UNITED BANK OF INDIA STAFF TRAINING COLLEGE, KOLKATA

STUDY MATERIAL FOR INTER SCALE PROMOTION TEST – 2019

Scale I to II & II TO III TEST – 2019

Dear Colleagues,
Our Bank is going to conduct an Inter-Scale Promotion process in order to select eligible
candidates to assume higher responsibilities in terms of HO Circular No. PA (OE)/PROM
/ 7 /OM-435 / 19-20 dated 23Oct2019. Morever, the industry is knowledge based, and all
officers are expected to upgrade their knowledge and sharpen their skills to meet the future
challenges.
The written tests and interviews are expected to take stock of an officer’s understanding of
the various areas of banking and also changes that are taking place in and around us. In
order to help you to prepare for your forthcoming promotion, we have prepared a Training
Material. The material provided is a guide book and the officers appearing for the
examination are advised to also go through manuals, policies and circulars, RBI directions
and policies issued from time to time. Wishing each aspirant all the very best, so that you
come out with flying colors in the written examination as well as in the Interview.
24th of October 2019

DGM & Principal, STC

Page 1 of 131
 QUICKBITES
CRR 4% | SLR 18.75 % | Bank Rate 5.65% | MSF 5.65% | Repo
Rate 5.40% | Rev. Repo Rate 5.15%, MCLR-Y-8.55%

Performance of the Bank at a glance

Rs. In Crore
Parameters 2017- 2018- Parameters 2017- 2018-
2018 2019 2018 2019
Total Deposit 129326 134983 Business per 13.22 14.96
employee
Total Advance 68692 73123
Total Business 198018 208106 CD Ratio 53.12 54.17
Operating Profit 1024 1412 CASA 48.44% 51.45
Net profit (1454) (2316)
Total Asset 144749 151530
CAPITAL 8019 7428
Tier I capital 6271 6028 Gross 24.10% 15.89%
Basel III NPA(GNPA)
CRAR 12.62% 13.00 Net NPA 16.49% 8.19%
Bank’s Key Strength: -
 Robust CASA Deposit
 Deep reach across country particularly in Eastern & North Eastern part.
 Significance presence in rural & semi urban markets with focus on middle class
customers.
 Diversified products to cater customer requirements.
 High quality service to clients to meet their banking needs.
 Technology enabled operating platform and committed to digital banking.
 Experience Management Leadership.
Key Focus for future growth: -
 Robust recovery drive
 Focus on CASA growth
 Quality RAM (Retail credit, Agriculture credit, MSME Credit) Growth.
 Reduction in expenditure.
 Increase in Non Interest Income.

Page 2 of 131
Bench Mark Parameters of Lending Policy

Parameters

Credit Risk Rating Internal UBICR-3,External-BBB

Current Ratio Micro-1.11:1,Small-1.15:1, Medium- Take over-MSME-
1.18:1 1.25:1, Export-
Others-1.20:1 1.18:1,Others-
1.33:1
TOL/TNW MSME-4:1 Take over -SAME
Trading-3:1

Promoters Minimum 20%

Contribution
ACR Preferabily 1.50, Minimum-1.20
DSCR (For T/L) Average-1.50,Minimum 1.20
Project Finance-Average 1.33,
Minimum-1.20
Debt Equity (T/L) 3:1 3:1
 PRIORITY SECTOR ADVANCES
RBI revised the priority sector lending guidelines with effect from April 23, 2015 on the
basis of recommendations of an Internal Working Group (MIG) headed by Ms Lily
Vadera. The revised guidelines are operational with effect from 23 April 2015.
CATEGORIES UNDER PRIORITY SECTOR
Priority sector will include (i) Agriculture, (ii) Micro, Small and Medium Enterprises
including Retail Trade, (iii) Export Credit (iv) Education loans (v) Housing loans (vi)
Social Infrastructure (vii) Renewable Energy (viii) Other Priority Sector.
Overall credit to priority sector (as % of ANBC or CEOBE) 40%
Agriculture (0/0 to ANBC or CEOBE) 18%
Advances to weaker section 10%
Micro Enterprises 7.50%
Maximum Loan under various categories of Priority sector
I.Farm Credit
Pledge/ Hypothecation of a agriculture produce, including warehouse Rs.50 lac
receipts up to 12 months
Loan to corporates & firm for agriculture & allied activities Rs 2 crore
II. Agriculture infrastructure like cold storage, soil conservation, plant Rs 100
tissue culture (loan from banking system crore
III. Ancillary Activities:Agro Food processing Units loan from banking Rs 100
system crore
Loans up to Rs.5.00 crore to co-operative societies of farmers for
disposing of the produce of members.
IV. Bank Loans to Micro Small and Medium Enterprises for both
manufacturing and service sectors are eligible to be classified under
priority sector as per following norms
A. Manufacturing Sector: Investment in Plant & Machinery
Micro Enterprises Does not Exceed Rs.25 Lac
Small Enterprises >Rs. 25 Lac up to Rs.5.00 crore
Medium Enterprises >Rs.5 crore up to Rs.10.00 Crore
B. Service Sector Investment in equipment
MicroEnterprises Does not Exceed Rs.10.00 Lac
Small Enterprises >Rs.10 Lac upto Rs.2.00 crore
Medium Enterprises >Rs.2.00 crore up to Rs.5.00 crore
Retail Trade Rs 5 crore
Education Loans: India and abroad 10.00 lac
Housing loans
• Construction or purchase of houses in areas with population 10 lac & Rs 35 lac
above
• Construction or purchase of houses in areas with population less than 10 Rs 25 lac
lac
• Repair of damaged houses: Rural/S Urban/Urban 2 lac
• Repair of damaged houses: Metropolitan 5 lac
Loan to Govt agency for construction of houses for slum clearance or Rs 10 lac
rehabilitation of slum dwellers Loan per unit
Loan to Housing Finance companies for on lending for construction of Rs 10 lac
houses per unit
Social Infrastructure Rs 5 crore
Renewable Energy Rs 15 crore
solar based power generators, biomass based power generators, wind
mills etc
Other priority Sector advances
Loans, to individuals and their SHG/JLG - borrower's household annual Rs 50,000
income in rural areas up to Rs 100,000 and for non-rural areas up to Rs
1,60,000/-
Loans to distressed persons (other than farmers) to prepay debt to non- Rs 100,000
institutional tenders.
Overdrafts, in PMJDY accounts - the borrowers household annual income Rs 10000
in rural areas up to Rs 100,000/- and for non-rural areas it should not
exceed Rs 1,60,000/-
Incremental export credit over corresponding date of preceding year up
to 2% of ANBC or credit equivalent Amount of Off Balance sheet
exposure, whichever is higher, subject to a sanction limit of Rs. 25 crore
per borrower to units having turn over up to Rs.100 crore.
CATEGORIES OF WEAKER SECTIONS WITHIN PRIORITY SECTOR
1. Small and Marginal Farmers
2. Artisans, village and cottage industries where individual credit limits do not
exceed Rs 1 lakh
3. Beneficiaries under Government Sponsored Schemes such as National Rural
Livelihoods Mission (NRLM), National Urban Livelihood Mission (NULM) and
Self Employment Scheme for Rehabilitation of Manual Scavengers (SRMS)
4. Scheduled Castes and Scheduled Tribes
5. Beneficiaries of Differential Rate of Interest (DRI) scheme
6. Self Help Groups
7. Distressed farmers indebted to non-institutionai lenders
8. Distressed persons other than farmers, with loan amount not exceeding Rs 1 takh
per borrower to prepay their debt to non-institutional lenders
9. Individual women beneficiaries up to Rs 1 lakh per borrower 10. Persons with
disabilities ll. Overdrafts upto Rs 10,000/- under Pradhan Mantri Jan-DhanYojana
(PMJDY) accounts, provided the borrowers' household annual income does not
exceed Rs 100,000/- for rural areas and Rs 1,60,000/- for non-rural areas
Terms and Conditions for Priority Sector Advances
1. Loans up. to Rs 25,000 in PS there is no margin, no collateral security, no penal
interest on advance, no processing fees and no inspection charge.
2. Loan more than Rs 25 000, the margin will be from 15% to 25%.
 CASES WHERE NO COLLATERAL SECURITY TO BE OBTAINED
Agriculture Up to Rs 160,000
Small enterprises
-normal accounts Up to Rs.10 lac
-good track record accounts Up to Rs.25 lac
-accounts guaranteed under CGTMSE Up to Rs.200 lac
Agri clinics & business centres Up to Rs.5 lac
Education loan No collateral & No TPG. up to Rs 4 lac
No coltateral up to Rs 7.5 lac; TPG can
be taken;
PMEGP Up to Rs 10 lac
NRLM No collateral for loans up to Rs 10 lac
 AGRICULTURAL ADVANCES
1) Committee on flow of credit to agriculture was headed by: Prof Vyas
2) No Margin and No Collateral security for agricultural advances up to Rs 160,000
3) No dues certificate not required for loans up to any amount
4) Crops divided into short duration and long duration. Short duration crop where
crop season upto: 12 months. Long Duration crop where crop season more than
12 months.
5) The decision regarding duration of crop by SLBC.
6) Service Area approach discontinued except for Government sponsored schemes.
7) Rashtriya Krishi Bima Yojna (RKBY) is operated by: Agri Insurance company
Limited.
8) Risks covered by RKBY: damage to crops by_natural calamities like flood,
draught, pest attack etc
9) Risks not covered under RKBY: War and Nuclear risk
10) Members of Joint Liability Group can be: 5 to 10
11) Maximum advance to Joint Liability Group: Rs 50,000 per member and Rs 5 lac
for the group.
12) The scale of finance per acre for crop loans is to be decided by District Technical
Committee.
13) If crop is damaged, crop loan has to be converted to medium term loan repayable
in 3 to 5 years.
14) Annewari refers to damage to crop due to natural calamities like draught, flood,
hailstorm etc.
15) There are mainly two types of crops i.e. Rabi and Kharif. Rabi is generally sown
in Oct/Nov and harvested in April and Kharif is generally sown in July and
harvested in Sept/Oct. Main Rabi crops are wheat and gram and main Kharif
crops are paddy, jwar, bajra.
Various types of cultures and revolutions
1. Sericulture: Silk production.
2. Apiculture: Honey Bee keeping
3. Aquaculture: Farming of aquatic animals & Plants
4. Pisciculture: Breeding of fishes in pond
5. Floriculture: Flower production
6. Silviculture: Forestry
7. White revolution: milk production
8. Blue revolution: fish production
9. Olericulture: Vegetable Cultivation
10. Vermiculture-Rearing of earthworm
11. Apriculture: Mushroom production
12. Hortiiculture: Fruits, vegitables, Flowers production
13. Green revolution: increase in foodgrain production
14. Yellow revolution: increase in oilseeds and pulses
15. Tissue culture: Improvement of plant varieties
16. Mulberry — Associated with sericulture
17. Rainbow revolution- connected with flowers.
 Interest Subvention for Agricultural Loans
1. Available for short term production loans in agriculture up to: Rs 3 lakh
2. Available to public sector banks and private sector banks
3. Subvention provided by Central Govt
4. Rate of subvention: 2% p.a.
5. Interest charged by banks: 7% per annum.
6. Submission of claims: Half-yearly as at September 30, and March 31,
7. Additional subvention for prompt repayment: 3% if repayment within one year.
8. Effective rate to farmer: 4%
9. KCC facility is extended to animal husbandry and fisheries. Interest subvention
@2% and repayment incentive @3% will be also given.
 Kisan Credit Card
1. Revised on recommendations of Committee headed by Shri T.M. Bhasin.
2. Kisan Credit Card Scheme can be used for (a) meeting the shot-t term credit
requirements for cultivation of crops (b) Post harvest expenses (c) Produce
Marketing loan (d) Consumption requirements of farmer household (e) Working
capital for maintenance of farm assets and activities allied to agriculture, like
dairy animals, inland fishery etc. (f) Investment credit requirement for agriculture
and allied activities like pump sets, sprayers, dairy animals etc.
3. Fixation of limits: The short term credit limit for farmers other than marginal
farmers for first year will be calculated as under - Scale of finance for the crop
(as decided by District Level Technical Committee) x Extent of area cultivated +
10% of limit towards post-harvest / household I consumption requirements + 20%
of limit towards repairs and maintenance expenses of farm assets + crop
insurance, PAIS & asset insurance. For subsequent years, limit will be increased
each year by 10% towards cost escalation / increase in scale of finance for every
successive year and estimated Term loan component for the tenure of Kisan
Credit Card, i.e., five years
4. If there is a credit balance in the account it will earn interest at Saving Fund rate
as per rules applicable in SB account.
5. Personal Accident Insurance for KCC holders: KCC holders are covered against
death or permanent disability due to accident for Rs 50,000. For partial disability
due to accident the cover is available for Rs 25,000. The cover is available only
to KCC holders up to 70 years of age at the time of entry to the Scheme. The
insurance premium is competitive but not more than Rs 15 per annum to be shared
by the bank and the borrower in the ratio of 2:1 .
6. No Margin and No Collateral security for agricultural advances up to Rs 160,000
7. No processing charge up to loan limit of Rs.3.00 Lac
AGRI CLINIC & AGRI BUSINESS CENTRE
1. Eligibility: (i) The applicant should be Agricultural Graduates/Graduates in
subjects allied to agriculture. (ii)Diploma in agriculture and allied subjects from
State Agriculturat Universities. (iii)Science graduates with post graduation in
agriculture and allied subjects (iv) Individuals or in group of not exceeding 5
persons; of which one could be a Management Graduate with qualification or
experience in business development and management.
2. Maximum Project cost: (a) Project by individual: Rs 20 lakh; (In highly
successful cases Rs 25 lakh); (b) Project by a Group: Rs 100 lakh.
3. Margin: (a) Upto Rs 5 Lakh: Nil; (b) Above Rs 5 lakh: 25%.
4. Security: (i)Upto Rs. 5 Lakh: No collateral security (ii) Above Rs.5 Lakh:
Hypothecation of assets created out of bank loan and. Collateral security or Third
Party Guarantee.
5. NABARD Refinance: 100 per cent of bank loan.
6. Automatic Refinance Scheme of NABARD: Maximum loan - Rs.30 lakh, and
the ceiling for refinance would be Rs.20 lakh. Projects with outlay over Rs 30
lakh require NABARD approval.
7. Depending on the type of venture, the loan can be repaid within 5-10 years (with
moratorium upto 2 years), in easy installment
8. Credit linked capital subsidv bv Govt of India: (a) 36% of the capital cost of the
project. It would be 44% for SC, ST, Women and other disadvantaged sections
and those from North-Eastern and Hilly States. Lock in period for subsidy is 3
years.

Laghu Udyami Credit Card (LUCC)

1. Eligibility: Existing customers with a satisfactory track record. (standard account
for 3 years)
2. Maximum amount: Working capital limits up to Rs 10 lac.
3. For whom: For small business, retail trade, Small manufacturing enterprise,
professional/ self employed
4. Amount of Limit: Artisans, businessmen, traders and small entrepreneurs: 20%
of the annual turnover declared for tax purposes; professional and self-employed:
50% of the gross annual fees received.
5. Validity of the Card: 3 years subject to annual review.
General Credit Card (GCC) Scheme (2013 scheme)
1. Objectives: To increase flow of credit to individuals for entrepreneurial activity
in the non-farm sector;
2. Eligibility: All non-farm entrepreneurial credit extended to individuals, which is
eligible for classification under PS.
3. Coverage: The scheme shall cover the entire country.
4. Nature of financial accommodation: Both working capital and term loan
requirements of entrepreneurs. TheGCC, preferably, may be issued as a Smart
card / Debit card
5. Quantum of credit limit: There will be no ceiling on the loan amount
6. Security: As per RBI guidelines on collateral free lending for micro and small
units.
7. Card for Consumption Credit:Banks can issue any other credit card to their
customers for their consumption needs. Consumption credit extended to
individuals should not be reported under GCC.
SMALL ENTERPRISES
1. No collateral security to be obtained for loans up to: Rs 10 lac
2. If track record is good, no collateral security for loans up to: Rs 25 lakh
3. Loan guaranteed by CGTMSE: No collateral security for loans up to: Rs 100 lakh
4. Composite loan to SSI (Small manufacturing enterprises) should not be more than
Rs 100 lakh.
 T K A Nair Committee Recommendations
1. Taskforce on Micro, Small and Medium Enterprises (MSMEs) was headed by:
Shri T K A Nair.
2. Yearly Growth in credit to MSE should be: 20%
3. Annual growth in number of micro enterprise accounts: 10%
4. Cluster approach should be adopted for financing MSE
National Equity Fund of SIDBI
1. It is a soft loan window of SIDBI to provide margin money assistance to Small
Manufacturing enterprises.
2. Maximum project cost: Rs 50 lakh.
3. Margin money assistance: 25% of the project cost with a maximum of Rs 10 lakh.
4. Promoter's contribution: minimum 10% of the project cost and Debt equity ratio
should be 2:1
5. Repayment period: 7 years including moratorium of 3 years.
Differential Rate of Interest Scheme (DRI)
1. Family in-come of borrower should not exceed Rs. 24,000/- p.a. in
Metro/urban/semi-urban areas and Rs. 18,000/- p.a. in rural areas.
2. For Housing, loan can be granted up to Rs 20,000 to SC/ST or under Indira Awas
Yojna
3. Other than housing loan to SC/ST, maximum loan amount is Rs. 15,000/- Besides
production credit, loan can be sanctioned to physically handicapped for purchase
of artificial limbs, hearing aids, wheel-chair etc to the extent of Rs 5000.
4. Rate of interest is only 4% p.a. simple;
5. Maximum repayment period is 5 years including initial moratorium of 2 years
 Prime Minister's Employment Generation Programme (PMEGP)
1. Created by: merger of Rural Employment Generation Programme (REGP) with
Prime Minister Rozgar Yojana (PMRY).
2. Applicability: Throughout India.
3. Objectives: To generate employment opportunities in rural as well as urban areas
of the country through setting up of new micro enterprises.
4. Eligibility: (a) Age: Any individual, above 18 years of age (b) Income: No
income ceiling
5. Educational Qualification: No minimum or maximum qualification for projects
up to Rs 10 lakh in the case of industry and up to Rs 5 lakh for business or service
sector. In case project cost is more than Rs 10 lakh in the manufacturing sector
and above Rs. 5 lakh in the business or service sector, the beneficiaries should be
at least Vlll standard pass.
6. Assistance under the Scheme is available only for new projects.
7. Only one person from one family is eligible for obtaining financial assistance for
setting up of projects under PMEGP. The 'family' includes self and spouse.
8. Project cost: (a) Maximum cost of the project under manufacturing sector is Rs.
25 lakh and under business/service sector is Rs. 10 lakh.
9. Subsidy (Margin Money):
a. General category borrowers: 15% of project cost in urban areas and 25%
in rural areas;
b. Special category: 25% in urban areas and 35% in rural areas. (Special
category means including SC / ST, OBC, Minorities, Women, Ex ser„'icemen,
Physically handicapped, NER, Hill and Border areas etc.
c. Subsidy provided by KVIC
d. Subsidy should be kept in the Term Deposit Receipt of three years at
branch level
e. No interest will be paid on the TDR and no interest will be charged on
loan to the corresponding amount of TDR.
f. Margin money (subsidy) will be credited to the Borrowers •loan account
after three years from the date of first disbursement to the borrower/institution,
by the Bank.
g. In case the Bank's advance goes "bad" before the three year period, due to
reasons, beyond the control of the beneficiary, the Margin Money (subsidy)
will be adjusted by the Bank to liquidate the loan liability of the borrower
either in part or full.
h. Margin Money (subsidy) will be 'one time assistance', from Government.
For any enhancement of credit limit or for expansion/modernization of the
project, margin money (subsidy) assistance is not available. Margin Money
(subsidy) assistance is available only for new projects sanctioned specifically
under the PM EGP.
10. Borrower's Margin: 10% in general category and 5% in special category.
11. Collateral Security: No collateral security for projects involving loan upto Rs.
10 lakh.
12. Repayment schedule may range between 3 to 7 years after an initial moratorium
as may be prescribed by the concerned bank/financial institution.
13. Implementing Agencies: PMEGP will be a central sector scheme to be
administered by the Ministry of Micro, Small and Medium Enterprises
(MoMSME). The Scheme will be implemented by Khadi and Village Industries
Commission (KVIC) which will be the single nodal agency at the national level.
14. Identification of beneficiaries: The identification of beneficiaries will be done
at the district level by a Task Force consisting of representatives from KVlC/State
KVIB and State DICs and Banks.
 NATIONAL RURAL LIVELIHOOD MISSION (NRLM) - AAJEEVIKA
1. Launched by: Ministry of Rural Development, Government of India by
replacing the existing SGSY scheme.
2. Obiectives: Promoting poverty reduction through building strong institutions of
the poor, particularly women. The mission will provide a hand-holding support
to the institutions of poor for a period of 5 — 7 years till they come out of abject
poverty.
3. Type of Groups: Women self help groups. However, males with disabilities,
elders, transgenders, can also become members.
4. Number of members: 10-20; in difficult areas, groups with disabled persons, and
in remote tribal areas — 5 to 20
5. Type of group: an informal group; Federations of SHGs formed at village level,
cluster level, are to be registered under appropriate acts.
6. Revolvinq Fund (RF): To SHGs in existence for a minimum period of 3/6
months and follow 'Panchasutra' — regular meetings, regular savings, regular
internal lending, regular recoveries and maintenance of proper books of accounts.
Corpus of RF: minimum of Rs. 10,000 and up to a maximum of Rs. 15,000 per
SHG.
7. Capital Subsidy: No Capital Subsidy be sanctioned to any SHG from the date of
implementation of NRLM.
8. Interest subvention: SHG to get finance at 7% for loans up to Rs 300,000.
Difference between the Lending Rate of the banks and 7%, to be provided as
subsidy. Additional interest subvention of 3% on prompt payment, reducing the
effective rate of interest to 4% in selected districts.
9. Openina of Savings accounts: Banks will open accounts for all the Women
SHGs, SHGs with members of Disability and the Federations of the SHGs after
observing KYC norms.
10. Elligibility criteriafor the SHGs to avail loans: SHG should be in active
existence at least since the last 6 months as per the books of account of SHGs and
not from the date of opening of SB account. SHG should be practicing
'Panchasutras'.
11. Loan amount: Loan will be provided in multiple doses as given below: (a) First
dose: 6 times to the proposed corpus during the year or minimum of Rs 100000
Lac whichever is higher; (b) Second dose: 8 times of existing corpus or Rs. 2
lakhs, whichever is higher; (c) Third dose: Minimum of Rs. 3 lakhs, (d) Fourth
dose onwards: Loan amount minimum ofeen Rs. 5 lakhs for fourth dose and/or
higher in subsequent doses. The loans may be used for meeting social needs, high
cost debt swapping and taking up sustainable livelihoods by the individual
members within the SHGs or to finance any viable common activity statted by
the SHGs. Corpus is inclusive of revolving funds, its own savings and funds from
other sources in case of promotion by other institutes/NGOs.
12. Type of facility and repayment: SHGs can avail either Term loan or a CCL loan
or both based on the need. Repayment schedule could be as follows: (a) The first
 dose of loan will be repaid in 6-12 instalments; (b) Second dose of loan will be
repaid in 12-24 months; (c) Third dose will be sanctioned based on the micro
credit plans, the repayment has to be either dose of Loan will be repaid in 24-36
months. (d) Fourth dose repayment within 3to 6 years.Repayment has to be either
monthly/quarterly basis .
13. Securitv and Margin: No collateral and no margin upto Rs. 10.00 lakhs limit to
the SHGs. No lien should be marked against savings bank account of SHGs. and
no deposits should be insisted while sanctioning loans.
 BALANCE SHEET ANALYSIS
Terms used in financial statement analysis
Cash Profit Profit before charging Depreciation Net Profit + Depreciation
Cash Loss Loss before charging Depreciation Net Loss — Depreciation
Fixed Assets Not converted into cash in normal course of business, These are
acquired to use them in the production of other goods and
services. Land & Building, Plant & Machine , Furniture
Current Assets Assets which are meant to be converted into cash or consumed
in normal course of business say within 1 year or operating cycle.
Stocks, Debtors, Cash, Bank Balance, Prepaid expnses.
Intangible & Expenditure on invisible assets, likely to yield benefit to the
Fictitious company in future e.g. goodwill, patent, trade marks, losses, pre
Assets operative or preliminary expense.
Miscellaneous Assets Which can't be classified as current, fixed or intangible e.g.
or Non current assets Stores, Debtors more than 6 month old, investment in associates.
Quick Assets Assets which can be converted to cash quickly. Cash, bank
balances, marketable investments, bills receivables and sundry
debtors considered good. (Current Assets minus Inventories &
Prepaid Expenses)
Owners Equity (Net Paid up share capital, reserves and surplus, preference shares
Worth with more than 12 years maturity .
Long term liabilities Outsiders' funds, payable in more than 12 months. Term loan
or Debt (excluding instalment payable within 12 months) plus
debentures maturing within more than one year, preference
shares redeemable within 12 years, deposits payable beyond one
year. Loan from friends and relations
Current Liabilities Liabilities which are payable in less than one year e.g. sundry
creditors, unsecured loans, provisions for tax and dividend, Bank
borrowings for workin ca ital etc
Tangible Net Worth Total tangible assets minus total outside liabilities. Owner's
funds minus Intangible & Fictitious assets ; Paid up capital plus
reserves minus intangible assets
Net Workin Capital Current assets minus total current liabilities.
Working Current Assets minus current liabilities other than Bank
Capital Borrowing
Computation of Certain Important Ratios
Current Ratio = Current Asset/ Current Liabilities
( Liquidity Ratio)
Current Ratio without = Current Asset/Current Liabilities( excluding Instalment
Instalment of T/L due within 1 yr.
TOL/TNW( Gearing = (Term Liability+ current Liability)/ Tangible Net worth
Ratio)
Debt Equity Ratio = Long Term Debt/ TNW[ Long term Debt means Term
 Loan, Debenture, Bond, Redeemable Preference share
etc]
Debtors Turnover = (Debtorsx365)/Gross sales[ Lower the days, better the
Ratio sales realization capacity) calculated in days
Inventory Turnover = Cost of Sales/Total Inventory [ variable depending on
Ratio operating cycle; higher the ratio better the operating
efficiency; preferably should not go below 3:1
Interest Service = PBDITA/Interest [PBDITA means Profit before
Coverage Ratio Depreciation,Interest and Tax] This ratio should be
preferably above 1:5, but should not go below 1]
DSCR(Debt Service = (Gross cash generation+Interest )/( Instalment +Interest
coverage Ratio) on ) Instalment means repayment/ redemption
obligation of term loan/ debenture/ etc during the year
and interest means interest obligation on those during
the year. It should be average 1.5, but not less than 1.20
Priority Obligation = (Operating cash Inflow – Operating cash
Ratio outflow)/Priority outflow, Preferably 1.5:1, should not
go below 1
Priority Inflow = Consumptions of Raw materials, stores,spares and
consumables,+Power & fuel,+Direct wages+ Other
manufacturing costs ( excluding Depreciation) +selling
and marketing expenses+ General Administrative
expenses( excluding non operating and non cash
expenses), Add/less: Increase/(decrease0 in closing
stock of raw material, stores, spares and consumables
Add/less: Decrease/Increase in sundry creditors
Add/less: Increase/ Decrease in loans
Advances(excluding Advances for capital goods and
other non operating Advances)
Add: Payment/ deemed payment of taxes
Less: Opening Cash & Bank balances
Priority Outflow = Repayment of term loan+ Redemption of loan Bond/
Debentures/Deposit/Preference Shares+ Interest
Return on Average = EBIT( excluding non-operational income)
Capital Employed ( Opening Capital Employed+ Closing Capital
(ROACE) Employed)/2
Note: Capital Employed = TNW+ Term Liabilities-
Investment( including inter-corporate deposit)
Return on Average = EBIT( excluding non operational income)/ ( Opening
Operating Capital Current Asset+ Closing Current Asset)/2
Employed(ROACE)
 Break Even Analysis
Fixed costs are those costs which do not change with production like rent, salaries
Variable costs are those which change with production like raw material, wages, power,
repair etc.
Contribution = Sale price per unit minus variable cost per unit or Sale-variable cost
Break Even Point in units —Fixed Cost/(Sale Price per unit — Variable Cost per unit)or
Break Even Point in Rupees= Fixed cost x sale/(Sale- Variable Cost)
Margin of Safety (Actual Sale — Break Even Sale)
If sale is more than BEP, unit will earn profit and if sale is less than BEP, unit will be at
loss
BEP is used in project appraisal
 Working Capital Assessment
Before the nationalization of banks, credit decisions were mostly security oriented.
Bankers were not so much concerned about how a borrower was conducting his
business. But the nationalization of 14 major banks in 1969 envisaged a qualitative
change both in the pattern and content of bank advances.
A study group under the chairmanship of Mr.P.L. Tandon, the then chairman of Punjab
National Bank, was formed in july 1974 for this purpose. The group submitted its final
report in August 1975, which is popularly known as Tandon committee report.
Committee recommended three methods of lending which are called first method,
second method and third method of working capital finance or MPBF (Maximum
permissible bank finace) as per Tandon committee. RBI or government has accepted
only 1st method and 2nd method of lending as per Tandon committee.
Under the 1 st method ,75% of working capital gap would be financed by a bank, which
was called Permissible Bank finance, and remaining 25% would come from long term
resources of a borrower.
In the second method, a borrower would be required to finance 25% of the total current
assets &not of working capital gap, as in 1 st method) from long term resources
The committee illustrated these method of lending by taking the following example of
a borrower’s financial position projected at the end of the next year.

Current Liabilities Current Assets

Creditors for purchase 100 Raw Material 200
Other current Liabilities 50 Stock in process 20
Total 150 Finished Goods 90
Bank Borrowing 200 Receivable including bill
discounted with bankers 50
Other current Asset 10
350 370
From above example Assessment as per 1 st method and 2 nd method of lending as per
Tandon committee: -
1st Method 2nd Method
Total Current Asset 370 Current Assets 370
Less Current Liabilities Current Liabilities other
Other than Bank Borrowing 150 than Bank Borrowing 150
Working Capital Gap 220 Working capital Gap 220
25% of above from long 25% of current asset from
Term sources 55 long term sources 92
Maximum Permissible Bank Maximum permissible
finance (MPBF) 165 Bank Finance 128
Bank Borrowing 200 Actual Bank Borrowing 200
Excess Borrowing 35 Excess Bank Borrowing 72
Current Ratio 1.17: 1 Current Ratio 1.33:1
a. From above example it can be observed that minimum current ratio , if working
capital finance is made by 1 st method of lending would be 1.17 and as per second
method would be 1.33.
b. Third method as recommended by Tandon committee is based on core current
asset, means total current asset other than inventory, so it is more stringent for the
borrower and yet to be accepted by government.
c. To overcome the problem faced by MSME borrowers, government constituted
another committee in the chairmanship of P.J Nayak, who was also then chairman
of Punjab National Bank. The committee submitted its report in 2008 and has
been accepted by government.
d. Working capital assessment as per Nayak Committee :-
e. Working capital requirement up to 5 crore other than information technology( for
information technology it is 2 crore) for MSME borrower, turn over method will
be applied. As per turn over method 25% of projected sales turn over accepted
by the banker will be working capital requirement. 5 % of projected sales or 20%
of working capital requirement will be margin.
f. From above if projected turn over accepted by the bank is Rs.100 lac. Working
capital requirement would be Rs.25 lac ( 25 % of Rs.100 lac)
g. Margin 5% of Rs.100 lac or 20 % of Rs.25 lac i.e Rs.5 lac
h. Bank finance Rs.20 lac.
i. As per Bank’s Lending policy: In respect of borrowers who are enjoying
aggregate fund based working capital limit up to Rs.5.00 crores ( except
Information Technology & software Industries where the ceiling is Rs. 2.00
crore) from banking system, the turn over method shall be followed for sanction
of credit limit to them. In certain cases e.g. petrol pump, etc, it may be observed
that turn over is high but cash flow is also high because of major part of turn over
is in cash. In such cases allowing limit on the basis of turn over method only may
result in over financing. Hence, only need based limit should be a allowed
judiciously.
j. For all other borrowers ( except certain seasonal industries) enjoying fund based
working capital limit over Rs.5.00 crore bank would continue to follow the
MPBF ( 2nd method) of lending.
k. In case of certain seasonal industries like tea, sugar mills, cold storage, brick
fields, etc, and certain specified sectors like advances to borrowers engaged in
construction business and information technology & software sector the Bank
follows cash budget system for assessment of the working capital need. However,
in other cases also, considering the suitability of cash budget system over MPBF
system, the Bank may adopt cash budget system for working capital assessment
on the merit of the proposal on case to case basis. The salient features of cash
budget method for assessing working capital requirement are given below;
l. The borrower is required to submit the cash budget (cash inflow including margin
& outflow) to the bank along with actual as well as projected financial statements.
m. The budget is to be prepared for a period of one year and then split into forecasts
for shorter periods say monthly or quarterly. The budget will provide the
following information:
n. The peak level of bank finance required during the course of the year
corresponding to peak deficit in cash flow.
o. The interim level of bank finance required as forecasted by the split budget on
monthly/ quarterly basis.
p. The maximum limit will be fixed on the basis of peak requirement while interim
limits will be fixed as per interim levels indicated in split period budget.
q. While the desirable margin for annual basis will be as per benchmark current
ratio, during split period (monthly/quarterly) the margin may fall below desirable
level. However, the minimum current ratio during peak deficit must not be below
1:1.
r. Drawing in the account will be regulated by the split period cash budget vis-à-vis
actual cash flow along with stock & receivable statements.
s. Bank should explore the possibility to channelize the cash flow through escrow
mechanism for better monitoring and control.
 Credit Monitoring- Tools
The sanctioned terms should contain a clause that in case of default Bank can issue
Public Notice cautioning the Public in general not to deal with the assets of the defaulter
charged to the Bank. Diversion of loan or siphoning off of funds, for purposes other than
those for which the loan has been granted, will be treated as misutilization of funds and
shall be liable to be recalled.
a. External Credit Risk Rating is applicable for proposal of over Rs. 5.00lac
b. MCR-A : Limit of Rs. 1.00 crore &above
c. MCR-B : Limit of Rs. 10.00 lac to less than Rs. 1.00crore
d. MCR-C : Limit below Rs. 10.00lac
e. QIS – I & II for fund based working capital limit of Rs. 2.00 crore &above
f. MSODformanufacturingunits&underMSMEwithworkingcapitallimitofRs.10lak
hand above
DOCUMENT AUDIT: All accounts having Credit Limits Rs. 5 lacs & above and
account where property is mortgaged having credit limit below Rs.5.00 lac will come
under the perview of document audit. The documents of these accounts should be
completed within 3 months from date of sanction. The account where credit limit is
Rs.1.00 crore & above the document audit should be completed before disbursement.

STOCK AUDIT: Once in a year by empanelled stock auditor of the Bank for Working
capital Credit Limits of Rs. 2 crore &above
a. Property / Fixed assets shall be revalued once in 3years
b. Valuation of property- Upto Rs.50 lac- 1 valuer & above Rs.50 lac- 2 valuers
c. Searching of immovable property- Upto Rs.10 crores- 1lawyer, above 10 crore
by two empanelled advocates.
d. Vetting of all loans (fund based or non fund based) > 10lac
Important Points:
a. Registration with ROC- within 30 days. Efforts should be made to complete
immediately after sanction.
b. Disbursement- Advance payment to be restricted to 20% of the cost of the
machinery
c. Restrictions on cash withdrawal

1. Before a loan account turns into a NPA, banks are required to identify incipient
stress in the account by creatin three sub-categories under the Special Mention
Account SMA categories as given in the table below:

SMA Sub-categories Basis for classification

SMA-O Principal or interest payment not overdue for more than 30
days but account showing signs of incipient stress
SMA-I Principal or interest payment overdue between 31-60 days
SMA-2 Principal or interest payment overdue between 61-90 days
 2. Banks should report credit information, including classification of an account as
SMA to Central Repository of Information on Large Credits (CRILC) on all their
borrowers having aggregate fund-based and non-fund based exposure of Rs.5
crore and above with them. Crop loans will be exempted from such reporting.
CREDIT POLICY ISSUES
MARGINAL COST OF FUNDS METHOD FOR INTEREST RATE ON ADVANCES
(FROM 01.04.2016)
1. Applicability: With effect from April 1, 2016. To replace Base Rate System.
2. Components of MCLR:(a) Marginal cost of funds; (b) Negative carry on
account of CRR; (c) Operating costs; (d) Tenor premium.
3. Exemotions from MCLR: (i) Loans covered by schemes specially formufated
by Government of India wherein banks have to charge interest rates as per the
scheme, (ii) Working Capital Term Loan (WCTL), Funded Interest Term Loan
(FITL), as part of the rectification/restructuring package; (iii) Loans granted
under various refinance schemes formulated by Government of India; (iv)
Advances to banks' depositors —against their own deposits; (v) Advances to
banks' own employees including retired employees; (vi) Advances granted to the
Chief Executive Officer / Whole Time Directors; (vii) Loans linked to a market
determined external benchmark; (viii) Fixed rate loans granted by banks.
Cash Reserve Ratio
1. Relevant Act: section 42(1) of RBI Act.
2. Basis of calculation: As percentage of Net Demand & Time Liabilities as as on
the last Friday of the second preceding fortnight.
3. How to maintain: As cash with RBI.
4. Minimum or Maximum rate: There is no minimum or maximum CRR as per
RBI Act and RBI will fix CRR.
5. RBI can prescribe the Cash Reserve Ratio (CRR) for Scheduled Commercial
Banks without any floor rate
6. Banks are required to maintain daily average balance of prescribed percentage of
NDTL with RBI. The actual balance on any day of the fortnight (14 days) may
be more or less than the required balance. However, cash balance with RBI on
any day of the fortnight should not fall below 95% of the required average daily
cash balance.
7. RBI will not pay any interest on the CRR balances with effect from 31 st March
2007.
8. Reserve Bank of India has prescribed statutory returns i.e. Form A return (for
CRR) to be sent fortnightly.
 Statutory Liquidity Ratio
1. Statutory Liquidity Ratio is maintained as per section 24 of Banking
RegulationAct.
2. There is no minimum rate of SLR as per B R Act. Maximum rate could be 40%
of NDTL.
3. It is decided by RBI.
4. SLR can be kept in the form of (a) cash (b) gold valued at a price not -exceeding
the current market price, (c) unencumbered approved securities valued at a price
as specified by the RBI from time to time (d) cash balance with other banks (e)
excess cash balance with RBI. Cash management bill issued by Government of
India will be treated as Government of India T Bills and accordingly shall be
treated as SLR securities
5. For calculation of SLR, banks are required to send monthly statement on Form
Vlll under Section 24 of the B R Act.
Summery of exchange rate
Rate Transaction
TT-Selling Outward remittance such as TC etc.
Cancellation of purchase such as:
bills purchased returned unpaid,
bills transferred to collection account
forward purchase contract cancelled
Bill-selling Transfer of roceeds of import bills
TT-Buying cancellation of outward TT, MT etc.
clean inward remittances (TT,DD,MT) where cover already received
abroad
Conversion of proceeds of instruments that are sent for collection
Cancellation of forward sale contract
Bills Buying Purchase of bills and other instruments
Rate quotation:
Direct quotation- A quote in fixed unit of foreing currency against variable amount of
the domestic currency is Direct quotation.
Indirect quotation-A price of one unit of foreing currency in terms of the domestic
currency is termed as Indirect quotation.
 Foreign Exchange Management Act 1999: Certain Definitions
1. Objective: Facilitating external trade and payments and for promoting the orderly
development and maintenance of foreign exchange market in India
2. It extends to the whole of India. It shall also apply to all branches, offices and
agencies outside India owned or controlled by a person resident in India.
3. It was implemented from 1 st June 2000.
4. capital account transaction: a transaction which alters the assets or liabilities,
including contingent liabilities, outside India of persons resident in India or assets
or liabilities in India of persons resident outside India.
5. current account transaction" means a transaction other than a capital account
transaction and without prejudice to the generality of the foregoing such
transaction includes,- (i) payments due in connection with foreign trade, other
current business, services, and short-term banking and credit facilities in the
ordinary course of business, (ii) payments due as interest on loans and as net
income from investments, (iii) remittances for living expenses of parents, spouse
and children residing abroad, and (iv) expenses in connection with foreign travel,
education and medical care of parents, spouse and children;
6. Foreign exchange" means foreign currency and includes,- (i) deposits, credits and
balances payable in any foreign currency, (ii) drafts, travellerst cheques, letters
of credit or bills of exchange, expressed or drawn in Indian currency but payable
in any foreign currency, (iii) drafts, travellers cheques, letters of credit or bills of
exchange drawn by banks, institutions or persons outside India, but payable in
Indian currency;
7. "person resident in India" means- (i) a person residing in India for more than one
hundred and eighty-two days during the course of the preceding financial year
but does not include a person who has gone out of India or who stays outside
India, in either case (a) for or on taking up employment outside India, or (b) for
carrying on outside India a business or vocation outside India, or (c) for any other
purpose, in such circumstances as would indicate his intention to stay outside
India for an uncertain period;
8. "person resident outside India" means a person who is not resident in India;
 LETTER OF CREDIT
A letter of credit is an instrument by which a bank undertakes to make payment to a
seller on production of documents stipulated in the credit. The credit specifies as to when
payment is to be made which may be either when the documents are presented to the
paying bank or at some future date, depending upon the terms stipulated in the credit.
Parties to a LC transaction
There are 3 parties to LC i.e. Exporter who is beneficiary of credit, Importer who is
applicant for credit, Issuing bank who is importer's bank and who lends its name on
credit.
1. Advising bank is the one through whom LC is advised to the exporter. It is the
branch of issuing bank or its correspondent in exporter's country. If there is any
amendment to LC, it is advised through the same bank which advised LC. The
advising bank is not liable for making payment but it has the liability to ensure
apparent authenticity of credit.
2. Confirming bank is the one who gives additional undertaking to make payment
in addition to undertaking of issuing bank.
3. Negotiating Bank: The bank to whom the beneficiary presents his documents
for negotiation or acceptance under the credit.
4. Reimbursing Bank: The bank which repays, settles or funds the negotiating
bank at the request of its principal, the issuing bank.
Types of Letters of Credit
1. Revocable Credit: Such a Credit can be revoked / modified or amended without
consent of beneficiary. If the negotiating bank makes a payment to the seller prior
to receiving notice of cancellation or amendment, the issuing bank must honour
the liability.
2. Irrevocable Credit: Such a Credit cannot be cancelled / modified or amended
without consent of beneficiary. In the absence of any indication whether an L/C
is revocable or irrevocable, it shall be deemed to be irrevocable. As per UCPDC
600, banks will issue only irrevocable LC
3. Confirmed Credit: An irrevocable credit which carries confirmation of the
advising bank is called confirmed credit.
4. Transferable Credit: Under a transferable L/C the beneficiary requests for
credit being made available in whole or in part to one or more other beneficiaries.
Under Article 38 of UCPDC, 600 a credit is transferable only if it designated as
'Transferable' by the issuing bank. Unless otherwise stated in the Credit, a
transferable Credit can be transferred once only.
5. Revolving Credit: In such an LC the amount of drawing is reinstated and made
available to the beneficiary again after negotiation of documents drawn under
LC. There will be restriction regarding number of times LC can revolve or
maximum value upto which documents can be negotiated or both.
6. Back to Back Credit: It is an LC which is issued on the strength of original WC.
 Beneficiary of original LC is applicant of Back to Back credit. Normally an
exporter uses his export IJC as a cover for L/C in favour of local suppliers.
7. Red Clause LC: This LC has a clause permitting the correspondent bank in the
exporter's country to grant advance to beneficiary at issuing bank's risk and
responsibility. These advances are adjusted from proceeds of the bills negotiated.
8. Green Clause L/C: This type of LCis an extension of Red Clause LC. Besides
pre-shipment credit, Green Clause L/C entails finance for storing of goods in a
warehouse. Both Red clause and Green clause LC are called anticipatory credits.
9. Restricted LC: A letter of credit in which negotiation is restricted to a particular
bank.
10. Stand by LC:A LC issued in lieu of Bank Guarantee. It is similar to performance
bond or guarantee, but issued in the form of LC. The beneficiary can submit his
claim by means of a draft accompanied by the requisite documentary evidence of
non-performance, as stipulated in the credit.
11. DA LCS are those, where the payment is to be made on the maturity date in terms
of the credit. The documents of title to goods are delivered to applicant merely
on acceptance of documents drawn under LC.
12. DP LCS are those where the payment is made against documents on presentation.
13. With or without recourse LCs: Where the beneficiary holds himself liable to
the holder of the bill if dishonoured, is considered to be with-recourse. Where he
does not hold himself liable, the credit is said to be without-recourse.
14. Instalment Credit: It is a letter of credit for the full value of goods but requires
shipments of specific quantities of goods within nominated period and allows for
part-shipment. In case any instalment of shipment is missed, credit will not be
available for that and subsequent insalment unless of LC permits the same.
Merchant Exporter will prefer transferable or back to back credit whereas manufacturer
exporter will prefer Red clause or Green clause I-C. All exporters prefer Irrevocable LC
Documents under Letter of Credit
Liability of an opening bank in a letter of credit arises, when the beneficiary delivers the
documents strictly drawn as er terms of the letter of credit. These documents include the
followin.
Bill of Exchange This is the basic document that is required to be
discharged by making the payment. Beneficiary will
draw this document specifying the amount, tenor etc as
per LC.
Invoice This is made by beneficiary. This document provides the
details of sale transaction covering quantity, price,
specification etc. which should be same as mentioned in
the letter of credit.
Transport Documents This is a document which evidences the dispatch of the
goods by the beneficiary. It is issued by the carrier of
goods, which may be a ship, railways or a transport
operator and it will include bill of lading, railway receipt,
transport receipt. Other documents could be Airway Bill
or Postal or courier recei t.
Insurance documents Issued by the insurance company covering insurance of
goods during transit.
Other documents Letter of credit may also specify other documents to be
presented along with the above documents whichna
include certificate of ori in etc.
 Salient provisions of UCPDC
1. All LC transactions are subject to Uniform Customs and Practice for
Documentary Credits (UCPDC) 600 which is effective from 1 st July 2007 and
has been issued by International Chamber of Commerce Paris. When there is a
contradiction between terms of LC and UCPDC, provisions as stated in LC will
prevail.
2. Advising bank is not liable for making payment under LC. His responsibility is
only to ensure apparent authenticity of credit. Both issuing bank and confirming
bank are liable for making the payment.
3. On or about — Such expression will be interepreted as a stipulation that an event
is to occur during a period of 5 calendar days before and until 5 calendar days
after the specified date, both the start and end dates included.
4. The words 'to', 'until', 'from' and 'between' when used to determine a period of
shipment include the date mentioned and the words 'before' and 'after' exclude
the date mentioned.
5. The words 'from' and 'after' when used to determine a maturity date exclude the
date mentioned.
6. The terms 'first half' and 'second half' of a month shall be construed respectively
as the 1st to the 15th and the 16th to the last day of the month, all dates inciusive.
7. The terms 'beginning', 'middle' and 'end' of a month shall be construed
respectively as the 1st to 10th, the 11th to the 20th and the 21st to the last day of
the month, all dates inclusive.
8. Branches in different countries are considered to be separate banks.
9. The date of issuance of the transport documents will be deemed to be date of
dispatch, taking in charge or shipped on board and the date of shipment. If the
transport document indicates, by stamp or notation, a date of dispatch taking in
charge or shipped on board, this date will be deemed to the date of shipment.
10. Transshipment means unloading from one means of conveyance and reloading to
another means of conveyance (whether or not in different modes of transport)
during the carriage, from the place of dispatch taking in charge or shipment to
the place of final destination stated in the credit.
11. A clean transport documents is one bearing no clause or notation expressly
declaring a defective condition of the goods or their packaging.
12. If there is no indication in the credit about insurance coverage, amount of
insurance coverage must be at least 110% of CIF or CIP value of the goods.
13. Bill of Lading should be "On Board Bill of Lading". Since Bill of Lading is issued
in more than one set, all negotiable copies of bill of lading should be obtained.
14. Bank should accept Clean Bill of Lading and not claused one. Claused Bilt of
Lading means the one which indicates defective condition of goods or packing.
Clean bill of lading means a BL in which there are no adverse remarks on Bill of
Lading.
15. Bill of Lading should be presented for negotiation within 21 days of shipment
otherwise it will be treated as Stale Bill of Lading.
16. If words about is written in LC with quantity or amount, then variation of plus or
minus 10% is permitted. If word 'about' is not written in LC with quantity or
amount, then variation of plus or minus 5% is permitted in quantity but not in
amount.
17. Insurance policy should be in the same currency as those of LC.
18. If insurance policy is dated later than the date of issue of Bill of Lading, then it
should cover the risk from date of Bill of Lading.
19. If expiry date of LC falls on a holiday declared for banks, then LC can be
negotiated on the next working day. But as per Forece Majeaure' clause, if on
expiry date of LC, banks are closed due to riots or strike or any reason beyond
the control of the bank, expiry date will not be extended. Force Majeure clauses
envisage eventualities beyond the control of contracting parties. In the UCPDC
600 acts of terrorism have also been added to this clause.
20. Negotiating, confirming and Issuing Bank are given 5 banking days each to
scrutinize that documents are as per LC.
 Liberalised Remittance Scheme (LRS) for Resident Individuals
RBI has started this facility in February, 2004 and its salient features are as under:
1. Who can remit: Any Resident individuals
2. How much amount: up to $ 250, 000 per financial year. However, for
emigration, medical treatment abroad and studies abroad, higher amount may be
availed, if it is so required by a country of emigration, medical institute offering
treatment or the university respectively.
3. Purpose: For current or capital account for any approved purpose including
remittance for gift or donations. There is no sub limit for gift and donation within
the LRS limit.
4. Permissible capital account transactions: i) opening of foreign currency
account abroad with a bank; ii) purchase of property abroad; iii) making
investments abroad; iv) setting up Wholly owned subsidiaries and Joint Ventures
abroad; v) extending loans including loans in Indian Rupees to Non-resident
Indians (NRls) who are relatives as defined in Companies Act, 2013.
5. Permissible Current account transactions: (i) Private visits to any country
(except Nepal and Bhutan); (ii) Gift or donation; (iii) Going abroad for
employment; (iv) Emigration; (v) Maintenance of close relatives abroad; (vi)
Travel for business, (vii) Medical treatment abroad; (viii) Studies abroad; (ix)
Any other current account transaction.
6. Remittance in addition to LRS: Not available. All the facilities for release of
exchange for current account transactions to resident individuals shall now be
subsumed under the overall limit of USD 250,000.
7. Gift in Indian Rupees by resident individuals to NRI relatives shall also be
subsumed under the LRS limit.
8. The Scheme cannot be made use for making remittances for any prohibited or
illegal' activities such as margin trading, lottery, etc.
9. Facility available only to resident individuals including minors
10. The facility is not available for making remittances to Bhutan, Nepal, Mauritius
and Pakistan.
11. Banks should not extend any kind of funded and non-funded facilities to resident
individuals to facilitate capital account remittances under the Scheme.
12. The applicants should have maintained the bank account with the bank for a
minimum period of one year prior to the remittance for capital account
transactions.
13. Foreign exchange in the form of currency can be taken abroad up to US $ 3000
and balance in the form of Traveller cheque or Draft.
14. For Iraq and Libya forex in the form of currency can be US $ 5000.
15. For Iran, Russia and CIS countries, & Haj Pilgrims, entire permitted forex can be
carried as currency.
 16. Indian rupees can be taken abroad up to Rs 25000.
17. Foreign exchange can be issued against cash up to Rs 50,000.
Inward Remittance
1. Any person foreigner or Indian coming to India can bring any amount of foreign
exchange in India.
2. If foreign currency being brought is more than US$ 5000 or foreign currency and
traveler cheque is more than US $ 10,000, then the person bringing forex should
make declaration before Customs on the Currency Declaration form.
3. Unspent Foreign exchange should be surrendered within 180 days of arrival in
India whether it is foreign currency or foreign traveler cheque.
4. A resident individual can retain up to US $ 2000. There is no limit on coins.
5. Indian rupees can be brought up to Rs 25000.
6. Full fledged Money Changers (FFMCs) permitted to encash foreign currency and
make cash payment only up to USD 3000 or its equivalent. Amount exceeding
USD 3000 or its equivalent has to be paid by way of demand draft or bankers'
cheque. Banks can credit proceeds of demand drafts / bankers' cheques issued
against encashment of foreign currency to the NRE account of the NRI account
holder where the instruments issued to the NRE account holder are supported by
encashment certificate issued by AD.
 Non Residents and their Accounts
Resident: As per section 2(v) of the FEMA 1999, a person is called resident in India if
he stays in India for more than 182 days during the preceding financial year except those
who have gone out of India for taking up employment outside India or for carrying on a
business or vocation outside India or for any other purpose indicating his intention to
stay abroad for indefinite period.
Non Resident: Person resident outside India means a person who is not resident in India.
NRI has been defined in Income Tax Act.
Person of Indian Nationality (PIN):A Person Of Indian Nationality is one who holds
an Indian passport at the time of opening the account.
Person of Indian Origin: A Person of Indian Origin is one who is presently not a
national of Pakistan or Bangladesh and: (a) who at anytime held an Indian passport; or
(b) he himself, either of his parents or any of his grand parents was a citizen of India by
virtue of Constitution of India or the Citizenship Act, 1955 ; or (c) the person is a spouse
of Person of Indian Nationality / Origin.
Overseas Corporate Bodiesare those in which at least 60% shareholding is of NRI.
OCBs are not allowed to open NRI accounts.
Studentswho go abroad for studies have also been given the facility of opening NRI
accounts.
Non resident accounts are of 3 types (a) Non Resident ordinary (b) Non Resident
(External) (c) Foreign Currency Non Resident (Bank) account. Salient features of these
accounts are as under:
Non Resident Ordinary account (NRO DEPOSIT)
1. Type of account: Saving, Current, FD and RD
2. Credit: can be local income as well as remittance from abroad.
3. Currency: Indian Rupees
4. Period of Deposit and interest rate:As per domestic term deposit of the Bank.
5. Joint account allowed with residents as well non residents:NRO account can be
opened with ‘F’ or S clause where non residence will be Former.
6. Interest income is taxable as per TDS rule.
7. Power of Attorney is allowed to resident for making local payments.
8. Repatriation (i) Remittance up to USD one million, per financial year (April-
March), for all bonafide purposes; (ii) sale proceeds of immovable property up
to US $ 10 lakh per financial year without waiting for 10 year period. Funds can
be transferred from NRO to NRE within US$ 10 lakh entitlement.
Non Resident (External) and Foreign Currency Non Resident (Bank) account
There are certain common features in these accounts like;
1. Credits: Only amount received from abroad can be credited to these accounts.
2. Joint account is allowed with Non residents. Joint account also allowed with
resident close relatives on former or survivor basis.
3. Power of attorney is allowed to residents. He can make local payments. POA can
remit money abroad if permitted by Power of Attorney.
 4. Maximum loan aaainst NRE and FCNR(B) is allowed up to any limit subject to
margin.
5. Interest income is free of Income tax and therefore tax is not deducted at source
6. Repatriation: Entire balance including interest can be repatriated abroad.
Foreign Currency accounts of residents
Foreign currency accounts of residents are of three types namely (a) Resident Foreign
Currency account (b) Resident Foreign currency (domestic) account (c) Exchange
Earners Foreign Currency account. Salient features of the same are given as under:
Resident Foreign Currency Account
1. Who can open: This account can be opened by a resident individual who was
NRI and returned to India after minimum stay of one year abroad.
2. Source of funds: Foreign exchange received as pension or other benefits from
employer; realization of assets held abroad, proceeds of FCNR/NRE.
3. Joint account is allowed with resident individuals who are close relatives on
former or survivor basis.
4. Nature of accounts: Saving, current and fixed deposit.
5. Loan is not allowed against deposit.
6. Period of deposit, interest rate on deposit and currency of deposit: as decided by
bank
7. Repatriation is allowed for entire balance including interest for any purpose.
Resident Foreign Currency (Domestic) account
1. Who can open: Account can be opened by any resident individual.
2. Type of account: Non interest bearing current account.
3. Credits: Forex acquired on visit abroad, from any person on visit to India or gift
or honorarium for services, gift or honorarium on a visit abroad, unspent forex
acquired during travel abroad.
4. Joint account is allowed with resident individuals who are close relatives on
former or survivor basis.
5. Repatriation is allowed for permissible current and capital account transactions.
Exchange Earners Foreign Currency account
1. Who can open: The account can be opened by any resident. This account will
be opened by exporters.
2. Type: Non interest bearing current account.
3. Credits: 100% of foreign exchange earnings can be credited to this account.
4. Packing credit can be adjusted out of such funds.
5. Resident individuals can include resident close relative(s) as a joint holder(s) in
their EEFC bank accounts on 'former or survivor' basis.
6. SEZ developers are also allowed to open, hold and maintain EEFC Account and
to credit up to 100 per cent of their foreign exchange earnings to this account.

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 Export Credit
Export credit is allowed in two stages namely pre shipment or packing credit and post
shipment. Salient features of packing credit are as under:
1. For packing credit eligibility conditions are (a) Exporter should have Import
Export Code Number (b) Exporter should not be on the caution list of RBI (c)
Exporter should not be on the specific approval list of ECGC (d) He should have
confirmed order of LC. However, if running packing credit facility has been
allowed confirmed order can be submitted later on.
2. Amount of PCL: on the basis of F.O.B value
3. Period of PCL: As per need of exporter. If pre-shipment advances are not
adjusted by submission of export documents within 360 days from the date of
advance, the advances will cease to qualify for prescribed rate of interest for
export credit to the exporter ab initio.
4. Adiustment of PCL:Normally through proceeds of export bills or export
incentives or debit to EEFC account.
Post shipment credit
1. As per Exchange Control Regulations, bills should be submitted for negotiation
within 21 days of shipment.
2. Export proceeds should be realized within 9 months from date of shipment in all
cases except for warehousing for which the period of realization is 15 months.
3. Authorised Dealer can grant extension up to 6 months if invoice amount is up to
USD 1 million.
4. If any export is not realized within 180 days of date of shipment, in all cases, a
report should be sent to RBI on XOS statement which is a half yearly statement
submitted as at the end of June & Dec of each year. This is to be submitted by
15th of July / January.
5. Post-shipment credit is to be liquidated by the proceeds of export bills received
from abroad in respect of goods exported/ services rendered or from balances in
Exchange Earners Foreign Currency (EEFC) Account as also from proceeds of
any other unfinanced (collection) bills.
6. Normal Transit Period is the period between negotiation of bills and credit to
Nostro account. It is fixed by FEDA' and presently it is 25 days irrespective of
the country.
Interest Rate on Export Credit
1. Export credit in rupees:Not below MCLR of Bank.
2. Export Credit in Foreign Currency: As per Bank discretion w.e.f. 5th May 2012.
Interest Equalisation Scheme on Pre and Post Shipment Rupee Export Credit
The Government of India has announced the Interest Equalisation Scheme (earlier called
Interest Subvention Scheme) on Pre and Post Shipment Rupee Export Credit to eligible
exporters. The scheme is effective from April 1, 2015. Salient features of the scheme
are given below:
1. The rate of interest equalisation would be 5% w.e.f 02.11.2018
2. The scheme would be applicable w.e.f 01.04.2015 for 5 years.
 3. The scheme will be available to all exports under 416 tariff lines [at ITC (HS)
code of 4 digit] and exports made by Micro, Small & Medium Enterprises
(MSMEs) across all ITC(HS) codes. Scheme would not be available to merchant
exporters.
4. A study may be initiated on the impact of the scheme on export promotion on
completion of 3 years of the operation of the scheme. The study may be done
through one of the llMs.
Export Declaration Forms for goods and services
1. Form EDF: To be completed in duplicate for export from Non EDI port
including export of software in physical form i.e. magnetic tapes/discs and paper
media. For export by post also this form will be used (earlier form GR was used
for exports other than by post and PP form for exports by post).
2. Form SDF: To be completed in duplicate and appended to the shipping bill, for
exports declared to customs Offices notified by the Central Government which
have introduced Electronic Data Interchange (EDI) system for processing
shipping bills notified by the Central Government.
3. Form SOFTEX: To be completed in triplicate for declaration of export of
software otherwise than in physical form, i.e. magnetic tapes/discs, and paper
media. A common "SOFTEX Form" will be used for declaration of single and
bulk software exports.
As per revised procedure, the exporters will have to declare all the export transactions,
including those less than US$ 25,000 in the form as applicable. Duplicate copy of the
declaration form which is submitted to the AD is now required to be retained by the AD
for the purpose of audit and not to be forwarded to RBI.

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 Gold Card Scheme for Exporters
1. Exporters with good track record eligible for the Card. Their account should have
been Standard for 3 years continuously with no irregularity.
2. Gold Card Scheme is not applicable to those exporters who are blacklisted by
ECGC or included in RBI's defaulter's list/ caution list or making losses for the
past three years or having overdue export bills in excess of 10 per cent of the
'previous year's turnover'.
3. Limits to Card holder exporters to be sanctioned for 3 years with provision for
automatic renewal subject to fulfilment of terms and conditions. For disposal of
fresh applications, the period is 25 days, 15 days for renewal of limits and 7 days
for sanction of ad-hoc limits.
4. A stand by limit of not less than 20% of the limits sanctioned should be made
available for executing sudden orders.
5. Gold Card holder exporters will be given preference in the matter of sanction of
PCFC.
6. Gold Card holders are entitled for concessional interest on post shipment credit
up to 365 days.
Trade and Exchange Control Regulations for Imports
1. Importer can import goods either on the basis of OGL or specific import licence
issued by DGFT.
2. Payment for imports should be made within 6 months from date of shipment.
3. Advance payment against imports is allowed up to any amount. However, where
the amount of advance remittance for services exceeds US $ 500,000 or its
equivalent, or for goods exceeds USD500,000.
4. (provided bank is satisfied about the bonafides of importer otherwise USD
200,000), the same can be allowed against guarantee of an international bank of
repute or guarantee of a bank in India against counter guarantee of an
international bank. However, in respect of Public Sector Company or a
Department/ Undertaking of the Government of India/ State Governments,
approval from the Ministry of Finance, Government of India is required for
advance remittance for import of goods or services without bank guarantee for
an amount exceeding USD 100,000.
5. Banks can make remittances for imports, where the import bills / documents have
been received directly by the importer from the overseas supplier and the value
of import bill does not exceed USD 300,000.
6. Bill of Entry is documentary evidence of physical arrival of goods into India. For
advance remittance exceeding US $ it should be submitted within 6
months of remittance. If not submitted within 6 months, it should be reported to
RBI on BEF statement on half yearly basis (within 15 days from the close of the
half-year) as at the end of June & December of every year.
7. Delinking or Crystallisation of Export and Import bills: Crystallisation means
converting a foreign currency liability to rupee liability. In the case of overdue
export bills it will be done as per bank discretion and exchange rate will be TT
selling rate. In the case of import bills conversion will be at Bills selling rate. In
demand bills it will be on 10th day and in case of usance bills it will be done on
 due date.
8. For release of forex for imports, requirement of application on Form Al has been
withdrawn. For release of forex for purpose other than import, application should
be made on Form A2 if the amount of remittance is more than USD 25000.
INCO TERMS
Inco terms stand for International Commercial Terms. Inco Terms framed by
International Chamber of Commerce. The latest version is of 2010. There are 11 terms
in revised version but in earlier version it used to be 13. The main objective for issue of
Inco terms is to rovide rules for inter retation of commonl used terms in foreign trade.
Contract Seller, in addition to cost of Buyer bears
goods, bears
Ex-Works - Goods available at factory All cost of insurance and freight
EXW subsequent to seller's factory
Free alongside Cost relating to place the All cost relating to loading,
the ship- FAS goods alongside the ship insurance and freight after these
areplaced along the ship.
Free on Board- Cost up to loading the goods All cost relating to insurance and
(FOB) on the ship freight once these are on board of
the ship
Cost & Freight- After shipment cost of freight Insurance
CF also
Cost, insurance Subsequent to shipment His cost starts after the goods
& freight CIF insurance and frei ht cost reach the port of destination.
Delivered at All cost till goods reach the His liability starts after the goods
Frontier- DAF customs boarder — normally reach the frontier.
by rail or road
Risk in Foreign Exchange
1. Risk in foreign exchange arises when a bank has open position in forex i.e either
it is overbought or oversold. A bank is said to be overbought when purchase is
more than sale and it is oversold when sale is more than purchase.
2. When a bank is overbought and it wants to square its position it will gain if rate
of forex goes up and will lose if rate of forex goes down. When a bank is oversold
and it wants to square its position, it will gain if rate of forex goes down and will
lose if rate of forex goes up.
3. The Daylight open position will be generally more than the overnight open
position.

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 COMPUTER TERMINOLOGY

ATM: Automated Teller Machine

SWIFT: Society for worldwide Interbank Financial Telecommunication
SFMS: Structured Financial Messaging System
OLTAS: Online Tax Accounting System
CBS: Core Banking Solution
PIN: Personal Identification Number
LAN: Local Area Network (used in the same building)
MAN: Metropolitan Area Network (used in the same city)
WAN: Wide Area Network (used in different locations)
IDRBT: Institute for development & Research Banking Technology
WWW: World Wide Web
HTTP: Hyper Text Transfer Protocol
URL: Uniform Resource Locator
VSAT: Very Small Aperture terminal
Firewall: Software programme that restricts unauthorized access to data
Booting: Starting of a computer
Hard Disk: A device for storage of data fitted in the processor itself
Encryption: Changing the data into coded form
Decryption: Process of decoding the data
Virus: Vital Information Resources Under Seize: Software programme that slows
down the working of a computer or damages the data. Main source of virus
is internet(other sources are floppy or CD)
Digital Sign: Authentication of electronic records by means of electronic method.
Key used: For digital signatures, there is a pair of keys, private key & public key
RTGS: Real time Gross Settlement
ECS: Credit: One account debited, number of accounts credited
ECS: Debit: One account credited, number of accounts debited
Hacking: Knowingly concealing, destroying, altering any computer code used for
computer network
 Real Time Gross Settlement
1. "RTGS" stands for Real Time Gross Settlement.
2. RTGS system is a funds transfer mechanism where transfer of money takes place
from one bank to another on a "real time" and on "gross" basis.
3. This is the fastest possible money transfer system through the banking channel.
4. RTGS helps in preventing Systemic and Settlement Risks.
5. Minimum / maximum amount for RTGS transactions: Minimum amount: Rs 2
lakh; Max: No limit.
NEFT (National Electronic Fund Transfer)
NEFT is a payment system that enables electronic transfer of funds from one bank to
another bank account. Money transfer can be made by an individual or company, s bank
account with any bank that is a member of the NEFT scheme, according to Reserve
Bank of India.NEFT transactions are executed in half yearly batches. At present there
are twenty-three half hourly settlement batches which run from 7A.M to 6P.M. There is
no limit on the amount of fund which can be transferred using NEFT however,
maximum amount of Rs.50000 cash remittance can be made within India and also to
Nepal under the Indo Nepal Remittance Facility Scheme.
Difference between IFSC Code and MICR: Indian Financial System Code (IFSC) is
an alpha numeric code designed to uniquely identify the bank-branches in India. This is
11 digit code with first 4 characters representing the banks code, the next character
reserved as control character (Presently 0 appears in the fifth position) and remaining 6
characters to identify the branch. The MICR code has 9 digits to identify the bank-
branch. IFSC code is printed on cheques leaves issued to their customers.
Electronic Clearing Service (ECS)
1. ECS (Credit) is used for affording credit to a large number of beneficiaries by
raising a single debit to an account, such as dividend, interest or salary payment.
2. ECS (Debit) is used for raising debits to a number of accounts of consumers/
account holders for crediting a particular institution.
3. Amount: There is no minimum or maximum limit on the amount of Individual
transactions.
Cheque Truncation
1. What is Truncation: Converting physical cheque to electronic image.
2. After truncation only image goes to paying bank.
3. With effect from 1.12.2010, cheque with material alteration duly confirmed
cannot be presented in clearing houses where cheque truncation has taken place.
Cheques with alteration in date can be accepted.
4. Record of physical cheques and electronic image in respect of Truncated cheques
should be preserved for 10 years.
AUTOMATED TELLER MACHINE
1. Services/facilities available at ATMs: In addition to cash dispensing ATMs
may have many services/facilities such as (a) Account information (b) Cash
Deposit (c) Regular bills payment (d) Purchase of Re-load Vouchers for Mobiles
(e) Mini/Short Statement (f) Loan account enquiry etc.
 2. Non receipt of cash from ATM: In case during the cash withdrawal process,
cash is not disbursed but the account gets debited for the amount, the customer
may lodge a complaint with the card issuing bank. Banks should re-credit such
wrongly debited amounts within a maximum period of 7 working days from the
date of complaint. If there is a delay, customer is eligible for compensation for
delayed period at the rate of Rs 100/- per day. This amount should be credited to
the account of the customer without any claim being made by the customer.
IMPORTANT DEVELOPMENTS
UNIVERSAL BANKING
Universal banking means allowing undertaking all kinds of activity of banking or
development financing activity, subject to compliance of statutory and other
requirements prescribed by RBI, Govt. and related legal Acts. Activities include low
risk activities like acceptance of deposits, investing in securities, medium risk activities
like granting of loans, high risk activities like credit cards, forex and insurance, project
financing. It means providing various other financial services in addition to normal
banking services like acceptance of deposits and making short term advances.
CROSS SELLING
Cross selling is a marketing tool which means to make effort to sell to customers, more
than one product. It leads to per customer (a) reduction in operational cost and (b)
increase in business and profits.
SECURITISATION
Securitisation is the process by which the selected pool of loans of a Bank is sold to a
trust called Special Purpose Vehicle. (say SBI sells a part of its housing finance loans to
the SPV). The SPV in turn, issues marketable paper securities (called Pass Through
Certificates and similar to debentures) against the backing of such assets and sells the
same to prospective investors.
FACTORING
Factoring is an arrangement under which a factoring company purchases and
administers the domestic receivables of short term period of a firm after purchasing the
receivables from the seller of goods. The responsibility to recover is that of the factor
which recovers discount and collection charges from the seller.
FORFAITING
It is on the pattern of factoring and deals with long term and medium export receivables
(deferred payment exports) while factoring deals with short terms receivables.
LIQUIDITY ADJUSTMENT FACILITY
It is short term loan that RBI allows to a commercial bank to cover the short term
liquidity problem. It is through repo-reverse repo mechanism.
REPO & REVERSE REPO
Repo:When RBI purchase govt. securities from bank to inject liquidity. It increases the
liquidity with banks. It is done at Repo Rate.

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Reverse Repo: When RBI sells govt. securities to bank to absorb liquidity. It reduces
liquidity with banks and done at reverse Repo Rate.
CERTIFICATE OF DEPOSIT & COMMERCIAL PAPER
1. Commercial paper can be issued by corporates while Certificate of Deposit can
be issued by banks.
2. Minimum period: 7 days; Maximum period: 1 year
3. Minimum denomination: For CP Rs 5 lac; For CD Rs 1 lac.
4. Maximum amount: No limit
5. Both are usance promissory notes issued at discount. Can be issued in
Dematerialised form only
6. No premature payment, no loan against CP, CD
7. Transfer by endorsement and delivery
8. If payment day is holiday, paid on next preceding business day
9. For issue of Commercial paper 4 conditions are to be satisfied (1) Net worth Rs.4
cr, sanctioned working capital, their loan accounts in standard category and credit
rating of A3 from CRISIL or equivalent from others.
TERMS RELATING TO MONEY MARKET
Call Money Money lent for one day
Notice Mone Mone lent for a period of 2-14 days
Term Money Money lend for 15 days or more in Inter-bank market
Held till maturit Govt. securities which are not meant for sale and shall be kept till
maturity .
Held for trading Govt. securities acquired by the banks with the intention to trade
by taking advantage of the short-term price/ interest rate
movements.
Available for sale Govt. securities which do not fall within the above two categories
i.e. HTM or HFT.
Yield to maturity Expected rate of return on a security during the period, it is held
by an investor which may include capital gains and losses also.
Coupon Rate Specified interest rate on a fixed maturity security , fixed at the
time of issue.
Gilt Edged Government security: It is a secured financial instrument which
security guarantees certainty of both capital and interest. These securities
are free of default risk or credit risk, which leads to low market
risk and hi gh liquidity .
Dated securities Instruments which -have tenure over one year. The -returns on
dated securities are based on fixed coupon rates. These are
considered risk free.
Prudential limits Borrowing: On a fortnightly basis, maximum 100% of capital
for call money fund of latest audited balance sheet. It can go up to 125% on any
particular day.
Lending: On a fortnightly basis, maximum 25% of capital fund
of latest audited balance sheet. It can o u to 50% on an articular
da .
Page 42 of 131
 TERMS RELATED WITH RISK
Credit Risk Risk on account of possible default by the borrower in meeting his
commitments
Market Risk Risk on account of trading in securities
Le al Risk Risk on account of deficiency in loan documentation
Liquidity risk Risk of inability of a bank to meet its liabilities due to mismatch in
inflows from assets and liabilities
Interest rate Risk due to changes in interest rates leading to effect on profit and
risk loss of the bank
Operational Risk on account of failure of internal rocesses, procedures etc.
risk
Forex Risk Risk on account of fluctuation in forex rates
Sy stemic Risk to a system on account of failure of other related systems.
Risk
RIGHT TO INFORMATION ACT
1. Information can be obtained by Indian Citizen from any public authority without
giving any reason.
2. Time for providing information: 30 days; If information pertains to life and
liberty, the period is 48 hours
3. Fine for delay in providing information: Per day Rs.250 and total maximum fine
Rs.25000
4. Record preservation time: 5 to 8 years as fixed by Central Govt.
Financial Inclusion: Providing Banking Services in unbanked areas
1. Financial inclusion means providing banking services to poor persons at
affordable cost.
2. First committee on financial inclusion was headed by Dr C Rangarajan
3. The Committee on Comprehensive Financial Services (2nd Committee on
Financial Inclusion — 2014) was
4. headed by Shri Nachiket Mor
5. In 2015, RBI constituted a Committee with the objective of working out a
medium-term (five year) measurable action plan for financial inclusion. The
Committee is headed by Shri Deepak Mohanty, Executive Director, RBI.
6. Steps taken for financial inclusion include appointing business correspondents,
opening small accounts and Basic saving accounts, relaxation in KYC, Jan Dhan
Yojna, Jeevan Suraksha Yojna, Jeevan Jyoti Yojna.
Pradhan Mantri Jeevan Jyoti Bima Yojana (PMJJBY)
Implemented from June 1st, 2015. Life Insurance for Rs. 2 lakhs, at Rs 330, per annum.
Available to all bank account holders whose age is between 18 to 50 years.
Pradhan Mantri Suraksha Bima Yojana (PMSBY)
Implemented from June 1st, 2015. Accident insurance worth Rs 2 lakhs at Rs 12 per
annum. Available to all bank account holders whose age is between 18 to 70 years.
Including Time varying tariff of Rs 5. Service tax is extra. No charges for Inward
RTGS/NEFT/ECS
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 NEGOTIABLE INSTRUMENTS ACT
1. Provisions relating to Negotiable Instruments are given in the Negotiable
Instruments Act, 1881 .
2. The Negotiable Instruments Act is applicable in whole of India including Jammu &
Kashmir.
3. As per Section 13 of the Act, promissory notes, bills of exchange and cheques are
the negotiable instruments.
4. As per practice and usage and as per court decisions, certain instruments such as
Treasury Bills, Certificate of Deposit, Commercial Paper, Govt. Promissory Note
are also Negotiable instruments.
5. Some instruments like Railway Receipt, Bill of Lading, Warehouse Receipt etc are
also treated as Negotiable instruments as per Section 137 of Transfer of Property
Act.
6. The main feature of a negotiable instrument is that it is freely transferable and the
title of the transferee-will be better than the transferor.
7. Promissory Note: As per Sec 4, PN is in writing, containing unconditional
undertaking or promise, signed by the maker, to pay a certain sum of money to or
to the order of a certain person or to the bearer thereof. It requires payment of stamp
duty and can be demand PN or usance PN. There are 2 parties (maker & payee).
Currency/bank notes are excluded from the definition of promissory notes. Writing
the words "l owe you Rs 1000" does not constitute PN but "l owe you Rs 1000
payable on demand constitute PN.
8. Bill of exchange: As per Sec 5, BOE is an instrument in writing, containing an
unconditional order, signed by maker, directing a certain person to pay a certain
sum of money only or to the order of a certain person or to the bearer of the
instrument. In a Bill of Exchange, the person ordering for payment is called Drawer
and the person directed to pay is called Drawee. The beneficiary is called payee.
9. Cheque is defined in Sec 6 of NI Act.
10. Cheque is a bill of exchange but always payable on demand and drawee is always
a banker. It also include truncated cheque and electronic cheque.
11. A cheque is similar to a Bill of Exchange.
12. Any bill of exchange which is payable on demand and in which drawee is a banker
will be called cheque.
13. The promissory note or bill of exchange can be payable on demand or after some
time. If no time is mentioned then the same will be treated as Demand promissory
note or Demand Bill of Exchange.
14. A negotiable instrument can be payable to bearer or order. If neither bearer nor order
is written it is treated as payable to order. If both bearer or order are written it is
treated as payable to bearer.
15. As per Section 31 of RBI Act, no person other than Central Government or Reserve
Bank of India or any other person authorized in this behalf can issue bearer
promissory notes and a demand bills of exchange payable to bearer.

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 16. Inchoate Instruments: As per section 20 of the NI Act, an instrument on which
date, payee or amount is not mentioned is called as Inchoate or incomplete
instrument. Incomplete cheque can be completed by the Holder and the completion
wilt not be treated as material alteration.
17. An instrument without signatures is not treated as an instrument at all.
18. AmbigousnInstruments: As per section 17 of the NI Act, an instrument which can
be bill of exchange or promissory note. Holder can treat it either of these.
19. Presumption: UIs 118 NIS are presumed to be (a) made for consideration, (b) bear
date on which they are made. (c) every holder is a holder in due course.
20. Holder: defined in section 8 of the NI Act. Holder of a promissory' note, bill of
exchange or cheque means any person entitled in his own name to the possession
thereof and to receive the amount due thereon from parties thereto.
21. Holder in Due Course: defined in Section 9 pf the NI Act. Holder in due course is
a person who became possessor of a NI for valuable consideration, in good faith,
before becoming due, and without having any reason to believe that the person
transferring the instrument was not entitled thereto.
Transfer of a Neqotiable Instrument and Endorsement
1. Transfer of a Negotiable instrument: by assignment (under Transfer of Property
Act) or by Negotiation(under NI Act).
2. Negotiation of a Bearer instruments: A bearer instrument is negotiated by mere
delivery and no endorsement is required.
3. Negotiation of an order instrument: An order instrument-can be negotiated by
endorsement followed by delivery. It’ may be noted that legal heirs can not
complete the negotiation of a negotiable instrument with endorsement by the
deceased merely by delivery.
4. Endorsement: Signing of an instrument on the back or face thereof or on a slip of
paper annexed thereto for the purpose of negotiation is called endorsement (Section
15). The person who transfers the instrument is called endorser and the person to
whom it is transferred is called endorsee.
5. Blank Endorsement: In a blank endorsement the endorser just signs his name
without indicating endorsee. It can be converted into full by writing name of a
person above signatures. The effect of an endorsement in blank is that it makes an
instrument dawn originally payable to order to bearer instrument for the purpose of
negotiation which can be further negotiated by mere delivery.
6. Endorsement in Fult: When, the endorser indicates the name of the endorsee it is
called full endorsement.
7. Sans RecourseEndorsement: An endorsement in which endorser excludes his
liability is termed 'sans recourse' or without recourse endorsement. In case of
dishonour of instrument, the amount can not be recovered from such endorser.
8. Facultative: An endorsement in which endorser waives the notice of dishonour is
called Facultative endorsement. But this is not applicable to other parties to the
instrument.

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9. Restrictive endorsement: An endorsement which restricts further right of
negotiation is called as restrictive endorsement. For example if it is written in the
endorsement as "Pay to Hari for my use" it is restrictive endorsement.
10. Conditional Endorsement: When alongwith endorsement, condition is imposed
by endorser. For example, pay to C on completion of studies. Paying bank not to
ensure compliance of condition. Condition binds endorser and endorsee only.
11. Back to Back Endorsement: An endorsement in which the endorser himself
becomes endorsee is called as back to back endorsement and in such a case, the
endorsee can recover the amount only from parties prior to his own endorsement.
12. Negotiation Back: When the drawer of a cheque himself becomes endorsee, it is
called "Negotiation Back" and this cheque is treated as satisfied.
13. Partial Endorsement: The endorsement can be made only for full amount but in
case part payment has been received and a note to that effect is made on the
instrument, then the same can be endorsed for the balance amount.
14. Forged Endorsement: When endorsement is made by a person other than Holder
by forging signatures of Holder. Title does not pass to any person on the basis of
such endorsement. A person getting instru•ment after such endorsement does not
become holder.
15. Regularity of endorsement: Paying bank gets protection u/s 85(1) only when
endorsement is regular (may not be genuine).
16. Payment of cheques
17. A paying banker gets protection under Section 85 of the NI Act.
18. tn the case of order cheques, protection is available under section 85(1) and for
bearer cheques it is available under section 85(2) of NI Act. In the case of drafts it
is available under section 85A.
19. As per section 85(1) of the Act a paying banker has two duties i.e. the endorsement
should be regular and payment should be in due course. Paying banker is not
concerned about genuineness or forgery of endorsement.
20. As per section 85(2) of the NI Act, in case of a bearer cheque the responsibility of
paying banker is to ensure that payment is in due course. If a bearer cheque is
endorsed, the bank is not required to take note of any such endorsement. Thus as
per section 85(2), 'Once a bearer always a bearer'
21. Payment in Due Course: As per Sec 10, a payment would be considered in due
course if: (a) Payment as per apparent tenor of instrument; (b) Payment in good
faith and without negligence; (c) Payment to person in possession of instrument; (d)
Payment under circumstances which do not afford a reasonable ground for believing
that he is not entitled to receive payment of the amount mentioned therein
22. Form of Cheque has not been given in the Act. It is simply as per practice. However,
RBI has prescribed format at centres where cheque truncation has started. RBI has
prescribed the new cheque standards "CTS-2010" and all banks providing cheque
facility to their customers, will issue only 'CTS-2010' standard cheques across the
country by March 31 , 2013.
23. Different ink: A cheque can be drawn in different inks, handwritings or different
Page 46 of 131
 scripts. Thus, a cheque presented with different ink, handwriting or script can be
paid.
24. Language: The cheque should be written in Hindi, English or Regional language.
Bank is within its powers to return a cheque written in a language other than the
language of that region.
25. Signatures on Back: When a cheque is presented for payment signatures of the
presenter are taken on the back as a witness of payment. If the presenter refuses to
sign, the bank can take receipt on a separate paper.

Date on Cheque
1. Ante dated cheque: A cheque dated prior to its date of presentation is called ante
dated cheque. tt is valid and can be paid.
2. Post dated cheaue means a cheque which is dated subsequently to the date of
presentation. It is valid but can be paid only on date on cheque or thereafter till it is
stale. If it is paid before date on cheque, it is not a payment in due course.
3. Stale cheque: As per RBI guidelines issued under section 35A of B R Act, a cheque
becomes stale after 3months of its issue. These guidelines are effective for cheques
issued on or after 1.4.12. The validity can be reduced by the drawer but it cannot be
extended. On a cheque becoming stale, the cheque can be revalidated up to 3 months
at a time.
4. Impossible Date: A cheque with impossible date like 31.11.12 should be paid on
the last day of the month or within three months of the last day of the month.
5. Cheque dated prior to opening the account: A cheque dated prior to the date of
opening the account or issue of cheque book can be paidüf otherwise in order.
Amount of Cheque
1. The amount should be written both in words and figures.
2. As per Sec 18 of the NI Act, if the amount written in words and figures differ, the
amount written in words should be paid.
3. The amount written in words is called legal amount and amount written in figures
is called courtesy amount.
4. If the balance in the account is just equal to the amount of the cheque, the cheque
will be paid.
5. If the balance in the account is insufficient to pay the cheque, it should not be paid
relying on the balance in some other account or transferring the amount from other
account unless there is an arrangement to that effect.
6. If number of cheques are presented at the same time and the balance is not sufficient
to pay all the cheques, then normally priority is given to cheques favouring revenue
authorities, then to cheques favouring public authorities. If balance is left,
maximum number of cheques should be passed taking care that cheque of very
small amount is not dishonoured.
7. Banking Hours: The payment of a cheque should be made only during banking
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 hours otherwise it will not be a payment in due course. However, the payment of a
reasonable amount can be made to drawer even after banking hours.
8. Mutilation: if there is any mutilation of cheque, it should be confirmed by drawer
or by collecting banker.
9. Alteration in Cheque
10. Material alteration: Any change in date, amount or name of payee is called
material alteration.
11. The change from order to bearer, or cancellation of crossing or converting special
crossing to general crossing is also material alteration.
12. However, bearer to order or crossing a cheque or converting general crossing to
special crossing or completing an incomplete cheque is not material alteration.
13. If there is any material alteration on a cheque it can be paid only after confirmation
from drawer under his full signatures.
14. In the case of joint accounts with "either or survivor' clause any of the account
holders can confirm material alteration but in jointly operated accounts signatures
of all are required.
15. Under Section 89 of the NI Act, 1881 paying banker gets protection in case of
payment of materially altered cheques if the alteration is not apparent at the time of
payment and payment has been made in due course.
16. W.e.f. 31.12.10, CTS cheques with material alteration except in date will not be
collected even if confirmed by drawer.
17. Payee: if the payee is fictitious person then the cheque can be paid to bearer if it is
payable to bearer but if the cheque is payable to order, it can be paid only to the
drawer.
18. Bearer or Order: if a cheque is payable to bearer or order, it can be paid to bearer.
However, if neither bearer nor order is written it is payable to order.
19. Forged signatures: If there is a forgery in the signatures, such an instrument is null
and void. Paying banker will not get protection if it pays such a cheque even though
the drawer might have been careless in custody of the cheque book or bank might
have sent statement of accounts and the customer did not point out the mistake.
20. However, if the cheque has been signed by the drawer himself but in a different
fashion, the banker will not be liable.
Crossing of a cheque or demand draft
1. General Crossing: Crossing is of two types - General or special crossing. If there
are two parallel transverse lines on the face of cheque it is called General Crossing.
The parallel lines can be with words and company or & co or not contain any word.
(Sec 123)
2. For General crossing parallel lines are must. Any other thing is not so material.
3. A cheque on which name of some station like Indore is written between two parallel
lines will be called Generally crossed cheque.
4. Crossing is direction of drawer to paying banker. According crossed cheque can be
paid to or through a bank only (in cash or through clearing) and not across the

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 counter, to payee or holder. A cheque with General Crossing should be paid only to
a bank.
5. Even if the name of a city is written between two parallel lines like "Indore", it will
continue to be a general crossing and the cheque can be paid to any bank. Such
cheque can be paid at any station to a bank and not necessarily at Indore.
6. A general crossing can be convened into a special crossing.
7. Special Crossing: If name of a bank is written on the face of a cheque with or
without two parallel transverse lines it is called special crossing (Section 124).
Parallel line is not necessary. The name of a bank can be written anywhere on the
face of a cheque.
8. Specailly crossed cheque can be paid only to the bank whose name is mentioned on
the cheque or his authorized agent for collection.
9. A cheque crossed to two banks has to be returned unpaid unless crossed by one
bank to another as his agent for collection. Two branches of a bank for this purpose,
are only one bank
10. The special crossing is in favour of a bank and not in favour of a particular branch.
Therefore, if a cheque is favouring Canara Bank Patna, it can be paid to Canara
Bank at any place.
11. For special crossing it is not necessary that the cheque should bear two parallel tines.
12. A generally or specially crossed cheque can be paid to a banker in cash also.
13. If a crossed cheque is paid in violation of guidelines, it will not be a payment in due
course and bank will be liable to true owner of cheque i.e. payee or holder in due
course.
14. Provisions relating to crossing are applicable to cheques and drafts only and not to
Promissory Notes or Bill of Exchange. Therefore, if any Bill or Promissory note is
having addition of two parallel lines or name of a banker, it does not have any effect.
15. Who can cross a cheque: The Crossing can be done by drawer, payee or holder or a
banker.
16. 'Account Payee' crossing is not recognised by law but is a long standing practice
amongst bankers.
17. Account payee crossing is a direction to the collecting banker.
18. Account payee cheque can be collected for credit of the named payee only and
cannot be endorsed or transferred.
19. RBI has directed banks not to collect account payee cheques for any person other
than the payee as it is established practice.
20. RBI has advised banks not to credit 'Account payee' cheque to the account of any
person other than the payee.
21. RBI has clarified that the practice of collecting third party account payee cheques
on behalf of co-operative credit societies who are their constituents can be allowed
if the amount is up to Rs 50,000.
22. Not Negotiable Crossing: It is defined in Section 130 of N I Act.
23. Not negotiable crossing does not restrict transferability but it takes away the
important element of negotiation i.e. passing on better title to the transferee
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 (transferee cannot become holder in due course). It is direction to collecting bank.
Paying bank has to pay such cheques in normal course.
24. If words 'Not negotiable' are written between two parallel lines or with the name of
a bank, this cheque will continue to be transferable. It can be endorsed. But the title
of transferee will not be better than the title of transferor.
25. Cancellation of crossing can be done by drawer only under his full signatures by
writing the words crossing cancelled. In such cases, the payment is made in cash to
a person known to the bank.
26. Paying bank gets protection on payment of crossed cheques u/s 128 by ensuring that
the payment is made in due course.
When payment should not be made
Payment cannot be made in case of (a) death, insolvency, insanity of customer or
insolvency of partner or firm or liquidation of company (b) stop payment (c) receipt of
garnishee/attachment order (d) post dated cheque and (e) stale cheque. However, payment
can be made in case of death of agent (authorized signatory of a company, agent appointed
by a customer, trustee, office bearer of society or club etc.) where cheque is not dated prior
to date of authority to the agent and subsequent to date of death.

Protection to Collecting Banker

1. Protection to collecting banker is available under Section 131 of the N I Act. For
collection of demand drafts, this is as per section 131A of N I Act.
2. The protection is against risk of conversion i.e. dealing with others property without
his consent.
3. Protection will be available only if (i) the cheque/draft is crossed (ii) the bank
receives the payment for its customer (iii) the bank acts as agent for collection and
not holder for value (iv) it receives the payment in good faith and without
negligence.
4. To get protection as a collecting banker the bank must ensure that there is no
negligence involved. Examples of negligence could be opening of accounts without
proper identification, ignoring 'not negotiable or 'account payee' crossing, collecting
cheques payable to firm, Ltd Co, Trust, Institutions in the personal accounts of
partner, director, trustee or the office bearer.

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PROTECTION TO BANKERS
85 (1)Paying banker protected by payment in due course of order cheque that bears regular
endorsement. Genuineness of endorsement is not to be ensured by the paying bank.
85 (2)Protection to paying banker in case of a bearer cheque. Endorsement on a bearer
cheque to be ignored.
85 (A) Protection to paying banker in case of Bank drafts.
89Protection to paying bank for materially altered instrument,
128 Protection for payment in due course of crossed cheques
131Protection to collecting bank for crossed cheques subject to compliance of conditions
131 A Protection to collectin bank for crossed bank drafts.
Dishonour of Cheques due to Insufficient balance
1. As per Section 138 of the Act, if any cheque drawn by a person is returned by the
bank unpaid, either with the reason funds insufficient or exceeds arrangement or
similar reason such person shall be deemed to have committed an offence.
2. As per judgements of the Supreme Court, the cheques which are dishonoured on
account of stop payment by the drawer or Account being closed will attract penalty
prescribed under Sec 138 of the Act.
3. Penalty as per section 138: In case of dishonour of cheque due to reasons stated
above, punishment can be imprisonment up to two year, or maximum fine up to
twice the amount of the cheque, or both.
4. Conditions for invokinq section 138: (a) the cheque has been presented to the bank
within a period of six months from the date on which it is drawn or within the period
of its validity, whichever is earlier. (b) the cheque had been received for
consideration i.e. to discharge a liability or debt.
5. Notice to Drawer: should be sent by the payee or the holder in due course within
thirty days of the receipt of information regarding dishonor of cheque
6. When cause of action arise: If drawer of cheque fails to make the payment, to the
holder in due course, within fifteen days of the receipt of the said notice.
7. Limitation period for making complaint: The complaint in such cases should be
made in the court of a metropolitan magistrate or a judicial magistrate of the first
class or above within one month of the date of the cause-of-action (i.e. if payment
is not made within 15 days)
Bill of Exchange
1. Demand Bill: A bill of exchange payable on demand or at sight or on presentment
is called Demand Bill.
2. Usance Bill: A bill of exchange payable after some time is called Usance Bill.
3. Documentary bill: which is accompanied by document of title to goods like railway
receipt, bill of lading, etc.
4. Clean bill: is one which is not accompanied by any document of title to goods.
5. Inland bill: which is drawn or made in India and is either payable in India or on a
person resident in India.
6. Foreign bill: is one which is not an Inland Bill i.e. it is drawn outside India or if
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 drawn in India is payable outside India on a person resident outside India. Foreign
Bills are issued in more than one part.
7. Accomodation Bill: means a bill issued without consideration and dealing in such
bills is called kite flying.
8. Interest Rate: If in a bill of exchange or promissory note, interest rate is not
mentioned, it will be 18% p.a.
Calculation of Due Date
1. Usance bills should be presented for acceptance within a reasonable time.
2. The reasonable time is given under section 105 of NI Act. As per section 105,
reasonable time means as per usage and practice of the area.
3. The drawee is allowed 48 hours excluding public holiday to accept the bill.
4. If a Usance bill is payable after date, its due date is calculated from date of the bilt
and if it is payable after sight, its due date is calculated from the date of acceptance.
5. As per section 22 of the N Act, three days of grace are allowed in the case of Usance
bills and Usance promissory notes. But if the due date is fixed on a particular day
or days of grace are specifically prohibited, the same need not be given.
6. Days of grace are allowed only in case of Usance Promissory Note or Usance Bill
of Exchange and not in the case of demand bill or demand promissory note.
7. As per Section 25 of the Act, if a bill or promissory note matures for payment on
public holiday under NI Act, 1881 (Sunday or any day declared to be public holiday
by the Central Government) it falls due on immediate next preceding business day.
Since 26th Jan, 15th August and 2rd October are national holidays and if the bill
falls due on any of these dates, then preceding business day will be the due date.
8. If the period of usance is given in days, then the day from which due date is to be
calculated is excluded. Due consideration should be given to leap year in which
February has 29 days.
9. If the period of usance is given in months and there is no corresponding day in the
month in which bill matures, last day of the month is taken into account. For
example, a bill dated 31 st Dec payable two months after date will fall due on 31 st
Feb without grace period. But since February has only 28 days, 28th February will
be considered and after 3 days of grace, 3rd March will be due date.

Dishonour of a Bill, Noting and Protesting and Liability of Parties

1. If the drawee does not accept the bill within stipulated period it is treated as
dishonoured by non acceptance.
2. If a bill after being accepted is not paid on due date, it is said to have been
dishonoured due to non payment.
3. When a promissory note or bill of exchange has been dishonoured by non-
acceptance or non-payment, it may be got noted or protested with Notary Public.
4. Provisions relating to noting and protesting applicable only in case of dishonor of
promissory note or bill of exchange whether payable on demand or usance bill or
usance promissory note.

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 5. Noting and protest is optional in case of Inland bills.
6. If a bill is dishonoured by non acceptance, then the drawer will be primarily liable
on the bill.
7. If a bill is dishonoured due to non payment (it means it was accepted), acceptor
(drawee) witl be primarily liable on the bill and drawer's liability will be secondary.
Banking Regulation Act, 1949
1. Statutory Reserve: As per section 17 of B R Act, a bank should transfer to Reserve
Fund 20% of its net profits before declaring dividend or bonus. As per current
guidelines of RBI, a scheduled bank is required to transfer 25% of the profit before
providing for bonus and declaring dividend.
2. As per Section 19 (2), a bank can not hold shares in a company either as owner or
as pledgee more than 30% of the paid up share capital of that company or 30% of
its own paid up share capital and reserves, whichever is less. As per RBI, a bank
can not hold shares in a company as owner more than 10% of the paid up share
capital of that company or 10% of its own paid up share capital and reserves,
whichever is
3. As per section 20, a bank can not grant loans or advances on the security of its own
shares.
4. As per section 24, banks are required to maintain SLR (Statutory Liquidity Ratio)
5. Banks should transfer to RBI monthly all deposits which have not been
operated/claimed for the last 10 years. (Section 26 A).
6. Section 45 Y: Power granted to Central Govt. to make rules for preservation of
records.
7. Section 45Z: Return of paid instruments to customers after keeping a true copy of
such instruments.
8. Section 45ZA to 45 ZF relate to Nomination in deposits, safe custody and locker
accounts.
Reserve Bank of India Act, 1934
1. Reserve Bank of India Act, 1934 came into force on 01.04.1935.
2. RBI was established on the recommendations of the Hilton Young Commission.
3. Section 24: RBI can issue bank notes of the denomination of 2, 5, 10, 20, 50, 100,
500, 1000, 5000, 10000.
4. Section 31: No person other than RBI/Central Govt. can draw, accept, make/issue
Bill of Exchange, Hundi or promissory note payable to bearer on demand.
5. Section 42(1) deals with cash reserves ratio to be maintained by scheduled
commercial banks.
6. Section 49 requires RBI to publish bank rate from time to time.
Banker Customer Relationship
Definition of Bank & Banking: Bank is one which conducts business of banking. Banking
has been defined in Section 5 of Banking Regulation Act.
Definition of Customer: Customer is not defined in any Act. However, it is defined in KYC
norms. As per various court decisions, any person for whom bank agrees to open an
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account is called as customer of the bank.

Type of Transaction Bank Customer

Deposit in the bank CR balance in account Debtor Creditor
Loan from Bank Debit balance in account Creditor Debtor
Safe Depsit Vault Lessor Licensor Lessee Licensee
Safe custody Bailee Bailor
Issue of draft after issue of draft Debtor Creditor
Collection of cheque & Standing Instruction Agent Princi al
Goods left negliently by customer Trustee Beneficia
Purchase of cheque from customer Holder for value Endorser
Purchase/sale of securities on behalf of customer Agent Princi al
Banker's ObligationsDue to maintaining secrecy
1. A bank has duty to maintain secrecy of customer's account as per Implied Contract.
2. The duty to maintain secrecy continues even after closure of account.
3. Balance in the account of an employee should not be disclosed to employer.
Similarly balance in the account of wife not to be disclosed to husband and vice
versa.
4. If bank discloses customer's affair (e.g. in case of insufficient balance in the account
advising the presenter of cheque to deposit deficit amount), bank will be liable to
customer for resultant loss.
Exceptions to rule of secrecy: When information sought by Court for evidence or by
Incharge of a Police Station, or by revenue authorities like Income Tax Authority, or RBI
or to a bank as per general practice (without any liability) or as per consent of customer
(based only on records). Duty to honour cheques
As per section 31 of N I Act, a bank is under obligation to pay cheques issued by customer
provided (i) there is a sufficient balance in the account (ii) the cheque is otherwise in order
(iii) the funds are properly applicable i.e. not attached by Garnishee order or attachment
order. If a bank dishonour a cheque drawn by a customer despite satisfaction of aforesaid
conditions, bank will be liable to Drawer (and not to payee or true owner) for damages
suffered by him.
Banker's Rights
Bank has three rights namely (i) Right of Lien (ii) Right of Set Off (iii) Right of
Appropriation.

Right of Lien
1. Lien is the right of creditor to retain possession of goods and securities belonging
to the debtor till the debts due to him (creditor) are paid.
2. This right is available only on goods and securities and not on balances in the

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 accounts.
3. Lien can be Particular lien (Sec 170 of the Indian Contract Act) or General Lien
(Section 171 of the Indian Contract Act). In the case of General Lien, creditor has
right to retain the goods and securities belonging to the debtor for all dues payable
by him. This right is available only to bankers, factors, wharfingers, attorneys.
4. Banker's Lien is also a general lien but it is an implied pledge because the banker
has right to retain as well as sell goods of the borrower after giving him reasonable
notice.
5. For exercising right of lien, (a) the goods or securities and debt should be in the
same right and same capacity (b) Loan should be due or overdue and lawful (iii)
Reasonable notice is given. Further, Right of Lien is available on the goods and
securities received in the ordinary course of business.
6. It is not available when the goods or securities have been deposited for a specific
purpose; goods received for safe custody or lying in safe deposit vault or goods left
by the debtor negligently. However, in the case of loans against pledge of jewellery,
bank can exercise right of general lien on the ornaments left in the possession of the
bank after adjustment of the jewellery loan in case some other advance is
outstanding.
7. Law of limitation does not apply to Lien.
8. Negative lien is a declaration from the borrower to the effect that securities/goods
offered as security are not encumbered and that the borrower will not create any
charge over them without bank's permission. This undertaking does not create any
charge in favour of the bank and therefore advance against negative lien are treated
as clean advance.
Right of Set Off
1. Set off is the right to combine two or more accounts having debit and credit balance.
2. It is not defined in any Act. It is available due to implied contract.
3. This right arises when two parties are debtor as well as creditor to each other i.e.
one account should be in debit and another account should be in credit.
4. For banks, this right arises when wants to combine its loan due from a borrower
with his deposit accounts.
5. For exercising right of set off following conditions should be satisfied (i) Both
accounts should be in same right and same capacity (ii) The debt should be due and
not accruing due (iii) Reasonable notice should be sent to the depositor before
exercising set off.
6. Law of limitation does not apply and set off can be exercised even in case of loans
which are time barred.
7. It cannot be applied on fixed deposit which is not due as yet but can be exercised
when FDR matures. Similarly it cannot be applied for adjusting term loan or CC or
overdraft which are regular and not overdue.
8. If a loan is in the name of an individual, set off can be exercised on credit balance
in his individual account and sole proprietorship account. Set off cannot be

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 exercised on deposit accounts which are held jointly with other individuals, or
partnership in which the borrower is partner, or client account maintained by a
solicitor or account of minor under guardianship where borrower is the guardian or
on the credit balance of a trust in which borrower is trustee.
9. If loan is in joint names, set off can be exercised on credit balance in joint account
as well as credit balance in individual accounts of joint borrowers.
10. If loan is in the name of a partnership firm then set off can be exercised on credit
balance in the name of firm, partners and any other partnership firm which has just
same partners as are in the borrowing firm.
11. Available for the deposit of guarantor (after serving a recall notice on him).
12. For exercising right of set off, all branches of a bank are considered as one.
Appropriationof Payments
1. Section 59,60,61 of Indian Contract Act, deal with appropriation of payments.
2. If a customer maintains more than one account with a bank and he deposits some
amount then he has the first right to indicate to which account the amount should
be credited. If he does not exercise this right, then bank can credit the amount to
any of his accounts including an account which is time barred by limitation.
3. Clayton's rule is related to appropriation of payments and is applicable in case of
running borrowal accounts like cash credit or overdraft. This rule is applicable in
case of death, insolvency, insanity of a joint borrower or partner or guarantor or
retirement of a partner or revocation of guarantee by guarantor.
Garnishee Order
1. A Garnishee Order is an order issued by court under provisions of Order 21, Rule
46 of the Code of Civil Procedure, 1908. The bank upon whom the order is served
is called Garnishee. The depositor who owes money to another person is called
judgement debtor.
2. Garnishee Order applies to existing debts as also debts accruing due i.e.
SB/CD/RD/FD
3. Garnishee Order applies only to those accounts of Judgement Debtor which have
credit balance.
4. The relationship between bank and judgement debtor is of debtor and creditor. Bank
is the debtor of Judgement Debtor who is a creditor of the bank.
5. Garnishee order does not apply to money deposited subsequent to receipt of
Garnishee order. It also does not apply to cheques sent for collection but yet to be
realized. But if credit was allowed in the account before realization with power to
withdraw to customer, GO will be applicable on this amount.
6. Garnishee order does not apply to unutilized portion of overdraft or cash credit
account of the borrower as no debt is due to judgement debtor. For example, if limit
is Rs 4 crore and outstanding is Debit Rs 3 crore, Garnishee order is not applicable
on the balance Rs 1 crore.
7. Bank can exercise right of set off before applying Garnishee Order.
8. Garnishee order is applicable only if both debts are in same right and same capacity.

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 Garnishee order issued in a single name does not apply to accounts in the joint
names of judgement debtor with other person(s). But if Garnishee order is issued in
joint names, it will apply to individual accounts also of the same debtors. When
Garnishee Order is in the name of a partner it will not apply to partnership account
but when Garnishee order is in the name of firm, accounts of individual partners are
covered.
9. If amount is not specified in the order, then it will be applicable on the entire balance
in the account. However, if it is for specific amount, the cheques can be paid from
the balance available after setting aside the amount as mentioned in the Garnishee
order.
10. Not applicable on fixed deposits taken as security for some loan.
11. If loan given against FD, applicable on the amount after adjusting the loan.
Income Tax Attachment Orders
1. Income Tax Authorities issue Attachment Orders in terms of Section 226(3) of
Income Tax Act, 1961. On receipt of this order, banker is required to remit the
desired amount to income tax authorities.
2. A order without mentioning the amount is not a valid order.
3. Attachment Order is different from Garnishee order in following respects (a)
Attachment order applies to money deposited in the account after receipt of order
also till it is fully satisfied whereas Garnishee order does not apply to subsequent
deposits. (ii) Attachment Order in single name applies to joint accounts also
proportionately unless the contrary is proved whereas Garnishee order in single
name does not apply to joint accounts.
4. However, right of set off is available to bank before applying the order.
5. In case banker fails to comply with Attachment Order, it will be liable for the
amount of order and deemed as an assessee in default.
6. When both Garnishee order and Attachment Order are received simultaneously,
priority should be given to attachment order.
TYPES OF CUSTOMERS
1. Accounts of Minors
2. A minor is a person who has not attained the age of 18 years. A person will become
major at the age of 18 whether guardian is natural or appointed by a court of law.
3. Guardians: There can be three types of guardians.
4. Natural-guacgjans like father, mother.
5. Testamentary Guardian: A Guardian appointed by Will (Vasiyat). Natural guardian
may appoint somebody to act as guardian after his or her death through will. But
such guardian will come into picture only on the death of natural guardian (in case
of Hindus on the death of father as well as mother).
6. Legal guardian: A Guardian appointed by Court. If neither natural or testamentary
guardian then appointed by court.

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 Minor Guardian
Hindu son, unmarried Father and after father's death mother
daughter
Hindu Married daughter Husband. If husband is minor or has died, father in law and
after his death mother in law.
Mohammdan minor Father. After death of father, executor of father's will. If no
will, father's father i.e. paternal grand father and after his
death, his executor.
Christian or Parsi Father. After death mother.
7. When guardian of a Hindu minor ceases to be a Hindu or he becomes a hermit or
sanyasi he ceases to be natural guardian.
8. As per section 11 of the Indian Contract Act, 1872 a minor is not competent to enter
into a contract and the contract entered into by him is void ab-initio.
9. Loan to minor: Banks do not grant overdraft / loan to a minor, even if security is
provided because a contract with minor is void, and the bank will not be able to
recover the loan.
10. Loan against FD: No loan if account self operated. If under guardianship, loan can
be granted to guardian for benefit of minor.
11. Premature payment of FD): If account self operated, it is allowed as minor can give
valid discharge.
12. Addition of name: Even when loan has been raised on a term deposit in the name
of a major person, the request for addition of the name of the minor can not be
entertained till loan is adjusted.
13. Ratification of agreement by minor: A minor cannot ratify an agreement after
attaining majority.
14. Loan for education: A contract for the supply of necessities of life like food, clothes,
education to a minor is a valid contract.
15. Loan to minor against Guarantee: Cannot be recovered even from guarantor.
16. Minor as Agent: Minor cannot appoint an agent. However, a minor can be appointed
as an agent and he can make principal liable by his actions. A minor can not delegate
authority in his self operated account.
17. Issue of Cheques etc: According to Section 26 of NI Act, a minor can draw or
endorse or negotiate a cheque or a bill. He can make everybody liable except
himself.
18. A minor can not appoint nominee. However, minor can be appointed as a nominee.
19. A minor cannot be full fledged partner in a partnership concern as he can not enter
into a valid contract and partnership is created by agreement.
20. A minor may be admitted to benefits of partnership with the consent of all partners.
However, the liability of the partner wilt be limited to his share in the business of
the firm and he will not liable personally for the acts of the firm.
21. On attaining majority, a minor has to give public notice within six months of
attaining majority or when it comes to his knowledge after becoming major which

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 ever is later, whether he wants to continue as a partner. If he remains silent, it
amounts to his implied consent. If he chooses to become a partner, he will be held
liable as a partner from the date he has been admitted to the benefit of the
partnership firm.
22. As minor is not partner, he cannot give stop payment instructions on a cheque issued
by partnership.
23. Accounts of a minor: A minor can have account under guardianship as well as self
operated account.
24. Accounts under gauardianship: The account will be operated by the guardian during
minority of the child and once the minor becomes major, the debit in the account
will be allowed only with the consent of minor who has become major even though
the cheques might have been issued prior to his attaining majority. In case of death
of minor, next guardian to operate the account.
25. Minor's Account with Mother as Guardian: RBI has allowed mother to open and
operate all types of deposit accounts even though the father is alive and no consent
of father is required for such accounts.
26. Self operated account of minor: A minor can open self-operated deposit account
provided he has completed the age of 10 years and is literate. He can not appoint
nominee in this account. On his behalf nomination will be done by a person legally
competent to act on his behalf. Joint account is also allowed in the name of two
minors provided both are of 10 years of age, are literate, belong to the same family
and operation is jointly. In case of death of minor, payment to legal heirs of minor.
27. A bearer cheque presented for cash payment by a minor may be paid as a minor can
give a valid discharge in the capacity of the payee.

Accounts of Visually Challenged (Blind) Persons

1. A visually challenged person is competent to the contract like any other person.
2. Signature or thumb impression of the blind person should be attested by an
independent witness to the effect that all terms and conditions were properly
explained to the blind person in his presence.
3. Cash deposit and withdrawal by blind person should be handled by the officer of
the bank.
4. RBI has advised banks to ensure that all the banking facilities such as cheque book
facility including third party cheques, ATM facility, Net banking facility, locker
facility, retail loans, credit cards etc. are invariably offered to the visually
challenged without any discrimination.
Accounts of Illiterate Persons
1. An illiterate person is competent to contract like any other person.
2. Cheque book is not issued to illiterate depositor for cash payments.
3. Cheque book can be issued for making statutory payments, post dated cheques for
repayment of instalments of loan. In such cases, the cheques will be crossed account
payee and thumb impression of the illiterate depositor will be verified on such

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 cheques at the time of issue of cheque book by competent authority of the bank.

Joint accounts
1. Either or Survivor (E or S): It means anyone can operate the account till both are
alive. After the death of either of them, the bank can pay the balance to the survivor
without any formality.
2. To be operated iointly: Account witl be operated by both jointly till both are alive
and, if one of the two expires, the bank would pay the final balance to the survivor,
along with all the legal heirs of the deceased.
3. Jointly or by Survivors: Account can be operated by both / all the person jointly
during their lifetime and, in the event of death of any one, the balance is payable to
the surviving persons jointly.
4. Former or Surv'ivor: In such accounts, till the first named person is alive, the second
named person has no right to withdraw/operate the account. After the death of the
first named person, the payment will be made to second named person.
5. In case of "either" or "either or survivor' or "joint" operation any one of the account
holders can stop payment of the cheque. The revocation in case of either or either
or survivor can be done by either but in case of joint operation, revocation has to be
done by all jointly.
6. In case of former or survivor cheque can be stopped by former and revocation of
stop payment can also be done by former only.
7. In case of "either of survivor' alteration on the cheque can be confirmed by any of
the account holders. In case of former or survivor it can be confirmed only by former
and in case of joint operation by both.
8. If in a joint account any one becomes insane (Pagal), operation in the account will
be suspended and balance will be payable to the other account holders alongwith
guardian of insane appointed by court.
9. Any authority to a third party has to be with the consent of all joint account holders.
10. Premature payment of FDR: In all cases it will be consent of all account holders
unless mandate has already been taken that any one take premature payment.
11. 1 1 Loan against FDR: In all cases it will be consent of all account holders unless
mandate has already been taken that any one take raise loan singly.
12. 12 Joint accounts are joint property. Therefore, unless there is clear mandate in the
account opening form that any one can undertake the following functions, these
should be done by atl joint account holders jointly under signatures of all (a)
opening the account (b) closure of account (c) making or altering nomination (d)
raising loan against term deposit (e) premature payment of term deposit
Transaction Either or survivor Former or survivor Joint operations
Stop payment Any one Former Any one
Request for loan All jointly All jointly All jointly
Premature payment All jointly All jointly All jointly
of FDR

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Payment on death Survivor Survivor Survivor with legal
SB/CA heirs
Death - FDR Survivor with legal Survivor with legal Survivor with legal
Premature heirs heirs heirs
Closure of account All jointly All jointly All have to sign
Nomination All to sign All to sign All to sign
Payment in case of Survivor till any of Survivor, till any of Survivor & legal
them them heirs till a
Attachment order Each liable Each liable Each of them liable
proportion- proportion-
Garnishee order Order in joint Order in joint Order in joint
names only names names
Partnership Firms

1. Partnership is governed by Indian Partnership Act 1932.

2. Partnership is created by agreement.
3. Partnership is created to run a business for profit.
4. Minimum number of partners is 2. As per Companies Act 2013, maximum partners
can be 100. (Earlier maximum partners could be 10 for banking business and 20 for
other business).
5. As per section 1 1 of Companies Act, 2013 an association of more than 100 persons
will be an illegal association.
6. Who can become a partner: An individual other than minor, partnership firm,
limited company.
7. Who can not become a partner: Minor, insolvent, insane cannot become partner
because they are not competent to contract.
8. Though a minor cannot become partner, he can be admitted for sharing the benefits.
He has no personal liability. On attaining majority, minor gets 6 months (from date
of majority or date of his knowledge about his admission for benefits, whichever is
later), to decide, whether he wants to be a partner. If he chooses to be a partner, his
liability begins from date of his admission for benefits i.e. when he was minor.
9. As per Supreme Court Judgement, HUF can not become partner as HUF can not be
liable for action of others. As per RBI, NBFC cannot become partner.
10. Trust can not become partner because partnership is established for business.
11. A partnership firm is registered with registrar of firms.
12. Registration of a partnership firm is optional. It is not necessary that the firm be
registered. But an unregistered firm can not file suit against others for recovery of
its deht whereas others can file suit against the firm. Therefore, while granting loans
banks prefer that the firm should be registered one.
13. Implied Authority: As per section 19 of the Partnership Act, 1932, a partner of a
firm has implied authority to act on behalf of the firm for the normal business of the

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 firm and bind the firm.
14. What is not included in Implied authority: A partner's implied authority does not
cover (a) admission of any liability in a suit against the firm (b) withdrawal of any
suit filed on behalf of the firm (c) acquire/transfer any immovable property on
behalf of the firm (d) submitting a dispute relating to the business of the firm to
arbitration (e) opening a bank account on behalf of the firm in his own name (f)
compromising on behalf of a firm (g) entering into partnership on behalf of the firm.
But if all partners agree for these issues and authorize any one in this regard, these
jobs can be undertaken by the said partner.
15. Liabilitv of a partner: Every partner is liable, jointly with all other partners and also
personally, for all acts of the firm while he is a partner. His liability is unlimited.
16. Operational Aughority.: In Partnership accounts operation authority is given by all
partners.
17. Any change in the operational authority is also with the consent of all partners.
18. Partner can not delegate authority.
19. Every partner including a sleeping partner has authority to stop payment of a cheque
issued by another partner of the firm but revocation can be done only as per
operational authority.
20. A partner is the agent of the firm for the purpose of business of the firm and all his
action in the course of business will be binding on other partners also.
21. Death of a partner: On the death of a partner, the partnership is dissolved.
22. The cheques signed by the deceased, insane or insolvent partner will be paid after
obtaining consent of surviving partners.
23. if the account is in credit, operations are allowed for winding up of the firm.
24. It the account is in debit, operations in the account should be stopped to retain
liability of the deceased linsolvent partner or his/her estate and to avoid operations
of the Clayton's rule.
25. Assets of the firm are first used to meet the liability of the firm. Surplus if any, can
be distributed and used to meet the personal liability of the partners. Assets of the
partners are first used to meet the liability of the partner. Surplus if any, can be used
to meet the liability of the firm.
Limited Liability Partnership
 Minimum members -2; Max — No limit
 Liability of partners restricted up to amount agreed to be contributed by the
partner.
 Limited Liability partnership is registered with Registrar ot Companies.
Limited Companies
1. A limited company is an artificial person with perpetual succession incorporated
under the Companies Act.
2. Company is a legal person, created through process of incorporation for which
Registrar of Companies issues Certificate of Incorporation.
3. Shareholders are owners of the Company and directors are agents of the company
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 to manage company.
4. A limited company may be private limited or public limited.
5. Members in a private limited comoany (as per Companies Act 2013): Minimum 2;
Maximum excluding employees can be 200 (earlier as per Companies Act 1956 it
could be 50)
6. Members in a public limited companv: minimum 7 and there is no ceiling on
maximum number.
7. Number of Directors: A private limited company should have minimum 2 directors
whereas a public limited company should have minimum 3 directors. No limit on
maximum number of directors. As per Companies Act 2013, if directors are more
than 15, company is required to pass a special resolution. No permission required
from central govt. As per Companies Act 2013, minimum one director should be
woman, one director as resident and in case of listed companies minimum one third
directors should be independent directors. An individual can become director of
maximum 20 companies but not more than director of 10 public companies.
8. Public company: When minimum 51% shares with government.
9. Main difference between Private and Public limited company: Transferability of
shares. Shares of a public limited company are transferable and are quoted on the
stock exchange while in case of a private limited company these are transferable
only among the members and are not quoted on stock exchange.
10. Documents for opening the account: Memorandum of Association, Articles of
Association, Certificate of Incorporation, Certificate of Commencement of
Business (only for public limited companies) and Board Resolution. KYC norms to
be applied on all persons authorized to operate the account.
11. Memorandum of Association: It contains name of the Company, its authorised
capital, registered office and liability of shareholders, objects of the company etc.
12. Ultra Vires: Anything done by the directors beyond the objects stated in the
memorandum of association is called ultra-vires the company. The company will
not be liable for such actions. These can't be ratified even in a general body meeting.
Therefore, directors can borrow only for the objects mentioned in the memorandum
of association.
13. Articles of Association: lays down the internal working of the company like rights
and powers of the rules of conducting meetings, borrowing power of directors etc.
14. Borrowing Power of Companv: Company's borrowing powers arise from
Memorandum of Association. Hence shareholders have unlimited borrowing
powers.
15. Borrowing Power of Directors: Board's borrowing powers are stated in the Articles
of Association. Where it is not mentioned, these are equal to paid up capital and
free reserves of the Company. Where Board wants to borrow beyond the paid up
capital and free reserves of the company, it has to seek consent from shareholders
under section 180 (1) of Companies Act 2013 by way of resolution in general body
meeting of shareholders. However, short term borrowings like cash credit,
overdraft, BP limit are not covered under this provision.
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 16. Constructive Notice: As per doctrine of 'Constructive Notice' anybody dealing with
company is assumed to have knowledge of Memorandum and Articles of
Association.
17. Certificate of Incorporation: It is just like birth registration certificate of the
company issued by Registrar of Companies
18. Certificate of Incorporation is issued by Registrar of Companies.
19. This is the most important document. A company does not exist without it. If an
account is opened without this certificate, the bank will hold the amount as trustee.
20. Certificate of commencement of business: is issued by Registrar of companies.
Earlier, Certificate of Commencement of Business was required only by public
limited companies.
21. As per Companies Act,2013 no certificate will be issued by ROC. Instead both
private limited and public limited companies will file a declaration with ROC before
starting business
22. Resolution of Board of Directors is passed by the Board of Directors authorising
opening and operation of the account by named officials of the company. A copy
of the resolution should be attested by its Company Secretary and / or Chairman of
the meeting at which resolution was passed.
23. Operational Authority: The operational authority is decided by Board Resolution.
24. Any change in operational authority is also as per Board Resolution.
25. Stop payment of a cheque and revocation of stop payment will be as per operational
authority.
26. The directors can not delegate their authority to any other person.
27. In case a director dies, the cheques signed by him presented for payment can be
paid if these are dated prior to his death.
28. If a director stops authority of other director it is of no use. Bank will allow
operations as per Board Resolution. 29 Common Seal of the Company is to be
affixed on documents as per Articles of Association or Board Resolution.
29. Cheque favouring company should not be credited to the personal account of the
director. Such cheques should not be paid in cash. These should be credited to the
account of company only.
Registration of Charqe:
a. In case of advance against security of a limited company, charge is required to be
registered with Registrar of Companies under section 77 of Companies Act 2013.
b. Charge is required to be registered if advance is against hypothecation, or mortgage
of property or assignment of debt. Charge is not required to be registered if advance
is given against Lien, pledge of goods or securities or against Fixed Deposits.
c. The particulars of the charge should be filed with the Registrar of companies in
whose jurisdiction the Registered Office of the Company is located. For example,
a company having its registered office at Jaipur shall have to file particulars of
charge with ROC Jaipur though loan might have been availed from a bank in Delhi
and security may be located in any other state.

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 d. For filing particulars of fresh charge and for modification of charge Form No. CHG
1 (earlier form no 8) is required.
e. Particulars of charge should be filed with Registrar of Companies (ROC) within 30
days of creation of charge. It is the primary duty of the company to get the charge /
modification of charge / satisfaciton of the charge registered with ROC. However,
if the company does not get the charge registered, bank in its own interest can file
particulars of charge.
f. In case the particulars are not filed, the bank becomes the unsecured creditor against
the officiat liquidator.
g. When charge in favour of two banks is registered, the priority of the charge is from
the date of creation of charge (i.e. date of documents) and not from the date of
registration if the charge is registered within the stipulated period.
Hindu Undivided Family (HUF)
1. HUF is neither a legal person nor a natural person. It is not created by agreement.
It is not incorporated under any Act. It is from a common ancestor and membership
is by birth or adoption.
2. The eldest member of family is the Karta and others are co parceners. Daughter can
also be Karta.
3. Seniormost member continues to be Karta even when he/she lives outside India.
4. Operational authority to operate the account is with Kana.
5. Karta can appoint any other coparcener or third party to conduct business of HUF
and/or operate the account.
6. Co parcener can not stop payment of the cheque unless he is authorized to operate
the account.
7. Karta is personally liable.
8. The liability of a co parcener is limited up to his share in the firm. He is not liable
personally.
9. HUF can not be partner as per Supreme Court Judgement.
Trusts
1. Trusts can be of two types - private trusts where beneficiaries are certain specified
individuals or groups and public trusts where beneficiary is public at large.
2. Private trusts are governed by Indian Trust Act, 1882, public trusts are governed by
Public Trusts Act of the concerned state.
3. The document creating a trust is called 'trust deed'. Public Trusts are registered with
the Charity Commissioner.
4. The operation and other aspects of the bank account are to be conducted as per the
Trust Deed. If trust deed is silent about operational authority, all trustees have to
operate the account jointly.
5. Stop payment will be as per operational authority. Revocation of stop payment as
per operational authority.
6. Trustees can't delegate their powers to an outsider even by mutual consent.
7. Loan to a trust: Loan can be allowed provided it is permitted by Trust Deed and it

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 is for the purposes of Trust.
8. On the death of a trustee, the trust property is passed on to the next trustee while in
the event of death of sole trustee or last surviving trustee, the court can appoint a
trustee.
9. Death or insolvency of a trustee does not affect the trust property and the bank can
pay cheques issued by the deceased trustee prior to his death.
Clubs and Societies
1. For opening account of Clubs and Societies bank will require Certificate of
Registration, Bye laws of the Society, and resolution of Managing Committee or
Executive Committee.
2. Operational Authority will be as per resolution of Managing Committee.
3. Change in Operational authority as per resolution of Managing Committee.
4. Stop payment and revocation of stop payment as per Operational Authority.
5. Cheque signed by the secretary or treasurer or president of society and presented
after his death can be paid if otherwise in order.
Account of Executors and Administrators
1. An executor is a person named by the deceased in his will to mange his estate
whereas an administrator is appointed by the court of law for the same purpose
where the deceased dies without leaving behind a will (intestate).
2. In the eyes of law, executors and administrators, unlike trustees are treated as one
person. On opening a bank account, therefore, executors/administrators can
authorise any one or more of them to operate the account.
3. On the death of an executor or administrator, the surviving executor(s) or
administrator(s) can continue to operate the account unless otherwise provided for
in the will or letter of administration.
4. While opening the account of an executor, bank should obtain letter of probate,
which is an official confirmation of the will of the deceased by a court of law. For
opening account in the name of administrator(s), letter of administration is required
which is issued by the court of law.
Mandate and Power of Attorney
1. When an account holder authorises another person through a simple letter of
authority, it is called mandate. On the other hand, power of attorney is executed on
stamped paper and may cover any other transactions besides opening/operation of
an account. Bank generally accept mandates.
2. The account holder can revoke mandate or power of attorney any time even if it is
stated to be irrevocable.
3. Any cheque signed by the agent and presented after cancellation of authority shall
not be paid.
4. Power of attorney or mandate is revoked by death, insanity, insolvency of the
Principal. Any cheque signed by the principal or agent presented after the death,
insanity or insolvency of the principal will not be paid.
5. In case Cheque issued by the agent is presented for payment after his death, insanity
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 or insolvency, the same can be paid so long as the principal is alive provided the
cheque is otherwise in order and is dated prior to the date of death or insanity of the
agent.
6. Agent can not delegate authority to a third party.
Death of a Customer and Settlement of Claims
1. In the case of death of individual customer, operation in the account should be
stopped. Any cheque presented after the death of individual account holder should
not be paid as bank's authority to pay the cheque is terminated in case of death,
insanity or insolvency of individual customer.
2. The payment should be made to nominee if there is nomination. If there is no
nominee but will has been written by the account holder, then the person named in
the will be required to bring Probate from competent court. The person named in
the will or probate is called Executor. In this case payment should be made to
executor.
3. When a person dies without writing Will, he is said as having dies intestate. In this
case, payment will be made to legal heirs.
4. RBI has advised that for making payment of balance in the account of deceased
customer to legal heirs of the deceased, Succession certificate is not mandatory for
any amount. Bank has to satisfy about legal heirs. For delivering contents of locker
or safe custody, Letter of Administration is required.
5. While delivering contents of locker or safe custody, inventory should be prepared.
If some sealed packet is found in the locker of safe custody, it should be delivered
as it is without opening the same.
6. The claim should be settled and payment should be made within 15 days from the
date of receipt of completed papers.
7. If any credit is received in the account after death of customer, it should be credited
to a separate account in the name of customer with the permission of legal heir or
nominee. Otherwise it should be returned to remitter under intimation to the legal
heir or nominee.
8. Pre-mature payment of term deposit can be allowed but no loan can be allowed.
9. Interest in case of current account should be paid at Saving rate from date of death
till date of payment.
10. In case of term deposits, up to due date interest should be paid at contracted rate.
For overdue period, interest should be paid at applicable rate on date of maturity if
the death was before maturity and at saving rate if the depositor died after maturity.
KNOW YOUR CUSTOMER (KYC) GUIDELINES
1. KYC guidelines have been issued by RBI under Section 35A of the Banking
Regulation Act, 1949 (and Rule 7 of Prevention of Money Laundering Rules)
keeping in view the recommendations of Financial Action Task Force
2. Objective: The objective of KYC guidelines is to ensure Anti Money Laundering
(AML) and Combating Terrorism Finance (CTF) and risk management.
3. Banks should frame their KYC policies incorporating the following four key

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 elements: Customer Acceptance Policy; Customer Identification Procedures;
Monitoring of Transactions; and Risk management.
4. While opening the account, bank should obtain photograph for the purpose of
identification, proof of identity and proof of address. If address on proof of identity
is same as on Account opening form then separate proof of address is not required.
5. Documents for identity of the customer: (i) Passport (ii) PAN card (iii) Voter's
Identity Card (iv) Driving Licence (v) Job card issued under NREGA (vi) Aadhar
card issued by the Unique Identification Authority of India (vii) Any document as
notified by the Central Government in consultation with the regulator
6. Documents for proof of address: For proof of address also same documents as
mentioned in proof of identity should be used.
7. One Documentary Proof of Address: Customers may submit only one documentary
proof of address (either current or permanent) while opening a bank account or
while undergoing periodic updation. In case the address mentioned as per 'proof of
address' undergoes a change, fresh proof of address may be submitted to the branch
within a period of six months. In case the proof of address furnished by the customer
is not the local address or address where the customer is currently residing, the bank
may take a declaration of the local address on which all correspondence will be
made by the bank with the customer. No proof is required to be submitted for such
address for correspondence/local address. This address may be verified by the bank
through 'positive confirmation' such as acknowledgment of receipt of (i) letter,
cheque books, ATM cards; (ii) telephonic conversation; (iii) visits; etc.
8. Transfer of account or change of address: No proof of new address required. In the
event of change in this address due to relocation or any other reason, customers may
intimate the new address for correspondence to the bank within two weeks of such
a change.
9. Customers should be categorised into low, medium and high risk customers.
10. High risk customers include Politically Exposed persons, High Net worth
individuals, NGO, Trust etc.
11. Low risk customers include salaried persons, pensioners, no frill accounts and
Government departments.
12. Risk review of customers: Bank should review the risk profile of the customer at
least once in six months.
13. Introduction is not necessary for opening accounts.
14. Periodical updation of customer identification data: Full KYC exercise will be
required to be done at least every two years for high risk individuals and entities, at
least every eight years for medium risk individuals and at least every ten years for
low risk individuals. However, physical presence of the clients may, not be insisted
upon at the time of such periodic updations. Positive confirmation has been
dispensed with. Fresh photographs will be required to be obtained from minor
customer on becoming major.
15. Small accounts: As per PMLA guidelines, a small account is one in which balance
will not be more than Rs 50,000; credits in a Financial year not more than Rs 1 lac;
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 withdrawals or transfers in a month not more than Rs 10,000. These accounts can
be opened with self attested photo and self attested address. Foreign remittances
cannot be credited to these accounts.
16. Basic saving bank deposit account: No minimum or maximum balance or restriction
on credits in a year but maximum number of withdrawal in a month 4 times without
any limit on amount of withdrawals. Other saving bank accounts in that bank to be
closed within 30 days of opening Basic Saving Bank Deposit account.
17. Foreign students studyinq in India: Non Resident Ordinary (NRO)) bank account to
be opened on the basis of his passport along with a photograph and a letter offering
admission from the educational institution. Foreign student should submit a valid
address proof giving local address, in the form of a rent agreement or a letter from
the educational institution as a proof of living in a facility provided by the
educational institution within 30 days of opening the account. During the 30 days
period, maximum credit of foreign remittances up to USD 11000 and maximum
monthly withdrawal to Rs. 50,000/-, pending verification of address.
18. Simplified Measures for KYC: 'Simplified measures' may be applied to verify the
identity of the 'Low risk' customers and for this purpose following documents shall
be deemed to be 'officially valid documents for proof of identity and address: (i)
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; (ii) letter issued
by a gazetted officer, with a duly attested photograph of the person.
19. Time for completing KYC Norms: Where a customer categorised as low risk
expresses inability to complete the documentation requirements on account of any
reason that the bank considers to be genuine, and where it is essential not to interrupt
the normal conduct of business, the bank may complete the verification of identity
within a period of six months from the date of establishment of the relationship.
20. Any remittance of funds by way of demand draft, MT/TT or any other mode and
issue of travelers' cheques for value of Rupees fifty thousand and above should be
only by debit to the customer's account or against cheques and not against cash
payment.
21. Monitoring of Transactions & Reporting to FIU (Financial Intelliaence Unit)
22. Record of transactions: Branches should maintain proper record of all cash
transactions (deposits and withdrawals) of more than Rs.10 lakh.
23. Banks should send report of alI cash transactions (deposit or withdrawal) of more
than Rs 10 lakh (Cash transaction report -CTR) to FIU— India within 15 days from
the close of the month to which it pertains.
24. Series of Transactions: Banks should maintain proper record of all series of cash
transactions integrally connected to each other which have been individually valued
below rupees ten Lakhs or its equivalent in foreign currency where such series of
transactions have taken place within a month and the monthly aggregate exceeds
rupees ten lakhs or its equivalent in foreian currency. Such transactions should be
reported to FIU on CTR. However, while filing CTR, details of individual cash
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 transactions below rupees fifty thousand may not be indicated.
25. Suspicious Transactions: In respect Of suspicious transactions involving any
amount, report called as Suspicious Transaction Report (STR) should be sent within
7 days from the date of transaction.
26. Counterfeit currency notes: All Cash transactions where forged or counterfeit
currency notes or bank notes has been used as genuine or where any forgery of
valuable security or a document has taken place facilitating the transactions, it
should be reported by the 15th day of the succeeding month.
27. Preservation Period of Records: The record of transactions repotted to FIU should
be kept for 5 years from the date of transaction between the bank and the client.
Banks should also maintain records pertaining to the identification of the customer
and his address (e.g. copies of documents like passports, driving licenses, PAN card,
etc.) for at least 5 years after closure of account.
28. Banks are to appoint a Sr. Mgmt. Officer, to be designated as Principal Officer
responsible for monitoring and reporting.
29. Cross border wire transfers: All cross border wire transfers of the value of more
than rupees five lakhs or its equivalent in foreign currency where either the origin
or destination of fund is in India to be reported to FIU.
30. Hard or Soft copy of Record: Banks may maintain records of the identity of clients,
and records in respect of transactions-with its client in hard or soft format.
31. Rely on third party due dilience: For identifying and verifying the identity of
customers, banks may rely on a third party provided (a) the bank takes adequate
steps to satisfy that copies of identification data will be made available from the
third party upon request without delay; (b) the bank is satisfied that such third party
is regulated, supervised or monitored for compliance with client due diligence and
record-keeping requirements. The bank is ultimately responsible for client due
diligence.
32. Central KYC Records Registry (CKYCR): The KYC records received and stored
by the CKYCR could be retrieved online by any reporting entity across the financial
sector for the purpose of establishing an account based relationship. Every reporting
entity shall within three days after the commencement of an accountbased
relationship with a client, file the electronic copy of the client's KYC records with
the Central KYC Records Registry. The Central KYC Records Registry shall issue
a KYC Identifier for each client to the reporting entity, which shall communicate
the KYC Identifier in writing to their client. Where a client, submits a KYC
Identifier to a reporting entity, then such reporting entity shall retrieve the KYC
records online from the Central KYC Records. Registry by using the KYC
Identifier shall not require a client to submit the same KYC records or information
or any other additional identification documents or details.
33. In case of marriage, a document shall be deemed to an "officially valid document"
even if there is a change in the name subsequent to its issuance, provided it is
supported by a marriage certificate issued by the State Government or a Gazette
notification, indicating such a change of name.
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 NOMINATION FACILITIES IN CUSTOMERS' ACCOUNTS
1. Provisions relating to nomination are contained Section 45ZA to 45ZF of the B R
Act.
2. Nomination facilities are available in deposit accounts (Sec 45 ZA & 45ZB), in
respect of articles deposited for safe custody with the bank (Sec 45ZC & 45ZD) and
in locker accounts (45ZE & 45ZF)
3. Where façility is available: Nomination facility is available in all types of deposit
accounts like SB, CA, FD, RD, foreign currency accounts of individuals and
accounts of NRI like NRE, FCNR(B) and NRO.
4. Who can nominate: Account should be in individual capacity or joint account of
individuals or a sole proprietorship firm.
5. Who çan not nominate:The facility of nomination is not available in partnership
accounts, HUF, deposit accounts of clubs/societies/limited companies/trusts. A
minor can not appoint a nominee. On his behalf, nomination facility can be
exercised by the person legally competent to act on behalf of the minor.
6. Who can be nominee: Only an individual can be appointed nominee. He can be
Resident or Non-resident. He or She can be minor, very' old person or even an
insolvent person. If nominee is a minor, the depositor has to appoint a major person
to receive deposit amount / articles in the safe custody / locker etc. on behalf of the
minor nominee in the event of death of the depositor.
7. Who can not be nominee: Trust, HUF, Ltd Co, Partnership, Society.
8. Number of nominess: the case of deposit accounts there can be only one nominee
irrespective of the fact whether deposit account is in single name or joint names and
also irrespective of operating instructions in the joint accounts.
9. In the case of articles deposited for safe custody only one nominee is permitted if
account is in the name of a single person. In case articles are deposited by more
than one person, nomination facility is not available. Nomination not allowed in
joint Safe Custody account.
10. In the case of locker accounts in single names or in joint names where under contract
of hire, operation is allowed to any one or more of locker holder(s)/survivor(s),
nominee can be only one. However, in locker accounts in joint names where
operations are 'jointly, by 2 or more of such hirers, more than one nominee can be
appointed.
11. Nomination can be made any time from opening of account to closure of account.
Nomination once exercised can be changed, cancelled or modified by the
depositor(s) at any time and any number of times. In case of more than one
depositors, all such acts require their joint consent.
12. When does the right of nominee start?: Right of a nominee starts only after death of
all depositors/locker holders/safe custody article lodger. In case of either or survivor
accounts payment should be made to survivor and in case of jointly operated
accounts, if one dies, payment to survivor alongwith legal heirs of deceased. The
only exception is the nominee(s) in case of jointly operated lockers. In that case,
right of nominee(s) starts immediately after the death of any of the hirers.
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13. Witnessing of nomination: In the case of illiterate account holder nomination is
required to be witnessed by two persons but in case of account in the name of a
literate person no witness required.
14. Status of nominee: The status of nominee is just like trustee of legal heirs. He does
not become absolute owner of the amount or items lying in safe custody or in safe
deposit vault. Nominee can not get his name added or get his name substituted or
renew FDR. He can not raise any loan against FDR. However, Nominee is entitled
to premature payment of deposit and no penalty is levied in effecting premature
payment to nominee.
15. Legal Heir versus nominee: When both nominee and legal heirs approach the bank
for getting payment after the death of depositor or locker holder, bank will make
payment to the nominee and not to legal heirs unless there is a court order to make
payment to legal heirs, Bank gets a valid discharge by payment to nominee.
16. Formalities for making payment to nominee: In case of death of depositor, nominee
has to submit following documents (a) Copy of death certificate (b) claim form (c)
Identification which can be done by 1st class Magistrate or Gazetted officer or by a
bank officer or any two persons known to bank. While delivering contents of locker
or safe custody, if any sealed packet is found, the same should be delivered without
opening the same.
17. In case of term deposits, there is no need of fresh nomination in the case of renewal
of FDR.
18. In the case of accounts in the name of single persons, nomination must be obtained.
If the depositor does not want to nominate any body, a written letter should be
obtained from him in this regard. In case the person opening the account declines
to give such a letter, the bank should record the fact on the account opening form .
19. Banks should acknowledge the receipt of the duly completed form of nomination,
cancellation and / or variation of the nomination. Such acknowledgement should be
given to all the customers irrespective of whether the same is demanded by the
customers.
20. Banks should incorporate the legend "Nomination Registered' on every pass book
or deposit receipt so as to enable the relatives to know that the nomination facility
was availed of by the deceased depositor.
21. In addition to the legend "Nomination Registered", banks should also indicate the
name of the Nominee in the Pass Books / Statement of Accounts / FDRs, in case
the customer is agreeable to the same.
22. In case of joint deposit account, all persons to sign the nomination.
23. Nomination forms: For nomination — Deposit accounts DA1, Safe Custody SC1,
Locker SL1
BANK OMBUDSMAN SCHEME 2006
1. The Ombudsman Scheme has been started by RBI under section 35 A of B R Act.
2. Applicable all Scheduled Commercial Banks including Private sector banks and
foreign banks, RRB/Coop Banks (including J&K State)

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3. Ombudsman is appointed by RBI. The appointment will be for 3 years at a time.
4. Who can be Ombudsman?: The Chief General Manager / General Manager of RBI
5. The expenses of the Ombudsman will be borne by RBI.
6. Scope - Complaints relating to deficiency in service in deposit, ancillary services,
non adherence of RBI guidelines on advances, delay in sanction or disbursement,
time schedutes, credit card and direct selling agents. The scope of scheme has been
extended to internet banking , violation of code of banking services.
7. Before making a complaint to the Ombudsman, the complaint will be made to the
bank. The complainant can file the complaint with the Ombudsman if no reply is
received within one month of lodging the complaint with bank or reply received is
not satisfactory.
8. Maximum period within which complaint can be filed is 1 year from the date of
receiving the reply from the bank. In case reply is not received from the bank,
complaint can be lodged within 13 months from the date of making the complaint
to the bank.
9. Ombudsman will not entertain a complaint where (a) case is pending in the court
(ii) case has already been decided by the court (iii) similar case has already been
decided Ombudsman.
10. Procedure: On receipt of complaint views of bank called to promote settlement by
agreement. If not settled within 1 month, Ombudsman shall announce award. Role
of the Ombudsman is that of Arbitrator with mutual consent.
11. Maximum amount of award: Rs 10 lakh. In case of credit card maximum claim is
Rs 1 lakh.
12. The complainant should accept the award within 30 days of receipt of the copy of
the award. The award shall not be binding on a bank unless the complainant gives
acceptance within 30 days from the date of receipt of copy of award.
13. If complainant accepts the award, the bank should implement the award within 1
month of receipt of acceptance from the complainant and intimate compliance to
the Banking Ombudsman.
14. If Ombudsman rejects the complaint or award is not acceptable to the complainant,
he can file an appeal to the Appellate authority (Deputy Governor, RBI) within 30
days of the of the date of receipt of communication regarding award or rejection of
the complaint.
15. Bank may also file appeal with Deputy Governor, RBI within thirty days from the
date on which the bank receives letter of acceptance of Award by complainant.
16. In the case of bank, appeal may be filed by a bank only with the previous sanction
of the CMD or ED or CEO of the bank.
17. Non-implementation: If award is not implemented, report to Customer service
committee of the Board and make disclosure in balance sheet of the bank.

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 OTHER ISSUES RELATING TO CUSTOMER SERVICE
1. Delays in Cheque Clearing: (i) For local cheques credit and debit shall be given on
the same day or at the most the next day of their presentation in clearing. (ii)
Timeframe for collection of cheques drawn on state capitals / major cities / other
locations to be 7/10/14 days respectively.
2. Customer Committees: Branch level committees include their customers too.
Further a senior citizen may preferably be included therein. The Branch Level
Customer Service Committee may meet at least once a month.
3. Both the drop box facility and the facility for acknowledgement of the cheques at
the regular collection counters should be available to customers and no branch
should refuse to give an acknowledgement if the customer tenders the cheque at the
counters. On the cheque drop box it should be indicated that customer can deposit
the cheque at collection counter and obtain acknowledgement.
4. Banks should invariably offer pass book facility to all its savings bank account
holders (individuals) and in case the bank offers the facility of sending statement of
account and the customer chooses to get statementof account, the banks must issue
monthly statement of accounts. The cost of providing such Pass Book or Statements
should not be charged to the customer.
5. Banks should mention the address / telephone number of the branch on the Pass
Books / Statement of accounts issued to account holders.
6. Unique Customer Identification Code (UCIC) for banks' customers in India: Banks
should initiate steps for allotting UCIC to all their customers while entering into
any new relationships for individual customers to begin with, and to existing
individual customers by end-March 2014.
7. Banks should give an acknowledgment to customer at the time of receipt of Form
15-G/15-H.
CONSUMER PROTECTION ACT
1. The Act is not applicable in J&K
2. A complaint can be filed by the consumer, voluntary consumer association, Central
or State Government.
3. The objective is to address consumer's grievances against deficiency in the quality
of goods or services for consideration.
4. Limitation period for lodging the complaint is 2 years from the date of cause of
action.
5. Pecuniary jurisdiction: The Forum operates at three levels i.e. District, State or
National. For claims up to Rs 20 lac, complaint will be lodged with Distt. Forum,
for claims over Rs 20 lac up to Rs 100 lac with State Commission and for claims
more than Rs 100 lac with the National Commission.
6. Time limit — admissibility of complaint 21 days. Decision 3 months without
analysis and 5 months with analysis.
7. Penalty - Imprisonment 1 month to 3 years and fine Rs.2000 to Rs.10000.
8. Appeal — Appeal from one forum to another can be made within 30 days of the

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 order. Against Distt Forum to State Commn deposit of 50% of amount or Rs.25000,
whichever less, against State Commission, to National Commission Rs.35000 and
against National Commn to Supreme Court Rs.50000.

Settlement of claims in respect of missing persons

As per the provisions of Section 108 of the Indian Evidence Act, presumption of death can
be raised only after a lapse of seven years from the date of his/her being reported missing.
As such, the nominee / legal heirs have to raise an express presumption of death of the
subscriber under Section 107/108 of the Indian Evidence Act before a competent court. If
the court presumes that he/she is dead, then the claim in respect of a missing person can
be settled on the basis of the same.

REMITTANCES / CHEQUE COLLECTION

1. DD/TT/MT etc. are modes of remittances. DD is valid for 3 months and it requires
revalidation thereafter.
2. If DD is for Rs 20,000 or above it should be crossed account payee only.
3. Duplicate DD has to be issued to the purchaser within 14 days (fortnight) of the
request subject to completion of formalities. In case there is delay, banks are
required to pay interest for the period of delay at rates applicable to term deposits
of corresponding maturities.
4. Duplicate DD up to Rs 5000 should be issued without awaiting non-payment advice
from the drawee branch.
5. When a duplicate DD has been issued at the request of purchaser/beneficiary, the
original should not be paid but returned with the remarks. "Duplicate since issued".
6. In case both original as well as duplicate DDs are presented to the drawee branch
for payment it should pay duplicate DD and return original with the reason 'DD
reported lost and duplicate since issued and paid'.
7. The payment of a demand draft can not be stopped
8. Demand draft or Pay order of Rs 50,000 & above should be issued to the debit of
an account or cheque and not against cash.

PENSION PAYMENTS & GOVERNMENT BUSINESS

1. Pension Payment Order is the basic document sanctioning pension to a retired
employee.
2. Life certificate is obtained in November every year. Now, the Government of India
has launched "Jeevan Pramaan", a digital life certificate based on Aadhaar
Biometric Authentication. Personal appearance of the pensioner or physical Life
Certificate not to be insisted upon.
3. Banks handling government pension payments should issue a duly signed
acknowledgement to pensioners on reteipt of the life certificate submitted in
physical form.
4. Pension for the month of March is credited in the month of April. Thus, in the month
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 of April, pension is credited twice in the account of the pensioner.
5. Type of account: in the name of self or joint account with the spouse either as "either
or survivor" or "former or survivor'.

Agency Commission:-
a. i. Receipt- Physical mode-Rs.40 per transaction
ii. Emode -Rs.9 per transaction
b. Pension Payment- Rs.75 per transaction
c. Payment other than pension-6.5 Paisa per Rs.100 turnover

PUBLIC PROVIDENT FUND (1968)

 Account can be opened only in the name of individuals. Joint accounts and HUF
account not allowed.
 Account in the name of minor can be opened either by father or mother.
 Contribution: Minimum Rs 500 & maximum Rs 150000 p.a. (Max 12 instatments
in a year) Period: 15 years. Can be extended by blocks of 5 years each.
 Interest Rate for PPF at present is 8% p.a. paid on min balance between 5th and last
day of month. Nomination: Allowed. Nominees can be one or more than one.
SUKANYA SAMRIDDHI Yojana: The rules relating to scheme were notified by Central
Government on 2nd Dec 2014. These accounts can be opened with Post Office or select
branches of banks authorized for this purpose.
1. Who can open the account: Natural or legal guardian, in the name of a girl child
from the birth of the girl child till she attains the age of ten years or Girl child of 10
years and above. Birth certificate, of the girl child to be submitted. Guardian
allowed to open the account for two girl children only.
2. Amount of Deposit: Initial deposit — Rs 1000 and then in multiple of one hundred
rupees. Minimum deposit in a financial year — Rs 1000. Maximum deposit in a
financial year — Rs 150,000.
3. Period of Deposit: up to 14 years, from the date of opening of the account. The
account shall mature on completion of twenty-one years from the date of opening
of the account.
4. Interest on deposit: As notified by the Government, compounded yearly. Presently,
it is 8.5% p.a.
5. Withdrawal: up to fifty per cent of the balance at the credit, at the end of preceding
financial year for higher education and marriage only when the account holder girl
child attains the age of eighteen years.
6. Tax Benefits: Contributions made under the scheme will qualify for deduction
under section 80C of Income Tax Act subject to a maximum of Rs 150,000. The
interest income in case of these deposits is not taxable.

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DEPOSIT INSURANCE
1. Deposit Insurance is provided by Deposit Insurance and Credit Guarantee
Corporation.
2. Compulsory for all banks in India including private, foreign and co-operative banks
except Primary Agricultural societies.
3. Each depositor in a bank insured to max extent of Rs.l lac for principal and interest
held in same right same capacity (account of A& B are separate from account of B
& A) on date of liquidation/cancellation of bank's licence or date of amalgamation
'merger / reconstruction.
4. If a customer has more than one account in a bank, all his accounts will be clubbed
and maximum claim will be Rs 1 lakh in case of liquidation or amalgamation of a
bank.
5. Premium is Rs 10 paise per Rs 100 per annum payable on half yearly basis as on 31
st March (For Apr to Sept) and 30th Sept ( Oct to Mar). Thus, effectively insurance
premium is 5 paise per half year. Insurance premium is payable in advance within
2 months of beginning of the half year.
6. 100% of the premium is to be borne by bank and not by depositor.
7. Deoosits in the name of Central or State Govt. Banks and Foreign Govt not covered.
However, deposits in the name of quasi Govt bodies, local authorities like Municipal
Corporation, Statutory bodies, Govt owned corporations are covered.
TAX DEDUCTED AT SOURCE
1. Interest on deposits with banks:
a. No tax is deducted at source on interest payable on saving bank deposits.
From 1.6.2015, TDS will be applicable on interest on RD also.
b. TDS on interest on deposits: if the interest payable in a financial year exceeds
Rs 10,000.
c. TDS in banks with CBS will be on the basis of deposit in bank and not on
the basis of branch.
d. Rate of TDS: 10%; if PAN No not submitted then 20%
e. Interest paid on NRE,FCNR accounts is exempt from income tax.
f. On NRO, TDS for all accounts and on all interest payments.
g. Submission of Form No.15G/15H: For non deduction of TDS declaration on
15G (for senior citizens on 15H). If PAN no not submitted TDS will be
deductible @ 20%.
h. Senior Citizen means who is of 60 years or above and very senior citizen
means of 80 years & above.
2. TDS certificate — On deduction, T DS certificate to be issued on Form No.16-A
within 15 days from the due date for furnishing the quarterly statement of TDS.
 No surcharge or Educational Cess on TDS.
 If PAN is not submitted T DS rate is 20% wef 1.4.2010.

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  Advance tax is payable if the tax liability is Rs. 10000 or more from 2009-10.
VARIOUS PENALTIES IN TAX NON-COMPLIANCE
 If a person makes payment of FDR of Rs.20000 or above in cash: penalty equal to
amount paid. No penalty of imprisonment.
 Penalty for non-deduction of TDS on interest on deposits, by a bank: Bank shall be
assessee in default in respect of that amount, pay simple interest at 1.5% per month
on the amount of that tax before furnishing quarterly statement of each quarter (Sec
200 IT Act); Imprisonment: 3 months to 7 years. Delay in filing TDS return —
Rs.200 per day
 Non compliance of provision of PAN = Rs.10000
 Wrong reporting in TDS statement: Rs 10,000 to Rs 100,000
CHARGING OF SECURITIES
PLEDGE
1. Pledge is defined in section 172 of Indian Contract Act.
2. Pledge is the bailment of goods as a security for payment of a debt or performance
of a promise.
3. Bailment is defined in Indian Contract Act.
4. Bailment. means delivery of goods with some purpose and with the condition that
when the purpose is accomplished the goods will be delivered back to the bailor.
5. Pledge can be only in respect of movable goods like stocks. On Railway receipt also
charge is created by pledge.
6. In the case of pledge, ownership remains with the borrower; onIy possession is
transferred to the banker.
7. The bank as a pledgee must take care of the goods pledged as a person of ordinary
prudence would take of his own goods of the same value.
8. Bank can sell the goods without intervention of the court in case the pledgor fails
to repay the bank loan. But the sale can be done only after giving reasonable notice
to the pledgor.
9. Bank as a pledgee has priority in right over the goods and Bank's right of sale under
pledge cannot be extinguished even by lawful seizure of goods pledged to it.
HYPOTHECATION
1. Hypothecation is defined in Section 2 of Sarfaesi Act.
2. Hypothecation is also done on moveable property like stocks.
3. In case of hypothecation both ownership as well as possession remains with the
borrower i.e. neither ownership nor possession is transferred to the bank.
4. The charge created in Hypothecation is equitable charge.
5. When stocks are hypothecated to the bank, the charge is floating charge.
6. 60 Basic difference between pledge and hypothecation is on account of possession.

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ASSIGNMENT
1. Provisions relating to Assignment in section 130 of Transfer of Property Act
2. Assignment is transfer of right or interest to recover the debt.
3. The transferor of claim is called as the assignor and the transferee is called the
assignee.
4. Assignment is done on Book Debts, Supply Bills, LIC policy, fixed deposit etc.
5. Assignment is possible through writing only.
6. Acknowledgment required to be acknowledged by original debtor u/s 131.
7. Assignor cannot give better title to the assignee than what assignor has.
8. In case of default, the assignee can recover the actionable claim amount from the
original debtor without reference to assignor.

MORTGAGE
1. Mortgage is defined in Section 58 of the Transfer of Property Act.
2. Mortgage is the transfer of interest in a specific immovable property, for the purpose
of securing an existing or future debt.
3. The person creating the mortgage is called as the mortgagor and the person in whose
favour mortgage is created (bank) is called as the mongagee.
4. Mongage is created on immovable property like land and building.
5. Types of Mortaaae: There are six types of mortgages namely (i) Simple Mortgage
(ii) Mortgage by Conditional Sale (iii) Usufructuary Mortgage (iv) English
Mortgage (v) Mortgage by Deposit of title Deeds (Equitable Mortgage) and (vi)
Anamalous Mortgage. Of these, all mortgages except Equitable Mortgage require
registration with the Registrar of Assurances.
6. Registered Mortgage: In the case of registered mortgage (also called legal
mortgage) first a mortgage deed is written which is stamped as per Stamp Act of
the concerned state. The deed is then executed in the presence of two witnesses.
Thereafter, in terms of the Indian Registration Act 1908, it is to be registered with
the Registrar of Assurances (Sub Registrar) within 4 months of the execution.

Equitable Mortgage

a. Equitable Mortgage is created by mere deposit of title deeds of property with

intention to borrow.
b. Title deeds may be deposited by the mortgagor himself or his agent.
c. Title deeds should be deposited with the bank at Mumbai, Kolkatta and Chennai
or any other town notified by the State Government in this regard.
d. Property may be situated anywhere in India. For property located in Lucknow,
title deeds can be deposited at Chennai.
e. It is not necessary that the title deeds should be deposited with the branch or at
the place where the loan is being raised. These can be deposited anywhere in
India at a notified place.

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 f. The bank should not part with the title deeds even for a short duration at the
request of the mortgagor because if some other creditor is induced to finance on
the basis of title deeds, the bank may lose priority over the mortgaged property.
g. Equitable Mortgage does not require registration with Registrar of Assurances.
But in case of a limited company charge in respect of equitable mortgage under
Section 125 of the Companies Act, 1956 must be registered with Registrar of
Companies.
h. All mortgages in favour of bank require registration with CERSAI (established
under SARFAESI Act) within 30 days.
Advance against Shares
 Bank should not grant advance against security of partly paid shares because these
represent contingent liability. Moreover, it is prohibited by RBI.
 Amount of advance: Loans against the security of shares, should not be more than
Rs 10 lakh per borrower if the shares etc are held in physical form and not more
than Rs 20 lakh per borrower if these are in dematerialised form.
 Margin: Minimum margin of 50 percent of the market value of equity
shares/convertible debentures held in physical form and 25% for demat shares. in
case advance is granted to an employee for purchase of shares of his own company,
then the amount of advance can be up to 90% of the value.
GUARANTEE & BANK GUARANTEE
1. Guarantee is defined in section 126 of Indian Contract Act.
2. There are three parties to a contract of guarantee namely principal debtor, creditor
and surety.
3. The liability under guarantee is a contingent liability and surety is liable on default
by the principal debtor.
4. Once there is a default, the liability of the surety is co extensive with the principal
debtor. That is he is equally liable as principal debtor.
5. When a guarantor makes payment on being called by the creditor, he becomes
entitled to all rights and remedies which creditor had against the principal debtor.
This right of the surety is called Right of Subrogation.
6. When guarantee is issued for a single transaction it is called specific guarantee and
when it is issued for series of transactions it is called continuing guarantee.
7. Deferred payment guarantee is issued when the applicant purchases machine etc on
instalment basis.
8. Deferred payment Guarantee is just like financial guarantee.
LIMITATION OF LOAN DOCUMENTS
1. Period of Limitation:Time limit within which legal remedy can be sought in a court
of law to enforce the right.
2. 2. There is no limitation period in case of pledge or lien or set off.
3. Date of execution of a document is excluded for the purpose of ascertaining

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 limitation period of a document. Thus, a suit based on a DPN dated 5.4.2015 can be
filed latest by 5.4.2018.
4. If courts are closed on the day the limitation period expires, case can be filed on the
day the court reopens.
5. In case documents are signed by various partners on different dates, limitation will
start from last date of signing the documents.
6. Extension of Period of Limitation:
a. Period of limitation can be extended -by Acknowledgement of debt or part
payment. In both cases, limitation period will start from the date of
acknowledgement or part payment
b. The acknowledgment or part payment should be by the borrower himself or
his agent specifically authorized for this purpose.
c. Acknowledgement or part payment should be before the expiry of limitation
period. Once the limitation expires it can not be extended by pan payment or
acknowledgement of debt.
d. An admission of debt in the balance sheet, acknowledgement to third party,
credits on account of standing instruction also extends the period of
limitation.
e. In case limitation expires in a particular case, the liability can be revived by
obtaining fresh promise to pay the outstanding debt. Limitation period of
various documents is given below:

Descri tion Period of Limitation

Termprary Overdraft without DPN 3 years from date of loan
Demand Loan 3 years from the date of loan
Demand Promisso Note 3 years from date of DPN
Bill of exchange payable on demand 3 years from date of Bill.
Usance bill of exchange or promissory note 3 years from the due date of the bill or
PN
Suit for Money Decree 3 years from the date ri ht is due
Term Loans payable by instalments 3 years from due date of each instalment
Mortgage 12 years from the due date of the loan
Right of foreclosure by the mortgagee 30 years
Right of redemption 30 years
Cashreditagainst hypothecation or overdraft 3 years from the date of document.
against
hypothecation
Cash Credit Pledge Not applicable
An suit by State/Central Government 30 years from the date when limitation
would start
Deposit like SB, CA, FD with a bank 3 years from date of demand

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Execution of Decree 12 years from the date of decree
Recovery of loss caused by fraud 3 years from the date of detection of
fraud
Claim under Consumer Protection Act 2 year from the date ri ht accrues
Dishonour of cheque under sec 138 of NI Act 1 month from the date right accrues
Apeal to High Court against Lower court 90 days from date of decree

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 Start Up India
Objectives:
1. Bank financing for start up ventures to boost entrepreneurship and jobcreation
2. To promote ‘Ease of Doing Business’ which includes land permissions and
environmental clearances by Govt, single window clearance, 80% reduction in
patent registration fees and othertaxes
3. Rs.10,000 crorpus funds

Pradhan Mantri MUDRA Yojana (PMMY): Micro Units Development and

RefinanceAgency Ltd (MUDRA)
Bank was launched on 8 April, 2015 with a corpus of Rs 20,000 crore and a credit
guarantee corpus of Rs 3,000 crore. The overdraft amount of Rs 10000/ sanctioned under
PMJDY will also be classified as MUDRA loans.
MUDRA Bank has classified the borrowers into three segments: the starters, the midstage
finance seekers and the next level growth seekers.
To address the three segments, MUDRA Bank has launched three loan instruments:
1. Shishu: covering loans upto Rs50,000/-
2. Kishor: covering loans above Rs 50,000/- and upto Rs 5lakh
3. Tarun: covering loans above Rs 5 lakh and upto Rs 10lakh
Initially, sector-specific schemes have been confined to “Land Transport, Community,
Social & Personal Services, Food Product and Textile Product sectors”. Based on the
experience of implementation of PMMY , Ministry of Finance ,Government of India has
broaden the scope and coverage of Mudra Loan and decided to cover activities allied to
Agriculture and services under Pradhan Mantri Mudra Yojana(PMMY).Accordingly
pissiculture, beekeeping, poultry, livestock rearing,grading, sorting, aggregation agro
industries, dairy, fishery, agriclinics and agribusiness centres, food & agroprocessing etc
(excluding crop loans, land improvement such as canals, irrigation, wells)and services
supporting these, which promote livelihood and generate income shall be eligible for
coverage under PMMY.
Mudra Loan may be extended on cluster basis in addition to existing indivisual cases.
Significant Developments in Indian Banking (At a glance)
Year Development
Imperial Bank of India nationalized and renamed as State Bank of India to pave
1955 way for social banking
1962 Deposit Insurance Scheme to protect the interest of depositors was introduced
with anamount of INR 1,500/-.
Scheme of Social Control over Banks was introduced. National Credit Council
1968 was set up to set lending targets for commercial banks.

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 14 major banks with deposit base of INR 50 crores and above were nationalized
1969 so as to platform for branch expansion. Since then, population per branch came
down drastically from 65,000 in 1969 to around 15,000 in 2009.
Focus was shifted from trade and business to agricultural farm credit and small
1970 industries.
1972 Lead Bank Scheme was launched to provide impetus to rural and backward
areas. Differential Rate of Interest with low interest rate on the loans to poor
borrowers –DRI scheme was introduce with a direction of 1 percent of credit to
be under DRIscheme, 40 percent of which to go to SC/ST sectors, resulting in
significant contribution for business entity towards margin money.
1975 Five Regional Rural Banks (RRBs) set up and formulated.
Though Tandon and Chore Committee, scientific lending norms were
introduced so as to deploy the funds that were scare when credit squeeze was
prevailing and also to ensure that borrower‘s stake is crystallized.
1976 Regional Rural Bank was set up with the central government, sponsoring bank
and thestate government contributing 50:35:15 ratio in capital formation.
1978 Deposit Insurance and Credit Guarantee Corporation (DICGC) was established.
Integrated Rural Development Programme (IRDP) was launched to benefit the
1979 rural populace.
1980 Six more banks were nationalized and class banking changed into mass
banking. Twenty Point Programme was introduced to ensure efficient
production and distribution of essential goods and services to the community
and to raise income and standard of living of weaker section.
1982 NABARD and EXIM bank came into existence
1983 Scheme for Self Employment for Educated Unemployed Youth was introduced.
1985 Nomination facility introduced
1988 Introduction of capital adequacy requirements as part of Basel Committee
norms.
1989 Service area approach
1991 Financial sector reforms, akin to what is practiced in western countries, were
introduced.
Securities scam surfaced and shocked the banking sector with the undesirable
1992 link with the capital market.

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1992- Narasinhman Committee –First Report on Financial Sector reform:
1993 Income Recognition & Asset Classification (IRAC) norms introduced.
Standard assets, non- performing assets (NPAs)- substandard, doubtful and loss
assets, capital adequacy, phasing out directed credit programme, deregulation
of interest rate, slowly waning out the health code system, etc. resulted in banks
reporting net loss depending on certain norms.
1994 Photograph in deposit a/c.
1993 Deposit insurance amount raised to INR 1 lac per depositor.
1994 Introduced Board for Financial Supervision so as to focus on regulation.
1995 Put in place Off-Site Monitoring and Online Supervision (OSMOS)
mechanism.
1995 Banking Ombudsman.
New Private sector banks were allowed entry with certain stipulated minimum
1996 capital funds.
Narsimham Committee: Second Report. PSBs allowed total capital market
1998 through public issue of shares.

1999 Asset Liability Management (ALM) concepts were introduced as risk

management
2001 Term lending institutions turned into universal banks to share the cake with
PSBs.
2002 The Know Your Customer (KYC) norms strengthened to check money
launching.
Securitisation and Reconstruction of Financials Assets and Enforcement of
Security
Interest (Sarfaesi) Act was passed to strengthen the hands of banks in the
recovery of impaired loan assets, without going through the lengthy legal
process.
The first financial asset reconstruction company, viz. Asset Reconstruction
2003 Company (India) Ltd. (ARCIL) was formed.
RBI issued draft guidelines on Basel II norms released by Bank for International
2005 Settlements (BIS) in June 2004.
2007 Final RBI guidelines were issued on Basel II norms for compliance.
2008 Banks with international presence complied with the Basel II norms in March
2008 RBI set up Financial Literacy and Credit Counseling (FLCC), as a step to
encourage financial inclusion concept.

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 Banks without international presence were also required to comply with Basel II
2009 norms by March 2009.

With effect from April 2009, the foreign investors can have stake in banks, up to
a maximum of 74 percent, up from, 25 percent. As part of rationalization of
capital market public issue collection, concept of Application Supported Blocked
Amount (ASBA) is introduced.
2010 Basel III norms introduced

2013 Bharatiya Mahila Bank was inaugurated on 19 November 2013.

2014 RBI grants Bank License to BANDHAN and IDFC.

2014 Launching of PMJDY scheme

2015 Launching of MUDRA Bank

Launching of PMSBY,PMJJBY & APY by Prime Minister
2016 Launching of PMFBY (Prime Minister Fasal Bima Yojana) to give protection to
farmers at every stages. The oblective of Govt is to increase the income of
farmers double by 2020.
Parliament Passed Insolvancy & Bankrupsy code.
Demonetisation of High Value Notes of Rs.500/ & Rs. 1,000/- with an aim to
curb circulation of Black Money, Forged Indian Currency Notes & Tax
compliance on 8th
November, 2016
2017 Passage of Goods & Services Tax(GST).
Initiation of merger of five Associate Banks of SBI namely State Bank of
Bikaner and Jaipur,State Bank Of Mysore, State Bank of Patiala, State Bank Of
Travancore and State Bank Of Hyderabad along with Bhartiya Mahila Bank.
2018 Initiation of process of merger of three PSU banks namely BOB, DENA& Vijaya
Bank.

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 Lok Adalats
1. Lok Adalats are created under Legal Services Authority Act 1987
2. There is no court fees in Lok adalats.
3. Since its decisions are consent decree, no appeal can be filed against decision of
Lok Adalat.
4. Cases involving an amount upto Rs.20 lakh may be referred to Lok Adalats.
5. Type of accounts that can be referred: Suit filed and non-suit filed accounts, which
are in "doubtful" and "loss" category, with outstanding balance up to Rs.20 lakh.
6. Repayment: Preferably down-payment. Max in 1-3 years.
7. Limitation not extended by filing a case in Lok Adalat

Debt Recovery Tribunals

1. DRTs are established under the Recovery of Debts due to banks and financial
institutions Act 1993
2. The Act is not applicable to J&K.
3. DRT is headed by a Presiding Officer. He is assisted by a Recovery Officer and one
Registrar.
4. Type of Cases: Cases involving recoverable dues of banks and FIs of Rs 20 lacs and
above only are filed with DRTs. Such cases can not be filed in the normal civil
courts.
5. Any appeal against the judgement of DRT can be preferred with Debt Recovery
Appellate Tribunal.
6. The head of DRAT is called Chairperson.
7. The appeal is made within 45 days of the date of receipt of the order.
8. If borrower wants to appeal, 75% of the judgment amount is required to be
deposited which can be waived or reduced by the Chairperson of the DRAT even
to nil.
9. DRT should qualify to be district judge and DRAT should qualify to be High Court
Judge.
10. Appeal to Presiding officer of DRT against order of Recovery Officer within 30
days and appeal against Registrar within 15 days.
11. Fee: for filing case with DRT up to Rs 10 lac: Rs 12,000; For each additional Rs 1
lac or part thereof, it is Rs 1000. Maximum amount of fees is Rs 1,50,000/-
For filing appeal with DRAT, Where the amount of debt is less than Rs 10 lakh Rs 12,000;
For debts due between Rs 10 lakh to less than Rs 30 lakh Rs 20,000; For debts of Rs 30
lakh and more — Rs 30,000

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 SARFAESI ACT
Securitisation & Reconstruction of Financial Assets and Enforcement of Secuirty Interest
Act 2002.
 Applicable throughout India including Jammu & Kashmir.
 Rights of Bank: (i) take possession of the security (ii) sale or lease or assign the
right over the same (iii) Manage the same and/or appoint any person to manage the
same (iv) Recover money receivable from 3rd parties.
 Competent authoritv to enforce rights under SARFAESI is Chief Manager and
above. Board of Bank can delegate powers to lower rank official also.
 A bank can exercise rights under the Act provided following conditions are
satisfied.
a. The asset to be acquired should be charged to the bank.
b. Minimum recoverable dues: more than Rs 1,00,000/-
c. The Act is not applicable if 80% of the Principal has been paid. It means
outstanding amount should be more than 20% of the Principal amount.
d. Notice period: A notice of 60 days is required to be given before taking over
possession.
e. Consortium: tf loan from more than one bank/Fl, consent of 60% (earlier
75%) of lenders by value is required before initiating action under the Act.
No condition of number of banks. BIFR cases can be recalled back with
consent of 75% of creditors by value.
f. Agricultural Land: The Act does not cover agricultural land mortgaged to
the credit institution. (However, other assets charged to bank can be
acquired).
g. Type of account: Account should be NPA
h. The documents are within the limitation period The security is not charged
by pledge or lien
 Loans not eligible — Amount up to Rs.l lac, agricultural land as security, security
under pledge or lien and where recovery up to 80% of due amount already affected.
 Remedy to borrower: If borrower has objection against the action of the bank, bank
has to reply within 15 days (earlier one week). If borrower still not satisfied, can
file application with the DRT within 45 days of the taking over of possession by the
bank and is not required to deposit any amount with DRT at this stage.
 Bank or borrower can make appeal to DRAT within 30 days of receiving the copy
of judgement.
 If the borrower prefers an appeal with DRAT, he is required to deposit 50% ot the
bank's claim which can be reduced to 25% by the Chairperson.
 Notice after taking possession: Within 7 days of taking over of possession.
 Notice period for sale: If the bank wants to sell the acquired assets, 30 days notice
is to be given to the borrower/guarantor.
 Sale: Sale at reserve price to be fixed by bank. Below reserve price consent of the
borrower. Sale by public tenders or through public auction. If sale through public
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 auction, public notice in one English and one Hindi or Regional language paper.
Sale is confirmed by bank on receipt of 25% amount immediately and balance is
payable in 15 days.
Concept of NPA
IRAC Norms & Non-Performing Assets
Non performing assets are loans which have ceased to earn income for lending banks.
Classification of NPA
 Term Loan- if interest/installment remain overdue for a period of more than 90 days.
 Bills/ Cheque purchased- if the bills remain overdue & unpaidfora period of more
than 90 days. The entire facility along with other facilities will be treated as NPA if
any of the Bills /cheques remain overdue for more than 90days.
 Cash Credit- Overdraft account: if account remains out of order for more than90
days.
An account should be treated as ‘out of order’ –
If the outstanding balance remainscontinuously in excess of sanctioned limit/drawing
power. In cases, where the outstanding balance in the principal operating account is less
than the sanctioned limit / drawing power, but there are no credit continuously for 90 days
or credit are not enough to cover the interest debited during the same period, these accounts
should be treated as ‘out oforder’.DP allowed on the basis of stock statement older than 3
months is irregular & if this irregularity is allowed for more than 90days the account will
turn to NPA. An a/c where Review is pending for more than 180 days than also the account
will be straight way classified NPA.
Direct Agricultural advances:- A loan granted for
1. Short duration crops will be treated as NPA if the installment or interest remain
overdue for two crop seasons i.e. the period up to the harvesting ofcrops.
2. Long duration crops will be treated as NPA if the installment or interest remain
overdue for one cropseason.
Long duration crops are having crop season longer than 1 year and except long duration
crops, all others are short duration crops.
The crop season for each crop, which means the period up to harvesting of the crops raised,
would be as determined by the State Level Bankers Committee in each State.
Depending upon the duration of crops raised by an agriculturist, the above NPA norms
would also be made applicable to agricultural term loans availed of by him.
Advances under consortium: The concept of NPA is based on the record of recovery of the
individual Banks. In respect of Consortium advances or financing under multiple Banking
arrangements, each bank may classify the borrower accounts according to its own record
of recovery and other aspects having a bearing on the recoverability of the advances.
Govt. guaranteed accounts: w.e.f 01.04.2000 advances sanctioned against State Govt
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guarantees, should be classified as NPA, if the guarantee is invoked and remains in default
for more than 90 days. Advances against Central Govt. guarantee may be treated as NPA,
when the Govt. repudiates it’s guarantee when invoked.
ASSET CLASSIFICATION
PerformingAssets Non PerformingAssets

Regular Irregular Substandard. Doubtful Loss

1. Standard-not classified as NPA and carries not more than normal credit risk attached
to abusiness
2. Sub-standard-which has been classified as NPA for less than or equal to 12 months.
A sub standard a/c can not be upgraded to standard asset by just re- shedulement of
principal andinterest
3. Doubtful asset (D1)--An asset which remains as NPA for a period exceeding 12
months but less than or equal to 24months
4. Doubtful asset (D2)--If it remains in doubtful category for a period of more than
one year but less than or equal to 3years
5. Doubtful asset (D3)--- If it remains in doubtful category for more than 3years.
Loss Asset
1. An asset which has been identified as loss by the bank by internal /external/RBI
2. If realizable value of security is less than 10% of the outstanding it should be
straightaway classified as lossasset
3. Exceptional cases
4. An advance can be straightaway be classified as Doubtful irrespective of the period
it remained as NPA if there is potential threats on it’s recovery on account of
significant credit impairment like erosion of security or fraud (realizable value is
less than 50% of the value assessed) and can be classified as Loss where erosion of
security is less than 10% of the value of security as assessedearlier.
Provisions
a. Standard ---- For Direct agriculture & Direct SME it is 0.25%, for Real estate sector
it is 1% and in all other cases it is 0.40%
b. Substandard(210) general provision of 15% on total outstanding on secured portion
and 25% on unsecuredportion
c. Doubtful-1 (NPA 220)-25% of outstanding balance secured by tangible sec and
100% of the unsecuredportion.
d. Doubtful-2 (NPA 230)-40% of the outstanding bal secured by tangible sec and
100% of the unsecuredportion
e. Doubtful asset more than 3 years-D3 (270) 100% irrespective of the availability of
security
f. Loss asset(250)-100% of the outstandingbalance.

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Important clarification
1. Treatment of NPAs – Borrower wise and not Facilitywise
2. In respect of a borrower having more than one facility with a Bank, all the facilities
granted by the Bank will have to be treated as NPA and not the particular facility or
part thereof which has become irregular. Borrower wise classification i.e if one a/c
becomes NPA, all other credit facilities of the same borrower will also becomeNPA.
3. Advances against TD, NSC, LIC are excluded from the Prudential accounting
norms.
4. Interest will be due after Moratoriumperiod.
5. Provision on the balance amount in excess of the Guaranteed amount under schemes
covered by ECGC, CGTSIguarantee.
6. Non fund based facilities like LC/LG, will become NPA only after it becomes a
fund based facility and the amount remains overdue for more than 90days.
One Time Settlement Through OTS Module–I:
Eligible Accounts:
All NPA and Technically Written Off accounts, having outstanding ledger balance
upto Rs.10.00 lac, irrespective of the security. Outstanding Balance above Rs.5 Lac up to
Rs.10 Lac backed by mortgage security SARFAESI action 13(2), 13(4), DM,CMM
Permission ,E-auction sale notice should be completed .
Exclusion:
Following type of accounts will not be considered for settlement through OTS Module-I
by Branch /RLCC:
 Quick Mortality accounts (The account which becomes NPA within 12 months
from the date of first disbursement).However quick mortality accounts upto Rs.5.00
lac can be approved for compromise settlement by AGM Headed RLCC & up to
Rs.10.00 lac by DGM Headed RLCC.
 Declared Fraud accounts
 NPA account of less than 6 months old
 Accounts referred to Vigilance Deptt., HO
 Staff / staff guaranteed / staff related accounts
Computation of Minimum Recoverable Amount (MRA) under OTS Module-I:
Asset Classification of account MRA as % of Outstanding Ledger Balance as on date
and Code of OTS proposal
Substandard (210) 85%
Doubtful-1 (220) 65%
Doubtful-2 (230) 50%
Doubtful-3 (270) 35%
Loss --------(250) 25%
Technically Written Off-(270) 25%
Page 91 of 131
Deviation:
Any proposal which does not conform to the norms in respect of MRA mentioned above
and /or
involve remission of payment of interest for extending repayment period beyond 3
months,should be referred to the next higher authority and the same will be considered as
follows:
1. Deviation up to 5% of amount of MRA or / and remission of payment of interest
for extending
2. repayment period uotp 12 months - by the RLCC;
3. ii) Deviation above 5% but upto 15% of amount of MRA or / and remission of
payment of interest
4. for extending repayment period beyond 12 months- by the authority one step above
the RLCC

Eligible Accounts for Compromise under Module-II:

All NPA and Technically Written Off accounts with outstanding ledger balance of above
Rs10.00 lac Computation of Minimum Recoverable Amount (MRA) under OTS
Module – II:
Based on maximum score of 38, the “Score Obtained”

Points scored/slab Minimum Recoverable Amount (MRA)

30 & above TOD (OLB + ARO+ NSI)
Intt. @ MCLR-Y
Between 25 & below 30 OLB + ARO + NSI
Intt. @ MCLR-Y -2%
Between 20 & below 25 90% of (OLB + ARO )
Between 15 & below 20 80% of (OLB + ARO)
Between 10 & below 15 70% of (OLB + ARO)
Between 5 & below 10 50% of (OLB + ARO)
Less than 5 30% of (OLB + ARO)
The formula for ascertaining the NPV is as follows:
PV = FV/(1+r)y
where PV = Present Value; FV = Fair Market Value of security; r = Discounting rate of
interest,
i.e., MCLR-Y+ 2%)/100, y = number of years for realization of security.
NPV = PV - Cost of realization.
(Cost of realization = projected Expenses to be incurred for taking possession ofsecurities

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& its sale)
Computation of Net Book Value (NBV):
NBV of the account is arrived as below’
NBV = Ledger Balance of a/c on date of submission of OTS proposal – Interest Suspense
–Provision provided.
Fixation of OTS Amount of a proposal Under Module-II
The minimum OTS amount will be higher of the below:-
a. Minimum Recoverable Amount (MRA)
Or
b. Net Present Value (NPV) of securities
Or
c. Computed Net Book Value of the account (NBV)
Deviation clause:
a. Any proposal which does not conform to the norms with respect to Minimum
RecoverableAmount (MRA) / Net Present Value (NPV) / Net Book Value of the
account (NBV) mentioned above should be referred to the next higher authority and
the same will be considered as follows:
i) Deviation up to 5% of amount of MRA /NPV/NBV- by the next higher
authority;
ii) Deviation above 5% but up to 15% of amount of MRA /NPV/NBV – by the
authority one stepabove the authority specified above.
iii) iii) Deviation above 15% in MRA /NPV/NBV - by Cedit Approval Committee
(CAC).
b. Proposals referred to HO, where the offer amount is below the MRA NPV/NBV
will be disposed off according to the delegated Discretionary Power of different
tiers of committees at H.O.
Payment of settled amount:
Negotiation with the obligant(s) should be made to recover the entire settled amount in one
stroke.However, if the borrower/guarantor concerned desires to pay the settled amount in
installments, utmost endeavour should be to recover the entire settled dues from the
borrower/guarantor within 3(three) months. If the settled amount is paid within a period of
three months from the date of communication of sanction, no interest on the settled amount
is payable.

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 DISCRETIONARY POWER FOR WRITE OFF AND WAIVER

DELEGATES SACRIFICE WRITE-OFF

(RS.inlacs)
MCBOD FULL Write off and waiver together
Credit Approval Committee 250.00 Write off maximum Rs.125.00 lac
HLCC-1 150.00 Write off maximum Rs.75.00 lac
HLCC-2 60.00 Write off maximum Rs.30.00 lac
GM Headed RLCC 50.00 Write off maximum Rs.25.00 lac
DGM Headed RLCC 40.00 Write off maximum Rs.20.00 lac
AGM Headed RLCC 30.00 Write off maximum Rs.15.00 lac
DGM/AGM as Branch Head 20.00 Write off maximum Rs.10.00 lac
Chief Manager (Scale-IV) as 10.00 Write off maximum Rs.2.00 lac
Branch Head
Senior Manager (Scale-III) as 2.00 Write off maximum Rs.0.50 lac
Branch Head
Manager (Scale-II) as Branch 1.00 Write off maximum Rs.0.25 lac
Head
Manager (Scale-I) as Branch 0.50 Write off maximum Rs.0.10 lac
Head
QUICK and EARLY MORTALITY ACCOUNTS
The accounts, which become NPA within 12 months from the date of first disbursement,
will betreated as Quick Mortality accounts and the accounts which become NPA after 12
months butwithin 24 months from the date of first disbursement will be treated as Early
Mortality accounts.
Quick mortality in Project finance / loans where moratorium period allowed:
In such cases, the accounts which became NPA within 12 months from the date of COD
orrepayment starting date whichever is later; will be treated as Quick Mortality
accounts.Any proposal for settlement of quick mortality accounts shall be settled by the
HLCC-2 / HLCC-1/ CAC/ MCBoD under their respective DP.
Early mortality accounts shall be settled at par with the normal guidelines mentioned
hereinabove.

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SARFAESI ACT
Securitisation & Reconstruction of Financial Assets and Enforcement of Secuirty
Interest Act 2002.
1. Applicable throughout India including Jammu & Kashmir.
2. Rrights of Bank: (i) take possession of the security (ii) sale or lease or assign the
right over the same (iii) Manage the same and/or appoint any person to manage
the same (iv) Recover money receivable from 3rd parties.
3. Competent authoritv to enforce rights under SARFAESI is Chief Manager and
above. Board of Bank can delegate powers to lower rank official also.
a. A bank can exercise rights under the Act provided following conditions
are satisfied.The asset to be acquired should be charged to the bank.
b. Minimum recoverable dues: more than Rs 1,00,000/-
c. The Act is not applicable if 80% of the Principal has been paid. It means
outstanding amount should be more than 20% of the Principal amount.
d. Notice period: A notice of 60 days is required to be given before taking
over possession.
e. Consortium: tf loan from more than one bank/Fl, consent of 60% (earlier
75%) of lenders by value is required before initiating action under the
Act. No condition of number of banks. BIFR cases can be recalled back
with consent of 75% of creditors by value.
f. Agricultural Land: The Act does not cover agricultural land mortgaged
to the credit institution. (However, other assets charged to bank can be
acquired).
g. Type of account: Account should be NPA
h. The documents are within the limitation period The security is not
charged by pledge or lien
i. Loans not eligible — Amount up to Rs.l lac, agricultural land as security,
security under pledge or lien and where recovery up to 80% of due
amount already affected.
4. Remedy to borrower: If borrower has objection against the action of the bank,
bank has to reply within 15 days (earlier one week). If borrower still not satisfied,
can file application with the DRT within 45 days of the taking over of possession
by the bank and is not required to deposit any amount with DRT at this stage.
5. Bank or borrower can make appeal to DRAT within 30 days of receiving the
copy of judgement.
6. If the borrower prefers an appeal with DRAT, he is required to deposit 50% ot
the bank's claim which can be reduced to 25% by the Chairperson.
7. Notice after taking possession: Within 7 days of taking over of possession.
8. Notice period for sale: If the bank wants to sell the acquired assets, 30 days
notice is to be given to the borrower/guarantor.
9. Sale: Sale at reserve price to be fixed by bank. Below reserve price consent of
the borrower. Sale by public tenders or through public auction. If sale through
public auction, public notice in one English and one Hindi or Regional language
paper. Sale is confirmed by bank on receipt of 25% amount immediately and
balance is payable in 15 days.

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 Insolvency & Bankruptsy Code-2016
Parliament passed Insolvency and Bankruptsy Code on 11th may 2016, which came into
existence on 20th May 2016.The code created a new institutional framework which
facilitates a formal & time bound insolvency resolution process & Liquidation.
Pillar of the IBC framework:-
1. Adjudication Authority: National Company Law Tribunal(NCLT) constituted
under the Companies Act 2013 has to act as Adjudicating authority.It has 13
benches.
2. Insolvency professional: They should be registered with IBBI
3. Information utilities: Creation of information utilities to collect, authenticate and
disseminate financial information of debtors in centralized electronic data base.
4. Regulator: Insolvency Bankruptsy Board of India (IBBI):-
Key points
a. To initiate an insolvency process, default should be at least Rs.1.00 Lac.
b. Demand Notice to be issued in a prescribed manner and debtor is required
to reply within 10 days of receipt of notice and on expiry of 10 days , if
payment not received, NCLT passess orderfor initiating insolvency
resolution process.
c. NCLT orders a moratorium on the debtors operations and during this
period no judicial process for recovery takes place against the debtor.
d. NCLT appoints Interim resolution professionals who constitutes
committee of creditors(COC) .Later on COC appoints a resolution
professional who takes over the management of the company.
e. Resolution professionals prepare Information memorandum and on that
basis resolution plan is prepared which may be either approved or not
approved by COC.If not approved then liquidation order is passed by
NCLT.
f. The resolution process should be completed wiyhin 180 days which may
be extended by 90 days once.
Priority of Claim
1. The insolvency resolution process & liquidation cost in full.
2. Workmen dues pending 24 months and dues owed to secured creditor.
3. Unpaid dues owed to employees other than workmen for 12 months.
4. Debts owed to unsecured creditor.
5. Any amount due to Government.
6. Any remaining debts and dues.
7. Preference share holders.
8. Equity share holders.

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 United Housing Loan
Salient features of united Housing Loan Scheme
Eligibility: Individual of 21 to 65 years. Salaried person in regular and permanent
service, self-employed persons having at least 3 years IT return filed separately in each
financial year preferably loan should be given in joint names of two or more individuals
i.e. co-owner of the property (must) /Spouse/Parent / Children.
Purpose:
1. Purchase ready built house / flat or house or flat under construction. / purchase
of old house / flat not old over 35 years
2. Construction of house on own land / purchase of land for construction of house
within 2 years.
3. Takeover of loan from other bank/HFC.
4. Renovation/extension/repair/furnishing of house or flat.
Quantum of Loan:
Location Max.
quantu
m
Metros i.e. 300 lac
Mumbai,Delhi,Calcutta,Chennai,Bengaluru,Ahmedabad,Hyderabad,Gurg
aon,Noida and New Delhi.
Other Metro Cities 150 lac
Urban 100 lac
Semi urban 45 lac
Rural 25 lac
For Furnishing 20%
extra
High value loan (Rs 50 lac above) for purchase of flats is restricted to buy flats from
National/State level/Reputed builders/developers.
For repair of Existing House Max 10 lac and for Extension/ModificationMax15 lac and
LTV should be >=75% and margin for the additional loan should be minimum 25%.
Margin:
1. For loan amount upto 30 lac is 10%, but if the annual income of the borrower is
3 lac or
2. below then Up to 30 lacs is 25%.
3. For loan amount above 30 lacs and upto 75 lac is 20% of the project cost.
4. For loan amt above 75 lacs is 25% of project cost.
5. For purchase of land 40% of maximum eligibility of the borrower and 75% of
cost of the landwhichever is lower.

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Rate of Interest:

Tenure of Loan: For salaried as well as professional and self-employed persons-30

years or 70 years of age provided the applicant will have sufficient income generation
for repayment.
Moratorium Period: For construction of house – 12 months from 1st disbursement or
upto completion of construction (whichever is earlier). Moratorium period can be
extended upto 18 months and in case of mega project it may be extended upto 36 months
BY RLCC.
Security /Guarantee
1. Mortgage of the property financed by the Bank.
2. If mortgage of land cannot be created, homeloans may be considered
against110% liquid collateral security.
3. In case of married borrowers, spouse is to be made co-borrower/ guarantor
wherever possible.
4. In case of unmarried persons, parents are to be made co-borrower /guarantor
wherever possible.
5. Personal guarantee of 1 or 2 persons (acceptable to bank) if net worth of
borrower is less than 125% of the loan amount.
Photograph of Guarantor and that of property proposed to be mortgaged with borrower/
Co borrower, to be kept on record with documents.

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 UNITED PLATINUM HOUSING LOAN SCHEME
Our bank introduced United Platinum Housing Loan scheme to serve the Govt.
employee / Employees of statutory/regulatory bodies / PSUs in our fold as this segment
has negligible default rate and lending is secured with assurance on time return.
Scheme Code LAUPH
Target Segment Permanent Employees of State / Central Government /
Statutory & Regulatory Bodies / PSUs
Rate of Interest EBLR=0.15%
Other Terms and • The facility will be offered only to the employees of State
Conditions / Central Government Departments / Statutory & Regulatory
Bodies / PSUs etc. • Undertaking from the employer to Pay
EMI by direct deduction from Salary Bill and to remit to the
financing branch • Undertaking from the Employee
borrower authorizing his / her employer to pay EMI by
direct deduction from salary bill and to remit to the
financing branch •
All other terms and conditions as per UHL scheme.

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 SMART LOAN
ELIGIBILITY: Existing Housing Loan borrowers having completed minimum 2(two)
years of repayment schedule with a record of regular repayment and having good
repayment capacity
PURPOSE: Personal purpose including purchase of furniture/fixtures and interior
decoration of the house
QUANTUM OF LOAN: The maximum quantum of loan may be to the extent of the
principal amount of housing loan repaid subject to maximum ceiling of Rs.5lac with
condition that outstanding in both loan should not exceed the original limit sanctioned
in housing loan.
However, while fixing quantum of loan and repayment period of loan under this scheme
it must be ensured that the amount of EMI of smart loan, amount of EMI on housing
loan plus other deductions from the gross salary/income must not exceed 60% of the
borrower's gross monthly salary/income in terms of Salary Certificate /Form No.16
(Copy of IT Return). Where spouse is co-borrower in the original sanction, the gross
monthly income of both the borrowers shall be considered.
NATURE OF LOAN: Loan can be availed either in the form of Term Loan or OD as
per convenience of the customers, subject to review every year.
REPAYMENT: Term loan should be repaid within 5 years and OD facility should be
reviewed every year.
MARGIN: No Margin
SECURITY: Extension of charge (mortgage) by the borrowers who have executed
documents in connection with existing housing loan and should be in force till
liquidation of loan.
RATE OF INTEREST: @MCLR + 2.80%
PROCESSING FEES:2% plus GST of the sanctioned loan subject to minimum
Rs.500/-.
DISBURSEMENT: Loan, under the scheme may be disbursed after observing all the
required formalities by crediting directly to SB/CD/CC account maintained by the
borrower with the Branch as per requirement of the borrower.

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 UNITED HOUSING LOAN FOR PENSIONER
1. All pensioners of Central and State Governments, Central and State
Eligibility Governments' Undertakings, Defence Services, reputed Companies,
Educational Institutions (Universities, Institutes, Schools and Colleges)
including pensioners (VR and VRS) of United Bank of India drawing
pension from the branches of the Bank are eligible for loan under the
scheme.
2. Monthly Net Pension: Min. Rs. 5,000/-
3. Entry Age: Max. 70 years
4. The pensioner must be physically fit and mentally alert to execute the
documents. Person(s) in paralytic condition or bed-ridden is/are not eligible
Purpose 1. Renovation/extension/repair/furnishing of self-occupied house / flat;
2. Purchase/construction of new house/flat;
3.Purchase of old house/flat not old over 35 years from the date of
completion of construction
4. Securing shelter in any “Old-Age Home”.
Interest Same as United Hosing Loan.
Security Primary Security:Mortgage of the House property. If loan is for shelter in
old age home, then loan should be secured by term deposit equal to the loan
amount.
Additional security: If payment is secured through deduction form EMI
from applicant net pension credit, then no additional security requires. In all
other cases additional security require as per scheme norms.
Quantum of Max. Rs. 10 lac provided total deduction including EMI of the loan must
Loan not exceed 40% of the borrowers' net monthly pension. If spouse becomes
co-borrower and if he/she is also pensioner drawing pension from the
branch, pension of both of them shall be considered for determining the
quantum of loan within the overall ceiling
Repayment Entire loan has to be within 10 years but liquidated before borrower's
Period attaining 75 years of age whichever is earlier. The age of the 1st pensioner
(Max. 10Yrs) or from whose income (also service holder/pensioner), the major recovery
of loan will be made, shall be the deciding factor for the period of loan.
However, where loan is extended for getting shelter in “Old –Age Home”
total repayment period including the extended period must not exceed 10
years (120 EMI).
Moratorium Repayment shall start from the following month in which the last instalment
Period is disbursed or two months after release of first instalment, whichever is
earlier.
Rescheduling Where loan is secured by way of mortgage of immovable property and
of loan family pension-holder is co-borrower, repayment may be rescheduled upon
death of the original pension holder. But rescheduled loan must be
liquidated within 75 years of age of the family pension holder
Disbursement In phases as per progress but loan for getting shelter in old age home loan
may be disbursed in full or in phases as per written request of the borrower.
Insurance Property created out of Housing loan has to insure as per norms.

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 UNITED AFFORADBLE HOUSING LOAN SCHEME
Hon’ble Prime Minister envisioned Housing for All by 2022 when the Nation
completes 75 years of its Independence. In order to achieve this objective, Central
Government has launched a comprehensive mission “Housing for All by 2022”.
The Mission seeks to address the Housing requirement of urban poor including slum
dwellers by Promotion of Affordable Housing for Weaker Section through Credit
Linked Subsidy under Pradhan Mantri Awas Yojana. Subsequently coverage of the
scheme extended to Middle Income Group (MIG-I & MIG-II) in urban areas.
All statutory towns as per census 2011 and towns notified subsequently will be eligible
for coverage under the scheme.
In case of EWS and LIG the houses constructed/ acquired with central assistance under
the mission should be in the name of the female head of the household or in the joint
name of the male head of the household and his wife, and only in cases where there is
no adult female member in the family, the house can be in the name of male member
of the household.
In case MIG-I & II either of the spouses or both together in joint ownership will be
eligible for a single house, subject to income eligibility of the household under the
Scheme.
Eligibility:
 Individuals aged 21 years or above having regular income viz. salaried person,
businessman, professional, self-employed and not defaulter borrower of any
Bank/ Financial Institution under category of Economically Weaker Section
(EWS) / Low Income Group (LIG) / Middle Income Group (MIG-I) / MIG-II.
The applicant should be in business or profession for at least three years.
 For identification of EWS under the scheme, an individual loan applicant will
submit self-declaration on income accompanied by an Affidavit as a proof of
income that the income of all major members of the family is below the taxable
limit. For LIG/MIG-I/MIG-II the applicant should submit salary slip/salary
certificate/other income coupled with ITR / IT Assessment Order / Form 16 as a
proof of income if his income is taxable. However, Bank should make proper
due diligence about regularity of the income. In no case loan to be sanctioned
where income is irregular and uncertain.
 Salaried person should be in regular and permanent service. Professional and
self-employed (P&SE) and business person should have at least 3 years IT return
filed separately in respect of each financial year on completion of relevant
financial year.
 The beneficiary family should not own a pucca house either in his/her name or
in the name of any member of his/her family in any part of India. Beneficiary
family should not have availed of central assistance under any housing scheme
from Government of India.

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Purpose:
 Credit Linked Subsidy will be available for housing loans availed for new
purchase / construction / addition of rooms, kitchen, toilet etc. to existing
dwellings as incremental housing.
 Construction / Extension should essentially have Toilet facility
 Repairing work to the existing house can be undertaken in houses which are
Kutcha, Semi Pucca and require extensive renovation
Carpet Area:-

1 EWS 30 Sqm
2 LIG 60 Sqm
3 MIG-I 160 Sqm
4 MIG-II 200 Sqm
Beneficiary:
 A beneficiary family will comprise husband, wife and unmarried son(s) and
daughter(s)
 The beneficiary family should not own a Pucca house (an all weather dwelling
unit) either in his/her name or in the name of any member of his/her family in
any part of India.
 An adult earning member (irrespective of marital status) can be treated as a
separate household.
Income Criteria:
A EWS Annual family Income upto Rs.3 Lac
B LIG Annual family income more than Rs.3.00 lakh and upto Rs.6.00 lakh
C MIG-I Annual Income more than Rs.6 lac and up to Rs.12 Lac
D MIG-II Annual family income more than Rs.12 lac and up to Rs.18 lac
Quantum of Loan Amount eligible for Interest Subsidy:
A) EWS Rs.6.00 Lac
B LIG Rs.6.00 Lac
C) MIG-I Rs.9.00 Lac
D) MIG-II Rs.12.00 Lac
Note: Additional Loans beyond the specified limit will be at non subsidized Rate
Interest Subsidy:
A EWS @6.5% Max.Rs.2.67 Lac for 20 Years
B LIG @6.5 Max.Rs.2.67 Lac for 20 Years
C MIGI @4% Max.Rs.2.35 Lac for 20 Years
D MIG-II @3% Max.Rs.2.30 Lac for 20 Years
Tenure of loan: Maximum repayment period is 30 years or 70 years of age whichever
is earlier provided the applicant have sufficient income generation for repayment.
However, subsidy will be allowed for tenure upto 20 years or tenure of loan, whichever
is earlier.

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Interest Rate: MCLR-H (As applicable to UHL scheme)
Margin: (AS applicable for UHL scheme) For borrowers having annual income up to
Rs.3.00 lac, the margin will be 25% of the project cost.
In all other cases the margin will be as follows:
 For loan up to Rs.30 lacs—10% of the project cost
 For loan above Rs.30 lacs and up to Rs.75 lacs—20% of project cost
 For loan above Rs.75 lac--25% of the project cost
Scheme Duration:
 EWS & LIG: From 17.06.2015- 31.03.2022
 MIG-I & MIG-II: From 01.01.2017 to 31.03.2020
Command Area: -25 Km from the financing branch (As applicable to UHL scheme)
Documentation charge: As applicable in UHL scheme
Mortgage charge: As applicable in UHL scheme
Processing charge: No processing charge to be realized from the borrower for Housing
Loan upto Rs. 6 Lakh for EWS/LIG Category Borrower and Rs. 9 Lakh and Rs. 12
Lakh for MIG I and MIG II category borrower respectively under the Scheme. The
Bank will receive an amount of Rs. 3000/- against each sanctioned application under
EWS/ LIG Category and Rs. 2000/- against each sanctioned application under MIG-I /
MIG-II Category as processing fee. However, for additional loan beyond Rs. 6 Lakh
for EWS/LIG Category Borrower and Rs. 9 Lakh and Rs. 12 Lakh for MIG-I and MIG-
II category borrower normal processing fees can be charged as per the extant policy
guidelines of the Bank on prorata basis.
Prepayment charge: NIL
Subsidy claim: The subsidy claim is to be lodged through online portal. Claim of
subsidy is to be made in not more than 4 installments depending upon progress of
construction. For outright purchase of house claim will be lodged only once. The
subsidy amount will be credited to loan account and the EMI will be reduced
accordingly.

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 UNITED MORTGAGE LOAN NEW SCHEME
In order to enable the owners of House, flat or any commercial property to avail of
Term Loan / OD facility from the Bank against mortgage of such property, the Bank
has introduced United Mortgage Loan (New Scheme) from 13.02.2013.
Eligibility: Individuals above 21 years of age but not exceeding 65 years owning the
property to be mortgaged and having regular income sufficient to repay the loan are
eligible for loan under the scheme. Proprietorship, partnership firm, company, Business
people, with satisfactory business dealings are also eligible under the sheme.
Purpose: The Term Loan under the scheme shall be for general purpose of the borrower
to meet business or profession or any personal requirement. However, OD limit shall
be allowed for business purpose only. The loan shall not be for speculative purpose.
Quantum of Loan:
The maximum loan amount shall be fixed at
For Rural Branches – Rs. 50.00 lacs
Semi Urban Branches-Rs.100 lacs
Urban Branches-Rs.300 lacs
Metro Branches-Rs.500 lacs
OD facility is available only for meeting working capital needs of the business.
1. For Individuals: 24 times of net monthly income (net of all deductions) or 60%
of distress sale value of property whichever is lower. [average of last six
months].
Total amount of deductions per month from gross income, including the EMI for this
loan should not exceed 60% of the gross income of the borrower (leaving40% as take
home income).
Term Loan for professional/self-employed:
Last 2 years’ net income after tax as per IT Return OR 60% of the distress sale value of
the mortgaged property offered as security, whichever is less.
2. For Business entities: Individuals engaged in trade / commerce/ business/
proprietorship/Partnership Firm/ Company - In case of term loan Four times of
Cash-accruals (i.e. PAT+ Depreciation+ Other Amortizations) as per their
Audited Balance Sheet/ P & L Account (Average of Last 2 years) or 60% of the
distress sale value of mortgage property whichever is less. (valuation shouldnot
be older than six months).
In case of OD facility, 25% of Projected Turn Over or 50% of distress sale value of
property,whichever is lower.
Primary: The loan amount shall be covered by mortgage of unencumbered residential
house or flat or the commercial property owned by the borrower having adequate value
with margin.

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Collateral:
In case Firm/ partnership/ Company: - personal guarantee of proprietor/individual
major partner’s/ promoter directors shall be taken in addition to Equitable Mortgage.
Valuation of Property: Valuation or Property shall be undertaken by Bank’s approved
Valuer. In case of sanction of loan for Rs. 50 lacs and above, valuation shall be obtained
from two empanelled valuers.
Rate of Interest: For term loan MCLR Y+1.90 at present 10.75%
For overdraft MCLR Y+2.15 at present 11%
Credit Risk Rating: The loan shall be classified as UBICR 2.
Repayment:In case of term loan: - 84 Monthly EMI after one month of disbursement.
Overdraft facility will be subject to review within 12 month of sanction.
Processing Charge:One-time processing charge @ 1% plus GST of the sanctioned
loanamount shall be realized by the branch before disbursement of the loan. Thecharges
for due diligence shall be realized upfront along with application.
Pre-payment Charge: In case of repayment of loan before the scheduled period
ortakeover of loan by bank or financial institutions, a pre-payment charges @ 2%
ofoutstanding balance shall be levied.
Penal Interest: 2% on amount default in case of term loan and in case of OD thepenalty
shall be 2% p.a. on the balance overdrawn for the period till it is regularized.
Insurance: The property mortgaged to the Bank shall be insured against loss byfire,
flood, earthquake and other damages for full value covering full period of theloan at the
cost of the borrower with bank clause and the insurance policy dulyassigned in favour
of the Bank shall be kept by the Bank.
Disbursement: The loan shall be disbursed through the Savings Bank or CurrentDeposit
Account of the borrower maintained with the branch on completion of
thedocumentation and other formalities.
Documentation: As per extent guide lines and manual of documentation.
Finacle Scheme code: LAUPM for term loan and for OD ODUPM.
Important points for considering Loan under the scheme: -
1. Loan under the scheme should preferably be sanctioned to existing depositor or
borrower customer. Non customer may also apply for the loan, in which case the
applicant shall open KYC compliant savings or current account.
2. If applicant is borrower customer of other bank, credit report from existing
banker/ market report should be obtained.
3. No projected income should be considered.
4. No Mortgageloan can be sanctioned against Agricultural land or other vacant
land. Mortgage loan against third party properties may be extended to
individual’s/ proprietorship firms, if such properties stand in the name of family
members like Father/ Mother/ Husband/ Wife/ Son/ Daughter/Brother/ Sister.

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 The person in whose name the property to be mortgaged stands should be Co-
borrower in case of individual and Guarantor in case of Proprietorship. Mortgage
loan may also be sanctioned to companies/ Partnership Firms against properties
standing in the name of promoter directors of the companies/ Partners (excluding
sleeping partners) of the partnership firms, provided mortgage is backed by
personal guarantee of the promoter directors/ partners.
5. No loan against security of property where mutation and conversion is pending
should be allowed.
6. Term loan to builders/ developers against mortgage of unsold flats or project
under construction shall not be allowed under the scheme.
7. Term loan backed by mortgage of land & building of educational institutions
and/ or mortgage of property of promoters for setting up educational institutions
or infrastructural development of existing institution cannot be considered.
8. Term loan cannot be considered against property of Nursing Homes/ Hospitals,
Orphanages, Old age homes or any other social infrastructure.
9. No mortgage loan shall be sanctioned against factory land and building.
10. For term loan business entity must complete full-fledged operation of two years
i.e two audited annual accounts should be available.
11. For OD facility one audited annual accounts covering 12 months should be
available.
12. For overdraft facilities under the scheme, projected turn over should not exceed
125% of actual turn over as per audited accounts.
13. Mortgage loan by way of extension of charge on the property already mortgaged
against housing loan can be allowed for one time to the same borrower. In such
case the distress sale value of the security in excess of 133% of the outstanding
balance in housing loan including top up loan (United Smart Loan if any) should
be available for the mortgage loan subject to fulfilment of margin and other
eligible criteria for the same.
14. In case of existing mortgage loan extension of mortgage may be allowed for one
time to cover other loans of the same borrower, provided there is vacancy in the
distress value of the property after covering the original mortgage loan with
required margin (50%/40% as the case may be).
Mortgage loan proposal of business entities should be evaluated on the basis of: -
Business model, analysis of financial statement, cash flow analysis justifying
repayment capacity. DSCR which should be minimum 1.50:1.

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 CAR LOAN
1. Individuals between the age of 21- 65 years (including repayment period)
2. Maximum Quantum of Loan 40 Lac for individual and No limit for non-
individual
3. Take Home Income of the borrower:
Minimum Monthly Net Take Home is to be
o Salaried Person: 40% of gross pay / Rs. 25,000/- after all deductions
including the EMI of the proposed loan whichever is higher.
o Other than Salaried:Should be in the profession/ business for at least 2
years having minimum Annual Post- Tax Income of Rs.4.00 Lac as per
ITR (Average of last 2 years).
Margin: New Car: 15%, Old Car: 25% of the valuation of Old Car certified by the
valuer.
1. The prospective customer/ guarantor should have KYC complied account with
the Branch.
2. Borrower must have secured threshold mark 55 in risk analysis as per risk
scoring model.
3. In case of corporate the minimum Debt Service Coverage Ratio (DSCR) should
be 1.5:1
Processing Charges: 0.50%; No Documentation Charges.
Rate of interest: for salaried, P& SE, Business people & Car loans for Pensioners

Old Car- MCLR-Y+1.05 i.e. 9.90% p.a.

 Repayment period for individual 7 years and for corporate 3 years.

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 United Trade Credit Scheme
Purpose: Working Capital finance is provided for the purpose of business in the form
of OD and / or Term Loan. Term Loan can also be extended for acquisition of
commercial shop / space/equipment/ plant & machinery/ Furniture & fixture.
Eligibility:
1. Individual, Proprietorship, Limited Co. (Private or Public), HUF, and
Cooperative Societies registered under Co-operative Societies Act, having
existing business with profit for the last 3 years
2. If the borrower is engaged in multiple business, finance cannot be extended to
profit earning units, if it incurs overall loss.
3. The borrower should be registered or License holder under any of the Local Law
/ Act. If not, he/ she must provide it before disbursement of the loan.
Quantum of Loan:
Minimum 0.50 Lac and Maximum 50 lac subject to 20% of the annual sales / Turnover
for the immediate preceding year or Projected annual sales as per ITR/ STR/AO, etc.
However, projected sales should not exceed 120% of actual sales achieved in immediate
preceding year or 120% of average sales of last three years.
 Term Loan for fixed assets will be maximum upto three times of the cash profit
of the immediate preceding year and in this case Debt Service Coverage Ratio
(DSCR) of the project shall not be less than 1.75
 Loan for acquisition of fixed assets shall be in the form of Term Loan whereas
working capital finance shall be in the form of Over Draft / Term Loan. Term
Loan for capital investment can be extended provided all other operative
business a/cs and / or working capital loan are maintained with the branch. Entire
transaction should be routed through the financing branch.
Margin:
40% in case of mortgage of land and building, 20% in case of financial securities viz.
NSCs, KVPs, Relief Bond, Bank’s own Term Deposits, Govt. Securities
Concession in margin:
A onetime concession of margin to the extent of 5% may be considered after one year
at the time of review subject to satisfactory conduct of the account by branch.
Primary Security:
Mortgage of land and building excluding agricultural land and liquid security like
NSC/KVP/ Bank’s own Term Deposit/ LIC Policy (S/V), Relief Bond etc. No loan
against security of vacant land/ agri- land/ third party property (except parents &
spouse, brother sister) and where mutation & conversion pending.
Collateral Security:
Hypothecation of stock and other current assets for working capital facility and hypo.
of plant & machinery and other fixed asset for term loan sanction for capital investment.

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Rate of Interest: MCLR-Y +4.55%
Concession in interest rate:
1. A concession of 0.25% in interest may be allowed for every 25% (of the limit)
if liquid security provided
2. On satisfactory conduct of the account, one time incentive by way of reduction
in rate of interest to the extent of 0.25% p.a. shall be allowed at the beginning of
third year of operation, at the discretion of sanctioning authority. Concession
will continue till the conduct of the a/c remains satisfactory and score result is
50 marks or above in credit rating.
Processing Charge: 1.0% + Tax of the loan amount
Prepayment Charges: 2.00% + Tax of the outstanding balance of the loan amount.
Processing / Review/Supervision/Documentation/Mortgage: - Normal as per working
capital facility
Repayment Period: Term Loan: Max 60 months
Working Capital in the form of O/D: It is to be sanctioned for a period of one year and
reviewed annually.
Credit Rating: - Threshold score of 60% marks for new proposal & 50% for existing
account at the time of renewal & enhancement under comprehensive credit scoring is
essential.

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 United Salary Payment Scheme
Risk Weight: Personal loan carries a Risk Weight of 125%
Employee Groups:-
Group A Group B Group C
Local Bodies
Central Govt State Govt (Municipality,
Panchayet etc)
Profit making State Loss making Central
Profit making Central PSUs
PSUs PSUs
Statutory & Regulatory Bodies
(Non-Constitutional Body created Private School &
by Act of Parliament. e.g.-RBI, Colleges should be
NABARD, IRDA, SEBI, CVV - 1. At least 5 years
Central Vigilance Commission, old and
TRAI - Telecom Regulatory 2. Affiliated to
State Govt. Colleges /
Authority of India, Central CBSE / ICSE / UGC /
Schools / Universities
Pollution Control Board, Medical AITC etc.
Council of India, PFRDAI - 3. Having
Pension Fund Regulatory & minimum 1 years
Development Authority of India, banking relationship
Directorate General of Civil with us
Aviation etc)
Govt. aided School &
Central Govt. Colleges / Schools / Colleges (where
Universities salary is paid by State
Govt.)
Reputed Private Colleges / Schools Quasi Government
/ Universities (Categorized under (supported by Govt.
list A & B in United Superb but managed
Education Loan) privately)
Corporates not rated
Corporates having
by any External
Reputed profit making Corporates external rating of
Rating Agency and
having external rating of A (-) and BBB(+) and below
financed by us, having
above excluding C & D
rating of UBICR3 and
rated corporates
above.
RLCCs are also empowered to approve corporate, Organizations/Institutions under Group-
A/B/C, whose total number of permanent employees are 200 or less.
Eligibility of the borrower:
1. Salaried person between the age of 21 to 65 years (including repayment period) are
eligible for Personal Loan under USP Scheme (Circular No. RBD/USP/ 27 /OM- 342
/17-18, 16th August, 2017)
2. Applicant should be in permanent service for a period of minimum 1 year and have
Page 111 of 131
 remaining period of service to cover repayment period.
3. No Command area restriction.
4. The spouse shall be made co-borrower wherever possible.
a. Check the salary drawn in 6 month’s pay in slips with the salary account statement
or latest Form 16 (in case of income tax payers)
b. Where the employer remits salary through NEFT for credit to concerned
employee’s Savings Bank account, the source of such remittance should be
verified with the remitting Bank.
c. The name and designation of the concerned DDO should be verified with
reference to the Circular issued by the higher authority / concerned department /
Govt. circular and the contents such instruction shall be kept on file for future
reference. Confirmation of issuance of letter of undertaking by the employer and
his authority of the person for issuing the same shall be verified.
1. Branch will process the proposal and issue sanction letter, which need to be accepted by
applicant(s). If proposal is not sanctioned, a regret letter shall be issued to applicant(s)
stating reason.
Purpose:
Both Term Loan and Over Draft facility may be sanctioned to meet personal expenses but not
for the purpose of speculation business.
Quantum of the loan:
Group A Group B Group C
Branch: Maximum Rs. 10 Branch: Maximum Rs. 7.50 Branch: Maximum Rs. 3 Lac
Lac or 10 months gross salary Lac or 10 months gross salary or 10 months gross salary
whichever is less, whichever is less, whichever is less,
RLCC: Empowered upto Rs. RLCC: Empowered upto Rs. RLCC: Empowered upto Rs.
15 Lac or 10 months gross 10 Lac or 10 months gross 5 Lac or 10 months gross
salary whichever is less salary whichever is less salary whichever is less
OD limit: Equivalent to 1 month's Net Salary in addition to personal loan. No processing &
documentation charges will be levied for the employee availing OD limit under the scheme
Provided in all cases, monthly net take after all deductions including interest on OD (MCLR-
Y + 4.40% p.a.) & proposed EMI of the personal loan should be at least 40% of gross monthly
salary or Rs.10000 whichever is higher
Security:
Undertaking from Employer as per the format - Annexure-F & G should be obtained for the
following:
1. Remittance of EMI to financing branch by deducting from employee's salary or to
continue disbursement of Salary in Salary account maintained with the financing branch
and to pay the loan outstanding from the terminal benefits in the event of cessation of
service due to any reason.
2. To obtain NOC from the financing Branch before shifting of the salary disbursement
account.

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Undertaking from borrower in the format Annexure-D & E should be obtained on Non-judicial
Stamp Paper:
1. To pay outstanding loan dues from terminal benefits in the event of death, resignation &
termination etc.
2. Not to transfer his A/c to other Bank / branches without NOC from the financing branch
Copies of these undertakings are to be sent to the employer by registered post and
acknowledgment to be kept for branch record.
Rate of Interest:
Full Check Off Partial Check Off
No Check Off
Where Both Where only
Where no Undertakings from the Employer are
Undertakings from Undertaking from
available but both Undertakings from
the Employer & Employer to obtain
Employee-Borrower are available
Employee-Borrower NOC from the branch
However, where Employer is not willing to
are available issue any employer’s undertakings as per
before shifting of
Bank’s specified format, there must be a tacit
salary account & both
Undertakings from
arrangement with the employer for not shifting
Employee-Borrower
the salary account of the employee-borrower
are available
without obtaining NOC from the financing
branch.
EBLR + 3.15% i.e. EBLR + 3.65% i.e. EBLR + 4.15% i.e. 12.25%.
11.25%. 11.75%.
Penal Interest:
 upto Rs. 25000: Nil
 Above Rs.25000: @ 2% p.a. on the defaulted amount of installment for the defaulted
period.
Processing fee: 1% plus GST of the loan amount; But No processing & documentation charges
will be levied for the employee availing OD limit. Waiver of processing & documentation
(mortgage) charges for other retails loans to be availed by the employee
Documentation fee: Nil
Repayment:
 Maximum upto 60 months and the loan shall be compulsorily repaid 3 months before
superannuation.
 Repayment shall start from the next month of disbursement corresponding to the date of
disbursement.
 EMI should be realized from SB/USP a/c of the borrower, every month, where salary is
being credited, on the basis of Standing Instruction
 Prepayment charges: Nil

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 United Personal Loan Scheme for Pensioners
Pensioners as well as Family pensioners of Central and State Govt., Railways, Local Bodies
(Munipalities, Municipal Corporations etc), PSUs, Defence Services, Reputed Companies,
Educational institutions (Universities, Institutes, Schools and Colleges) and Banks including
UBI pensioners drawing pension from the branches of the Bank are eligible. The spouse/ family
pensioner/ working son or daughter shall be made co-borrower to ensure repayment of dues in
the event of any eventuality of the pensioner. The pensioner-borrower shall have KYC complied
account with the Branch. In case of Personal guarantee, it should be ensured that KYC
compliance of guarantor(s) is done. It is to be ensured that entire loan is to be repaid before
attaining 75 years of age.
The purpose of the scheme is to extend short term loan to the pensioners to meet their family
and personal expenses. Quantum of loan is 12 months' gross pension subject to a maximum of
Rs.10 lac. The repayment schedule should be fixed in such a manner that the EMI of proposed
loan plus other deductions should not be more than 40% of the Gross monthly pension
disbursed.
Repayment period is maximum of 48 EMIs where the pensioner is below 70 years of age &
maximum of 36 EMIs where the pensioner is above 70 years. However, it is to be ensured that
entire loan is to be repaid before attaining 75 years of age. Repayment shall start from the next
month of disbursement corresponding to the date of disbursement.
EMI shall be calculated and fixed on the basis of repayment period and rate of interest. It is to
be ensured that EMI is realized on the date falling due for payment every month to avoid
accumulation of interest and resultantly even after repayment of stipulated number of EMIs, the
account may show debit balance, which may become a source of complaint from the
customers/ombudsman. The EMI is subject to change with revision of Bank’s MCLR.
Consequent upon variation in interest rate the EMI is liable to change, otherwise the account
may slip into NPA. The Sanctioning authority should specifically mention the condition in the
sanction letter. The customer should be made to understand this point. Effort should be made to
modify the EMI with revision of rate of interest.
EMI is to be realized from the SB A/c of pensioner as per SI and care should be taken that there
is no default in realization of EMI. Concerned pensioner / family pensioner / co-borrower shall
submit (1) undertaking for deduction of EMI/ Disbursement of pension and (2)undertaking to
the pension disbursing authority to the effect that he/she has availed loan and the pension
payment disbursing bank-branch will not be changed without prior permission from the
financing bank (Annexure- VI). Tracking of realization of EMI should be maintained on weekly
basis so that on date of disbursement of pension, if EMI does not forthcoming, routine follow
up shall be undertaken and if the account becomes stressed, vigorous persuasion shall be made
and suitable action be taken.
In the event pension disbursement account of the borrower is transferred to other Bank without
written consent of the financing branch, the matter should immediately be brought to the notice
of the pension disbursing authority of the pensioner, on the basis of whose undertaking, the loan
was granted and wherever necessary it should be brought to the notice of the Bank where
pension account is transferred, for repayment of outstanding balance.
Personal guarantee of the family pensioner is to be obtained. If there is no family pensioner or

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the family pensioner is dead, the personal guarantee of any working son or daughter or of a
Third Party shall be accepted. If the borrower is unable to provide personal guarantee as
stipulated above, he/she shall have to cover at least 50% of the loan by pledge of any liquid
security acceptable to the Bank.

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 United Kaushal Rin Yojana (Skill Loan Scheme)
National Skill Development Mission was approved by the Union Cabinet on 01.07.2015 and
officially launched by Hon’ble Prime Minister on 15.07.2015 on the occasion of World Youth
Skill Day. Accordingly,Government of India, Department of Financial Services has devised
Skill Loan Scheme (Kaushal Rin Yojna) in line with the existing IBA Model Education Loan
Scheme for vocational courses. The IBA Managing Committee has approved the same and has
advised Member Banks to replace the existing Scheme for Vocational Studies with Skill Loan
Scheme (Kaushal Rin Yojna).
To give a boost to the Skill Loan Scheme, Government of India through Ministry of Skill and
Entrepreneurship has notified Credit Guarantee Fund Scheme for Skill Development
(CGFSSD). The skill loan sanctioned on or after July 15, 2015 will be eligible for coverage
under this Scheme. The Guarantee Scheme will be managed and operated by National Credit
Guarantee Trustee Company Ltd. (NCGTC) which is a wholly-owned trustee company of
Government of India.
Our Bank has approved new Skill Loan Scheme. The Scheme will be implemented in the name
and style “United Kaushal Rin Yojna” which will replace the existing Scheme for Vocational
Education and training. The detailed guideline of the scheme are given below:
OBJECTIVE:
The United Kaushal loan Yojna aims at providing a loan facility to individuals who intend to
take up skill development courses as per the Skilling Loan Eligibility Criteria.
APPLICABILITY OF THE SCHEME:
This scheme is applicable to all branches of our Bank
ELIGIBILITY CRITERIA:
Student applying for loan should be an Indian National
The applicant has secured admission in a course run by Industrial Training Institutes (ITIs),
Polytechnics or in a school recognized by central or State education Boards or in a college
affiliated to recognized university, training partners affiliated to National Skill Development
Corporation (NSDC)/Sector Skill Councils, State Skill Mission, State Skill Corporation aligned
to National Skill Qualification Framework (NSQF)
There is no specific restriction with regard to the age of the student to be eligible for skilling
loan. However, if the student is a minor, the parent will execute documents for the loan and in
such cases the Branches need to obtain a letter of acceptance/ratification from him / her upon
attaining majority.
Know your customer (KYC) norms: Aadhar number will be considered as a valid proof for KYC
norms in addition to other identity and address proof as per Bank’s Extant guidelines in this
regard.
QUANTUM OF FINANCE:Need Based finance to meet expenses on course subject to the
following ceilings-
Minimum Rs.5000/-
Maximum Rs 1,50,000/-
EXPENSES CONSIDERED FOR LOAN:Tuition/ course fee.
Examination/ Library/ Laboratory fee.Caution deposit.
Purchase of books, equipments and instruments.

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Any other reasonable expenditure found necessary for completion of thecourse.
Type Loan: Term loan
MARGIN: 10% of total expenses.
RATE OF INTEREST:MCLR-Y +1.70%
Simple Interest will be charged during the study period and up to commencement of repayment.
Servicing of interest during study period and the moratorium period till commencement of
repayment is optional for students.
1% interest concession may be provided by the bank, if interest is serviced during the study
period and subsequent moratorium period prior to commencement of repayment.
Documentation: The documents should be executed by both the student and the
parents/guardian.
PROCESSING CHARGES /UPFRONT FEE: Nil
Documentation charge: Nil
SECURITY:No collateral security or third party guarantee will be taken. However, the parent
will execute document along with the student as joint borrower.
MORATORIUM PERIOD: Upon completion of the course, repayment will start after a
moratorium period as indicated below:
Courses of duration upto 1 year 6 months from the completion of the course
Courses of duration above 1 year 12 months from the completion of the course
REPAYMENT:The loan will have a tenure as follows:
Loans upto Rs.50,000 Upto 3 years
Loans between Rs.50,000 to Rs.1.00 lakh Upto 5 years
Loans above Rs.1 lakh Upto 7 years
INSURANCE: Optional at the requirement of the borrower
Prepayment:No prepayment charge
Appraisal:In the normal course, while appraising the loan, the prospects of future income of the
student will be looked into. The disposal of application is to be ensured within 48 hours.
Sanction/rejection shall be communicated within 15 days of receipt of duly completed
application with supporting documents. Rejection of application shall be done with the
concurrence of the Regional Office and be conveyed to the student stating reason for rejection.
Discretionary power: As per Discretionary powerdelegated under United Educational loan
scheme.
Disbursement: The loan is to be disbursed in stages as per requirement/demand directly to the
Institutions/Vendors of books/equipments/instruments etc. to the extent possible. However, for
purchase of books/equipments/instruments, cash disbursement may be made but cash
memo/bill/voucher shall be submitted to the Branch.
Other Conditions:
a. Multiple Loans in a family:All applications will be treated separately and loan may be
sanctioned up to ceiling limit individually.
b. Minimum age: No minimum age bar.
Guidelines on Execution of Documents for extending education
Loan to Minor Students:
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 a. Education Loan can be sanctioned to minor students jointly with his/her parent / guardian
as the case may be.
b. No loan application & loan documents are to be signed by the minor Student.
c. In case the student is minor, loan application & all loan documents are to be signed /
executed by the parent/ guardian in two capacities i.e. for self as co-obligant and also on
behalf of the minor student.
d. After attaining majority only, the student has to execute the Deed of Ratification in
respect of all agreements & documents executed by the parent/ guardian on his / her
behalf.
Scheme code: LAEDS
In “EDUDET” menu option, under “Name of course” put code 11 for Vocational & Skill
Development Training
Subsidy:Loan given under this scheme is covered under Credit Guarantee Fund Scheme for
Skill Development (CGFSSD) which is administrated by National Credit Guarantee Trustee
Company (NCGTC)
a. Guarantee Fee:0.125% per quarter to be paid within 16 days from the end of the calendar
quarter on quarter end outstanding balance. The guarantee fee is paid by the bank.
b. Coverage:75% of amount of default
c. Lock-in period:12 months from the date of commencement of guarantee cover or end of
period of moratorium of interest whichever is later.
d. Invocation of guarantee: Within a maximum period of one year from the date of NPA. If
NPA is within lock-in period, then within one year of lock-in period
e. Settlement of claim:100% of guarantee amount at one go subject to submission of
required certificate from bank i.e. all avenues of recovery of default amount are
exhausted, no further scope to recover the default amount, claim is in order and complete
in all respect.

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 United Demand Loan Scheme
United Demand Loan is a very important Retail Credit Product for the growth of quality and
risk free Retail Credit portfolio of the Bank. Loans under this scheme are granted against Bank’s
own Term Deposits, /NSCs/KVPs/LIP(SV)/Relief Bonds etc. at stipulated terms and conditions.
Eligibility:
a. For loan Against NSC/KVP/LIP/RELIEF BOND etc. - Borrower/ guarantor should have
well introduced a/c with KYC compliance.
b. For loan against bank’s own term deposit including third party deposits- Any legal entity
with KYC compliance.
Purpose:For meeting all types of expenses.
Maximum Quantum of loans:
1. Against LICI Policy: 90% of Surrender Value of LIP.
Non unit linked LI policies of LIC of India with clearly defined surrender value will only be
acceptable as security.
2. Against NSC/KVP
Against NSC/ KVP Against NSC/ KVP Against NSC/ KVP Face
Face Value Face Value Value
For 5 year issues For 6 year issues For 10 year issues
1 year or less - 70% 1 year or less - 70% 1 year or less - 55%
1 to 2 years - 75% 1 to 2 years - 75% 1 to 2 years - 60%
2 to 3 years - 80% 2 to 3 years - 80% 2 to 3 years - 65%
3 to 4 years - 85% 3 to 4 years - 85% 3 to 4 years - 70%
4 to 5 years - 90% 4 to 5 years - 90% 4 to 5 years - 75%
Above 5 years- 95% 5 to 6 years - 80%
6 to 7 years - 85%
7 to 8 years – 90%
8 to 9 years – 95%
9 to 10
years
–
100%
a. Against Bank’s own term deposit (To be calculated on accrued value of deposits)
Rate of Interest:
1. For loans against LIC/NSC/KVP etc
a. Term Loan: MCLR-Y + 1.80% i.e., currently 10.65% p.a Floating
b. O.D: MCLR-Y + 1.80% i.e., currently 10.65% p.a Floating
2. For loans against Banks Term Deposit:
a. If the deposit is in the name of borrower: 1.00% above the rate of interest on
deposit.

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 b. (b) For loans/OD facility against third party deposits with our bank: 2.00% above
the rate of interest on deposit (no ceiling).
In case of Demand Loan against more than one deposits with varied rate of interest, the rate of
interest on Demand Loan is to be fixed on the basis of weighted average of rate of interest paid
on deposits plus applicable margin (depending on whether the deposit is the name of the
borrower or a loan against third party deposits as above).
Calculation of weighted average of rate of interest: Let us suppose the borrower has offered
four different deposits with varied rate of interest as follows: ( amount in lacs)
Sl No Total Deposit with same rate of Intt Rate of Intt Product
(A) (B) (C=AXB)
1 10.00 5.00 50.00
2 20.00 5.5 110.00
3 30.00 6.00 180.00
4 40.00 6.5 260.00
Total 100.00 600.00
Weighted average Rate of interest for these set of deposits will be = sum total of (C) divided by
sum total of(A) i.e (600/100) %=6.00%
The application for computing weighted average of rate of interest is available in the Bank’s
Intranet under Navigation.
3. Processing Charges: Nil. However, all out of pocket expenses if any, are to be realised
from the account holder.
4. Repayments: Maximum 10 years (120 months) or maturity date of security offered,
whichever is earlier for term loan.

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 United Gold Loan Scheme
United Gold Loan Scheme is an all-purpose scheme to provide quick and hassle free loan against
pledge of gold ornaments and jewellery to individuals and traders to meet working capital
requirements and /or purchase of equipments for development of shop and / or meet personal /
consumption expenditures (like marriage / medical/ educational needs etc.).
The financial assistance will be extended in the form of (i) term loan and/ or (ii) OD facility.
Eligibility:Individuals, Joint Borrowers, Proprietorship / Partnership firms who are engaged in
trading and having licenses whatever /whenever required with KYC compliance. He/she/they
should have one SB/CD A/c with the Bank.
Companies, Co-operative Society etc. and other entities are not eligible for such loan. No
advance under the scheme can be granted (i) for speculative purpose and investment in capital
market instruments and (ii) to persons engaged in gold / jewel manufacturing / trading. (iii)
Employees of the Bank are not eligible to take such loans unless otherwise permitted by the
Regional Office / Head Office.
Age: Minimum 21 yrs. and Maximum up to 70 yrs. (including repayment period) of age for
individuals, proprietor, partners with steady income. Capacity to service interest shall be
sufficient parameter to determine eligibility
Loans can be granted to individuals singly or jointly with the provision of delivery of ornaments
to either of them or survivor or to them jointly or to the former or survivor provided both the
account holders sign the ownership certificate on the Take Delivery letter.
Area of operation:Select branches of the Bank as will be decided by the Regional Managers,
where (i) Armed Guard is posted (ii) Sufficient storage facilities in Safe Vault / Locker is
available (iii) CCTV is installed.
However, branches having no armed guard may be designated for gold loan subject to
compliance of following norms:
1. Use and installation of CCTV Camera
2. Use infrared detectors for safe deposit vault where pledge of gold ornaments of borrowers
will be kept as security.
Quantum of loan: Minimum amount of loan: Rs.25000/- and Maximum amount of loan:
Rs.10,00,000/- per borrower /entity, subject to adequate income generation and repayment
capacity of the borrower.
Maximum permissible limit to be assessed on the basis of value of per gram of gold / gold
jewellery to be kept as security.
The account wise portfolio (loan amount and margin) will be evaluated by the financing branch
periodically (at least once in a month) on the basis of advance value for gold to be available on
UBI Intranet.
Sanctioning Authority: Sanction to be accorded by the concerned Branch Manager within
his/her discretionary power
Margin: 25% of assessed value of gold ornaments and jewellery as stipulated by RBI. It is to be
ensured that the margin remains the same throughout the tenure of the loan. (on the total

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outstanding in the account, including accrued interest against current value of gold jewellery
accepted as security).
Security:i) Pledge of gold ornaments and jewellery of 22 carats. If the gold is of purity less than
22 carats, the security is to be translated into 22 carat and exact valuation to be ascertained. ii)In
case of Ornaments with jewellery fittings, infillings net weight as certified by the assessor shall
be considered for determination of quantum of loan.iii) Ornaments which are ‘Stridhan’ are
acceptable only when the female owner joins as co-borrower.iv) Ornaments inscribed with
names other than the borrower shall not be accepted.
Interest (floating):MCLR-Y +1.05%. (Currently 9.90% p.a)
Processing charges:0.59% of the Loan Amount with a minimum of Rs. 600/- and maximum of
Rs. 3000/- (inclusive of GST)
Charges for late payment: 2%
Charges for excess drawing: In case of excess drawing resulting fromapplication of interest or
revaluation of security, interest to be levied at BR + 4% for no. of days delayed / on amount
drawn in excess of limit (on daily product basis). Interest is to be charged on monthly basis.
Review Charges: Not applicable. As entire loan is to be repaid within 12 months from the date
of sanction.
Disbursement:The loan shall be disbursed through SB/CD/ OD account (KYC complied)
maintained with the Branch.
Add On benefits:(in case of OD – sanctioned limit above Rs. 5 lac)
a) Free Debit card (1st year free).
b) RTGS/NEFT & Inter sol Transfer free of charges (charges to be reviewed annually).
c) Internet Banking, Tele Banking & Mobile Banking -free of Charges
d) Statement of Accounts from other Branch free of charge.
e) Two cheque books (20 leaves) free per year.
f) Preferential allotment of Safe Deposit Lockers (subject to availability)
Scheme Code:For OD limit “ODGOL” and Term Loan “LAUGL” scheme code
Repayment:Maximum 12 months.
In order to assess repayment capacity of the borrower (for loan amount beyond Rs.1.00 lac),
submission of income proof like Form No. 16 or copy of ITR (for last one year) is required.
(proof of income is not necessary for loan amount upto Rs. 1,00,000/-).
Credit Life Insurance:The coverage of credit life is optional. The premium payable under the
scheme is to be borne by the borrower. However, at the option of the borrower, loan for such
payment of premium shall be provided by the Bank and amount shall be included in project
cost.

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 UNITED CASH RENTAL SHEME FOR LANDLOARD OF BANK PREMISES
Purpose: Loan against unencumbered rent receivables for professional, business, personal or
any other productive purpose.
Nature of facility: Term Loan
Eligibility: Landlord of premises leased out to the Bank is eligible to avail loan under this
scheme. The owner i.e. landlord / lessor and UBI should have entered into a registered tenancy
/ lease agreement and the unexpired period of tenancy / lease must be at least one year. Such
tenancy / lease must be at least one year. Such tenancy / lease agreement must be tenable as per
state act and / or local customs / acts. The rent receivables should not have been already charged
/ assigned towards security of any loan. The loan shall be in the joint names of all the owners
if the property is owned by more than one individual.
Amount of Loan: 85% of total rent receivables (net of tax and other charges) during unexpired
period of lease or 75% of the market value of the property to be mortgaged, whichever is lower
Loan amount: Min. Rs.0.50 Lakh with upper ceiling of Rs.2.00 Crore (EMI should not exceed
85% of net monthly rent)
Margin: 15% of Rent Receivables (net of tax and other charges) or 25% of value of property to
be mortgaged, whichever is higher
Credit Risk Rating: Loan under the scheme irrespective of amount shall be classified as UBICR
2 for credit risk rating purpose.
Rate of Interest: rate of interest shall be charged @ MCLR-Y + 1.55 i.e.10.40% (at present)
Repayment: The loan is to be repaid by Equated Monthly Installments within the unexpired
Period of lease / tenancy with a maximum repayment period of 7 years. The repayment shall
start after one month from the date of first disbursement.
Processing Charge: 1% plus Taxes as applicable, Documentation / mortgage charges as per
norms.
Primary Security:
1. Equitable or registered mortgage of the property for which tenancy / lease agreement has
been entered into between the borrower and the Bank. The property proposed to be
mortgaged must be marketable and mutation done in favor of the borrower(S).
2. Assignment of future rent receivables. It is desirable that Tenancy agreement with bank
is registered as per urban rent control act and/ or similar acts, if any, apart from mortgage
of property in bank’s favor. The cost is to be borne by the land lord(s).
Insurance: The property mortgaged to the Bank shall be insured against loss by fire, flood.
Earthquake and other damages for full value at the cost of the borrower(s)
Search and valuation of property: As per bank’s prescribed norms
Disbursement: The loan will be disbursed through the savings bank or current deposit account
of the borrower(s) maintained with the Branch.
Documentation
The following documents shall be executed by the borrower for availment of term loan under
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the scheme, in addition to other regular documents:
1. Agreement for Term Loan against Rent Receivables
2. DP Note
3. Agreement for assignment of rent receivables by the owner/borrower
4. Letter of Lien
5. Undertaking-cum-Declaration by the borrower/landlord containing authority to the Bank
for realization of EMI from rent payable
6. Undertaking of the borrower in respect of repayment of loan either in one stroke or by
agreed EMI from his own source in the event the Bank terminates the tenancy/lease
during the currency of the loan
7. Original Title deed of the property for creation of equitable mortgage of the immovable
property by observing Bank’s usual procedure. The documents should be stamped
wherever required as per norms. The original lease/tenancy agreement shall also be kept
by the Bank

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 United Reverse Mortgage Loan Scheme
Purpose of Loan: For supplementing pension / other income, Repair, Renovation, extension
and insurance of Residential Property, insurance, Medical expenditures, Repayment of an
existing loan taken for the residential property to be mortgaged, etc. However, use of RML for
speculative, trading and business purposes is not permissible.
Eligibility:
1. Senior Citizens of 60 years & above of age and retired from active work life are eligible
for the scheme. Married couples will be eligible as joint borrowers but both of them
should be of 60 years & above age.
2. Owning a residential house property in their name with clear title indicating his/her/their
ownership of the property and willing to mortgage the same to the bank.
a. The property should be self-occupied one. He/she/they should use that residential
property as his/her/their ‘permanent primary residence’. He/she/they should be
residing in the same residence at least for the last one year.
b. The property should be free from all encumbrances
c. The property should be an approved construction.
d. The property is maintained in good condition.
e. Commercial property will not be eligible for RML.
f. The residual life of the property should be at least 20 years.
g. No Income Tax is due from the borrower(s). An Income Tax Clearance
Certificate is required to be obtained from the Borrower(s).However, borrower(s) need not
submit any income proof.
Command Area Approach for Retail Lending will not be applicable for this Scheme. However,
only an authorized branch nearest to the place of residence of the borrower will sanction loan.
Quantum of Loan:
1. The amount of loan depends on the ‘‘Qualifying Amount’’ i.e. realizable value of the
property minus margin, but the maximum ‘‘Qualifying Amount’’ shall be restricted to
Rs. 50 lakhs.
2. Bank shall re-value the property at an interval of every five years & consequently the
‘‘Qualifying Amount’’ and thus loan amount shall be revised based on such revaluation
of property.
3. The quantum of lump sum payment (if any) and periodic payment shall be decided in
such a manner so that the total lump sum payment and total periodic payment to the
borrower together with the accrued interest and other charges in the loan account during
the sanctioned tenor will not be more than the ‘‘Qualifying Amount’’.
Margin: 20% of the value of the property
Disbursement:
1. The loan instalments could be paid through monthly / quarterly / half-yearly / annual
disbursements and/or a lump sum payment (upon request) or as a combination of the two.
2. Lump sum disbursement should be restricted to 40% of the ‘‘Qualifying Amount’’ and
thereafter period payment shall be fixed on the remaining 60% of the ‘‘Qualifying
Amount’’. Lump sum disbursal shall be restricted to end use of the fund.
3. Tenor: The maximum period of the loan is 15 years. If the borrower outlives the

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 maximum loan period, he / she can continue to retain the property and need not repay the
loan or service the interest. However, the periodic payments under RML will cease and
interest will continue to accrue till the death of the borrower or till he / she moves out of
the property. The tenor of disbursement shall be of 15 years or till the death of the last
surviving borrower, whichever is earlier.
4. Extension of the loan period: The Bank may consider extension of loan tenor for
additional 5 years at its discretion depending on the market value of the property.
However, the maximum tenor shall not exceed 20 years from the date of initial sanction
of the loan.
5. In case of joint account, if one of the borrowers dies, the surviving borrower will continue
to receive periodic payment as per schedule till full term of the loan.
Calculation of monthly payments:
[{(𝑃𝑉∗𝐿𝑇𝑉𝑅)−𝑂𝑇𝐷𝐴}∗𝐼]
Monthly Instalment = where,
[{(1+𝐼)𝑛 }−1]

PV = Property Value
Qualifying Amount or LTVR = Loan to Value Ratio = 80%
OTDA = One Time Disbursement Amount
n = Loan Disbursement Period = 15 years or 180 months
Disbursement Frequency = Monthly
I = Current Interest = (MCLR-Y+2.80)% = (8.85 + 2.80)% = 11.65% p.a. or (11.65 / 12)%
= 0.008541667 monthly
Repayment of Loan: The borrower will not be called upon to service the loan during his / her
lifetime. The loan (including accumulated interest) is repaid from the proceeds of the sale of
the property, on the occurrence of any or more the following events:
1. The owner of the residential property and his / her spouse are generally joint borrowers
and the surviving borrower is allowed to retain the property till his / her death.
2. When the last surviving borrower dies, sells the home, or permanently moves out of the
home. (Typically, a “permanent move” would mean that neither the borrower nor any
other co-borrower has lived in the house for continuous one year).
3. If the residential property so mortgaged to the Bank is donated or abandoned by the
borrower(s).
4. The borrower(s) having failed to pay property taxes or maintain and repair residential
property or failed to keep the home insured.
5. Borrower(s) having declared himself/ herself/ themselves bankrupt.
6. If the borrower(s) effect any changes in the residential property that affect the security
of the loan for the Bank. For example: renting out part or all of the house; adding a new
owner to the house’s title; changing the house’s zoning classification; or taking out new
debt against the residential property.
7. Perpetration of fraud or misrepresentation by the borrower(s).
8. If a government agency needs the residential property for public use (for example, to
build a highway).
9. If a government agency condemns the residential property (for example, for health or
safety reasons).

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 10. Where the market value (realizable value) of the residential property has declined below
the applicable ‘Qualifying Amount’ of loan or outstanding balance in the loan account,
whichever is higher, at any time during the currency of the loan.
Under any one or more the above, no further payment will be released to the borrowers and
settlement of loan along with accumulated interest to be met by the proceeds received out of
Sale of Residential Property.
The mortgage may also be released if the loan and interest is repaid by the heirs / borrower.
Settlement of Loan: Settlement of loan along with accumulated interest is to be met by the
proceeds received out of Sale of Residential Property. A reasonable amount of time, say up to
2 months may be provided when RML repayment is triggered, for house to be sold. Branches
are authorized for sale of house/property as per rules within three months from the death of
borrower(s)/ permanent eviction of property by the borrower(s)/ occurrence of any of the events
triggering closure of loan account. The balance surplus (if any) remaining after settlement of
the loan with accrued interest shall be passed on to the estate of the borrower.
National Housing Bank’s Guarantee to Borrowers: NHB extends guarantee to the borrower at
his request, against the bank’s failure in payment of periodical instalment, in the event of
liquidation of the bank. The Guarantee coverage shall be limited to the least of the following:
1. 100% of the unpaid principal amount sanctioned and payable by the Bank.
2. A sum of Rs. 50 lakhs

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 UNITED EDUCATIONAL LOAN SCHEME
Objective Providing need-based finance to meritorious student for taking up higher
education for study in India and Abroad.
Eligibility The student should be an Indian national seeking admission to a
professional/technical course through entrance test / merit based selection
process either inland or abroad.
Courses Courses conducted by reputed Indian/foreign institutions in
eligible Graduation/Post Graduation/Professional etc.
Expenses Course Fee, Examination/Library/Laboratory Fee, Purchase of Books/
to be Equipments/Instruments/Uniforms, Caution Deposit/Building Fund/
covered Refundable Deposit, Travel Expenses/Passage money for studies abroad,
purchase of computer/laptop, if required and other expenses to complete
the course like study tours, project work, thesis etc. (Caution
deposit/building fund/refundable deposit does not exceed 10% of total
tution fees)
Quantum 1. For study in India :Max. Rs. 10 lac
of loan 2. For study abroad :Max. Rs. 20 lac
Rate of
interest
(floating)

(Interest shall be debited monthly on simple basis during moratorium

period and thereafter on compounding basis)
The credit guarantee will be available for education loans up to Rs. 7.50
lakh extended by Banks to eligible borrowers . Such loans should conform
to the “IBA Model Educational Loan Scheme for pursuing Higher
Education in India and Abroad”
For Girl students: 0.50% concession from card rate
Intt. Subsidy: To be allowed for the moratorium period to applicants whom
1st disbursement was made on or after 1st April, 2009 and whose parental
income is not exceeding Rs. 4.50 lac per annum.

UNITED SUPERB EDUCATION LOAN SCHEME:

Quantum of
Interest
Loan
For List A Institutes:
For Male/Female student
For List B Institutes:
Upto Rs.30.00
For Male student:
lac
For Girl students: 0.25% concession from card rate
Note: No concession in interest will be given, even if
interest is serviced during the moratorium period.

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Concessio Concession: 1.00% interest concession is allowed during moratorium
n period only if the interest is serviced monthly & regularly during the
moratorium period. However, where interest subsidy is claimed from Govt.
of India by the borrowers, the question of servicing of interest does not
arise. The amount deposited, if any, during the moratorium period, should
be treated as repayment of loan and hence no further concession of 1.00%
will be allowed
a) Upto Rs.4.00 lacs: NIL
Margin b) Above Rs.4.00 lacs:
i) Inland Studies: 5%
ii) Studies Abroad:15%
Processing a) For study in India: Nil
Charge b) For Abroad: 0.20% of loan amount. It will be refunded if the loan is
availed by the student. In case of partial availment, refund be made on pro-
rata basis.
Security For UNITED SUPERB EDUCATION LOAN SCHEME:-
Co obligation of Parents / Guardians in all cases.
Collateral Security for loans:

- For List A Institutes:

Up to Rs.20 lakhs: No Collaterals;
Above Rs. 20 lakhs: Tangible collaterals covering loan amount.

- For List B Institutes:

Up to Rs. 10 lakhs: No Collaterals;
Above Rs. 10 lakhs: Tangible collaterals covering loan amount.

For UNITED EDUCATION LOAN SCHEME

a) Up to Rs.7.50 lac: No security. Only Co-obligation of parents.

b) Above Rs.7.50 lac: Co-obligation of parents together with tangible
collateral security of adequate value to cover the loan amount along with
the assignment of future income of student for payment of installments.
Repaymen The loan is to be repaid in maximum 10 to 15 years after moratorium period
t depending on courses.
Moratoriu Course period plus one year (two years depending on merit) or six months
m after getting the job whichever is earlier.
Capability It can be issued by the Bank for students going abroad for higher studies.
certificate For this financial and other supporting documents may be obtained from
applicant.
Multiple In case of receipt of application for more than one loan for student-borrower
Loan from a family, it is to be noted that the limit is not for family wise but
individual wise.
Minimum No specific restriction with regard to age of the student to be eligible for
age loan
Change of In case of student staying with parent whose service is transferable, the

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address student has to intimate the same as and when changes occurred by obtaining
an undertaking from the parent / guardian jointly with student
Co- Parents / guardian should be the co-borrower. In case of married person,
obligator co-obligator can be either spouse or the parents / parents-in-law.
Disposal 15 days to 1 months
of loan
Top up a) The bank can consider 2nd loan but it must not exceed the period of
loan 7 years from the date of sanction of 1st loan.
b) Total loan under both courses should be within the maximum ceiling
of loan.
c) Two separate loan accounts are to be opened with prevailing rate of
interest on the date of sanction by issuing fresh sanction letter for 2nd
loan and separate documents have to be obtained.
d) After clubbing both the loan accounts, requirement of security is to
be ascertained as per security norms of the scheme.
e) Regional authority will be sanctioning authority on recommended
by the concerned branch
f) Life insurance for entire amount of loan is mandatory
g) The borrower must service the interest during moratorium (1st loan
as well as 2nd loan). In case interest is not serviced, total accumulation
Manageme interest shall be got serviced before exercising such extension.
nt Quota
(a)Loan to be sanctioned against security to cover entire loan by liquid
security/ mortgage of property (with margin 25%)
(b) Quantum of Loan: Min. Rs. 5 lakh (max. As per normal education loan
scheme)
(c) Rate of Interest: As per interest rates under UEL.
(d) Interest Subsidy not available
(e) Repayment Period: Max. 5 years irrespective of loan amount after
completion of moratorium period (course period plus 1 year, or 6 months
after getting job whichever is earlier)
(f) Study of MBA or similar courses nominated by the employer: To be
disposed of in terms of guidelines of Management Quota. Repayment of
EMIs shall be ensured from the employer either through deduction from
pay bill or from the salary disbursement account maintained with the bank.
No moratorium period shall be allowed. In the event terminal benefits are
attached, the sanctioning authority may consider to waive insistence of
security.

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 Risk and Capital Adequacy
a. Liquidity Risk- Mismatch in portfolio
b. Interest Rate Risk- Variation in interest rate, premature closure of
deposit and prepayment of loan( Embedded option)
c. Market Risk- Adverse deviation in mark to market value of trading
portfolio.
d. Credit risk/ Default risk- Delay in repayment or non payment by
counterparty.
e. Operational risk- Failed internal process, people, system and
external events.
NII (Net interest income)- Interest Income – Interest Expenditure
NIM( Net Interest Margin)- NII/ Average earning asset( Also called spread)
Derivatives- Forward contract, Option, Future, Swap
BCBS- Basel committee on Banking supervision
Basel -1 came into effect since 1988 covered credit risk, Market risk 1996
Basel II- June 2004, covered Credit risk, Market risk and Operational risk
Basel III- Sep 2010, fully affective from Jan 2015 2019-(1) For liquidity risk
additional capital of 2.5%. (2) Leverage risk- Limit the amount of debt as bank
can owe further. (3) Liquidity capital (LCR) apart from SLR and CRR.
In India Minimum capital requirement as per Basel III as % of RWA
Minimum Common equity tier I- 5.5%
Additional tier I -1.5%
Total tier I 7%
Tier II 2%
Minimum total capital Ratio 9%
Capital Conservation buffer 2.5%
Minimum total capital+ Cpital conservation Buffer-11.5%

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