by an
officer of the State Government, letter issued by the Unique Identification Authority of India containing
details of name, address and Aadhaar number, or any other document as notified by the Central
Government in consultation with the Regulator.
(i) Provided that where ‘simplified measures’ are applied for verifying the identity of the clients the
following documents shall be deemed to be OVD:
a) identity card with applicant’s Photograph issued by Central/ State Government Departments,
Statutory/ Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks,
and Public Financial Institutions;
b) Letter issued by a gazetted officer, with a duly attested photograph of the person.
(ii) Provided further that where ‘simplified measures’ are applied for verifying for the limited purpose of
proof of address the following additional documents are deemed to be OVDs :.
a) Utility bill which is not more than two months old of any service provider
(electricity, telephone, post-paid mobile phone, piped gas, water bill);
b) Property or Municipal Tax receipt;
c) Bank account or Post Office savings bank account statement;
d) Pension or family pension payment orders (PPOs) issued to retired employees by Government
Departments or Public Sector Undertakings, if they contain the address;
e) Letter of allotment of accommodation from employer issued by State or Central Government
departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial
banks, financial institutions and listed companies. Similarly, leave and license agreements with
such employers allotting official accommodation; and
f) f) Documents issued by Government departments of foreign jurisdictions and letter issued by
Foreign Embassy or Mission in India.
Person
In terms of PML Act a ‘person’ includes:
(i) an individual,
(ii) a Hindu undivided family,
(iii) a company,
(iv) a firm,
(v) an association of persons or a body of individuals, whether incorporated or
not,
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Govt.Link Cell, Nagpur 9|Page
(vi) every artificial juridical person, not falling within any one of the above persons (i to v),
and
(vii) any agency, office or branch owned or controlled by any of the above persons (i to vi).
Transaction
“Transaction” means a purchase, sale, loan, pledge, gift, transfer, delivery or the arrangement thereof
and includes-
(i) opening of an account;
(ii) deposits, withdrawal, exchange or transfer of funds in whatever currency, whether in cash or by
cheque, payment order or other instruments or by electronic or other non-physical means;
(iii) the use of a safety deposit box or any other form of safe deposit;
(iv) entering into any fiduciary relationship;
(v) any payment made or received in whole or in part of any contractual or other legal
obligation; or
(vi) establishing or creating a legal person or legal arrangement.
Opening of Accounts
KYC procedure should be the key principle for identification of an individual/corporate while opening an
account. The customer identification/verification should be on the basis of documents provided by the
customer.
Introduction : As per RBI Cir dated Dec 10, 2012, introduction from existing account holder of a bank is
not mandatory.
Officially valid documents (OVD) for Customer Identity & Address Proof as per PML Act:
Passport, PAN card, Voter I-Card, driving license, UIDAI letter (including e-KYC process), MGNAREGA
job card.
• For low risk customers under simplified procedure, the documents can be (i) Identity Card issued
by Govt., Bank, PSU (ii) Letter issued by Gazetted Officer. (RBI July 17, 2014)
• If identity document contains address, separate document not to be taken for address proof.
• For low risk customers, if a/c is opened without appropriate KYC, complete verification of identity,
must be done within 6 months.
• Address can be current or permanent. If address changes fresh proof to be given within 6
months. If change is due to relocation, customer to inform within 2 weeks.
• No fresh KYC is required at transferee branch if it is completed at transferor branch.
Where simplified measures are applied for verifying proof of address and a prospective customer is
unable to produce any proof of address, the following shall be deemed to be OVD:
a) Utility bill max 2 months old of a service provider (electricity, telephone, post-paid mobile phone,
piped gas, Water bill);
b) Property or Municipal tax receipt;
c) Bank or Post Office savings bank a/c statement;
d) Pension or family pension payment orders issued by Govt. Deptt. or PSU, if they contain the
address;
e) Letter of allotment of house from employer issued by State or Central Govt. departments,
statutory or regulatory bodies, PSU, commercial banks, financial institutions and listed companies.
f) Documents issued by Govt. departments of foreign jurisdiction and letter issued by Foreign Embassy
or Mission in India.
Remittances-Non customer transactions : Banks are required to issue travellers cheques, demand
drafts, mail transfers, and telegraphic transfers for Rs.50,000 and above by following the proper due
diligence and only by debit to customers' accounts or against payee's account cheques and not against
cash.
Freezing of non-compliant accounts :If a customer fails to comply with the KYC requirement, partial
freezing (no debit) to be exercised after giving initial 3 months notice followed by a reminder of 3 months.
If compliance is not done even after 6 months, banks will disallow debits and credits till, KYC requirement
is complied with. Banks are open to close such accounts by following due process.
SMALL ACCOUNT
“Small account” means a savings account in a banking company where-
1. the aggregate of all credits in a financial year does not exceed rupees one lakh,
2. the aggregate of all withdrawals and transfers in a month does not exceed rupees ten thousand,
and;
3. the balance at any point of time does not exceed rupees fifty thousand.
4. An individual who desires to open a small account in a banking company may be allowed to open
such an account on production of a self-attested photograph and affixation of signature or thumb
print, on the Account opening form.
5. Foreign remittance shall not be allowed to be credited into a small account unless the identity of the
client is fully established through the production of officially valid documents.
6. A small account shall be opened only at Core Banking Solution linked branch or in a branch where it
is possible to manually monitor and ensure that foreign remittances are not credited to a small
account and the stipulated limits on monthly and annual aggregate of transactions and balance in
such accounts are not breached.
7. A small account shall remain operational initially for a period of twelve months, and thereafter for a
further period of twelve months if the holder of such an account provides evidence before the banking
company of having applied for any of the officially valid documents within twelve months of the
opening of the said account, with the entire relaxation provisions to be reviewed in respect of the said
account after twenty four months.
Basic Saving Bank Deposit Account
In supersession of instructions dated Nov 11, 2005 on Financial Inclusion, banks have been advised by
RBI (Aug 10, 2012) to offer a 'Basic Savings Bank Deposit Account' to replace the no-frill account,
Which will offer following minimum common facilities to all their customers:
i. A/c is a normal banking service for alt.
ii. No requirement of any minimum balance.
iii. The services available include deposit and withdrawal of cash at bank branch / ATMs; receipt/ credit
of money through electronic payment channels or by means of deposit/collection of cheques drawn
by Central/State Govt. agencies and departments;
iv. There will be no limit on the no. of deposits but maximum 4 withdrawals will be allowed in a month,
including ATM withdrawals; and
v. Facility of ATM card or ATM-cum-Debit Card;
• No charges for the facility or for nonoperation/activation of in-operative Account.
• A/c is subject to RBI instructions on KYC / Anti-Money Laundering for opening of bank accounts.
If account is opened on the basis of simplified KYC norms, the account would be treated as a
'Small Account' and would be subject to conditions stipulated for such a/c.
• Holders of the Account will not be eligible for opening any other savings bank account in that
bank. If a customer has any other existing savings bank account in that bank, it wilt be required
to be closed it within 30 days from the date of opening a 'Basic Savings Bank Deposit Account'.
• The existing 'no-frills' accounts should be converted to 'Basic Savings Bank Deposit A/c'.
Fine for violation of KYC Norms : RBI has powers to impose fine under Section 47 A (1 ) (b) of the
Banking Regulation Act, 1949 for violation of KYC norms and for violation of extant guidelines of relating
to IPO financing.
Unique Customer Identification Code (UCIC) for Banks' Customers in India
Banks have been advised by RBI (Apr 2012) to allot UCIC number to all their customers while entering
into any new relationships in the case of all individual customers to begin with. The existing individual
customers may be allotted unique customer identification code by end-31.12.14 (RBI-26.06.14)
MONEY MULES & KYC :In a money mule transaction, an individual with a bank account is recruited to
receive cheque deposits or wire transfers and then transfer these funds to accounts held on behalf of
another person or to other individuals, minus a certain commission payment. When caught, they face
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Govt.Link Cell, Nagpur 11 | P a g e
legal action for being part of a fraud. Many a times the address and contact details of such mules are
found to be fake or not up to date, making it difficult to locate the account holder. RBI has desired that
banks should strictly • adhere to the guidelines on KYC/AML/CFT to avoid money mules.
KYC procedure for Foreign Students in India RBI (Sep 02, 2013)
a) Other than for Pakistani nationality students where RBI permission is required, banks may open a
Non Resident Ordinary account on the basis of passport (with proper visa & immigration endorsement)
containing the proof of identity and address in the home country along with a photograph and a letter
offering admission from the educational institution.
b) Within a Reriod of 30 days, the student should submit, a valid address proof giving local address.
c) During the 30 days period, the account should be operated with a condition of allowing foreign
remittances not exceeding USD 1,000 into the account and a cap of monthly withdrawal to Rs. 50,000,
pendIng.verification of address.
d) On receiving proof of current address, a/c would be treated as'a normal NRO a/c.
MONEY LAUNDERING
Money laundering means acquiring, owning,possessing or transferring any proceeds of money of
crime or knowingly entering into any transaction related to proceeds of the crime either directly or
indirectly or concealing or aiding in the concealment of the proceeds or gains of crime, within or outside
India. It is a process for conversion of money obtained illegally to appear to have originated from
legitimate sources.
• Essential elements of money laundering (a) a crime is committed, (b) there are gains from the
crime, (c) proceeds have been received from crime and (d) there is some transaction in respect of
these proceeds or the gains.
• Legal set up in India
Indian Parliament passed 'The Prevention of Money Laundering Act 2002' during December 2002 for
prevention of money laundering.
• Offences and punishment :Offences are cognizable/non-bailable.
Punishment is imprisonment for not less than 3 years but up to 7 years and fine up to Rs.5 lac.
• Enforcement Directorate is the designated authority to track cases of money laundering, which has
far more powers than what was available to ED under FERA.
(a) Customer Acceptance Policy ( CAP ) :Banks should lay down policy on the following aspects of
customer relationship in the bank,
• No account is opened in anonymous fictitious/ benami name(s);
• Not to open an account or close an existing account where the bank is unable to verify the identity
and /or obtain documents required as per the risk categorisation due to non cooperation of the
customer or non reliability of the data/information furnished to the bank.
Customer profile : Banks may prepare a profile for each new customer based on risk categorization (it
will be a confidential document and details contained therein' shall not be divulged for cross selling or any
other purposes).
Risk Categorisation : The customer may be categorized into low and medium/high risk categories.
Low risk customers: 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 categorised as low risk (such as (a) salaried employees, (b) lower economic strata, (c)
Government departments & Government owned companies, (d) regulators and statutory bodies etc.). In
such cases, only the basic requirements of verifying the identity & location of the customer are to be met.
Medium/high risk customers. : Customers that are likely to pose a higher than average risk to the bank
may be categorized as medium or high risk. Banks may apply enhanced due diligence measures in case
of (a) non-resident customers, (b) high net worth individuals, (c) trusts, (d) charities, (e) NGOs and
organizations receiving donations, (f) companies having close family shareholding or beneficial ownership,
(g) firms with 'sleeping partners', (h) politically exposed persons (PEPS) of foreign origin, (i) non-face to
face customers, and (j) those with dubious reputation as per public information, etc.
Risk Categorisation
"Customer risk" in the present context refers to the money laundering and
terrorist funding risk associated with a particular customer from a Bank's
perspective.
This risk is based on risk perceptions associated with customer profile and level of
risk associated with the product & channels used by Customer.
For risk categorization of customers, the IBA has provided a hybrid model containing
seven parameters (,561/2015 ).Account are rated as per below mentioned 7 parameters
under the risk categorization matrix.Accounts are to be categorized basing on the
highest risk category under those parameters.
Customer Type
Customer Profession
Type of Business
Product Code
Account Status
Account Vintage
Balance
All customer profiles/accounts of NRIs, HNIs, PEPs, NGOs, Trusts, Cooperative
Societies, HUF, Exporters, Importers and Accounts having Beneficial Owners are to be
invariably categorised as High Risk
In case branch receive complaints from legal enforcement authorities or fraud is
reported against the customer ,such customers/accounts should be categorized unde
‗High Risk‘
Branches should categorise Blacked accounts and unclaimed deposits as High Risk at the
time of blocking the account itself.
Accounts of dealers in Jewellery,gold/silver/billions,diamonds and other precious metals/stones
IV. Miscellaneous
A. At-par cheque facility availed by co-operative banks
Some commercial banks have arrangements with co-operative banks under which the latter open
current accounts with the commercial banks and use the cheque book facility to issue ‘at par’ cheques
to their constituents and walk-in- customers for effecting their remittances and payments. Since the ‘at
par’ cheque facility offered by commercial banks to co-operative banks is in the nature of
correspondent banking arrangement, banks should monitor and review such arrangements to assess
the risks including credit risk and reputational risk arising therefrom. For this purpose, banks should
retain the right to verify the records maintained by the client cooperative banks/ societies for
compliance with the extant instructions on KYC and AML under such arrangements.
In this regard, Urban Cooperative Banks (UCBs) are advised to utilize the ‘at par’ cheque facility only
for the following purposes:
(i) For their own use.
(ii) For their account holders who are KYC complaint provided that all transactions of
Rs.50,000/- or more should be strictly by debit to the customer’s account.
(iii) For walk-in customers against cash for less than Rs.50,000/- per individual.
In order to utilise the ‘at par’ cheque facility in the above manner, UCBs should maintain the following:
(i) Records pertaining to issuance of ‘at par’ cheques covering inter alia applicant’s name
and account number, beneficiary’s details and date of issuance of the ‘at par’ cheque.
(ii) Sufficient balances/drawing arrangements with the commercial bank extending such
facility for purpose of honouring such instruments.
UCBs should also ensure that all ‘at par’ cheques issued by them are crossed ‘account payee’
irrespective of the amount involved.
B. Operation of Bank Accounts & Money Mules
“Money Mules” can be used to launder the proceeds of fraud schemes (e.g., phishing and identity theft)
by criminals who gain illegal access to deposit accounts by recruiting third parties to act as “money
mules”. In order to minimise the operations of such mule accounts, banks should strictly adhere to the
guidelines on opening of accounts and monitoring of transactions.
Monitoring of Transactions
Ongoing monitoring
Ongoing monitoring is an essential element of effective KYC/AML procedures. Banks/FIs should
exercise ongoing due diligence with respect to every customer and
closely examine the transactions to ensure that they are consistent with the customer’s profile and
source of funds as per extant instructions. The ongoing due diligence may be based on the following
principles:
(a) The extent of monitoring will depend on the risk category of the account. High risk accounts have
to be subjected to more intensified monitoring.
(b) Banks/FIs should pay particular attention to the following types of transactions:
(i) large and complex transactions, and those with unusual patterns,
which have no apparent economic rationale or legitimate purpose.
(ii) transactions which exceed the thresholds prescribed for specific
categories of accounts.
(iii) transactions involving large amounts of cash inconsistent with the
normal and expected activity of the customer.
(iv) high account turnover inconsistent with the size of the balance
maintained.
(c) Banks/FIs should put in place a system of periodical review of risk categorization of accounts and
the need for applying enhanced due diligence measures. Such review of risk categorisation of
customers should be carried out at a periodicity of not less than once in six months.
(d) Banks should closely monitor the transactions in accounts of marketing firms, especially accounts
of Multi-level Marketing (MLM) Companies. Banks should analyse data in cases where a large
number of cheque books are sought by the company, there are multiple small deposits
(generally in cash) across the country in one bank account and where a large number of
cheques are issued bearing similar amounts/dates. Where such features are noticed by the bank
and in case they find such unusual operations in their accounts, the matter should be
immediately reported to Reserve Bank and other appropriate authorities such as FIU-IND.
Risk Management
Banks/FIs should exercise on going due diligence with respect to the business relationship with every
client and closely examine the transactions in order to ensure that they are consistent with their
knowledge about the clients, their business and risk profile and where necessary, the source of funds.
The Board of Directors should ensure that an effective AML/CFT programme is in place by establishing
appropriate procedures and ensuring their effective implementation. It should cover proper management
oversight, systems and controls, segregation of duties, training of staff and other related matters. In
addition, the following may also be ensured for effectively implementing the AML/CFT requirements.
(i) Using a risk-based approach to address management and mitigation of
various AML/CFT risks.
Wire Transfer
Banks/FIs use wire transfers as an expeditious method for transferring funds between bank
accounts. Wire transfers include transactions occurring within the national boundaries of a country
or from one country to another. As wire transfers do not involve actual movement of currency, they
are considered as rapid and secure method for transferring value from one location to another.
(a) The salient features of a wire transfer transaction are as under:
(i) Wire transfer is a transaction carried out on behalf of an originator
person (both natural and legal) through a bank by electronic means with a view to making an
amount of money available to a beneficiary person at a bank. The originator and the beneficiary
could be the same person.
(ii) Domestic wire transfer means any wire transfer where the originator
and receiver are located in the same country. It may also include a chain of wire transfers that takes
place entirely within the borders of a single country even though the system used to effect the wire
transfer may be located in another country.
(iii) Cross-border transfer means any wire transfer where the originator and
the beneficiary bank or financial institutions are located in different countries. It may include any
chain of wire transfers that has at least one cross-border element.
(iv) The originator is the account holder, or where there is no account, the
person (natural or legal) that places the order with the bank to perform the wire transfer.
(b) Wire transfer is an instantaneous and most preferred route for transfer of
funds across the globe and hence, there is a need for preventing terrorists and other criminals from having
unfettered access to wire transfers for moving their funds and for detecting any misuse when it occurs.
This can be achieved if basic information on the originator of wire transfers is immediately available to
appropriate law enforcement and/or prosecutorial authorities in order to assist them in detecting,
investigating, prosecuting terrorists or other criminals and tracing their assets. The information can be
used by Financial Intelligence Unit - India (FIU-IND) for analysing suspicious or unusual activity and
disseminating the same. The originator information can also be put to use by the beneficiary bank to
facilitate identification and reporting of suspicious transactions to FIU-IND. Owing to the potential terrorist
financing threat posed by small wire transfers, the objective is to be in a position to trace all wire transfers
with minimum threshold
limits. Accordingly, banks/FIs must ensure that all wire transfers are accompanied by the following
information:
1. Cross-border wire transfers
(i) All cross-border wire transfers must be accompanied by accurate and meaningful originator
information.
(ii) Information accompanying cross-border wire transfers must contain
the name and address of the originator and where an account exists, the number of that account. In
the absence of an account, a unique reference number, as prevalent in the country concerned,
must be included.
(iii) Where several individual transfers from a single originator are bundled
in a batch file for transmission to beneficiaries in another country, they may be exempted from
including full originator information, provided they include the originator’s account number or
unique reference number as at (ii) above.
2. Domestic wire transfers
(i) Information accompanying all domestic wire transfers of Rs.50000/-
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(Rupees Fifty Thousand) and above must include complete originator information i.e. name,
address and account number etc., unless full originator information can be made available to the
beneficiary bank by other means.
(ii) If a bank has reason to believe that a customer is intentionally
structuring wire transfer to below Rs.50,000/- (Rupees Fifty Thousand) to several beneficiaries in
order to avoid reporting or monitoring, the bank must insist on complete customer identification
before effecting the transfer. In case of non-cooperation from the customer, efforts should be made
to establish his identity and Suspicious Transaction Report (STR) should be made to FIU-IND.
(iii) When a credit or debit card is used to effect money transfer,
necessary information as at (i) above should be included in the message.
(c) Exem ptions
Interbank transfers and settlements where both the originator and beneficiary are banks or financial
institutions would be exempted from the above requirements.
(d) Role of Ordering, Intermediary and Beneficiary banks
(i) Ordering Bank
An ordering bank is the one that originates a wire transfer as per the order placed by its customer. The
ordering bank must ensure that qualifying wire transfers contain complete originator information. The
bank must also verify and preserve the information at least for a period of five years.
(ii) Intermediary bank
For both cross-border and domestic wire transfers, a bank processing an intermediary element of a
chain of wire transfers must ensure that all originator information accompanying a wire transfer is
retained with the transfer. Where technical limitations prevent full originator information accompanying
a cross-border wire transfer from remaining with a related domestic wire transfer, a record must be
kept at least for five years (as required under Prevention of Money Laundering Act, 2002) by the
receiving intermediary bank of all the information received from the ordering bank.
(iii) Beneficiary bank
A beneficiary bank should have effective risk-based procedures in place to identify wire transfers
lacking complete originator information. The lack of complete originator information may be
considered as a factor in assessing whether a wire transfer or related transactions are suspicious and
whether they should be reported to the Financial Intelligence Unit-India. The beneficiary bank should
also take up the matter with the ordering bank if a transaction is not accompanied by detailed
information of the fund remitter. If the ordering bank fails to furnish information on the remitter, the
beneficiary bank should consider restricting or even terminating its business relationship with the
ordering bank.
Maintenance of KYC documents and Preservation period
PML Act and Rules cast certain obligations on the banks/FIs in regard to maintenance, preservation and
reporting of customer account information.
Banks/FIs are, therefore, advised to go through the provisions of the PMLA, 2002 and the Rules notified there
under and take all steps considered necessary to ensure compliance with the requirements of the Act and the
Rules ibid.
Maintenance of records of transactions
Banks/FIs should introduce a system of maintaining proper record of transactions prescribed under Rule
3 of Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules, 2005), as
mentioned below:
(i) All cash transactions of the value of more than Rupees Ten Lakh or its equivalent in foreign
currency;
(ii) Series of all cash transactions individually valued below Rupees Ten Lakh, or its equivalent in
foreign currency which are that have taken place within a month and the monthly aggregate which
exceeds rupees ten lakhs or its equivalent in foreign currency. It is clarified that for determining
‘integrally connected transactions’ ‘all accounts of the same customer’ should be taken into account.
(iii) All transactions involving receipts by non-profit organisations of value more than rupees ten lakh
or its equivalent in foreign currency [Ref: Government of India Notification dated November 12, 2009-
Rule 3,subrule (1) clause (BA) of PML Rules]
(iv) All cash transactions where forged or counterfeit currency notes or bank notes have been used as
genuine and where any forgery of a valuable security or a document has taken place facilitating the
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transaction and
(v) All suspicious transactions, whether or not in cash, made as mentioned in the Rules.
Banks/FIs are required to maintain all necessary information in respect of transactions prescribed under
PML Rule 3 so as to permit reconstruction of individual transaction, including the following information:
(i) the nature of the transactions;
(ii) the amount of the transaction and the currency in which it was denominated;
(iii) the date on which the transaction was conducted; and
(iv) the parties to the transaction.
Preservation of Records
Banks/FIs should take appropriate steps to evolve a system for proper maintenance and preservation of
account information in a manner that allows data to be retrieved easily and quickly whenever required or
when requested by the competent authorities
(i) In terms of PML Amendment Act 2012, banks/FIs should maintain for at least five years from the
date of transaction between the bank/FI and the client, all necessary records of transactions, both
domestic or international, which will permit reconstruction of individual transactions (including the
amounts and types of currency involved, if any) so as to provide, if necessary, evidence for prosecution
of persons involved in criminal activity.
(ii) Banks/FIs should ensure that records pertaining to the identification of the customers and their
address (e.g. copies of documents like passports, identity cards, driving licenses, PAN card, utility bills,
etc.) obtained while opening the account and during the course of business relationship, are properly
preserved for at least five years after the business relationship is ended as required under Rule 10 of the
Rules ibid. The identification of records and transaction data should be made available to the competent
authorities upon request.
(iii) Banks/FIs may maintain records of the identity of their clients, and records in respect of
transactions referred to in Rule 3 in hard or soft format.
(iv) As mentioned in paragraph 3.3.1(i) of this Master Circular, banks/FIs are required to pay special
attention to all complex, unusual large transactions and all unusual patterns of transactions, which have
no apparent economic or visible lawful purpose. It is further clarified that the background including all
documents/office records/memorandums pertaining to such transactions and purpose thereof should,
as far as possible, be examined and the findings at branch as well as Principal Officer level should
be properly recorded. Such records and related documents should be made available to help
auditors to scrutinize the transactions and also to Reserve Bank/other relevant authorities. These
records are required to be preserved for five years as is required under PMLA, 2002.
Combating Financing of Terrorism
The United Nations periodically circulates the following two lists of individuals and entities, suspected of
having terrorist links, and as approved by its Security Council (UNSC).
(a) The “Al-Qaida Sanctions List”, includes names of individuals and entities associated with the Al-
Qaida. The Updated Al-Qaida Sanctions List is available at http://www.un.org/sc/committees/1267/aq
sanctions list.shtml.
(b) The “1988 Sanctions List”, consisting of individuals (Section A of the consolidated list) and entities
(Section B) associated with the Taliban which is available at http://www.un.org/sc/committees/
1988/list.shtml.
The United Nations Security Council Resolutions (UNSCRs), received from Government of India, are
circulated by the Reserve Bank to all banks and FIs. Banks/FIs are required to update the lists and
take them into account for implementation of Section 51A of the Unlawful Activities (Prevention)
(UAPA) Act, 1967, discussed below. Banks/FIs should ensure that they do not have any account in
the name of individuals/entities appearing in the above lists. Details of accounts resembling any of the
individuals/entities in the list should be reported to FIUIND.
Reporting Requirements
a) Reporting to Financial Intelligence Unit - India
(i) In terms of the Rule 3 of the PML (Maintenance of Records) Rules, 2005, banks/FIs are required to
furnish information relating to cash transactions, cash transactions integrally connected to each other,
and all transactions involving receipts by non-profit organisations (NPO means any entity or organisation
that is registered as a trust or a society under the Societies Registration Act, 1860 or any similar State
legislation or a company registered (erstwhile Section 25 of Companies Act, 1956 ) under Section 8 of the
Companies Act, 2013), cash transactions where forged or counterfeit currency notes or bank notes have
been used as genuine, cross border wire transfer, etc. to the Director, Financial Intelligence Unit-India
(FIU-IND) at the following address:
Director, FIU-IND,
Financial Intelligence Unit-India, 6th Floor, Hotel
Samrat,
Chanakyapuri,
New Delhi-110021
Website - http://fiuindia.gov.in/
(ii) FIU-IND has released a comprehensive reporting format guide to describe the specifications of
prescribed reports to FIU-IND. FIU-IND has also developed a Report Generation Utility and Report
Validation Utility to assist reporting entities in the preparation of prescribed reports. The Office
Memorandum issued on Reporting Formats under Project FINnet dated 31st March, 2011 by FIU
containing all relevant details are available on FIU’s website. Banks/FIs should carefully go through
all the reporting formats prescribed by FIU-IND.
(iii) FIU-IND have placed on their website editable electronic utilities to file electronic Cash Transactions
Report (CTR)/ Suspicious Transactions Report (STR) to enable banks/FIs which are yet to install/adopt
suitable technological tools for extracting CTR/STR from their live transaction data base. It is, therefore,
(iv) advised that in cases of those banks/FIs, where all the branches are not fully computerized, the
Principal Officer of the bank/FI should cull out the transaction details from branches which are not yet
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computerized and suitably arrange to feed the data into an electronic file with the help of the editable
electronic utilities of CTR/STR as have been made available by FIU-IND on their website
http://fiuindia.gov.in
(v) (iv) In terms of Rule 8, while furnishing information to the Director, FIU-IND, delay of each day in not
reporting a transaction or delay of each day in rectifying a misrepresented transaction beyond the time
limit as specified in the Rule shall constitute a separate violation. Banks/FIs are advised to take note of
the timeliness of the reporting requirements.
(vi) In terms of instructions contained in paragraph 3.4 (b) of this Master Circular, banks/FIs are required
to prepare a profile for each customer based on risk categorisation. Further, vide paragraph 3.2.2. (III), the
need for periodical review of risk categorisation has been emphasized. It is, therefore, reiterated that, as a
part of their transaction monitoring mechanism, banks/FIs are required to put in place an appropriate
software application to throw alerts when the transactions are inconsistent with risk categorization and
updated profile of the customers. It is needless to add that a robust software throwing alerts is essential
for effective identification and reporting of suspicious transaction.
b) Reports to be furnished to FIU-IND
1. Cash Transaction Report (CTR)
While detailed instructions for filing all types of reports are given in the instructions part of the related
formats, banks/FIs should scrupulously adhere to the following:
(i) The CTR for each month should be submitted to FIU-IND by 15 th of the
succeeding month. Cash transaction reporting by branches to their controlling offices should, therefore,
invariably be submitted on monthly basis and banks/FIs should ensure to submit CTR for every month to
FIU-IND within the prescribed time schedule.
(ii) All cash transactions, where forged or counterfeit Indian currency notes have been used as genuine
should be reported by the Principal Officer of the bank to FIU-IND in the specified format(Counterfeit
Currency Report – CCR), by 15thday of the next month. These cash transactions should also include
transactions where forgery of valuable security or documents has taken place and may be reported to
FIU-IND in plain text form.
(iii) While filing CTR, details of individual transactions below Rupees Fifty thousand need not be
furnished.
(iv) CTR should contain only the transactions carried out by the bank on behalf of their clients/customers
excluding transactions between the internal accounts of the bank.
(v) A summary of cash transaction reports for the bank as a whole should be compiled by the Principal
Officer of the bank every month in physical form as per the format specified. The summary should be
signed by the Principal Officer and submitted to FIU-IND. In case of CTRs compiled centrally by banks
for the branches having Core Banking Solution (CBS) at their central data centre, banks may generate
centralised CTRs in respect of the branches under core banking solution at one point for onward
transmission to FIU-IND, provided the CTR is to be generated in the format prescribed by FIU-IND;
(vi) A copy of the monthly CTR submitted to FIU-India in respect of the branches should be available at
the branches for production to auditors/inspectors, when asked for; and
vii) The instruction on ‘Maintenance of records of transactions’; and
‘Preservation of records’ as contained above in this Master Circular at Para 6.1 and 6.2 respectively
should be scrupulously followed by the branches.
viii) However, in respect of branches not under CBS, the monthly CTR should continue to be
compiled and forwarded by the branch to the Principal Officer for onward transmission to FIU-IND.
2. Suspicious Transaction Reports (STR)
(i) While determining suspicious transactions, banks/FIs should be guided by
the definition of suspicious transaction as contained in PMLA Rules as amended from time to time.
(ii) It is likely that in some cases transactions are abandoned/aborted by
customers on being asked to give some details or to provide documents. It is clarified that banks/FIs
should report all such attempted transactions in STRs, even if not completed by the customers,
irrespective of the amount of the transaction.
(iii) Banks/FIs should make STRs if they have reasonable ground to believe that the transaction
involves proceeds of crime irrespective of the amount of the transaction and/or the threshold limit
envisaged for predicate offences in part B of Schedule of PMLA, 2002.
(iv) The STR should be furnished within seven days of arriving at a conclusion that any
1.Individual : Passport , Driving License, PAN Card, Voter ID , NREGA Job Card , Letter
issued by UIDIA containing name ,address and Aadhaar number. If the OVD submitted
for proof of identity does not have address proof , then customer is required to submit
another OVD for proof of address
2.Low Risk Customers ( Individual):Simplified measures may be applied for low risk customer .
Under simplified measures, in addition to above OVD following ID Proof may be accepted
Identity card with applicant‘s Photograph issued by Central/State
Government Departments, Statutory/Regulatory authoriries
,PSUs,Scheduled commercial banks and Public financial institutions
Letter issued by Gazetted officer, with a duly attested photograph of the person
Under simplified measures, in addition to above OVD following address proof may be
accepted.
Utility bill( electricity,water,telephone,postpaid mobile phone ,piped gas bill) which is not
more than two months old
Proprty or Municipal Tax receipt
Bank account or post office savings bank account statement
Pension or family pension payment orders (PPOs) issued to retired government
employees /PSU
Letter of allotment of accommodation from employer issued by State or Central
Governments , Statutory or regulatory bodies,PSBs/PSUs/FIs/Listed companies.Similarly
leave and license agreements with such employers allotting official accommodation.
Documents issued by Govt. departments of foreign jurisdictions and letter issued by
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Foreign Embassy or Mission in India.
3.Individuals who are unable to provide OVD : "Canara Small SB Deposit" may be opened by
such customers on the basis of a self attested photograph and putting signature on account
opening form in the presence of a bank official
6.Trusts and Foundations :Registration certificate; Trust deed; An officially valid KYC document in
respect of the trustees,Settlers,beneficiaries and the person holding a power of attorney to
transact on its behalf; and PAN number of the Trust.
Customer is required to furnish proper proof of identity through photo identity card and address
proof. Documents required from various types of customers are given below. The original
documents are to be verified, copies taken and duly authenticated by the officer of the Bank stating
'verified with the original'.
Type of customer Documents
Accounts of individual For proof of identity, only the documents mentioned below would be accepted for opening
accounts of individuals. They are: the passport, the driving license, the Permanent
Account Number (PAN) Card, the Voter's Identity Card issued by Election Commission of
India, job card issued by NREGA duly signed by an officer of the State Government, the
letter issued by the Unique Identification Authority of India containing details of name,
address and Aadhaar number. It is
implied that proof of address also follows from the above documents only. Banks would
not have the discretion to accept any other document for this purpose.
Accounts of a) Certificate of incorporation; b) Memorandum and Articles of Association; c) A
Companies: Name, resolution from the Board of Directors and power of attorney granted to its managers,
Principal place of officers or employees to transact
Business; Mailing on its behalf; and d) An officially validdocument in respect of managers, officers or employees
address; Phone no holding an attorney to transact on its behalf; (e) Copy of PAN Allotment letter; (f) Copy
of the telephone bill.
Punishment for violation of Prevention of Money Laundering (Amendment) Act, 2012 : If it is found
that a reporting entity or its designated director on the Board or any of its employees has failed to comply
with the obligations, a fine on such reporting entity or its designated director on the Board or any of its
employees, can be imposed, which shall not be less than Rs.10000 but may extend to Rs.100000 for each
failure.
Intra-bank Deposit Accounts Portability : KYC once done by one branch of the bank should be valid
for transfer of the account within the bank as long as full KYC has been done for the concerned account.
The customer should be allowed to transfer his account from one branch to another branch without
insisting on fresh proof of address and on the basis of a self-declaration from the account holder about
his / her current address, subject to submitting proof of address within a period of six months. Periodical
updation of KYC data would continue to be done by bank as per prescribed periodicity.
Aadhar Card for KYC Purposes
1. The fetter issued by the Unique Identification Authority of India (UIDAI) containing details of name,
address and Aadhaar number may be accepted as an 'Officially Valid Document'. Further, while
opening accounts based on Aadhaar, if the address provided by the account holder is the same as that
on Aadhaar letter, it may be accepted as a proof of both identity and address.
2. Banks may accept e-Aadhaar, downloaded from UIDAI website, as an officially valid document. If the
prospective customer knows only his/her Aadhaar number, the bank may print the prospective customer's
eAadhaar letter in the bank directly from the UIDAI portal; or adopt e-KYC procedure as prescribed by RBI
or confirm identity and address of the resident through simple authentication service of UIDAI.
3. e-KYC service is accepted as a valid process for KYC verification under Prevention of Money Laundering
(Maintenance of Records) Rules, 2005. Information containing demographic details and photographs made
available from UIDAI as a result of e-KYC process ("which is in an electronic form and accessible ") may be
treated as an 'Officially Valid Document' under PML Rules. The individual user has to authorize the =Ai, by
explicit consent, to release her or his identity/address through biometric authentication to the bank
branches/business correspondents (BCs). The UIDAI then transfers the data of the individual comprising
name, age, gender, and photograph of the individual, electronically to the bank/BCs, which may be
Q1. What is KYC? Why is it required?: KYC means “Know Your Customer”. It is a process by which banks obtain
information about the identity and address of the customers. This process helps to ensure that banks’ services
are not misused. The KYC procedure is to be completed by the banks while opening accounts. Banks are also
required to periodically update their customers’ KYC details.
Q2. What are the KYC requirements for opening a bank account?: To open a bank account, one needs to
submit a ‘proof of identity and proof of address’ together with a recent photograph.
Q3. What are the documents to be given as ‘proof of identity’ and ‘proof of address’?: The Government of India
has notified six documents as ‘Officially Valid Documents’ (OVDs) for the purpose of producing proof of
identity. These six documents are Passport, Driving Licence, Voters’ Identity Card, PAN Card, Aadhaar Card
issued by UIDAI and NREGA Job Card. One has to submit any one of these documents as proof of identity.
If these documents also contain address details, then it would also be accepted as ‘proof of address’. If the
document submitted for proof of identity does not contain address details, then one will have to submit
another officially valid document which contains address details.
Q4. How to open account if a person does not have proof of address & identity?: If a person does not have any of
the documents listed above to show ‘proof of identity’, he can still open a bank account known as ‘Small
Account’ by submitting his recent photograph and putting his signature or thumb impression in the presence of
the bank official. The ‘Small Accounts’ have certain limitations such as:
• balance in such accounts at any point of time should not exceed Rs.50,000
• total credits in one year should not exceed Rs.1,00,000
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• total withdrawal and transfers in a month should not exceed Rs.10,000
• Foreign remittances cannot be credited to such accounts.
Such accounts remain operational initially for a period of twelve months and thereafter, for a further period of
twelve months if the holder of such an account provides evidence to the bank of having applied for any of the
officially valid documents within twelve months of the opening of such account.
Q5. Opening bank account if a person does not have any of the officially valid documents and which is not
subjected to any limitations as in the case of ‘small accounts’?: A normal account can be opened by
submitting:
Proof of identity: a copy of any one of the following documents as Proof of Identity (PoI) - (i) Identity card
with person’s photograph issued by Central/State Government Departments, Statutory/Regulatory
Authorities, Public Sector Undertakings, Scheduled Commercial Banks, and Public Financial Institutions;
or (ii) letter issued by a gazetted officer, with a duly attested photograph of the person.
Proof of Address (PoA): Any one of the following documents: (i) Utility bill, which is not more than two
months old, of any service provider (electricity, telephone, post-paid mobile phone, piped gas, water bill);
or (ii) Property or Municipal Tax receipt;
(iii) Bank account or Post Office savings bank account statement; or (iv) Pension or family Pension
Payment Orders (PPOs) issued to retired employees by Government Departments or Public Sector
Undertakings, if they contain the address; (v) Letter of allotment of accommodation from employer issued by
State or Central Government departments, statutory or regulatory bodies, public sector undertakings,
scheduled commercial banks, financial institutions and listed companies. Similarly, leave and license
agreements with such employers allotting official accommodation; and (vi) Documents issued by Government
departments of foreign jurisdictions or letter issued by Foreign Embassy or Mission in India.
This, however, is not a general rule and it is left to the judgement of the banks to decide whether this
simplified procedure can be adopted in respect of any customer.
Q6. If name is changed due to marriage and person does not have any OVD in the new name, how can
she open an account?:
A copy of the marriage certificate issued by the State Government or Gazette notification indicating
change in name together with a certified copy of the ‘Officially Valid Documents’ in the prior name of the
person is to be furnished for opening of account in cases of persons who change their names on account
of marriage or otherwise.
Q7. Are banks required to categorise their customers based on risk assessment?: Yes, banks are
required to classify their customers into ‘low’, ‘medium’ and ‘high’ risk categories depending on their AML
risk assessment. But banks do not inform customers about this risk categorization.
Q8. Can a person open a bank account with only an Aadhaar card?: Yes, Aadhaar card is accepted as a
proof of both identity and address.
Q9. Is it compulsory to furnish Aadhaar Card for opening an account?: No. A person may furnish Aadhaar
card or any of the other five OVDs for opening an account.
Q10. What is e-KYC? How does e-KYC work?: e-KYC refers to electronic KYC. e-KYC is possible only for
those who have Aadhaar numbers. While using e-KYC service, you have to authorise the Unique
Identification Authority of India (UIDAI), by explicit consent, to release your identity/address through biometric
authentication to the bank branches/business correspondent (BC). The UIDAI then transfers your data
comprising your name, age, gender, and photograph electronically to the bank. Information thus provided
through e-KYC process is permitted to be treated as an ‘Officially Valid Document’ under PML Rules and is a
valid process for KYC verification.
Q11. Is introduction necessary while opening a bank account?: No, introduction is not required.
Q12. If a person is staying in Chennai but if proof of address shows address of New Delhi, can he still
open an account in Chennai?: Yes. Account can be opened in Chennai also even if the address in the
“Officially Valid Document” is that of New Delhi. In such case, the person can submit the officially valid
document having New Delhi address, together with a declaration about Chennai address for
communication purposes.
Q13. Can one transfer his existing bank account from one place to another?: It is possible to transfer an
account from one branch to another branch of the same bank. There is no need to undergo KYC exercise
again for such transfer. However, if there is a change of address, then one will have to submit a declaration
about the current address. If the address appearing in the ‘Officially Valid Documents’ (OVDs) submitted for
proof of address is no longer his valid address (i.e. neither permanent address nor current address), he needs
to get an Officially Valid Document for Proof of
Address containing the current or the permanent address and furnish the same within six months. In
case of opening an account in another bank, however, one will have to undergo KYC exercise afresh.
Q14. Whether separate proof of address & identity required for various accounts in same bank?: No, if one
Banks should leverage the technology available with them and the telecom service providers to ensure
that SMS alerts charges are levied on all customers on actual usage basis.
The Banking Codes and Standards Board of India has been registered as a separate
society under the Societies Registration Act, 1860. Therefore, it would function as an
independent and autonomous body.
The Banking Codes and Standards Board of India is not a Department of the RBI.
Reserve Bank has agreed to lend it financial support for a limited period. It is an
independent banking industry watch dog to ensure that the consumer of banking
services get what they are promised by the banks.
To ensure that the Board really functions as an autonomous and independent
watchdog of the industry, the Reserve Bank also decided to extend financial support to
the Board by way of meeting its full expenses for the first five years. This was to
enable the Board to reach its economic critical mass that will make it truly independent
in its functioning and take a view on any bank without its existence coming under any
threat. On its part, RBI would derive supervisory comfort in case of banks which are
members of the Board. In substance, the Board has been set up to ensure that
common man as a consumer of financial services from the banking Industry is in a no
way at a disadvantageous position and really gets what it has been promised
Relationship between RBI and BCSBI
The Board has been set up as an independent and autonomous organization. But it is strongly
supported by RBI as RBI would bear the financial cost of this institution in the initial period of five
years in the best interests of the entire banking system and more particularly the interests of the
common person as customer. Although the membership of BCSBI is optional, RBI is expected to have
more intensive oversight on banks that do not become members of BCSBI.
Functions of BCSBI
The initiative to establish the Board is driven by the banks themselves as this would lead to the
empowerment of their customers for a higher level of satisfaction with regard to the services offered,
through a significant and enduring improvement in customer services. Internationally, such codes are
developed by associations of bankers as self-regulatory exercises. The IBA and the BCSBI have drawn
up the voluntary codes in general terms and the codes will be followed by detailed Guidance Notes on
each of the code.
The adherence to the codes by banks will be monitored by BCSBI. The central task of the
Board would, therefore, be to ensure that the subscriber banks file detailed compliance
reports to the Board on observance of voluntary codes and that they are followed
rigorously.
If, after a thorough assessment the Board is still not satisfied with the compliance, the
Board could contemplate sanctions which may include the following :
1. Follow "Name & Shame" policy. That is publication by the Board of the bank's name
and details of the breach;
2. Inclusion of details of the breach in the Board's Annual Report;
3. Issue of instructions to banks on remedial action;
4. Warning or reprimand;
5. Public censure; and
6. Cancellation of registration with the Board.
While provisions for penal action exist, the basic approach of BCSBI is to take collaborative
remedial action rather than through penal measures.
Of the 79 scheduled commercial banks, 70 banks have enrolled as members of the BCSBI and have
voluntarily adopted the 'Code of Bank's Commitment to Customers'.
12.In a cash deposit made by a customer, one piece of counterfeit note is detected. What should
the bank do - (i) It should be impounded and acknowledgement to be issued(ii) Should be
destroyed (iii) Should be returned back: It should be impounded and acknowledgement
to be issued to depositor signed by cashier.
13. In case of counterfeit notes received in a deposit by a person with bank, FIR is not lodged
and only a monthly consolidated report is sent if counterfeit notes in one remittance is up
to: 4
14.In case of Non-KYC compliant customer, after how much time notice, account should be
freezed?: 3 months notice
15.In respect of Low Risk customers, KYC norms relating to obtaining photograph and proof of
address and ID should be applied once in: 10 Years
16.In respect of Medium Risk customers, KYC norms relating to obtaining photograph and proof of
address and ID should be applied once in: 8 Years
17.Process of making illegally-gained proceeds (i.e. "dirty money") appear legal (i.e. "clean") is
called: Money Laundering
18.RBI has allowed banks to accept at least _____ of the documents prescribed by RBI as activity
proof by a proprietary concern, for opening a bank account in respect of a sole proprietary
firm: One
19. What is the Risk category of Trust account High/Low/medium risk?: High Risk
20.When in case of deposit of cash over counter, two counterfeit notes are detected by bank,
what should the bank do – (a) To be returned to customer, (b) impounded immediately, (c)
call the police, (d) destroy it: impound immediately and issue acknowledgement to
Partnership
1. A document was executed by three partners in different dates. When shall the limitation period
start?: The limitation period will start from the last date i.e. when the document was executed by
the last partner
2. A minor who was admitted to the benefits of partnership has become major. Within how much
period, he has to decide to remain partner in the firm or not?: within 6 months of attaining
majority or 6 months of knowing that he is the partner in the firm whichever is later.
3. A partnership firm conducting business other than the banking business has more than 100
members as partners. Whether this is allowed?: Such association is called illegal association as
per Companies Act
4. Account payee crossing defined in:-Not defined any where
5. HUF cannot be partner in a Partnership firm: HUF does not have any legal entity.
6. Implied authority of a partner does not allow ______ singly? Settle a dispute relating to the
01 KYC guidelines have been issued by RBI under the provisions of:
a Section 35 of Banking Regulation Act
b Section 35-A of RBI Act
c Section 35-A of Banking Regulation Act
d Section 35-A Prevention of Money Laundering Act
02 What is the minimum balance that the banks can stipulate in a basic saving bank deposit account:
a no such condition can be imposed
b Rs.10 ,
c Rs.100
d Rs.200
03 In a basic saving bank deposit account which
of the following 'service can be allowed: (1) deposit and withdrawal of cash at bank branch as well as
ATMs; (2) receipt/credit of money through electronic payment channels (3) by means of
deposit/collection of cheques drawn by Central/State Government agencies and departments
a 1 only b 1 and 2 only
c 1 to 3 all d 2 and 3 only
04 As per KYC policy of RBI, which of the following instruments can be issued in cash if the amount is
Rs.50000 or above:
a travellers' cheque, demand drafts
b demand drafts, mail-transfers
c mail transfers, telegraphic transfers
d none of the above
05 PAN is required to be quoted, as per RBI's KYC guidelines if the amount of transaction in cash is:
a above Rs.50000
b Rs.50000 or above less than Rs.50000
d Rs.10000 and above
06 Banks are to keep a close watch on large size cash debit or credit transactions in deposit or loan
accounts and keep a record of such transactions. For this purpose, the large size transaction means,
where the amount is :
a Rs.10 lac and above
b above Rs.10 lac c. less than Rs.10 lac d all the above
07 KYC guidelines take into account the recommendations of an international Financial Action Task Force
(a) on anti-money laundering standards (b) on combating financing of terrorism (c) on manipulation of
economic offences:
a a and b only ,b b and c only a and c only d a to c all
08 KYC policy of the banks, as per RBI directives should provide for (a) customer acceptance policy (b)
customer identification procedure (c) monitoring of transactions (d) risk management
a a, b and c only
b a, c and d only
c b, c and d only
d a to d all
09 For KYC policy, the customer has been defined to include (a) a person or entity that maintains an
account and/or has a business relationship with the bank (b) one on whose behalf the account is
maintained (i.e. the beneficial owner) (c) beneficiaries of transactions conducted by professional
intermediaries, such as Stock Brokers, Chartered Accountants, Solicitors etc. as permitted under the
law, (d) 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.
a a, b and c only , b a, c and d only , c b, c and d only, d a to d all
10 Under KYC guidelines, where a customer does not comply with the KYC requirement, his account
can be closed. (a) decision to close the account should be taken at a high level (b) account should
closed after giving due notice to the customer (c) account should be closed after explaining the
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reasons to the customer:
a a to c all correct
b a and c only correct
c a and b only correct
d b and c only correct
11 Which of the following customer does not fall under low risk category under KYC guidelines :
a salaried employees
b persons from lower strata of the society
c govt. departments
d trusts
12 Which of the following customers fall under
the high risk category customers from KYC purposes (a) politically exposed persons of foreign origin
(b) companies having close . shareholding (c) firms having sleeping partners (d) high net worth
individuals.
a a to d all , b a to c only c b to d only d a, b and d only
13 As per KYC guidelines, the banks cannot have correspondent arrangements with 'Shell Banks'. For this
purpose, the 'Shell Bank' mean:
a a bank having no existence but on paper only
b a bank incorporated outside India and having a branch in India
c a bank incorporated in a country where it has no existence and it is not regulated by a regulating
authority
d a bank incorporated outside India and banned by UNTO to have operations other than in country of
incorporation.
14 As per Prevention of Money Laundering Act, the banks are required to maintain record of
transactions for a period offrom date of cessation of the transaction:
a 2 years b 5 years 10 years d 20 years
15. As per Prevention of Money Laundering Act, the banks are required to maintain record of transactions
of below Rs.10 lac even, if the aggregate of such transactions is Rs. during days/weeks/ months:
a. Rs.10 lac, one month, b.above Rs.10 lac, one month, c.above Rs.10 lac, a single day
d. Rs.10 lac, a single day
16.As per Prevention of Money Laundering Act the banks are required to submit to Financial Intelligence
Unit-India, monthly statement of large cash transactions called, CTR. It is to be submitted for transactions
of Rs. and within of close of the month: a.Rs.10 lac, 7 days, b.above Rs.10 lac, 7 days
c.above Rs.10 lac, 15 days, d.Rs.10 lac, 5 days
17.As per Prevention of Money Laundering Act, the banks are required to submit to Financial Intelligence
Unit-India, statement on suspicious transactions, called, STR. It is to be submitted for transactions of Rs.
and within of arriving at conclusiori : a.Rs.10 lac, 7 days, b.above Rs.10 lac, 3 days
c.any amount, 7days, d.any amount, 15 days.
18. Which of the following is the document for proof of customer identity and address under KYC:
a.telephone bill, b.Aadhaar number, c.electricity bill, d.all the above
19.Which of the following is an important feature of small deposit accounts?:
a. where the maximum balance shall not exceed Rs.50000
b.total of credit entries in the account would not exceed Rs.I lac during an year
c. monthly withdrawal is not more than Rs.10000, d. a to c all, e. a and b only
20.In a basic saving bank deposit account what is the maximum no. of deposit and cash
withdrawal (including ATM) transactions: a no ceiling, b. 2, c 4 d 10
21 Punishment for offences under Prevention of Money Laundering Act is prescribed as
a fine up to Rs.3 lac and imprisonment ranging b between 3 to 5 years.
b fine up to Rs.3 lac and imprisonment ranging between 3 to 7 years.
c fine up to Rs.5 lac and imprisonment ranging between 3 to 5 years.
d fine up to Rs.5 lac and imprisonment ranging between 5 to 7 years.
22 To open account in the name of a proprietorship firm, which of the following documents can be used for
proof of name and address. (a) certificate / registration document issued by sales tax (b) certificate /
registration document issued by service tax (c) certificate / registration document issued by professional
tax authorities (d) IEC number issued by DGFT
a a and c only, b a, b and c only, c b and d only, d a to d any
23.X has a current account with the bank and he agrees to receive a cheque of Rs. 10 lac from B and on
the strength of this amount of Rs.10 lac, he issues 5 cheques of Rs.1.90 each in the name of 5 different
1) The Government had amended the Prevention of Money Laundering (Maintenance of Records) Rules,
2005, for setting up of the :
a) Central KYC Records Registry (CKYCR).
b) Centralised KYC Records Registry (CKYCR)
c) Core KYC Records Registry (CKYCR)
d) Common KYC Records Registry (CKYCR)
2) The _______ would receive, store, safeguard and retrieve the KYC records in digital form of a client, for
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which necessary amendments to the Rules have been made. The KYC records received and stored could
be retrieved online by any reporting entity across the financial sector for the purpose of establishing an
account based relationship:
a) CRILC b) CKYCR c) CERSAI d) None
3) The Government of India has authorised the _______ to act as, and to perform the functions of the
Central KYC Records Registry (CKYCR). All Regulated Entities (REs) shall capture KYC information
for sharing with the CKYCR in the manner prescribed for ‘individuals’ and ‘Legal Entities’:
a) Central Registry of Securitisation Asset Reconstruction and Security Interest of India (CERSAI)
b) Reserve Bank of India.
c) Banking Codes and Standards Board of India (BCSBI)
d) Financial Action Task Force (FATF)
4) RBI has decided to modify the procedure for exchanging mutilated / imperfect notes in order to
improve customer service and enhance customer protection. Where the number of notes presented by a
person is up to ___ pieces with a maximum value of ____per day, banks should exchange them over the
counter, free of charge:
a) 10 pieces; Rs.5,000 b) 20 pieces; Rs.5,000
c) 15 pieces; Rs.3,000 d) 20 pieces; Rs.4,000
5) Where the number of mutilated / imperfect notes presented by a person exceeds 20 pieces or
Rs.5,000 in value per day, banks may accept them, against receipt, for value to be credited later. Banks
may levy service charges as permitted in the extant guidelines. In case tendered value is above _____
banks are expected to take the usual precautions:
a) Rs.10,000 b) Rs.20,000c) Rs.40,000 d) Rs. 50,000
6) Where the number of mutilated / imperfect notes presented by a person is up to ____ pieces per day,
non-chest branches should normally adjudicate the notes and pay the exchange value over the counter.
a) 3 b) 5 c) 8 d) 10
7) If the non-chest branches are not able to adjudicate the mutilated notes, the notes may be received
against a receipt and sent to the linked currency chest branch for adjudication. The probable date of
payment should be informed to the tenderers on the receipt itself and the same should not exceed ____.
Bank account details should be obtained from the tenderers for crediting the exchange value by
electronic means:
a) 10 days b) 20 days c) 30 days d) 40 days
8) Where the number of mutilated / imperfect notes presented by a person is more than 5 pieces not
exceeding _____ in value, the tenderer should be advised to send such notes to nearby currency chest
branch by insured post giving his / her bank account details (a/c no, branch name, IFSC, etc) or get them
exchanged thereat in person:
a) Rs. 20,000 b) Rs. 15,000 c) Rs.10,000d) Rs.5,000
9) The Reserve Bank has decided that in addition to previous limits, banks will be
permitted to reckon
government securities held by them up to another ___ of their Net Demand and Time Liabilities (NDTL)
under Facility to Avail Liquidity for Liquidity Coverage Ratio (FALLCR) within the mandatory Statutory
Liquidity Ratio (SLR) requirement as level 1 High Quality Liquid Assets (HQLA) for the purpose of
computing their Liquidity Coverage Ratio (LCR). Hence, the total carve-out from SLR available to banks
would be ____ of their NDTL:
a) 1%;11% b) 2%;11% c) 3%;12% d) 4%;12%
10) As per the Reserve Bank of India guidelines for ‘On Tap’ Licensing of Universal Banks in the Private
Sector’, the Eligible Promoters include Individuals / professionals who are ‘residents’ and have _____ of
experience in banking and finance at a senior level.
a) 8 years b) 9 years c) 10 years d) 11 years
11) As per the Reserve Bank of India guidelines for ‘On Tap’ Licensing of Universal Banks in the Private
Sector’, the entities/groups in the private sector that are ‘owned and controlled by residents’ and have a
successful track record for at least 10 years, provided that if such entity/group has total assets of Rs. 50
billion or more, the non-financial business of the group does not account for ____or more in terms of total
assets/in terms of gross income are eligible for application.
a) 20% b) 25% c) 30% d) 40%
12) As per the Reserve Bank of India guidelines for ‘On Tap’ Licensing of Universal Banks in the Private
Sector’, Existing non-banking financial companies (NBFCs) that are ‘controlled by residents’ and have a
successful track record for at least ______ years are eligible for application:
a) 5 years b) 10 years c) 12 years d) 15 years
13) As per the Reserve Bank of India guidelines for ‘On Tap’ Licensing of Universal Banks in the Private
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Sector’, Individual promoters/promoting entities/converting entities that have other group entities, shall set
up the bank only through an NOFHC. Not less than _____ of the total paid-up equity capital of the NOFHC
shall be owned by the Promoter / Promoter Group:
a) 49% b) 50% c) 51% d) 55%
14) With regards to Licensing norms of Universal Banks in the Private Sector, the initial minimum paid-up
voting equity capital for a bank shall be______. Thereafter, the bank shall have a minimum net worth of
Rs. five billion at all times:
a) Rs.20 bn b) Rs.15 bn c) Rs.10 bn d) Rs.5 bn
15) As per RBI guidelines, the promoter/s and the promoter group / NOFHC, as the case may be, shall
hold a minimum of ___ of the paid-up voting equity capital of the bank which shall be locked-in for a period
of five years from the date of commencement of business of the bank:
a) 25% b) 35% c) 40% d) 45%
16) As per RBI guidelines as regards promoter group shareholding, the promoter group shareholding
shall be brought down to ____ within a period of _____ from the date of commencement of business of
the bank:
a) 10%; 10yrs b) 15%; 15 yrs c) 15%; 10 yrs d) 12%; 15yrs
17) With respect to RBI Guidelines relating to Foreign Shareholding in the Bank, the foreign shareholding
in the bank would be as per the existing foreign direct investment (FDI) policy subject to the minimum
promoter shareholding requirement. At present, the aggregate foreign investment limit is _____ per cent:
a) 62% b) 74% c) 78% d) 80%
18) With regards to licensing norms of Universal Banks in the Private Sector, the bank shall get its
shares listed on the stock exchanges within ___ years of the commencement of business by the bank:
a) 2 yrs b) 3 yrs c) 5 yrs d) 6 yrs
19) As per RBI guidelines relating to licensing norms of Universal Banks in the Private Sector, the bank
shall open at least ___ of its branches in unbanked rural centres (population up to 9,999 as per the latest
census):
a) 10% b) 20% c) 25% d) 30%
20) As per RBI guidelines relating to licensing norms of Universal Banks in the Private Sector, the validity
of the in-principle approval issued by the RBI will be ____ from the date of granting in-principle approval
and would thereafter lapse automatically:
a) 6 months b) 12 months c) 18 monthsd) 24 months
21) All branches of Banks in all parts of the country should provide which of the following customer
services, more actively and vigorously to the members of public so that there is no need for them to
approach the RBI Regional Offices for this purpose?
a) Issuing fresh / good quality notes and coins of all denominations on demand,
b) Exchanging soiled / mutilated / defective notes
c) Accepting coins and notes either for transactions or exchange.
d) All of these.
22) With a view to extending the facility for the benefit and convenience of public, all branches of banks
have been delegated powers under Rule 2(j) of _______ for exchange of mutilated / defective notes free
of cost:
a) Reserve Bank of India (Note Refund) Rules, 2008
b) Reserve Bank of India (Note Refund) Rules, 2009
c) Reserve Bank of India (Note Refund) Rules, 2010
d) Reserve Bank of India (Note Refund) Rules, 2011
23) A ______means a note which has become dirty due to normal wear and tear and also includes a two
piece note pasted together wherein both the pieces presented belong to the same note and form the
entire note with no essential feature missing:
a) Soiled Note b) Mutilated Note
c) Imperfect Note d) Defective Note
24) Which of the following statements is true with respect to RBI Guidelines relating to Soiled Notes?
a) These notes should be accepted over bank counters in payment of Government dues and for credit to
accounts of the public maintained with banks.
b) In no case, these notes should be issued to the public as reissuable notes and shall be deposited in
currency chests for onward transmission to RBI offices as soiled note remittances for further
processing.
c) Both of these. d) None of these.
25) A _______ is a note of which a portion is missing or which is composed of more than two pieces.
These notes may be presented at any of the bank branches and shall be accepted, exchanged and
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adjudicated in accordance with Reserve Bank of India (Note Refund) Rules 2009:
a) Soiled Note b) Mutilated Note
c) Defective Note d) Deliberately Cut Note
26) Which of the following types of notes shall not be accepted by the bank branches for exchange.
Instead, the holders may be advised to tender these notes to the concerned Issue Office where they will
be adjudicated under a Special Procedure:
a) Turned extremely brittle b) Badly Burnt
c) Charred d) Inseperably stuck up together
e) All of the above.
27) Every Officer-in-charge of the branch i.e. the Branch Manager and every Officer-in-charge of the
Accounts or Cash Wing of the Branch shall act as _______ in each branch to adjudicate the notes
received at the branch for exchange in accordance with Reserve Bank of India (Note Refund) Rules,
2009:
) Prescribed Officer b) Exchange Officer
c) Settlement Officer d) Cash In charge
28) Which of the following points are true with respect to record keeping instructions for Mutilated Notes?
a) After adjudicating mutilated notes, the Prescribed Officer is required to record his order by subscribing
his initials to the dated 'PAY'/ 'PAID'/ 'REJECT' stamp.
b) Mutilated / defective notes bearing 'PAY'/'PAID' (or 'REJECT') stamp of any RBI Issue Office or any
bank branch, if presented for payment again at any of the bank branches should be rejected under
Rule 6(2) of Reserve Bank of India (Note Refund) Rules, 2009.
c) All bank branches have instructions not to issue notes bearing PAY/PAID stamps to the public even
through oversight.
d) The branches should caution their customers not to accept such notes from any bank or anybody else.
e) All of these.
29) Any note with slogans and message of a political nature written across it ceases to be a legal tender
and the claim on such a note will be rejected under _____ of Reserve Bank of India (Note Refund) Rules,
2009:
a) Rule 6(3) (i) b) Rule 6(3) (ii)
c) Rule 6(3) (iii) d) Rule 6(3) (iv)
30) The notes, which are found to be deliberately cut, torn, altered or tampered with, if presented for
payment of exchange value should be rejected _____of the Reserve Bank of India (Note Refund) Rules,
2009:
a) Under Rule 6(3)(i) b) Under Rule 6(3)(ii)
c) Under Rule 6(3)(iii) d) Under Rule 6(3)(iv)
31) With regards to disposal of notes adjudicated at bank branches, the full value paid notes have to be
remitted by all branches to the ______ with which they have been linked and there from to the Issue
Offices concerned together with the next soiled note remittance in the manner already laid down:
a) Chest Branches b) Circle Office
c) Head Office d) Zonal Office
32) The full value paid notes will be treated as chest remittance by the Issue Office while the half value
paid notes and rejected notes will be treated as notes tendered for _____and processed accordingly:
a) Settlement b) Adjudication
c) Exchange d) None of these.
33) All chest branches are required to submit to Issue Offices a _____ statement showing the number of
notes adjudicated during that period:
a) Fortnightly b) Monthly c) Quarterly d) Half Yearly
34) Which of the following points are correct with regards to agreement between RBI and commercial
banks relating to acceptance of coins in exchange of notes?
a) The bank branches should accept coins in exchange of notes.
b) They should accept coins of all denominations which are legal tender under the Indian Coinage Act,
2011 from any member of public without any restriction and pay the value in notes.
c) They should use Coin counting machines or accept coins by weight for large receipts to facilitate the
customers. d)Only a & b e) All (a), (b) & (c)
35) The coins of denomination of ____, issued from time to time, ceased to be legal tender for payments
as well as account with effect from June 30, 2011:
a) 20 Paise and below b) 25 Paise and below
c) 50 Paise and below d) All of these.
36) All coins of denomination of 25 Paise and below should be retained in the (SCDs) of the bank till
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further advise from Reserve Bank of India. What does SCD stand for?
a) Small Coin Depots b) Small Currency Depots
c) Small Coin Deposits d) Small Currency Deposits’
37) The study of counterfeit currency has unearthed that fake Indian currency notes (FICN) worth Rs.
_____ crore are infused into the Indian market every year with agencies only being able to intercept one
third of them:
a) Rs. 50 Crore b) Rs. 60 Crore
c) Rs. 70 Crore d) Rs. 80 Crore
38) Which of the following points are true with respect to RBI guidelines relating to Detection of Counterfeit
Notes?
a) Banknotes tendered over the counter / received directly at the back office / currency chest through
bulk tenders should be examined for authenticity through machines.
b) No credit to customer’s account is to be given for counterfeit notes, if any, detected in the tender
received over the counter or at the back-office / currency chest.
c) In no case, the counterfeit notes should be returned to the tenderer or destroyed by the bank branches
/ treasuries.
d) Failure of the banks to impound counterfeit notes detected at their end will be construed as willful
involvement of the bank concerned, in circulating counterfeit notes and penalty will be
imposed for violation. e) All of these.
39) Notes determined as counterfeit shall be stamped as _______ and impounded in the prescribed
format. Each such impounded note shall be recorded under authentication, in a separate register.
a) Counterfeit note b) Fake note
c) Duplicate note d) Any of these.
40) When a banknote tendered at the counter of a bank branch/back office and currency chest or treasury
is found to be counterfeit, an acknowledgement receipt in the prescribed format must be issued to the
tenderer, after stamping the note. The receipt, in running serial numbers, should be authenticated by the
______ and ______. The receipt is to be issued even in cases where the tenderer is unwilling to
countersign it. a) Cashier, Branch Manager b) Cashier; Tenderer
c) Branch Manager; Tenderer d) None of these
41) For cases of detection of counterfeit notes upto ___ pieces, in a single transaction, a consolidated
report in the prescribed format should be sent by the Nodal Bank Officer to the police authorities or the
Nodal Police Station, along with the suspect counterfeit notes, at the end of the month.
a) 8 b) 6 c) 4 d) 3
42) For cases of detection of counterfeit notes of ____ pieces, in a single transaction, the counterfeit notes
should be forwarded by the Nodal Bank Officer to the local police authorities or the Nodal Police Station
for investigation by filing FIR in the prescribed format.
a) 8 or more b) 6 or more c) 5 or more d) 4 or more
43) A copy of the monthly consolidated report / FIR shall be
sent to the ____ constituted at the Head Office of the
bank (only in the case of banks), and in the case of the treasury, it should be sent to the Issue Office of
the Reserve Bank concerned.
a) Forged Note Vigilance Cell b) FATCA
c) Banking Ombudsman d) Financial Action Task Force
44) W.r.t. guidelines pertaining to counterfeit notes, acknowledgement of the police authorities
concerned has to be obtained for notes forwarded to them both as consolidated _____ statement and
FIR. If the counterfeit notes are sent to the police by insured post, acknowledgement of receipt thereof
by the police should be invariably obtained and kept on record.
a) Weekly b) Quarterly c) Monthly d) Bi-Monthly
45) The progress made by banks in detection and reporting of counterfeit notes to Police, RBI, etc. and
problems
thereof, should be discussed regularly in the meetings of which of the following State Level Committees?
a) State Level Bankers’ Committee (SLBC),
b) Standing Committee on Currency Management (SCCM),
c) State Level Security Committee (SLSC)
d) State Level Coordination Committee (SLCC)
e) Only (a), (b) & (c) f) All from (a) to (d)
46) The data on detection of counterfeit Indian notes at bank branches & treasuries should be included
in the ______ Returns forwarded to the Reserve Bank Issue Offices:
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Govt.Link Cell, Nagpur 57 | P a g e
a) Fortnightly b) monthly c) Bi-monthly d) Quarterly
47) The banks should re-align their cash management in such a manner so as to ensure that cash
receipts in the denominations of _____and above are not put into recirculation without the notes being
machine processed for authenticity:
a) Rs. 20 b) Rs. 50 c) Rs. 100 d) Rs. 500
48) As per RBI guidelines, penalty at ____ of the notional value of counterfeit notes, in addition to the
recovery of loss to the extent of the notional value of such notes, will be imposed when counterfeit
notes are detected in the soiled note remittance of the bank and in the currency chest balance of a
bank during Inspection / Audit by RBI:
a) 50% b) 60% c) 80% d) 100%
49) The responsibility of ensuring the quality and genuineness of cash loaded at _______would be that
of the Sponsor Bank:
a) White Label ATM’s b) Brown Label ATM’s
c) Both (a) & (b) d) None of these.
50) Data on counterfeit notes detected by all the branches of the bank shall be reported in the
prescribed format, on a monthly basis. A statement showing the details of counterfeit notes detected
in the bank branches during the month shall be compiled and forwarded to the Issue Office of
Reserve Bank concerned so as to reach them by ___ of the next month:
a) 5th b) 6th c) 7th d) 8th
51) Under Rule 3 of Prevention of Money Laundering Rules, 2005, Principal Officers of banks are also
required to report information on cash transactions where forged notes have been used as genuine
note to The Director, FIU-IND, Financial Intelligence Unit- India, within _____ working days. A ‘nil’
report may be sent in case no counterfeit has been detected during the month.
a) 5 b) 7 c) 10 d) 14
52) All Counterfeit Notes received back from the police authorities/courts may be carefully preserved in
the safe custody of the bank and a record thereof be maintained by the branch concerned. These
Counterfeit Notes at branches should be subjected to verification on a _____ basis by the Officer-in-
Charge of the bank office concerned. They should be preserved for a period of ____years from the
date of receipt from the police authorities.
a) Half-yearly; 3 b) Yearly; 3
c) Quarterly; 3 d) Bi-monthly; 3
53) As per RBI guidelines, Counterfeit notes, which are the subject matter of litigation in the court of law
should be preserved with the branch concerned for a period of ____ years after conclusion of the
court case.
a) 1 year b) 2 years c) 3 years d) 4 years
54) As per RBI guidelines relating to reporting of Currency Chest Transactions, the minimum amount of
deposit into/withdrawal from currency chest will be ______ and thereafter, in multiples of Rs._____.
a) 50,000; 10,000 b) 1,00,000; 50,000
c) 1,50,000; 50,000 d) 2,00,000; 1,00,000
55) With regards to RBI guidelines relating to Time Limit for Reporting, the currency chests should
invariably report all transactions through ICCOMS on the same day by ______ by uploading data through
the Secured Website (SWS) to their respective link offices. Link offices should invariably report the
consolidated position to the Issue Offices latest by ____on the same day.
a) 7 PM; 9PM b) 8 PM; 10PM c) 9 PM; 11PM
d) 10 PM;12PM e) 11 PM; 12 PM
56) In the event of delay in reporting currency chest transactions, penal interest will be levied on the
amount due from the chest holding bank for the period of delay which will be calculated on _____basis.
However, Reserve Bank may at its discretion grant appropriate grace period in the matter of levy of penal
interest.
a) T+0 basis b) T+1 basis c) T+2 basis d) T+3 basis
57) Which of the following points are true with respect to levy of Penal interest on wrong reporting?
a) Penal interest will be levied in respect of all cases of wrong reporting in the same manner till the date
of receipt of corrected advice by Reserve Bank.
b) Penal interest will invariably be levied in all cases of wrong reporting in the Link Office Statements
even if the reporting was done correctly in the chest slips.
c) Both of these. d) None of these.
58) As per RBI guidelines, Soiled note remittances to RBI /diversion to other currency chest/s should
ANSWERS
1 A 2 B 3 A 4 B 5 D 6 B 7 C
8 D 9 A 10 C 11 D 12 B 13 C 14 D
15 C 16 B 17 B 18 D 19 C 20 C 21 D
22 B 23 A 24 C 25 B 26 E 27 A 28 E
29 C 30 B 31 A 32 B 33 B 34 E 35 B
36 A 37 C 38 E 39 A 40 B 41 C 42 C
43 A 44 C 45 E 46 B 47 C 48 D 49 A
50 C 51 B 52 A 53 C 54 B 55 C 56 A
57 C 58 C 59 F 60 C 61 B 62 C 63 A
64 A 65 B 66 C 67 B 68 B
142) In case of deposits with Post office and Saving Bank, the PAN Card is mandatory if the amount
is exceeding Rs. _______: a) Rs 10,000 b) Rs 20,000, c) Rs 50,000 d)
Compiled by Sanjay Kumar Trivedy, Divisional Manager, Govt.Link Cell, Nagpur 69 | P a g e
Discontinued*
143) In case of Sale or Purchase of securities, the PAN Card is mandatory if the contract of
sale/purchase value is exceeding Rs. ____: a) Rs 5 lakh b) Rs 4 lakh, c) Rs 2 lakh d) Rs 1
lakh*
144) Which of the following statement is correct regarding Opening of an account (other than time
deposit) with a Banking Company:
a) PAN Card is compulsory for all the new accounts that are being opened with the banking company.
b) In case of opening of Basic Saving Bank Account there is no requirement of PAN Card.
c) Co-operatives banks also need to comply with the guidelines on Pan.
d) All of the above*
145) As per the revised guidelines, for installation of telephone / cellphone connections, the PAN Card
is : a) Mandatory b) Discontinued*, c) Varies from State to State. d) None of above
146) In case of Hotel / restaurant bill(s), the PAN Card is required if the cash payment on account of
the bill is exceeding Rs. _____: a) Rs 30,000 b) Rs 40,000 c) Rs 50,000* d) Rs 60,000
147) In case of cash purchase of bank Drafts / Pay orders / Banker’s cheque, the PAN Card is
mandatory if the amount aggregating exceeds Rs. _______ in a day: a) Rs 25,000 b) Rs 50,000*
c) Rs 60,000 d) Rs 80,000
148) In case of Cash deposits with the Banking Company exceeding Rs. _____ in a day, then the
PAN Card is compulsory: a) Rs 50,000* b) Rs 30,000 c) Rs 25,000 d) Rs 40,000
149) PAN Card is mandatory if the cash payment in connection with foreign travel for fare, payment
to travel agent, purchase of foreign currency is exceeding Rs. _______ at any one time:-
a) 20,000 b) 50,000* c) 1,00,000 d) 5,00,000
150) In case of Mutual funds unit transactions, the PAN Card is compulsory if the payment for
purchase of mutual funds units exceeds Rs. _______: a) Rs 35,000 b) Rs 50,000* c) Rs 45,000
d) Rs 60,000
151) Which of the following statement is true 158) All penal interest regarding purchase/sale
of Shares, Debentures, RBO bonds w.r.t PAN Card:
a) PAN Card is required if the purchase/sale of shares is exceeding Rs. 1 lac per transaction.
b) PAN Card is required if a person opens a demat account.
c) PAN is mandatory in case of purchase of debentures/bonds, RBI bnds is exceeding Rs. 50,000/
d) All of above*
152) PAN Card is compulsory if the payment of the premium is exceeding Rs. _______ in a year:
a) Rs 20,000 b) Rs 30,000, c) Rs 45,000 d) Rs 50,000*
153) In case of Purchase or sales of goods and services, including jewellery/bullion PAN Card is
mandatory if the purchase/sale of any goods and services is exceeding Rs. _____ per transaction:
a) Rs 50,000 b) Rs 1 lakh, c) Rs 2 lakh* d) Rs 2.5 lakh
154) In case of Cash cards/Prepaid instruments issued under Payment and Settlement Act, PAN Card
is mandatory if the cash payment aggregating is more than ____ in a year:
a) Rs 30,000 b) Rs 40,000, c) Rs 50,000* d) Rs 60,000
155) The Reserve Bank in its Fourth Bi-monthly Monetary Policy Statement, 2015-16, announced on
Sept. 29, 2015, decided to reduce the policy Repo rate under the liquidity adjustment facility (LAF) by
50 basis points and now it stands at _______: a) 6.00% b) 6.25 % c) 6.75%* d) 7.00%
156) The RBI has decided to continue to provide liquidity under overnight repos at 0.25 per cent of
bank-wise NDTL at the LAF repo rate and liquidity under 14-day term repos as well as longer term
repos of up to 0.75 per cent of NDTL of the banking system through auctions and continue with daily
variable rate repos and reverse repos to smooth liquidity.
a) 0.25 %, 0.50 % b) 0.25%, 0.75 %*, c) 0.5%; 0.75% d) None of these
157) Consequent to the changes in the Repo rate, the Reverse Repo rate under the LAF stands
adjusted to ______, and the marginal standing facility (MSF) rate and the Bank Rate to _____. a)
5.75 %; 7.75%* b) 4.75 %; 6.75 %, c) 4.50%; 6.50% d) 5.50%; 7.50%
158) rates on shortfall in reserve requirements, which are specifically linked to the Bank Rate stand
revised. Effective rate from 29th Oct 2013, the penal interest is Bank Rate plus _____ percentage
points or Bank Rate plus ____ percentage points depending upon the duration of the shortfalls. a)
1.0; 3.0 b) 3.2; 5.1 c) 3.0; 5.0* d) 2.5; 5
159) Government of India has approved the extension of the Interest Subvention Scheme for the year
2015-16 for short term crop loans. Interest subvention @ _____% per annum will be made
available to the Public Sector Banks and the Private Sector Scheduled Commercial Banks (in
respect of loans given by their rural and semi-urban branches) on their own funds used for short-
term crop loans up to Rs.______ lac per farmer provided the lending institutions make available
short term credit at the ground level at ____ % per annum to the farmers. a) 2 ; 3; 7* b)
3; 4; 7 c) 3 ; 5 ; 7 d) 3; 4; 8