CHAPTER 1

GENERAL GUIDELINES

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 CHAPTER 1

GENERAL GUIDELINES
Acceptance of deposits and maintenance of deposit accounts is the core activity in a bank.
The very basic legal interpretation of the word 'banking" as defined in the Banking
Regulation Act, 1949 means accepting deposits of money, for the purpose of lending or
investment, from the public, repayable on demand or otherwise, and withdrawable by
cheque, draft, order or otherwise. Thus, deposits are the major resource and mainstay of a
bank, and one of the main objectives of a bank is to mobilize adequate deposits, in particular
at low cost (popularly known as CASA deposit).

Depositors are one of the major stakeholders of the Banking System. The depositors and their
interests form the key area of the regulatory framework for banking in India and this has been
enshrined in the Banking Regulation Act, 1949. The Reserve Bank of India (RBI) is
empowered to issue directives / advices on interest rates on deposits and other aspects
regarding conduct of deposit accounts from time to time. With liberalization in the financial
system and deregulation of interest rates, banks are now free to formulate deposit products
within the broad guidelines issued by RBI.

RBI has advised banks to formulate a transparent and comprehensive policy setting out the
rights of the depositors in general and small depositors in particular. The policy should cover
all aspects of operations of deposit accounts, charges to be levied and other related issues to
facilitate interaction of depositors at branch levels. The policy should also be explicit in
regard to secrecy and confidentiality of the customers. Accordingly, this deposit manual
outlines the guiding principles in respect of formulation of various deposit products offered
by the Bank and terms and conditions governing the conduct of the account. The document
recognizes the rights of depositors and aims at dissemination of information with regard to
various aspects of acceptance of deposits from the members of the public, conduct and
operations of various deposits accounts, payment of interest on various deposit accounts,
closure of deposit accounts, method of disposal of deposits of deceased depositors, etc., for
the benefit of customers as well as the Bank. It is expected that this document will impart
greater transparency in dealing with the individual customers and bring proper awareness
among staff members how to deal with the customers in a given situation while not
bypassing the banks’ rules. The ultimate objective is that the customer will get services they
are rightfully entitled to receive without demand and this is only possible with the right kind
of motivation and knowledge updation.

All staff members must get themselves thoroughly acquainted with the Bank's rules of
business for various types of deposits and with the Reserve Bank of India directives on the
related issues etc. They should also keep abreast of any amendments/changes therein from
time to time.

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 TYPES OF DEPOSIT ACCOUNTS

1.1 Types of Deposit Accounts: -

While various deposit products offered by the Bank are assigned different names, the deposit
products can be categorized broadly into the following types:-

A) "Demand deposits" means a deposit received by the bank which is withdrawable on

demand, for example:
a) "Savings deposits (SB)" means a form of demand deposit that can be anytime
withdrawn through bank permissible legitimate mode which is subject to certain
restrictions as to the number of withdrawals as also the amounts of withdrawals permitted
by the Bank during any specific period.
b) "Basic Savings Bank Deposit Account" means a demand deposit account opened for
greater financial inclusion. Such accounts, opened on the basis of simplified KYC norms
are additionally treated as a ‘Small Account’ subject to conditions stipulated by RBI.
c) ‘Small Account’, a type of deposit account facilities for all those who do not possess any
of the 6 mandated OVDs. This account facility is temporarily in nature unless the
customer provides the KYC proof within 12/24 months otherwise failing so the
operations in the account shall be frozen with due notice to the customer. There are
restrictions over amount of debit, amount of credit, inward foreign remittances and
balance position till account is made KYC compliant.
d) "Current Account (CA)" means a form of demand deposit wherefrom withdrawals are
allowed any number of times depending upon the balance in the account or up to a
particular agreed amount and will also include other deposit accounts which are neither
Savings Deposit nor Term Deposit.

B) "Term deposits" means a deposit received by the Bank for a fixed period withdrawable only
after the expiry of the fixed period and includes deposits such as Recurring Deposits/ Flexi
Deposits, Term Deposits (TDR)/ Double Benefit Deposits (DBD) etc.

1.2 Account Opening and Operation of Deposit Accounts

1.2.1 KYC/AML/CFT: The Bank before opening any deposit account will carry out due
diligence as required under "Know Your Customer, Anti-Money Laundering, Combating
Financing of Terrorism" (KYC-AML-CFT) guidelines issued by RBI and or such other norms or
procedures adopted by the Bank. The status of KYC in accounts will be updated periodically
depending upon the Risk Category of customers. For financial inclusion, Bank opens Basic
Savings Bank Deposit accounts/Small accounts which have certain transaction related and other
restrictions. Savings Bank accounts opened on the basis of simplified KYC norms are named as
BSBDA and time based temporary relaxed KYC norms are known as Small Accounts. Small
Accounts initially remain operational for a period of twelve months. Thereafter, it can be
extended for a further period of 12 months, if the account holders provide an evidence of having
applied for any of the officially valid documents for KYC/ Anti Money Laundering (AML)
whereas other small accounts are to be frozen / closed with proper notice.

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1.2.2 Customer Identification Procedure (CIP):
A) Introduction is not mandatory for opening of Savings Bank Accounts.
B) Officially Valid Documents (OVD):
i. Passport,
ii. Driving License,
iii. Proof of possession of Aadhaar number,
iv. Voter's Identity Card issued by the Election Commission of India,
v. Job card issued by NREGA duly signed by an officer of the State Government
and
vi. Letter issued by the National Population Register containing details of name and
address.
C) The PAN No or Form 60, where PAN is not available, is mandatory.
D) If the Customer is unable to provide OVD as the proof of address or identity, he can
apply for BSBDA (Basic Saving Bank Deposit Account) facility along with following
documents, but the operations in such accounts shall have restrictions like those in small
accounts till account is turned KYC compliant by submitting one of the OVDS as above
mentioned.
(I)Proof of Identification: 1. Photo Identity Card issued by a government agency; 2.
Photo and particulars of the applicant customer is issued and authenticated by a
Gazetted Officer on his Official Letter of Head.
(II) Proof of Address:
i. Utility Bill which is not more than two months old of any service provider (electricity,
telephone, post-paid mobile phone, piped gas, water bill);
ii. Property or Municipal tax receipt;
iii. Pension or family pension payment orders (PPOs) issued to retire employees by
Government Departments or Public Sector Undertakings, if they contain the address
iv. Letter of Allotment of accommodation from employer issued by State Government
or Central Government Departments, statutory or regulatory bodies, public sector
undertakings, scheduled commercial banks, financial institutions and listed companies
and lease and license agreements with such employers allotting official
accommodation.

The Bank will undertake due diligence as per applicable Foreign Account Tax
Compliance Act (FATCA)/ the Common Reporting Standard (CRS) rules as notified
by RBI/CBDT. The customer has to declare and agree to disclose the material facts at
the time of opening and also in future, failing which the Bank would be within its right
to put restrictions in the operations of the account or close it or report to any regulator
and/or any authority designated by Government of India (GOI)/RBI or take any other
action as may be deemed appropriate by the Bank if the deficiency is not remedied
within the stipulated period.

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The account opening forms and other material would be provided to the prospective depositor by
the Bank. The same will contain details of information to be furnished and documents to be
produced for verification and / or for record. It is expected of the Bank official opening the
account, to explain the procedural formalities and provide necessary clarifications sought by the
prospective depositor when he approaches for opening a deposit account.

E) Transgender persons can decide their self-identified gender such as male, female or third
gender, which has been made available in all forms/applications etc.

F) For deposit products like Savings Bank Account and Current Deposit Account, the Bank will
normally stipulate certain minimum balances to be maintained as part of terms and conditions
governing operation of such accounts. Failure to maintain minimum balance in the account will
attract levy of charges as specified by the Bank from time to time. For Savings Bank Account,
the Bank may place restrictions on number of transactions, cash withdrawals, etc., for given
period. Similarly, the Bank may specify charges for issue of cheque books, additional statement
of accounts, duplicate pass book, folio charges, etc. All such details, regarding terms and
conditions for operation of the accounts and schedule of charges for various services provided
will be communicated to the prospective depositor while opening the account. At the time of
opening the accounts, bank informs customers in a transparent manner the requirement of
maintaining minimum balance and levying of charges, etc., if the minimum balance is not
maintained. Any charge levied subsequently shall be transparently made known to all depositors
in advance with one month’s notice. The bank informs at least one month in advance (through
public notice, advertisement or Official Webpage), the existing account holders of any change in
the prescribed minimum balance and the charges that may be levied if the prescribed minimum
balance is not maintained.

G) Savings Bank Accounts can be opened for eligible person / persons and certain organizations
/ agencies as per eligibility criteria advised by RBI from time to time. Current Accounts can be
opened by individuals / partnership firms / Private and Public Limited Companies / HUFs /
Specified Associates / Societies / Trusts, etc. Term Deposits Accounts can be opened by
individuals / partnership firms / Private and Public Limited Companies / HUFs/ Specified
Associates / Societies / Trusts, etc.

H) The due diligence process, while opening a deposit account will involve satisfying about the
identity of the person, verification of address, and compiling a customer profile. Obtaining recent
photograph of the person/(s) opening / operating the account is part of due diligence process.

I) Deposit accounts can be opened by an individual in his own name (status: known as account in
single name) or by more than one individual in their own names (status: known as Joint
Account). Savings Bank Account can be opened by a minor jointly with natural guardian or with
mother as the guardian (Status: known as Minor's Account). Mother can also be a guardian of the
minor for opening of accounts. Mother, however, will be guardian for the limited purpose of
operation of the account with her minor children. Minors above the age of 10 will also be
allowed to open and operate Savings Bank account independently provided the Minor can sign

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uniformly. Deposits in the account of minors/minors with Natural Guardian will have restrictions
as per Govt./RBI guidelines.

J) KYC once done by one branch of the bank will be valid on transfer of the account within the
Bank as long as full KYC has been done for the concerned account and the same is not due for
periodic updation. The customers are allowed to transfer their account from one branch to
another branch without insisting on fresh proof of address and subject to submitting proof of
address within a period of six months. Periodical updation of KYC data would continue to be
done by the Bank as per prescribed periodicity.

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 CHAPTER 2

KYC, AML & CFT

KNOW YOUR CUSTOMER,

ANTI-MONEY LAUNDERING
&
COMBATTING FINANCING OF
TERRORISM

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 CHAPTER 2

KYC, AML & CFT

(KNOW YOUR CUSTOMER, ANTI-MONEY LAUNDERING &
COMBATTING FINANCING OF TERRORISM)
[Ref.: Master Direction - Know Your Customer (KYC) Direction, 2016. Ref. RBI/ DBR/ 2015-16/18; Master
Direction DBR.AML.BC.No.81/14.01.001/2015-16; February 25, 2016 (Updated as on August 09, 2019)
(Updated as on May 29, 2019) & Aryavart Bank, KYC, AML & CFT Policy dated 06.04.2019]

In terms of the provisions of Prevention of Money-Laundering Act, 2002, the Prevention of

Money-Laundering (Maintenance of Records) Rules, 2005, as amended from time to time by the
Government of India and Aadhaar and other Laws (amendment) Ordinance, 2019 as notified by
the Government of India, Regulated Entities (REs) are required to follow certain customer
identification procedures while undertaking a transaction either by establishing an account-based
relationship or otherwise and monitor their transactions.

Accordingly, in exercise of the powers conferred by Sections 35A of the Banking Regulation
Act, 1949, the Banking Regulation Act (AACS), 1949, read with Section 56 of the Act ibid, Rule
9(14) of Prevention of Money-Laundering (Maintenance of Records) Rules, 2005 and all other
laws enabling the Reserve Bank in this regard, the Reserve Bank of India on being satisfied that
it is necessary and expedient in the public interest to do so, has issued the Master Directions.
These Directions shall be called the Reserve Bank of India (Know Your Customer (KYC))
Directions, 2016.

Accordingly, Banks were required to put in place a comprehensive policy framework covering
the KYC Standards and AML Measures. The guidelines also took into account the
recommendations made by the Financial Action Task Force (FATF) on AML measures and CFT
measures as well as the Basel Committee on Banking Supervision document on Customer Due
Diligence (CDD) measures. Accordingly a Policy Document on KYC and AML guidelines was
formulated and adopted by our Bank, “KNOW YOUR CUSTOMER (KYC) and ANTI MONEY
LAUNDERING (AML) MEASURES” on 06.04.2019.

2.1. OBJECTIVE: The objective of the KYC Policy is:

(a) To enable the Bank to know/understand the customers and their financial dealings better,
thereby helping us to manage the risks prudentially,
(b) To prevent the Bank from being used, intentionally or unintentionally, by criminal elements
for money laundering or terrorist financing activities,
(c) To put in place a proper control mechanism for detecting and reporting of suspicious
transactions in accordance with the statutory and regulatory provisions,
(d) To ensure that all the provisions of Prevention of Money Laundering Act, 2002 and the Rules
made there under and all subsequent amendments thereto are duly complied with, and
(e) To ensure compliance with guidelines/instructions issued by the regulators, including FIU-
IND and RBI.

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2.2. SCOPE:

Applicability,

(a) RBI Master Directions (KYC) 2016, (dated 25.02.2016) its provisions contained therein and
adopted by our Bank applies to our Bank being the entity regulated by RBI by granting us
license under section 22 of Banking Regulation Act 1949.
(b) KYC / AML rules shall not apply on “Small Accounts” defined under Section 23 of RBI
Master Direction 2016.
(c) Obligations under Prevention of Money Laundering Act, 2002 (PML Act) and its
amendments having taken place from time to time which are obligatory on every banking
company, financial institution and intermediary.

Accordingly,

This policy is applicable to all branches / offices of the Bank. Branches should keep in mind that
the information collected for the purpose of opening of account is to be kept as confidential and
details thereof are not to be divulged for cross-selling or any other purposes. Information sought
should be relevant to the perceived risk and should not be intrusive. Any other information from
the customer should be sought separately with his/her consent only after opening of the account.
Banks should ensure that provisions of Foreign Contribution Regulation Act, 2010, wherever
applicable, are strictly adhered to.

2.3. Obligations under Prevention of Money Laundering Act, 2002 (PML Act) include:
(a) Appointment of a Principal Officer and Designated Director;
(b) Maintaining records of prescribed transactions;
(c) Furnishing information of prescribed transactions to the specified authority;
(d) Verifying and maintaining records of the identity of its clients and shall include updated
records / data pertaining to identification, account files and business correspondence;
(e) Preserving records in respect of (b) and (c) above for a period of at least five years from the
date of each such transaction between the Bank and the client;
(f) Preserving records in respect of (d) above for a period of at least five years after the business
relationship is ended or the account closed, whichever is later;

2.4. Important Definitions

2.4.1 PRINCIPAL OFFICER: A senior management official as Principal Officer, he/she must
be able to act independently and report directly to the senior management or to the Board of
Directors and should be located at the Head Office and shall be responsible for monitoring and
reporting of all transactions and sharing of information as required under the law. He / she shall
maintain close liaison with the enforcement agencies, banks and any other institution which are
involved in the fight against money laundering and combating financing of terrorism. He shall be
responsible for overseeing and ensuring overall compliance with regulatory guidelines on
KYC/AML/CFT issued from time to time and obligations under the Prevention of Money
Laundering Act, 2002 and its amendments, rules and regulations made therein. He shall be
responsible for timely submission of Cash Transaction Report (CTR), Suspicious Transaction
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Report (STR), Counterfeit Currency Report (CCR), Non-Profit Organization Transaction Report
(NPOTR) and Cross Border Wire Transfer (CBWT) report, to the FIU-IND. The staff working
with him / her should have timely access to customer identification data and other customer due
diligence information, transaction records and other relevant information for timely reporting to
the regulators. In our bank General Manager, Compliance Department, Head Office shall
be the Principal Officer for this purpose.

2.4.2 DESIGNATED DIRECTOR: The bank is needed to designate a Director to ensure over
all compliance of obligations imposed under PML Act and Rules. In our bank Chairman shall
be Designated Director.

2.4.3 FINANCIAL INTELLIGENCE UNIT – INDIA: FIU-IND is a central agency; it is an

independent body and reports directly to the Economic Intelligence Council headed by the
Finance Minister. Its functions are to act as the central reception point for receiving CTR, STR,
CCR, NPOTR and Cross Border Wire Transfer (CBWT) reports. It analyzes information
received from banks to uncover pattern of transactions suggesting suspicion of money laundering
and related crime. It disseminates the information to appropriate national / international
authorities to support anti- money laundering efforts. It monitors and identifies strategic key
areas on money laundering trends, typologies and developments. Director of FIU-IND is vested
with the powers of a civil court under the code of Civil Procedure, 1908, accordingly has the
power to seize, direct, penalize reporting entities and its employees for breach or violation of
PML Act.

2.4.4 BENEFICIAL OWNER (BO)

a. Where the customer is a company, the beneficial owner is the natural person(s), who,
whether acting alone or together, or through one or more juridical persons, has/have a controlling
ownership interest or who exercise control through other means.

Explanation- For the purpose of this sub-clause-

1. “Controlling ownership interest” means ownership of/entitlement to more than 25 per cent of
the shares or capital or profits of the company.
2. “Control” shall include the right to appoint majority of the directors or to control the
management or policy decisions including by virtue of their shareholding or management rights
or shareholders agreements or voting agreements.

b. Where the customer is a partnership firm, the beneficial owner is the natural person(s), who,
whether acting alone or together, or through one or more juridical person, has/have ownership
of/entitlement to more than 15 per cent of capital or profits of the partnership.
c. Where the customer is an unincorporated association or body of individuals, the beneficial
owner is the natural person(s), who, whether acting alone or together, or through one or more
juridical person, has/have ownership of/entitlement to more than 15 per cent of the property or
capital or profits of the unincorporated association or body of individuals.

Explanation: Term ‘body of individuals’ includes societies. Where no natural person is identified
under (a), (b) or (c) above, the beneficial owner is the relevant natural person who holds the
position of senior managing official.
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d. Where the customer is a trust, the identification of beneficial owner(s) shall include
identification of the author of the trust, the trustee, the beneficiaries with 15% or more interest in
the trust and any other natural person exercising ultimate effective control over the trust through
a chain of control or ownership.

2.4.5 CERTIFIED COPY OF OVD - Obtaining a certified copy by bank shall mean comparing
the copy of officially valid document so produced by the customer with the original and
recording the same on the copy by the authorised officer of the Bank.

Provided that in case of Non-Resident Indians (NRIs) and Persons of Indian Origin (PIOs), as
defined in Foreign Exchange Management (Deposit) Regulations, 2016 {FEMA 5(R)},
alternatively, the original certified copy of OVD, certified by any one of the following, may be
obtained:
• Authorised officials of overseas branches of Scheduled Commercial Banks registered in India,
• Branches of overseas banks with whom Indian banks have relationships,
• Notary Public abroad,
• Court Magistrate,
• Judge,
• Indian Embassy/Consulate General in the country where the non-resident customer resides.

2.4.6 CENTRAL KYC RECORDS REGISTRY (CKYCR) means an entity defined under
Rule 2(1)(aa) of the Rules, to receive, store, safeguard and retrieve the KYC records in digital
form of a customer.

2.4.7 NON PROFIT ORGANISATIONS (NPO) means any entity or organisation that is
registered as a trust or a society under the Societies Registration Act, 1860 or any similar State
legislation or a company registered under Section 8 of the Companies Act, 2013.

2.4.8 WALK-IN-CUSTOMER: means a person who does not have an account-based

relationship with the Bank, but undertakes transactions with the Bank.

2.4.9 CUSTOMER DUE DILIGENCE (CDD) means identifying and verifying the customer
and the beneficial owner.

2.4.10 ON-GOING DUE DILIGENCE means regular monitoring of transactions in accounts to

ensure that they are consistent with the customers’ profile and source of funds.

2.4.11 PERIODIC UPDATION means steps taken to ensure that documents, data or
information collected under the CDD process is kept up-to-date and relevant by undertaking
reviews of existing records at periodicity prescribed by the Reserve Bank.

2.5. KYC Norms / Guidelines / Directions:

Knowing a customer is not just simply obtaining a copy of OVD (Officially valid documents). It
is about understanding the normal life and business practice of the customer, by developing /
having this knowledge about the customer we shall be able to recognize the clues/ signals which
will make us aware of any suspicious activity that may be occurring. In general terms, KYC is: 
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Making every reasonable effort to determine the true identity and beneficial ownership of
accounts  knowing the source of funds  Knowing the correct location, address and nature of
customer’s business  knowing what constitutes reasonable account activity.

2.6. Money Laundering: As per Section 3 of PML Act 2002, the “offence of money
laundering” has been defined as: “Whosoever directly or indirectly attempts to indulge or
knowingly assists or knowingly is a party or is actually involved in any process or activity
connected with the proceeds of crime including its concealment, possession, acquisition or use
and projecting it as untainted property shall be guilty of the offence of money laundering”. In
India AML activities are monitored by FIU-IND as per the provision of PML Act. Money
laundering refers to any transaction that aims at concealing and/or changing the identity of
criminal proceeds so that it appears to have been derived from legitimate sources. “Proceeds of
Crime” (as per section 2 of PML Act) means any property derived or obtained directly or
indirectly by any person as a result of criminal activities. Money launderers use the banking
system for cleansing ‘dirty money’ obtained from criminal activities with the objective of
hiding/disguising its source.

Bank is exposed to the following risks which arise out of Money Laundering activities:
 Reputation Risk
 Compliance Risk
 Operational Risk
 Legal Risk

2.7. Combating Financing of Terrorism (CFT):

Bank shall ensure that in terms of Section 51A of the Unlawful Activities (Prevention) (UAPA)
Act, 1967, they do not have any account in the name of individuals/entities appearing in the lists
of individuals and entities, suspected of having terrorist links, which are approved by and
periodically circulated by the United Nations Security Council (UNSC). The details of the two
lists are as under:

(a) The “ISIL (Da’esh) &Al-Qaida Sanctions List”, which includes names of individuals and
entities associated with the Al-Qaida. The updated ISIL &Al-Qaida Sanctions List is available at
https://scsanctions.un.org/fop/fop?xml=htdocs/resources/xml/en/consolidated.xml&xslt=htdocs/r
esources/xsl/en/al-qaida-r.xsl

(b) The “1988 Sanctions List”, consisting of individuals (Section A of the consolidated list) and
entities (Section B) associated with the Taliban which is available at
https://scsanctions.un.org/fop/fop?xml=htdocs/resources/xml/en/consolidated.xml&xslt=htdocs/r
esources/xsl/en/taliban-r.xsl.

Details of accounts resembling any of the individuals/entities in the lists shall be reported to FIU-
IND apart from advising Ministry of Home Affairs as required under UAPA notification dated
March 14, 2019 (As Annexed at the end of the Chapter).

In addition to the above, other UNSCRs circulated by the Reserve Bank in respect of any other
jurisdictions/ entities from time to time shall also be taken note of.
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The KYC / AML / CFT Policy includes Four Major Key Elements:
(A) Customer Acceptance Procedure
(B) Risk Management / Categorisation of Customer
(C) Customer Identification Procedure and
(D) Monitoring of Transactions

2.8. Customer Acceptance Policy

a No account shall be opened in anonymous/fictitious/benami name/s,

b All the accounts shall be opened with applying appropriate Customer Due Diligence
measures. No accounts shall be opened where Bank is not able to apply CDD
measures either due to non-cooperation of the customer or non-reliability of the KYC
documents /information furnished by the customer / applicant,
c All customers new as well as existing will be classified into risk categories based on
the risk perception i.e. Low, Medium and High.
d “Beneficial Owner” shall be identified / verified necessarily while opening /
marinating accounts having constitution as Partnership, Limited Companies, Trust
etc.
e Before opening any account, it shall be ensured that the identity of the prospective
customer does not match with any person belonging with banned entities such as
individual terrorists or terrorist organizations as advised by UN sanctions lists and
RBI list being published from time to time and has been available through FINACLE
on real time basis,
f Transaction based relationship shall be undertaken only after following the desired
CDD procedures,
g Information collected from the customer for the purpose of opening of account is to
be treated as confidential and details thereof are not to be divulged for cross selling
or other purposes.
h ‘Optional’/additional information is obtained with the explicit consent of the
customer after the account is opened.
i Bank shall apply the CDD procedure at the UCIC level. Thus, if an existing KYC
compliant customer of a Bank desires to open another account with the same Bank,
there shall be no need for a fresh CDD exercise.
j CDD Procedure is followed for all the joint account holders, while opening a joint
account.
k Circumstances in which, a customer is permitted to act on behalf of another
person/entity, is clearly spelt out.
l Customer Acceptance Policy shall not result in denial of banking/financial facility to
members of the general public, especially those, who are financially or socially
disadvantaged.

While adopting / implementing all above procedures, Bank shall ensure banking / financial
facility shall be available with due care to the general public and specially those who are
financially or socially disadvantaged.

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2.9. Risk Management in terms of RBI directions and PML Act 2002 requirements
A risk based approach has been adopted by Bank for all type of customers to effectively address,
manage and mitigate the risks. Risk Based Approach has been designed based on profile of the
customer i.e. occupation, the nature of business activity, location of the customer and his clients,
mode of payments, volume of turnover, social and financial status etc. At the stage of on–
boarding of the customer information submitted by the customer and verified as per the
documents/ credentials, the risk categorization is done as Low, Medium and High.

2.9.1 Low Risk

 salaried employees whose salary structures are well defined;  people belonging to lower
economic strata of society whose accounts show small balances and low turnover;  Government
Departments and Government owned companies;  Regulators, Statutory Bodies, etc.; 
Customers who are employment-based or with a regular source of income from a known source
which supports the activity being undertaken;  Pensioners, benefit recipients, persons whose
income is from their partner’s employment;  Customers with a long-term and active business
relationship with the bank;  Customers other than those classified as High or Medium Risk, 
Individuals (other than High Net Worth/NRI customer) and entities whose identities and source
of funds can be easily identified and transactions in whose accounts by and large conform to the
known profile can be categorized as Low Risk.

2.9.2 Medium Risk

 Non-Banking Finance Companies;  Builders;  Stock Brokerage;

2.9.3 High Risk category

 non-resident customers;  high net worth individual;  Trusts, charities, NGOs / NPOs (other
than those promoted by United Nations or its agencies);  organizations receiving donations; 
companies having close family shareholding or beneficial ownership;  firms with ‘sleeping
partners’;  Politically Exposed Persons of foreign origin including their relatives, accounts
where PEP is the ultimate beneficial owner;  non-face to face customers;  Customers with
dubious reputation as per available public information,  Client a/cs managed by professional
service providers such as law firms, Accountants, agents, brokers, fund managers, Trustees,
custodians, etc.  Customers based in high risk countries/jurisdictions and countries identified by
FATF as having strategic deficiencies in compliance of AML/CFT standards;  Investment
management/money management company/personal Investment Company;  Individuals and
entities specifically identified by Regulators, FIU and other competent Authorities as ‘High
Risk’;  Cash-intensive businesses such as tolls, shopping malls, liquor stores, petrol pumps /
service stations etc.;  Antique Dealers, Money Service Bureau, and Dealers in arms; 
Customers who may appear to be Multi-Level Marketing companies;  Accounts of bullion
dealers (including sub-dealers), jewellers, religious institutions;  Accounts where STR had been
filed with FIU IND earlier;  Any other category, where the Bank decides to classify as High
Risk based on its risk perception;

Periodicity has been fixed for these three Risk categories, as under:
 Category LOW -Once in Ten Years;

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
MEDIUM- Once in Eight years
 HIGH- Once in Two Years
2.10. Customer Identification Procedures (CIP)
Customer identification implies identifying the customer and verifying his/her identity
by using reliable, independent source documents, data or information. Bank has to be
satisfied that a prospective customer is who he/she claims to be. It is, therefore,
necessary to obtain sufficient information to establish the identity of each new
customer, whether regular or occasional, and the purpose of the intended nature of
banking relationship. Being satisfied implies the Bank must be able to satisfy the
competent authorities that 'due diligence’ was observed based on the risk profile of the
customer in compliance with the extant guidelines.
For customers who are natural persons, the branches shall obtain sufficient
identification by obtaining self-attested copy of one of the Officially Valid Documents
(OVDs):
2.10.1 Officially Valid Documents (OVDs)
vii. Passport,
viii. Driving License,
ix. Proof of possession of Aadhaar number,
x. Voter's Identity Card issued by the Election Commission of India,
xi. Job card issued by NREGA duly signed by an officer of the State Government
and
xii. Letter issued by the National Population Register containing details of name and
address.
Provided that,
a). where the customer submits his proof of possession of Aadhaar number as an OVD,
he may submit it in such form as are issued by the Unique Identification Authority of
India.
b). where the OVD furnished by the customer does not have updated address, the
following documents shall be deemed to be OVDs for the limited purpose of proof of
address:-
i. Utility bill which is not more than two months old of any service provider
(electricity, telephone, post-paid mobile phone, piped gas, water bill);
ii. Property or Municipal tax receipt;
iii. Pension or family pension payment orders (PPOs) issued to retired employees by
Government Departments or Public Sector Undertakings, if they contain the address;
iv. Letter of allotment of accommodation from employer issued by State Government
or Central Government Departments, statutory or regulatory bodies, public sector
undertakings, scheduled commercial banks, financial institutions and listed companies
and leave and license agreements with such employers allotting official
accommodation;

c). the customer shall submit OVD with current address within a period of three months
of submitting the documents specified at ‘b’ above
Page-15
d). where the OVD presented by a foreign national does not contain the details of address, in
such case the documents issued by the Government departments of foreign jurisdictions and
letter issued by the Foreign Embassy or Mission in India shall be accepted as proof of address.
e). For the purpose of this clause, a document shall be deemed to be an OVD 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 Gazette notification, indicating such a change of name.

2.10.2 Bank shall undertake identification of customers in the following cases:

(a) Commencement of an account-based relationship with the customer.
(b) Carrying out any international money transfer operations for a person who is not an account
holder of the bank.
(c) When there is a doubt about the authenticity or adequacy of the customer identification data it
has obtained.
(d) Selling third party products as agents, selling their own products, payment of dues of credit
cards/sale and reloading of prepaid/travel cards and any other product for more than rupees fifty
thousand.
(e) Carrying out transactions for a non-account-based customer, that is a walk-in customer,
where the amount involved is equal to or exceeds rupees fifty thousand, whether conducted as a
single transaction or several transactions that appear to be connected.
(f) When the Bank has reason to believe that a customer (account- based or walk-in) is
intentionally structuring a transaction into a series of transactions below the threshold of rupees
fifty thousand.
(g) The ultimate responsibility for customer due diligence and undertaking enhanced due
diligence measures, as applicable, will be with the Bank.

Whenever there is suspicion of money laundering or terrorist financing or when other factors
give rise to a belief that the customer does not, in fact, pose a low risk, full scale Customer Due
Diligence (CDD) shall be ensured to be carried out before opening an account.

2.10.3 Introduction in Account:

Bank shall ensure that introduction is not to be sought while opening accounts.

2.10.4 Photograph and Balance Confirmation of Minor on Becoming Major:

Fresh photographs will be required to be obtained from minor customer on becoming major. In
addition, the balance in the account of the customer on the date when he becomes major shall
also be confirmed from the minor account holder on becoming major.

2.10.5 Local/Permanent Address Proof and KYC requirements; Change of Address;

Address Proof in case of Transfer of Accounts:

(a). Minimum documents for KYC process shall be obtained. Address given in the Account
Opening Form (AOF) should match the KYC document submitted by the customer. Only one
documentary proof of address (either current or permanent) may be obtained while
opening an account or during periodic updation.

16 | P a g e
(b). In case the address proof mentioned as per ‘proof of address’ undergoes a change, fresh
address proof is required to be submitted within a period of six months.

(c). In case the proof of address furnished by the customer is not the local address or address
where the customer is currently residing, a declaration of the local address shall be obtained
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 acknowledgement of receipt of
(i) letter, cheque books, ATM cards; (ii) telephonic conversation (iii) visits.

(d). In the event of change in this address due to relocation or any other reason, customers should
intimate the new address for correspondence to the bank within two weeks of such a change.

(e). KYC verification once done by one branch/office of the Bank shall be valid for transfer of
the account to any other branch/office of the Bank, provided full KYC verification has already
been done for the concerned account and the same is not due for periodic updation

2.10.6 Simplified KYC Norms:

As per RBI Master Direction (KYC) 2016, dated 25.02.2016, in respect of customers who are
categorised as ‘low risk’ and are not able to produce any of the OVDs ‘simplified procedure’ is
applied for verification of identity of the customer, the following documents shall be deemed to
be OVD:

a. Proof of Identity:
 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;
 Letter issued by a Gazetted officer, with a duly attested photograph of the person.

b. Proof of Address:
Provided further that where ‘simplified measures’ are applied for verifying, for the limited
purpose of, proof of address the following additional documents are deemed to be OVDs :
a. Utility bill, which is not more than two months old, of any service provider (electricity,
telephone, post-paid mobile phone, piped gas, water bill);
b. Property or Municipal Tax receipt;
c. Bank account or Post Office savings bank account statement;
d. Pension or family Pension Payment Orders (PPOs) issued to retired employees by
Government Departments or Public Sector Undertakings, if they contain the address;
e. Letter of allotment of accommodation from employer issued by State or Central Government
departments, statutory or regulatory bodies, public sector undertakings, scheduled commercial
banks, financial institutions and listed companies. Similarly, leave and license agreements with
such employers allotting official accommodation; and
f. Documents issued by Government departments of foreign jurisdictions or letter issued by
Foreign Embassy or Mission in India.

17 | P a g e
2.10.7 Small Accounts:

The individual customer who does not possess either any of the OVDs or documents applicable
in respect of “Simplified Procedure” and desires to open a bank account, such type of account
shall be opened as “Small Account” with guidelines / terms as under:-
1. Small account means a savings account;
2. An individual shall be allowed to open a ‘small account’ on production of a self attested
photograph and affixation of signature or thumb impression, as the case may be, on the account
opening form provided the Branch. The branch official shall certify having obtained photograph
and signature / thumb impression of the individual while opening the said account.
3. The aggregate of all credits in such accounts in a financial year must not exceed Rupees One
Lakh;
4. The aggregate of all withdrawals and transfers in a month must not exceed Rupees Ten
Thousand;
5. The balance at any point of time does not exceed Rupees Fifty Thousand;
6. No foreign remittance shall be credited in the account;
7. The account shall remain operational initially for a period of twelve months and thereafter for
a further period of twelve months if the account holder provides evidence to the branch of
having applied for any of the officially valid documents within twelve months of the opening of
the account. If no KYC document is provided within stipulated timeframe, account shall be first
frozen full or partial after due notice and subsequently be closed, but under no condition, account
should be allowed to be operated if KYC document is not furnished within stipulated timeframe.

Customer Due Diligence (CDD) Procedure

2.10.8 Part I - Customer Due Diligence (CDD) Procedure in case of Individuals
For undertaking CDD, Branches shall obtain the following from an individual while establishing
an account-based relationship or while dealing with the individual who is a beneficial owner,
authorised signatory or the power of attorney holder related to any legal entity:

(a) A certified copy of any OVD containing details of his identity and address
(b) One recent photograph
(c) The Permanent Account Number or Form No. 60 as defined in Income-tax Rules, 1962, and
(d) Such other documents pertaining to the nature of business or financial status specified by the
KYC policy.

Provided that,
i) Branch shall obtain the Aadhar number from an individual who is desirous of receiving
any benefit or subsidy under any scheme notified under section 7 of the Aadhaar (Targeted
Delivery of Financial and Other subsidies, Benefits and Services) Act, 2016 (18 of 2016)1.
Banks, at receipt of the Aadhar number from the customer may carry out authentication of
the customer’s Aadhar number using e-KYC authentication facility provided by the Unique
Identification Authority of India upon receipt of the customer’s declaration that he is

1
Biometric based e-KYC authentication can be done by bank official/business correspondents/business facilitators.
18 | P a g e
 desirous of receiving any benefit or subsidy under any scheme notified under section 7 of
the Aadhaar (Targeted Delivery of Financial and Other Subsidies Benefits and Services)
Act, 2016 (18 of 2016) in his account2.
ii) Branch may carry out Aadhaar authentication/ offline-verification of an individual who
voluntarily uses his Aadhaar number for identification purpose.
iii) In cases where successful authentication has been carried out, other OVD and
photograph need not be submitted by the customer.
iv) Provided further that in case biometric e-KYC authentication cannot be performed for
an individual desirous of receiving any benefit or subsidy under any scheme notified
under section 7 of the Aadhaar (Targeted Delivery of Financial and Other subsidies,
Benefits and Services) Act, 2016 owing to injury, illness or infirmity on account of
old age or otherwise, and similar causes, Branch shall, apart from obtaining the
Aadhaar number, perform identification preferably by carrying out offline verification
or alternatively by obtaining the certified copy of any other OVD from the customer.
CDD done in this manner shall invariably be carried out by an official of the Bank
and such exception handling shall also be a part of the concurrent audit as mandated.
Branch shall ensure to duly record the cases of exception handling in a centralised
exception database. The database shall contain the details of grounds of granting
exception, customer details, name of the designated official authorising the exception
and additional details, if any. The database shall be subjected to periodic internal
audit/inspection by the Bank and shall be available for supervisory review.

2.10.9 Accounts opened using OTP based e-KYC, in non-face-to-face mode are subject to
the following conditions:
i. There must be a specific consent from the customer for authentication through OTP.
ii. The aggregate balance of all the deposit accounts of the customer shall not exceed rupees one
lakh. In case, the balance exceeds the threshold, the account shall cease to be operational, till
CDD as mentioned at (v) below is complete.
iii. The aggregate of all credits in a financial year, in all the deposit accounts taken together, shall
not exceed rupees two lakh.
iv. As regards borrowal accounts, only term loans shall be sanctioned. The aggregate amount of
term loans sanctioned shall not exceed rupees sixty thousand in a year.
v. Accounts, both deposit and borrowal, opened using OTP based e-KYC shall not be allowed
for more than one year within which identification as per Section 16 is to be carried out.
vi. If the CDD procedure as mentioned above is not completed within a year, in respect of
deposit accounts, the same shall be closed immediately. In respect of borrowal accounts no
further debits shall be allowed.
vii. 12A declaration shall be obtained from the customer to the effect that no other account has
been opened nor will be opened using OTP based KYC in non-face-to-face mode with any other
Bank. Further, while uploading KYC information to CKYCR, Bank shall clearly indicate that
such accounts are opened using OTP based e-KYC and other Banks shall not open accounts

2 The use of Aadhaar, proof of possession of Aadhaar etc., shall be in accordance with the Aadhaar (Targeted Delivery of
Financial and Other Subsidies Benefits and Services) Act, the Aadhaar and Other Law (Amendment) Ordinance, 2019 and the
regulations made there under.

19 | P a g e
based on the KYC information of accounts opened with OTP based e-KYC procedure in non-
face-to-face mode.
viii. Bank shall have strict monitoring procedures including systems to generate alerts in case of
any non-compliance/violation, to ensure compliance with the above mentioned conditions.
Account holder applies and furnishes evidence of having applied for any of the OVDs during the
first twelve months of the opening of the said account.
(ix) The entire relaxation provisions shall be reviewed after twenty four months.
(x) The account shall be monitored and when there is suspicion of money laundering or
financing of terrorism activities or other high risk scenarios, the identity of the customer shall be
established through the production of an OVD and Permanent Account Number or Form No.60,
as the case may be.
(xi) Foreign remittance shall not be allowed to be credited into the account unless the identity of
the customer is fully established through the production of an OVD and Permanent Account
Number or Form No.60, as the case may be.

2.10.10 Part II - CDD Measures for Sole Proprietary firms

For opening an account in the name of a sole proprietary firm, CDD of the individual
(proprietor) shall be carried out.

In addition to the above, any two of the following documents as a proof of business/ activity in
the name of the proprietary firm shall also be obtained:
(a) Registration certificate
(b) Certificate/licence issued by the municipal authorities under Shop and Establishment Act.
(c) Sales and income tax returns.
(d) (provisional/final) CST/VAT/ GST certificate
(e) Certificate/registration document issued by Sales Tax/Service Tax/Professional Tax
authorities.
(f) IEC (Importer Exporter Code) issued to the proprietary concern by the office of DGFT or
Licence/certificate of practice issued in the name of the proprietary concern by any professional
body incorporated under a statute.
(g) Complete Income Tax Return (not just the acknowledgement) in the name of the sole
proprietor where the firm's income is reflected, duly authenticated/acknowledged by the Income
Tax authorities.
(h) Utility bills such as electricity, water, landline telephone bills, etc.

In cases where the Branches are satisfied that it is not possible to furnish two such documents,
Branch may, at their discretion, accept only one of those documents as proof of business/activity.
Provided branch undertakes contact point verification and collect such other information and
clarification as would be required to establish the existence of such firm, and shall confirm and
satisfy itself that the business activity has been verified from the address of the proprietary
concern.

2.10.11 Part III- CDD Measures for Legal Entities

For opening an account of a company, certified copies of each of the following documents shall
be obtained:
(a) Certificate of incorporation
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(b) Memorandum and Articles of Association
(c) Permanent Account Number of the company
(d) A resolution from the Board of Directors and power of attorney granted to its managers,
officers or employees to transact on its behalf
(e) OVDs of the managers, officers or employees, as the case may be, holding an attorney to
transact on the company’s behalf

Partnership Firm:
For opening an account of a partnership firm, the certified copies of each of the following
documents shall be obtained:
(a) Registration certificate
(b) Partnership deed
(c) Permanent Account Number of the partnership firm
(d) OVDs of the person holding an attorney to transact on its behalf

Trust:
For opening an account of a trust, certified copies of each of the following documents shall be
obtained:
(a) Registration certificate
(b) Trust deed
(c) Permanent Account Number or Form No.60 of the trust
(d) OVDs of the person holding an attorney to transact on its behalf Documents.

Unincorporated Association or Body of Individuals:

For opening an account of an unincorporated association or a body of individuals, certified
copies of each of the following documents shall be obtained:
(a) Resolution of the managing body of such association or body of individuals
(b) Permanent Account Number or Form No. 60 of the unincorporated association or a body of
individuals
(c) Power of attorney granted to transact on its behalf

2.10.12 Ongoing Due Diligence:

 Periodic updation of KYC (Re-KYC) as per stipulated frequency: All the customers
are categorized under the risk categories LOW, MEDIUM and HIGH and Re KYC
exercise shall be undertaken i.e. obtaining fresh KYC documents along with recent
photograph.
 Branch shall undertake on-going due diligence of customers to ensure that their
transactions are consistent with their knowledge about the customers, customers’
business and risk profile; and the source of funds.
 Partial Freezing / Closure of Accounts: The customers who are non-compliant of KYC
requirements at any stage either at the time of on boarding or at subsequent stage and not
responding to the reminders by branches, RBI has advised that banks may impose ‘partial
freezing’ on such KYC non-compliant accounts in a phased manner. The procedure for
exercising option of ‘partial freezing’ is given as under: 1) initially a notice of three
months should be given to the customers to comply with KYC requirements, 2) it should
21 | P a g e
 be followed by a reminder for further period of three months, 3) thereafter, branches may
impose ‘partial freezing’, by allowing all credits and disallowing all debits with the
freedom to close the accounts, If the accounts are still KYC non-compliant after six
months of imposing initial ‘partial freezing’ branches may disallow all debits and credits
from/to the accounts, rendering them inoperative. Further, it would always be open to the
branches to close the account of such customers.
 Without prejudice to the generality of factors that call for close monitoring following
types of transactions shall necessarily be monitored:
a. Large and complex transactions including RTGS transactions, and those with
unusual patterns, inconsistent with the normal and expected activity of the
customer, which have no apparent economic rationale or legitimate purpose.
b. Transactions which exceed the thresholds prescribed for specific categories of
accounts.
c. High account turnover inconsistent with the size of the balance maintained.
d. Deposit of third party cheques, drafts, etc. in the existing and newly opened
accounts followed by cash withdrawals for large amounts.

 The extent of monitoring shall be aligned with the risk category of the customer. High
risk accounts have to be subjected to more intensified level of monitoring. A system of
periodic review of risk categorisation of accounts, with such periodicity being at least
once in six months, and the need for applying enhanced due diligence measures shall be
put in place. The transactions in accounts of marketing firms, especially accounts of
Multi-level Marketing (MLM) Companies shall be closely monitored. Cases where a
large number of cheque books are sought by the company and/or multiple small deposits
(generally in cash) across the country in one bank account and/or where a large number
of cheques are issued bearing similar amounts/dates, shall be immediately reported to
Reserve Bank of India and other appropriate authorities such as FIU-IND.

2.10.13 Periodic Updation

Periodic updation shall be carried out at least once in every two years for high risk customers,
once in every eight years for medium risk customers and once in every ten years for low risk
customers as per the following procedure:

(a) Branch shall carry out

i. CDD at the time of periodic updation. However, in case of low risk customers when there is no
change in status with respect to their identities and addresses, a self-certification to that effect
shall be obtained.
ii. In case of Legal entities, branch shall review the documents sought at the time of opening of
account and obtain fresh certified copies.

(b) Branches may not insist on the physical presence of the customer for the purpose of
furnishing OVD or furnishing consent for Aadhaar authentication/Offline Verification unless
there are sufficient reasons that physical presence of the account holder/holders is required to
establish their bona-fides. Normally, OVD/Consent forwarded by the customer through
mail/post, etc., shall be acceptable.

22 | P a g e
(c) Branches shall ensure to provide acknowledgment with date of having performed KYC
updation.

(d) The time limits prescribed above would apply from the date of opening of the account/ last
verification of KYC.

In case of existing customers, branches shall obtain the Permanent Account Number or Form
No.60, by such date as may be notified by the Central Government, failing which branch shall
temporarily cease operations in the account till the time the Permanent Account Number or Form
No. 60 is submitted by the customer.

Provided that before temporarily ceasing operations for an account, the branch shall give the
client an accessible notice and a reasonable opportunity to be heard. Further, Branch shall
extend, as per Bank’s internal policy, appropriate relaxation(s) for continued operation of
accounts for customers who are unable to provide Permanent Account Number or Form No. 60
owing to injury, illness or infirmity on account of old age or otherwise, and such like causes.
Such accounts shall, however, be subject to enhanced monitoring.

Provided further that if a customer having an existing account-based relationship with a Branch
gives in writing to the Branch that he does not want to submit his Permanent Account Number or
Form No.60, Branch shall close the account and all obligations due in relation to the account
shall be appropriately settled after establishing the identity of the customer by obtaining the
identification documents as applicable to the customer.

Explanation – For the purpose of this Section, “temporary ceasing of operations” in relation an
account shall mean the temporary suspension of all transactions or activities in relation to that
account by the branch till such time the customer complies with the provisions of this Section. In
case of asset accounts such as loan accounts, for the purpose of ceasing the operation in the
account, only credits shall be allowed.

2.10.14 Enhanced Due Diligence

(i) Accounts of non-face-to-face customers: Whenever any account is opened without visit of
the customer to the Branch, e.g. NRI accounts, Branches should ensure that all the documents
presented are certified to Bank’s satisfaction, call for additional documents, if necessary. In such
cases, as a prudent and precautionary measure, branches may also insist that the first credit be
effected through the customer’s account with another bank which, in turn, adheres to similar
KYC standards.

(ii) Walk-in Customers: In case of transactions carried out by a non-account based customer,
i.e. a walk-in customer, where the amount of transaction is equal to or exceeds rupees fifty
thousand, whether conducted as a single transaction or several transactions that appear to be
connected, the customer’s identity and address should be verified and documentary proof of the
same should be obtained and held on record.

(iii) Accounts of Non-Government Organizations (NGOs): Accounts of NGOs should be

opened only after fully complying with the KYC/AML/CFT guidelines. Accounts of NGOs
23 | P a g e
receiving foreign contribution should be registered with the Ministry of Home Affairs,
Government of India or possess prior approval of the Government for receiving foreign
funds. All NGO accounts opened (except those promoted by the United Nations or its
agencies) should be classified as High Risk category accounts AB INITIO and transactions
in these accounts should be properly scrutinized with enhanced due diligence on
continuous basis. All foreign inward remittances to the credit of these accounts should be
scrutinized taking into account the customer profile, country of origin of funds, etc. and
extant guidelines regarding such remittances.
(iv) Accounts of Politically Exposed Persons (PEPs)
A. Branches shall have the option of establishing a relationship with PEPs provided that:
(a) Sufficient information including information about the sources of funds accounts of
family members and close relatives is gathered on the PEP;
(b) The identity of the person shall have been verified before accepting the PEP as a
customer;
(c) The decision to open an account for a PEP is taken at a senior level in accordance with
the Bank’s Customer Acceptance Policy;
(d) All such accounts are subjected to enhanced monitoring on an on-going basis;
(e) In the event of an existing customer or the beneficial owner of an existing account
subsequently becoming a PEP, senior management’s approval is obtained to continue the
business relationship;
(f) The CDD measures as applicable to PEPs including enhanced monitoring on an on-
going basis are applicable.
B. These instructions shall also be applicable to accounts where a PEP is the beneficial
owner.
(v) Client accounts opened by professional intermediaries viz. BCs, BFs, CSPs:
Branches shall ensure while opening client accounts through professional intermediaries
viz. BCs, BFs, CSPs, that:
(a) Clients shall be identified when client account is opened by a professional intermediary
(b) Branches shall, at their discretion, rely on the 'customer due diligence' (CDD) done by
an intermediary, provided that the intermediary is a regulated and supervised entity and has
adequate systems in place to comply with the KYC requirements of the customers.
(c) The ultimate responsibility for knowing the customer lies with the Branches.
2.10.15 Simplified Due Diligence
i. Norms for Self Help Groups (SHGs)
(a) CDD of all the members of SHG shall not be required while opening the savings bank
account of the SHG.
(b) CDD of all the office bearers shall suffice.
(c) Customer Due Diligence (CDD) of all the members of SHG may be undertaken at the
time of credit linking of SHGs.”
ii. Procedure to be followed by banks while opening accounts of Foreign Students
(a) Banks shall, at their option, open a Non Resident Ordinary (NRO) bank account of a
foreign student on the basis of his/her passport (with visa & immigration endorsement)
bearing the proof

Page-24
of identity and address in the home country together with a photograph and a letter offering
admission from the educational institution in India. i. Provided that a declaration about the local
address shall be obtained within a period of 30 days of opening the account and the said local
address is verified. ii. Provided further that pending the verification of address, the account shall
be operated with a condition of allowing foreign remittances not exceeding USD 1,000 or
equivalent into the account and a cap of rupees fifty thousand on aggregate in the same, during
the 30-day period.

(b) The account shall be treated as a normal NRO account, and shall be operated in terms of
Reserve Bank of India’s instructions on Non-Resident Ordinary Rupee (NRO) Account, and the
provisions of FEMA 1999.
(c) Students with Pakistani nationality shall require prior approval of the Reserve Bank for
opening the account.

2.11 Monitoring of Transactions

Once an account is opened and business relationship is established after ensuring KYC
compliance, it is essential that the transactions in the account are monitored on an ongoing basis
so as to achieve the ultimate objective of preventing the Bank from being used, intentionally or
unintentionally, by criminal elements for money laundering or terrorist financing activities.
Transactions which do not fall within the ambit of the declared activity of the customer may be
treated as suspicious and need to be reported to the FIU-IND. Special attention should be given
to all complex, unusually large value transactions, transactions involving large amount of cash
inconsistent with the normal and expected activity of the customer, transactions having unusual
patterns which have no apparent economic or visible lawful purpose, etc. High risk category
accounts should be subjected to intensive monitoring.

2.11.1 The close monitoring of following types of transactions shall necessarily be carried
out:
(i) Large and complex transactions including RTGS transactions, and those with unusual
patterns, inconsistent with the normal and expected activity of the customer, which have no
apparent economic rationale or legitimate purpose,
(ii) Transactions which exceed the thresholds prescribed for specific categories of accounts.
(iii) High account turnover inconsistent with the size of the balance maintained.
(iv) Deposit of third party cheques, drafts, etc. in the existing and newly opened accounts
followed by cash withdrawals for large amounts.
(v) The extent of monitoring shall be aligned with the risk category of the customer.

High risk accounts have to be subjected to more intensified monitoring: (a) A system of periodic
review of risk categorisation of accounts, with such periodicity being at least once in six months,
and the need for applying enhanced due diligence measures shall be put in place. (b) The
transactions in accounts of marketing firms, especially accounts of Multilevel Marketing (MLM)
Companies shall be closely monitored. Cases where a large number of cheque books are sought
by the company and/or multiple small deposits (generally in cash) across the country in one bank
account and/or where a large number of cheques are issued bearing similar amounts/dates, shall
be immediately reported to Reserve Bank of India and other appropriate authorities such as FIU-
IND.
25 | P a g e
2.11.2 Accounts / Transactions where PAN OR Form 60/61 required
Rule 114B of the Income Tax Rules, 1962 has made it mandatory for the customer to quote the
PAN for certain banking transactions, which have been detailed as below:
(i) Placing a time deposit (i.e. a Term Deposit) EXCEEDING Rs.50,000/;
(ii) Opening an account (not being a time deposit);
(iii) Payment in cash for purchase of bank drafts or pay orders or banker’s cheques FOR
AN AMOUNT AGGREGATING TO RS. 50,000/- OR MORE DURING ANY ONE
DAY;
(iv) A deposit in cash aggregating to Rs.50,000/- or more;
(v) Making an application for issue of CREDIT OR DEBIT card;
(vi) In case of a MINOR, who does not have any income chargeable to income tax, he /
she shall quote the PAN of his / her father or mother or guardian, as the case may be.
PROVIDED FURTHER THAT ANY PERSON WHO DOES NOT HAVE A PAN
AND WHO ENTERS INTO ANY TRANSACTION SPECIFIED IN THIS RULE,
SHALL MAKE A DECLARATION IN FORM 60/61 AS THE CASE MAY BE
GIVING THEREIN THE PARTICULARS OF SUCH TRANSACTIONS.

2.12 Reporting Requirements to Financial Intelligence Unit - India

Bank is required to furnish to the Director, Financial Intelligence Unit-India (FIU-IND),
information referred to in Rule 3 of the PML (Maintenance of Records) Rules, 2005 in terms of
Rule 7 thereof.

The reporting formats and comprehensive reporting format guide, prescribed/ released by FIU-
IND and Report Generation Utility and Report Validation Utility developed to assist Banks in
the preparation of prescribed reports shall be taken note of that have been made available by
FIU-IND on its website http://fiuindia.gov.in.

While furnishing information to the Director, FIU-IND, delay of each day in not reporting a
transaction or delay of each day in rectifying a mis-represented transaction beyond the time limit
as specified in the Rule shall be constituted as a separate violation. Branches shall not put any
restriction on operations in the accounts where an STR has been filed. Branches shall keep the
fact of furnishing of STR strictly confidential. It shall be ensured that there is no tipping off to
the customer at any level.

Robust software, throwing alerts when the transactions are inconsistent with risk categorization
and updated profile of the customers shall be put in to use as a part of effective identification and
reporting of suspicious transactions.

Important Reports to be furnished to FIU-IND:

2.12.1 Cash Transaction Report (CTR): CTR for every month is to be submitted by 15th of the
succeeding month and shall include: All cash transactions (credit & debit) of the value of more
than Rupees Ten Lakh or its equivalent in foreign currency taken place within a month.

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2.12.2 SUSPICIOUS TRANSACTION REPORT (STR):  There are several indicators of
financial as well as non financial nature which could give rise to an equal amount of suspicious
and result in filing STR. STRs should be reported if there is a reasonable ground to believe that
the transaction involves proceeds of crime generally, irrespective of the amount of transaction
even attempted but failed or aborted suspicious transactions shall be reported. The customers
should not be tipped off in any manner whatsoever regarding enquiry. Scrutiny of the
transactions and enhanced due diligence should be done in completely discreet manner. Branches
may file STR wherever they find the transaction to be suspicious by filling in prescribed format
within 7 days from the date of transactions. Submission of STR in an account should in no way
restrict operations in that account and the customer should not know about the STR filed in the
account.

2.12.3 Counterfeit Currency Report (CCR): All cash transactions, where forged or counterfeit
Indian currency notes have been used as genuine, should be reported by the Principal Officer to
the FIUIND in the specified format and submitted to FIU-IND within the mandatory time limit
of 15th of the following month as per their stipulation. Once a counterfeit currency transaction is
detected, the same should be reported by the. RBI has recently relaxed the rules in respect of
filing of FIR i.e. for upto 4 (four) counterfeit currency notes per transaction FIR need not be
filed. Instead, a consolidated monthly statement is to be sent to the police authorities, enclosing
therewith the counterfeit currency notes. In respect of counterfeit currency notes of 5 (five) and
above, FIR has to be filed. Under no circumstances the counterfeit currency notes are to be
returned to Customers. As per the implementation of Reserve Bank of India Clean note policy,
detection, impounding and reporting of counterfeit notes are revised. Branches are advised to
accept all forged notes of customer and credit the full value to his account.

2.13 RECORD MANAGEMENT

The following steps shall be taken regarding maintenance, preservation and reporting of
customer account information, with reference to provisions of PML Act and Rules. Branches
shall,
(a) Maintain all necessary records of transactions between the Bank and the customer, both
domestic and international, for at least five years from the date of transaction;
(b) Preserve the records pertaining to the identification of the customers and their addresses
obtained while opening the account and during the course of business relationship, for at least
five years after the business relationship is ended;
(c) Make available the identification records and transaction data to the competent authorities
upon request;
(d) Introduce a system of maintaining proper record of transactions prescribed under Rule 3 of
Prevention of Money Laundering (Maintenance of Records) Rules, 2005 (PML Rules, 2005);
(e) Maintain all necessary information in respect of transactions prescribed under PML Rule 3 so
as to permit reconstruction of individual transaction, including the following:
(i) The nature of the transactions;
(ii) The amount of the transaction and the currency in which it was denominated;
(iii) The date on which the transaction was conducted; and
(iv) The parties to the transaction.

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(f) Evolve a system for proper maintenance and preservation of account information in a manner
that allows data to be retrieved easily and quickly whenever required or when requested by the
competent authorities;
(g) Maintain records of the identity and address of their customer, and records in respect of
transactions referred to in Rule 3 in hard or soft format.

2.14 Requirements/obligations under International Agreements

Communications from International Agencies –

Branches shall ensure that in terms of Section 51A of the Unlawful Activities (Prevention)
(UAPA) Act, 1967, they do not have any account in the name of individuals/entities appearing in
the lists of individuals and entities, suspected of having terrorist links, which are approved by
and periodically circulated by the United Nations Security Council (UNSC):

(a) The “ISIL (Da’esh) &Al-Qaida Sanctions List”, which includes names of individuals and
entities associated with the Al-Qaida.

(b) The “1988 Sanctions List”, consisting of individuals (Section A of the consolidated list) and
entities (Section B) associated with the Taliban.

Freezing of Assets under Section 51A of Unlawful Activities (Prevention) Act, 1967
The procedure laid down in the UAPA Order dated March 14, 2019 (Annex I of this Chapter)
shall be strictly followed and meticulous compliance with the Order issued by the Government
shall be ensured.

Jurisdictions that do not or insufficiently apply the FATF Recommendations

(a) FATF Statements circulated by Reserve Bank of India from time to time, and publicly
available information, for identifying countries, which do not or insufficiently apply the FATF
Recommendations, shall be considered. Risks arising from the deficiencies in AML/CFT regime
of the jurisdictions included in the FATF Statement shall be taken into account.
(b) Special attention shall be given to business relationships and transactions with persons
(including legal persons and other financial institutions) from or in countries that do not or
insufficiently apply the FATF Recommendations and jurisdictions included in FATF Statements.

(c) The background and purpose of transactions with persons (including legal persons and other
financial institutions) from jurisdictions included in FATF Statements and countries that do not
or insufficiently apply the FATF Recommendations shall be examined, and written findings
together with all documents shall be retained and shall be made available to Reserve Bank/other
relevant authorities, on request.

2.15. Other Instructions

2.15.1 Secrecy Obligations and Sharing of Information:

(a) Banks shall maintain secrecy regarding the customer information which arises out of the
contractual relationship between the banker and customer.

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(b) Information collected from customers for the purpose of opening of account shall be treated
as confidential and details thereof shall not be divulged for the purpose of cross selling, or for
any other purpose without the express permission of the customer.
(c) While considering the requests for data/information from Government and other agencies,
banks shall satisfy themselves that the information being sought is not of such a nature as will
violate the provisions of the laws relating to secrecy in the banking transactions.
(d) The exceptions to the said rule shall be as under:
i. Where disclosure is under compulsion of law
ii. Where there is a duty to the public to disclose,
iii. The interest of bank requires disclosure and
iv. Where the disclosure is made with the express or implied consent of the customer.

2.15.2 CDD Procedure and sharing KYC information with Central KYC Records Registry
(CKYCR)

Branches shall capture the KYC information for sharing with the CKYCR in the manner
mentioned in the Rules, as required by the revised KYC templates prepared for ‘individuals’ and
‘Legal Entities’ as the case may be. Government of India has authorised the Central Registry of
Securitisation Asset Reconstruction and Security Interest of India (CERSAI), to act as, and to
perform the functions of the CKYCR vide Gazette Notification No. S.O. 3183(E) dated
November 26, 2015.

2.15.3 Reporting requirement under Foreign Account Tax Compliance Act (FATCA) and
Common Reporting Standards (CRS)
Under FATCA and CRS, Bank shall adhere to the provisions of Income Tax Rules 114F, 114G
and 114H.

2.15.4 Period for presenting Payment Instruments

Payment of cheques/drafts/pay orders/banker’s cheques, if they are presented beyond the period
of three months from the date of such instruments, shall not be made.

2.15.5 Operation of Bank Accounts & Money Mules

Money mules can be used to launder the proceeds of fraud schemes (e.g. phishing and identity
theft) by criminals, black or corrupt money by tax defaulters, etc who gain illegal access to
deposit accounts by recruiting third parties to act as “money mules”. In some cases these third
parties may be innocent while in other cases they may be having complicity with the criminals.
When caught, these money mules often have their bank accounts suspended, causing
inconvenience and potential financial loss, apart from facing likely legal action for being part of
a fraud. Many a times the address and contact details of such mules are found to be fake or not
up to date making it difficult for enforcement agencies to locate the account holder. The
operations of such money mules can be minimized if branches follow the guidelines on opening
of accounts and monitoring of transactions. Branches should especially monitor the operations in
the accounts of low profile customers like students, pensioners, housewives etc. and in case such
accounts show transactions which are not commensurate with the profile, it may be an indication
or a pointer that the account is being used as a money mule account. In such cases the branches
should immediately file Suspicious Transaction Report (STR).
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The instructions on opening of accounts and monitoring of transactions shall be strictly adhered
to, in order to minimise the operations of “Money Mules” which are used to launder the proceeds
of fraud schemes (e.g., phishing and identity theft) by criminals who gain illegal access to
deposit accounts by recruiting third parties which act as “money mules.” If it is established that
an account opened and operated is that of a Money Mule, it shall be deemed that the branch has
not complied with these directions.

2.15.6 Collection of Account Payee Cheques

Account payee cheques for any person other than the payee constituent shall not be collected.
Banks shall, at their option, collect account payee cheques drawn for an amount not exceeding
rupees fifty thousand to the account of their customers who are co-operative credit societies,
provided the payees of such cheques are the constituents of such co-operative credit societies.

2.15.7 Unique Customer Identification Code

A Unique Customer Identification Code (UCIC) shall be allotted while entering into new
relationships with individual customers as also the existing customers. The branches shall, at
their option, not issue UCIC to all walk-in/occasional customers such as buyers of pre-paid
instruments/purchasers of third party products provided it is ensured that there is adequate
mechanism to identify such walk-in customers who have frequent transactions with them and
ensure that they are allotted UCIC.

2.15.8 Credit / Debit / Smart / Gift Cards, Mobile Wallet, Net Banking/ Mobile Banking,
RTGS/ NEFT/ ECS/ IMPS, Demat Services/ E-KYC Money Laundering Threats from New
Technology
Branches should pay special attention to any money laundering threats that may arise from new
or developing technologies like internet banking, mobile banking etc. that might favour
anonymity and take measures, if needed, to prevent their use in money-laundering schemes.
Branches should extend such facilities only to those accounts that are fully KYC compliant, as
per extant KYC/AML/CFT guidelines.

2.15.9 Wire transfer

Branches shall ensure the following while effecting wire transfer:
(a) All cross-border wire transfers including transactions using credit or debit card shall be
accompanied by accurate and meaningful originator information such as name, address and
account number or a unique reference number, as prevalent in the country concerned in the
absence of account.

Exception: Interbank transfers and settlements where both the originator and beneficiary are
banks or financial institutions shall be exempt from the above requirements.

(b) Domestic wire transfers of rupees fifty thousand and above shall be accompanied by
originator information such as name, address and account number.

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 (c)Customer Identification shall be made if a customer is intentionally structuring wire transfer
below rupees fifty thousand to avoid reporting or monitoring. In case of non-cooperation from
the customer, efforts shall be made to establish his identity and STR shall be made to FIU-IND.
(d)Complete originator information relating to qualifying wire transfers shall be preserved at
least for a period of five years by the ordering bank.

2.15.10 Issue and Payment of Demand Drafts, etc.,

Any remittance of funds by way of demand draft, mail/telegraphic transfer/NEFT/IMPS or any
other mode and issue of travellers’ cheques for value of rupees fifty thousand and above shall be
effected by debit to the customer’s account or against cheques and not against cash payment.
Further, the name of the purchaser shall be incorporated on the face of the demand draft, pay
order, banker’s cheque, etc., by the issuing bank.

2.15.11 Selling Third party products

Banks acting as agents while selling third party products as per regulations in force from time to
time shall comply with the following aspects for the purpose of these directions:
(a) The identity and address of the walk-in customer shall be verified for transactions above
rupees fifty thousand as required under Section 13(e) of RBI’s Master Directions.
(b) Transaction details of sale of third party products and related records shall be maintained.
(c) AML software capable of capturing, generating and analysing alerts for the purpose of filing
CTR/STR in respect of transactions relating to third party products with customers including
walk-in customers shall be available.
(d) Transactions involving rupees fifty thousand and above shall be undertaken only by:
• Debit to customers’ account or against cheques; and
• Obtaining and verifying the PAN given by the account-based as well as
walk-in customers.
(e) Instruction at‘d’ above shall also apply to sale of Banks’ own products, payment of dues of
credit cards/sale and reloading of prepaid/travel cards and any other product for rupees fifty
thousand and above.

2.15.12 Issuance of Prepaid Payment Instruments (PPIs):

PPI issuers shall ensure that the instructions issued by Department of Payment and Settlement
System of Reserve Bank of India through their Master Direction are strictly adhered to.

2.15.13 Hiring of Employees and Employee training

(a) Adequate screening mechanism as an integral part of their personnel recruitment/hiring
process shall be put in place.
(b) On-going employee training programme shall be put in place so that the members of staff are
adequately trained in AML/CFT policy. The focus of the training shall be different for frontline
staff, compliance staff and staff dealing with new customers. The front desk staff shall be
specially trained to handle issues arising from lack of customer education. Proper staffing of the
audit function with persons adequately trained and well-versed in AML/CFT policies of the
Bank, regulation and related issues shall be ensured.

2.15.14 Basic Savings Bank Deposit Account (BSBDA)

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Banks are advised to offer a 'Basic Savings Bank Deposit Account' which will offer following
minimum common facilities to all their customers:
i. The 'Basic Savings Bank Deposit Account' should be considered a normal banking
service available to all.
ii. This account shall not have the requirement of any minimum balance.
iii. The services available in the account will include deposit and withdrawal of cash at
bank branch as well as ATMs; receipt / credit of money through electronic payment
channels or by means of deposit / collection of cheques drawn by Central / State
Government agencies and departments.
iv. While there will be no limit on the number of deposits that can be made in a month,
account holders will be allowed a maximum of four withdrawals in a month,
including ATM withdrawals.
v. Facility of ATM card or ATM-cum-Debit Card.
vi. The above facilities will be provided without any charges. Further, no charge will be
levied for non-operation / activation of in-operative 'Basic Savings Bank Deposit
Account'.
vii. Banks would be free to evolve other requirements including pricing structure for
additional value-added services beyond the stipulated basic minimum services on
reasonable and transparent basis and applied in a non- discriminatory manner.
viii. The 'Basic Savings Bank Deposit Account' would be subject to RBI instructions on
Know Your Customer (KYC) / Anti-Money Laundering (AML) for opening of bank
accounts issued from time to time. If such account is opened on the basis of
simplified KYC norms, the account would additionally be treated as a 'Small
Account' and would be subject to conditions stipulated for such accounts as indicated
in paragraph 3.2.2(I)(A)(vi) of Master Circular dated July 01, 2015 on 'KYC norms /
AML standards / Combating of Financing of Terrorism (CFT) / Obligation of banks
under PMLA, 2002'.
ix. Holders of 'Basic Savings Bank Deposit Account' will not be eligible for opening any
other savings bank deposit account in that bank. If a customer has any other existing
savings bank deposit account in that bank, he / she will be required to close it within
30 days from the date of opening a 'Basic Savings Bank Deposit Account'.
x. The existing basic banking 'no-frills' accounts should be converted to 'Basic Savings
Bank Deposit Account' as per the instructions contained above.

2.16. KYC DOCUMENTS

Individual:

(A) Normal KYC:

 Passport
 Voter’s Identity Card
 Permanent Account Number (PAN) Card, (Address proof additionally required)
 Job card issued by NREGA duly signed by an officer of the State Government,
 Aadhaar number
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  Driving License

(One OVD is sufficient for Identity or Address Proof both, except in PAN where additional
Address Proof is to be sought)

(B) OVD where “simplified measures” for verification of identity/BSBDA:

Identification Proof:
a) identity card with applicant’s Photograph issued by Central/ State Government Departments,
Statutory/ Regulatory Authorities, Public Sector Undertakings, Scheduled Commercial Banks,
and Public Financial Institutions;
b) Letter issued by a gazetted officer, with a duly attested photograph of the person.
Address Proof: Utility Bills except Ration Card

(C) Small Accounts/ No-Frill Accounts: No Formal Documents required, self-declaration and
self-attested photograph sufficient in front of a bank official on account application form

Accounts of persons other than individuals:

(i) Where the customer is a company, one certified copy each of the following documents is
required for customer identification:
(a) Certificate of incorporation;
(b) Memorandum and Articles of Association;
(c) A resolution from the Board of Directors and power of attorney granted to its managers,
officers or employees to transact on its behalf and
(d) An officially valid document in respect of managers, officers or employees holding an
attorney to transact on its behalf.

(ii) Where the customer is a partnership firm, one certified copy of the following documents
is required for customer identification:

(a) Registration certificate;

(b) Partnership deed and
(c) An officially valid document in respect of the person holding an attorney to transact on its
behalf.

(iii) Where the customer is a trust, one certified copy of the following documents is required
for customer identification:
(a) Registration certificate;
(b) Trust deed and
(c) An officially valid document in respect of the person holding a power of attorney to transact
on its behalf.

(iv) Where the customer is an unincorporated association or a body of individuals, one

certified copy of the following documents is required for customer identification:
(a) Resolution of the managing body of such association or body of individuals;
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(b) Power of attorney granted to transact on its behalf;
(c) An officially valid document in respect of the person holding an attorney to transact on its
behalf and
(d) Such information as may be required by the bank/FI to collectively establish the legal
existence of such an association or body of individuals.

(v) Proprietary concerns:

For proprietary concerns, in addition to the OVD applicable to the individual (proprietor), any
two of the following documents in the name of the proprietary concern are required to be
submitted:
(a) Registration certificate
(b) Certificate/licence issued by the municipal authorities under Shop and Establishment Act.
(c) Sales and income tax returns.
(d) CST/VAT certificate.
(e) Certificate/registration document issued by Sales Tax/Service Tax/Professional Tax
authorities.
(f) Licence/certificate of practice issued in the name of the proprietary concern by any
professional body incorporated under a statute.
(g) Complete Income Tax Return (not just the acknowledgement) in the name of the sole
proprietor where the firm's income is reflected, duly authenticated/acknowledged by the Income
Tax authorities.
(h) Utility bills such as electricity, water, and landline telephone bills.

2.17 Amendment to Master Direction on KYC: Address Proof of Prisoners

(Circular no. 01/ 187 Dote: 19-09-2019)

The Government of India vide Gazette Notification G.S.R 381 (E) dated 28-05-2019, has
notified amendment to the Prevention of Money-Laundering (Maintenance of Records) Rule,
2005. Accordingly, the change carried out in the Master Direction in accordance with the
aforementioned amendment to PML rule has been notified by the Reserve Bank of India vide
Circular No. RBI/2019-20/37:: DBR.AML.BC.No.11/14.01.001/2019-20 dated 09-08-2019,
which is as under:

“A proviso has been added to condition (b) of section 23 of the Master Direction to the
effect that, where the individual is a prisoner in jail, the signature or thumb print shall be
affixed in presence of the officer-in-charge of the jail and the said officer shall certify the
same under his signature and the account shall remain operational on annual submission of
certificate of proof of address issued by the officer-in-charge of the jail”.

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 Annex I
File No.14014/01/2019/CFT
Government of India
Ministry of Home Affairs
CTCR Division
New Delhi, dated 14 March 2019

ORDER
Subject: - Procedure for implementation of Section 51A of the Unlawful (Prevention) Act,
1967.
The Unlawful Activities (Prevention) Act, 1967 (UAPA) was amended and notified on
31.12.2008, which, inter-alia, inserted Section 51A to the Act. Section 51 A, reads as under:-
"51A. For the prevention of, and for coping with terrorist activities, the Central Government
shall have power to —
(a) freeze, seize or attach funds and other financial assets or economic resources held by, on
behalf of or at the direction of the individuals or entities Listed in the Schedule to the Order, or
any other person engaged in or suspected to be engaged in terrorism;
(b) prohibit any individual or entity from making any funds, financial assets or economic
resources or related services available for the benefit of the individuals or entities Listed in the
Schedule to the Order or any other person engaged in or suspected to be engaged in terrorism:
(c) prevent the entry into or the transit through India of individuals Listed in the Schedule to the
Order or any other person engaged in or suspected to be engaged in terrorism".

The Unlawful Activities (Prevention) Act, 1967 defines "Order" as under :-

"Order" means the Prevention and Suppression of Terrorism (Implementation of Security
Council Resolutions) Order. 2007, as may be amended from time to time.
In order to expeditiously and effectively implement the provisions of Section 51A, a procedure
was outlined vide this Ministry Order No. 17015/10/2002-IS-VI dated 27.08.2009. After the
reorganization of the Divisions in Ministry of Home Affairs, the administration of Unlawful
Activities (Prevention) Act, 1967 and the work relating to countering of terror financing has been
allocated to the CTCR Division. The order dated 27.8.2009 is accordingly modified as under:

Appointment and communication of details of UAPA Nodal Officers

2. As regards appointment and communication of details of UAPA Nodal Officers-
(i) The UAPA Nodal Officer for CTCR Division would be the Joint Secretary (CTCR), Ministry
of Home Affairs. His contact details are 011-23092736 (Tel), 011-23092569 (Fax) and jsctcr-
mha@gov.in (e-mail id).

(ii) The Ministry of External Affairs, Department of Economic Affairs, Foreigners Division of
MHA, FIU-IND; and RBI, SEBI, IRDA (hereinafter referred to as Regulators) shall appoint a
UAPA Nodal Officer and communicate the name and contact details to the CTCR Division in
MHA.
(iii) The States and UTs should appoint a UAPA Nodal Officer preferably of the rank of the
Principal Secretary/Secretary, Home Department and communicate the name and contact details
to the CTCR Division in MHA.

35 | P a g e
(iv) The CTCR Division in MHA would maintain the consolidated list of all UAPA Nodal
Officers and forward the list to all other UAPA Nodal Officers.
(v) The RBI, SEBI, IRDA should forward the consolidated list of UAPA Nodal Officers. to the
banks, stock exchanges/depositories, intermediaries regulated by SEBI and insurance companies
respectively.
(vi) The consolidated list of the UAPA Noda! Officers should be circulated by the Nodal Officer
of CTCR Division of MHA in July every year and on every change. Joint Secretary (CTCR)
being the Nodal Officer of CTCR Division of MHA, shall cause the amended list of UAPA
Noda! Officers to be circulated to the Nodal Officers of Ministry of External Affairs, Department
of Economic Affairs, Foreigners Division of MHA, RBI, SEBI, IRDA and FIU-IND.

Communication of the list of designated individuals/entities

3. As regards communication of the list of designated individuals/entities-
(i) The Ministry of External Affairs shall update the list of individuals and entities subject to UN
sanction measures on a regular basis. On any revision, the Ministry of External Affairs would
electronically forward this list to the Nodal Officers in Regulators, FIU-IND, CTCR Division
and Foreigners Division in MHA,
(ii) The Regulators would forward the list mentioned in (i) above (referred to as designated lists)
to the banks, stock exchanges/ depositories, intermediaries regulated by SEBI and insurance
companies respectively.
(iii) The CTCR Division of MHA would forward the designated lists to the UAPA Nodal Officer
of all States and UTs.
(iv) The Foreigners Division of MHA would forward the designated lists to the immigration
authorities and security agencies.

Regarding funds, financial assets or economic resources or related services held in the form
of bank accounts, stocks or Insurance policies etc.
4. As regards funds, financial assets or economic resources or related services held in the form of
bank accounts, stocks or Insurance policies etc., the Regulators would forward the designated
lists to the banks, stock exchanges/depositories, intermediaries regulated by SEBI and insurance
companies respectively. The RBI, SEBI and IRDA would issue necessary guidelines to banks,
stock exchanges/depositories, intermediaries regulated by SEBI and insurance companies
requiring them to- (i) Maintain updated designated lists in electronic form and run a check on the
given parameters on a regular basis to verify whether individuals or entities listed in the schedule
to the Order, herein after, referred to as designated individuals/entities are holding any funds,
financial assets or economic resources or related services held in the form of bank accounts,
stocks or Insurance policies etc., with them.
(ii) In case, the particulars of any of their customers match with the particulars of designated
individuals/entities, the banks, stock exchanges/depositories, intermediaries regulated by SEBI
and insurance companies shall immediately, not later than 24 hours from the time of finding out
such customer, inform full particulars of the funds, financial assets or economic resources or
related services held in the form of bank accounts, stocks or Insurance policies etc., held by such
customer on their books to the Joint. Secretary (CTCR), Ministry of Home Affairs, at Fax
No.011-23092569 and also convey over telephone or 011-23092736. The particulars apart from
being sent by post, should necessarily be conveyed on e-mail id: jsctcr-mha@gov.in.

36 | P a g e
(iii) The banks, stock exchanges/depositories, intermediaries regulated by SEBI and insurance
companies shall also send a copy of the communication mentioned in (ii) above to the UAPA
Nodal Officer of the State/UT where the account is held and Regulators and FIU-IND, as the
case maybe.
(iv) In case, the match of any of the customers with the particulars of designated
individuals/entities is beyond doubt, the banks, stock exchanges/depositories, intermediaries
regulated by SEBI and insurance companies would prevent designated persons from conducting
financial transactions, under intimation to the Joint Secretary (CTCR), Ministry of Home Affairs,
at Fax No.011-23092569 and also convey over telephone on 011-23092736. The particulars apart
from being sent by post should necessarily be conveyed on e-mail id: jsctcr-mha@gov.in.
(v) The banks, stock exchanges /depositories, intermediaries regulated by SEBI and insurance
companies, shall file a Suspicious Transaction Report (STR) with FIU-IND covering all
transactions in the accounts covered by paragraph (ii) above, carried through or attempted as per
the prescribed format.
5. On receipt of the particulars referred to in paragraph 4(ii) above, CTCR Division of MHA
would cause a verification to be conducted by the State Police and/or the Central Agencies so as
to ensure that the individuals / entities identified by the banks, stock exchanges/depositories,
intermediaries regulated by SEBI and Insurance Companies are the ones listed as designated
individuals/entities and the funds, financial assets or economic resources or related services,
reported by banks, stock exchanges/depositories, intermediaries regulated by SEBI and insurance
companies are held by the designated individuals/entities This verification would be completed
within a period not exceeding 5 working days from the date of receipt of such particulars. 6. In
case, the results of the verification indicate that the properties are owned by or are held for the
benefit of the designated individuals/entities, an order to freeze these assets under Section 51A of
the UAPA would be issued by the UAPA Nodal Officer of CTCR Division of MHA and
conveyed electronically/to the concerned bank branch, depository, branch of insurance company
branch under intimation to respective Regulators and FIU-IND. The UAPA Nodal Officer of
CTCR Division of MHA shall also forward a copy thereof to ail the Principal
Secretary/Secretary, Home Department of the States or UTs, so that any individual or entity may
be prohibited from making any funds, financial assets or economic resources or related services
available for the benefit of the designated individuals/ entities or any other person engaged in or
suspected to be engaged in terrorism. The UAPA Nodal Officer of CTCR Division of MHA shall
also forward a copy of the order to all Directors General of Police/ Commissioners of Police of
all States/UTs for initiating action under the provisions of the Unlawful Activities (Prevention)
Act, 1967.

The order shall be issued without prior notice to the designated individual/entity.
Regarding financial assets or economic resources of the nature of immovable properties
7. CTCR Division of MHA would electronically forward the designated lists to the UAPA Nodal
Officer of all States and UTs with the request to have the names of the designated
individuals/entities, on the given parameters, verified from the records of the office of the
Registrar performing the work of registration of immovable Properties in their respective
jurisdiction.
8. In case, the designated individuals/entities are holding financial assets or economic resources
of the nature of immovable property and if any match with the designated individuals/entities is
found. the UAPA Nodal Officer of the State/UT would cause communication of the complete
37 | P a g e
particulars of such individual/entity along with complete details of the financial assets or
economic resources of the nature of immovable property to Joint Secretary (CTCR), Ministry of
Home Affairs, immediately within 24 hours at Fax No.011- 23092569 and also convey over
telephone on 011-23092736. The particulars apart from being sent by post would necessarily be
conveyed on e-mail id jsctcr-mha@gov.in.
9. The UAPA Nodal Officer of the State/UT may cause such inquiry to be conducted by the State
Police so as to ensure that the particulars sent by the Registrar performing the work of registering
immovable properties are indeed of these designated individuals/entities. This verification would
be completed within a maximum of 5 working days and should be conveyed within 24 hours of
the verification, if it matches with the particulars of the designated individual/entity to
14. To give effect to the requests of foreign countries under U.N. Security Council Resolution
1373, the Ministry of External Affairs shall examine the requests made by the foreign countries
and forward it electronically, with their comments, to the UAPA Nodal Officer for CTCR
Division for freezing of funds or other assets.
15. The UAPA Nodal Officer of CTCR Division of MHA, shall cause the request to be
examined, within 5 working days, so as to satisfy itself that on the basis of applicable legal
principles, the requested designation is supported by reasonable grounds, or a reasonable basis,
to suspect or believe that the proposed designee is a terrorist, one who finances terrorism or a
terrorist organization, and upon his satisfaction, request would be electronically forwarded to the
Nodal Officers in Regulators, FIU-IND and to the Nodal Officers of the States/UTs. The
proposed designee, as mentioned above would be treated as designated individuals/entities.
16. Upon receipt of the requests by these Nodal Officers from the UAPA nodal officer of CTCR
Division, the procedure as enumerated at paragraphs 4 to 12 above shall be followed.

The freezing orders shall be issued without prior notice to the designated persons involved.
Procedure for unfreezing of funds, financial assets or economic resources or related
services of individuals/entities inadvertently affected by the freezing mechanism upon
verification that the person or entity is not a designated person
17. Any individual or entity, if it has evidence to prove that the freezing of funds, financial assets
or economic resources or related services, owned/held by them has been inadvertently frozen,
they shall move an application giving the requisite evidence. in writing, to the concerned bank,
stock exchanges/ depositories, intermediaries regulated by SEBI, insurance companies, Registrar
of Immovable Properties and the State/UT Nodal Officers.
18. The banks, stock exchanges/depositories, intermediaries regulated by SEBI, insurance
companies, Registrar of Immovable Properties and the State/ UT Nodal Officers shall inform and
forward a copy of the application together with full details of the asset frozen given by any
individual or entity informing of the funds, financial assets or economic resources or related
services have been frozen inadvertently, to the Nodal Officer of CTCR Division of MHA as per
the contact details given in paragraph 4 (ii) above, within two working days.
19. The Joint Secretary (CTCR), MHA being the UAPA Nodal Officer for CTCR Division of
MHA shall cause such verification, as may be required on the basis of the evidence furnished by
the individual/entity, and, if satisfied, he shall Pass an order, within 15 working days, unfreezing
the funds, financial assets or economic resources or related services, owned/held by such
applicant, under intimation to the concerned bank, stock exchanges/depositories, intermediaries
regulated by SEBI, insurance company and the Nodal Officers of States/UTs. However, if it is

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not possible for any reason to pass an Order unfreezing the assets within 15 working days, the
UAPA Nodal Officer of CTCR Division shall inform the applicant.

Communication of Orders under section 51A of Unlawful Activities (Prevention) Act, 1967.
20. All Orders under section 51A of Unlawful Activities (Prevention) Act, 1967 relating to
funds, financial assets or economic resources or related services, would be communicated to all
the banks, depositories/stock exchanges, intermediaries regulated by SEBI, insurance companies
through respective Regulators, and to all Registrars performing the work of registering
immovable properties, through the State/UT Nodal Officer by CTCR Division of MHA.

Regarding prevention of entry into or transit through India

21. As regards prevention of entry into or transit through India of the designated individuals. the
Foreigners Division of MHA, shall forward the designated lists to the immigration authorities
and security agencies with a request to prevent the entry into or the transit through India. The
order shall take place without prior notice to the designated individuals/entities.
22. The immigration authorities shall ensure strict compliance of the Orders and also
communicate the details of entry or transit through India of the designated individuals as
prevented by them to the Foreigners’ Division of MHA.

Procedure for communication of compliance of action taken under section 51A

23. The Nodal Officers of CTCR Division and Foreigners Division of MHA shall furnish the
details of funds, financial assets or economic resources or related services of designated
individuals/entities frozen by an order, and details of the individuals whose entry into India or
transit through India was prevented, respectively, to the Ministry of External Affairs for onward
communication to the United Nations.
24. All concerned are requested to ensure strict compliance of this order.

(Piyush Goyal)
Joint Secretary to the Government of India

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 CHAPTER 3

TYPES OF ACCOUNTS
(MODE OF OPERATIONS)

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 CHAPTER 3

TYPES OF ACCOUNTS (MODE OF OPERATIONS)

3.1 Accounts of Individual: Single

When an account is opened in the name of one individual it is known as single account. All the
powers to operate the account generally are vested in the individual account holder concerned
only and no one else. The mode of operation for a single account is SINGLE or SELF. Only the
account holder can instruct the bank in matters such as issue of cheque books, withdrawal and
transfer of funds from his/ her account etc. Even the closest relatives are treated as third parties
and these include blood relatives such as father, mother, brother, sister, children and spouse. This
is purely a personal account in the name of an individual and is generally operated upon by the
account holder him/herself.

However, the account holder may authorize another person to operate on his account with his
written mandate. For this purpose, he gives a mandate or executes a Power of Attorney in favour
of such a person.

One person can have only one customer ID in his name in the entire bank. All his accounts
single, joint or through any other operational mode or type have to be linked with his unique
Customer ID. For institutional or business or group accounts too, where he is attached as one of
the operating or signatory person, in that particular account too, his customer ID should be
attached as authorized operating person. At the same time, one person cannot have more than
one single saving account in entire Bank.

In order to avoid legal complications that may arise after the death of the account holder, it is
desirable to obtain proper nomination at the time of account opening itself which account holder
can get it modified time to time as per his/her wishes.

3.2 Joint Accounts of Individuals

A joint account is a bank account held in the name of two or more persons opened for reasons
like convenience or joint control of funds.

3.2.1 Major Types of Jointly Operated Accounts:

a). Jointly operated: In this arrangement, the account needs to be operated by all account
holders together.
b). Operated by either holder or survivor(s): Any one of the account holders can sign and
operate the account in this mode.
c). Operated by former or survivor(s): The first named account holder will operate the account
and on his death, the survivor(s) will operate the account.

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 d). Operated by latter or survivor: The second named account holder will operate the account
and on his death, the survivor or former account holder will operate it.

e). Others: The account will be operated as specifically arranged with the bank— operated
jointly by any two account holders, or jointly above a certain amount, etc.

3.2.2 Operation of Joint Account - The Joint Account opened by more than one
individual can be operated by single individual or by more than one individual jointly.
The mandate for operating the account can be modified with the consent of all account
holders.

The joint account holders can give any of the following mandates for the disposal of balance in
the above accounts at the time of maturity:

 Either or Survivor
 Former or Survivor
 Latter or Survivor
 Jointly operated by All
 Any two of Authorised Signatories
 Any three of Authorised Signatories
 Any Two Jointly
 No. 1 and any other jointly
 Former or any one of the survivors
 Any one of them or any one of the survivors or the last survivor
 A & B or C, etc.
 “A” only and after the death of A, “B” & “C” jointly
 “A” only and after the death of A, “B” or “C” or survivor
 “A” only and after the death of A, “B” only, and after the death of “B”, “C” only, etc.

A joint account is opened in the names of more than one individual for convenience of
operations and/ or to avoid legal complications upon death of one of the joint account holders. A
joint account is neither a partnership nor a trust account. It is important to obtain clear and
unambiguous instructions regarding the mode of operation and repayment of balance of a joint
account in the event of death of one or more joint account holder(s). Authority of the joint
account holder to operate a particular deposit account is restricted to operation on that account
only and does not automatically extend to other accounts of related customers, such as, a term
deposit account, a safe custody account or an overdraft account, nor does it make any party to the
account responsible for an overdraft created in that joint account by the other(s). One or more of
the joint account holders can authorize operation on the account on his/their behalf by giving a
Mandate or executing a Power of Attorney, but, such Mandate or Power of Attorney must be
given by ALL the parties to the accounts.
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An account may be in the name of one person or in the names of two or more persons;
arrangements can be made for one or more persons to operate upon the account and the balance
to be paid to the survivors or survivor or/and to legal heirs in eligible cases. The mode of
operation of a joint account after it is opened can be altered ONLY with the consent of ALL the
joint account holders. The Bank will not be bound to act on the instructions of one or some of the
joint account holders regarding such alteration.

While there are no restriction on the number of account holders in a joint account, it is incumbent
upon the Bank to examine such request vis-a-vis the purpose, nature of business of account
holders with its relevant aspects, their financial position etc.

3.2.3 Operations on Accounts

Instructions regarding operations on a joint account can take any one of the following forms:

Account in the name of Mode of Operations

A&B Either or Survivor

A&B Both jointly or Survivor
A, B, C, D, E, ETC. Any one/two or more of us or any one or two or more
Of the survivors of us or the survivors of us or the last survivor
A&B Former or Survivor
A, B & C Former or Survivors

(Note: For accounts in the name(s) of minor(s), please refer to instructions given under
"Accounts of Minors")

Unless there are instructions to the contrary, cheques or orders to pay on a joint account should
be signed by all the parties to the account.

Upon the death of one of the joint account holders, where operational/repayment
instructions are either by "Either or Survivor" or by "Jointly or Survivor", the right to
operate the account and entitlement to the balance in the account vests with the surviving
account holder. In a joint account of more than two persons, where the operational/repayment
instructions are "any one or two (or more) of us or any one or two (or more) of the survivors of
us or the survivors of us or the last survivor", upon the death of one of the account holders, the
right to operate the account and entitlement to the balance in the account vests with the
remaining (i.e. surviving) account holders in accordance with operational instructions specified.

Joint holders of the term deposit with ‘Former or Survivor’ or ‘Either or Survivor’ clause should
give a specific mandate to the Bank, if they desire premature payment of the deposit amount to
the survivor/survivors in case a joint holder dies before the maturity of the deposit.

The joint deposit holders may be permitted to give the mandate either at the time of placing fixed
deposit or anytime subsequently during the term/tenure of the deposit. If such a mandate is
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obtained subsequently it should be as per standard format. If the parties are desirous of giving the
mandate while opening the deposit itself, the following MANDATE should be added in the
Deposit account opening / additional deposit account opening form invariably:

1. ‘We would like to further clarify and declare that in the event of death of
anyone or more of the joint depositors , the surviving depositors shall be
within their rights to request the Bank for premature payment of the said
deposit without obtaining the consent or discharge from the
heirs/executors/successors of the deceased depositor.
2. Accordingly, we hereby authorize the Bank to make premature payment of
this term deposit to the surviving joint depositors, if so requested by
them, without insisting on No Objection Certificate / discharge from the
legal heirs /executors /successors of the deceased and any such payment
made shall be a valid discharge to the Bank.
3. This mandate is being issued on our full responsibility and shall bind our
successors, executors and heirs as well as shall continue to hold good for
renewal of the said deposit from time to time.’

If such a mandate is obtained, branches can allow premature withdrawal of term/fixed deposits
by the surviving depositor without seeking the concurrence of the legal heirs of the deceased
joint deposit holder.

Such premature withdrawal in diseased account would not attract any penal charge.

3.2.4 Variation in Operational Instructions

Instructions regarding operations on the account given at the time of opening a joint account can
be varied only by the account holders jointly and Branches should not accept variation in such
instructions unless authorized by ALL the parties to the account.

3.2.5 Objections by One Account Holder to Operations by Another

When a Branch receives a letter from any one, two or more joint account holders to the effect
that the Bank should not allow operations by the remaining account holder(s), a letter should be
addressed jointly to all the account holders stating that the Bank has received an intimation from
one (or more) of the account holder(s) that the account should not be allowed to be operated by
the other(s) of them; that in view of the dispute that has arisen between the account holders, the
Bank would desire to close the account unless it is operated and the cheques are signed by all the
account holders jointly; that the Bank should receive within a specific time a written intimation
from the account holders signed by all of them that they are agreeable to the account being
operated by all of them jointly; that if the Bank does not receive such intimation within the
specified time, the Bank would close the account and issue a pay-slip in favour of all the account
holders, which when presented for payment should be discharged by all of them.

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In specifying the time in such letter, regard should be to the time taken for the Bank's letter to
reach the account holders and time taken for their letter to reach the Bank, allowing a couple of
days for their consideration and further action.

The joint letter must be addressed to the address of the account holders as appearing on the
record of the Bank. If the Bank is officially aware that one or more account holder(s) has or have
different address (es), copies of the joint letter must be posted to those addresses also.

If, by the time so specified in the joint letter, all the account holders do not agree as required
therein, whether or not some may have agreed, the account should be closed and a pay-slip
drawn in favour of all the account holders should be issued and sent with a covering letter
addressed to all the account holders at the address on record with the Bank. Copies of the letter
should be sent to other account holders if the Bank is officially aware that they have different
addresses.

The pay-slip issued as above should be paid only if it is discharged by all the joint account
holders.

Between the time of the receipt of intimation from the objecting account holder(s) and the
closing of the account as above, if any cheques drawn in terms of the original instructions
are presented in particular the cheques issued prior to the date of objection raised, Bank
may pay against the instruments, even though in so doing, the balance may be substantially
reduced or even brought to Nil, but utmost precautions need to be taken. In case of any
doubt especially in the account operating instructions like ‘Either or Survivor’ or ‘Any one
or Survivor’, Branches may ask for suitable declarations from the objecting customers or
may even ask for stop payment instructions if he/she insists for “no further withdrawal to
be allowed”

3.2.6 Accounts to be operated by "Former or Survivor"

(a) Operations on Accounts

Joint account in the names of two account holders 'A' and 'B' may be opened to be operated upon
by "Former or Survivor". The instructions "Former or Survivor" convey that the account will be
operated upon by the former 'A' alone, as long as he is alive and after his death, by the survivor
'B'. 'B' is not to operate the account during the lifetime of 'A'. 'B' can operate the account after the
death of 'A'. If 'B' dies first, the account is to be operated upon solely by 'A' and the legal
representative of 'B' will have no right to the balance in the account or to operate the account.
Only the legal representative of the last account holder to die is entitled to the balance in the
account.

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 Similarly, joint account in the names of three account holders 'A', 'B' and 'C' may be opened to be
operated upon by "Former or Survivor" where the following modes of operation may be allowed
i) 'A' only, after his/her death, So long as 'A' is alive, he or she will be the only
jointly by 'B' and 'C' or the person entitled to operate, after his or her death
survivor of them, the operation will be by 'B' and 'C' jointly, and
one of them is not alive, then by the survivor.
ii) 'A' only, after his/her death, The account will be operated by 'A' alone so long
by either or survivor of 'B' as he or she is alive, after his or her death, if 'B'
and 'C' and 'C' are both alive either can operate, if one
'B' or 'C' is already dead, the survivor can
operate.
iii) 'A' only, after his/her death 'A' will operate so long as he or she is alive, after
by 'B' only if alive or by the his or her death, only 'B' will operate if he / she
survivor of 'B' and 'C' is alive only, after 'B's death or if 'B' has
predeceased 'A', 'C' can operate.

(b) Variation or Revocation of the Instructions

Any variation in or revocation of the instructions "Former of Survivor" must be effected UNDER
THE SIGNATURE OF THE FORMER ACCOUNT HOLDER ONLY "Former or Survivor"
instructions are normally given with the intention that the "Former" i.e. the first named depositor
should retain, as long as he/she is alive, full rights to deal with the monies deposited by him/her
and the other depositor(s) i e the "Survivor(s)" should receive and deal with the monies only after
the death of the "Former". Hence, the "Former" alone is entitled to make any variation or
revocation of operational instructions "Former or Survivor".

(c) Overdrawing of Accounts

An account with the instructions "Former or Survivor" should NOT be allowed to be overdrawn
even temporarily. THIS POINT SHOULD BE BROUGHT ADEQUATELY TO THE NOTICE
OF THE DEPOSITORS AT THE TIME OF OPENING THE ACCOUNT.

(d) Precautions

A customer may sometimes wish to open an account which he wants to operate during his
lifetime, but after his death the account is to be allowed to be operated upon by or the balance
paid to another person and that such other person is not proposed to be a joint account holder AN
ACCOUNT WITH SUCH INSTRUCTIONS SHOULD NOT BE OPENED instead they should
be asked to make him/her nominee in one’s account.

3.3 Accounts of Sole Proprietorship Concerns

The sole proprietorship is the simplest business form under which one can operate a business.
The sole proprietorship is not a legal entity. It simply refers to a person who owns the business
and is personally responsible for its debts. A sole proprietorship can operate under the name of
46 | P a g e
its owner or it can do business under a fictitious name, such as M/s ABC Salon. The fictitious
name is simply a trade name--it does not create a legal entity separate from the sole proprietor
owner.

The sole proprietorship is a popular business form due to its simplicity, ease of setup, and
nominal cost. A distinct disadvantage is that the owner of a sole proprietorship remains
personally liable for all the business's debts. So, if a sole proprietor business runs into financial
trouble, creditors can bring lawsuits against the business owner. If such suits are successful, the
owner will have to pay the business debts with his or her own money.

The owner of a sole proprietorship typically signs contracts in his or her own name, because the
sole proprietorship has no separate identity under the law. The income earned by a sole
proprietorship is income earned by its owner.

One of the great features of a sole proprietorship is the simplicity of formation. Little more than
buying and selling goods or services is needed. In fact, no formal filing or event is required to
form a sole proprietorship; it is a status that arises automatically from one's business activity.

A sole proprietorship is the most common form of a business entity where one person is the
owner and is personally liable for all the debts and liabilities of the business. It is the simplest
form of an entity with minimal compliance procedures.

3.3.1 Registration of Sole Proprietorship3

Sole Proprietorship Registration is not mandatory. It is optional on whether a person intends to
register his sole proprietorship or not. Although, banks insist on getting sole proprietorship
registered if one intents to open a bank account in the name of his business, but as per law – it is
not mandatory.

Even if you register your sole proprietorship, the government will not issue a new PAN Card for
the same. The same PAN Card of the proprietor would continue to be applicable for the sole
proprietorship as well.

Sole Proprietorship Registration can be done in 3 ways:

a. Register under the Shop and Establishment Act.
b. Get a Udyog Aadhaar under the Ministry of MSME.
c. Get a GST registration.

a. Sole Proprietorship registration under Shop and Establishment Act

A sole proprietor can register his business under the Shop and Establishment Act, if he has a
shop as a place of business. Here, shop means any premises: a place where goods are sold, either
by retail, wholesale, or a place from where services are provided to customers. It includes an
office, a store-room, godown, warehouse or work place, whether in the same premises or
otherwise, which is used in connection with such trade/ business.

3
https://www.charteredclub.com/sole-proprietorship/ 1-8/8

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It does not include a factory, a commercial establishment, residential hotel, restaurant, eating
house, theatre or other place of public amusement or entertainment.

If one has a shop as per the definition given above, then one can register his/her sole
proprietorship business under the Shop and Establishment Act by making an application to the
local Municipal Corporation of your city.

b. Sole Proprietorship Registration through Udyog

Aadhaar under Ministry of MSME. An Udyog Aadhaar is a unique identification number
provided by the Ministry of MSME to the business owners. Along with all other entities such as
company and partnership, even a sole proprietor can apply for udyog aadhaar.

Apart from getting eligible to avail the benefits offered by the Ministry of MSME, a sole
proprietor has an added advantage of getting a unique identity for his business which is also
considered as Sole Proprietorship Registration. Udyog Aadhaar is a new method of registration
under Ministry of MSME. It has replaced the old method of registration, where form EM-I and
EM-II were used to register. Now, by applying for Udyog Aadhar any business can register itself
to avail the benefits of the various schemes introduced by the Ministry of MSME.

c. Sole Proprietorship Registration through GST Registration

GST registration is another way of getting one’s sole proprietorship registered. One can apply for
GST registration if one is dealing in any kind of exchange of goods and services. It has replaced
the old VAT and Service tax registration.

GST registration is a great method of getting an identity for one’s sole proprietorship concern.
However, there are certain important considerations that must be evaluated before opting this
method. Under GST registration, the only drawback is that after registration it is mandatory to
meet all the compliances. Every registered business has to compulsorily collect the tax from the
customers and file the GST returns.

If a sole proprietor has a turnover of less than Rs. 40 Lakhs, it is not mandatory for him to get
registered and collect GST. But if he still chooses to register in order to register his sole
proprietorship then he will have to go through unnecessary added compliances which he could
have avoided.

3.3.2 Opening a Bank Account in the Name of Sole Proprietorship

Although all the above 3 ways of registering a sole proprietorship are legally valid, some banks
still don’t accept Udyog Aadhaar or Registration under the Shop and Establishment Act. Banks
insist on a GST Registration. If the GST Registration is not there, some banks are willing to
accept the Income Tax Return as a proof of registration provided one’s Trade Name is mentioned
in business’ previous year’s ITR. In absence of Registration, we shall not deny account opening
facilities to a proprietorship concern simply on that basis.

3.3.3 Sole Proprietorship Entity Benefits

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There are various benefits of starting business as a proprietorship concern, some of which are
listed below,
 Less Compliances
 Easy to start
 Cost Efficient
 Business Name
 Absolute Control
 Easy to close

Less Compliance
A sole proprietorship concern does not have to file any separate tax returns for the business even
if it is registered under any Act. The sole proprietor only has to file his own individual tax return
and in that disclose the details related to his business profit/loss. In other cases, like partnership
and company, the entities have to file a separate return for the business. However, if the sole
proprietor has registered under GST then has to file the returns for GST compliances. But for
Income tax purposes no separate return filing is required.

Easy to start
There is no mandatory registration required to start a sole proprietorship. One can start a business
on his own under any name as a sole proprietorship concern.

Cost Efficient
The cost of starting a business as sole proprietorship is almost nil. The only expense that may be
required is to obtain a license for the business, if where required. Also, since the compliance
requirements are minimal, even that cost is saved.

Business Name
A sole proprietor can start a business under any name as long as it is not infringing any
trademark. The sole proprietor can initially start the business under a unique name and then when
he thinks he has made a goodwill, he can get a registered trademark for his name. However a
business name is not a Brand Name and anyone can use it. If you want to register a brand name
then you have to register your trademark. Sole Proprietorship registration is not Brand Name
registration.

Absolute Control
In a sole proprietorship there is only one owner and hence the control of the business is always
with the owner. In all other entities there is a minimum requirement of at least two people to start
the business, such as Partnership, Private Company etc.

Easy winding-up
Since in a sole proprietorship concern, the business and the owner are considered as one and not
a separate entity, there is no special winding up process as in the case of other entities. The
winding up of the business is easy and the only requirement is cancellation of tax registrations, if
any, such as GST registration.

Sole Proprietorship Registration Benefits:

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 Registering a sole proprietorship has two major benefits:

Business Identity–
A separate identity of the business which is available in the case of other entities such as
Partnership and Company.

Ease in opening the bank account in the name of business–

The major concern in case of a sole proprietorship is getting a bank account in the name of the
business. Since a sole proprietorship does not have a Government identity it becomes difficult to
prove the existence of a business. After registration it becomes easier to open a bank account for
a sole proprietorship since it gets a valid Government identity.

3.3.4 Disadvantages of a sole proprietorship concern

The biggest disadvantage of a sole proprietorship is unlimited liability. A sole proprietorship
does not have any governing law to protect the rights of a sole proprietor. The owner is
personally liable for all the debts and liabilities of the business. If the business does not have
enough assets to pay off the debts and liabilities then the owner will be personally liable for it.
His personal can be taken to settle the external claims.

3.3.5 Tax on Sole Proprietorship

A sole proprietorship is not considered as a separate identity which is different from its owner.
Therefore, the tax of the proprietorship business is assessed in the hands of the owner only as per
the Income Tax Slabs. This means that the profit earned through the business will not be taxed
separately as in case of partnership or company. But it will be taxed as an income of the owner.

3.4 Accounts of Partnership Firms4

Partnership firm comprises of two or more persons who have come together to carry out certain
business by all or any one or more of them acting for all with an intention to share the
profits/losses of business.

3.4.1 Restrictions on Number of Partners

The number of partners in a partnership firm shall not exceed ten if it transacts the business of
banking and twenty if it transacts any other business. If this condition of members is not
complied with, such a firm, unless registered under the Companies Act, 1956, becomes an illegal
association in terms of Sections 11(1)5 and (2)6 of that Act.

4
https://www.mca.gov.in/Ministry/actsbills/pdf/Partnership_Act_1932.pdf (Please refer given website for detailed information
for Partnership Account)
5
Section 11(1) in The Companies Act, 1956: No company, association or partnership consisting of more than ten persons shall
be formed for the purpose of carrying on the business of banking, unless it is registered as a company under this Act, or is formed
in pursuance of some other Indian law.
6
Section 11(2) in The Companies Act, 1956: No company, association or partnership consisting of more than twenty persons
shall be formed for the purpose of carrying on any other business that has for its object the acquisition of gain by the company,
association or partnership, or by the individual members thereof, unless it is registered as a company under this Act, or is formed
in pursuance of some other Indian law.

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Where a partnership firm consists of (i) individual(s) and other separate firm(s) or (ii) two or
more separate firms, each partner of such separate firm(s) should be individually counted as a
partner of the firm formed by combinations of individual or other firms for the purpose of
Section 11 of the Companies Act, 1956. Thus, for instance, where four firms enter into
partnership and the aggregate number of the partners of all the four firms exceeds 10 or 20 as the
case may be, it would be an illegal association under Sections 11(1) and (2) of the Companies
Act, 1956.

3.4.2 Partnership Firms and HUF

Similar consideration will apply to a partnership firm composed (i) of individual(s) and a Joint
Hindu Family or Families, or (ii) of more than one Joint Hindu Families. In such cases, each
individual member of such Joint Hindu Family (ies) (other than the minor members) must be
counted for the purpose of Sections 11(1) and (2) of the Companies Act, 1956. However,
accounts of such firms should be discouraged, as far as possible, and in any event should never
be allowed to be overdrawn. Sections 11(1) and (2) of the Companies Act, 1956, do not apply
to a single Joint Hindu Family carrying on any business, whatever may be the number of
its members.

a. In Agrawal & Company V/s. C.I.T. U.P. AIR Case the Supreme Court has expressed the
following views:
“It is now well settled that HUF cannot as such enter into a contract of partnership with
another person(s). The Supreme Court further held that the concept of a HUF joining a
partnership presents considerable difficulty. A HUF is a floating body. Its composition changes
by births, deaths, marriages and divorces. Such partnership is likely to have a precarious
existence. The assumption in section 4(3) of the Old Companies Act, 1913 that a HUF can be a
partner in a partnership appears to be based on erroneous view of the law.”

b. In Rasiklal & Company V/s. C.I.T. Orissa the Supreme Court has stated the following:
“A HUF directly or indirectly cannot become a partner of a firm because the firm is an
association of individuals. A HUF not being a “person” cannot enter into an agreement of
partnership. The partnership Act contains various provisions regulating the relationship
between partners.”

From a reading of the aforesaid judgments,, it appears that HUF’s cannot be partners in a
firm and hence such firms who have HUF’s as partners may be viewed as not competent to
enter into contract. Therefore banks must exercise caution in dealing with such firms have HUF
as partners while opening bank accounts.

3.4.3 Partnership Deeds

Branches normally need to insist on partnership deeds being produced even before opening
ordinary deposit accounts of partnership firms, otherwise, the Bank might be fixed with notice of
the contents of the partnership deeds and might, possibly, be bound thereby in case if not
properly read minutely the clauses of this Partnership Deed. A partnership deed, if produced to
the Bank, should be carefully studied to see whether the implied rights of partners are in any way
restricted. Where the partnership deed provides for two partners to sign cheques, Branches
cannot accept instructions empowering any one of the partners to sign cheques on the firm's
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account unless the partners suitably amend the provisions in the partnership deed. There may be
other restrictive clauses concerning the bank account of the firm which might demand a suitable
warning record in the system, specimen signature card and the account opening form. It is,
therefore, preferable to carry inspection of a partnership deed instead of relying on Bank's
Partnership Letter and the legal position regarding the implied authority of a partner as stated in
the Indian Partnership Act, 1932.

3.4.4 Registration of Partnership

The Indian Partnership Act, 1932, provides for registration of partnership firms. Non-
registration under the Act debars a firm from suing, but it does not affect the rights of
third parties in suing the firm. The advantage of registration of a firm under the Act to the
Bank is that it binds the firm to the statement recorded in the Register of Firms. Branches need
not press firms to register against their wishes so long as the firms want to open only ordinary
deposit accounts (vide Sections 58,59, 60 and 69 of the Indian Partnership Act, 1932). The
following points should be noted:

(a) Partnership enjoying borrowing facilities should, as a rule, be registered under the Partnership
Act.
(b) Registration of a firm under Partnership Act is different from the registration of the firm
under the Income Tax/GST law and registration of the Partnership Deed with the Registrar of
Assurances and these must not be confused.
(c) The Branch should avoid, as far as possible, opening partnership accounts with restrictive
operations thereon.

3.4.5 Opening of Accounts of Partnership Firms

In all types of partnership accounts, Partnership Letter should be obtained along with account
opening form/card duly signed by all the partners of the firm in their capacity as partners and
also in their personal capacity. In case the Partnership Letter is already held in existing account
at the Branch, it need not be obtained again while opening another account. It should, however,
be ensured that when account in which the Partnership Letter was held is closed, a new
Partnership Letter is obtained and kept on record in one of the accounts which continues.

The Partnership Letter merely states that each partner has full and unrestricted authority to sign
for and bind the firm. There is no provision therein for the operation of the account by any one of
the partners nor is there any direct reference to the mode of operation. The letter also has
provision that the partners are jointly and severally responsible to the Bank for all the liabilities
of the firm to the Bank.

3.4.6 Operations on the Account by Partners

Operations on an account of a firm are governed by the instructions given by all partners and
recorded on the account opening form/card which should be authenticated under the initials of all
the partners. Normally, an account in the name of partnership firm is proposed to be operated by
any one of the partners. However, requests for the operation of a firm account in the modes other
than this are not uncommon. Such modes can be any one of the following

(a) Jointly by any two or three or more of all the partners, or

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(b) Jointly by any two or three or more of some (not all) of the partners, or
(c) Singly by one of some (not all) of the partners

Such accounts with restrictive instructions may be opened of firms having good reputation and of
fair means and the instructions should clearly and unambiguously be recorded on the account
opening form/ card duly authenticated by initials of all the partners

If in any such account to be operated upon by more than one partner e g , A, B and C are
partners, and B authorizes A to sign for him, such authority should not be accepted as sufficient
justification for A in his own right and as B's attorney to operate on the account. This would have
the effect of making operations single and not joint, apart from being objectionable on the
ground that the authority given by B to A to sign for him is not given by all the partners of the
firm

3.4.7 Mode of Signature on the Cheques of a Partnership Firm

The usual mode of signature and endorsement on the cheques of a firm would be for the partners
to sign or endorse for and on behalf of the firm in their capacity as partners. Sometimes the
partners desire to sign or endorse cheques in the name of the firm. "The signature in the name
of the firm is equivalent to the signature by the person so signing in the names of all the persons
liable as partners in the firm". It is the practice to allow signature or endorsement simply of the
name of the firm only if the name of the firm is a combination of the names or surnames of the
partners, e.g. A, B & Co or B Roy & Co, etc. If the firm is trading under an assumed trade name
or an impersonal name, for example Rainbow Trading Co., Hasmukh Engineering Co, the
signature and the endorsement on cheques of the firm must be for and on behalf of the firm by
the partners in their capacity as such.

3.4.8 Payment of a Cheque Drawn by a Firm

There appears to be no prima facie case to enquire each time a partner pays into his personal
account a cheque which he alone has drawn on the firm's account, unless the surrounding
circumstances warrant such an enquiry. It may be that the partner may merely be drawing his
salary or his share in the profits or that the amount represents the refund of a loan that the partner
may have advanced to the firm. Much will depend upon the facts of each case, the standing of'
the firm and the partner and the amount of the cheque. If there is any room for suspicion, it
would be prudent to make a judicious enquiry as to the validity of the transfer. The case
demanding the greatest care occurs where, to meet the demands of the Bank to reduce the
overdraft in his personal account, a partner tenders a cheque which he has just drawn on the
partnership account. Enquiry in such an event is imperative.

When cheques drawn on the firm's account by any one partner in favour of a third-party are
lodged in the personal account of the partner or of any other partner, suitable enquiries should be
made to ensure that the Bank acts without negligence. Cheques payable to a firm should neither
be accepted for the credit of the personal account of a partner without the sanction of the other
partners, nor for the credit of an account of an employee of the firm without the firm's
permission.

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 3.4.9 Addition and Removal of Partners7
Any slight changes made in the relationship between partners in a partnership firm would result
in the reconstitution of the firm itself. Thus, whenever a new partner is introduced or when an
existing partner is being removed, a partnership firm is bound to be reconstituted. Therefore,
subject to a contract between partners and the provisions regarding minors in a firm, no addition
or removal of a partner can be initiated without the consent of all the existing partners. This
article talks about the legal consequences of Addition and Removal of Partners in a Partnership
Firm as stated in the Indian Partnership Act of 1932.

3.4.10 Introduction of a new partner (Section 31 of Indian Partnership Act, 1932)

It is a basic rule of partnership incorporation that the introduction of a new partner into the
partnership firm has to be backed up by the knowledge and consent of the existing partners.

Rights and Liabilities of a New Partner

The liabilities of a new partner in a partnership firm generally commences from the date when
the individual is admitted as a partner unless he agrees to be liable for obligations incurred by the
firm before the date. The new firm, including the newly introduced partner who joins it, may
agree to assume liability for the firm’s existing debts, and creditors may decide to accept the new
firm as their debtor and discharge the old partners. The consent of the creditor is necessary in
every case to make the transaction operative. Novation is the technical term in a contract for
substituted liability, of course, not confined only to the case of a partnership.

But a simple agreement among the partners cannot operate as Novation. Thus, an agreement
between the partners of the firm and the incoming partner stating that he shall be liable for
existing debts will not ipso facto give creditors of the firm any right against him.

In the case of a partnership between two partners, this section does not apply as the partnership
automatically dissolved by the death of one of them. In this event, there is no partnership at all
for any new partner to be introduced into it without the consent of other.

3.4.11 Retirement of a partner (Section 32 of Indian Partnership Act, 1932)

An existing partner of a partnership firm may retire while fulfilling the following conditions.
1. Obtain the consent of all the other partners of the firm.
2. By an express agreement among the partners.
3. By submitting a notice in writing to all the partners regarding the intention to retire if the
partnership is formed at will.
However, such a partner shall continue to be liable to the third party for the acts of the firm after
his retirement unless public notice of the withdrawal has been published by himself or by the
other existing partners. Although, as stated in Sub-sections (3) and (4), the retired partner will
not be liable to any third parties if the latter deals with the firm without knowing that the former
was a partner.

Rights of the outgoing partner

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The following are the rights of an outgoing partner.

Section 36: Right to conduct a competing business

An outgoing partner may carry on a company that competes with that of the firm. The partner
may advertise such activity, but subject to contract to the contrary, the partner, cannot use the
name of the firm or represent himself as carrying on the business of the firm. This includes
soliciting customers of the firm that he has left as stated in Section 36(1). Although this
provision has imposed a few restrictions on an outgoing partner, it effectively allows him to
carry on a business activity competing with that of the firm. However, the partner may agree
with his partners that on his ceasing to be so, he will not carry on a business activity similar to
that of the firm within a specified period or prescribed local limits. Such an agreement will not
be restraint of trade if the limitation is reasonable as stated in Section 36(2).

Right to Shares
When a partner retires, he has the right to obtain or receive his share of the firm’s property that
includes goodwill. The assets or the properties should be taken at their fair value to the
partnership firm at the date of the account and not at a value as appearing in the partnership if it
has been held that in the absence of evidence of any uniform usage to the contrary.

Section 37: Entitled to claim

If the continuing partners carry on the business of the firm with the property of the firm without a
final settlement of accounts with the exiting partner, then the outgoing partner is entitled to claim
from the firm. The partner may claim from the firm such share in the profits made by the firm, as
he ceased to be a partner, as attributable to the use of share of the property of the firm. Another
option for the partner is to claim interest at 6 per cent per annum rate on the amount of the
partner’s share in the firm’s property.

However, if through a contract between the partners, and has been provided to the continuing
partners, to purchase the interest belonging to the outgoing partner, the outgoing partner or his
estate will not be entitled to any further share of the profits if the option is duly exercised. On the
other hand, a partner who assumes to act in exercise of the option does not in all material respect
comply with the terms thereof; then the partner would be liable to account under the provisions
under the Section.

Liabilities of the outgoing partner

The following are the liabilities of a partner who is leaving the partnership firm.

Section 32(3) and (4): Liability to the third party

As stated earlier, a retiring partner of a partnership firm continues to be held liable to a third
party for the actions of the firm even after his retirement, until a public notice regarding the
retirement has been published either by himself or the other existing partners. However, the
retired partner shall not be liable to any third party if the latter has dealings with the firm without
the knowledge that the former was a partner.

Section 32(2): Agreement of Liability

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The retired partner is liable to a third party until a public notice of retirement is published. As
regard to the liability for the acts of the firm done before his retirement, the retiring partner shall
remain liable for the same unless an agreement exists between him, the partners of the firm and
the concerned third parties. This sort of a deal may be implied by a course of dealings between
the third party and the reconstituted firm after he knew about the retirement.
If the partnership is formed at will, the partner will be deemed to be relieved as a partner without
giving public notice to this effect by giving notice in writing to all the other partners of the firm
of his intention to retire.

Branches should observe the following procedure on receipt of notice of the retirement of a
partner:

(a) The date of receipt of notice of retirement should be entered in the specimen signature card
and the account opening form, under the initials of an officer and the name of the retiring partner
to strike it off from the a/c and also on the card.

(b) Notice of retirement should be acknowledged to the retiring partner.

(c) Cheques drawn by a retiring partner before his retirement may be paid if otherwise in order
and if the account is an ordinary credit current account/savings bank account. It is advisable to
obtain confirmation of the other partners.

The retirement or admission of a partner amounts to a change in the constitution of the firm.
Accordingly, the existing account of the firm should be closed and a new account of the
reconstituted firm opened (by requiring all the partners of the reconstituted firm to complete and
sign a fresh set of account opening forms/ cards). The credit balance in the existing account of
the firm should be transferred to the new account of the reconstituted firm by obtaining a cheque
or a letter of authority signed by the remaining partners of the existing firm in terms of signing
instructions in the account.

If an account of firm which is being reconstituted has a debit balance for any reason, endeavour
should be made to get the account in order (in credit) before the change in the constitution of the
account is given effect to in the books of the Bank in terms of the instructions in the foregoing
paragraphs.

Pending opening of a new account, the remaining partners of the old firm may be allowed to
operate on the existing account of the firm, if and only if, the account is merely an ordinary
credit account. Arrangements should be made for payment of outstanding cheques drawn on the
existing account, when a new account is opened.

3.4.12 Section 33: Expulsion of a partner

There are various reason why a partner may be expelled from a partnership firm. A partner of a
firm may not be dismissed from a partnership firm by a majority of the partner except in
exercise, in good faith, of powers conferred by contract between the partners. An expulsion is not
deemed to be in a proper interest of the business of the firm if the conditions below are not
fulfilled.
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1. The power of expulsion must be stated in a contract between the partners.
2. A majority of the partners must exercise the power.
3. It has to be exercised in good faith.
The test of good faith as required for expulsion as stated under Section 33(1) includes three
aspects.
1. The expulsion must be in the best interest of the partnership.
2. The partner that is to be expelled must be served with a notice.
3. The partner has to be given the opportunity of being heard.
If a partner is expelled without fulfilling these conditions, the expulsion is considered null and
void. The only solution, when a partner is involved in misconduct in the business of the firm, is
to seek judicial dissolution. It should be noted that the expulsion of partners does not always
result in the dissolution of the firm. An invalid expulsion of a partner does not bring the
partnership to an end even if the partnership is at will and it will be deemed to continue as
before.

3.4.13 Section 34: Insolvency of a partner

When a partner of a partnership firm is adjudicated an insolvent, the partner ceases to be a
partner on the date of the order of adjudication regardless if the firm is dissolved or not. The
partner’s estate ceases to be liable for any action of the firm taken after the date of the order, and
the firm is also not responsible for action taken by the partner after the said date.

Effects of Insolvency
The effects of Insolvency have been listed below.
1. The partner cannot continue as one in the firm after being insolvent.
2. The partner ceases to be a partner from the date on which the order of adjudication is made.
3. The estate of the insolvent partner shall not be liable for the actions of the firm taken after the
date of the order of adjudication.
4. The firm is similarly not liable for any action taken by the insolvent partner after the date of the
order of adjudication.
5. Generally but not invariably, the partner’s insolvency often results in the dissolution of the firm.
However, the partners are competent to agree among themselves that adjudication of a partner as
an insolvent will not give rise to dissolution of the firm.

3.4.14 Section 35: Death of a partner (Section 35 of Indian Partnership Act, 1932)

In a case where under a contract that the death of a partner does not dissolve a firm, the estates of
the deceased partner are not liable for any act of the firm after his death.

Generally, the effect of the death of a partner would result in the dissolution of the partnership.
Although the rule in concern to the dissolution of the partnership due to death of a partner is
subject to a contract between the parties and the partners are competent to agree that the death of
a partner will not have the effect of dissolving the partnership. This is applicable unless the firm
consists of just two partners. It is not essential to give any notice either to the public or the
individuals who have dealt with the firm about the estate of the deceased partner may be
absolved from liability from future obligations of the firm.

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 For example, if in a firm there were 3 partners out of which one partner has died. Now remaining
partners want to continue business in partnership and want to add a new partner. In that case,
first there would be a DISSOLUTION DEED effective the date of death of a Partner. And the
Profit & Loss and Balance Sheet shall be drawn on date of death. Then on next day a new
Partnership Deed will be signed by old and/or new partners. A new set of books will be taken
from this date. However, for the income tax (of Partnership) and TDS purposes full year will be
treated as continued one. The Capital (including share of profit and loss up to his date of death)
shall be taken/transferred to his legal heir as payable.8

3.4.15 Minors in Relation to a Partnership Firm (Section 30)

Under Section 30 of the Indian Partnership Act, 1932, a minor can, with the consent of all the
partners for the time being, be admitted to the benefits of a partnership firm. At any time within
six months of such a minor attaining majority or of his obtaining knowledge that he has been
admitted to the benefits of the partnership, whichever date is later, such an erstwhile minor may
give public notice that he has elected to become or not to become a partner in the firm and such
notice will determine his position as regards the firm, provided that if he fails to give such a
notice, he shall become a partner in the firm on the expiry of the said six months (Section 30 (5))
Branches should exercise care in opening accounts of partnership firms where minors have been
admitted to the benefits of a partnership. The date of birth of the minor should be recorded in the
books of the Bank. The minor is not required to sign the set of account opening forms nor can he
be allowed to operate on the account. However his name with Date of Birth should be entered in
account opening form and partnership letter.

3.4.16 Objection by one of the Partners to Operations

On receipt of intimation from one (or more) of the partners to the effect that the Bank should not
allow operations on the firm's account by the other partner(s), all operations on the account
must be stopped. A joint letter must be addressed and sent to the firm and all partners, stating
that having regard to the objection by one (or more) of them, the Bank is compelled to stop all
operations on the account until all the partners jointly agree to a particular mode of operation. If
after receipt of such a letter, any partner raises some legal contentions, the Branch should make a
reference to Head Office giving all the relevant facts and the copies of the relevant
correspondence.

3.5 Accounts of Joint Hindu Families (HUF) or Firms

Branches are authorized to open, in special cases, deposit accounts in the names of Joint Hindu
Families or Firms of respectability and means as under:
i. Current accounts of business or trading character.
ii. All types of deposit accounts (including current accounts) of non-trading character.

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Under the Hindu Law, the joint family business is carried on by the senior male member of the
family as Karta, or Manager who acts on behalf of the joint family.

The account of Joint Hindu Family should be operated upon by the Karta, who should complete
the account opening form/card. In current accounts (of trading nature) of Joint Hindu Families, in
addition, the Bank's printed Joint Hindu Family Letter should be completed and signed by the
Karta and the major co-parceners; the names and dates of birth of minors should be mentioned in
the space provided.

In Mitakshara Law although a Female can be a member of the joint family, she is not a co-
parcener in the sense that normally she does not have any right in the joint family property.
However, signatures of the female members of the joint family should also to be taken on the
Joint Hindu Family Letter. For all dealings with the Bank, the Karta is the person who acts on
behalf of the joint family or firm.

In all deposit accounts of Joint Hindu Families (including current accounts) which are non-
trading in nature, Branches need not obtain Joint Hindu Family Letter. Instead, an unstamped
Joint Hindu Family Letter as per specimen given in Appendix V should be obtained, in addition
to the relevant account opening form/card. The Joint Hindu Family Letter should be completed
in all respects and signed by the Karta and the major members in their individual capacity as also
on behalf of their joint family. Particulars of the minor members of the Joint Hindu Family must
be given in the Joint Hindu Family Letter.

Partnership of Joint Hindu Family with Outsider

The partnership is a relationship between persons who have agreed to share the profits of a
business carried on by all or any of them acting for all. Hence, to become a partner in a
partnership firm, the partner should be a natural person or recognized as person by the law
(Company - by virtue of Companies Act 1956). Since, HUF is not a "person", but only group of
persons belonging to the same family and carrying on the family business, HUF cannot be a
partner in a partnership firm.

The above view is supported by a catena of judgments.

The Supreme Court of India held (AIR-1930-PC-300 & AIR1956-SC-854) - HUF is an

association of persons is "not a person" within the meaning of expression in the Partnership Act.
"… it is now well settled that HUF cannot enter into contract of partnership with another person
or persons."

The Supreme Court of India, in another case M/s Rasiklal & Co Vs Commissioner of held that
"…………. an HUF directly or indirectly cannot become a partner of a firm because the firm is
an association of individuals." "…….in law, an HUF can never be a partner of partnership firm."

Under the Indian Partnership Act, partnership is defined under Section 4 as “a relationship
between persons who have agreed to share profits of a business carried on by all or any of them
acting for all.” Now the question is whether a HUF can be treated as a person under the law.
Unlike a company, a HUF has no separate existence from its members. A Company as a separate
59 | P a g e
 entity can enforce its rights, whereas, a HUF, has to be necessarily represented by a Kartha or an
adult member for enforcing any of its rights. A HUF cannot be treated as a person.

Though under the Income Tax Act, a person includes a HUF also, the Supreme Court in the case
of Dulichand Laxminarayanan vs. Commissioner of Income Tax (AIR 1956 SC 354) has clearly
held that the said definition cannot be imported to Section 4 of the Partnership Act and a firm
cannot enter into partnership with a HUF. Further, in Rashiklal & co vs. Commissioner of IT,
Orissa 9AIR 1998 SC 401) it was held that a HUF directly or indirectly cannot become a partner
of a firm because firm is an association of individuals. Hence on the strength of the above
rulings, it may be stated that a HUF as such cannot be a partner in a partnership firm.

However, in CIT Vs. Seth Govindram Sugar Mills [ ( 1965) 57 ITR 510 SC] THE Supreme
Court has held that a Kartha of a HUF or an adult member of the family in their individual
capacity can enter into a partnership as a representative of the family. In such cases, it is the
individual who is becoming a partner and not the HUF.9

The Karta thus of a Joint Hindu Family business acting on behalf of the family is competent to
enter in to a partnership with a stranger. Joint Hindu Family Letter should, however, be obtained
as usual. If the Karta dies, the partnership would normally be dissolved.

3.6 Accounts of Illiterate Persons

A person is said to be illiterate when he is unable to read and write. The account of such a person
may be opened provided he calls on the Bank with a latest passport size photograph. Thereupon,
his thumb impression or mark should be obtained on the account opening form/card in the
presence of the Bank's official. Such thumb impressions or marks affixed by illiterate persons on
instruments are equivalent to their signatures. Any withdrawal/repayment of deposit amount
and/or interest by way of withdrawal form or otherwise should similarly be affixed with the
thumb impression or mark of the depositor.

The Bank's Officer will then complete the account opening formalities by obtaining thumb
impression or mark of the depositor on the card. It would suffice if the officer opening the
account is satisfied that the photograph is that of the depositor who had come in person. He
should also get the photograph on the application form get cross-signed or thumb impression
across but face portion of the photograph should not be touched. To guard against the
substitution of photographs, the same should be pasted on the account opening form and thumb
impression obtained on the photographs in addition to thumb impression at the place of
signature, and initials by the Bank's authorized official under date in red ink ball-point pen in
token of having satisfied himself that the photograph is of the depositor himself. As a further
precaution, the Branch round rubber stamp should be affixed halfway across the card and the
photograph but care should be taken to see that the photograph is not mutilated/ disfigured.

At the time of withdrawal/repayment of deposit amount and/or interest, the account holder
should affix his thumb impression or mark in the presence of the cancelling officer who should

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 verify the identity of the person from the photograph stapled to account opening form/card prior
to passing the instrument for payment

The Branch should impress upon such illiterate account holder the need of proper care and
custody of pass book, deposit receipt etc. given by the Bank in respect of his deposit account
with the Bank.

3.6.1 Cheque Book Facility to Illiterate Customers

Generally Cheque book is not issued to an illiterate persons in fear of probable misuses. But if an
illiterate customer insists for cheque book facility or some bank official feels safer for outward
NEFT, RTGS transactions with cheque book, the cheque book can be issued for over the counter
usage. Sometimes an illiterate person may demand for cheque book facility for loan instalments,
payment of statutory dues, life insurance policies to present for clearing purposes, Branch can
extend cheque book facility in such exclusive demand with due care and conformity from
concerned customer over probable misuses. Illiterate persons may be allowed to open an account
with cheque book facility with an undertaking by the account holder (witnessed by two
individuals who are known to Bank and the Customer) that the cheque book be issued at his/her
own risk and any use or misuse of cheque carries his sole responsibility. On the request of the
account holder, the branch should issue the cheques in the name of the specified payee to make
periodic payments for the retail loans, utility bills, statutory dues, life insurance premiums etc. At
the time of issuing of cheque books itself, thumb impression, of the account holder should be
duly affixed and authenticated by the bank official as well as cheque leaves should be crossed.

3.7 Accounts of Visually Impaired Persons / Blind Persons

The RBI, vide circular DBOD.No.Leg BC.91/09.07.005/2007-08 dated 4th June 2008 advised
banks that all banks must render the same services to a visually impaired person as it would to
any other person without discrimination. The Circular stated that the banks, must provide the
visually impaired with every facility viz., cheque Book facility, ATM facility, net banking
facility, locker facility, retail loans, credit cards etc. as they are legally competent to contract.10
RBI Circular further states that in the Case No. 2791/2003, the Honourable Court of Chief
Commissioner for Persons with Disabilities had passed Orders dated 05.09.2005 which was
forwarded by IBA to all the member banks vide their circular letter dated October 20, 2005. In
the above Order, the Honorable Court has instructed that banks should offer all the banking
facilities including cheque book facility, ATM facility and locker facility to the visually
challenged and also assist them in withdrawal of cash. Further, in Para 14 of the above Order, the
Honorable Court has observed that visually impaired persons cannot be denied the facility of
cheque book, locker and ATM on the possibility of risk in operating / using the said facility, as
the element of risk is involved in case of other customers as well.

As per the captioned Circular, “Banks are therefore advised 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. Banks may also advise their branches to

10
RBI Circular on “Banking Facilities to the Visually Challenged” DBOD.No.Leg BC.91/09.07.005/2007-08 dated 4th June
2008; https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=4226&Mode=0
61 | P a g e
render all possible assistance to the visually challenged for availing the various banking
facilities.”

United Nations Convention on the Rights of Persons with Disabilities clearly commits to rights
of persons with disability and their access to services. Article 9 of the Convention enables
persons with disabilities to live independently and participate fully in all aspects of life and also
gives them access to facilities and services open or provided to the public, both in urban and
rural areas. Additionally, Article 12 states “Parties shall take all appropriate and effective
measures to ensure the equal right of persons with disabilities to own or inherit property, to
control their own financial affairs and to have equal access to bank loans, mortgages and other
forms of financial credit, and shall ensure that persons with disabilities are not arbitrarily
deprived of their property."
All Banks must therefore provide the same facilities to a visually impaired customer/prospective
customer as it would to any other customer. But at the same time the customers should be made
aware of the risk involved in some of these facilities which may be higher than that for a normal
customer.11

Additional facilities like reading and filling up of forms, slips, cheques should be provided to a
visually impaired customer, if required. Banks should not deny any services to visually impaired
customers including visually impaired customers who use their thumb impression for operating
the bank account.

A visually impaired customer must not be forced to operate the bank account jointly with
any person or in the presence of any person. Visually impaired customers may be allowed to
appoint a person/persons as their Power of Attorney or Mandate Holder to operate their bank
account if the visually impaired customer so desires.
 Opening of Bank Accounts: All banking products offered by the bank should be made
available to visually impaired persons.The bank must follow the same procedure for
opening the account of a visually impaired person as it does for its other customers. He /
She must be allowed to open the account either singly or jointly with others.The Bank
must allow the visually impaired customer to open a joint account with anybody that
he/she chooses including person(s) who is/are visually impaired. The Officer / Manager
of the branch should read out the rules of business and other terms and conditions in the
presence of a witness, if required by the customer. The bank branch manager must inform
a visually impaired customer/prospective customer of his rights and liabilities before
opening the account. The documentation requirements of a visually impaired customer
must be the same as any other customer. The account has to be clearly marked as "the
account holder is visually impaired".
 Withdrawal of cash / Cheque book facility: Facilities for withdrawal of cash as are
provided to all customers regarding cash payments must be provided to visually impaired
customers. In case a visually impaired customer makes cash withdrawals at the bank then
the payment must be made in the presence of another bank employee/officer. No outside

11
‘IBA Circular for providing banking facilities to visually impaired persons’. IBA CIRCULAR No.CE/RB-1/vip/1766
November 18, 2008. [ http://www.eyeway.org/?q=iba-circular-providing-banking-facilities-visually-impaired-persons]

62 | P a g e
 witnesses are required unless the visually impaired customer requests that such witnesses
be present. Operations should not be restricted to self-withdrawals.
 Cheque Book Facility: Cheque book facility should not be denied to visually impaired
person. All procedures pertaining to the use of such cheque books by visually impaired
customers must be in accordance with that the other customers. Cheques issued by
visually impaired persons to third parties should be honoured, if otherwise in order.
 Credit Cards /Debit Cards: Visually impaired customers must be issued credit
cards/debit cards on request. All rules and regulation regarding credit/debit card must be
available on the web-site of the respective bank in accessible format. These should be
read out to visually impaired persons and perceived risk factors explained to them. Banks
may consider issuing Credit/Debit Card with Photograph. This Photograph will work as
an identification/verification.
 ATM/Debit Cards: Visually impaired customers must be permitted to avail of ATM
facilities. Banks should also ensure that the ATMs are accessible to other categories of
persons with disabilities such as the orthopedically disabled.
 Lockers: Visually impaired customers should be provided with locker facility on request.
Suitable lockers conveniently located for operations may be allotted. Bank procedures for
issuing a locker to a visually impaired customer must be the same as to any other
customer. A visually impaired customer may be given the following options for operation
of locker: ‘Operation – Singly’, ‘Operation - Singly with the assistance of a reliable
person, as per the choice of the Applicant’& ‘Operation – Jointly’. A visually impaired
customer may request the person in-charge of the locker to be present when the locker is
opened or to check if nothing has been left behind or fallen after the locker is closed.
 Loans: Loans must be made available to visually impaired customers as are offered to
other customers and their impairment of vision should not be a criterion for
sanctioning/denying a loan. No additional burden of interest payment, collateral and other
terms should be imposed on the visually impaired customer.

Branches may open an account in the name of a visually impaired person as he is not legally
incompetent to enter into a contract. He must call at the Branch in person and sign/put his thumb
impression on the account opening form/card in the presence of the Bank's official and also
preferably in presence of a witness known to both the Bank and the depositor.

ATM-cum-Debit Card facility has also to be allowed on demand to the visually impaired
customers as available to other customers. Branches should also ensure that the ATMs are
accessible to other categories of persons with disabilities such as the wheel chair users.
The Branch should impress upon the visually impaired account holder(s) the obvious risk
involved and the precautions to be taken in the matter of care and custody of pass book/cheque
book/deposit receipt given by the Bank in lieu of his deposits with the Bank. Normal precautions
should be exercised by the Branch for protection and safety of the Bank.

3.8 Operation of Accounts by Old & Incapacitated Persons

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 Facility to sick/old/incapacitated non-pension account holders: The facilities offered to pension
account holders should be extended to the non-pension account holders also who are sick / old /
incapacitated and are not willing to open and operate joint accounts.

Types of sick / old / incapacitated account holders:

The cases of sick / old / incapacitated account holders fall into following categories:
(a) An account holder who is too ill to sign a cheque / cannot be physically present in the bank to
withdraw money from his bank account but can put his/her thumb impression on the
cheque/withdrawal form;
(b) An accountholder who is not only unable to be physically present in the bank but is also not
even able to put his/her thumb impression on the cheque/withdrawal form due to certain physical
incapacity.

Operational Procedure
With a view to enabling the old / sick account holders operate their bank accounts, branches may
follow the procedure as under:-
a. Wherever thumb or toe impression or some mark of the body part the sick/old/incapacitated
account holder is obtained, it should be identified by two independent witnesses known to the
bank, one of whom should be a responsible bank official.
b. Where the customer cannot even put his / her thumb impression and also would not be able to be
physically present in the bank, a mark can be obtained on the cheque / withdrawal form which
should be identified by two independent witnesses, one of whom should be a responsible bank
official.
c. The customer may also be asked to indicate to the bank as to who would withdraw the amount
from the bank on the basis of cheque / withdrawal form as obtained above and that person should
be identified by two independent witnesses. The person who would be actually drawing the
money from the bank should be asked to furnish his signature and KYC particulars to the bank.

In case of a person who cannot sign due to loss of both hands:

The branches will act upon as per the following opinion obtained by the Indian Banks’
Association from their consultant on the question of opening of a bank account of a person who
has lost both his hands and could not sign the cheque / withdrawal form is as under :
“In terms of the General Clauses Act, the term “Sign” with its grammatical variations and
cognate expressions, shall with reference to a person who is unable to write his name, include
“mark” with its grammatical variations and cognate expressions. The Supreme Court has held in
AIR 1950 – Supreme Court, 265 that there must be physical contact between the person who is
to sign and the signature can be by means of a mark. This mark can be placed by the person in
any manner. It could be the toe impression, as suggested. It can be by means of mark which
anybody can put on behalf of the person who has to sign, the mark being put by a metallic
instrument which has had a physical contact with the person who has to sign”.

3.9 Opening / operating bank accounts of Persons with Autism, Cerebral Palsy, Mental
Retardation, Mental Illness and Mental Disabilities

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 The following guidelines would be applicable for the purpose of opening / operating bank
accounts of the above persons:
i. The Mental Health Act, 1987 provides a law relating to the treatment and care of mentally ill
persons and to make better provision with respect to their property and affairs. According to the
said Act, “mentally ill person” means a person who is in need of treatment by reason of any
mental disorder other than mental retardation. Sections 53 and 54 of this Act provide for the
appointment of guardians for mentally ill persons and in certain cases, managers in respect of
their property. The prescribed appointing authorities are the district courts and collectors of
districts under the Mental Health Act, 1987.
ii. The National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and
Multiple Disabilities Act, 1999 provides a law relating to certain specified disabilities. Clause (j)
of Section 2 of that Act defines a “person with disability” to mean a person suffering from any of
the conditions relating to autism, cerebral palsy, mental retardation or a combination of any two
or more of such conditions and includes a person suffering from severe multiple disabilities. This
Act empowers a Local Level Committee to appoint a guardian, to a person with disabilities, who
shall have the care of the person and property of the disabled person.
iii. Branches s are advised to take note of the legal position stated above and may rely on and be
guided by the orders/certificates issued by the competent authority, under the respective Acts,
appointing guardians/managers for the purposes of opening/operating bank accounts. In case of
doubt, care may be taken to obtain proper legal advice.
Regional Managers may also ensure that their branches give proper guidance to their customers
so that the guardians/managers of the disabled persons do not face any difficulties in this regard.

3.10 Minors' Accounts

A minor is a person below the age of 18 years. However, if a minor is of European domicile or a
guardian of his person or property has been appointed by the Court or the property of the minor
is under Superintendence of the Court of Wards, he attains majority at the age of 21 years.

A minor is under legal incapacity to contract by himself and, therefore, a guardian recognised by
law along can deal with the person and property of the minor. The term "guardian" includes a
natural guardian or guardian appointed by the Court of Law. Discharge given by guardian,
during the minority of the ward, cannot be challenged by the minor during minority or after
attaining majority. Ordinarily, an account of a minor is opened and operated upon by the natural
guardian of the minor or by the guardian appointed by the Court.

3.10.1 Minor’s Account with Mother as Guardian

RBI vide circular RPCD.CO.RRB.BC.No.100/03.05.33/2013-14 dated May 12, 201412 advised
Regional Rural Banks to allow minors’ accounts (fixed, savings and recurring deposit accounts
only) with mothers as guardians to be opened subject to safeguards in allowing operations in
such accounts by ensuring that the minors’ accounts opened with guardian are not allowed to be
overdrawn and that these always remain in credit.

12
RBI Guidelines on ‘Opening of Bank Account in Name of Minors’. RPCD.CO.RRB.BC.No.100/03.05.33/2013-14 dated May
12, 2014. https://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=8904
65 | P a g e
 With a view to promote the objective of financial inclusion and also to bring uniformity among
banks in opening and operating minors’ accounts, Regional Rural Banks are advised as under:
a. A savings /fixed / recurring bank deposit account can be opened by a minor of any age through
his/her natural or legally appointed guardian.
b. Minors above the age of 10 years may be allowed to open and operate savings bank accounts
independently, if they so desire. Banks may, however, keeping in view their risk management
systems, fix limits in terms of age and amount up to which minors may be allowed to operate the
deposit accounts independently. They can also decide, in their own discretion, as to what
minimum documents are required for opening of accounts by minors.
c. On attaining majority, the erstwhile minor should confirm the balance in his/her account and if
the account is operated by the natural guardian / legal guardian, fresh operating instructions and
specimen signature of erstwhile minor should be obtained and kept on record for all operational
purposes.
d. RRBs were free to offer additional banking facilities like ATM/ debit card, cheque book facility,
internet banking (as and when permitted) etc., subject to the safeguards that minor accounts are
not allowed to be overdrawn and that these always remain in credit.

3.10.2 Guardianship under Various Personal Laws

3.10.2.1 Guardianship Under Hindu Law13

The Dharmashastras did not deal with the law of guardianship. During the British regime the law
of guardianship was developed by the courts. It came to be established that the father is the
natural guardian of the children and after his death, mother is the natural guardian of the children
and none else can be the natural guardian of minor children. Testamentary guardians were also
introduced in Hindu law: It was also accepted that the supreme guardianship of the minor
children vested in the State as parens patrie and was exercised by the courts. The Hindu law of
guardianship of minor children has been codified and reformed by the Hindu Minority and
Guardianship Act, 1956. The subject may be discussed under the following heads : (i)
Guardianship of person of minors, (u) Guardianship of the property of minors, and (iii) De facto
guardians, and (iv) guardians by affinity.

Guardianship of the person

Minor Children

Under the Hindu Minority and Guardianship Act, 1956, S. 4(b), minor means a person who has
not completed the age of eighteen years. A minor is considered to be a person who is physically
and intellectually imperfect and immature and hence needs someone's protection. In the modern
law of most countries the childhood is accorded protection in multifarious ways. Guardian is "a
person having the care of the person of the minor or of his property or both person and property."
It may be emphasized that in the modern law guardians exist essentially for the protection and
care of the child and to look after its welfare. This is expressed by saying that welfare of the

13
Guardianship Under Hindu, Muslim, Christian And Parsi Laws Written by: Romit Agrawal & Gorang Vashistha - IV year Students of
Gujarat National Law University, Gandhinagarhttp://www.legalserviceindia.com/article/l35-Guardianship.html
66 | P a g e
child is paramount consideration. Welfare includes both physical and moral well-being.
Guardians may be of the following types : 1. Natural guardians, 2. Testamentary guardians, and
3. Guardians appointed or declared by the court. There are two other types of guardians, existing
under Hindu law, de facto guardians, and guardians by affinity.

Natural Guardians
In Hindu law only three persons are recognized as natural guardians father, mother and husband,
Father. “Father is the natural guardian of his minor legitimate children, sons and daughters."
Section 19 of the Guardians and Wards Act, 1890, lays down that a father cannot be deprived of
the natural guardianship of his minor children unless he has been found unfit. Me effect of Lh1s
provision has been considerably whittled down by judicial decisions and by Section 13 of the
Hindu Minority and Guardianship Act which lays down that welfare of the minor is of
paramount consideration and father's right of guardianship is 5;ubordinate to the welfare of the
child. The Act does not recognize the principle of joint guardians. The position of adopted
children is at par with natural-born children. The mother is the natural guardian of the minor
illegitimate children even if the father is alive. However, she is the natural guardian of her minor
legitimate children only if the father is dead or otherwise is incapable of acting as guardian.
Proviso to clause (a) of Section 6, Hindu Minority and Guardianship Act lays down that the
custody of a minor who has not completed the age of five years shall ordinarily be with the
mother. Thus, mother is entitled to the custody of the child below five years, unless the welfare
of the minor requires otherwise.

In Gita Hariharan v. Reserve Bank of India and Vandana Shiva v. Jayanta

Bandhopadhaya, the Supreme Court has held that under certain circumstances, even when the
father is alive mother can act as a natural guardian. The term 'after' used in Section 6(a) has been
interpreted as 'in absence of' instead 'after the life-time'. –

Rights of guardian of person. -The natural guardian has the following rights in respect of minor
children:
(a) Right to custody,
(b) Right to determine the religion of children,
(c) Right to education
(d) Right to control movement, and
(e) Right to reasonable chastisement

These rights are conferred on the guardians in the interest of the minor children and therefore of
each- of these rights is subject to the welfare of the minor children. The natural guardians have
also the obligation to maintain their minor children.

Testamentary Guardians
When, during the British period, testamentary powers were conferred on Hindus, the
testamentary guardians also came into existence. It was father's prerogative to appoint
testamentary guardians. By appointing a testamentary guardian the father could exclude the
mother from her natural guardianship of the children after his death. Under the Hindu Minority
and Guardianship Act, 1956, testamentary power of appointing a guardian has now been
67 | P a g e
conferred on both parents.' The father may appoint a testamentary guardian but if mother
survives him, his testamentary appointment will be ineffective and the mother will be the natural
guardian. If mother appoints testamentary guardian, her appointee will become the testamentary
guardian and father's appointment will continue to be ineffective. If mother does not appoint,
father's appointee will become the guardian. It seems that a Hindu father cannot appoint a
guardian. of his minor illegitimate children even when he is entitled to act as their natural.
guardian, as S. 9(1) confers testamentary power on him in respect of legitimate children. In
respect of illegitimate children, Section 9(4) confers such power on the mother alone.

Under Section 9, Hindu Minority and Guardianship Act, testamentary guardian can be appointed
only by a will. The guardian of a minor girl will cease to be the guardian of her person on her
marriage, and the guardianship cannot revive even if she becomes a widow while a minor. It is
necessary for the testamentary guardian to accept 'the guardianship. Acceptance may be express
or implied. A testamentary guardian may refuse to accept the appointment or may disclaim it, but
once he accepts, he cannot refuse to act or resign except with the permission of the court.

Guardians Appointed by the Court

The courts are empowered to appoint guardians under the Guardians and Wards Act, 1890. The
High Courts also have inherent jurisdiction to appoint guardians but this power is exercised
sparingly. The Hindu Minority and Guardianship Act is supplementary to and not in derogation
to Guardians and Wards Act. Under the Guardians and Wards Act, 1890, the jurisdiction is
conferred on the District Court: The District Court may appoint or declare any person as the
guardian whenever it considers it necessary in the welfare of the child.' In appointing ,,a"
guardian, the court takes into consideration various factors, including the age, sex, wishes of the
parents and the personal law of the child. The welfare of the children is of paramount
consideration.
The District Court has the power to appoint or declare a guardian in respect of the person as well
as separate property of the minor. The chartered High Courts have inherent jurisdiction to
appoint guardians of the- person as well as the property of minor children. This power extends to
the undivided interest of a coparcener.

The guardian appointed by the court is known as certificated guardian. Powers of Certificated
guardians. Powers of certificated guardians are controlled by the Guardians and Wards Act,
1890. There are a very few acts which he can perform without the prior permission of the court.
In the ultimate analysis his powers are co-extensive with the powers of the sovereign and he may
do all those things (though with the permission of the court) which the sovereign has power to
do. A certificated guardian from the date of his appointment is under the supervision, guidance
and control of the court./

Guardianship by affinity
In pre-1956 Hindu law there existed a guardian called guardian by affinity. The guardian by
affinity is the guardian of a minor widow. Mayne said that "the husband's relation, if there exists
any, within the degree of sapinda, are the guardians of a minor widow in preference to her father
and his relations."' The judicial. pronouncements have also been to the same effect[1]. The
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guardianship by affinity was taken to its logical end by the High Court in Paras Ram v. State[2]
In this case the father-in-law of a minor widow forcibly took away the widow from her mother's
house and married her for money to an unsuitable person against her wishes. The question before
the court was whether the father-in-law was guilty of removing the girl forcibly. The Allahabad
High Court held that he was not, since he was the lawful guardian of the widow.

A question has come before our courts, whether the nearest sapinda of the husband automatically
becomes a guardian of the minor widow on the death of her husband or whether he is merely
preferentially entitled to guardianship and therefore he cannot act as guardian unless he is
appointed as such? Paras Ram seems to subscribe to the former view, and the Madras and the
Nagpur high Courts to the latter view. Under Section 13, Hindu Minority and Guardianship Act,
in the appointment of 'any person as guardian, the welfare of the child is paramount
consideration. The fact that under Hindu law father-in-law has preferential right to be appointed
as guardian is only a matter of secondary consideration.

In our submission, it would be a better law if the guardianship of the minor wife, both of her
person and property, continues to vest in the parents. We do not have much of textual guidance
or case law on the powers of the guardians by affinity. Probably his powers may be taken to be at
par with those of the natural guardian.

De Facto Guardian
A de facto guardian is a person who takes continuous interest in the welfare of the minor's person
or in the management and administration of his property without any authority of law. Hindu
jurisprudence has all along recognized the principle that if liability is incurred by one on behalf
of another in a case where it is justified, then the person, on whose behalf the liability is incurred
or, at least, his property, is liable, notwithstanding the fact that no authorization was made for
incurring the liability.'

The term 'de facto guardian' as such is not mentioned in any of the texts, but his existence has
never been denied in Hindu law. In Sriramulu, Kanta[3]. said that Hindu law tried to find a
solution out of two difficult situations : one, when a Hindu child has no legal guardian, there
would be no one who would handle and manage his estate in law and thus without a guardian the
child would not receive any income for his property and secondly, a person having no title could
not be permitted to intermeddle with the child's estate so as to cause loss to him. The Hindu law
found a solution to this problem by according legal status to de facto guardians.

A mere intermeddler is not a de facto guardian. An isolated or fugitive act of a person in regard
to child's property does not make him a de facto guardian. To make a person a de facto guardian
some continuous course of conduct is necessary on his part. In other words, a de facto guardian
is a person who is not a legal guardian, who has no authority in law to act as such but
nonetheless he himself has assumed, the management of the property of the child as though he
were a guardian. De facto guardianship is a concept where past acts result in present status. The
term literally means 'from that which has been done.'
The de facto guardian was recognised in Hindu law as early as 1856. The Privy Council in
Hanuman Pd.[4] said that 'under Hindu law, the right of a bona fide incumbrancer, who has taken
69 | P a g e
a de facto guardian a charge of land, created honestly, for the purpose of saving the estate, or for
the benefit of the estate, is not affected by the want of union of the de facto with the de jure title.

3.10.2.2 Guardianship under Muslim Law:

The source of law of guardianship and custody are certain verses in the Koran and a few ahadis.
The Koran, the alladis and other authorities on Muslim law emphatically speak of the
guardianship of the property of the minor, the guardianship of the person is a mere inference. We
would discuss the law of guardianship of custody as under:
(a) Guardianship,
(b) Custody, and
(c) De facto guardian.

Classification of Guardianship

In Muslim law guardians fall under the following three categories:

(i) Natural guardians,
(ii) Testamentary guardians, and
(iii) Guardians appointed by the court.

Natural Guardians
In all schools of both the Sunnis and the Shias, the father is recognized as guardian which term in
the context is equivalent to natural guardian and the mother in all schools of Muslim law is not
recognized as a guardian, natural or otherwise, even after the death of the father. The father's
right of guardianship exists even when the mother, or any other female, is entitled to the custody
of the minor. The father has the right to control the education and religion of minor children, and
their upbringing and their movement. So long as the father is alive, he is the sole and supreme
guardian of his minor children.[5]

The father's right of guardianship extends only over his minor legitimate children. He is not
entitled to guardianship or to custody of his minor illegitimate children.
In Muslim law, the mother is not a natural guardian even of her minor illegitimate children, but
she is entitled to their custody.[6]

Among the Sunnis, the father is the only natural guardian of the minor children. After the death
of the father, the guardianship passes on to the executor. Among the Shias, after the father, the
guardianship belongs to the grandfather, even if the father has appointed an executor, the
executor of the father becomes the guardian only in the absence of the grandfather. No other
person can be natural guardian, not even the brother. In the absence of the grandfather, the
guardianship belongs to the grandfather's executor, if any.'

Testamentary Guardian
Among the Sunnis, the father has full power of making a testamentary appointment of guardian.
In the absence of the father and his executor, the grandfather has the power of appointing a
70 | P a g e
testamentary guardian. Among the Shias, the father's appointment of testamentary guardian is
valid only if the grandfather is not alive. The grandfather, too, has the power of appointing a -
testamentary guardian. No other person has any such power. Among both the Shias and the
Sunnis, the mother has no power of appointing a testamentary guardian of her children. It is only
in two cases in which the mother can appoint a testamentary guardian of her property of her
minor children: first, when she has been appointed a general executrix by the will of the child's
father, she can appoint an executor by her will; and secondly, she can appoint an executor in
respect of her own property which will devolve after her death on her children.

The mother can be appointed a testamentary, guardian or executrix by the father, or by the
grandfather, whenever he can exercise this power. Among the Sunnis, the appointment of a non-
Muslim mother as testamentary guardian is valid, but among the Shias such an appointment is
not valid, as they hold the view that a non-Muslim cannot be a guardian of the person as well as
of. the property of a minor. It seems that the appointment of non'-Muslim fellow-subject (iiinmi)
is valid, though it may be set aside by the kazi. According to the Malikis and the Shafii law, a
zimmi can be a validly appointed testamentary guardian of the property of the minor, but not of
the person of -the minor. The Shias also take the same view. It appears that when two persons are
appointed as guardians, and one of them is disqualified, the other can act as guardian. A
profligate, i.e., a person who bears in public walk of life a notoriously bad,character, cannot be
appointed as guardian:
Acceptance of the appointment of ...testamentary guardianship is necessary, though acceptance
may be express or implied. But once the guardianship is accepted, it cannot be renounced save
with the permission of the court.

Muslim law does not lay down any specific formalities for the appointment of testamentary
guardians. Appointment may be made in writing or orally. In every case the intention to appoint
a testamentary guardian must be clear and unequivocal. A testamentary deposition made by a
testator may be invalid, but appointment of the executor may be general or particular. The
testator must have the capacity to make the will at the time when it was executed. This means
that the feslat8r ghould be major and of sound -mind, i.e., at the time of execution of the will, he
should be in full possession of his senses.

The executor of the testamentary guardian is designated variously by Muslim lawgivers,

indicating his position and powers. He is commonly called, wali or guardian. He is also called
amin, i.e., a trustee. He is also termed as kaim-mukam, i.e., personal representative of the
testator.

Guardian appointed by the Court.-On the failure of the natural . guardians and testamentary
guardians, the kazi was entrusted with the power of appointment of guardian of a Muslim minor.
Now the matter is governed by the Guardians and Wards Act, 1890. This Act applies to the
appointment of guardians of all minors belonging to any community. The High Courts also have
inherent powers of appointment of guardians, though the power is exercised very sparingly.

Under the Guardians and Wards Act, 1890, the power of appointing, or declaring any person as
guardian is conferred on the District Court. The District Court may appoint or declare any person
71 | P a g e
as guardian of a minor child's person as well as property whenever it considers it necessary- for
the welfare of the minor, taking into consideration the age, sex, wishes of the child as well 'as the
wishes of the parents and the personal law of the minor.

3.10.2.3 Guardianship under Christian Law

The Guardians and Wards Act, 1890, which resides in the secular realm also, may be resorted to.
The relevant provisions are reproduced herein: -
According to section 17 of the above-said Act, the matters of the case should be considered by
the court in appointing guardian. The section reads, “ (1) In appointing or declaring the guardian
of a minor, the Court shall, subject to the provisions of this section, be guided by what,
consistently with the law to which the minor is subject, appears in the circumstances to be for the
welfare of the minor

(2) In considering what will be the welfare of the minor, the Court shall have regard to the age,
sex and religion of the minor, the character and capacity of the proposed guardian and his
nearness of kin to the minor, the wishes, if any, of the deceased parent, and any existing or
previous relations of the proposed guardian with the minor or his property.

(3) If the minor is old enough to form an intelligent preference, the Court may consider that
preference.”

Section 19, which prohibits the Court from appointing guardians in certain cases, reads:
S.19. Guardians not to be appointed by the Court in certain cases:-Nothing in this Chapter shall
authorize the Court to appoint or declare a guardian of the property of a minor, whose property is
under the superintendence of a Court of Wards, or to appoint or declare a guardian of the person-
(a) Of a minor who is a married female and whose husband is not, in the opinion of the Court,
unfit to be guardian of her person. Or
(b) Of a minor whose father is living and is not, in the opinion of the Court, unfit to be guardian
of the person of the minor, or
(c) Of a minor whose property is under the superintendence of a Court of Wards competent to
appoint a guardian of the person of the minor."

Duties of guardian of the person-

A guardian of the person of a ward is charged with the custody of the ward and must look to his
support, health and education, and such other matters as the law to which the ward is subject
requires.

Title of guardian to custody of ward:

(1) If a ward leaves or is removed from the custody of a guardian of his person, the Court, if it is
of opinion that it will be for the welfare of the ward to return to the custody of his guardian, may
make an order for his return, and for the purpose of enforcing the order may cause the ward to be
arrested and to be delivered into the custody of the guardian.

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(2) For the purpose of arresting the ward, the Court may exercise the power conferred on a
Magistrate of the first class by Section 100 of the Code of Criminal Procedure, 1882.

(3) The residence of a ward against the will of his guardian with a person who is not his guardian
does not of itself terminate the guardianship."

In Thrity Hoshie Dolikuka v. Hoshiam Shavaksha Dolikuka[7], the Court held

The principles of law in relation to the custody of a minor appear to be well established. It is well
settled that any matter concerning a minor, has to be considered and decided only from the point
of view of the welfare and interest of the minor, In dealing with a matter concerning a minor, the
Court has a special responsibility and it is the duty of the Court to consider the welfare of the
minor and to protect the minor's interest. In considering the question of custody of a minor, the
Court has to be guided by the only consideration of the welfare of the minor.

It is, however, noteworthy that under Indian Divorce Act the sons of Indian fathers cease to be
minors on attaining the age of 16 years and their daughters cease to be minors on attaining the
age of 13 years: S. 3 (5). The Court under the Divorce Act would thus be incompetent now to
make any order under Ss. 41 and 42 with respect to the elder son and the daughter in the present
case. According to the respondent-husband under these circumstances he cannot approach the
Court unless, the Divorce Act for relief with respect to the custody of these children and now that
these children have ceased to be minors under that Act, the orders made by that Court have also
lost their vitality. On this reasoning the husband claimed the right to invoke S. 25 of the
Guardians and Wards Act.”

3.10.2.4 Guardianship under Parsi Law

Although there is no general law of guardianship, yet it is permitted by a statute amongst Hindus
and by custom amongst a few numerically insignificant categories of persons. Since adoption is
legal affiliation of a child, it forms the subject matter of personal law. Muslims, Christians and
Parsis have no adoption laws and have to approach court under the Guardians and Wards Act,
1890. Muslims, Christians and Parsis can take a child under the said Act only under foster care.
Once a child under foster care becomes major, he is free to break away all his connections.
Besides, such a child does not have legal right of inheritance. Foreigners, who want to adopt
Indian children have to approach the court under the aforesaid Act. In case the court has given
permission for the child to be taken out of the country, adoption according to a foreign law, i.e.,
law applicable to guardian takes place outside the country.

3.10.3 Modes of Operations in Minor Account:

(a) Accounts Operated upon by Guardians

Normally, accounts of minors should be opened and operated upon by the natural
guardian/guardian appointed by the Court.

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An account in the name of a minor to be operated upon by the mother (in cases other than
Mohammedans) as natural guardian even though the father is alive can be opened, in approved
cases, for reasons, such as the father being away for long period etc., after obtaining a letter of
consent signed by the father.

It would also be in order to open and allow operation on the minor's account by the mother of the
minor (in cases other than Mohammedans) without obtaining such letter of consent from the
father, provided the Branch is fully satisfied about standing and respectability of the parties.

In terms of the Supreme Court ruling on Hindu Minority and Guardianship Act, opening and
operations of Minor's account by mother, may be allowed in the absence of father without
insisting upon the consent letter from the father. The Supreme Court lays down that the father is
considered as absent if:

i) Father and mother are separated or divorced,

ii) Father has left the minor in the custody of the mother,

iii) Father is not taking care of the mother and minor,

iv) It is agreed between the spouses that the mother shall take care of the minor.

If the circumstances listed above exist, the consent letter from the father should not be insisted
and the mother should be allowed to open and operate the minor's account.

Branches may open deposit accounts of a minor to be operated upon by either the father or the
mother (in cases other than Mohammedans) after obtaining a letter duly signed by both father
and mother.

There is also no objection to opening a joint account in the names of two minors to be operated
upon by the natural guardian of both the minors.

The mode of signature on the cards and withdrawal forms/cheques in these accounts should be
"A B C (Minor) by his/her natural guardian/guardian appointed by Court X Y Z”.

(b) Accounts to be operated upon by Minor Alone

As a minor has no capacity to contract, it is generally believed that any commercial transaction
with him is risky. But where minor is a creditor, where a minor has received funds, his discharge
is valid and effective. Banks normally allow a literate minor over the age of 10 years and above
to operate a deposit account if he is able to sign straight.

Accounts to be operated upon and/or the balance repayable to the minor alone can be opened,
provided he is aged 10 years or more, with restrictions on maximum balances/repayments as
shown below Care should be taken that he / she should receive the payment by him/herself.

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 i. Saving Bank Accounts: Balance not exceeding Rs 25.000/-14 at any time.15
ii. Recurring Deposit Accounts: The total amount repayable at the end of the stipulated term
without any upper limit.
iii. Term Deposit Accounts The amount of deposit without any upper limit (to include
Fixed/Short/DBD/MIC,etc)

The balances in such joint accounts at any time should not exceed Rs. 25.000/- as far as Savings
Bank Deposits are concerned. However, there is no upper limit for the balance, acceptance in
Term Deposit Accounts and the total amount repayable at the end of the stipulated term in
respect of Recurring Deposit Accounts.

(c) Joint Accounts of Minors

Joint account of a minor of 10 years and more may be opened as under:

(i) Jointly with natural guardian.

The operational instructions may be obtained as -

(a) Either or Survivor, or

(b) Former or Survivor (The word "Former" may refer either to natural guardian or to minor)

(ii) Jointly with mother/major brother/major sister/grandfather or grandmother (paternal or

maternal) who are not the natural guardians

The operational instructions should be "Former or Survivor" only where "Former" shall
refer to the mother/grandfather/grandmother/major brother or major sister, and "Survivor" to
minor.

Branches may also open joint account of a minor with a major as described under (ii) above even
if the minor is below 10 years of age. Since, in such cases, the minor is incapable of signing at
the time of opening of the account, the account opening card would bear:

i) the name of major, his address and his specimen signature, n) the name of minor, his address
but no specimen signature of the minor.

Specimen signature of the minor should be obtained only when he/she completes the age of 10.
A suitable note should be taken for this purpose. Where Branches have opened such accounts
and obtained the signature of the minor before completion of the age of 10, a fresh signature of
the minor should be obtained when he/she completes the age of 10.

14
RBI has mandated vide its Customer Services guidelines that Bank can not refuse any credit to the students’
account irrespective of amount based on Hon’ble High Court Mumbai Order
15
Gramin Bank of Aryavart’s Manual of Instructions (Deposit)
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In the event of the death of the major account holder in such an account, where the minor
continues to be below 10 years, the account can be operated upon by the natural guardian of
the minor till the minor attains the age of 10 years and the account thereafter will be
operated upon by the minor himself. Branches should obtain the specimen signature of the
natural guardian of the minor on receipt of notice of death of the major joint account holder, after
getting the sanction from the Regional Manager. The Branch may or may not receive a formal
notice of the major's death, it is sufficient if there is an announcement of the death of the account
holder in newspapers, such an announcement is deemed to be proper notice of death. When the
minor attains the age of 10 years, Branches should carefully note to stop all withdrawals by the
natural guardian, as the minor is considered capable of operating the said account himself.

It is not safe to open a joint account in the names of two minors to be operated upon by either of
them as one of the minors can, on attaining majority, question the operations by the other minor.
However, joint accounts in the names of minors who are of the age of 10 years & above may be
opened to be operated upon by them jointly subject to maximum balance restrictions referred
above.

Branches may accept without any upper limit, deposits in Savings Bank Accounts of minors
operated upon by:

(i) The natural guardian, father

(ii) The Guardian appointed by the Court

(iii) The mother as natural guardian (in cases other than Mohammedan Minors)

(iv) The mother as Guardian (and not natural guardian) of a Mohammedan minor

The upper limit of Rs 25,000/- for balances in Savings Bank Accounts of minor shall be
applicable in the following cases only:

i) Account of a minor operated by self,

ii) Joint account of two minors operated by them jointly,
iii) Joint account of a minor with their natural guardians,
iv) Joint accounts of minor with his mother/major brother/major sister/grandfather/grandmother
(Paternal & Maternal)

Management of Minors' Accounts

While opening any type of deposit account in which a minor is a party, birth date of minor and
date of his attaining majority must be printed/written prominently in the account opening form/
card, pass book. The date of birth should be verified from school/birth certificate from the
Municipality or Gram Panchayat and a note of proof made on the form/card. A copy of such
certificate should be kept on record.

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A constant watch has to be kept on the accounts of minors and their attaining majority
particularly in accounts which are operated upon by the guardians, because if the erstwhile
guardian makes any withdrawals from a minor's account after the minor has attained majority,
the withdrawals may be questioned by the erstwhile minor. To eliminate this risk and generally
to safeguard the Bank's interest, it is necessary to maintain a record of the dates of minors'
attaining majority. In the present computer system, a report can be generated by invoking menu
option, a list of accounts where minors are attaining majority. The report should be periodically
taken.

If a withdrawal form/cheque signed by natural guardian/guardian appointed by Court is

presented for payment after the date on which the minor has become major, the erstwhile minor
must be contacted and his instructions sought. If he cannot be contacted, the withdrawal
form/cheque should be returned with the answer "Mr/Miss
…………………………………….(the erstwhile minors name) has since attained majority".

3.10.4 Procedure after Minor Attains Majority

When a minor attains majority, the guardian ceases to be the guardian and the account ceases to
be that of a minor. The payment from the account should be made to the erstwhile minor
provided that the Branch is satisfied about his identity.

When the account is operated upon by the guardian on behalf of the minor, who has attained
majority, a Balance Confirmation Letter duly signed by the erstwhile minor with his signature
duly verified by the guardian should be obtained. The signature of the erstwhile minor should be
obtained on the form/card and it should be verified by natural guardian/guardian appointed by
Court. Having done this, it is not necessary to close the existing account and to open a new
account, but the note made in the ledger account and the account opening form/card to indicate
that it is a minor's account, should be cancelled. Thereafter, the account should be operated upon
only by the erstwhile minor. A fresh photograph of the minor should also be obtained on
his/her attaining the majority.

When the account is operated upon by the minor himself, after attaining majority, the erstwhile
minor should be asked to sign a Balance Confirmation Letter which should be kept on record
after making a note in the relative card/ledger account.

Where the account is operated by two minors jointly, upon one of them attaining majority, the
account should be closed after obtaining Balance Confirmation Letter duly signed by both the
account holders with the withdrawal form for the final balance signed by the two jointly. The
account holders may then open new accounts according to the Bank's rules.

Where, in a joint account of a minor with natural guardian father or mother/grandfather or

grandmother (paternal or maternal), brother or sister (major), the minor has attained majority, a
Balance Confirmation Letter duly signed by the account holders should be obtained. Note of the
Balance Confirmation Letter should be made in the account opening form/card.

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 Where, in a joint account of two minors operated by the natural guardian of both, one of the
minors has attained majority, the account should be closed after obtaining the Balance
Confirmation Letter duly signed by both the account holders with the withdrawal form/cheque
for the final balance signed by the erstwhile minor and the natural guardian on behalf of the other
minor A fresh account(s) may be opened as they may wish.

In Term Deposit accounts such as Fixed/Short Deposits, Monthly Income Certificates, Double
Benefit Deposits, Recurring Deposits, where the account is in the name of a minor to be operated
upon by the natural guardian or jointly in the name of a minor and his natural guardian, branches
should exercise care at the time of repayment of the amounts and ensure that the minor has not
attained majority, and if he has become major, his discharge is obtained, in addition to the
natural guardian's discharge, where necessary, for repayment of the amount.

3.11 Accounts of Limited Companies

A Limited Company may be public or private incorporated under the Companies Act.

When the Registrar of Companies issues a Certificate of Incorporation, a Company comes into
legal existence.

Before opening an account of a limited company the following requirements must be complied
with:

(a) The original Certificate of Incorporation should be inspected and a copy thereof (certified true by
the Secretary) obtained for the Bank's record.

(b) The original Certificate of Commencement of Business should be inspected in the case of a
public company. A copy certified true by the Secretary of the Company should be obtained for
the Bank's record. Certificate of Commencement of Business is not required in the case of a
Private Limited Company or a Company Limited by Guarantee.

(c) A copy of Memorandum and Articles of Association duly certified as true and up to date by the
Secretary of the Company should be obtained and kept on record. The Memorandum and
Articles of Association should be studied and any special restrictions/requirements in regard to
the dealing of the Company with the Bank should be noted and acted upon.

(d) A copy of the Board Resolution authorizing opening of the account duly certified true by the
Chairman of the meeting at which the Resolution is passed should be obtained (Specimen-
Appendix XII). There should be a specific mention in the Resolution about the type of deposit
account to be opened. A Resolution obtained incorporating opening of different categories of
deposit accounts, if on record, may suffice in future to open any type of deposit account covered
by the Resolution. No fresh Resolution need be asked for in such cases but a copy of the
Resolution on record should be kept with the account opening form/card relating to the new
account with a proper noting as to where the original Resolution is filed. It should be ensured
that the instructions regarding operations on the account contained in the Resolution are in

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 conformity with the relative provisions in the Company's Memorandum and Articles of
Association.

(e) A copy of the latest audited balance sheet and profit and loss account may be obtained in the
case of a public limited company.

(f) A list of the present Directors signed by the Chairman may be obtained.

A. Sometimes, while opening an account, a company is unable to furnish Board Resolution

along with other documents such as, Certificate of Incorporation, Memorandum and Articles of
Association etc. In such cases, current account in a Limited Company's name can be opened on
the basis of omnibus resolution passed by the company's board of directors, empowering its
Chief Executives etc., to open accounts at banks. Such resolution should have been passed at a
meeting of board of directors and should not be 'Circular Resolution'. It is advisable that the
resolution mentions account opening officials by designation rather than by names. The power
delegated through the resolution or by grant of a power of attorney to sign on behalf of the
company, should not be confined to cheques only, but should extend to other orders, whether the
account is in credit or debit. It should even extend to the bills to be accepted on behalf of the
company.

B. Occasions may arise when a Company is required to open a Current Account at places, other
than its head quarters, where the Company has Branches/Offices. Under the circumstances, the
Company may not be able to produce a Board Resolution for opening an Account at such a place
with any Bank until after the Board Meeting. In such cases, a Current Account in the name of the
Limited Company can be opened on the basis of an Omnibus resolution passed by the
Company's Board of Directors empowering it's Chief Executives etc. to open accounts at Banks.
However, all other documents should also be obtained at each Bank Branch maintaining such
accounts. It will be advisable to mention account opening officials by designations rather than by
names in the resolution. It should not be a 'Circular Resolution' but passed at a Meeting of the
Board of Directors. A Draft of the intended resolution for the limited use of Companies in need
of opening an operative account at any of the Bank's outstation Branches for certain limited
purpose, like management of a site office etc. is given in Appendix XXII.

Completion of Account Opening Form

Branches are sometimes requested to send a set of account opening forms/cards for being filled
in at the company's office. This facility should not be entertained instead a bank official may
visit the premises of the Company to complete the needful formalities related to the account
opening and KYC formalities.

In the case of companies when none of the directors is known to the Bank, it would be
worthwhile to make independent market enquiries on the standing of the company/its directors
and also to take a search in the company's records at the office of the Registrar of Companies.

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Issuance of cheque books to Limited Companies (Public and Private Ltd. Cos.) Branches
should issue 'order' cheque leaf books only, to the corporate clients, unless a request to the
contrary is made in writing.

Change of Directors - Authority to Operate

In the event of any changes in the Directors authorised to operate on the account of the
Company, a copy of the relative Board Resolution certified true by the Chairman of the meeting
at which the Resolution was passed should be obtained for record. (Branches should also obtain
fresh specimen signature form/card duly signed by all authorised signatories including the new
Directors authorised to operate the account, with their signatures verified by the Chairman).

Form of Signature on Cheques as Drawer

The common form of signature on cheques drawn by a limited company in terms of Section
147(1)(C) of Companies Act, 1956, is

For A.B. & Co. Ltd.

"X.Y.Z."
Director/Secretary

The above illustration shows the name of the company - the essential thing -as required by the
Companies Act, 1956, followed by the signature of the person who wrote or impressed it, with
the designation to indicate that it was done under authority and on behalf of the company. It is
not the practice of the Bank to accept an endorsement on a cheque, let alone any drawing of a
cheque, in the form of mere name of the company only, as there is nothing to show that it was
written on behalf of the company by someone in authority.

Safeguards against Conversion of Cheques

Branches should treat with care all cheques drawn by a limited company which are presented for
collection in an account other than that of the named payee. Branches should not collect a cheque
drawn by a limited company payable to a third-party and apparently endorsed by the payee for
the private account of a director or employee of the company which drew the cheque.

54.2 PROPER PLACE FOR THE DEPOSIT OF CHEQUE PAYABLE TO A LIMITED

COMPANY IS THE COMPANY'S ACCOUNT ANY OTHER METHOD OF DEALING
WITH THE CHEQUE PUTS THE BANK ON ENQUIRY. Branches should not collect a cheque
payable to a limited company for the personal account of any director, official or employee of
the payee company. Branches should not collect a cheque payable to a limited company for the
account of any other party. Particular care would be necessary when the customer is short of
funds or some connection with the payee company is suspected.

Importance of the Registered Office of a Company

To the Bank, the registered office of a company is of importance as the address where all notices
and documents may be served upon the company. A document/legal notice to be properly served
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on the company or an officer thereof must be sent to the company or the officer at the registered
office of the company by post under certificate of posting or by registered post or by leaving it at
the registered office of the company (Section 51 of the Companies Act, 1956). Statements of
account, paid cheques and general correspondence relating to day-to-day business of the
company may be sent to the respective offices of the company by mutual arrangements.

Winding Up of a Limited Company by Court's Order

A limited company may be wound up by the Court in which case the winding up order is served
on the Bank. No cheques drawn on the account should be paid even though they were drawn
prior to the date of receipt of Court's winding up order.

Appointment of liquidator: The liquidator(s) who may be appointed for the purpose is the only
person(s) who will deal with the account.

3.12 Accounts of Clubs, Schools, Societies (including Co-operatives), Associations,

Committees etc.
Account may be opened in the name of a club, school, society (including co-operative society),
association, committee, etc., which is registered or incorporated under the Societies Registration
Act or the Companies Act, 1956 or Co-operative Societies Act.

The activities of these bodies are governed by their rules, regulations, bye-laws etc., it should be
ensured that bank account is opened and operational instructions are in conformity with the rules,
regulations, etc. Before opening an account the following documents should be obtained:

(a) Certified true copy of the rules, regulations, bye-laws (as the case may be).

(b) Certified true copy of Memorandum of Association, where applicable.

(c) Certificate of Registration or Incorporation in original (which may be returned after

inspection). A certified true copy of the Certificate should be obtained for the Bank's record.

Note: (a), (b) and (c) should be certified by the Chairman/Secretary.

(d) A certified true copy of the resolution (certified by the Chairman of the Meeting of Board of
Directors or Managing Committee at which it was passed) authorizing opening of an account
with the Bank and authorizing certain office-bearers in accordance with the rules and bye-laws of
the body to sign cheques and operate the account etc. (Specimen-Appendix XII or XIII as may
be applicable). Type of deposit account to be opened should be specifically brought out in the
resolution. If the resolution on record provides clearly for opening of accounts of different
categories of deposits, no separate resolution for each type of deposit account to be opened is
necessary, but a copy of the resolution on record should be kept with the account opening
form/card relating to the new account with a proper noting as to where the copy of original
resolution is filed.

(e) A copy of the latest balance sheet in the case of Co-operative Societies, if available.

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In the case of account of Co-operative Society, in some States, the Co-operative Societies Acts
do not permit a society to open accounts with banks other than with a Co-operative bank without
the permission of the Registrar of Co-operative Societies. For the sake of good order, the Letter
granting permission to open account with the Bank should be inspected and necessary action
taken; a copy of the Letter may be kept on record.

In the event of subsequent changes in the Board of Directors or Management or the Managing
Committee, a copy of the resolution certified true by the Chairman should be obtained by the
Bank for its record (Fresh specimen signature cards or slips signed by the new Directors or
Members of the Managing Committee with their signatures verified by the Chairman should also
be obtained).

Sometimes the Bank is approached to open accounts of clubs, schools, societies, associations or
committees which are unregistered. Such unregistered bodies have no legal entity and cannot be
sued in their own names. The Bank may be put to difficulties in the case
of internal disputes arising amongst the members of such bodies. Accounts of unregistered clubs,
schools, societies, associations, etc, should be opened in their names provided Manager is
thoroughly satisfied about the objects and the constitution of such bodies and the respectability
and standing of the office-bearers. The accounts of unregistered associations should not be
allowed to be overdrawn even temporarily.

Precautions

Cheques payable to clubs, schools, societies, associations etc, either in their own names or in the
name(s) of office-bearers in their fiduciary capacity should not be collected in the private
accounts of office bearers or other employees of those bodies. Similarly, cheques drawn on the
account of the club, school, society or association payable to third-parties should not be collected
in the private accounts of the office bearers or employees of the club, school, society or
association except after stringent inquiry.

3.13 Accounts of Trusts

By an instrument of Trust Deed, an estate is placed in the hands of the Trustees to whom the
estate is entrusted in order that they may deal with it in accordance with the provisions of the
Trust Deed. A Trust may be Public Charitable Trust or Private Trust (for the benefit of private
individuals).

Branches may open any type of deposit account or safe custody account in the name of a Trust
by adopting the following procedure and precautions strictly, but, in dealing with such an
account care must be taken to see that the Bank is not knowingly a party to a breach of trust.

Examination of the Instrument of Trust Deed

Before opening a trust account, the original Trust Deed (Instrument/Document creating the
Trust) must be obtained for examination. Such instrument may be a Trust Deed or scheme
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framed by a competent authority such as a Charity Commissioner or by an order of a Court.
There are some charitable institutions which are for promotion of education or for providing
medical aid or for furtherance of religious activities etc, which have in addition to the Trust
Deeds their own rules and bye-laws or constitutions for the administration of the trust and the
powers of the trustees, in these cases such rules and bye-laws or constitutions should be treated
as part of the Instrument of Trust. In what follows the word "instrument" is used as a general
term meaning any document creating the trust and defining the powers of trustees. The
Instrument of trust should be carefully examined to get answers to the following questions and to
ascertain as well the legal obligations applicable to the conduct of the account:

(a) Whether the trust is a public charitable trust or a private trust.

(b) What is the minimum number of trustees provided in the Instrument?

(c) Whether the Instrument contains any provision authorizing the trustees to open a bank
account of the type desired to be opened.

(d) Whether the Instrument contains any provision authorizing the operation of such account by a
number of trustees which is smaller than their full or maximum number.

(e) Whether the Instrument contains any provision authorizing the trustees to delegate their
powers to some of them.

(f) Whether there are any provisions in the Trust Deed which place onerous responsibilities on
the Bank regarding the operation of the account.

The opening and operation of the account depend upon the answers to the above questions, as
indicated below:

(a) If the trust is a public charitable trust, enquiries must be made whether it is registered with the
Charity Commissioner or such other competent authority In most (though not all) of the States,
there are Public Trusts Acts under which any public charitable trust is compulsorily required to
be registered with the Charity Commissioner or such other authority appointed under the Act,
and a certificate of registration is issued to the trustees. The original of such certificate of
registration should be called for, examined and a copy taken on record. There can be no
certificate of registration in respect of a wholly private trust i.e. a trust without any charitable
objects, but made solely for the benefit of private individuals, mostly family members of the
settler.

(b) The trust should have the prescribed minimum number of trustees as provided in the
Instrument.

(c) If the Instrument contains any provision authorizing the trustees to open a bank account, any
restriction or condition implied by such provision regarding the operation of the account must be
strictly complied with by the trustees.

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(d) If the instrument authorises the operation of a bank account by a number of trustees less than
their full number, the operation must be allowed by the specific number mentioned in the
Instrument.

(e) If there is a provision in the Instrument regarding the operation of a bank account by some
trustees only out of all the trustees, it is NOT necessary to see whether there is a general
provision authorising the trustees to delegate their functions and powers to some of them. If,
however, there is nothing in the Instrument regarding the operation of bank accounts, the
provision authorising delegation to some of the trustees becomes relevant. If, for instance, it is
provided that there shall be five trustees and that they can delegate their powers to any two of
them, the operation of the account can be permitted by any two of them.

(f) The operation of the account by only one of several trustees can be permitted only if the
Instrument specifically and in clear terms authorises such operation.

(g) If the Instrument places any restrictions on the operation of the bank account, these
restrictions should be strictly complied with. For instance, the Instrument may provide that the
account should be operated by one particular trustee (sometimes called the "Managing Trustee")
jointly with any two of the rest of them, or it may provide that the account should be operated
upon by any one of a particular group of the trustees jointly with any one of the remaining
trustees. The latter type of provision is sometimes found in Provident Fund Trusts. The operation
must be allowed accordingly.

Documents to be Obtained

After examining the Instrument and determining how the operation on the account is to be
allowed, the following documents should be obtained:

(a) The account opening form/card should be signed by all the trustees, whatever may be the
mode of operation.

(b) Certificate of registration under the local Public Trusts Act, if the trust is a public charitable
trust, should be examined and a copy taken for record.

(c) The relevant extracts from the Instrument pertaining to the number of trustees, operation of
bank accounts and/or power of delegation should be entered in a register in which copies or
extracts of powers of attorney, particulars of death certificates, copies of letters of administration,
etc., are maintained. These particulars should be checked and initialed by an officer. (It is not
necessary to have a copy of the whole Instrument on the Bank's record). The date and serial
number under which the record is maintained in the register should be noted on the account
opening form/card and at the head of the ledger account.

(d) A resolution in the form provided in Appendix XIV or XV or XVI as may be applicable,
signed by ALL the trustees (whatever be the mode of operation) should be obtained. If any
change takes place in the board of trustees, a fresh resolution signed by all the new trustees
should be obtained.
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(e) The confirmation of the balance in the account signed by all the trustees (whatever be the
mode of operation) should be obtained every six months.

(f) Periodical statements of accounts should be sent under a covering letter addressed to all the
trustees (whatever be the mode of operation).

When Trust Deed is Silent about Operation of a Bank Account

When the Trust Deed/Instrument does not contain any provision about the operation of a bank
account or authorising the trustees to delegate powers to some of them, the account can be
opened, but should be operated upon by ALL THE TRUSTEES JOINTLY.

Operations proposed by only some out of all the trustees : If, however, in such cases the
trustees request the Branch to allow the operations by only some out of all the trustees, the matter
must be referred to Regional Office with a copy of the Instrument and a status report on the
standing, respectability and such other facts about the trustees and also about the trust; the
Branch should also state whether looking to such factors the Bank would or would not take
undue risk by allowing the operation of the account by lesser number of trustees - that is to say,
whether there are any chances of the trustees committing breach of trust. The operation on the
account by some of the trustees and not all of them may be permitted in spite of there being no
specific provision in the Instrument; but in such a case the number of trustees operating must be
at least two and not one. If possible, an endeavour should be made to persuade the trustees to
agree to operate the account by a majority in number of the trustees.

Indemnity

If Regional Office permits to open the account and allows operation by lesser number of trustees,
in addition to the documents mentioned above, a letter of indemnity (Specimen-Appendix XVII)
signed by ALL the trustees should be obtained. The letter of indemnity is necessary only when
there is no provision in the Instrument authorising the trustees to delegate their powers to some
of them AND the trustees nevertheless desire to operate the account not by all of them but by
some of them If the operation is either in accordance with the authority given in the Instrument
or is by all the trustees jointly, no indemnity is necessary.

3.13.1 Term Deposit and Safe Custody Accounts of a Trust

In a current or savings bank account, the trustees generally deposit the income of the trust funds.
Term Deposit and Safe Custody accounts on the other hand relate to the capital of the trust funds.
The following ADDITIONAL POINTS are, therefore, to be considered while opening a Term
Deposit or Safe Custody account in the name of a trust:

(a) Sometimes the Instrument contains a provision authorising the operation of "a bank account"
generally by some only of all the trustees. THE WORDS "A BANK ACCOUNT" CANNOT
NORMALLY BE CONSTRUED TO INCLUDE A TERM DEPOSIT ACCOUNT OR A SAFE
CUSTODY ACCOUNT. There must be either a specific mention of the Term Deposit account or
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the Safe Custody account and specific mode of operation prescribed in the Instrument, or there
must be a general descriptive provision for such an account, for instance, stating that the trustees
shall have power to place the trust moneys in Term Deposit with any bank or that they will have
power to place the investments of the funds in Safe Custody with any bank AND that any two or
three of them are authorised to deal with such Term Deposits or to withdraw the investments or
to instruct the bank to sell or otherwise deal with them.

(b) In the absence of such a provision as is referred to in (a) above or of a power of delegation
referred to in paragraph above, the account should be operated by all the trustees jointly. The
request for the operation by some only of all the trustees should be entertained more sparingly in
the case of these accounts than in the case of Current or Savings Bank accounts. If the Branch is
inclined to accommodate the trustees, a reference should be made to Regional Office before
opening the account. If Regional Office agrees to allow operations by some of the trustees, an
indemnity should be taken in addition to other usual documents referred above. THE FORM OF
INDEMNITY WILL BE FURNISHED BY REGIONAL OFFICE IN EACH CASE
SEPARATELY.

General Principles and Precautions

With regard to trust accounts of any nature, the principle of treatment by a banker is that he must
not be knowingly a party to a breach of trust otherwise he would be liable or accountable to the
beneficiaries or any person interested in the trust. In other words, if an account holder places
money that a banker knows is trust money in his charge, the banker must not allow the account
holder to draw out the money for a purpose which the banker knows or has sufficient reasons to
believe, to be inconsistent with the account holder's duties as a trustee. On the one hand, the
banker must not act upon mere suspicion; on the other hand, he must not ignore a circumstance
which shows that the moneys are being drawn for a purpose not consistent with the duties of a
trustee. It is because of such onerous nature of the banker's liability regarding a trust account that
elaborate procedure is required to be followed.

The following are some of the precautions which arise from the abovementioned general
principles:

(a) A cheque payable to a trust account should not be collected for the private account of a
trustee. In no case should a trust account cheque be credited into the overdrawn private account
of a trustee himself.

(b) Branches should exercise caution in paying cheques drawn on trust accounts and ensure that
such payment does not contravene the provisions of the trust deed.

(c) Proceeds of the investments of the trust or Term Deposits should not be allowed to be
collected or paid into private account of a trustee.

(d) Trust accounts should not normally be allowed to be overdrawn Any request by trustees or
loan or overdraft arrangements should be referred to Regional Office for instructions, even when
the amount is within the sanctioning power of the Manager.
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(e) The trustees cannot appoint attorneys where, by so doing, they delegate the exercise of their
discretion except in terms of the clearest authority to do so under the Instrument.

(f) Any one of the trustees may stop payment of a cheque whether he is the signatory of the
cheque concerned or not. If the trustees desire to remove the stop payment instructions it is
advisable to have them issued a new cheque, alternatively, instructions cancelling stop payment
may be accepted, if the letter is signed in the same manner as cheques drawn on the account
(Also refer Chapter on Current/Savings Bank Accounts-General under "Stop Payment of
Cheques").

3.14 Accounts of Executors and Administrators

The Executor or Administrator, as the case may be, of a deceased person is his legal
representative for all purposes and all the property of the deceased person vests in him as such.

An Executor is a person named in the Will and derives his title immediately upon the testator's
death for the purpose of administration of the deceased's property. Before acting as Executor and
exercising powers given to him under the Will, he should obtain Probate from Court though there
is nothing in the law to prevent him acting as Executor under certain circumstances.

But, an administrator is the legal representative of a person who has died intestate and derives
his title wholly from the Court as per Letters of Administration granted in his favour by the
Court.

The Executor or Administrator cannot usually delegate power to third-parties. Any power of
attorney or an authority given to third-parties to operate on the account of the estate must not be
accepted without the prior permission of Regional Office.

Procedure to Open Accounts

The Probate or Letters of Administration must be produced to the Bank before an account can be
opened in the names of Executors or Administrators (A Will for which a probate has not been
obtained should not be acted upon). Usually the original grant or a copy certified by the Court
should be produced for inspection and registration. If such original or certified copy is not
produced but only a plain copy is produced, the registration thereof should be declined and the
original or a copy certified as such by the Court should be requested. The Executors or
Administrators should be identified before an account is opened in their names. The particulars
of Probate or Letters of Administration produced should be registered, i.e entered in a Register in
which copies or extracts from powers of attorney, particulars from death certificates, letters of
administration, trust deeds, etc , are maintained. The Register should contain such particulars of
the Probate or Letters of Administration as:

(a) Date of the Will, if any

(b) Date when the Probate or Letters of Administration were granted

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(c) Name of Court which issued the grant

(d) Date when exhibited to the Bank and by whom

(e) Names of Executors or Administrators

(f) Gross value of the estate

(g) Powers of Executors or Administrators

(h) A brief extract of the contents of the Probate or Letters of Administration and the accounts of
business of the deceased with the Bank, if any

The entry in the Register should be checked and initialed by the Manager. The Register should
be indexed alphabetically. The date and the serial number in which the record is maintained in
the Register should be noted on the account opening form/card and at the head of the ledger
account under the initials of an officer.

The accounts of the Executors or Administrators should be opened in the following style "A, B
and C - Executors (or Administrators) of D".

Precautions

(a) Account opening form/card should be signed by ALL the proving Executors or by ALL the
Administrators, if there are more than one Executor or Administrator.

(b) Clear instructions for operation of the account signed by all Executors or Administrators
should be obtained.

(c) Care must be taken to see that the Bank is not involved in any misapplication of the funds of
the estate by the Executor or the Administrator. The Bank cannot examine every payment out of
the account but care should be taken where necessary (depending on the surrounding
circumstances concerning any transaction suggesting misapplication of funds). It would be
unwise to collect a cheque payable to the Executor or Administrator as such for the private
account of the Executor or Administrator. If the Bank were pressing for a reduction in the private
indebtedness of the Executor or Administrator, it would be dangerous to accept for the credit of
his private account a cheque drawn by him on the estate account payable to self or to any third-
party.

Operation by Any One Executor or Administrator where Permissible

In the absence of any direction to the contrary in the Probate or Letters of Administration, any
one of the Executors or Administrators can operate on the account without written authority from
the others, as the co-executors or administrators are regarded in law as one person. However, it is
prudent to obtain their precise instructions regarding operation on the account.
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 3.15 Accounts of Provident Funds

Accounts may be opened in the names of properly constituted Provident Funds. The trust deed of
Provident Fund should be examined carefully to ensure that there are no onerous provisions in it.
The Rules of the Provident Fund should also be read carefully to see that they do not place any
onerous responsibility on the Bank.

The Provident Fund must have recognition under the Income Tax Act, 1961. The trustees should
be well-known and respectable persons of standing.

All instructions regarding opening of trust accounts and precautions thereto shall also apply to
these accounts (Refer paragraphs 63 to 71).

Savings Bank Accounts in the name of Employees Provident Fund organisations/Gratuity Funds
of Public/Private Limited Companies can be opened provided that :

i. The fund is recognised Provident/Gratuity Fund within the meaning of chapter IX A of Income
Tax Act 1922,
ii. The entire Income of the fund is exempted from Income Tax and
iii. The funds do not fall within the categories of bodies mentioned in clause 3(i) of RBI direction
dated 27-12-85 reproduced below "No bank shall open a Savings Deposit Account in the name
of Government Departments/bodies depending upon budgetary allocations for performance of
their functions/Municipal Corporations/Municipal Committees/Panchayat Samities/State
Housing Boards/Water/Sewerage/Drainage/Boards, State Text Book Publishing
Corporation/Societies/Metropolitan Development Authority/State/District Level Housing, Co-op
Society etc or any trading or business concern whether such concern is a proprietary or a
partnership firm / or a company or an association.

The following documents together with the usual account opening form/card should be obtained:

a) The original trust deed (which may be returned after its registration in the Bank's record). A copy
should be obtained for Bank's record.
b) A copy of the rules of the Provident Fund.
c) A copy of the resolution, certified true by the Chairman of the meeting at which it was passed by
the Board of Trustees authorising opening of an account with the Bank and conferring authority
on the trustees of the Fund, who, in accordance with the rules of the Fund are authorised to sign
cheques etc.

3.16 Accounts of Liquidators

A Liquidator under a VOLUNTARY WINDING UP of a Company may open an account with

the Bank subject to the consent of the Committee of Inspection, if any, and need only produce a
copy of the resolution (certified by the Chairman of the meeting at which the resolution of such

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 winding up was passed) of the creditors or members of the Company appointing him The
Liquidator's account should be opened in the following style:

"The Liquidation Account of ………. Company Ltd" or "(Company Pvt. Ltd.)"

Liquidators cannot delegate their powers to third-parties. Where more Liquidators than one are
appointed, they may not authorize less than two of their number to sign generally unless
empowered to do so at the time of their appointment, although they may all authorize one of their
members or a third-parties to sign a particular document.

In case of account of Official Liquidator who is the Liquidator of a Company which is being
WOUND UP UNDER THE SUPERVISION OF THE COURT, "Public Account of India" in the
Reserve Bank of India must be used (Section 552 of the Companies Act, 1956).

Neither the Official Liquidator nor any other Liquidator of a Company shall pay any moneys
received by him in his capacity as such into any private banking account (Section 554 of the
Companies Act, 1956).

3.17 Accounts of Other Banks

Branches may, at their discretion, open Current Accounts only of other scheduled banks
including Regional Rural Banks, in case of doubt, they should refer to Regional Office. No
account of a non-scheduled bank may be opened without reference to Regional Office.

3.18 Accounts of State Financial Corporations

Accounts of State Financial Corporations may be opened. Before opening an account, the
following documents should be obtained.

a) A copy of the relevant Act of Legislature,

b) A copy of the Bye-laws and
c) A certified copy of the resolution regarding opening and operation of the account It should be
seen that the terms of the resolution are in agreement with the relative provisions in the Act and
Bye-laws.

It should be ensured at all times that the accounts are conducted in conformity with the rules and
regulations.

3.19 Collection Accounts

Sometimes, an account holder e.g Company, Sales Organisation, Life Insurance Corporation of
India, etc, may request the Bank to collect moneys/cheques etc, deposited by their
representatives and/or general public at centres where the Bank has Branches and to transfer such
collections at specified intervals to their main account at a specified Branch/bank.

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 Before opening such an account, Branches should refer to the Regional Office for approval.
Regional Office will fix the terms and conditions depending upon the value of the account. That
office will also fix the exchanges on transfer of funds from the collecting centres to the main
Branch of the Bank at which the collections are to be centralized.

Collection account is non-operating current account and no transaction other than remitting funds
to the main account should take place (cheque book should not be issued). Actual postages
incurred in remitting the funds and also the exchange as per agreed terms should be recovered
from the account holder.

All the usual formalities connected with the opening of an account are to be observed in this type
of account also, with an exception that the main Branch at which the collections are to be
centralized will supply the usual forms and verified specimen signatures to the Branch where the
collection account is to be maintained.

Opening of this type of account should be restricted to well-known and respectable parties.

3.20 Customer Identification Procedure

Branches should strictly comply to the Customer Identification Procedure (CIP) by obtaining
identification documents given below for every new customer without fail.

S.No Type of Accounts Documents to be obtained

1 Individual A) For proof of identity (any one of the following for
verification along with a copy):
 PAN Card
 Aadhhar Card
 Passport
 Election / Voter ID Card
 Driving License
 MGNREGA Job Card signed by a State Govt Official
 Name in National Population Register

B) For proof of current/permanent address:

 Aadhhar Card
 Passport
 Election / Voter ID Card
 Driving License
 MGNREGA Job Card signed by a State Govt Official
 Name in National Population Register

For KYC at Simplified Norms:

 For Identification: a) Identity Card issued by a Govt
Agency; b) Attested Photography with particulars on

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 his/her letterhead issued by a Gazetted Officer
 For Address Proof: Utility Bills (No Ration Card)
For Small Account: No formal documents, but self-declaration
and self attesting of photograph and application by the
customer in front of a Bank Official

C) Recent photograph (passport size)

Documents in 1.A, 1.B and 1.C to be obtained in case of
Individual / proprietor / each joint account holder / Partner
/ Director/ Trustee/ HUF Member, each other authorized
signatory, if any.
2 Proprietorship Following documents are to be obtained in addition to 1.A, 1.B,
concerns 1. C above:
 Proprietorship letter in Bank’s format
 Power of attorney if any granted by the Proprietor
 Telephone bill for verification with a copy

RBI has advised that in respect of accounts of sole proprietary

concerns, the Customer Identification Procedure (CIP) shall,
apart from the extant guidelines, include obtaining and
verifying any two of the following documents for proof of
name, address and activity of the concern before opening of
such accounts:
i. Registration Certificate in case of a registered concern;
ii. Certificate/licence issued by the Municipal authorities
under Shops & Establishment Act;
iii. Sales & income-tax returns;
iv. GST/CST / VAT certificate;
v. Certificate/registration document issued by Sales
Tax/Service Tax/Professional Tax authorities;
vi. license issued by any registering authority like
Certificate of Practice issued by the Institute of
Chartered Accountants of India, Institute of Cost
Accountants of India, Institute of Company Secretaries
of India, Indian Medical Council, Food and Drug
Control Authorities, etc.
- Any Registration/Licensing Document issued in the
name of the Proprietary Concern by the Central
Govt./State Govt. Authority/Dept..
- IEC (Importer/Exporter Code)issued to the Proprietary
Concern by the Office of The Director General of
Foreign Trade(DGFT).(Identity Document)
vii. Complete Income Tax Return (not just the
acknowledgement) in the name of the sole proprietor
where the firm’s income is reflected, duly authenticated
/acknowledged by the Income Tax Authorities.
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 viii. Utility bills such as electricity, water and landline
telephone bills in the name of the proprietary concern.
Please note importantly that the above mentioned documents
should be in the name of the proprietary concern(except (vii)
above)
Branches may also accept any registration / licensing
documents issued in the name of the proprietary concerns by
the Central Govt. or State Govt. Authority / Department. The
IEC (Import Export Code) issued to the proprietary concerns by
the office of Directorate General of Foreign Trade (DGFT) can
also be accepted as an identity document for opening of Bank
accounts of the proprietary concerns.
3 Partnership Firms Following documents are to be obtained in addition to 1.A, 1.B,
1.C above:
 Registration certificate with a copy certified by the
Partners (if registered)
 Partnership letter in Bank’s format
 Power of attorney, if any, granted by the firm for
verification with a copy
 Telephone bill for verification with a copy
4 Limited Following documents are to be obtained in addition to 1.A, 1.B,
Companies 1.C above:
 Certificate of incorporation with a copy certified by the
Secretary/Director of the Company
 A copy of the Memorandum and Articles of Association
(upto date) certified by the Secretary/Director of the Company
 Certificate of commencement of business with a copy
certified by the Secretary/Director of the Company (for Public
Limited Company)
 Board resolution for opening and operating the account
certified by the Chairman of the meeting
 List of present Directors signed by the Chairman of the
Company
 List of authorized signatories with their signatures
attested by the Chairman of the Company
 Power of attorney if any granted by the Company
 PAN allotment letter for verification with a copy
 Telephone bill for verification with a copy
5 Hindu Undivided Following documents are to be obtained in addition to 1.A, 1.B,
Family (HUF) 1.C above:
 Declaration from Karta
 Joint Hindu Family letter signed by the Karta and all
major co-parceners
 PAN allotment letter for verification with a copy
 Telephone bill for verification with a copy
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6 Society/ Following documents are to be obtained in addition to 1.A, 1.B,
Association/ 1.C above:
Club/  Certificate of registration with a copy certified by the
Schools Chairman/Secretary (if registered)
etc  Memorandum of Association (where applicable)
certified by the Chairman/Secretary
 Rules, regulations, bye laws certified by the
Chairman/Secretary
 Committee resolution for opening and operating the
account certified by the Chairman of the meeting
 A list of authorized signatories with their signatures
attested by the Chairman/Secretary
 PAN allotment letter for verification with a copy
 Telephone bill for verification with a copy
7 Trusts Following documents are to be obtained in addition to 1.A, 1.B,
. 1.C above:
 Certificate of registration for verification with a copy
certified by the Chairman (for Public Charitable Trust)
 Trust deed for verification with a copy certified by the
Chairman
 Resolution for opening and operating the account signed
by all the Trustees
 Any document listing the names of the trustees / settlers
/ beneficiaries
 A list of the names of trustees with their signatures
attested by the Chairman
 PAN allotment letter for verification with a copy
 Telephone bill for verification with a copy

8 Non Resident Following documents are to be obtained in addition to 1.A, 1.B,

Indian (NRI) 1.C above:
 Passport for verification with a copy
 Work Permit / Permanent Residency / Green Card etc
indicating the NRI’s residence status abroad for verification
with a copy
 NRI declaration
9 Bank A/cs of Identity Card / Employer Letter / Employer Certificate should
Salaried be obtained only from corporate and other entities of repute.
Employees Branches obtaining such documents should be aware of the
competent authority designated by the concerned employer to
issue such identity Card / Employer Letter / Employer
Certificate.
Branches should, in addition to the above document, obtain at
least one officially valid KYC document to establish the
prospective customer’s identity proof and address proof.
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 MISCELLANEOUS ITEMS

3.21 Addition/Deletion of Names in all Deposit Accounts of Individuals

Branch Managers have been authorized to consider request from Account holder/s for
Addition/Deletion of name/s of any person/s in Demand as well as Term Deposit Accounts
without reference to the heirs/legal representative and/or without obtaining 'No Objection Letter'
from the legal heir/legal representatives, subject to the following:
(i) Where all account holders are alive - upon written request signed by all the account
holders
(ii) Where one of the account holders is deceased - upon written request signed by the
surviving account holder/s provided operational instructions in the account are any of
the following :
(a) Either or survivor
(b) Former or survivor
(c) Any one of them or any one of the survivors or the last survivor

While considering such requests, Branches should ensure that

(i) the request for addition/deletion of name/s is made in writing duly signed by
all the depositors/ surviving depositors
(ii) the signatures of all the account holders on the letter of request are verified
very carefully particularly in the case of deletion of a name and in case of any
doubt, the account holders are to be contacted and confirmation obtained or
preferably the account holder/s are requested to sign in the presence of the
Manager.
(iii) the reasons for the addition/deletion of name/s are set out in the letter of
request and that they are cogent.
(iv) the Branch is satisfied about the bonafide nature of the request

v) A balance confirmation letter as of the date of the request for addition/deletion is obtained
duly signed by all account holders.

(vi) Details of changes in the account if any in the past are examined.

(vii) The name of the new depositor is added after the name/s of the existing depositor/s in order
not to contravene Section 269 T (2) of the Income-Tax (Second Amendment) Act, 199516.

16
Section 269T(2) in The Income- Tax Act, 1995 No branch of a banking company or a co- operative bank and no other
company or co- operative society and no firm [ or other person] shall repay any deposit made with it otherwise than by an
account payee cheque or account payee bank draft drawn in the name of the person who has made the deposit if-(a) the amount of
the deposit together with interest, if any, payable thereon, or (b) the aggregate amount of the deposits held by such person with
the branch of the banking company or co- operative bank or, as the case may be, the other company or co- operative society or
the firm, either in his own name or jointly with any other person on the date of such repayment together with the interest, if any,
payable on such deposits, is twenty] thousand rupees or more: Provided that where the repayment is by a branch of a banking

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Changes in Records upon Addition / Deletion of Name(s)

Addition
1.B. In the case of addition of a name, although the existing account will continue with the
additional name, letter of request, fresh account opening card/form with appropriate instructions
regarding mode of operations, repayment of balance in the account etc, should be obtained,
signed by the present and new account holder(s). The account number and the date of opening of
the original account should also be noted in the new account opening card/form.

The letter of request, old account opening card/form and, in the case of savings bank accounts,
signed by all the account holder(s), existing as well as new, should be carefully preserved. In the
relative pass book/deposit receipt, the name of new deposit holder and the date of his inclusion
together with variation in operational instructions, if any, should be appropriately indicated under
the full signature of the concerned Officer.

Deletion
C. In the case of deletion of a name of a joint account holder, the name and signature of the
person whose name is to be deleted should be cancelled by drawing two parallel lines with the
remark "deleted", and the date of such deletion noted in the relative account opening/specimen
signature card, deposit receipt and pass book under the full signature of the concerned Officer. A
new specimen signature card of the remaining account holder(s) should also be obtained - the old
(cancelled) card should be carefully preserved with the remark thereon that a fresh card has been
obtained with the deletion effected.

3.22 Proof of death of the depositor: Branches should follow the procedure of obtaining the
certificate or any other satisfactory modes of proof of death of the depositor(s).

3.23 Identity of the Nominee: Indian Banks' Association has devised the claim format
(Specimen Appendix IV) which is required to be submitted by the nominee duly completed and
signed by him as well as two witnesses as under:

i) Magistrate or Judicial official and / or

ii) An Officer of the Central or State Government and / or
iii) An Officer of a bank and / or
iv) Two persons of good standing and integrity acceptable to the Bank Branches should obtain
satisfactory status reports on these two persons suggested as witnesses, if necessary.

3.24 Introduction of Accounts

Introduction has become now optional and subject to offer from customer and bank cannot make
it mandatory for customer to offer the introduction otherwise he/she would be denied the banking
facilities as customers’ credentials and identification is done through KYC documents. In case of
customer offering Introduction, Bank should take care of following:

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As far as possible, the introducer should sign the account opening form/card at the appropriate
place in the presence of a Bank official. The introducer of an account should expressly confirm
inter alia, the identity, occupation and address of the prospective account holder by signing a
certificate incorporated in the account opening form/card with the following wording:
"I certify that I have known Mr./Mrs./Ms....................................................................................
since the past ..................... months/years and confirm his/her occupation and address as stated in
this application.
Account Number ................................. Introducer's Signature"

The introducer should write full name of the depositor in the certificate in his own handwriting.
In those account opening forms/card wherein the certificate format is not incorporated, such
certificate should be obtained at an appropriate place on the form/card. The signature of the
introducer on the account opening form/card should be verified promptly with his specimen
signature on record and with the same care as required to verify the drawer's signature on
cheques. The officer verifying the signatures should initial against the signature in token of such
verification.

An introduction of an account by a customer of another bank should be discouraged, as far as

possible.

3.25 Vernacular Signature: Signature(s) in the regional languages known to the Branch can be
accepted provided the signature(s) is steady and natural. In case an employee comes across a
signature in a language not known to him, he could always take the assistance of some other
employee at the Branch who knows the language for the purpose of verification of the specimen
signature. In such instances particular attention should be given to the Strokes in the signature.

3.26 Initial Deposit

An account should ordinarily be opened with an initial deposit of cash. The Manager may accept,
at his discretion a cheque drawn by the prospective account holder on his own account with
another bank as initial deposit. A cheque drawn in favour of a prospective account holder by a
third-party should not be accepted unless the prospective account holder is well-known to the
Bank or is introduced by a customer of good standing and well-known to the Bank. A cheque
drawn in favour of a third-party should not, as a rule, be accepted as an initial deposit.

3.27 Approval of Account Opening forms/Cards

The Officers opening the Current Accounts/Savings Bank Accounts/Term Deposit Accounts
should verify the signatures of the customers/introducers as per the existing instructions. The
account opening official, in addition to initialling (as his authentication) against every signature
of the customer on the account opening form/card should affix his full signature in red with the
serial (code) number against appropriate legend "Account opened by ………………. ".
Thereafter, the account opening form/card should be submitted to the Manager for
approval/authentication.

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Approval of account opening form/card is tantamount to approval for opening of account and
due care must, therefore, be exercised by the concerned officer. The officer
approving/authenticating the account opening forms/cards should ensure that the specimen
signatures of prospective account holders and introducers are individually authenticated by the
officer opening the accounts and thereby he should satisfy himself that the instructions obtained
for operation on accounts are acceptable to the Bank. He should also check whether the official
opening the account has superimposed his full signature (in red) with the serial number.
Thereafter, he should initial the account opening form/card in token of his having checked it. It
would be the responsibility of the officer approving/authenticating the account opening
forms/cards to see daily without fail what accounts are opened and to satisfy himself about the
genuineness of the introduction.

The scrutiny/approval of current account opening forms should precede the opening of the
account. But in the case of Savings Bank/Term Deposit Accounts, such scrutiny may be done
after the account is opened but before opening of the account in the computer system.

3.28 DEPOSIT LEDGERS: WRITING, POSTING, CHECKING AND BALANCING

Computer Systems

Recording of entries in computer systems, books, registers, etc , should normally be made only
by the staff member who is entrusted with the relative work. However, it should be ensured that
this does not create an impediment in smooth flow of work at the Branch.

3.28.1 Opening of New Accounts

All particulars of account holder(s) such as the full name(s) (i e title of account), address,
telephone number, operational instructions, other special instructions given by the account
holder(s) e.g. the frequency of periodical statement etc., should be recorded from the account
opening form/card and cheque book series numbers (where applicable) should be recorded/noted
from cheque request form. The title of the account should be spelt and styled exactly as in the
relative account opening form/card. In the case of a joint account, the names of all the account
holders should be recorded. In the cases of sole proprietary concerns or partnerships trading
under impersonal names or in names other than their own, it is desirable that the style of the
account as entered in the system head should show the connection of the proprietor or partners of
the concern, e.g. Rainbow Trading Co, A B, Proprietor or Partner and not simply the Rainbow
Trading Co. The names of partners should be noted in the system folio in the case of partnership
accounts. All entries in the system must be individually verified by checking Officer.
Instructions which cease to be operative should be ruled through in red ink/ball-point pen and the
date and authority (e.g. account holder's letter) of such cancellation should be entered under the
initials of checking officer.

(a) Current Accounts

If there are accounts with similar names, the words “Care : similar account (Title of the other
similar account)" should be mentioned in all the concerned accounts. The account holders
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should be requested to use rubber stamps to affix the full title of the accounts on their paying-in-
slips and cheques. They might also be advised to write a distinguishing code in addition to their
usual signatures.

(b) Savings Bank Accounts

Savings Bank accounts must be opened in the system strictly in the serial order of account
numbers.

(c) Other Accounts

In the case of other deposit accounts viz., Term Deposits, Monthly Income Certificates, Double
Benefit Deposit Certificates, Recurring Deposits, etc., there are certain other additional
information, such as the term of deposit, rate of interest, due dates, etc., which should also be
recorded under respective columns fully, in the system.

3.28.2 Ledger Posting (in System)

The transactions must be posted up to date, accurately and authenticated in the same evening.

3.28.3 Precautions in Posting Credit/Debit Entries

Before cheques/withdrawal forms, paying-in-slips or vouchers are posted in the ledger accounts,
it should be ensured that the title of the ledger account and account number (where applicable) is
the same as that written on cheques/withdrawal forms, paying-in-slips or vouchers. The vouchers
should be properly arranged either alphabetically or according to the number of accounts, as the
case may be, to facilitate continuous and smooth posting.

The ledger keepers must enter full particulars of debit/credit entries under the column
`Particulars' legibly.

3.28.4 Ledger Checking

When checking ledgers, the particulars (of names of accounts, account numbers and amounts)
from the relative vouchers should be checked. The authorizing officer should run through the
vouchers and compare that:

(a) in respect of each credit voucher : the title of the account, account number and the amount

(b) in respect of every cheque : the amount

(c) in respect of debit vouchers other than cheques : the name, account number and the amount
are correct.

The officer should go through the vouchers to ensure that:

(a) each voucher bears the transaction number entered by the posting clerk under his initials (to
indicate that it has been posted in the ledger)

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(b) each voucher bears "Cash", "Clearing" or "Transfer" stamp (with date) as the case may be

(c) vouchers are passed by the authorised officers and all credit and debit vouchers bear the full
signatures of officers

(d) each cash payment cheque or other instrument involving payment of cash bears the full
signature of the cancelling officer (and not merely his initials)

(e) all payment cheques and other instruments involving payment of cash are cancelled with full
signatures singly as delegated. It is also to be ensured that clearing and transfer vouchers are
signed as per delegation.

Regarding second cancellation / authorisation, the following requirements are to be followed:-

a) Where the first cancellation is by an officer, the second cancellation will be done by
another officer. The official passing payment of cheques should pass (cancel) the
drawer’s signature on the instrument in such a manner that it is not obliterated /
defaced,

i) Above instructions are not applicable to P & L Suspense Debit, Sundry Credits, Sundry
Deposits and Dormant Account etc. Vouchers which should invariably be checked and
signed by two officials.

The signing powers for Demand Drafts / Pay Orders / Mail Transfers / Telegraphic Transfers /
Term Deposit Receipts as under-
Category Signing Power
(A) Singly
Officers Instruments upto Rs.50,000/-
(B) Jointly by two officers Instruments above Rs.50,000/-

When authenticating the postings, the checking officer should ensure that:

(a) the vouchers are posted in the right accounts and the amounts are correctly entered in the
correct column, debit or credit, as the case may be;
(b) the serial numbers of the cheque(s) drawn on the account are from the cheque book issued to
the account holder

(c) no cheque has been accepted in a savings bank account unless the account is introduced to the
satisfaction of the Bank or has been otherwise approved
(d) no stopped cheques have been inadvertently paid
(e) restrictions placed on the operations of an account under orders of any Court/Income Tax
Authorities are adhered to. If any mistake is noticed, it should be corrected on the spot in all the
relevant accounts under the initials of the officer.

3.29 Death, Insolvency and Insanity of Account Holder

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Separate Chapter on Diseased Account Payment has been made from the Bank of India’s Policy
on Diseased Payment

3.30 Insolvency or Winding up

Accounts of Individuals and Limited Companies

Insolvency of an individual customer and winding up of a corporate body customer terminates
the authority of the banker to pay cheques or to accept or honour bills or to take any other action
or deal with the property on behalf of such a customer. The cheques drawn by the insolvent or
his agent dated prior to the date of his being adjudicated as insolvent, should not be paid. After
the order of adjudication is made, property of the insolvent vests in the Official
Assignee/Receiver/Liquidator.

Joint Accounts

The insolvency of a joint account holder terminates the joint relationship and further operations
on the account must be transacted by the Official Assignee or Official Receiver and the solvent
parties. Cheques drawn by the insolvent account holder must be returned unpaid. Cheques drawn
by the solvent account holder(s) alone irrespective of the operational instructions also should be
returned if they are not countersigned by the Official Assignee/Official Receiver. Care must be
taken not to damage the credit of the solvent parties. The remark on the returned cheques should
be "Joint account holder `A' in insolvency" or in similar terms.

Partnership Firm Accounts

Subject to a contract between the partners, a firm is dissolved on the insolvency of a partner of
the firm (Section 42 of The Indian Partnership Act, 1932). The credit balance in the account of
the firm, a partner of which has become insolvent, can safely be paid to the solvent partner. If
the firm is indebted to the Bank and it is desired to retain the Bank's rights on the insolvent's
estate, it is necessary to break (not close) the firm's account. Cheques drawn by the insolvent
partner should be paid upon confirmation of the solvent partners.

A firm is dissolved by the adjudication of all the partners or all the partners but one as insolvent
(Section 41 of the Indian Partnership Act, 1932). In such a case, all operations on the firm's
accounts and also on the private accounts of the partners should be stopped, whether the accounts
are in debit or in credit.

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OTHER INSTRUCTIONS

3.31 Filing and Custody of Account Opening Forms/Cards

Normally each account opened at a Branch is given a serial number and the specimen signature
cards should be arranged in the filing cabinets in their respective serial order. The account
number should be noted on the specimen signature cards before they are filed. The cards must be
maintained in good condition.

The signatures should be scanned immediately and the same should be authenticated verified.

When an account is closed, a rubber stamp "Account Closed" should be affixed on the specimen
signature card under the date and initials of an officer in such a manner as not to obliterate the
specimen signature(s). The signatures of closed accounts should be immediately deleted from the
system.

Filing of Current Account Opening Forms

Branches should take proper care in filing of current account opening forms.

Custody of Current Account Opening Forms

As the current account files contain account opening forms bearing specimen signatures etc., of
account holders, it is absolutely necessary that these files, at all times, remain in the custody of
an officer of the Branch. It is of paramount importance that no unauthorised person should be
allowed to have an access to these files. The files, when they are not in use, must be kept locked
in a steel cabinet. The concerned officer at the Branch should once in a year, verify that the
account opening cards of all operative accounts (live accounts) are available and that they are
properly arranged.

Custody of Other Deposit Account opening Forms/Cards

The care and precautions indicated in the above paragrap apply equally to the custody of account
opening forms/cards of other deposit accounts.

3.32 Paying-in-slips

Paying-in-slips are provided by the Bank for deposit of money for credit of deposit accounts.
Care should be taken to see that the paying-in-slips bear the name of the Branch, for which,
Branch rubber stamp should be affixed thereon. All particulars on the slip should be properly and
carefully filled in by the depositor who should sign at the place "By.......". In the case of paying-
in-slips for Term Deposits, other particulars such as term of deposit, rate of interest, etc., should
also be filled in by the depositor.

The customer should be advised to preserve the counterfoil of the paying-in-slip carefully to be
able to exchange it with the deposit pass book/deposit receipt/certificate etc. in due course. On
the paying-in-slip, the number of account, where applicable, should be written legibly. Where, in
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a savings bank account, moneys are accepted without pass book accompanying paying-in-slip,
the paying-in-slip and counterfoil should be rubber stamped "without Pass Book" by the cashier
receiving such deposits.

3.33 Receipt/Payment Scroll Book

All cash payment cheques/withdrawal forms and other payment instruments should be entered in
payment Scroll Book. All cash receipts must be entered in the receipt Scroll Book before cash is
accepted by Cash Counter. (Also refer Chapter on Cash and Clearing for detailed instructions.)

3.34 Tokens

The payment Tokens for current and savings bank deposits and other accounts are to be issued
by the Counter Clerk / ledger keepers to the account holders/payees presenting
cheques/withdrawal forms for payment accompanied by pass book, wherever applicable. Each
Branch is supplied with an adequate number of tokens with the name of the Branch and the serial
number engraved thereon. The tokens should remain in the dual control of Manager / authorized
Supervising official and the Cashier of the Branch overnight.

Every morning, Manager / authorized Supervising official should issue token to Counter Clerk /
ledger keeper/s against their receipt in the Tokens Register maintained by Cashier. Each ledger
keeper should check the tokens he receives before signing for them in the Token register. Ledger
keepers should keep the token in their drawers during the day so that they are not accessible to
anybody else; they should not be left on the counter. If a ledger keeper is away from his counter
for any reason, he must lock his drawer in which the tokens are kept; the ledger keeper who acts
during his absence must use tokens received by him. At the end of business hours, the unissued
tokens left with the ledger keepers should be returned to Cashier after entering the distinctive
numbers of the tokens returned in the appropriate column in the Tokens Register.

In case of loss of cheque Book Token/Payment Token a penalty charge of Rs. 100/- should be
recovered from the customer.

3.35 Change in the Specimen Signature of Account Holder

When it is noticed that an account holder's signature has undergone a drastic change from the
specimen lodged with the Bank, it is desirable to obtain a fresh specimen signature card duly
completed by the account holder in the presence of the officer. It is important to record the date
on the card when such specimen signature is obtained. The officer concerned must initial against
the fresh Specimen Signature on the new card. The old specimen signature card/slip should then
be marked "cancelled" with two parallel lines across the card/slip with a remark under initials of
the officer, that fresh signature obtained on (date). The old card/slip may then be stapled behind
the new card. The new signature should be scanned immediately and authenticated.

The account holder may, in certain circumstances, also desire to change the mode of his
signature in which case he should personally call on the Bank. He should be properly identified
and then a fresh signature should be obtained on specimen signature card. The same procedure of

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stapling and initialing in new/old specimen signature card/slip scanning signature mentioned
above should be followed in this case also.

Noting of the date on the new specimen signature card and initials of the concerned officer
against the fresh signature are of great importance, in the absence of which it may be difficult at
a future date establish when and by whom the new specimen signature was obtained.

3.36 Change in Address of Account Holder

Change in address of account holder should be noted only on his written authority. The signature
of the account holder on the letter advising change in address should be verified by the
cancelling officer. The original address in the account opening form/card, the ledger page in the
system and pass book (where applicable) should be neatly ruled through and the new address be
written immediately below in the relative column in red ink/ball point pen, giving reference to
date of customer's letter, under initials of the ledger checking officer. It should be ensured that
the change in address of the account holder is made only in such accounts indicated by the
customer specifically, but not in all accounts as a matter of routine. In case of any doubt about
the intention of the account holder regarding the change of address in some or all accounts, a
reference should be made to him.

It is observed that over a period of time, addresses and other contact details of many of our
customers have changed. To correct this situation, get a customer update form (APPENDIX
XXVII) filled from the customers and obtain. Since all the formalities regarding KYC Norms are
completed and due diligence is already conducted at the time of opening of the account; Branch
know the identity of the customer. Hence in the case of existing accounts, which have been
satisfactorily conducted for more than six months, it is not necessary to ask for address proof if
the customer wishes to change his address in Bank’s records. All such requests should be signed
by the customer/s and duly verified with customer/s signatures on record. All such requests
should be properly filed and preserved so that they are available for future scrutiny, if required.

3.37 Staff Accounts

Deposit accounts opened in the names of the members/ex-members of Bank's staff/widows of

ex- members of Bank's staff/ officials taken on deputation, either singly or jointly, but only with
their close relatives (i.e. father, mother, husband, wife, brother, sister, son or daughter) are
termed as "Staff Accounts" for the purpose of concessional rates of interest on their deposits. Ex-
members of the staff are those who have retired from the Bank's service either on attaining the
superannuation age or seeking voluntary retirement but NOT those who have resigned from the
Bank's service or whose services have been terminated by the Bank or employees & retired
compulsorily.

In case of Current Accounts opened in the name(s) of the staff/relatives of staff members the
following procedure should be adopted:

(a) Details of all Current accounts in the name(s) of close relatives of staff members operated and
maintained at a Branch should be reported to the next Controlling Authority. The format for
reporting is given in Appendix XXIII.
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(b) Branches which do not have any such account should submit a `NIL' statement.

(c) The branches should also submit to the next Controlling Authority the particulars of
operations in these accounts every quarter as per the format given in Appendix XXIII.

(d) The Branch Manager is the authority to authorize the opening of such accounts.

(e) All credit vouchers relating to all staff accounts including paying-in-slips should be
countersigned by an officer of the Branch.

(f) The current accounts of all staff members held in their names either singly or jointly with any
other person should be checked by an officer of the Branch.

(g) The Manager should carry out periodical scrutiny or test check of such accounts.

3.37.1 Concessional Rate of Interest

The Bank allows to the staff 1% p.a. higher than the normal rate of interest paid to the public in
different types of deposits which includes NRE/FCNR deposits, as permitted by Reserve Bank of
India. However a declaration should be obtained that the monies deposited/to be deposited in
such accounts belong to the account holder(s) (specimen: Appendix XXI). If the declaration in
writing as required is not forthcoming from the staff account holders, normal rate of interest
payable on the relevant category of deposit account(s) to the members of public should alone be
allowed.

The benefit of additional interest of 1% is allowed to staff members for NRE/FCNR Deposits
provided other terms and conditions of deposits under NRE/FCNR Schemes are fulfilled.

The benefit of concessional rate of interest should be allowed in a joint account only where the
account holder(s) is a close relative as mentioned in paragraph above. An account opened in the
name of a minor jointly with the staff member (who may be the guardian of the minor) will be
entitled to get concessional rate of interest only if the minor belongs to the family of the staff.
Deposit Accounts opened singly in the names of minor children of the staff member with the
latter as natural guardian are not eligible for the benefit of concessional rate of interest, even if
the required declaration of ownership of the monies deposited, is given by the staff member. As
per Board approved Deposit Policy dated 06.04.2019, it is mandatory to have the first name
of Staff in the joint account facilities to avail 1% additional rate of interest.17

Interest will not be paid in current accounts whether in the individual name of the member of
staff or accounts of staff co-operative societies, staff sport clubs, staff housing societies, staff
provident fund, etc.

17
Aryavart Bank Deposit Policy dated 06.04.2019
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Branches must, before accepting deposits in staff accounts, reasonably be satisfied that the
deposits belong to members/ex-members of the Bank's staff/widows of the ex-members of the
staff and that the deposits in the account are commensurate with the status of the concerned staff
member and his likely savings. Branches are not permitted to allow additional interest on
deposits accepted from minor children of the deceased employee. However, in the case of term
deposit standing in the joint names of the employee with his/her minor child, the additional
interest of 1% p.a. would continue till the date of maturity of the original deposit irrespective of
the intervening incident like death of the employee. In the accounts of officials on deputation
working with the Bank, the concessional rate of interest can be allowed on the monies
representing normal savings - not in excess of say, two/three months' wages, etc.

The benefit of concessional rate of interest on deposits of erstwhile staff accounts of the
following categories should be withdrawn and normal rates of interest should be made
applicable:

(a) those who have resigned from the Bank's service,

(b) whose services have been terminated by the Bank,

(c) those who were taken up in the Bank on deputation but have reverted back to the original
place of their service,

(d) those employees who have retired compulsorily.

(In case of Term Deposits, normal rates of interest would be applicable on renewal, if any, of the
deposits).

The interest payable on fixed deposits as also on savings bank deposits in the names of the
members/ex-members of the Bank's staff should be calculated at the prescribed rates, i.e.,
quarterly or longer rests, as at present and not on actual at monthly intervals.

Normally additional interest of 0.5 to 1 % is being offered to senior citizens, including Ex-staff
members for various deposit accounts.

3.37.2 Temporary Overdraft

No temporary overdraft should be granted to an employee of the Bank.

3.38 Garnishee Order

The Bank is prohibited and restricted from honouring the customer's cheques after a Garnishee
Order (Prohibitory Order) issued by a competent Court in execution of a decree in a Civil Court
has been served on the Bank.. Whether Garnishee Order covers the whole of the credit balance of
the account concerned or only a part of the amount will depend on the terms of the Order. If no
amount is specified in a Garnishee Order, then the Order will apply to the whole amount but if
restrictions in the Garnishee Order apply only to a named amount, the Bank may earmark such a
sum and allow the customer to operate on the account for the balance. Garnishee Order applies to
the debts actually due from the Bank to the customer on the date of receipt of the Order. The
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amount of a Term Deposit can be attached before the date of maturity but can be paid only on or
after the date of maturity. The order does not affect future debts. Upon service of a Garnishee
Order, the time and date of the receipt thereof should be recorded prominently in the account
concerned. The original Garnishee Order should be compared carefully with the copy which
should be kept on the Bank's record.

Upon the receipt of a Garnishee Order, all accounts in a customer's name must be taken into
consideration and a debit balance may be set off against the credit balance before arriving at the
attachable sum. If a Garnishee Order specifies one judgement debtor, a joint account is not
attached. This means that a Garnishee Order citing a sole judgement debtor will not attach a joint
account in which such a debtor is a constituent. In such a case an affidavit is required to be filed
in Court stating that there is a joint account in the name of the judgement debtor and another
person and, therefore, the debt in the account is not attachable. This can be done with the help of
a junior Advocate.

Where a Garnishee Order has been served and cheques have been received through clearing in
the day, it is the practice to pay the cheques, but Branch Managers should use their discretion
and pay the cheques with circumspection; where the credit balance includes uncleared effects,
the amount of such items is not attached unless there is an agreement to allow drawings before
clearance.

The attachment order relates to the funds in the account as on the date and time of receipt of the
Order which are immediately payable to the account holder. When the Bank receives Garnishee
Order, it should advise the customer of its receipt and that cheques drawn by the customer will
be honoured only if the balance left after satisfying Garnishee Order is adequate to meet them.

lf the circumstances demand, the cheques presented after service of the Order should be returned
with the answer "Refer to Drawer".

Moneys in a Trust Account where the judgement debtor is a trustee are not attachable under the
Order.

The banker is not entitled to deduct interest and commission charges accruing from any
attachable balance.

3.39 Notice from Income Tax Authorities

A notice under Section 226(3) (ii) of the Income Tax Act, 1961 may be issued in writing -by the
Income Tax Officer to any person who holds or may subsequently hold any money for or on
account of the assessee jointly with any other. For the purpose of this Sub-Section, the shares of
the joint holder in such account shall be presumed to be equal until the contrary is proved.

In terms of this Section and provisions thereof, an Income Tax Officer by a notice in a prescribed
form may call upon the Bank to pay to him the amount due to him by way of arrears of income
tax super tax/penalty/ interest/fine by an assessee who may be a customer of the Bank. In law,
such a demand is deemed to have been made under the authority of the tax payer and the receipt
of Income Tax Officer will constitute a good and sufficient discharge of the Bank's liability to
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the account holder concerned. The Bank should, therefore, pay the amount demanded by the
Income Tax Officer forthwith, subject to adhering to the requirements of the following
paragraphs and advise the account holder(s) suitably.

When a notice under this Sub-Section is issued to a banking company, it shall not be necessary
for any pass book, deposit receipt or other documents to be produced for the purpose of any
entry, endorsement, etc. before payment is made, notwithstanding any rule, practice or
requirements of the bank to the contrary.

As per the I. T. Act 1961 and guidelines prescribed by the Central Board of Direct Taxes and the
Ministry of Finance, the I. T. Authorities ought to call for information which is related to a
specific assessee. They ought not to call for information of an absolutely roving nature in the
case of banks. So on receipt of notices and/or summons of roving and fishing nature, the
Regional Offices /Branches should approach the concerned I. T. Authorities or their senior
officers and request that the notice/summons either be withdrawn or modified. Under no
circumstances such notices be ignored as it would otherwise expose them to penalty for non-
compliance.

Sub-Section(1) of Section 131 of I. T. Act 1961 confers the I. T. Authorities the power to ask for
information in respect of pending proceeding. The power under Section 131 (1A) of I.T. Act
1961 can be exercised even in absence of pending proceedings but the presence of a "reason to
suspect" is a pre-condition to exercise this power.

Section 133 (6) of I. T. Act 1961 empowers specified I. T. Authorities to require any person
including a banking company or any officer thereof, to furnish information in relation to such
points or matters as, in the opinion of the authority will be useful for, or relevant to, any enquiry
or proceeding under the Act. The power in respect of an enquiry, in a case where no proceeding
is pending, shall not be exercised by any I. T. Authority below the rank of Director or
Commissioner as the case may be.

Notice of Single Accounts

If the assessee has an account in his single name, the entire balance in the account or the amount
of arrears of income tax etc., mentioned in the notice, whichever is less, should be paid to the
Income Tax Officer.

Notice in Joint Accounts

If the assessee has a joint account in the names of himself and one other person, half the balance
in the account as on the date of receipt of the notice or the arrears of income tax etc. mentioned
therein, whichever is less, should be paid to the Income Tax Officer. This is irrespective of
whether the account is operated jointly or by either or survivor of the depositors.

If the account is in three names and the assessee is one of them, one-third of the balance in the
account as on the date of receipt of the notice or the arrears of income tax etc., mentioned
therein, whichever is less, should be paid to the Income Tax Officer, irrespective of the mode of
operation. This is because under this Section, the share of each joint account holder is presumed
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to be equal unless the contrary is proved. The Bank does not ordinarily have any notice of the
actual share of each account holder; it will have to proceed on the presumption mentioned in the
Section.

Notice in Term Deposit Account

If the assessee has a Term Deposit account, the amount thereunder does not become payable
until the date of maturity of the deposit. The notice under Section 226 (3), however, calls upon
the Bank to pay to the Income Tax Officer even such moneys as may subsequently become due
from the Bank to the assessee-account holder. The Bank will, therefore, have to pay the requisite
amount on or immediately after the date of maturity. On receipt of such notice, Branches should
immediately inform the account holder of having received the notice and that the Bank will make
the payment on the date of maturity to the Income Tax Officer., unless the Bank receives an
intimation from such an office withdrawing the notice. The account holder may then, if he so
thinks fit, make some arrangement with the Income Tax Officer and have the notice to the bank
withdrawn, if possible. If no such withdrawal is intimated, the payment will have to be made on
the date of maturity. If the Term Deposit is joint, the payment will be on the pro rata basis.

Advice to Account Holders

Under this Section, the Income Tax Officer is required to send a copy of the notice to the
assessee. Even then the Bank should inform the account holder(s) before and after making the
payment to the Income Tax Officer.

Notice in Advance Accounts

If an assessee has, in addition to deposit account(s), borrowing facilities whether singly or jointly
with the Bank and the outstanding debit balance(s) in advance account(s) is more than the
balance(s) of his deposit account(s), the Income Tax officer should be informed of the balances
in the account(s) and the Bank's right of lien or set off and that the Bank is unable to comply
with the notice. The customer should be immediately informed of the Bank's claim. If the
Income Tax Officer should contest the Bank's right to such security and/ or lien or set off,
immediate reference should be made to Regional Office for further instructions, giving full
details and forwarding copies of all the relevant correspondence. In case the outstanding debit
balance in the borrowing account(s) is lower than the deposits of the assessee, the balance
available after full liquidation of the advance should be paid to the Income Tax Officer.

Overdraft Accounts - An overdraft (to the extent the credit facility is not utilised) does not
represent money due to the assessee - customer nor can the bank be said to be holding any
money for or on account of the assessee. However, if the account has a credit balance then the
bank can be said to be holding money for or on account of the customer and the credit balance is
attachable.

Other Loan Accounts - If there is credit balance in the account then the bank can be said to be
holding money for or on account of the customer and the credit balance is attachable.

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Notice in Accounts of Deceased Customers

If a notice is served on the Bank under Section 226(3) of the Income Tax Act, 1961, attaching
moneys in respect of the tax dues of the deceased account holder in a joint account to be operated
upon in anyone of the following manner viz. :

(a) Either or Survivor

(b) Both of us or Survivor

(c) Anyone or Survivors

(d) Any Two or Survivors

(e) Former or Survivor

The Bank would be justified in refusing to pay in response to the notice. The Bank's liability
would be to make payment of the entire amount to the survivor(s); provided such notice is
received after death of the joint account holder from whom the tax recovery is to be made. The
reason to be given for such refusal should be that on the date of service of such notice no amount
was due and payable by the Bank to the estate of the deceased.
.
3.40 Banker's Lien

A lien is the right to retain property belonging to a debtor until he has discharged a debt due to
the retainer of the property.

Banker's lien is a general lien covering all securities, documents and things deposited with him
as a banker by a customer or coming into his possession in the ordinary course of his business as
the banker of his customer.

The lien does not operate if there is an express contract or circumstances that show an implied
contract inconsistent with lien. For instance, deposit of securities for the purpose of Safe Custody
is a purpose inconsistent with the banker's lien.

In the absence of a contrary agreement, a banker has a lien on all bills, cheques and notes sent to
him by a customer for collection.

Banker's lien is sometimes described as "an implied pledge". This means, the banker has power
not only to retain but also to realise the securities over which he has a lien. But before doing so,
he should give reasonable notice to his customer.

Strictly speaking, there is no right of lien on money in a customer's account. Bankers, however,
have a right of set off on the moneys in Deposit Accounts.

3.41 Banker's Right of Set Off

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The right of set off is also called the right to combine Accounts. The banker can set off the
balance or money in a Deposit Account against the debt due to him in an Advance Account of
the customer, subject to the following:

(a) The debt due to the banker must be a sum certain due and recoverable at the date of set
off. This means, a notice of demand calling upon the customer to repay the advance should be
given before the right is exercised. The notice should state that on the failure of the borrower to
repay the debt within the time stipulated, the Bank will take all or any of such steps for the
recovery of the advance as the Bank is entitled under the security documents and law, including
the exercise of its right of set off.

(b) If the customer has one account of his own money and another as Trustee, the banker cannot
set off a credit balance in the Trust Account against the debit balance in his personal account.

(c) There should not be any agreement, express or implied, inconsistent with the right of set off.

(d) The creditor and the debtor should be one and the same person or one and the same set of
persons. If the Deposit Account is in the names of A and B of whom only A is indebted to the
Bank, no right of set off can be exercised.

3.42 Secrecy of Customer's Accounts

It is an implied term of the contract between the banker and the customer that the former will not
disclose the condition of his customer's account to a third-person or party without the express or
implied consent of the latter except on reasonable and proper occasions. The obligation to
observe secrecy does not end even with the closing of the customer's account. Branches should,
therefore, take scrupulous care not to disclose the state of customers' accounts to the third-party
without the authority of the customer even if the person approaching is known to the Bank and/or
to the customer. For example, if a customer has his "personal" and "business" accounts at a
Branch and if he deputes to the Bank an employee in connection with the "business" account, no
particulars of his "personal" account should be given to the employee for passing on to the
customer.

Furnishing of data - Violation of Secrecy Obligations

Branches receive, from time to time, requests for data/information on certain aspects of their
business from Government and other agencies for academic / theoretical purposes. In this
connection, Reserve Bank of India directives are :

"The bankers' obligation to maintain the secrecy arises out of the contractual relationship
between the banker and customer, and as such no information should be divulged to third parties
except under circumstances which are well defined. The following exceptions to the said rule are
now accepted.

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(a) Where disclosure is under compulsion of law

(b) Where there is a duty to the public to disclose

(c) Where interest of bank requires disclosure and

(d) Where the disclosure is made with the express or implied consent of the customer.

The banks should, therefore, appreciate the implications of furnishing information that would
violate the provisions of secrecy in the background or circumstances stated above."

In view of the above, Branches should note that whenever such requests are issued, they should
be satisfied that the information being sought is not of such a nature as will violate the provisions
of the laws relating to secrecy in the banking transactions. In cases in which branches have
doubts whether the furnishing of information might violate secrecy provisions, they should get
specific legal advice from the Regional Offices.

3.43 Closing of Accounts

Whenever an account holder desires to close an account, a request in writing duly signed by all
the account holders should be obtained.

It should be ensured that all unused cheque forms issued to a current account/savings bank
customer whose account is to be closed, are returned to the Bank immediately or within a
reasonable time after the account is closed as such unused cheque forms are likely to be used for
fraudulent purposes. If the unused cheque forms are not returned even after two reminders, the
question of further reminders is left to the discretion of Manager. The bottom right-hand (i.e. the
signature space) of each cheque form returned should be torn off; only whole cheque books
returned should be used for pay slips or for issue of loose cheques to account holders.

A remark "Account Closed" with date (on which the account was closed) should be made (or
rubber stamped) under the initials of the ledger checking officer on the relative account opening
form/card in such a manner as not to obliterate the specimen signature(s). A similar remark (with
date) should be made under the initials of the ledger checking officer in the Cheque Book Issue
Register against the serial number of the cheque book issued with distinctive numbers of the
unused cheque forms which are returned by the current/savings bank account holder. The
specimen signature cards of such closed accounts should be removed from the cabinet in which
such cards are filed and kept on record separately.

When an account is closed, the account holder should be asked to produce the pass book to the
Bank (where applicable). It should be written up to date and returned to him marked "Account
Closed" at the foot of the last entry and on the front cover.

When an account is closed, the plastic cover of the pass book issued, if any, should not be
removed while returning the pass book.

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Charges for closure of a/c should be recovered as advised by HO from time to time.

3.44 Care and Custody of Bank's Books and Computer Systems

No unauthorized person should be allowed access to Computer Systems, Ledgers, Books,

Records and Documents etc. These should remain in the custody of an officer and be kept safely
locked when not in use. The Manager should ensure personally that all these books and other
records of the Branch are, under no circumstances, left lying outside overnight on the counters
etc. These books should be kept overnight in strong rooms/fire proof safes or almirahs where
available; otherwise they should be stored in other steel cupboards/almirahs.

These books are important records of the Bank and should be very carefully preserved. All
ledgers when they become loose by constant use should be rebound even if due for re-writing.

3.45 Service to Senior Citizens

Senior members of the society deserve a special treatment in any service industry, looking to
their age, physical limitations, temperament and above all the service they have rendered to the
society in their prime days. Branches should hence take adequate care in providing services to
senior citizens and make necessary arrangements to provide efficient counter service. Senior
citizens should not be made to wait in the long queues for availing services or completing certain
banking transactions. The following points may be noted in this context:

(a) Senior citizen is a person above age of 60 years. (Branches should not question the
eligibility if any customer is claiming to be so;)

(b) Branches with large number of Pension accounts may arrange separate counter while
disbursing pensions during the first week of the month.

(c) Normally, queues are formed in the banking hall for withdrawal of cash, deposit of cash,
deposit of cheques, updating of pass books etc. Senior citizens should be exempted from facing
such queues. Staff members should be directed to entertain such customers ensuring minimum
inconvenience to other customers.

(d) All staff members should treat senior citizens with courtesy and respect. They should be
given patient hearing invariably and guided properly in completing their banking transactions.
Manager should take extra care in attending to disabled senior citizens.

(e) Complaints/Grievances or any representations from senior citizens, verbal or written should
be dealt with as far as possible on the spot. Arguments/dispute with the senior citizens should be
avoided.

While dealing with aged customer, (senior citizens) Branches are likely to come across some
very old, sick and incapacitated customers having pension or regular singly operated accounts or
such persons may approach for opening new accounts. The situation may arise sometime when
account holder may not be able to operate his account himself/herself or through a representative
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for being unable to sign cheque or withdrawal slip due to certain physical incapability. To
overcome such situations and help the distressed customer, the following guidelines should be
uniformly adhered to by Branches:

A) The cases of sick/old/incapacitated account holders fall into following categories:

a) An account holder is too ill to sign a cheque/withdrawal slip and cannot be physically present
in the Branch to withdraw money from his bank account but can put his/her thumb impression on
the cheque/withdrawal form and

b) An account holder who is not only unable to be physically present in the Branch but is also
not even able to put his/her thumb impression on the cheque/withdrawal form due to certain
physical defect/incapacity.

B) With a view to enabling the old/sick/incapacitated customers as described above to operate

their single accounts, the following procedure should be followed:

a) Where thumb or toe impression of the old/sick/incapacitated account holder is obtained, it

should be identified by two independent witnesses known to the branch, one of whom should be
a responsible bank official.

b) Where the customer cannot even put his/her thumb impression and also would not be able to
be physically present in the Branch, a mark can be obtained on the cheque/withdrawal form
which should be identified by two independent witnesses, one of whom should be a responsible
bank official. This mark can be placed by the person in any manner. It could be the toe
impression as suggested above, the point to be noted is that there should be physical contact
between the person's limb and the document i.e. cheque or withdrawal form.

c) The customer should also be asked to indicate as to who would withdraw the amount from the
branch on the basis of cheque/withdrawal form as obtained above and that person should be
identified by two independent witnesses. The person who would be actually drawing the money
from the Branch should be asked to furnish his/her signature to the Branch.

While allowing operations in the account as spelt out hereinabove, certain precautions should be
taken to avert perpetration of frauds or misappropriation of funds in such accounts, which are
generally as below:

i) A remark /note should be made in bold letters on the specimen signature card and the Ledger
folio or registered in the computer operated system that the account is of an incapacitated person.

ii) As far as possible the account holder should be asked to have a joint account with close
relation and make a nomination in the account.

iii) If the old/sick/incapacitated person is not willing to open and operate a joint account, he/she
should be convinced to give Power of Attorney/Mandate for operating the account. The Power of

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Attorney or Mandate should be carefully examined and noted in relevant branch records.

iv) Care should be taken in collection of cheques for large amounts.

v) Cheque book should be made available strictly on verification of the transactions in the
account and on proper inquiry and authorisation of the person collecting the cheque book.

vi) The facility should be rendered in deserving cases, so as to provide relief to the old / sick /
incapacitated persons who are unable to withdraw cash.

vii) The above points are illustrative and not exhaustive; the official allowing such operations
should fully satisfy himself about circumstances of each case and identity of the person
collecting cash on behalf of the old/sick/incapacitated person should be established beyond
doubts.

Facilities to Senior Citizens

Parameters Norms
Eligibility One who has completed 60 years of age.
Verification of Age School Leaving Certificate/ LIC Policy/ Passport/ Voter’s
Identity Card/ Pension Payment Order/ Employment
Discharge Card/ Identity Card with Date of Birth Indicated
therein or any other document acceptable to the bank.
Joint Accounts Can be allowed – only with close relatives, i.e. Father,
Mother, Spouse, Brother, Sister, Son or Daughter. The Close
Relative need not be a Senior Citizen.
The first deposit holder should necessarily be the Senior
Citizen.
Deposit Scheme All Term Deposits + Recurring Deposit Scheme
Minimum Amount Rs.1,000/- in Term Deposit. (No ceiling on max. amount)
acceptable Rs.100/- in normal RD

Rate of Interest Additional Rate of interest as per the guideline prevailing at

the time of accepting the deposit.
Nomination facility Available.

3.46 Customer Service:

Customers and especially the visitors who come to our branches for the first time to start a
relationship are in search of a friendly face at a visible help desk counter, who will reach out and
help the first time visitor / customer. Even existing customers many a times require guidance on
various banking issues.

The way we welcome our guests and make them feel important, the staff members should
welcome the customers with a warm smile, greetings and then help and facilitate their tasks in
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the branch. They should educate the existing customers about our various products and also help
them migrate to alternative delivery channels.

The good customer service entails following Jobs (the list is only illustrative and not exhaustive),
which is to:

i) Welcome first time visitors / customers with a smile, greetings and if possible
calling existing customers by their name to give them recognition
ii) See that all necessary forms are stocked at customer desk, signages in the branch
are proper, branch is neat and clean.
iii) Remain on the move and oversee whether there are any customer service
bottlenecks, like too many customers at a counter, slow movement etc.
iv) Assist customers in their queries/ tasks, guide them to the respective seats if need
arises.
v) Keep a stock of various stationary items/ publicity material at the branch so that
the same can be provided to the customers.
vi) Generate awareness about bank’s various products and guide them for further
action if customer evinces interest
vii) Educate the customers to use ATMs or guiding customers about nearby locations
of ATM and its usage, so that they can migrate to automated delivery system.

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 CHAPTER 4

SAVING BANK ACCOUNTS

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 CHAPTER 4

SAVING BANK ACCOUNTS

Introduction
Savings Bank accounts, as the very name suggests, are intended for savings for the future and at
the same time earning interest on savings otherwise money in pocket losing its value under
inflationary effects without earning anything. These accounts promote habit of savings among
masses. Balances in this type of account earn interest as per the directives of Reserve Bank of
India. There is no restriction on the number and amount of deposits to be made on any one day
and any small amount (including a fraction of a rupee in cash) can be deposited. The amounts
from the account can be withdrawn whenever needed.

The term "savings bank accounts" referred to in this Chapter includes different categories of
savings accounts, viz. Normal saving accounts, Basic Saving Bank Deposit Accounts (BSBDA),
Small Accounts, saving accounts with cheque book facility and saving accounts without cheque
book facility. Instructions in this Chapter are equally applicable to both these categories of
savings accounts unless the context indicates to the contrary.

4.1 Introduction of Accounts

As per prevailing KYC-AML-CFT Policy of RBI/Bank, requirement of introduction in an
account is no more a mandatory requirement. It is just optional. We shall not deny account
opening facility to a customer if he/she fails to bring introduction in the account. The
identification and verification of his relevant credentials are now being done through KYC
documents and so the role of introducer has just become optional.

But if introduction is offered in an account, an introduction for new accounts should be

accepted only from an account holder whose accounts are conducted satisfactorily for last 6
months except where the account is introduced by a prominent person well known to the
bank through other accounts and whose whereabouts are on bank’s records.

4.2 Savings bank accounts may be opened in the names of:

(i) Individual - Single Accounts

(ii) Two or more individuals Joint Accounts
(iii)Illiterate Persons
(iv) Blind Persons
(v) Minors
(vi) Associations, Clubs, Societies, SHGs, NGOs, etc
(vii) Trusts
(viii) Institutions / Agencies specifically permitted by the Reserve Bank of India

4.3 Savings bank account cannot be opened by banks in the names of:

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 Government departments.
 Bodies depending upon budgetary allocations for performance of their functions
 Panchayat Samitis
 State Housing Boards
 State Electricity Boards
 Industrial Development Authorities
 Water and Sewerage /Drainage Boards
 State Text Book Publishing Corporations/Societies
 Metropolitan Development Authority
 State/District Level Housing Co-op . Societies, etc.
 Any trading, business or professional concern (e.g. firms of Chartered Accountant,
Lawyer etc) whether such concern is a proprietary or a partnership firm for a
company or an association.
 Political Party
 Other banks including Regional Rural Banks, Co-Operative Banks and Land
Development Banks.

4.4 Opening of Savings Bank accounts in the name of certain agencies aiming to serve the
weaker sections of society:

In terms of the Reserve Bank of India Directive, savings bank accounts opened in the name of
any trading or business concern, whether such concern is a proprietary or a partnership firm, a
company or an association, would not be eligible for any interest. The Reserve Bank of India,
however, has exempted certain agencies/institutions from this prohibition on account of the
socially desirable purpose of their activities aiming to serve the weaker sections of society.
Accordingly, the following institutions/organizations are eligible for earning interest on their
savings bank accounts on the usual terms:

(I).
(i) Primary Co-operative Credit Society financed by the Bank
(ii) Small Farmers Development Agency (SFDA)
(iii)Marginal Farmers and Agricultural Labourers Agencies (MFAL)
(iv) Drought Prone Areas Programme (DPAP)
(v) District Development Authority (DDA)
(vi) District Rural Development Agency/Society (DRDA/DRDS)
(vii) Integrated Rural Development Programme (IRDP)
(viii) Integrated Tribal Development Agency (ITDA)
(ix) Agriculture Produce Market Committees
(x) Khadi and Village Industries Boards
(xi) Jawahar Rojgar Yojana funds held by Zilla Parishads/Gram Panchayats
(xii) Fish Farmers Development Agencies (FFDA)
(xiii) Development of Women and Children in Rural Areas (DWCRA)
(xiv) Swarna Jayanti Gram Swarojgar Yojana / NRLM

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 (xv) Self-help Groups (SHG) – registered and unregistered which are engaged in
promoting savings habits among the members
(xvi) Farmers’ Clubs – Vikas Voluneer Vahini – VVV
(xvii) Nagar Panchayats, Nagar Palikas and Municipal bodies in relation to funds given
as subsidy under Nehru Rozgar Yojana towards the Scheme of Urban Micro Enterprises
Scheme of Urban Wage Employment.

(II). Societies registered under the Societies Registration Act, 1960 or any other corresponding
law in force.
(III). Companies governed by the Companies Act, 1956 which have been licensed by the Central
Government under Section 25 of the said Act or under the corresponding provision in the Indian
Companies Act, 1913 and permitted not to add to their names the word `Limited' or the words
"Private Limited".
(IV). Collector/ District Magistrate /District Commissioner in respect of funds released for
implementation of Member of Parliament Local Area development Scheme (MPLADS) where
the works under the scheme are executed through the planning Department of the State
Government. Public Sector Banks may also open SB accounts under the said scheme in the
name of District Rural Development Agency (DRDA).
(V). Institutions other than those listed under para 4.3 below and whose entire income is exempt
from payment of Income Tax Act, 1961.
(VI). Any other institution permitted by the RBI from time to time.

Bank should not maintain even "Interest Free" Savings Bank Accounts of ineligible
entities.

Exceptions:
 The Block Development Officer, who is acting on behalf of the Agencies such as district
Development Authority/District Rural Development Agency and is charged with the task
of rendering social or economical assistance to, or welfare of the weaker and under-
privileged sections of the society, is eligible to open Savings Bank Account and earn
interest on the account.
 In terms of the Reserve Bank of India directives, it has been decided to allow banks to
open Savings Bank Accounts in the name of State Government
Departments/Bodies/Agencies in respect of grants/subsidies released for implementation
of various programmes/schemes sponsored by the State Governments on production of an
authorization to the bank from the respective Govt. Departments certifying that the
concerned Govt. Department or Body has been permitted to open Savings Bank Account.
While opening such accounts, banks should keep on their record, a copy of the
authorization issued by the respective State Government Departments.

Hence RBI has now permitted opening of Savings Bank account in the name of State
Government Departments/Bodies/Agencies also in respect of grants/subsidies, as stated above, in
addition to Central Government Departments/Bodies/Agencies for similar purpose. All other
provisions of RBI directives in the above matter, conveyed to branches from time to time, remain
unchanged.
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There are certain Government Departments, Semi-Government or Quasi-Government bodies,
local bodies and certain organizations engaged in public utility services e.g. State Housing
Boards, State Electricity Boards, etc., which are not liable to pay income-tax under the Income-
tax Act, 1961. However, these institutions/organizations receive grants, loans or subsidies from
the Government and, therefore, depend on budgetary allocation for performance of their
functions. As such they do not qualify for payment of interest and, hence, savings bank account
cannot be opened in their names. These include local bodies like Municipal Corporations, Zilla
Parishads, Taluka Panchayats and Gram Panchayats.

In the opinion of the Reserve Bank of India, the following institutions do not qualify for payment
of interest:
 Municipal Corporations/Committees/ Panchayat Samitis
 State Housing Boards
 Industrial Development Authorities
 State Electricity Boards
 Water and Sewerage/Drainage Boards
 State Text Books Publishing Corporations/Societies
 Metropolitan Development Authority
 State District Level Housing Co-operative Societies etc.

Although the activities of the institutions of this type are of developmental nature, these
organizations are not specifically serving any economically weaker/underprivileged sections of
the society, and as such they do not qualify for exemption under the Reserve Bank of India
Directive.

Branches should note that it will not be in order to open savings bank accounts in the names of
such organizations/institutions/agencies/Government Departments, etc., on usual terms of
payment of interest and the Reserve Bank of India will not entertain any application in respect of
them for relaxation.

The Institutions/Agencies listed under I, II & III in above paragraphs which may be getting
funds for their operation out of budgetary allocation have been specifically allowed to open
Savings Bank accounts with banks and earn interest thereon. For institutions covered by
applicable paras above, Banks should not maintain even Interest free Savings Bank Accounts.

In addition to these specifically exempted categories of agencies, if Branches desire to open

savings bank accounts in the names of certain institutions and they are fully satisfied that those
institutions satisfy the eligibility criteria, viz: specifically serving any economically
weaker/underprivileged section of the society and that they do not have to depend on
Government grant for their performance, it will be necessary to obtain prior approval of the
Reserve Bank of India for opening savings bank account in their names, through Head Office.

For this purpose, application is required to be made to the Reserve Bank of India furnishing full
particulars of the institution along with:

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 (i) Memorandum and Articles of Association,
(ii) Bye-laws,
(iii) Details of the nature of activities,
(iv) Published accounts such as the Balance-Sheet, Profit and Loss Account or statement of
Income and Expenditure,
(v) Statement regarding the manner of distribution of surplus funds, etc., to enable the
Reserve Bank of India to decide whether a specific exemption can be granted in favour of
a particular institution or not. Branches should note to send such information to Head
Office through their respective Regional Office, who will make a formal application to
the Regional Office of the Department of Banking Operations and Development within
whose jurisdiction the registered office of the beneficiary organisation is situated.

It should be noted that payment of interest on savings bank accounts opened in the names of
institutions, which is not permissible either under the directive or under a specific exemption
granted by the Reserve Bank of India, would involve violation of the directive of the Reserve
Bank of India.

Branches should not open Savings Bank Accounts of other banks, including Regional Rural
Banks and Co-operative Banks. Opening and conduct of accounts of Land Development Banks
are governed by the Reserve Bank of India directives (and not by the IBA Code for banking
practice) in terms of which they, being profit making bodies, are also not eligible to open
Savings Bank Accounts.

4.5 Opening of Accounts

The card should be completed by the account holder(s) in all respects. A copy of SB Account
Rules (Specimen: Appendix V) should be provided to the account holder(s) and the signature of
account holder(s) should be obtained on the SB Specimen signature card bearing the following
clause:

"I/We declare that a copy of Bank's Savings Bank Account Rules has been received and I/We
accept them as valid and binding upon me/us"

The smallest sum that can be deposited at the time of opening of an account and also for
maintaining stipulated minimum balance is as under:

without cheque book with cheque book

facility facility
Individuals Rs. 100/- Rs. 500/-

While opening the account, the official or the staff concerned should explain to the prospective
customers regarding requirement of minimum balance and our penal charges for not adhering to
the requirement.

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Branches must display in the Notice Board at a conspicuous place in the Banking Hall the above
details and ensure that it draws attention of customers.

The accounts of staff members/ex staff members of the Bank are exempted from the
stipulation of maintenance of minimum balances in their accounts.

4.6 Cheque Book/Cheque Collection Facility

A savings bank account holder, whose account is KYC compliant, is given the facility of
operating the account by means of cheques as per rules and also of depositing the cheques in his
account for collection, along with dividend warrants and other instruments payable to him.

Normally branches should issue one cheque book at a time in Saving Account. The branches
should discourage issuance of more than one cheque book to customers, except in deserving
cases, with circumspection after taking all precautions.

4.7 Account Number

Savings bank accounts are numbered serially in the order in which they are opened. Savings
bank pass books also have the account numbers printed thereon. Savings bank pass book issued
to an account holder must bear the same serial account number given to the account and recorded
on the relative card. For example, if a savings bank account having been given the serial number
of 21, it should be recorded on the card and a pass book bearing the same printed serial account
number 21 should be issued to the account holder.

Our Bank issues 15-digit unique account number to every customer on CBS module viz.
000110110000001. The first four digits of the account number refers to the sol id of the branch
where account is opened, next four digits refers to scheme code (first 3 digits for scheme code
like 101 for normal saving account and next digit 0 or 1 indicating, 0 for the accounts opened
prior to CBS migration and 1 for the accounts after CBS migration), last 7 digits showing
account number allotted to the particular customer.

4.8 Pass Books for New Accounts

The pass books should be issued on the opening of accounts to savings bank account holders
bear serial numbers should be printed on the cover page and also on the first page inside cover.
When a pass book is issued to the customer, his name should be written against that serial
number in the “Register of Saving Bank Pass Books Issued to Customers”. The entries in the
Register should be checked and initialled by an officer every day.

All pass books (on the first page near the title of the account) should additionally be stamped in
blue ink with the appropriate rubber stamp as under:

(a) Accounts with cheque book facility Rubber stamp in oval shape with the legend
"WITH CHEQUE BOOK FACILITY"

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 (b) Accounts without cheque book facility Rubber stamp in rectangular shape with the
legend "WITHOUT CHEQUE BOOK FACILITY"

Continuation Pass Books

When the original pass book is fully used up, a continuation pass book should be issued to the
account holder. These continuation pass books bear same account numbers prefixed by the letter
"A" just to distinguish them from the regular saving bank pass books.

The name of the account holder and the account number should be written against the serial
number of continuation pass book in the Register of Savings Bank Pass Books issued to
Customers in a separate section reserved for continuation pass books. For example, if the pass
book of account number 5150 is fully used up and the continuation pass book has to be issued to
the account number 5150, this will be with serial number 5150 A in issue register and "Pass
Book No. 2" be written on the top of the pass book and similarly for further passbook issue like
Pass Book No. 3, 4,..... (The entries in the Register should be checked and initialed by an officer
every day).

Instructions regarding affixing rubber stamps on pass books given in above paragraph are also
applicable to continuation pass books.

4.9 Entries in Pass Books

It is Important that pass books of accounts where the cheque book facility is allowed, are
received for being written up periodically. In cases where the account holders have not sent their
pass books for a long time, they may be asked to do so.

As and when pass books are received either by post or hand delivery they should be brought up-
to-date and kept ready for delivery. In all pass books lying with the Branch in the beginning of
each half-year, entry in respect of interest of the previous quarter must be made so that all such
pass books would be brought up to date as a matter of course and kept ready for delivery to the
customers when they call at the Branch. It should not be necessary for the customer to call again
and again to collect his/her pass book(s). In no case the pass book(s) should be delivered without
ascertaining that the same has been printed up to date.

Every entry in a savings bank pass book must be verified and authenticated by an officer under
his initials where branches still making passbook entries by hand. In case of printing of
passbook, such condition is not warranted but the concerned official should ensure right printing
on the passbook of an account holder and should not print the statement of other accounts in the
passbook of some other accounts because of ignorance or casual approach. It is desirable that
officers initialing the savings bank pass books should have uniform, steady, distinct and clear
initials.

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Deposits to the Credit of Accounts
Ordinarily, savings bank pass books should accompany the relative paying-in-slips for deposits
to the credit of accounts.

Deposit without Pass Book

If an account holder fails to bring his pass book but desires to make a deposit in his Savings bank
account, Branches may accept the deposit provided the name and the number of the account are
clearly and correctly written on the pay-in-slip.

4.10 Receipt/Delivery of Pass Books from/to Depositors

When depositor presents a counterfoil of the paying-in-slip and demands pass book, Branches
should, before delivering the pass book, affix a rubber stamp ``Pass Book Delivered'' on the
reverse of the counterfoil of the paying-in-slip and put the date of delivery to avoid any dispute
as to the custody of the pass book.
When the branch receives pass book from a depositor for being written up, Pass Book duly
written up should be delivered to the customer.

Pass books should be delivered against the presentation of the Counterfoil of a paying-in-slip
along with which the pass book was deposited at the time of cash receipt.

Wrong delivery of pass books may facilitate fraud. The concerned staff members should be made
aware of the dangers/implications of wrongly handing over pass books to unauthorized persons
or to other account holders by misreading the account number thereon.

Delivery of pass books of customers to members of the staff should normally be discouraged. If
allowed in special cases, a record should be maintained in a separate pass book.

In case the counterfoil of a paying-in-slip along with which the pass book was deposited is
reported lost or misplaced, the account holder should personally call at the Bank and give a letter
of request for delivering the pass book to him. For some reason, the account holder may be
unable to call at the Bank and sign such a letter of request and instead a representative of the
account holder may call with a letter of authority to receive the pass book. When such a request
is considered, the signature of the depositor on the letter of authority should be verified very
carefully and the representative's signature should be obtained thereon. If possible, the account
holder should be contacted either on telephone or otherwise and confirmation should be obtained
from him whether a request for delivery of the pass book has been made by him and it is only
after the officer-in-charge is fully satisfied that the passbook may be delivered to the
representative after obtaining his signature, for the receipt. Delivery of pass book to a
representative of the depositor against a letter of authority should be done only in exceptional
cases. If after delivery of a pass book to a representative, there is immediately a large withdrawal
in cash, such payments should be authorized after a very careful scrutiny.

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4.11 Custody of Pass Books

Savings bank pass books should be in the custody of a responsible officer. The officer-in-charge
should see to it that all savings bank pass books (including those handed over by the depositors
to be written up) are locked in almirahs/pass book cabinets, or kept in the strong room at all
times and the keys are kept with him. Ledger keepers/pass book writers should not keep pass
books which are pending for completion of entries with them overnight either on the counters or
in the drawers but in almirahs/pass book cabinet at all times. No insider other than the
clerk/officer concerned should be allowed to have access to the pass book cabinet. Outsider
should have no access to the pass books at all.

The stock of unissued pass books and continuation pass books should be periodically checked to
ensure that they are arranged in order and that no pass book is missing.

4.12 Loss of Savings Bank Pass Book

When the account holder reports loss of the pass book, the following procedure should be
adopted –

(i) The existing account should be closed and a new account be opened by transferring credit
balance of the erstwhile account to the new account as opening balance,

(ii)A letter of authority, to debit the new account with cheques in transit, issued on old
account should be obtained from the account holder, (as per specimen Appendix III),

(iii) A statement of account or a duplicate pass book giving entries upto the date the
new account is opened be given to the depositor. Appropriate service charges should be
recovered from the account holder for issuing the duplicate pass book in lieu of the
original reported lost.

(iv) A rubber stamp reading "New Account opened on __________' Original pass
book reported lost vide customer's letter dated __________" should be put on the new
specimen signature card giving reference of the old account number. The old card should
be stapled to the new card and kept on record.

(v)The existing cheque book if any, should be withdrawn and new cheque book for the new
account be issued. Alternatively, existing cheque book may be re-issued, after affixing
new number of Savings Bank Account on every leaf.

An unstamped letter of undertaking (Specimen-Appendix I or II as applicable) containing also a

clause for confirmation of balance should be obtained from the account holder/s.

The account holder should personally call at the Bank and sign in presence of Bank Officials, the
letter of undertaking requesting closure of the existing account and opening a new account by
transferring credit balance of the erstwhile account as opening balance of the new account. The

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signature/s of the account holder/s on the letter of request should be verified very carefully. This
letter of undertaking should not be attested.

In exceptional cases, if for some reason or the other, the account holder is unable to call on the
Bank and sign the aforesaid letter of request, the Branch should send a letter to the account
holder at the address registered with the Branch enquiring if a request for closure of the existing
account and opening a new one has been made by him, and if so, he should be requested to
confirm this in writing. The existing account should be closed and a new one be opened only
after receiving such confirmation in writing.

The account holder should be advised to return the old pass book/continuation pass book
reported lost, if found subsequently. Branches should cancel the found pass book with the note
that the relative account has been closed.

The procedure outlined above applies to all savings bank accounts including accounts without
cheque book facility.

The procedure regarding loss of pass book would also be applicable to an account in the name of
a minor operated by himself. In such a case the letter of indemnity will have to be signed by the
minor's natural guardian and also the minor (Specimen Appendix II).

A. Though closing the existing account and opening a fresh account is always advisable
from the point of view of safety and fraud prevention, as a measure of customer service,
Branch Managers have been given the discretion in this regard to issue duplicate Pass
Book. Branch Managers should, as far as possible, continue to follow the existing
guidelines and avoid issuing duplicate pass book in such cases. However, if any account
holder insists on continuing the existing account, the Branch Manager, based on the value
of the account and other relevant considerations, may permit the continuation of the
account and issue duplicate pass book, subject to:
a. Obtaining of specific request letter signed by all account holders citing cogent
reasons.
b. Obtaining of unstamped indemnity to be signed by all account holders as per
Appendix IV, in the presence of the concerned officer
c. Noting of details of issuance of duplicate pass book on the ledger folio/computer
pass book and specimen signature card under proper authentication
d. Applicable Charges for duplicate passbook (Rs. 100 + GST@ 18% as on date)
e. Facility to be given as a one-time facility only
f. Facility to be extended preferably to S/B accounts with cheque book facility and
not to accounts operated by withdrawal slips.

With a view to minimizing possible hardships to our NRE/NRO and pension account holders,
these accounts have been excluded from the purview of this procedure. Branches may continue
to issue duplicate pass book in such accounts, exercising usual precautions to avoid possible
frauds.

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4.13 Collection of Cheques, Dividend Warrants, etc., in favour of Account Holder

Cheques, dividend warrants, etc., drawn payable to the account holder may be accepted in all
KYC compliant savings bank accounts.

4.14 Collection of Cheques etc., in favour of Third-Parties

Ordinarily, even in a KYC compliant saving bank account, cheques, dividend warrants, etc.,
payable to a third-party should not be accepted for collection.

At times interest becomes payable in accounts where the cheques/other instruments deposited are
drawn on the outstation branches and sent for collection, if the proceeds are not realized /credited
to the customer's accounts or the unpaid instruments are not returned to the customers within a
specified period from the date of their lodgement. Interest at the rate of 2% per annum over the
savings bank rate should be paid for such delayed collection. Such interest should be paid only
when the amount of interest is Rs. 5/- or more. Interest should not be paid on cheques/other
instruments lost in transit.

Such cases, however, should be rare as with the services of the Service Branches, Courier
Services/Speed Post, speedy collection of instruments is possible. Where such interest is to be
paid for the delay in collection, the matter should be reported to the Regional Manager giving
specific reasons for the delay and prior sanction be obtained before payment is made. It should
be noted that the period specified has been allowed only for the purpose of calculating interest as
aforesaid and under no circumstances it should be construed that the Bank can take this much
time for collection/return of outstation instruments. Prompt despatch of collection instruments
and timely follow up would ensure a smooth collection service.

4.15 Withdrawals from the Account

A depositor can withdraw money from his account either by means of a cheque from a cheque
book supplied to him or by withdrawal form, where cheque book is not issued. Withdrawal form
when presented for payment must accompany the relative savings bank pass book. In savings
bank accounts with cheque book facility, all withdrawals must be made by cheques from the
cheque book issued to the account holder. Under very extra-ordinary circumstances and in
exceptional cases, where so warranted, the customer may be issued a loose cheque; withdrawal
form may not be used in an account with cheque book facility. (These instructions also apply to
the accounts of the members of staff).

Where the savings bank depositor wishes to withdraw by loose cheque leaf in the account having
cheque book facility, pass book must be insisted upon. This may however be waived in
exceptional cases, at the discretion of the Manager-in-charge of the branch.

Account holder may withdraw money from his account (by withdrawal form/cheque) but such
withdrawals (including withdrawal by loose cheque if any) should not exceed the number as
advised by Head Office from time to time (presently 10 in a month). These instructions also
apply to the accounts of the members of the staff.
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There have been instances of fraudulent withdrawals having been made by third parties who
claimed that they were collecting the payment on behalf of the account holder(s). There have also
been cases of misappropriation of monies handed over by account-holders to their
friends/acquaintances for the purpose of being deposited in their accounts. To appropriately
caution account holders in this regard, Branches should display the following notice in the
banking hall for the knowledge and guidance of customers.
"Customers are requested in their own interest to transact their business in the branch at
the right/appropriate counter(s) e.g. to scroll the cash before depositing with the receiving
cashier, ensure that the counterfoil of the paying-in-slip bears the `cash received' stamp,
tender savings pass book for up-dating to the Savings Bank Ledger Keeper at regular
intervals etc."

4.16 Withdrawal without Pass Book

Withdrawal from a savings bank account by means of withdrawal form without production of
pass book may be allowed to the account holder who has personally called at the Branch and is
known to the Branch. In such a case, the cancelling officer should write on withdrawal form
"Please pay without pass book" and initial there against. Such payments should not ordinarily be
made to third-parties without proper identification of the presenter. Withdrawals from a savings
bank account by means of a withdrawal form without production of pass book should not be
made to third parties.

Use of withdrawal slips for effecting third party cash withdrawals in saving accounts should
not be made even if they are accompanied by passbooks, without proper identification of the
presenter. However, in respect of pensioners' who are old and sick and unable to come to the
Bank personally for withdrawing through withdrawal slip the pensioner's representative may
be allowed to present the withdrawal slip provided:
i) It is accompanied by the Pass Book
ii) In authorization letter from the pensioner for receiving cash on his behalf and
bearing signature of the representative duly appended is obtained.
iii) The withdrawal does not exceed the monthly pension amount.
iv) The facility is rendered in extremely deserving cases so as to provide relief to the
old infirm and sick pensioners who are unable to come to the Branch personally for
withdrawing cash.
v) The identity of the bearer is established beyond doubt and the branch official is fully
satisfied about the exterminating circumstances.
The above instructions are applicable to S/B Accounts of Pensioners only and not for the
regular Savings Bank Accounts.

When the relative pass book is received at a later date the entry relating to the withdrawal
(without pass book) should be made therein. Before an officer initials such an entry in the
pass book, he should refer to the ledger account. It may not be necessary always to inspect
the withdrawal form unless the surrounding circumstances demand such an inspection.

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Temporary Overdraft Payment of Cheque in Excess of Balance should not be allowed
without prior written consent from Regional Offices and that too in exceptional cases only.

4.17 Minimum Balance to be maintained

Failure to maintain minimum balance on Average Quarterly Balance basis would attract penal
charges which are to be levied quarterly basis as under:-

Average Quarterly Balance Penal Charges

With Cheque Book Rs.500/- For AQB between Rs. 250-499: 50%
Without Cheque Book Rs. 100/- For AQB between Rs. 100-249: 80%
For AQB below Rs. 100/- : 100%
The accounts of staff/Ex-staff members of the Bank are exempted from the stipulation of
maintenance of minimum balances in their accounts. The following guidelines for BSBDA/es
with Zero balances are to be followed meticulously:

4.18 BASIC SAVING BANK DEPOSIT ACCOUNTS:

Branches are advised to offer a 'Basic Savings Bank Deposit Account' which will offer following
minimum common facilities to all their customers:
i. The 'Basic Savings Bank Deposit Account' should be considered a normal
banking service available to all.
ii. This account shall not have the requirement of any minimum balance.
iii. The services available in the account will include deposit and withdrawal of cash
at bank branch as well as ATMs; receipt / credit of money through electronic
payment channels or by means of deposit / collection of cheques drawn by Central
/ State Government agencies and departments.
iv. While there will be no limit on the number of deposits that can be made in a
month, account holders will be allowed a maximum of four withdrawals in a
month, including ATM withdrawals.
v. Facility of ATM card or ATM-cum-Debit Card.
vi. The above facilities will be provided without any charges. Further, no charge will
be levied for non-operation / activation of in-operative 'Basic Savings Bank Deposit
Account'.

If such account is opened on the basis of simplified KYC norms, the account would
additionally be treated as a 'Small Account' and would be subject to following conditions:
a. The aggregate of all credits in a financial year does not exceed rupees one
lakh;
b. The aggregate of all withdrawals and transfers in a month does not
exceed rupees ten thousand; and
c. The balance at any point of time does not exceed rupees fifty thousand
d. Inward Foreign Remittances shall not be allowed in the account.

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 vii. Holders of 'Basic Savings Bank Deposit Account' will not be eligible for opening
any other savings bank deposit account in that bank. If a customer has any other
existing savings bank deposit account in that bank, he / she will be required to close it
within 30 days from the date of opening a 'Basic Savings Bank Deposit Account'.
viii. The existing basic banking 'no-frills' accounts should be converted to 'Basic
Savings Bank Deposit Account' as per the instructions contained above.

4.19 Interest Calculation

Since all branches have been computerized, the interest calculations will be done by the system
only. Before invoking the respective modules for applying interest branches should ensure that:
i) Parameters for calculation of interest have been properly checked and correct.
ii) All accounts where interest applicable has to be made should be duly verified.
iii) Interest application should be made on the quarterly basis
iv) Interest on Savings Bank is calculated on daily product (w.e.f. 1st April 2010). Interest
calculation on daily products basis is applicable to Normal savings, NRE savings and
NRO savings accounts.

When an account is to be closed, interest accrued from the last application of quarterly interest
up to the preceding day of account closure should be calculated and credited to the account by
debit to Profit and Loss Account-Interest on Savings Bank Deposits.

4.20 Service Charges on Savings Bank Accounts

Service charges on saving bank account should be levied as per circulars issued by Head Office
from time to time.

4.21 Inoperative/Dormant Savings Bank Accounts

The Bank has decided not to levy Service Charges on SB accounts which are inoperative for one
year and are not maintaining minimum balance. The monthly penal charges for non-maintenance
of minimum balance in SB accounts would continue to be levied as hitherto.

Inoperative / Dormant Accounts – Criteria for classification:

A savings as well as current account should be treated as inoperative / dormant if there are no
transactions in the account for a period over two years. For the purpose of classifying an account
as inoperative, both the types of transactions, i.e. debit as well as credit transactions induced at
the instance of customers as well as third party should be considered. RBI has clarified that
interest on term deposits credited to the account of the customer should be treated as customer
induced transaction since it is according to the mandate of the customer. In such cases, the
account should not be treated as an operative account as long as the interest on term deposit
account is credited to the Savings Bank account. The Savings Bank account can be treated as
inoperative account only after two years from the date of the last credit entry of interest on term
deposit.

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Inoperative / Dormant Accounts

The Reserve Bank of India requires banks to transfer the balance every year in respect of
accounts which have been dormant for 10 years and more. To facilitate this being done,
Branches should deal with dormant savings bank accounts as given below:

Operationalising the Dormant / Inoperative accounts

i. Branches should identify all the inoperative accounts, not operated for more than two
years, and with a balance of Rs 1000/- to be classified as inoperative account through
system every half year. Branches should approach the customers and inform them in
writing (A suitable system generated communication will be sent to such customers)
exhorting them to (a) activate their accounts or (b) they may be asked to provide details
of their existing Bank account details, if they are shifted to new area so as to transfer the
amount lying in the account.

ii. Branches are required to make an annual review to identify inoperative accounts and send
communication to the customer stating that the account will slip into the
inoperative/dormant category within 3 months. In all such cases, where the accounts
continue to be inoperative even after sending a written reminder, the customers will be
contacted over phone or in person for getting the accounts activated and a record thereof
shall be maintained at the branch. In cases where the letters sent by the Bank are returned
undelivered, the branch should make efforts to contact the customer immediately
thereafter by approaching the introducer or the neighbours at the last recorded address
and gather information about the account holder’s present whereabouts.

iii. In all other cases , i.e. accounts with balances of less than Rs 1,000/- , system generated
reminders will be sent after one year from the date of last customer induced operation in
the account and necessary follow up through phone calls/ personal visits to the address
given at the time of account opening/ last recorded address for getting the account
activated. If necessary help of the introducer /customer’s neighbours be sought to contact
/ locating the customer for the above purpose. In case of deceased customer the details of
legal heirs are to be obtained.

Steps to be taken when requests for activation are received

When a request for activation of a dormant account is received, approval for activation should be
accorded by a designated officer at the branch. S/He will verify and satisfy her/himself that the
account was opened in a KYC compliant manner and the reasons adduced by the account holder
for not operating the account are genuine. An application along with fresh set of KYC documents
in respect of residence proof shall be obtained and the same should be confirmed by sending
letter to the above address given by the customer. Further it should be seen that the amount of
deposits being made is commensurate with the occupation level of the customer, as declared in
the account opening form and the transaction should be closely watched.

Operations on a Dormant Account

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Sometimes an account holder whose account has become a dormant may issue a cheque or a
withdrawal form. In such a case, special care has to be exercised to identify the customer and
after the Branch Manager is satisfied he should ask the account holder whether it is his intention
to continue operating the account or whether he desires to close it.

If the account holder intends to close the account, he should be asked to withdraw entire balance
of his account and his cheque or withdrawal form should be paid to the debit of the consolidated
"Savings Bank Dormant Accounts" or to respective individual account if it is an interest earning
account, as the case may be. Before paying out the balance, all the usual formalities should be
followed and unused cheque forms, if any, should be recovered from the account holder

All withdrawals from Dormant Accounts should be permitted only by the Branch Manager /
Cancelling Officer.
.
Large numbers of deposits made by account holders who have not made any nomination are
presently being held by branches as dormant Savings Bank Accounts. Branches should follow up
with such account holders by sending advices to the customers at their addresses on record. If
such letters are returned undelivered, the Branch should take immediate steps to find out to the
best extent possible, the whereabouts of the customers or their legal heirs, in case they are
deceased. Such follow up would be of timely assistance to the legal heirs and would also reduce
the quantum of unclaimed deposits with the Branch.

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 APPENDIX I

Draft Letter of Undertaking for Opening New Account in the event of Loss of Pass Book
Aryavart Bank,
___________________Branch

Dear Sir,
Re : Savings Bank Account No.________________
Loss of Pass Book. Request for Opening New Account.
I/We have to inform you that I/We have lost the pass book of my/our above Savings Bank Account
No.______________

2. In spite of my/our best efforts I/we have not been able to trace it. It appears to have now been
irretrievably lost.

3. As it may be difficult for me/us to operate the account without a pass book I/we request you to
close our Savings Bank Account without insisting on production of pass book by me/us. You have agreed
to do so, on the faith and strength of my/our above representation and on my/our giving an indemnity as
hereinafter appearing.

4. I/We confirm that the balance in the said account as on ___________________________ was
Rs. _______________ and I/we agree that the said balance will be the opening balance in the new
account that may be opened by you.

5. In consideration of your agreeing at my/our request to close the Savings Bank Account bearing
No. ________________ without insisting on production of pass book I/we so as to bind our/my respective
heirs executors/administrators estate and affects hereby agree and undertake with you and your
successors and assigns as follows :-

(i) to indemnify you and keep you indemnified from and against all present and future claims,
demands, actions, proceedings, loss, damage, liability, costs, charges and expenses whatsoever,
which may be made or commenced against you or be paid, sustained, suffered or incurred by you
whether now or at any time as a consequence direct or indirect of your closing my/our Savings
Bank Account No. ____________________ as aforesaid ;

(ii) to pay and make good on demand the amount of any such loss, damage, liability, costs (the
legal
costs being as between attorney/advocate and client), charges and expenses together with
interest at 12% per annum from the date of payment by you — until reimbursement by me/us;

(iii) that without prejudice to the right of lien and set-off conferred on you as a banker by law you
shall have the right to set-off any amount payable by me/us to you hereunder against the amount
standing to the credit of my/our new Savings Bank Account;

(iv) that I/we shall return to you the original pass book should it be found by me we/us or should it
again come into my/our possession at any time hereafter.

Yours faithfully,

(NOT TO BE ATTESTED)

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 APPENDIX II

Draft Letter of Undertaking for opening new account in the event of Loss of Pass Book in
cases where the Account is in the single name of a Minor

To,
Aryavart Bank,
________________ Branch.
Dear Sirs,

Re : Savings Bank Account No. ______________________________

in the name of Master/Miss __________________________________

Re : Loss of Pass Book.

Request for Opening New Account.
-----------------------------------------------------------------------------------

I am the Father/Mother and the Natural Guardian of my son/daughter who has the above account
with you.

2. I had informed you that the pass book of the above account is lost or misplaced and in spite of
our best efforts we have not been able to trace it. It appears to have been irretrievably lost.

3. As it may be difficult for my son/daughter, the said Master/Miss ___________________ to

operate the account without a pass book, I/we request you to close the Savings Bank Account bearing
No. _____________ of the said Master/Miss ____________ so as to enable us to open a new account
with you without insisting on production of pass book by me/us. You have agreed to do so on the faith
and strength of my/our above representations and on my/our giving an indemnity as
Hereinafter appearing.

4. My son/daughter the said Master/Miss _____________________ and I confirm that the balance
in the said account at ______________ was Rs. __________________ and that the said balance will be
the opening balance in the new account that may be opened by you at our request.

5. In consideration of your agreeing at our request and at the request of my son/daughter the said
Master/Miss ______________ to close the above Savings Bank Account bearing No. ________ so as to
enable us to open a new account in the name of the above named minor/s the said Master/Miss
_______________ without insisting on production of pass book which has been irretrievably lost or
misplaced, I in my capacity as the Natural Guardian as also in my personal capacity and so as to bind
myself and my respective heirs, executors/administrators, estates and effects hereby agree and
undertake with you and your successors and assigns as follows :

(i) to indemnify you and to keep you safe, defended and indemnified of, from and against all
presentand future claims, demands, actions, proceedings, loss, damage, liability, costs, charges and
expenses whatsoever which may be made or brought or commenced against you or be paid,
sustained, suffered or incurred by you whether now or at any time as a consequence direct or indirect
of your closing the aforesaid Savings Bank Account No. ___________________standing in the name
of my son/daughter the said Master/Miss ________________________________ and opening a new
Savings Bank Account as aforesaid;

(ii) to pay and make good on demand the amount of any such loss, damage, liability, costs (the legal
costs being as between attorney/ advocate and client) charges and expenses together with interest at
12% per annum from the date of payment by you until reimbursement by me/us;

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 (iii) that without prejudice to the right of lien and set-off conferred on you as a banker by law you shall
have the right to set-off any amount payable by us to you hereunder against the amount standing to
the credit of the above named minor's the said Master/Miss
__________________________________________ New Savings Bank Account or in my
individual/personal Savings Bank Account bearing No. ___________________________ with you;

(iv) that I/we shall return to you the original pass book should it be found by me/us or should it again
come into my/our possession at any time hereafter.

Yours faithfully,

_______________
(NOT TO BE ATTESTED)

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 Appendix III

Specimen of a Letter of Authority to debit the New Account with

cheques in transit issued in old account

Re : My/Our Savings Bank Account No. ___________________

Loss of Pass Book & Authority to debit cheques in transit to the new account.
----------------------------------------------------------

I/We refer to my/our letter dated _______________ requesting you to close my S/B A/C No.
________________ of which the pass book is irretrievably lost/misplaced by me/us and open a new S/B
A/C at our risk and responsibility.

2. A new S/B A/C No. _______________ has now been opened in my/our name.

3. I/We authorise you to debit cheques No. __________________ dated________________ issued

by me/us, but which have not been paid as on date , to my/our new S/B A/C No. _________ when
received for payment and we indemnify the Bank for any loss it may suffer in this connection.

Yours faithfully,

______________

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 Appendix IV
Draft of Letter of Undertaking for Issue of Duplicate Savings Bank Pass Book
Date:
Aryavart Bank
________________________Branch

Dear Sirs,
Re. : My/Our Savings Bank A/C. No.___________________
Re. : Loss of Pass Book
Re. : Issue of Duplicate Pass Book
I/we have to inform you that I/we have lost the pass book of my/our above Savings Bank Account
No._______________.

2. In spite of my/our best efforts I/we have not been able to trace it. It appears to have now been
irretrievably lost.
3. As it may be difficult for me/us to operate the account without a pass book I/we request you to
issue me/us a duplicate pass book. You have agreed to do so on the faith and strength of my/our
representation and on my/our giving an indemnity as hereinafter appearing.
4. I/we confirm that the balance in the said account as on ________________________was Rs.
______________and I/we agree that the said balance will be the opening balance in the new pass book
that may be issued by you.
5. In consideration of your agreeing at my/our request to issue the duplicate pass book, I/we so as
to bind our/my respective heirs, executors/administrators estate and effects hereby agree and undertake
with you and your successors and assigns as follows :-
(i) to indemnify you and keep you indemnified from and against all present and future claims,
demands, actions, proceedings, loss, damage, liability, costs, charges and expenses whatsoever
which may be made or commenced against you or be paid, sustained, suffered or incurred by you
whether now or at any time as a consequence direct or indirect of your issuing me/us a duplicate
pass book as aforesaid.

(ii) to pay and make good on demand the amount of any such loss, damage, liability, costs (the
legal costs being as between attorney/advocate and client ) charges and expenses together with
interest at 12% per annum from the date of payment by you until reimbursement by me/us.
(iii) that I/we shall return to you the original pass book should it be found by me/us or should it
again come into my/our possession at any time hereafter.

Yours faithfully,

_________________
(NOT TO BE ATTESTED)

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 Appendix V
Aryavart Bank’s Savings Bank Account Rules

1. Opening and Operation of Accounts:

(a) (i) An account may be opened in the name of one person or jointly in the names of two or
more persons.
(ii) All Savings Bank Accounts irrespective of their mode of operations must be properly
introduced to the Bank by such person as the Bank may at its absolute discretion require.

(b) An Account in the names of two or more persons operated upon by any one or more or all of
them, and the balance made payable to any one or more or all of them or anyone or more or all of
the survivors of them or to the last survivor, as applicable.

(c) The mode of operation of a joint account should be specified at the time of opening the
account and cannot be changed subsequently, without the written consent of all the joint account-
holders.

(d) In a joint account of two persons to be operated upon by 'Either or Survivor' on the death of
any one of them the surviving account-holder alone can operate on and will be entitled to the
balance in the account, the heirs of legal representatives of the deceased account-holder will have
no claim against the Bank. On the death of the surviving account-holder, his heirs or legal
representatives alone will be entitled to claim the balance from the Bank.

(e) A joint account to be operated upon by 'Former or Survivor' can also be opened. Where the
special instructions relating to the operation of an account reads 'Former or Survivor' the account
shall be operated upon and the cheques/withdrawal forms shall be drawn by and the balance shall
be repayable to the former i. e. the first named account-holder during his/her life time and only
after his/her death by and to the second named account-holder if then surviving.

(f) In approved cases, an account may be opened in the names of associations, clubs, co-
operative societies (with the permission of the Registrar of Co-operative Societies), Trusts or
other non-trading Institutions for purposes of depositing savings, provided the relevant bye laws,
rules, etc. are found acceptable to the Bank and are strictly adhered to and when required a
suitable indemnity is given to the Bank.

(g) In the event of death of a sole depositor or of the surviving or the last surviving depositor, the
amount payable in the account of such deceased depositor shall be paid to the legal
representatives of such sole depositor or of the surviving or the last surviving depositor, as the
case may be. "Legal representatives" shall include either the executor or the administrator who
has obtained Probate or Letters of Administration from a Competent Court in India or the holder
of a grant of Succession certificate or of any other proper grant of legal representation to the
estate of such deceased depositor from a Competent Court in India. The Bank reserves the right
to pay at its discretion the balance due in the account of such deceased account-holder to his/her
heirs on a proper indemnity with or without sureties.

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2. Account of Minors:

(a) A Savings Bank account of a minor may be opened to be operated upon by the natural
guardian of the minor or by the guardian appointed by the Court.

(b) A Savings Bank Account may also be opened in

(i) The single name of a minor aged 10 years or more to be operated upon by the minor.

(ii) The joint names of two minor who have completed the age of 10 years to be operated upon
by them jointly.

(iii) The joint names of two or more minors to be operated upon by a person who is the natural
guardian of both or all the minors.

3. How to open Savings Bank Account:

Application to open a Savings Bank Account should be made on the Bank's prescribed forms
duly completed with his name, address and occupation. Each applicant will be required to sign a
declaration to the effect that he has read and accepted the Savings Bank Rules.

4. Illiterate Depositors:

Any depositor unable to write must attend in person and (in the presence of an approved witness
who knows the depositor and is known to the Bank) affix his thumb impression to the application
and other forms and have it attested by the signature of the approved witness. An illiterate
depositor will lodge in person a passport size recent photograph with the Bank subject to
provision of rules regarding withdrawals. If a photograph is lodged with the Bank by an illiterate
depositor, he need not have his thumb impression attested every time he withdraws money. It
will suffice if he affixes his thumb impression in the presence of an official of the Bank.

5. Minimum Balances:

The smallest sum that can be deposited at the time of opening an account is Rs.100/- for without
chequebook facility accounts and Rs. 500/- for accounts with chequebook facilities. An average
quarterly balance of Rs.100/- for without chequebook facility accounts and Rs. 500/- for
accounts with chequebook facilities should always be maintained to keep the account running
where withdrawals are by withdrawal forms. Under BSBDA Accounts, related rules are
applicable as announced by RBI from time to time.
.
6. Maximum Balance:

There is no limit to the maximum balance in accounts. Interest will be allowed on the balance in
accounts in accordance with Rule No. 7 below.

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7. Interest:

(a) Interest will be allowed at the rate prescribed by the Bank from time to time. The present rate
of interest allowed on Savings Bank Account can be ascertained at the Bank. The Bank reserves
the right to vary the rate of interest from time to time and to increase or decrease the rate of
interest payable.

(b) Interest on Savings Bank is calculated on daily product (w.e.f. 1st April 2010).

(c) Interest will be calculated up and credited to account on quarterly basis. Interest amounting to
less than Re 1/- per half year will not be credited.

8. Collection of Cheques, Warrants, etc.:

Cheques, Dividend Warrants, Interest Warrants, etc., in favour of a third party will not be
accepted for credit of a Savings Bank Account.

The facility of collection of cheque/any other instrument deposited in the account will be at the
discretion of the bank and the Bank will not be held liable for any loss/delay beyond its control
for realisation of the same. Bank will have liberty to appoint agents/couriers of its choice for
collection of cheques/any other instrument. Any loss/damage that may be incurred/sustained by
the Bank and/or its agent/courier while making collection of the cheques/or any other instrument
will be solely at the risk of depositor/s who would be called upon to make good the same
immediately.

9. Pass Book:

(a) A pass book will be supplied to the depositor indicating the number of the depositor's account
and his name. Deposits in Savings Bank Account may be accepted without production of the
pass book if the number and name of the account are clearly written on the paying-in-slip. No
money can ordinarily be withdrawn by withdrawal forms from an account without production of
the pass book.

(b) The pass book of the account should be sent to the Bank from time to time for being written
up-to-date, particularly in the case of accounts operated upon by cheques. Depositors should
carefully examine their pass book before leaving the Bank and ascertain that entries are correct.
They should also be careful to keep their pass books in their own possession. The Bank will not
be responsible for any loss caused to the depositor, if an unauthorized person obtains possession
of the pass book.

(c) The Bank will not be responsible or accountable for any sum claimed to have been deposited
which is not acknowledged in the pass book under the initials of an authorised official of the
Bank.

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(d) Entries will be made by the Bank in the pass book in respect of amounts of cheques, etc.,
deposited in the account and initialled by an official of the Bank in the pass book. Such amounts
are, however, not available for withdrawal until the cheques, etc., are realised.

10. Loss of Pass Book:

(a) No charge will be made for the pass book supplied in the first instance to the depositor at the
time of opening the account or any pass book issued to him in continuation of the original pass
book.
(b) If a pass book be spoiled, mutilated or lost, the Bank may issue a duplicate pass book on
payment of a charge of Rs. 100/- plus applicable GST (as per prevalent rate at present, subject to
time to time revision)by the depositor.

(c) Loss of the Pass Book should be reported to the bank immediately. The depositor/s will be
required to sign a suitable letter of indemnity for issue of a duplicate pass book where the pass
book has been reported to be lost.

(d) If a statement of past entries is required, the Bank will make an appropriate charge for labour
involved in preparing it.

11. Withdrawals:

(a) Bank shall collect applicable charges with GST if customer withdraws or deposits more than
the stipulated number of free deposit or withdrawal transaction.

(b) A depositor cannot withdraw by withdrawal forms a sum smaller than Rs. 1/- or any sum
which is not a multiple of Re.1/- unless it is to be close the account.

(c) When a depositor wishes to withdraw from his account by withdrawal forms he must present
his pass book personally or by duly authorised agent at the Bank with an order for withdrawal on
the form prescribed by the bank for the purpose, signed by himself and showing the amount
which he wishes to withdraw. In the case of joint account the withdrawal forms should be signed
in accordance with the instructions given at the time of opening of the account.

(d) An illiterate depositor may operate an account by means of a cheque provided that his thumb
impression on every cheque is authenticated by the Bank's official at the time of issue itself.

(e) (i) Withdrawals may be made by cheques where allowed by the Bank. The Bank reserves the
right to refuse payment of a cheque drawn for amount smaller than Rs. 5/-.

(ii) Cheques must be drawn on the printed forms provided by the Bank, the Bank reserves the
right to refuse payment of cheques drawn otherwise.

(f) Cheque Books upto 25 MICR cheque leaves, will be issued free of charge per year to account
of an individual and over that at the rate of Rs. 3 per cheque leaf. Cheque Books will be issued
only to good depositors who maintain a minimum balance of Rs. 500 and Rs.1,000 for account
142 | P a g e
of individual/s and others respectively. The Bank reserves the right to withdraw the cheque book
facility if a minimum balance of Rs. 500/- is not maintained or for any other reason whatsoever,
either with or without prior intimation.

(g) Applications for cheque book must be made by the depositor in writing on the Bank's cheque
book requisition form. It is particularly important that the printed requisition form inserted in the
cheque book must be used when a new cheque book is required. The requisition form should be
signed in accordance with the mode of operation of the account as specified at the time of
opening the Account.

(h) Accounts in which cheque books are issued will be drawn upon only by means of cheques.
However, withdrawals may be allowed by means of withdrawal forms in accounts in which the
cheque book facility is withdrawn or at the discretion of the Bank.

(i) The attention of the depositor is particularly drawn to the notice on the front cover of the
cheque book, regarding the drawing of cheques and the safe custody of cheque books.

(j) Cheques/withdrawal forms must not be post dated.

(k) Cheques/withdrawal forms must be drawn in such a way as to prevent unauthorised alteration
or additions after issue.

(l) All alterations made in the writing of a cheque/withdrawal form must be authenticated by the
drawer's specimen signature; otherwise the cheque/withdrawal form will not be paid.

(m) The amount of the cheque/withdrawal form must be stated in words and figures. Writing
should be clear and distinct.

(n) The Bank will be entitled to refuse payment of a cheque/withdrawal form on which the
signature(s) does not exactly correspond with that on record at the Bank.

(o) It is desirable that in the case of a Savings Bank Account standing in the names of two or
more persons, the full title of the account should appear on the top of the cheque drawn on the
account. A rubber stamp may be used for this purpose; such stamp (or writing) of the full title of
the account would be in addition to the usual signature or signatures.

(p) Cheques/withdrawal forms should not be issued before the necessary funds have been
credited to the relative account and are actually available for withdrawal. If cheques/withdrawal
forms are presented when there are insufficient funds to meet them, payment will be refused and
the cheques/withdrawal forms returned as Savings Bank Account should not be overdrawn.
Disregard of this rule will entail summary closing of the account.

(q) The account number must be written on all cheques/withdrawal forms at the place provided
for the purpose. Should any cheque/withdrawal forms be drawn without the account number
being mentioned thereon the Bank shall be entitled to refuse payment of the cheque/withdrawal
form.
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(r) The bank will register instructions from the drawer of a cheque/withdrawal form to stop
payment of it, but cannot undertake any responsibility in case such instructions are over looked
for any reason or cause whatsoever and howsoever arising.

12. Transfer to Other Deposit Account:

The Bank would accept instructions from depositor to transfer amounts from their Savings Bank
Account to other types of deposit account such as Short Deposits, Fixed Deposits, Monthly
Income Certificates, Recurring Deposits, Double Benefit Deposits, etc. Such instructions should
normally be accompanied by cheques/withdrawal forms drawn on the depositor's account
together with completed opening forms/cards in respect of the deposit accounts proposed to be
opened. Transfer to such deposit accounts would be subjected to minimum amounts prescribed
and Bank's rules relating to such accounts prevailing from time to time.

13. Nature of Savings Bank Account:

Saving Bank Accounts are not intended to take the place of Current Accounts. Savings Bank
Accounts must not be overdrawn. The Bank reserves the right to stop the interest on or to close
without notice any account which is not, in the Bank's opinion properly conducted.

14. Business Hours:

The Savings Bank will be open for transaction of business during the normal hours the Bank is
open for business.

15. Change of Address:

Change of address should be immediately intimated to the Bank in writing.

16. Nomination Facility:

Nomination Facility is available to new as well as existing SB Accounts. A nomination form

duly filled up and signed by all account holder/s is required to be submitted to the Bank for the
purpose. The account holder/s can make, cancel and vary the nomination at any time during
currency of the account by submitting the prescribed form for the purpose duly signed. The
nomination can be made in favour of only one individual. The name of the nominee can be
indicated in the Saving Bank Pass Book if so desired by the account holder/s, in writing.

17. Closing of Accounts:

(a) If a depositor closes the account within 12 months of opening it, a small charge will generally
be made.

(b) The Bank reserves the right to close any account without previous intimation if in the Bank's
opinion it is not operated upon satisfactorily or for any other reason whatsoever.
144 | P a g e
18. Deletion, Addition and alteration to rules:

(a) The Bank reserves to itself the right to delete, add to or alter these rules at any time without
giving a separate notice to every account-holder. An announcement of any change in the rules
put up on the Bank's Notice Board or published in the press shall be deemed to be sufficient
notice to all account-holders.

(b) These rules as amended from time to time as aforesaid shall constitute a contract between the
account holder and the Bank and will be binding on the account holder, his heirs, executors,
administrators or other legal representatives and on the Bank.

145 | P a g e
 CHAPTER 5

CURRENT ACCOUNTS

146 | P a g e
 CHAPTER 5

CURRENT ACCOUNTS
Current accounts are opened mainly by business community, corporate bodies or the like where
the account holder has often to receive money and to make a number of payments. No interest is
paid on balances in current accounts except in the cases referred to in paragraph 8 below and
there are no restrictions as to the number of deposits into and withdrawals from the account per
day.

5.1 Introduction of Accounts

The account shall be opened on the basis of the documents stipulated, and introduction is merely
optional and not the necessary condition.

5.2 Types of Accounts

Current accounts are opened for approved persons only. Current accounts may be opened in the
names of:

i. Individual - Single Accounts

ii. Two or more individuals - Joint accounts (Can be opened with operational instructions
“Either or Survivor” or Former or Survivor” or “Any One/All of the Joint Account
Holders”.)
iii. Sole proprietary concerns
iv. Partnership Firms
v. Joint Hindu Families or Firms
vi. Limited Companies
vii. Associations, Clubs, Societies, etc.
viii. Trusts
ix. Executors and Administrators
x. Provident Funds
xi. Liquidators
xii. Other Banks
xiii. State Financial Corporations

In approved cases, branches may open non-operating accounts called "Collection Accounts".

5.3 Opening of Accounts

To fall in line with the RBI’s guidelines on Know Your Customer (KYC) policy the account
opening form has been standardized. Also refer to the Current A/c rules as per Appendix VIII.

A new form is to be obtained at the time of opening of accounts for new customer alongwith in-
built specimen signature Card, must been signed by all the account holders irrespective of the
mode of operations on the account. The nomination in the prescribed format should be obtained
in all personal accounts/sole proprietary accounts where such nomination is desired by the
account holders.

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Branches are normally opening current accounts and allow operations therein without making
any inquiries whether the account holder is enjoying any credit facilities with other Bank. It may
so happen that the borrowers of one bank open current accounts with other banks and conduct
operations through such accounts instead of routing all their transactions in the accounts
maintained with the lending bank and thereby violating credit discipline. This is more common
where a customer is enjoying borrowing facilities against book debts. Keeping in view the
importance of credit discipline for reduction in NPA level of lending banks, branches should, at
the time of opening current accounts, insist on a declaration to the effect that the account holder
is not enjoying any credit facility with any other bank. Branches should scrupulously ensure that
they do not open current accounts of entities which enjoy credit facilities (fund based or non-
fund based) from the banking system without specifically obtaining a Status reports/No-
Objection Certificate from the lending bank(s). Branches should note that non-adherence to the
above discipline could be perceived to be abetting the siphoning of funds and such violations
which are either reported to RBI or noticed during inspection would make the bank / branch
liable for penalty under Banking Regulation Act, 1949.

Branches may open current accounts of prospective customers in case no response is received
from the existing bankers after a minimum waiting period of a fortnight. If a response is
received within a fortnight, branches should assess the situation with reference to information
provided on the prospective customer by the branch concerned and are not required to solicit a
formal no objection, consistent with true freedom to the customer of branch as well as needed
due diligence on the customer by the branch.

(iii) In case of a prospective customer who is a corporate or large borrower enjoying credit
facilities from more than one bank, the branch should exercise due diligence and inform the
consortium leader, if under consortium, and the concerned bank’s branch, if under multiple
banking arrangement.

Branches should advise these lending banks the fact of opening of the account by the
firm/company.

I Declaration and undertaking as per Specimen - Appendix I:

From a firm/company not having any borrowing/banking facility with any other bank.
II Declaration and undertaking as per Specimen - Appendix II:
From a firm/company enjoying borrowing/banking arrangements with our Bank as well
as with other banks.

5.4 In case of Current Accounts opened in the name(s) of the staff/relatives of staff
members the following procedure should be adopted:
(a) Details of all Current Accounts in the name(s) of close relatives of staff members operated
and maintained at a Branch should be reported to the next Controlling Authority i.e. Regional
Manager. The format for reporting purpose is given in Appendix VII.
(b) Branches which do not have any such account should submit a `Nil' Statement.

148 | P a g e
(c) The branches should also submit to the Regional Manager the particulars of operations in
these accounts every quarter as per the format given in Appendix VII. Regional Manager will
scrutinize and report to Head Office their findings if warrants in view of the Risk Management.
(d) Branch Manager is the authority to authorize the opening of such accounts.
(e) Accounts of staff/relatives of staff members should be segregated from other Current
Accounts.
(f) All credit vouchers relating to all staff accounts including paying-in-slip should be
countersigned by an officer of the Branch.
(g) The current accounts of all staff members held in their names either singly or jointly with any
other person should be checked by an officer of the branch.
(h) Manager should carry out periodical scrutiny or test check of such accounts.

Other Accounts: While the operational instructions can be in any manner (say either or survivor
or former or survivor or any one Partner/Director/Trustee etc,), the same would be jointly
authenticated in the account opening form in case of Partnership Firms and in case of Limited
Companies or Trusts or Societies etc would be in accordance with the Board Resolution or the
Trust Deed or the Bye Laws as the case may be.

5.5 Minimum Balance

The minimum amount of initial deposits and maintenance of minimum balance in current
Deposit a/c (applicable to all centres) and penalty charges for not maintaining the same are as
under:

Minimum Balance to be maintained Penalty charges for not

maintaining minimum balance
(AQB)
------------------------------------------- ------------------------------------------
Rs.5,000/- for individuals and Rs.400/- per quarter
(Circular No.1/05 dated 01-04-2019 (Subject to changes from time to time)

Rs.10,000/- other than individuals

While opening the account, the official concerned should explain to the prospective customer the
requirement of maintaining minimum balance and the penal charges in case of non compliance.

Branches must display on the Notice Board at conspicuous place in the Banking Hall the above
details and ensure that it draws the attention of customers.

5.6 Temporary Overdrafts

As of now, branches are not authorized to sanction / approve any overdrawing in current
accounts

5.7 Service Charges/ Non-Remunerative Accounts

Properly maintained Current Accounts are very valuable to the Bank, but current accounts
maintaining an average quarterly balance below the stipulated minimum of Rs. 5000/- for
149 | P a g e
Individual(s) or Rs. 10000/- for other than Individuals or accounts in which there are very heavy
operations not commensurate with the balance maintained or accounts maintaining a small
average balance and taking undue advantage of the Bank's free remittance facilities with no
benefit to the Bank by way of deposits and/or other remunerative business or accounts with small
average balances in which small denomination notes and small coins are excessively tendered or
in which cheques are returned for want of funds, cause considerable operational strain and are
therefore, unremunerative and uneconomic. Attention of account holders who do not maintain
minimum balance of Rs. 5000/- and Rs. 10000/-, as the case may be, should be drawn by sending
a suitable letter. In the case of other accounts of the categories mentioned above, Branches
should draw the attention of the account holders to the necessity of opening their accounts in
accordance with the rules of business of the Bank. If repeated requests do not have any effect on
the customers, Branches should endeavour to weed out such accounts.

Branches should endeavour to build up good current account business by gradually and
systematically weeding out very poorly conducted and totally unremunerative accounts. When
unremunerative accounts are prudently weeded out from time to time, more time and attention
can be devoted to accounts which are satisfactorily conducted. This will enable the Bank to
improve its service to account holders by making quick payment of cheques and rendering other
services.

5.8 Interest Payable on Current Deposit Accounts

In terms of the Reserve Bank of India's directive, payment of interest on current accounts except
the accounts of the exempted categories mentioned below is prohibited. Interest is also not
payable on margin money held in current accounts with Branches.

Interest should be paid on the credit balances lying in a current account in the name of a
deceased depositor, from the date of death of the depositor till the date of payment of his/her
legal heir(s), representative/s and nominee/s at the rate applicable to Savings Bank Deposits as
on the date of payment. This is also applicable to current accounts in the name of a
proprietorship firm where the sole proprietor is deceased.

At times interest becomes payable in accounts where the cheques/other instruments deposited are
drawn on the outstation branches and sent for collection, if the proceeds are not realised/credited
to the customer's accounts or the unpaid instruments are not returned to the customers within a
specified period from the date of their lodgment. Interest at the rate of as conveyed by Head
Office from time to time should be paid for such delayed collection. Such interest should be paid
only when the amount of interest is Rs. 5/- or more. Interest should not be paid on cheques/other
instruments lost in transit.

Such cases, however, should be rare as with the services of the Service Branches, Courier
Services/Speed Post speedy collection of instruments is possible. Where such interest is to be
paid for the delay in collection, the matter should be reported to the Regional Manager giving
specific reasons for the delay and prior sanction be obtained before payment is made. It should
be noted that the period specified has been allowed only for the purpose of calculating interest as
aforesaid and under no circumstances it should be construed that the Bank can take this much
150 | P a g e
time for collection/return of outstanding instruments. Prompt dispatch of collection instruments
and timely follow up would ensure a smooth collection service.

5.9 Balance Confirmation Letters

In view of the instructions printed in the Current Account Statement Form, it is not necessary for
the Branches to send a Balance confirmation letter to all current account holders except holders
of:
i) Overdraft Accounts
ii) Trust Accounts
iii) Non-resident Accounts
iv) Accounts, where the Branch Manager considers it necessary in the Bank's interest to
obtain confirmation letter.

Branches should send to these account holders a Balance Confirmation Letter once a year (as of
31st March) as soon after March closing as possible.

When Balance Confirmation Letters are received back from these account holders duly signed,
they should be attended to immediately. Signatures on Balance Confirmation Letters should be
verified by cancelling officers in the usual manner. (Balance Confirmation Letters must be
signed by account holders in exactly the same manner as cheques are drawn on the accounts.)

The Balance Confirmation Letters should be pasted in a separate letter pasting file or file
properly, which should not be accessible to unauthorized persons.

The Manager should pay personal attention to ensure that Balance Confirmation Letters are
received back duly signed by the holders of:
i. Trust accounts
ii. Non-resident accounts
iii. Accounts where operations are few and far between
iv. Accounts where there have been occasions for return of cheques for reason "Drawer's
signature differs"
v. Accounts operated by the Attorney or the Mandatory. (The letter should be signed by the
Donor/ Mandator).
Apart from the Balance Confirmation Letters sent as on 31st March, the Manager may also send
at his discretion Balance Confirmation Letters on any other days for the above-mentioned
accounts.

Account holders who have not confirmed their balances may be requested to do so whenever
they happen to come to the Bank personally. If necessary, reminders should be sent.

5.10 Current Account Statements

Branches may send statements of accounts at the option of the current account holders. If a
statement of account is to be sent, the frequency thereof should also be noted. In accordance with
these instructions, prepare and dispatch statements of accounts to account holders within 5 days
from the date to which the statements relate.

151 | P a g e
To obviate delay, the current account statements should be sent to customers in a staggered
manner instead of sending them by a target date every month, in case the branch is having large
number of current accounts. Otherwise, statements should be dispatched in one lot.

A credit entry in a statement may be binding on the Bank if the account holder can show that he
altered his position by relying on such a credit entry. With regard to a debit entry in a statement,
the account holder is under no duty to check the entries and he can repudiate incorrect debits to
his account. Care should be taken to see that the account holder's credit is not harmed by return
of a cheque drawn in reliance upon the erroneous posting the account. The system of
authorization in Branches, therefore, must be such that mistakes or errors in postings such as,
posting of wrong amount or posting in wrong account and extension of wrong balances are
avoided. When any mistake or error in posting is found, the account holder should be advised
immediately and the error should be rectified.

It is desirable to avoid abbreviations while posting the entries. The customers must understand
the entries without difficulty. However, the following 12 standard abbreviations may be used.

CLG Clearing Cheque (vii) Rpp Remittance Per

(i)
Post
(ii) D/W Dividend Warrant (viii) Rtd. Returned
(iii
F.D.R Fixed Deposit Receipt . (ix) Reptd. Represented
)
(iv
INT Interest (x) S/C Safe Custody
)
PRO Proceeds (xi) S/I Transfer Cheque on
(v)
Ourselves
(vi Standing
R/C Returned Cheque (xii) TR
) Instructions

Full postal address of the account holder should appear on the first sheet of the statement; each
statement sheet should bear the name, number of the account.

As a rule, statements should be dispatched by post or hand delivery, unless account holders call
for them personally; statements may, however, be handed over in closed covers to the known
messengers or representatives of account holders. A record should be kept in a register/pass book
of statements of accounts dispatched to account holders. (A specimen of the ruling is given in
Appendix III). Where the statement is returned undelivered due to change of address, efforts
should be made to contact the account holder to obtain the correct address.

5.11 Duplicate Current Account Pass Books/Statements

Branches may issue duplicate statements to account holders upon their written request. The letter
should be signed in the same manner as cheques drawn on the account are signed. Charges at the
152 | P a g e
rate prevalent at the relevant time should be recovered from the account holders. Care should be
taken to see that no annoyance is caused to valued account holders. The word DUPLICATE
should be written on the statement and a suitable remark should also be made in the a/c.

Charges for issue of duplicate Statement of account should be credited to Profit and Loss
Account `Miscellaneous Receipts'.

5.12 Return of Paid Cheques

This service is not available as of now till further instructions. However for the sake of
information, the following may be noted by the branches:

Some account holders require their paid cheques to be returned to them at agreed intervals. The
facility of returning paid cheques should be extended to only approved customers selectively at
the discretion of the Manager. A Letter of Undertaking (Specimen-Appendix IV) should be taken
when any such arrangement for the return of paid cheques is made in an account. A note of such
arrangement should be made at in the account under special instructions.

Cheques which are in dispute should not be returned until the dispute is settled. Paid cheques
may be returned upto the last date for which the current accounts are balanced.

It should be ensured that the paid cheques (after authorization by an officer is completed) are
kept separately every day neatly arranged and bundled till they are required to be sent along with
the duplicate copy of the statement of account. A statement of account should be prepared in
triplicate - the original serving the purpose of statement of account, the duplicate to be sent along
with the paid cheques and the last copy to be retained at the Branch to serve as the "Duplicate
Voucher" for the paid cheques returned which should be carefully preserved like vouchers either
by keeping it along with the bundle of vouchers relating to the month or by keeping it filed in a
separate file. At the time of returning the paid cheques (periodically), it should be ensured that
they are arranged in the same order in which they appear in the statement of account and
particulars of their dates and the names of banks through which they were paid should be entered
under the columns provided for this purpose in the statement of account (second and third
copies) - these entries are necessary to have a complete record of the paid cheques returned.

At the time of sending the copy of the statement of account with the paid cheques, a printed
covering letter should be used as a covering letter - this also contains a counterfoil which is
required to be returned by the account holder acknowledging receipt of the cheques and
confirming the balance in the account. It is important to get back the acknowledgment
(counterfoil) duly signed by the customer (in case of debit balance, over appropriate revenue
stamp) and the matter should be followed up until it is received.

If any difficulty is experienced in obtaining the counterfoils containing the acknowledgment-

cum-balance confirmation promptly and regularly from a customer, the Branch Manager should
suitably notify the customer, regretting the Bank's inability to continue the facility and should
withdraw it.

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5.13 Dormant Current Accounts

A savings as well as current account should be treated as inoperative / dormant if there are no
transactions in the account for a period of two years. For the purpose of classifying an account as
inoperative, both the types of transactions, i.e. debit as well as credit transactions induced at the
instance of customers as well as third party should be considered. RBI has clarified that interest
on term deposits credited to the account of the customer should be treated as customer induced
transaction since it is according to the mandate of the customer. In such cases, ,the account
should be treated as an operative account as long as the interest on term deposit account is
credited to the Saving Bank account. The Saving Bank account can be treated as inoperative
account only after two years from the date of the last credit entry of interest on fixed deposit
account. The Current A/c termed as dormant should be transferred in February and August each
year to Sundry Deposit Account - "Unclaimed Balances" maintained under the head "Sundry
Deposit". The total of the balances in this head being reflected in the General Ledger account
"Sundry Deposits".

Accounts should not be transferred to Sundry Deposit Account - "Unclaimed Balances" in the
following cases:

a) Where an account is stopped under a garnishee or other Court order

(b) Where operations of an account are stopped till the grant of legal representation is
received
(c) Where, for particular reasons, discretion would dictate that an account should remain
current.(If, for instance, there is an operative account no. I and a dormant account no. II with a
small balance, and the account holder is known to be doing active business, it would ordinarily
be decided not to transfer the balance of the dormant account no. II to Sundry Deposit Account -
"Unclaimed Balances").

Operationalising the Dormant / Inoperative accounts

Branches should identify all the inoperative accounts, not operated for more than two years, to be
classified as inoperative account through system every half year. Branches should approach the
customers and inform them in writing (A suitable system generated communication will be sent
to such customers ) exhorting them to (a) activate their accounts or (b) they may be asked to
provide details of their existing Bank account details, if they are shifted to new area so as to
transfer the amount lying in the account.

Branches are required to make an Annual review to identify inoperative accounts and send
communication to the customer stating that the account will slip into the inoperative/dormant
category within 3 months. In all such cases, where the accounts continue to be inoperative even
after sending a written reminder, the customers will be contacted over ‘phone or in person for
getting the accounts activated and a record thereof shall be maintained at the branch. In cases
where the letters sent by the Bank are returned undelivered, the branch should make efforts to
contact the customer immediately thereafter by approaching the introducer or the neighbours at
the last recorded address and gather information about the accountholder’s present whereabouts.
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In all other cases, i.e. accounts with balances of less than Rs 1,000/-, system generated reminders
should be sent after one year from the date of last customer induced operation in the account and
necessary follow up through phone calls/ personal visits to the address given at the time of
account opening/ last recorded address for getting the account activated. If necessary help of the
introducer /customer’s neighbours be sought to contact / locating the customer for the above
purpose. In case of deceased customer the details of legal heirs are to be obtained.

Steps to be taken when requests for activation are received

When a request for activation of a dormant account is received, approval for activation should be
accorded by a designated officer at the branch. She/he will verify and satisfy her/ himself that the
account was opened in a KYC compliant manner and the reasons adduced by the account holder
for not operating the account are genuine. Fresh set of KYC documents in respect of residence
proof shall be obtained and the same should be confirmed by sending letter to the above address
given by the customer. Further it should be seen that the amount of deposits being made is
commensurate with the occupation level of the customer, as declared in the account opening
form and the transaction should be closely watched.

Before returning a cheque with the reason "Account closed", the officer should first ascertain
(from the Cheque Book Issue Register) the title of the account and search for the account in the
identified Dormant Current Accounts. If an account is traced in the Dormant accounts, before
paying the cheque, the balance of the dormant account (as noted in the Register) should be
transferred from Sundry Deposit Account - "Unclaimed Balances" to the appropriate current
account ledger. All particulars of the dormant account available in the Register should be noted
in the regular ledger account. While effecting the transfer of balances of dormant accounts from
Sundry Deposit Account - `Unclaimed Balances' to current account ledgers, any payment (i.e.
debit vouchers) from this account should be permitted only under the signature of two authorised
officials, one of whom must be the Branch Manager who will do so after satisfying themselves
that the proposed operations on the accounts are under circumstances which do not arouse any
suspicion. The drawers' signatures on cheques on inoperative accounts should be verified with
more than usual care. Such cases are to be reported to Regional Manager immediately.

Under Section 26 of the Banking Regulation Act, 1949, banks are required to submit to the
Reserve Bank of India the balance of accounts dormant for ten years. A record of the date of last
operation in dormant account is, therefore, necessary so that amounts in accounts dormant for ten
years can be remittted to the Reserve Bank of India.

It should be borne in mind that the particulars of accounts dormant for ten years are to be
obtained from:
a) Current Accounts identified and marked to by the system
b) Current accounts which may be dormant for ten years (but balances of which are not
transferred to Sundry Deposit Account - "Unclaimed Balances") for some special reasons.

It is of utmost importance that the balances in all accounts which are dormant or where
operations are few and far between are confirmed on the Bank's usual Balance Confirmation
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Letters. The Managers should give personal attention to see that this is done. Letters (Specimen -
Appendices V and VI) may be sent to account holders whose accounts have been dormant with
comparatively small balances for a considerable time. The shorter letter (Specimen - Appendix
V) should first be sent to the account holder whose account is dormant. A diary note may be
taken for a reminder to be sent six months later. At the expiry of six months the account should
again be scrutinized. If the account holder has not taken appropriate action either by closing the
account or by resuming transactions, the second and longer letter (Specimen - Appendix VI) may
be sent. The Branch Managers are advised to use these forms with discretion. They should not
hesitate, where circumstances require, sending a polite, specially worded letter, instead.

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 APPENDIX I

DECLARATION AND UNDERTAKING TO BE OBTAINED FROM CURRENT

ACCOUNT-HOLDER (COMPANIES/FIRMS) NOT HAVING ANY
BORROWING/BANKING FACILITY WITH ANY OTHER BRANCH/BANK

Date:

To,
The Branch Manager,
Aryavart Bank
Branch_________________________

Dear Sir,

With reference to my/our application dated________________________for opening current

account in your bank, I/We confirm and declare that I/We do not have any advance or other
banking facility from any branch of your bank or of any other bank and I/We undertake that
I/We shall not obtain any advance or other banking facility from any other branch of your bank
or of any other bank without giving to you prior written notice.
Yours faithfully,

(Authorised Signatories)

(To be signed by all Partners of a firm/to be signed by authorised Directors of a Limited

Company)

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 APPENDIX II

DECLARATION AND UNDERTAKING TO BE OBTAINED FROM CURRENT

ACCOUNT HOLDER (COMPANIES/FIRMS) HAVING BORROWING/BANKING
ARRANGEMENT WITH THE BANK / OTHER BANKS

Date:

To,
The Branch Manager,
Aryavart Bank
Branch_________________________

Dear Sir,

With reference to my/our application dated_______________________for opening current

account with your Bank, I/We furnish below the details of all borrowings/banking arrangements
made by us with your bank as well as other banking institutions:

Name of the Bank and Address Nature and details of banking /

borrowing arrangement

We confirm and declare that the above are all the existing banking/borrowing arrangements
made by us. We undertake to furnish to you promptly details of any changes in respect of the
above and/or any other information in this connection, which may be required by you.
Yours faithfully,

(Authorised Signatory)

(To be signed by all Partners of a firm/to be signed by authorised Directors of a Limited

Company.)

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 APPENDIX III
Specimen of Register of Statements despatched to Account Holders
Year______

Account Title of the Janu Febr March April May June July August September Remark
Number Account ary uary s
A1 Amit &1 2 2 1 and so on
Co.
A2 Attract & 2 2 2 1 and so on
Co.
A3 A. V. & 2 2 2 3 and so on
Co.
A4 A. X. & 3 3 2 5 and so on
Co.

Instructions:

1. The record may be kept ledger-wise and period-wise either in the same register/pass book or by
using separate registers/pass books.

2. Cut sheets containing twelve months (from January to December) may be provided in the
register/ pass book as per the requirements of the Branch, preferably for five years. The cut
sheets may be provided on the lines of the existing Daily Extract of Overdraft Balances. The
columns may, however, be provided as per the specimen.

3. The dates on which the statements (for previous month) are sent to the customer may be
mentioned in the appropriate month-wise columns provided in the register/pass book.

4. In the case of monthly statements, all endeavours should be made to send the statements to the
customers before the 5th of the subsequent months.

5. A similarly ruled register/pass book may be maintained for other periodical statements of
accounts.

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 APPENDIX IV

Specimen of letter of Undertaking for return of Paid Cheques to be obtained From Account
Holders

On stamped paper of appropriate value Place :

Date:

To,
The Branch Manager,
Aryavart Bank
Branch_________________________

Dear Sirs,

Re. : Our Current Account with your branch at..........................

In consideration of your having, at our request, agreed to return to us each week/month cheques
drawn by us on your Branch at......................, we hereby undertake and agree with you as
follows:

(1) We shall confirm the balance whenever called upon by the Bank to do so.
(2) We shall give you a receipt and acknowledgement for the cheques delivered each week/month
in the prescribed form.
(3) We shall keep the said cheques safe and secure for a period of at least eight years from the date
of their payment.
(4) We shall not part with the said cheques except when required by law.
(5) We shall produce the said cheques before the Income Tax Authorities whenever called upon to
do so.
(6) We agree to indemnify you against any losses, damages, costs, expenses, etc., you may incur or
be put to by reason of your acting upon our request as above.

Yours faithfully,

________________
(Authorised Signatories)

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 APPENDIX V
Specimen of First Letter of Advice - Inoperative Accounts

Ref. No. Date.........................

_________________________________________
_________________________________________
_________________________________________

Dear Sir/Madam,

Re. : Your Current Account

We observe that your current account has been dormant for some time and your balance
at the close of business today is Rs........................in your favour.

2. We trust that it is not your desire to cease banking with us and we would be very glad if
you would resume deposits in and withdrawals from your account.

3. If the account does not suit your immediate needs, we will endeavour to meet your
requirements if you will very kindly communicate with us.

Yours faithfully,

Manager

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 APPENDIX VI

Specimen of Second Letter of Advice - Inoperative Accounts

Ref. No. Date..........................

_________________________________________
_________________________________________
_________________________________________

Dear Sir/Madam,
Re.: Your Current Account

We observe that your current account has been dormant for some time and your balance at the
close of business today is Rs._____________in your favour.

2. We trust that it is not your desire to cease banking with us and we would be very glad if
you would resume deposits in and withdrawals from your account.

3. If the account does not suit your immediate needs, we will endeavour to meet your
requirements if you will very kindly communicate with us.

4. Should you, however, have decided definitely to discontinue making use of your account
with us, we should be glad if you would please instruct us regarding the disposal of the balance
standing to your credit and return to us the unused cheque forms in your possession.

Yours faithfully,

Manager

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 APPENDIX – VII
Specimen Statement of current Accounts Opened/Maintained in the Names of Close Relatives of
Staff Members

BRANCH FOR THE QUARTER ENDED

Name Account Account Activity Constitution Name(s) of Remarks

of the opened introduced Proprietor/Partners/ on
Account on by Directors and particulars conduct
of staff member who is a of
close relative of the Account
Proprietor/Partner/Director Minm.
& nature of relationship balance,
cheques
returned,
overlimit
granted
if any
etc.

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 APPENDIX – VIII

ARYAVART BANK: REVISED CURRENT ACCOUNT RULES

Opening of Accounts Current accounts would be opened for approved persons/firms

such as
Individual - Single Accounts.
Two or more individuals - Joint accounts
Sole proprietary concerns.
Partnership Firms.
Joint Hindu Families or Firms.
Limited Companies.
Associations, Clubs, Societies, etc.
Trusts.
Executors and Administrators.
Provident Funds.
Liquidators.
Other Banks.
State Financial Corporations.

Note: In approved cases, branches may open non-operating

accounts called "Collection Accounts".
Account Opening Form Common Account Opening Form and Bill Indemnity Letter should
be completed in all respects and signed by all the account holders
irrespective of the mode of operations on the account.
Opening and Introduction The account shall be opened on the basis of any of the documents
of Accounts/ stipulated below. Such documents are Passport/PAN Card/Voter’s
Identification of the Identity Card/Driving Licence/Aadhar Card and recent passport
Customer size Photograph.
Address Proof Passport/ Voter’s Identity Card/Driving Licence/ Aadhar Card
Declaration re. Borrowing Depositors enjoying any credit facilities with other Bank(s) must
Facilities with Other furnish full particulars of such facilities with the name(s) of the
Banks banks concerned. The Bank has every right to refer to the lending
Banks concerned for Status reports/No Objection Certificate
before opening such other bank borrowers’ CD accounts with the
Bank.
Minimum Deposit For Rs.5000/= for Individuals.
Opening the Account Rs.10,000/= for Firms/Business Establishments.
Restrictions NIL (as to the number of deposits into and withdrawals from the
account per day).
Joint Accounts of Can be opened with operational instructions “Either or Survivor”
Individuals or Former or Survivor” or “Any One/All of the Joint Account
Holders”.
Other Accounts While the operational instructions can be in any manner (say
either or survivor or former or survivor or any one
Partner/Director/Trustee etc,), the same would be jointly
authenticated in the account opening form in case of Partnership
Firms and in case of Limited Companies or Trusts or Societies etc
would be in accordance with the Board Resolution or the Trust

164 | P a g e
 Deed or the Bye Laws as the case may be.
Alterations in Operational Are possible with the consent of ALL the joint account holders.
Instructions Bank will not be bound to act on the instructions of one or some
only of the joint account holders regarding such alteration.
Death of a Balance in the account shall be paid to the legal representative of
sole depositor or last such sole depositor or the surviving or the last surviving
surviving Depositor depositor, as the case may be.
Legal representative shall mean either the executor or the
administrator who has obtained Probate or Letters of
Administration or the holder of a grant of Succession Certificate
or of any other proper grant of legal representation to the estate
of such deceased depositor. In the case of the firms or companies
etc fresh operational instructions may be given upon the death of
any authorized signatory.
Deposits are made by A Paying-in-slip, obtainable from the Branch. In addition to Cash
means of and Currency notes, the Bank receives for collection and credit to
customers’ accounts, bills, notes, cheques, Hundies, Interest and
Dividend Warrants etc.
However, separate pay-in-slips should be deposited for the
different instruments listed above. In respect of cheques, separate
pay-in-slips should be deposited for local and upcountry
collections. So also, separate pay-in-slips should be deposited for
cheques drawn on Aryavart Bank-local and upcountry branches.
Customers are particularly requested to cross all cheques
intended for collection before paying them into their accounts.
Such deposits of cheques can be at any other CBS/MBB branch
for credit to parent account at a CBS/MBB branch.
Cheque Books Cheque book will be issued and the depositor is required to tick in
the relevant box in the account opening form itself. The same will
be issued upon the Bank’s discretion and subject to recovery of
stipulated charges.
Account holders are requested to examine carefully the cheque
books issued to them and to verify that the number of forms in
each cheque book issued is correct and that the running numbers
of cheques are in serial order.
Subsequent cheque books will be issued upon submission of the
duly completed requisition slip in the last-used cheque book.
Depositors should ensure safe custody of their cheque books and
follow all the instructions contained in the cheque books
themselves carefully.
Drawing of Cheques Writing should be clear, distinct and legible.
& Cheques must be drawn on the printed forms provided by the
Cheques Drawn to Order Bank in such a way as to prevent alterations or addition after
or for smaller amounts issue.
The Bank reserves the right to itself to refuse payment of cheques
drawn otherwise or to ‘Order’ or for smaller amounts.
Cheques must not be post-dated.
The amount of a cheque must be stated both in words and figures.
The Bank will refuse payment of cheques on which the signature
does not exactly correspond with that on record at the Bank.
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Crossing of Cheques & No alteration canceling the crossing of a cheque will be
Alterations therein recognized unless the full signature of the drawer is appended to
the alteration and the altered cheque is presented for payment by
the drawer or his known agent. Otherwise the cheque will not be
paid.
Stop payment Instructions The Bank will register instructions from the drawer of a cheque to
stop payment of it, but cannot undertake any responsibility in case
such instructions are overlooked in the absence of any written
confirmation or if the cheques had already been paid in the
normal course. Acknowledgement would be given by Bank for
such instructions.
Interest on Current No interest will be allowed on balances on Current Accounts.
Deposits
Charges Bank’s charges levied for different types of transactions/services
are displayed in the Bank’s website www.aryavart-rrb.com.
A charge may be made on all accounts where the average balance
does not in the Bank’s view, compensate for the number of cheque
forms and amount of stationery used and labour involved in
keeping the account.
Minimum Balance Minimum balance as stipulated above should always be
Charges maintained. Otherwise, penalty would be levied for non-
maintenance of the requisite minimum balance. The Bank reserves
the right of closing any account after previous intimation if it is
not operated upon satisfactorily or if a minimum average credit
balance is not maintained or for any other reason whatsoever.
Issuance of Cheques Cheques must not be issued before the necessary funds have been
beyond available funds credited to the relative account and clear balance is available. If
cheques be presented when there are insufficient funds to meet
them, payment will be refused and the cheques returned. Repeated
disregard of these instructions will entail the summary closing of
the account.
Accounts must not be overdrawn without any prior
arrangement/approval of the appropriate authorities.
Nomination Facility The nomination may be made in the account opening form itself in
all personal accounts/sole proprietary accounts whereever such
nomination is desired by the account holder(s).
Dormant/ Accounts which are not operated upon for more than one year
Inoperative Accounts would be automatically tagged as Inoperative/Dormant account
and such accounts made inoperative/dormant can be reactivated
only by the depositor himself operating on the account.
Cheques Payable only at Cheques drawn by the depositors would be payable only at the
the parent branch parent branch upon presentation or at CTS Centre. Should the
depositor desire any payment at par facility, Multi-City Cheuqe
books are made available by CBS branches for payments through
other CBS branches, subject to stipulations.
Transfer of Funds From No transfer of funds from one account to another would be
One Account to Another allowed without the written authority of the account holder(s)
from whose account funds are being transferred. Such authority
letter should be signed in the same manner as the cheques on the
account are signed. It is preferable to either give standing
166 | P a g e
 instructions for regular transfer of funds or to issue cheques for
the purpose.
Deposit/ Depositors can either deposit or withdraw cash from other CBS
withdrawal of cash from branches than the parent CBS branch (where the account is
other than parent CBS maintained). While there is no restriction on cash deposits,
branch withdrawals are restricted to a maximum of Rs.25,000/= only.
Such withdrawals would be allowed only to the depositor(s) and
not to third parties. The authorised employee representative of the
depositors –who interacts with the branch officials on a daily
basis-would not be treated as third party.
Statement of Accounts Account statements are made available periodically as per
arrangement and through internet banking as well. The customers
should verify the entries therein at regular intervals.
No entry must be made in the pass book/statement, except by a
Bank official. Any error or omission should immediately be
brought to the notice of the Bank. The Bank will not be
responsible for any loss arising from the neglect of this
precaution.
The entries can be made of individual cheques deposited or for the
total of the cheques deposited in a pay-in-slip as per the
customer’s option and this option should be intimated in advance
to the Branch officials.
Clear Balances It should be understood that although entries may have been made
to the credit of an account and such entries initialled by an officer
in the pass book/statement, should such credits be made up of
cheques, which have to be collected, the amount they represent is
not available for drawing until the proceeds have been released
by the Bank.
Mandate/ The customer may authorise, for his convenience, an agent or
Power of Attorney nominee to operate on his account. Such an authority is given
either by way of Mandate Letter or Power of Attorney. KYC
Norms would be applicable to the Power of Attorney Holders
also.
By mandate letter the particular banker is informed that certain
powers have been delegated whereas a power of attorney acts as
a general notice and authority.
A power of attorney may be special or general. A special power of
attorney authorises a person to act in a single transaction whilst
authority to act in more than one transaction such as a bank
account or generally, is a general power of attorney.
The power of attorney is a stamped document. A power to operate
an account will not include, by itself, a power to overdraw or
borrow money.
Authority or power to borrow by the attorney should
definitely/explicitly be stated/embodied in the instrument.
Revocation of Power of The authority granted to an attorney to operate on the account is
Attorney/ revoked EITHER by specific instructions by the account holder(s)
Mandate Letter which should be in writing, OR (a) where the donor (or
mandator), or one of the donors (or mandators) is deceased
becomes insane, insolvent or bankrupt; (b) where there is more
167 | P a g e
 than one attorney with power to all of them to act JOINTLY the
power is revoked on the demise of one of them.
A notice of cancellation by one of the donors (or mandators) will
also have the effect of withdrawal of authority.
General The Bank reserves its rights to:
 Delete, alter or add to these Rules at any time, and the
amended rules shall be displayed on the Bank’s website from
time to time and also in the branches’ notice boards which
shall be binding on the customers.
 Opening of any account will be at the Bank’s sole discretion.
 Close any account after giving at least 15 days’ written
notice, and without assigning any reason whatever, if in its
sole discretion, the dealings are not satisfactory. In such
cases, the customers concerned should surrender their
unused cheque leaves to the Branch concerned forthwith.

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 CHAPTER 6

TERM DEPOSIT SCHEMES

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 CHAPTER 6

TERM DEPOSIT SCHEME

All officers dealing with the Term Deposit accounts must thoroughly acquaint themselves with
the Bank's Term Deposit Rules, study the directives issued by the Reserve Bank of India
regarding such deposits from time to time and keep abreast of changes, amendments, etc. and
strictly adhere to the instructions contained therein.

6.1 Introduction of Accounts

Provision for introduction has become optional and not mandatory as per RBI guidelines.
Identification of customer has to be done on the basis of Officially Valid Documents (OVDs) as
per KYC guidelines issued by RBI and Bank’s KYC Policy.

6.2 Opening of Accounts

To fall in line with the RBI’s guidelines on Know Your Customer (KYC) policy the account
opening form has been modified. The Branches are required to obtain the revised account
opening form while opening Savings Bank, Current Account, all types of term deposits,
Overdraft and Cash Credit account.

A new form is to be obtained at the time of opening of accounts for new customers and also the
same form for opening an additional account in an existing Customer ID until Bank designs a
one pager application form for already KYC compliant accounts for additional banking needs.

Opening-cum-Specimen Signature Card hereinafter referred to as ``the card''. Full name,

occupation and address of the prospective account holder(s) should be entered on the card. The
current or saving account number, if any, maintained by the applicant(s) should also be entered
on the card.

6.3 Nomination in Term Deposit Accounts

Nomination option should be emphasized to exercise to evade future inconveniences as per RBI
and Bank’s Policy.

6.4 Obtaining Permanent Account No. (PAN)

With effect from 1.11.1998 quoting of PAN or GIR No. is compulsory.

6.5 Paying-in-Slips
After the card is completed by the depositor(s), the paying-in-slip should be filled in. While
filing the paying-in-slip, needful care should be taken to cancel the inapplicable alternatives as
well as ticking at the head and in the body of the slip. All the particulars in the paying-in-slip
should be filled in. The names of all the depositors should be written after the words ``in the
name(s) of.'' Instructions as to whom the amount of the deposit is to be paid should be written
after the word ``repayable'' (e.g. ``either of us or survivor'' or ``both of us jointly or survivor,''
etc.). The prospective account holder should sign against the word ``By'' before paying in the

170 | P a g e
amount; if the amount is received by post, the remark ``remittance by post'' should be written
there against. Before cash is paid in, the paying-in-slip should be scrutinized and initialled
/signed by an official and entered in the Receipt Scroll Book by the scroll clerk.

The received paying-in-slip should be returned to the officer. The Deposit Receipt should
thereafter be prepared and particulars of the deposit recorded in the appropriate Ledger in the
system. The number of the Deposit Receipt and Ledger Folio number should be entered on the
paying-in-slip.

6.6 Rates of Interest and Minimum Amount of Deposit

Hitherto, the Reserve Bank of India issued directives from time to time regarding the rate of
interest payable on deposits. Branches were required to pay interest strictly in terms of these
directives.

Interest rates now stand freed. Branches should be guided by the communications received
periodically on Interest Rates on Deposits payable by our Bank.

Branches should not accept Term Deposits beyond a period of 120 months, in terms of the
Reserve Bank of India directive. If large sum of deposit is offered to be deposited for periods
beyond 120 months, a prompt reference to Regional Office should be made before accepting
such a deposit.

The minimum maturity period for term deposits has been reduced to 7 days from 15 days.
The minimum amount per single deposit for period between 7 days to 14 days will be Rs.
1,00,000/-.

6.7 Need to open Savings Bank Accounts

It is desirable that the Term Deposit account holders also maintain Savings Bank accounts with
the Bank so that the maturity proceeds of these Term Deposits can easily be credited and
subsequently utilized by the customer. All those customers willing to get the interest amount
accrued on term deposits on regular monthly, quarterly or half-yearly frequency credited to their
saving accounts without hassle. Accordingly, the customers should be suitably advised about the
need to have Savings Bank account also at the Branch.

6.8 Types of Accounts:

Term Deposit accounts may be opened in the names of:
a. Individual - Single Accounts
b. Two or more individuals - Joint Accounts
c. Sole Proprietary Concerns
d. Partnership Firms
e. Illiterate Persons
f. Blind Persons
g. Minors with or without parents if age above 10 and can sign straight
h. Minors unable to sign straight or below 10 years of age with guardian
i. Limited Companies
171 | P a g e
 j. Associations, Clubs, Societies, etc.
k. Trusts
l. Joint Hindu families or HUF
m. Municipalities
n. Government and Quasi-Government Bodies
o. Panchayats
p. Religious Institutions
q. Educational Institutions
r. Charitable Institutions

6.9 Minimum Amount of TDR’s

Term Deposits Metro & Urban Rural & Semi-

Urban Branches
Double Benefit Deposits Rs.5,000/- Rs.1,000/-
Fixed Deposit (Minimum per Receipt) (Minimum per
Monthly Income Certificate Receipt)
Quarterly Income Certificate
Short Deposit
Recurring Deposit Rs.500/- Rs.100/-
(Minimum monthly instalment
amount)

Please note the following exceptions of minimum amount criteria for term deposit receipts and
where extant instructions to be followed:

i) Automatic renewal
ii) Staff accounts
iii) Subsidy kept under Government sponsored schemes; Margin Money Deposits, Earnest
Money Deposits and Court attached / ordered deposits.
iv) In case of automatic renewal, while it has been made as an exception from the minimum
size criteria, branches may advise the customers to build up their deposit balance as per these
new criteria.

6.10 Period of Term Deposits:

It has now been decided in a bid to avoid ambiguity and provide operational convenience, the
Recurring Deposit/Monthly/Quarterly Income Certificates should be issued in completed
months/quarters, as the case may be.

6.11 Preparation and Issue of Deposit Receipts

Branches should ideally print the Term Deposit Receipts and should maintain a receiving register
where delivery of the Term Deposit Receipts and should be duly acknowledged by the
depositor(s) or authorized representatives. The appropriate Receipt Book should be used at the
time of preparing the receipts. Receipts should be issued free from alterations. Details of receipts

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issued should be duly noted in Counter foil. Those which are spoiled in preparation should be
cancelled. The signature portion on the cancelled receipt should be torn off and the word
“cancelled'' should be written on the receipt under the initials of the checking officer. In no case
should the spoiled receipt be removed from the Book. Before receipts are issued, it should be
ascertained that cash is received, if the deposit is by cheque, it should be made certain that the
cheque is realized.

Branches may issue deposit receipts against cheques/drafts/pay orders drawn on local Banks and
may pay interest on such deposits from the date on which the relative instrument gets adjusted in
the Bank's account at RBI/SBI/BOI etc.

“When the period prescribed is a calendar month running from any arbitrary date, the period
expires with the day in succeeding month immediately preceding the day corresponding to the
date upon which the period starts save that if the period starts at the end of a calendar month
which contains more days than the next succeeding month, the period expires at the end of the
latter month''.

A deposit is made on 11-2-2005 for six months. It falls due for payment on 11-8-2005, i.e. 6
months after the date of deposit. A deposit made on 30-8-2005 for 6 months will become due for
payment on the last day of the month of February 2006 i.e. on 28-2-2006. (Normally the Receipt
should have become due on 30th but there are only 28 days in February 2006).

When the due date of payment of a deposit is a holiday or a non-business working day, interest
should be paid for the intervening holiday/non-business working day, irrespective of whether the
depositor seeks repayment on the succeeding working day or later on e.g. If the Due Date of
payment of a Term Deposit is 1-4-06 and 1-4-06 and 2-4-06 happen to be holidays and if the
depositor seeks payment on 4-4-06 (or on any subsequent date) and not on 3-4-06, which is the
immediate succeeding day, interest in such case is payable for 1st and 2nd April 2006 only.

Interest so payable should be calculated on the maturity value in case of Double Benefit Deposits
and Recurring Deposits and on the principal amount in case of other term deposits.

In case of manually prepared Term Deposit Receipts, the Receipt should be prepared from the
card and the paying-in-slip. Full names of all the depositors (as appearing on the card), rate of
interest and the term of deposit (as appearing on the paying-in-slip) should be entered in the
appropriate places on the Receipt. The principal amount of deposit should be written in words
and figures. If the deposit is made in the joint names of two or more depositors, instructions (in
accordance with those on the card) regarding repayment of deposit should be entered in red
ink/ball-point pen on the Receipt in a complete form, for example, “Either or Survivor'' or “Both
Jointly or Survivor'' etc., under the initials of the officer(s) signing the Receipt. The counterfoils
of the Receipt should also be completed. Branches should give preference to printed Term
Deposit Receipts than preparing it manually.

After the Receipt and the counterfoil are written, the officer authorized to sign should first verify
from the paying-in-slip that the amount has been paid in / cheque has been realized and thereafter
check the Receipt and its counterfoil from the relative card and the paying-in-slip. He should
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initial/sign the paying-in-slip and the Receipt and initial the counterfoil. The officer authorized to
sign as Manager should initial the paying-in-slip and the counterfoil of the Receipt and sign the
Receipt after comparing the particulars entered on the Receipt with the paying-in-slip and the
card. The Receipt should be delivered to the depositor on surrendering the counterfoil of the
relative paying-in-slip.

The signing powers for Term Deposit Receipts are as under-

Signatory (Officer)
For Instruments upto and May be signed singly
inclusive of Rs.50,000/-
For Instruments above Must be signed by double official
Rs.50,000/-

Note: At one-officer Branches where the Manager is the only official in the supervisory cadre,
the second signature would necessarily have to be that of clerk-cashier.

It is incumbent on the Officer/Clerk-Cashier who signs first to satisfy that the second signature is
obtained in the manner specified above. Authorized signatories should append their signature
code numbers while signing Term Deposit Receipts.

The Term Deposits receipts in the name of Govt. Dept / Institutions etc. should invariably
bear the full name of the same and not the abbreviations

6.12 Custody of Undelivered Term Deposit Receipts

Term Deposit Receipts which remain undelivered for over a week from the date of issue should
be kept in a safe/cupboard under dual control till they are delivered to the concerned depositors.
Proper record of such receipts should be maintained in a pass book for future reference.

6.13 Calculation & Payment of Interest

Hitherto, the Reserve Bank of India issued directives from time to time regarding the rate of
interest payable on deposits. Branches were required to pay interest strictly in terms of these
directives. Interest rates now stand freed. Branches should be guided by the communications
received periodically on Interest Rates on Deposits payable by our Bank.

In case of change in rate of interest, existing deposits shall continue to run upto maturity at
originally contracted rates but the renewal shall be done at prevailing rate of interest as on date.

In terms of the Reserve Bank of India directive, interest should be calculated at quarter or larger
intervals (and not monthly). However, if any depositor insists on monthly payment, interest on
Fixed Deposit, Branches may agree to do so, provided that the amount of interest paid every
month is not more than the discounted value of the interest for one month, so that even if interest
is allowed on the interest so paid, the aggregate amount (i.e. amount of interest paid monthly
together with the interest that may accrue on the amount so paid in one month) would not exceed
one month's interest on the deposit calculated on a quarterly basis..

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 The Reserve Bank of India directive permitting payment of 1% p.a. additional interest does not
apply to minor son/daughter of the deceased employee and therefore, banks are not permitted to
allow additional interest on deposits accepted from such minor sons/daughters. In the case of
term deposit standing in the joint names of the employee with his/her minor child, the additional
interest of 1% would continue till the date of maturity of the original deposit irrespective of the
intervening incident like the death of the employee.

In terms of the Reserve Bank of India directive, bank should not accept deposits for a period
longer than ten years. However, Branches may accept Fixed Deposits for a period of six months
and above for any periods subject to a maximum period of ten years, in multiples of complete
months or even for a period where the terminal month is incomplete. For example, deposits can
be accepted for 13 months, 41 months, 38 months and 12 days, etc. However, the payment of
interest for the incomplete terminal quarter of terminal month would be in accordance with the
rules stated in the portion of ‘Monthly Income Certificates'.

Interest on deposits ceases on maturity of the deposits. Interest for the overdue period on Deposit
Receipts, if auto-renewal provision is not accorded, tendered for renewal should be paid at the
prevailing interest rate of saving accounts from the date of account turned overdue/matured.

Note: Branches are to follow the guidelines from time to time with reference to interest
calculated by the system and they are to be cross-checked.

6.14 Payment and Renewal of Term Deposits

A Deposit Receipt may be paid on or after due date on being surrendered, duly discharged by the
depositor on a revenue stamp of appropriate value (at present Re 1/-). The proper mode of
discharge of a Deposit Receipt would be “Received Payment'' or “Received Payment by
Renewal'', as the case may be, followed by the signature of the depositor (in accordance with
repayment instructions). A discharge on a revenue stamp is not necessary in the following cases:
i) When a Deposit Receipt is renewed,
ii) When the deposit is in the name of a Co-operative Society exempt from stamp duty,
iii) When the entire proceeds of the Deposit Receipt or the accrued interest (the deposit
having been renewed for the principal amount only) are credited to the current or savings
account of the depositor.

a) This modified Term Deposit Receipts will have provision for recording renewal endorsements on
the reverse of the receipts for 3 renewals i.e. the same receipt will be issued to the customers
after suitable endorsement duly authenticated on the reverse.

b) This modified format will also have the provision for systematically recording Bank’s lien when
a loan is granted to the customer against the receipt.

c) In the revised procedure, a separate debit voucher will be prepared on renewal instead of the old
receipt as was done earlier.

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A depositor may want to renew only the principal amount of the Deposit Receipt and draw the
accrued interest in cash. In such a case, a revenue stamp must be affixed on the interest voucher
if the amount of interest is more than Rs.1000/-. No revenue stamp is required if the interest
amount is credited to the depositor's current or savings account with the Bank.

Before a Deposit Receipt is paid / renewed, it should be seen in the Ledger that it is not under the
LIEN of the Bank.

Instructions regarding cancellation of cheques and Payment Scroll Book given in the Chapter on
Cash and Clearing also apply to Term Deposits.

Deposit Receipts issued by the Bank are NOT TRANSFERABLE by endorsement. The amount
of a Deposit Receipt can be paid only to the depositor on identification and in accordance with
the instructions on the card. Payment of a Deposit Receipt to a third-party must be authorized by
a separate letter from the depositor which should accompany the Deposit Receipt duly
discharged. The signature on the letter of authority must be verified and the person identified
before payment is made to him.

Sometimes a depositor may forward to the Bank an un-discharged Deposit Receipt with a
covering letter requesting renewal of the deposit. In such a case, the Deposit may be renewed if
the covering letter is signed as required for repayment of the deposit noted on the card. Before
the deposit is renewed, the signature(s) on the covering letter should be verified.

In respect of acting on the basis of communication received by way of letters, fax, emails etc. for
making third party payments, the branches must take extra precautionary measures. Branches
should ensure genuineness of the communication by means such as contacting the depositor/s
either over telephone or by other available means of communication and record the same on the
authority letter.

In case of renewal of Term Deposits frozen by enforcement authorities, while obtaining the
request letter from the depositor also advise him to indicate the term for which deposit is to
be renewed. In case the depositor does not exercise his option of choosing the term for
renewal, Branch may renew the same for a term equal to the original term.

6.15 Overdue Deposit Receipts

Renewal of overdue deposit receipt and interest for the overdue period are governed by the
Reserve Bank of India directives issued from time to time. Branches must adhere to the terms of
the directives in this regard.

The rules governing renewal of overdue deposit and interest payable on overdue deposits are as
under:

i) Interest on overdue receipt for the overdue period would be payable only when the
receipt is renewed from the date of maturity stated on the receipt. The interest allowed
shall be at the appropriate rate operative on the date of maturity, of such overdue deposits
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 which shall be payable only on the amount of deposit so renewed. In case a depositor
wishes to renew an overdue deposit from the date of presentation, the deposit would not
earn interest from the date of maturity (original due date) upto the date of presentation of
the overdue receipts.

ii) Renewal of domestic overdue term deposits shall be for a period extending up to at least
15 days beyond the date of renewal. Such renewed receipts will, however earn interest
from the date of maturity at the appropriate rate as mentioned in the preceding paragraph.
In the event premature withdrawal of such renewed deposit is sought within such
extended period of 15 days no interest shall be payable at all on such deposits from the
date of maturity of the old deposit receipt.

iii) Since deposits can be accepted for a maximum period of ten years, while renewing
an overdue term deposit, the maximum period would be ten years from the date of
presentation of the Term Deposit for such renewal, excluding overdue period. For
example, if a term deposit maturing on 1.6.2014 is presented for renewal on
1.10.2016, it can be renewed as of 1.6.2014 for a period of 148 months (overdue period
28 months + 120 months maximum period allowed).

iv) In the cases of overdue deposits renewed, interest for the overdue period could be paid in
cash at the time of presentation for renewal, only if a calendar quarter (viz. 31st March,
30th June 30th Sept. and 31st Dec.) has intervened between the date of (original) maturity
and the date of presentation for renewal. If, however, the depositor has not originally
opted for quarterly payment of interest, the interest for the overdue period would be
payable in cash at the time of presentation for renewal, only if a calendar half-year (viz.
30th June or 31st December) has intervened between the date of (original) maturity and
the date of presentation for renewal. In either case, the interest would be payable only
upto the end of previous quarter/half-year as applicable.
v) Some depositors may desire to renew an overdue deposit from the date of maturity
including the interest accrued on the receipt upto the date of maturity. Such requests may
be acceded to and the interest upto the original date of maturity may be added to the
principal deposit amount and the aggregate renewed as of the date of original maturity. In
such cases, the accrued interest would also qualify for interest for the overdue period.

6.16 Automatic renewal of maturing Term Deposits

All maturing Term deposits would be automatically renewed for the same tenure (as the
maturing deposit) at the rate of interest applicable on the date of maturity if no intimation has
been received from the depositor as regards to renew the concerned deposit for a shorter or
longer period if prior instructions are obtained at the time of account opening only.

In case the depositor/s send an advance (before the date of maturity) intimation, expressing a
desire to renew the concerned deposit for a shorter or longer period then deposit would be
renewed according to the depositor/s’ desire.

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Various situations that could arise relating to renewal of deposits:-

Deposit has been The depositor comes The amount will be repaid to him
renewed within 15 days of date of in the manner he desires without
automatically automatic renewal and any interest for the intervening
does not wish to have the period
deposit renewed
Deposit has been The Depositor comes to the The applicable interest for the
renewed branch after 15 days but intervening period as per the
automatically before the end of the fresh Term Deposit Rules (i.e. interest
due date of the at the rate applicable for the
automatically renewed period the deposit has remained
receipt and wishes to have with the Bank with quarterly
the funds back compounding) will be paid to the
depositor along with the
principal. However, penalty for
before maturity payment would
be levied as per the guideline
from Head Office from time to
time.

The matter regarding imposing of penalty in case of premature closure / withdrawal of deposits
(Term / Short term deposit) is decided by Bank from time to time must be followed in this
regards.

Branches are not to take out print-outs of the receipts of the renewed term deposits. The print
outs would be taken out and handed over to the customer as and when he calls at the branch. The
Authorising Officials however have to carefully verify that the automatic renewal details appear
correctly in the system.

The following instructions are also applicable for renewal of deposits:

i) Fresh receipts would be issued

ii) In case of Under Lien receipts, noting would be made on the reverse of the
receipts in the space allotted for the same
iii) TDS would be applicable as per extant guidelines

6.17 Payment and Renewal of Deposits before Maturity

Depositors may request repayment of their deposits before maturity. Repayment of term deposits
before maturity is permissible in terms of the directives of the Bank issued from time to time.
Branches should be guided by the instructions conveyed by Head Office from time to time in
respect of pre-closure penalty.

For the purpose of this directive, where:-

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(i) On the death of the depositor, the deposit is allowed by the Bank to be held in the names of
one or more legal heirs or legal representatives of the depositor, either jointly in their names or
along with other persons or separately in their names by splitting up the deposit; or

ii) The deposit has been made in the name of one person alone and the name of another is
allowed to be added by the Bank; or

iii) the deposit has been made in the name of two or more persons and the names of one or some
of them are allowed to be struck off or substituted by the Bank, such transactions shall not
merely on that account be regarded as involving renewal of the deposit or premature repayment
of the deposit provided the original term of the deposit is not reduced in any case.

6.18 Payment of interest on the Term Deposits of a deceased depositor

As per RBI directives in the event of death of the depositor before the date of maturity of the
deposit and the amount of the deposit is claimed after the date of maturity, the bank shall pay
interest at the contracted rate till the date of maturity. From the date of maturity to the date of
payment, the bank shall pay simple interest at the applicable rate operative on the date of
maturity, for the period for which the deposit remained with the bank beyond the date of
maturity.

However, in the case of death of the depositor after the date of maturity of the deposit, the bank
shall pay interest at saving deposit rate operative on the date of maturity from the date of
maturity till the date of payment.

6.19 Interest on premature withdrawal/renewal:

In the case of Fixed Deposits and Short Deposits, interest will be paid at simple rate of
interest on premature withdrawal/renewal of the deposit.

The Manager may premature renewal of Term Deposits before maturity without limit for the
specific purpose of re-depositing the full amount with the Bank to earn a higher rate of interest.

Request for and repayment before maturity of a Term Deposit in joint names should be made
by/to ALL the depositors and ALL of them must give their discharge on the back of the Deposit
Receipt, irrespective of the instructions given to the Bank regarding the mode of operation on the
account viz., "either or survivor" etc. Where the joint accounts are operated upon by "Former or
Survivor", such request can be made under the signature of the FORMER account holder only.

Repayment before maturity of a Term Deposit is as per delegation approved by the Head Office
from time to time.

6.20 Extension of Period of Deposit before Maturity

Renewal of deposit before the date of its maturity shall not be regarded as involving premature
repayment provided the deposit is held by the Bank after the date of renewal for a period longer
than the remaining period of the original contract; on such renewal the rate of interest in respect
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of the period upto the date of renewal shall be the rate of interest applicable for the period during
which the deposit has remained with the Bank upto the date of renewal and in respect of the
period after the date of renewal, at the rate of interest applicable for a period equal to the period
of renewal.

Extension of the period of deposit as stated above does not invoke the provisions of penal
interest for premature withdrawal of deposit.

This provision of extension of period is applicable to Fixed Deposits/Short Deposits. Extension

of period must be allowed only on the written requests of ALL depositors and surrender of
original Receipt duly discharged by ALL depositors. Where the joint accounts are operated upon
by `Former or Survivor', such requests can be made under the signature of the FORMER account
holder only.

The procedure for extension of period of deposit is similar to the repayment of deposit before
maturity but without applying penal rate of interest.

The extended deposit should be treated as a new deposit and a new Receipt should be issued.

6.21 Premature withdrawal of Deposits Renewed Before Maturity

Sometimes, a customer after renewing the deposit before maturity, may request the Bank to pay
the deposit even before the expiry of the period of the original contract. Whether a renewal
amounts to a premature withdrawal or not depends upon either the subsequent withdrawal is
made before the expiry of the period of the original deposit or after the expiry of that period. If
the subsequent withdrawal is made after the expiry of the period of the original contract, the
renewal does not amount to a premature withdrawal of the original deposit. If the subsequent
withdrawal is made before the expiry of the period of the original contract, the renewal will
certainly amount to a premature withdrawal of the original deposit.

Bank’s Circular No. 01/169 dated 21-08-2019 on Interest Rate on Deposit Accounts
(Premature Withdrawal):

 Deposit Accepted/Renewed before 01-12-2016: In case of premature withdrawal, “the

applicable rate of interest on the date of acceptance of deposit for the actual period which
the deposit has remained with the Bank or contracted rate of interest whichever is
LOWER shall be applicable
 Deposits Accepted/Renewed on or after 01-12-2016: Penalty on premature withdrawals
shall be applicable for fresh/renewed deposits w.e.f. 01-12-2016:

Penalty Details:
Category of Deposits Penalty on Premature
Withdrawal of the Deposit
1. Deposits less than Rs. 5 lakh withdrawn on or after NIL
completion of 12 months
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2. Deposits less than Rs. 5 lakh withdrawn prematurely 0.50%
before completion of 12 months
3. Deposits of 5 lakh & above withdrawn prematurely 1.00%

 No interest will be paid for premature withdrawal below 7 days in case of Term Deposits,
below 3 months in case of Recurring Deposits and below 12 months in case of NRE
deposits
 In case of the deposits which have been prematurely closed for renewing for a longer
period than the remaining period of the original contract tenure, there shall be “No
Penalty” for the premature withdrawal irrespective of the amount of the deposit.
 No penalty for premature withdrawal of term deposits due to death of depositors.
 No penalty on premature withdrawals of term deposits by Staff, Ex-Staff, Staff/Ex-Staff
Senior Citizens and spouse of deceased staff as a first account holder.

6.22 Transfer of Term Deposit Accounts from One Branch to Another

The Manager may accede to requests by depositors for transfer of Fixed Deposits before maturity
to another Branch for genuine requirements of the depositors. Depositors of Term Deposit
Accounts are allowed to transfer the balances at any time before maturity as deposits repayable
on the expiry of a fixed term with interest on a compounded basis at the rate applicable for the
period during which the deposit has remained with the Bank, without any penalty.

I. Procedure at Transferor Branch

i) A letter requesting the Branch to transfer the account to another specified Branch of Bank
should be obtained along with the relative pass book. This letter should be signed by ALL the
depositors in the case of joint accounts irrespective of the mode of operations specified in the
account and the signatures verified by two officers where more than two officers are working in
a Branch or by an authorized official, where only one officer is available.

ii) Original specimen signature card duly completed and signed by ALL the depositors in case of
a joint account should be sent for the use of the transferee Branch and photocopies of the original
documents should be retained for record purposes. The operational instructions and the order in
which the names are entered thereon (in case of joint accounts) should be exactly the same as
those in the existing account. All the signatures and operational instructions on the card should
remain verified in the same manner as stated in (i) above under a rubber stamp reading
"signatures verified". Full signatures of the officer/officers authorized to sign on behalf of the
Branch will be required.

iii) The account should be transferred to the specified transferee Branch through CBS sol change
command and physical documents should be sent via registered post with acknowledgement card
with all the due prudence.

vii) The letter of request for transfer should be attached to the physical application form,
signature card.

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viii) If the depositor has given any standing instructions in respect of crediting instalments for
the Recurring Deposit account, these may be cancelled under approval of the depositor.

ix) If the account is KYC compliant, there is no need for submitting fresh KYC document of new
address along with the request of transfer of the account. The depositor may submit the fresh
KYC of changed address, if applicable, within 6 months after transfer of the account.

II. Procedure at Transferee Branch

i) For Term Deposits, change of Sol ID must be done in the system by the Transferor Branch and
same should be recorded and authenticated on the TDR receipt. For RD, a new pass book for the
account should be prepared as usual. A remark "The Account is transferred from our_________
Branch" should be made on the inside first page of the pass book. The first entry to be made in
the pass book should be on the printed line relating to the latest month, for which the instalment
has been deposited at the transferor Branch, with the noting,

"By Amount Transferred from Branch." Only the total of instalments already paid in at the
transferor Branch (i.e. exclusive of interest) should be entered in the "Credit (instalments)" and
"Credit Balance (instalments)" columns. The space in the pass book page(s) pertaining to the
previous instalments deposited at the transferor Branch should be neatly ruled across.

ii) The pass book of the new account together with the pass book of the account of transferor
branch should be sent to the depositor.

iii) Standing instructions in regard to payment of further instalments may be obtained from the
depositor, if required.

6.23 Payment or Renewal of Deposits at Other Branches

A Deposit Receipt of one Branch of the Bank must not be paid or renewed at another Branch of
the Bank.

6.24 Renewal and delivery of deposit receipt to customer which is received from another
bank for collection

The IBA Code for Banking Practice provide that in case a deposit receipt is received for
collection from another bank, the receipt should not be renewed by the issuing bank and
delivered to the customer directly. Instead, the issuing bank should either pay to the collecting
bank or else, the instrument should be returned if the issuing bank has any valid reasons not to
pay.

6.25 Notice of Assignment

When a Branch receives notice from a third-party of an assignment of the amount due under a
Deposit Receipt of the Bank, the matter should immediately be referred to Regional Office for
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instructions. In such a case, the Branch should ask to see the original of the assignment together
with the notice of assignment signed by the assignor, i.e. the depositor. It is only where the
assignor has refused to sign the notice that the assignee is entitled to give notice of the
assignment to the Bank. The assignee, on producing the assignment duly stamped and also
producing the Deposit Receipt, can demand payment of the deposit on the due date and can give
the Bank a good discharge for such payment without any further signature by the assignor.
Though it is advisable to obtain the discharge of the depositor on the Deposit Receipt before
payment thereof on the due date, such discharge cannot be insisted upon. A note of the receipt of
notice of assignment should be made against the relative entry in the Ledger, duly verified by an
officer of the Bank.

The Bank is entitled to set off the debts, if any, due to the Bank by the depositor at the time the
notice of assignment is received by the Bank. When the Bank receives the notice of assignment,
the assignee should be informed of the amounts due from the depositor and requested to note that
the Bank will exercise its right of set off on the amount that will become due under the Receipt.

6.26 Term Deposit in Lieu of Earnest Money

Branches are sometimes required to issue Term Deposit Receipt on account of earnest money,
security deposits, tender deposits, etc., as security for performance of contracts and payable by
contractors to government/quasi-government departments or any other institution or agency. The
Central Government has amended Rule 274 of the General Financial Rules, 1963, so as to
include therein deposit receipts of all scheduled banks as acceptable securities. All local bodies
are free to choose any bank depending upon operational convenience and it is not incumbent on
them to have banking arrangement with only one Bank. As per Reserve Bank of India
clarification there is nothing in the instructions given by the Government to the local
bodies/statutory authorities which require them to deal exclusively with State Bank of India or
any particular bank. In case any difficulty is faced by Branches in this regard with any
Government department, etc. Branches should advise Head Office through their respective
Regional Office to take up the matter with the concerned Government department for doing the
needful.

Branches should obtain an application (Specimen - Appendix III) from the depositors before
issuing the term deposit receipt in favour of the Government department or any other institution
or agency. While issuing a term deposit receipt, in addition to the name of the concerned
Government department or any other institution or agency, the caption of the tender giving brief
description of job work and the number and date of the tender should also be mentioned in the
term deposit receipt with a view to identify the particular tender for which the deposit receipt has
been issued. Accordingly, term deposit receipt in lieu of earnest money may be issued in the
following form:
“Name of the depositor – A/c Government Department / representatives”

For the purpose of payment of interest on term deposit to the depositor, a letter from the
Government department or any other institution or agency in whose favour the term deposit
receipt is issued, authorising payment of interest to the depositor(s) is required to be obtained.
This letter should be submitted by the depositor along with the application. In the event of any
dispute between the depositor and the Government department/institution/agency in whose
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favour the term deposit receipt has been issued and if the authority to pay interest is revoked by
the Government department/institution/agency interest on such term deposit receipt becomes
payable only to the Government department/institution/agency in whose name the term deposit
receipt has been issued.

When any Government department so accepts a term deposit receipt from the contractors, it is
obligatory on the part of that Government department to seek confirmation from the concerned
Bank which has issued the term deposit receipt. Branches should confirm the issuance of deposit
receipt when requested by the Government department, etc.

In terms of the RBI Directive, banks are not permitted to receive Deposits at Call from parties
other than the Banks, Life Insurance Corporation of India and Unit Trust of India. Branches are,
however, permitted as a special case, to issue Deposit at Call Receipts to the tenderers
(contractors) for the amounts earmarked against the earnest money held in current accounts with
them for submission to the Government Departments, Local Bodies with the tender papers
relating to construction contracts. Such a course of action will not be construed as a violation of
the RBI directive on rates of interest on deposits.

6.27 Withdrawal of the Earnest Money Deposit: If any contractor i.e. the depositor who has
obtained the term deposit receipt requests for withdrawal of the earnest money deposit on the
plea that he had not participated in the bid or he was not awarded the contract, Branches should
insist on a release order from the Government department or any other institution or agency in
whose favour the term deposit receipt has been issued for releasing the deposit amount.
However, in cases where the contractor did not submit his tender in time and therefore, the
Government department refuses to issue a release order, Branches may pay the amount of term
deposit receipt to the depositor without insisting on the release order from the Government
department provided they are fully satisfied that the depositor i.e. the contractor was unable to
submit the tender in time for genuine reasons.

6.28 Deposit Receipt under Lien

Whenever a lien on a Deposit Receipt in favour of the Bank is created, a note to this effect
should be prominently made in the Receipt / System under the verification of an officer.

6.29 Advances against Bank’s Term Deposit Receipts

The Bank may consider a request from the depositor/s for loan/overdraft facility against Bank’s
own Term Deposit/s including recurring deposits duly discharged by the depositor/s on execution
of necessary security documents. Overdraft/loan facility is also applicable against third party
deposits. At present Bank allows loan/overdraft facility up to 90% of the accrued deposit value
(principal plus accrued interest till date) in name of depositor whereas 75% of accrued deposit
value in case of loan/overdraft facility against third party deposits. The Bank may also consider
loan against deposit standing in the name of minor, however, a suitable declaration from
Guardian stating that loan is for the benefit of the minor, is to be furnished by the depositor-
applicant. At present, Bank charges rate of interest 1% plus prevailing contracted rate of interest
on term deposit in case of loan/overdraft facility extended to depositor him/herself and 2% plus
in case loan/overdraft facility against third party deposits.
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The term loan/overdraft against term deposit shall expire on the date of maturity of term deposit
itself. In case of continuation of LATDR as well as automatic renewal of Term Deposit under
lien, the rate of interest on term deposit account shall be in accordance with the prevailing rate of
interest on the current date for the applicable term deposit period. In such cases of renewal of
term deposits at prevailing altered rate of interest, the prevailing rate of interest on such LATDR
accounts shall also be altered in accordance 1% (loan/overdraft facility in name of depositors)
higher than the altered rate of term deposit at the time of renewal and 2% higher than the
renewed and altered rate of interest in case of loan/overdraft facilities to the third parties.

6.30 Lost Deposit Receipt

When a depositor reports that he has lost or misplaced his Deposit Receipt, he should be asked to
notify the Branch in writing. The signature of the depositor (on the letter) should be verified and
a note ``Deposit Receipt Reported Lost/Misplaced'' should be made in the System under the
verification of an officer quoting reference to the letter of the depositor.

The Manager should consider the circumstances in which the Deposit Receipt is reported lost or
misplaced and satisfy himself that the depositor has made all possible efforts to trace the lost or
misplaced Deposit Receipt. If the Deposit Receipt is reported to be stolen, the depositor should
lodge a complaint with the police and inform the Bank of the result of the police investigation.

When the Manager is satisfied that the Receipt is irretrievably lost by the depositor(s), he may
issue a duplicate Term Deposit Receipt against an Indemnity Letter as per specimen given in
Appendix IV provided a request in writing is made by ALL the joint depositors setting out the
circumstances of the loss. Branches should obtain prior approval of the appropriate higher
controlling authority for issuance of duplicate Deposit Receipt in lieu of lost Receipt against
Indemnity Letter, when the amount of the lost Term Deposit Receipt is beyond the delegated
authority of the branch. The Indemnity Letter should be stamped as an agreement and signed by
all the joint depositors - the signatures thereon should not be attested.

The Indemnity Letter requires to be executed by two sureties. However, joining of sureties in
execution of the indemnity may not be insisted upon except in cases where the higher
Controlling Authority considers that the circumstances are such that it is in the Bank's interest to
insist on execution of the indemnities by sureties also.

When a request for advance is made against a duplicate Receipt so issued or against a Lost
Receipt where the depositors have not obtained a duplicate Receipt, Branches should refer the
matter to the Regional Office and accordingly act upon as per their advice and delegation in this
regard issued from to time.

Where a Deposit Receipt sent by the Branch to the depositor by post is irretrievably lost in postal
transit, a duplicate receipt may be issued against a simple Letter of Request-cum-Indemnity as
per specimen given in Appendix V duly signed by all the depositors. In such cases Branches
should ensure that:
i) All Deposit Receipts are sent to the depositors in India by Registered Post
Acknowledgement Due and to the depositors in foreign countries by Registered Post.
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 ii) A proper record is kept of all Deposit Receipts sent by post and acknowledgement slips
obtained duly signed by the depositor(s).
iii) When a depositor reports non-receipt of Deposit Receipt, effort is made to establish that
it is irretrievably lost in transit.
iv) Delegations of powers are to be followed as per Head Office guidelines, issued from time
to time.

A letter of request-cum-Indemnity (Specimen - Appendix V) should be signed by all the

depositors in the presence of an Officer. Where this is not possible for genuine reasons, the
Letter of Request-cum-Indemnity should be executed before a Notary Public. Branches should
carefully verify the signature(s) of the depositor (s) on the Letter of Request-cum-Indemnity.

When a duplicate Term Deposit Receipt is issued, an appropriate remark to that effect should be
made in the System.

6.31 Loss of Term Deposit Receipt issued in lieu of earnest money:

Where the depositor i.e. the contractor who has obtained a term deposit receipt in lieu of the
earnest money deposit in the name of Government department, etc., (also refer to paragraph 28
above) has reported the loss of the said term deposit receipt, a duplicate term deposit receipt in
lieu of the original reported lost may be issued after obtaining prior approval of higher
Controlling Authority therefore and a stamped indemnity (Specimen - Appendix VI) duly
executed and signed by both - the depositor i.e. the contractor as well as the Government
department, etc., in whose favour the deposit receipt is issued. However, as regards execution by
the Government departments, etc., such an indemnity should be signed by a person who is
authorised to sign on behalf of the Government/quasi-Government department or any other
institution or agency.

6.32 Brokerage
No brokerage on deposits in any form to any individual, firm, company, association, institution,
or any other person should be paid.

6.33 Deduction of Tax at Source

Under the provisions of the Income Tax Act Branches are required to deduct tax at source from
the interest payable on term deposits in excess of the limits prescribed and advised by them
through Head Office from time to time (presently Rs.40,000/- for common depositors and Rs.
50,000/- for Senior Citizens). Deduction of tax at source should also be made from interest
payable on Recurring Deposits. Non-compliance would attract severe penalties on the bank. At
present the rate of TDS is 10% for the customers with PAN and 20% for the customers without
PAN. The customers having PAN can also submit for 15 G/H for non-deducting TDS as his total
income from all sources including the TDS income falls below the threshold for income tax
payment. In no case, Form 15 G/H shall be accepted from a person without PAN or having
income more than the income tax exemption limit of income at present Rs. 2.50 lakh/ Rs. 5.00
lakh*.

6.34 Acknowledgement by Branches at the time of submission of Form 15-G / 15-H

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Branches are not required to deduct TDS from depositors who submit declaration in Form 15-
G/15-H under Income Tax Rules, 1962. Branches are advised to give an acknowledgment at the
time of receipt of Form 15-G/15-H. This will help in building a system of accountability and
customers will not be put to inconvenience due to any omission on part of the branches.

6.35 TDS submission/ Form 26Q/Form 16A

Branches should submit the TDS amount deducted from different sources of payments to Income
Tax Department through Regional Offices on monthly basis within stipulated timeframe without
fail with proper description of the TDS deduction heads viz. Interest payment, payment against
services, consultancy services, rents, etc. Failure on timely submission of TDS may invite heavy
penalty from Income Tax Authorities.

After submission of TDS, Branches should also ensure filing of Form 26 Q on Income Tax portal
providing the details of persons/firms from whom TDS have been collected and deposited, PAN
numbers and other needful information viz. Amount of Interest/Payment, TDS Amount, Challan
Number, etc on quarterly basis within stipulated timeframe. Failure in filing 26Q would result in
the persons/firms against whom TDS have been collected and remitted are not being able to
claim refund of TDS amount. As a result this may lead to serious complaints often turning into
litigation and penalty for Bank. In addition, filing of 26Q after the stipulated time with delay
would cause Rs. 200 per day penalty from the last due date of filing till the date of filing or the
challan amount for which 26Q was to be submitted whichever is less.

After filing 26Q, Branch should not forget to download the Form 16A from the Income Tax
portal after few days and should give it to the customers without fail so that he/she may claim the
tax refund if willing.

6.36 Payment of Interest/Principal Amount of Deposit-Payment by Crossed Cheques, etc.

In terms of Section 40 A (3) of the Income-tax Act, 1961, payment of any expenditure to be
debited to the Bank's Profit and Loss Account, whether directly or through a Suspense Account,
in an amount exceeding Rs. 20,000/- in a single day must be made by a crossed cheque or a
crossed bank draft. Crediting the amount into the payee's account is supposed as payment by
such crossed instruments.

However, the provision of the Section 40 A (3) will not be applied if the payment could not be
made by crossed cheque or bank draft due to "exceptional or unavoidable circumstances" and the
assessee furnishes evidence as to the genuineness of the payment and the identity of the payee. In
this connection, the hold-up in cheque clearing operations in banks or any other similar
circumstances which is likely to cause reasonable apprehension in the mind of the payee that the
crossed cheque/bank draft will not be cleared expeditiously would constitute "exceptional or
unavoidable circumstances".

In terms of the Income-tax (Second Amendment) Act, 1981, repayment of the deposit amount
(together with the interest, if any) of Rs.20,000/- or more must be made by an account payee
cheque/bank draft/payslip or by crediting the savings bank account or current account with the
Branch of the person(s) to whom such deposit has to be repaid. [Branches should satisfy
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themselves about the identity of their depositors. In this connection it is essential that an
introduction in a deposit account is treated as a substantive step having real signification and not
a mere formality.

As per the provisions of the Income-tax (Second Amendment) Act, 1981, for the purpose of
arriving at the aggregate amount of Rs. 20,000/- not only the amount of deposit(s) held by the
depositor(s) himself (themselves) but also those held jointly with any other person(s) with the
Branch (on the date of repayment of any such deposit) together with interest, if any, payable on
such deposit(s) should be reckoned. Where, by virtue of this provision being inapplicable
(namely, the aggregate amount being less than Rs.20,000/-) repayment of the term deposit is
desired IN CASH by the depositor(s), a Declaration (Specimen-Appendix VII) should be
obtained from the depositor(s). IT SHOULD, HOWEVER, BE CAREFULLY NOTED THAT
THE BRANCH CANNOT ABSOLVE ITSELF OF THE LEGAL OBLIGATION CAST BY
THE ACT MERELY BY RELYING UPON THE DECLARATION SO OBTAINED.

It should also be noted importantly that the failure to comply with the SAID
PRESCRIBED MANNER OF REPAYMENT will render the persons concerned liable to
imprisonment and fine.

Branches should make suitable notings in bold letters about the prescribed manner of repayment
in the Ledgers of all deposit accounts falling under the purview of the aforesaid Act so that the
repayment of such deposits (renewal or fresh) will be effected in accordance with the procedure
laid down in that respect.

6.37 Verification of Stock of Deposit Receipt Books Received from Head Office

It must be ensured that the stock of Deposit Receipt Books received from Head Office is intact.
The distinctive numbers on the Receipt forms in each Deposit Receipt Book should agree with
the serial numbers printed on the binding cover page of the Deposit Receipt Book.

6.38 Custody of Deposit Receipt Books and Counterfoils

A minimum working stock of blank Deposit Receipt Books may be issued to the departmental
officer for use. The balance stock of blank Deposit Receipt Books must remain locked under
dual control in a safe or almirahs. The stock on hand should be balanced periodically, say
quarterly. Counterfoils of all Deposit Receipts issued during the previous twelve months must be
kept in a locked almirahs.

6.39 FIXED & SHORT DEPOSIT ACCOUNTS

Fixed and Short Deposits in this Chapter are referred to as “Term Deposits".

Deposits which are repayable within less than 6 months are called Short Deposits; interest
thereon is calculated on the basis of 365 days in a year for the actual number of days the Short
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Deposit remains with the Bank. Deposits which are repayable after six months or more are called
Fixed Deposits; interest thereon is also calculated on the basis of 365 days in a year.

The due date for a Short Deposit is calculated by including the date of deposit and by excluding
the date of payment. A deposit made on 23-11-2005 for 91 days will mature on 22-2-2006 as
follows:

8 days November (including the date of deposit)

31 days December
31 days January
21 days February (excluding the date of payment)
Total: 91 days.

The date on which a Fixed or Short Deposit is made (or renewed) should be entered in the space
after “Notice of withdrawal given'' while the due date (calculated as shown above) should be
entered in the space after “Due''. Where upcountry cheques are issued for obtaining the Term
Deposit Receipts, Branches should not issue deposit receipts by giving immediate credit for
upcountry cheques even if the deposits are kept for more than six months.

6.39.1 Mode of Interest Calculation:

Mode of calculation of Interest on Short Deposits and Fixed Deposits for periods less than 12
months:

Short Deposits
On deposits repayable within six months(Short Interest should be paid for the actual
Deposits) number of days on the basis of 365
days in a year.
Fixed Deposits
On Deposits repayable after six months
(Fixed Deposits)
where the terminal month is incomplete Interest should be calculated for the
completed months and the actual
number of days on the basis
of 365 days in a year
where the terminal month is complete Interest should be calculated for
actual months.

Fixed and Short Deposit Entries

The entries for Fixed and Short Deposit receipts should be entered either from the relative
vouchers and verified from the Deposit at the time of issuing the Deposit Receipt or soon
thereafter. The details, such as receipt number, mode of payment, rate of interest, etc., should be
carefully entered if not in printed format.

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6.39.2 Payment of Half-Yearly Interest on Fixed Deposit Receipts

At the request of depositors, half-yearly interest on Fixed Deposits may be paid to them in cash
or credited to their accounts on 1st October and 1st April:

(a) Credited to his/her savings or current account, or

(b) Paid in cash

The standing instruction received from the depositors, should be kept in a separate card file. The
instructions should be arranged in 3 sections as under:

 Interest to be credited to savings accounts

 Interest to be credited to current accounts
 Interest to be paid in Cash

As per the standing instructions from the depositors, Branches are sometimes, required to remit
monthly/quarterly/half-yearly interest on the term deposits for credit of account of a specified
third party. While effecting such remittances, Branches should merely state to the beneficiary
that the amount is remitted as per the instructions from the depositor and nothing more except
where circumstances call for giving additional information or when the remitter specifically
advises to do so. The narrations like ‘By interest on FDR/MIC etc., which are normally used for
advising the depositors should be carefully avoided while crediting interest to the accounts of
third parties'.

Interest on premature withdrawal/renewal: In the case of Fixed Deposits and Short

Deposits, interest will be paid at simple rate of interest on premature withdrawal/renewal
of the deposit.

The Manager may premature renewal of Term Deposits before maturity without limit for the
specific purpose of re-depositing the full amount with the Bank to earn a higher rate of interest.

6.40 DOUBLE BENEFIT DEPOSITS(DBD)

Double Benefit Deposits provide a higher yield on the principal at the end of the stipulated
period as the interest is compounded on quarterly basis; but, the principal and the accrued
interest is paid only at the end of the period for which the deposit is placed with the Bank and not
monthly or half-yearly as in the case of other types of deposits. This scheme is useful for short
term and medium term investment ordinarily ranging from 6 months to 120 months.

The accounts may be opened in the names of:

(i) Individual — Single Accounts
(ii) Two or more individuals — Joint Accounts
(iii) Sole Proprietary Concerns
(iv) Partnership Firms
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 (v) Illiterate Persons
(vi) Blind Persons
(vii) Minors
(viii) Limited Companies
(ix) Associations, Clubs, Societies, etc.,
(x) Trusts
(xi) Joint Hindu Families or HUF (accounts of non-trading nature only)
(xii) Municipalities
(xiii) Government and Quasi-Government Bodies
(xiv) Panchayats
(xv) Religious Institutions
(xvi) Educational Institutions (including Universities)
(xvii) Charitable Institutions

6.40.1 Period and Amount of Deposit

Deposits under Double Benefit Deposit Scheme are accepted for a fixed period from six months
upto a maximum period of 120 months. These deposits, on maturity are repayable with interest
compounded on quarterly basis. These deposits may be accepted even for periods where the
terminal quarter/half year is incomplete. The incomplete quarter/half year of such deposits
should be reckoned at the end and for the incomplete quarter simple interest should be paid.

Deposits can be accepted for Rs. 5,000/- minimum per receipt in all Metro & Urban and Rs.
1000/- in Rural and Semi-Urban Branches. The following exceptions of minimum amount
criteria for term deposit receipts and where extant instructions to be followed:

i) Automatic Renewal
ii) Staff accounts
iii) Subsidy kept under Government sponsored schemes, Margin Money Deposits, Earnest Money
Deposits and Court attached/ordered deposits.

Since deposits in fractions are also accepted under Double Benefit Deposit Scheme, Branches
may conveniently issue certificates where the depositors request issue of Certificates of maturity
values in round sums. However, no rounding off upward or downward is allowed.

No Term Deposit of Rs. 50,000/- or above shall be opened with cash. Such term deposits shall be
opened through transfer of amount through the account of customer specifically.

Term Deposit of Rs. 50,000/- or above shall primarily be opened with PAN only whether
through transfer or cash (such term deposits not permissible in cash as per Income Tax Rules). In
case such account is being opened without PAN, needful reporting is to be done to IT Authority
under falling jurisdiction on Half-Yearly basis as per prevailing IT rules.

A cheque in favour of the account holder may be accepted for the credit of the account only if
the account holder is properly KYC compliant.

6.40.2 Preparation and Issue of Double Benefit Deposit Certificate

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Double Benefit Deposit Certificate should be prepared from the card and the paying-in-slip and
issued only after ascertaining whether cash is received by the Branch or cheque is realized.
"Maturity Value" of the Double Benefit Deposit Certificate is the ultimate amount repayable at
the end of the stipulated period together with the interest compounded quarterly. The DBD
Certificate shall be issued in printed form preferably.

6.40.3 Calculation and Application of Interest

Interest on Term Deposits shall be as applicable on the date of issue/renewal of the Term Deposit
Receipts. Interest on overdue term deposits will be payable at the savings deposit rate. Interest
would be paid for the actual numbers of days on the basis of 365 days in a year.

6.40.4 Repayment and Renewal

On the due date depositor will discharge the Double Benefit Deposit Certificate over revenue
stamp (in case of cash payment) at the back of the Certificate.

The Certificate itself will serve as debit voucher for the principal amount and a separate debit
voucher will be passed for the amount of interest due. Both the vouchers should be posted in the
Ledger. Before repayment, it should be ascertained that Double Benefit Deposit Certificate is not
under lien of the Bank.

Double Benefit Deposit Certificate is not transferable by endorsement. In absence of special

instructions the amount can be paid to the depositor in person in accordance with the repayment
instructions. Payment to third-party must be authorized by a separate authority letter duly signed
by the depositor, accompanying the discharged Double Benefit Deposit Certificate. The
signature on the authority letter should be verified and the person receiving the payment must be
identified before payment is made. In case an un-discharged Double Benefit Deposit Certificate
is received with a covering letter to renew the deposit, it may be renewed after verifying the
signature on the letter.

6.40.5 Automatic Renewal of Term Deposits on Due Date:

Unless there are specific instructions to the contrary, term deposits will be renewed for the same
tenure as was for the matured Term Deposit and rate of interest would be as prevailing on due
date. The TDR renewed under ARS would be given to the customer upon submission of e-mail
advice/original TDR duly discharged. In case the depositor/s send an advance (before the date of
maturity) intimation, expressing a desire to renew the concerned deposit for a shorter or longer
period then deposit would be renewed according to the desire of the depositor/s.

6.40.6 Premature Withdrawal/Closure of Term Deposit

The Bank, on request from the depositor, shall allow withdrawal of a term deposit before
completion of the contracted period agreed upon at the time of making deposit. While
prematurely withdrawing/ closing a deposit, “the applicable rate of interest on the date of
acceptance of deposit for the actual period which the deposit has remained with the bank or
contracted rate of interest whichever is LOWER shall be paid”. In addition, the Bank can levy
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penalty on premature withdrawal of Term Deposit, as applicable from time to time. The change
in this regard shall be notified to the customers and general public through Bank’s website i.e.
www.aryavart-rrb.com. Further, the Bank may disallow premature withdrawal of large Rupee
term deposit of Rs.15 Lakh and above of all depositors, including deposits of individual and
HUFs. Renewal of deposits before the date of its maturity shall not be regarded as involving
premature repayment provided the deposits is held with the bank after the date of renewal for a
period longer than the remaining period of the original contract. Penalty is also not applicable on
settlement of claims in the deceased depositor’s accounts in the case of a term deposit standing in
the name of deceased individual depositor and two or more joint depositors where one of the
depositors has died. For payment before maturity, in case the deposit receipt is in joint names, all
the joint account holders (Except F or S) have to discharge the Term Deposit Receipt. No interest
will be paid for premature withdrawal within 7 days in case of term Deposits (within 15 days for
term deposit less than 1 Lakh), within 3 months in case of Recurring Deposits and within 12
months in case of NRE Term Deposit. Premature withdrawal/closure of Term Deposit is not
allowed in Non callable Term Deposits viz. Tax Saver Deposits, etc.

6.40.7 Premature Renewal of Term Deposits

Extension of the period of Double Benefit Deposit before maturity is also possible, as in the case
of Fixed Deposits, without invoking the penal rate of interest subject to the usual condition that
the deposit is renewed for a period longer than the remaining period of the original contract.
Branches should follow the instructions given in general guidelines of this chapter as well as
Bank’s Circular on Interest Rate on Deposits. While prematurely closing a deposit for the
purpose of renewal, interest on the deposit for the broken period will be paid at the rate
applicable to the period for which the deposit remained with the Bank or contracted rate of
interest whichever is lower and not the contracted rate.

6.40.8 Settlement of Dues in Deceased Deposit Account:

If the Depositor has registered nomination with the Bank; - the balance outstanding in the A/c of
the deceased depositor will be transferred to the A/c of / paid to the nominee when valid claim on
prescribed format is received and the Bank is satisfied about the identity of the nominee.

The above procedure will be followed even in respect of a joint A/c where nomination is
registered with the Bank.

In Joint Deposit A/cs under operational instructions “operated jointly” where no nomination is
made when one of the Joint A/c Holders dies, the Bank is required to make payment jointly to
the legal heirs of the deceased person and the surviving depositor(s). However, if the Joint A/c
holders had given mandate for disposal of the balance in the A/c in the forms such as “either or
survivors”, etc., the payment will be made as per the mandate to avoid delays on production of
legal documents by the heirs of the deceased.

In the absence of nomination and when there are no disputes among the claimants, the Bank will
pay the amount outstanding in the A/c of deceased person against joint application and indemnity
by all legal heirs or the person mandated by all legal heirs to receive the payment on their behalf
without insisting on legal documents up to the limit approved by the Bank’s Board. This is to
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facilitate that the common depositors who are not put to hardship on account of delays in
completing legal formalities.

In case of premature withdrawal of diseased deposit accounts, the similar provisions for
premature closure in term deposit accounts shall be applicable without any penal provisions in
eligible cases where premature closure is permissible.

Premature Repayment of Term Deposit Accounts in Bank with “Either of Survivor” or

“Former or Survivor” Mandate

In case of term deposits with “Either or Survivor” or “Former or Survivor” mandate, banks are
permitted to allow premature withdrawal of the deposit by the surviving joint depositor on the
death of the other, only if there is a joint mandate from the joint depositors to this effect (RBI
Circular No.RBI/2012 13/168 DBOD No.Leg.BC.37/09.07.005/ 2012 13 dt.16.08.2012). The
joint deposit holders may be permitted to give the mandate either at the time of placing fixed
deposit or anytime subsequently during the term/tenure of the deposit. If such a mandate is
obtained, banks can allow premature withdrawal of term/ fixed deposits by the surviving
depositor without seeking the concurrence of the legal heirs of the deceased joint deposit holder.
It is also reiterated that such premature withdrawal would not attract any penal charge.

6.40.9 Settlement of Claims in Respect of Missing Persons:

The nominee/legal heirs of the missing depositor have to raise an express presumption of death
of the depositor after a lapse of seven years from the date of his/her being reported missing under
Section 107/108 of the Indian Evidence Act before a competent Court of Law. The claim in
respect of such missing person will be settled by the Bank if the Court presumes that he/she is
dead.

6.40.10 Advance against Double Benefit Deposits

Please refer above paragraphs under general guidelines

6.40.11 Term Deposits over Ten Years (Court Order)

The Domestic & NRO Rupee Term Deposits can be opened for minimum period of 7 days
(Minimum deposit Rs.1 Lac) and maximum up to 10 Years. For NRE Term Deposits, minimum
period is 1 Year and maximum up to 10 Years. However, Depositors are allowed for Domestic
Rupee Term Deposits to be opened for more than permissible period, i.e. 10 Years, in case of
Court Order issued in favour of the depositor. The Rate of Interest eligible for these Term
Deposit Accounts shall be the Rate of Interest applicable for the Domestic NRO & NRE Rupee
Term Deposits of Ten Years on the account open effective date.

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 6.41 ARYAVART TAX SAVER TERM DEPOSIT SCHEME
According to current income tax laws, under Section 80C of the Income Tax Act, one can claim
deduction for investments up to Rs 1.5 lakh in a financial year in tax-saving fixed deposits (FDs).
The amount so invested is to be deducted from gross total income to arrive at taxable income.18

 Only Individuals and HUFs can invest in tax saving fixed deposit (FD) scheme. A minor
can also invest jointly with an adult.
 The FD can be placed with a minimum amount of Rs. 1,000/-.
 The maximum amount can be deposited under this scheme is Rs 1.5 lakh in one financial
year which is the ceiling for tax saving investment under section 80C of the income tax
Act.
 These deposits have a lock-in period of 5 years.
 Premature withdrawals and loan against these FD's are not allowed.
 One can hold these FD's either in 'Single' or 'Joint' mode of holding. In the case the mode
of holding is joint; the tax benefit is available only to the first holder.
 The interest earned is taxable as per the investor's tax bracket and therefore, TDS is
applicable.
 A person can avoid TDS on the interest earned by submitting Form 15G (or Form 15H
for senior citizens) to the bank.
 Nomination facility is available for these FDs. However, no nomination facility is
available in case the deposit is applied for and held by or on behalf of a minor.

Maximum Deposit Rs. 1,50,000/- p.a.

Tenure Minimum- 5 Years, Maximum – Upto & Including 10 Years
Rate of Interest Normal Domestic Term Deposits as applicable to corresponding period
Premature Withdrawal Not permitted up to 5 years

18
https://economictimes.indiatimes.com/wealth/tax/tax-saving-fd-offers-convenience-safety-and-a-little-liquidity-
too/articleshow/57872984.cms?from=mdr
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 6.42 RECURRING DEPOSIT ACCOUNT
Every Drop Counts...19

Scheme An ideal way to plan for the future needs. Best way to save a fixed sum
every month for a fixed period and get a lump sum amount on maturity,
along with interest rate payable for term deposit.
Who can open :  An Individual in his/her own name.
 Individuals in their joint names with suitable repayment instructions.
 Minor represented by parents / guardian.
 Clubs, Societies, Associations, Educational Institutions, Trusts, Firms,
Partnerships, Joint Stock Companies, Executors, Administrators, HUFs,
Govt. Departments, etc.

Period of Investment 12 months to 120 months.

Amount of Deposit
 Minimum Rs.500/- for urban and metro branches & Rs. 100/- per
month for rural branches
 Deposit to be made in multiples of Rs.100/-/RD Amount, subject to
the minimum amount.
 No Maximum Limit on deposit.

Rate of Interest The rate of interest depends on the period of deposit, payable at the rate as
decided by the Bank from time to time.
Interest Payment  Interest is compounded on quarterly basis, credited to the account on half-
Frequency yearly basis and paid on maturity.

Penalty  Penalty @ Rs. 2.00 per Rs. 100/- per month is applicable, if any instalment
is not paid for the relevant month for the RD Period up to 5 years and @ Rs.
3.00 per Rs. 100/- per month for the RD period over 5 years

TDS on Interest  TDS is applicable as per norms.

Amount
Add-ons  Nomination facility
 Premature closure facility as per the rules lay down by the Bank.
 Loan facility up to 90% on the deposit

Recurring Deposit offers an ideal way to plan for the future needs, the best way to save a fixed
sum every month for a fixed period and get a lump sum amount on maturity, along with interest
rate payable for term deposit. Recurring Deposit is a product to provide a person with an

19
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 opportunity to build up saving through regular monthly deposits of fixed sum over a period of
time. Recurring Deposit is a special type of deposit account which enables a depositor
particularly from fixed regular income group to save by paying into the account an agreed fixed
sum of money on monthly basis for over a stipulated period. It also suits the fund requirements
of people from low income group who can add up decent sum by regular saving in smaller value
and thus a great tool for inculcating the habits of saving among people vulnerable to financial
exigencies.

The deposits in this type of account earn compound interest on quarterly basis. Interest rate on
recurring deposits is also calculated similar to the applicable rate of interest for other types of
term deposit accounts on the basis of tenure of holding. Moreover it offers rate of interest
uniformly irrespective of actual period of holding i.e. if a person opens a RD account for 24
months, his first instalment of 24 months holding period earns equal interest value as the last
instalment with holding period of one month only earning the same value. It means a depositor
enjoys higher interest under RD than DBD or other instruments for the amount being held even
for shorter period having less applicable rate of interest under other deposit instruments

The Recurring Deposit Scheme is designed to cater to the needs of people looking for smaller
value deposits but on regular basis basically suitable for salaried class and low income group.

The Recurring Deposit Accounts can be opened in the names of:

 An Individual in his/her own name.

 Individuals in their joint names with suitable repayment instructions.
 Minor below 10 under the guardianship of natural or legal guardian.
 Minor above 10 years with guardian or even without guardian subject to his providing his proof
of name and he can sign straight.
 Clubs, Societies, Associations, Educational Institutions, Trusts, Firms, Partnerships, Joint Stock
Companies, Executors, Administrators, HUFs, Govt. Departments, etc.

6.42.1 Opening of Accounts

When a prospective customer desires to open a Recurring Deposit account, he should be
requested to fill in the application form.

A Recurring Deposit account where the compounding of interest is to be done on quarterly basis
shall be accepted for periods in multiples of three months only upto the maximum period of ten
years. If large sums of deposits are offered for periods over 120 months,

Recurring Deposits will be in equal monthly installments. Minimum monthly installment will be
Rs.100/- with no upper limit for maximum monthly installments.

6.42.2 Deposit of Monthly Installments

Cheques drawn in favour of the account holder may be accepted if he maintains a current
account or a properly KYC compliant savings account at the Branch. Installment for any

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calendar month must be paid on or before the last working day of that month. If it is not so paid,
penalty will be charged on the installments in arrears at the following rates:

 Rs. 2.00 for every Rs. 100/- p.m. for deposits of 5 years and less,
 Rs. 3.00 for every Rs. 100/- p.m. for deposits of over 5 years

A fraction of a month will be treated as full month for the purpose of calculating such interest.

The total penalty so chargeable will be debited to the account and recovered from the total
amount repayable.

Where installments in the account are deposited in advance, penalty payable in respect of
delayed installments may be waived by branches against payment of equal number of advance
installment/s.

At the request of a depositor installments may be remitted by CBS free of charge by one Branch
to another Branch where the depositor maintains his Recurring Deposit account. Standing
instructions of the depositors to transfer the amounts of monthly installments from the
current/savings accounts to their Recurring Deposit accounts may be accepted free of charge.
Should the balance in the account be insufficient to make the transfer, the standing instructions
may be treated as cancelled under advice to the depositor.

In the case of defaults in the payment of installments, the depositor may either:

a) Regularize the account by paying the defaulted installments with a penalty as mentioned in
paragraph above, or

b) Continue the account till maturity without regularizing it in which case simple interest shall be
paid at the applicable rate for the entire period.

6.42.3 Acceptance of Annual Installments

Branches can also accept annual installments under the Recurring Deposit Scheme. This would
suit the requirements of corporate bodies, societies, etc., who may desire to create or invest funds
for specific purposes such as Sinking Fund, Gratuity Fund, Pension Fund, etc.

The minimum number of annual installments will be 5 and the maximum number of annual
installments will be 9. The amount of annual installment should be minimum Rs. 5000/- or in
exact multiple thereof. All other terms and conditions as applicable to Recurring Deposit
Accounts with monthly installments are also applicable to Recurring Deposit Accounts with
annual installments.

6.42.4 Opening of Accounts in the System

All the particulars of accounts, such as full names of account holders, special instructions, if any,
for repayment of the balance, address, PAN number and amount & number of installments, rate
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of interest etc. should be posted in the system from the card and these particulars should be
checked and initiated by an officer. The account number of the account that is opened should be
noted in the card and also on the relative pass book to facilitate easy reference.

6.42.5 Recurring Deposit Pass Books

Every Recurring Deposit account holder should be supplied with a Recurring Deposit Pass Book.

All the particulars, such as the name of the account holder, address, account number, the number
of installments, etc., should be cross verified with system on the cover page and the inside page
of the pass book. Every entry in the pass book must be verified and authenticated by an officer
under his initials. The summation of debit and credit columns in the pass book should be taken.

The date on which the last Installment falls due should be written on the first page of the R/D
Pass Book below the space provided for writing the maturity value.

As pass books of recurring deposit accounts are printed without the Rules, a separate printed
copy of the Rules is given to the account holders at the time of opening of the account who are
required to sign it. A printed copy of the Rules duly signed by the account holder should be
properly filed in a separate box file after writing prominently the account number at the top of it
on the right hand side for easy reference. An extra copy of the Rules may be supplied to the
account holder, if so desired.

No installment can ordinarily be paid into and no repayment can ordinarily be made from an
account without production of the pass book. If the pass book is mutilated/spoiled/lost, charges at
the rate prevalent at the relevant time should be made for a fresh pass book.

6.42.6 Calculation and Application of Interest

Rates of interest applicable to Recurring Deposits are subject to the Reserve Bank of India
directive on interest rates on deposits and are liable to change from time to time.

Interest on Recurring Deposits is calculated at quarterly rests on the basis of daily balance. Since
compounding of interest is done on quarterly basis, the interest will be calculated on the basis of
quarterly compounding but is to be applied every six months in September & March.

In computerized branches running on Finacle, the system takes care of calculation of interest.
After application of interest, the print copy of the interest sheets should be cross-checked, signed
and preserved for future use.

If any installment in arrears is paid at a later date, interest on the amount of arrears of
installments should be calculated for the month/s for which the installment was in arrears at a
rate specified in paragraph above.

Interest on Recurring Deposits accrues every year and comes for assessment on annual basis. In
case a depositor requests for a certificate of interest accrued on the Recurring Deposit, it may be
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issued to him for the relevant financial year. However, it should be made clear to the account
holder that the interest accrued on Recurring Deposit will actually be paid to the depositor only
on maturity.

6.42.7 Advice of Maturity Date

Branches may send the Maturity Date Advices to Recurring Deposit Account holders on
payment of last installment.

6.42.8 Repayment of Recurring Deposit

The total amount repayable to a depositor inclusive of interest depends on the amount of monthly
installments and the period for which it is invested. When all the installments stipulated by the
depositor are paid, the accumulated amount will be repayable together with accrued
interest 30 days after the last installment has become payable and has been paid, or the
date of maturity whichever date may have fallen later. For this purpose, the "date of
maturity" is that date corresponding to the date of opening of the account and falling in the
month subsequent to the month for which the last installment is due.

The examples of the due dates for repayment of deposits of accounts in which the last installment
is deposited on different dates are given in the following Table.

Date a/c No of Date of last Date of Due date of Remarks

opened installmen installment maturity repayment
ts
stipulated
a) 7.5.2005 12 1.4.2006 7.5.2006 7.5.2006Last installment paid in
the month it is due but
before the date
corresponding to account
opening date.
b) 1.3.2004 24 20.2.2006 1.3.2006 20.3.2006 Last installment paid in
the month it is due but
after the date
corresponding to account
opening date.
c) 12 14.10.2005 20.12.200 20.12.2005 Last installment paid in
20.12.2004 5 earlier month than the
month in which it is due
d) 17.5.2003 36 . 10.7.2006 17.5.2006 10.8.2006 System does not allow
adjustment of pending
installments after
expiry of RD period

But, under no circumstances, the interest will be payable beyond stipulated contractual
period for a particular Recurring Deposit account.

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6.42.9 Repayment of Recurring Deposit before Maturity

Sometimes depositors may request repayment of their deposits before all the stipulated
installments are paid. Branches should follow Reserve Bank of India or Bank’s directives in the
matter of premature withdrawal of deposits issued from time to time.

Interest amount every half-year has been calculated on monthly products and provided for and
debited to Profit and Loss Account — Interest on Recurring Deposits on the footing that the
monthly installments will be paid regularly during the stipulated period. The normal rate of
interest on Recurring Deposit is higher than the rate of interest payable to a depositor requesting
repayment of deposit before maturity. The difference between the interest at normal rate of
interest and the actual interest payable will be credited to Profit and Loss Account — Interest on
Recurring Deposits.

In the case of premature closure of a Recurring Deposit account within three months of its
opening no interest should be paid.

In other cases where the sole depositor or all joint depositors or all survivors of them wish to
discontinue the account before all the stipulated installments are paid, the amount of the
installments already paid will be repayable together with compound interest on monthly products
at a rate of interest one percent less than the rate of interest applicable to the period for which the
deposit has remained with the Bank subject to the directive of the Reserve Bank of India in this
regard for Term Deposits.

6.42.10 Payment of Balance of Deceased Account Holders

If a depositor or surviving depositor or the last surviving depositor dies before the stipulated
installments are paid, the account will be discontinued and the balance of installments in the
account will be repayable to the legal heirs of the deceased with interest as under:

(a) If deposit has run for less than 12 months, at the rate stipulated in Reserve Bank of India
directive on repayment of Term Deposits from time to time,

(b) If deposit has run for a period of 12 months or more but less than the contractual period, at
the rate applicable for the period for which the deposit has remained with the Bank from the date
of opening the account to the date of repayment,

(c) If the deposit has run for the contractual period or more, at the rate applicable for contractual
period.

6.42.11 Closing of RD Account

The Bank reserves the right to close any account in which the monthly installments are not
regularly paid. In such event, the amount of the installments already paid will be repayable
together with simple interest.

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If an account is closed within 12 months of its opening, charge at the rate prevalent at the
relevant time should be made.

Requests of customers to give retrospective effect as of the date of maturity for reinvestment of
proceeds of the overdue Recurring Deposit Accounts in other modes of Term Deposits can be
acceded to, subject to compliance of instructions.

6.43 M O N T H L Y I N C O M E C E R T I F I C A T E S
Moneys invested in this type of deposit (Monthly Income Certificate) provide fixed monthly
income by way of interest to the depositor for a specified period leaving the deposit amount
intact. The Scheme will specially appeal to retired people who have no pension. The monthly
interest installment should be credited to the savings or current account or recurring deposit
account of the depositor according to his instructions.

The accounts may be opened in the names of:

(i) Individual — Single Accounts

(ii) Two or more individuals — Joint Accounts
(iii) Sole Proprietary Concerns
(iv) Partnership Firms
(v) Illiterate Persons
(vi) Blind Persons
(vii) Minors
(viii) Limited Companies
(ix) Associations, Clubs, Societies, etc.
(x) Trusts
(xi) Joint Hindu Families (accounts of non-trading nature only)
(xii) Municipalities
(xiii) Government and Quasi-Government Bodies
(xiv) Panchayats
(xv) Religious Institutions
(xvi) Educational Institutions (including Universities)
(xvii) Charitable Institutions

6.43.1 Amount to be invested

Minimum amount that may be accepted for deposits under the Monthly Income Certificate
Scheme shall be Rs. 5000/- for Metro & Urban Branches and Rs. 1000/- for rural and semi urban
branches and the amounts above the limit can be accepted in multiples of Rs. 1000/-.

The monthly interest (discounted value) on deposits accepted as above is generally paid in
fractions. For example, on Rs. 600/- accepted for a period of 12 months at the rate of 8% p.a.,
monthly interest payable at discounted value amounts to Rs. 3.97. However, where it is desired
to receive interest in round amount, branches are allowed to accept deposits in fraction of Rs.
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100/- and correspondingly pay interest in round amount of Rs. 5/- or in multiples thereof. (It may
be noted that rounding up of interest is allowed only where deposit is accepted in fraction).
Branches should follow the tables supplied to them by Head Office from time to time showing
the amounts of deposits for different periods which would earn interest of Rs. 5/- or multiples
thereof at different rates of interest.

6.43.2 Interest
Rate of interest payable on Monthly Income Certificates is the same as that payable on Term
Deposits of equivalent periods.

6.43.3 Preparation and Issue of Monthly Income Certificate

Please refer general guidelines.

The signing powers for Monthly Income Certificate are as under-

Signatory ( Officer)
For Instruments upto and May be signed singly
inclusive of Rs.50,000/-
For Instruments above Must be signed jointly
Rs.50,000/-

Note: At one-officer Branches where the Manager is the only official in the supervisory cadre,
the second signature would necessarily have to be that of clerk-cashier.

It is incumbent on the Officer/Clerk-Cashier who signs first to satisfy that the second signature is
obtained in the manner specified above. Authorised signatories should append their signature
code numbers while signing Monthly Income Certificate.

6.43.4 Calculation and Credit of Monthly Interest

Although in terms of the Reserve Bank of India directive, interest should be calculated at
quarterly or longer intervals (and not monthly), banks are allowed to pay interest to the
depositors on a monthly basis (as is done in the case of deposits under Monthly Income
Certificate Scheme), provided, however, that the amount of interest paid every month is not more
than the discounted value of interest for one month, so that even if interest is allowed on the
interest so paid, the aggregate amount (i.e. the amount of interest paid monthly together with the
interest that may accrue on the amount so paid in one month) would not exceed one month's
interest on the deposit calculated on a quarterly basis.

Illustration: If an amount of Rs. 10,000/- is deposited for a period of 24 months or more, yielding
interest amount of Rs. 225/- per quarter (at 9% per annum, convertible quarterly), the monthly
installment of interest would work out at Rs. 74.44 (recurring), instead of Rs. 75/-.
There are two alternative ways in which a depositor may opt for interest on deposits under
Monthly Income Certificate Scheme as under:

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I. Depositor may receive interest every month at monthly discounted value as explained in
paragraph above. Monthly installment of interest at discounted value will be paid according to
the table available in the system. It is essential that the exact amounts of interest as indicated in
the table is paid for the respective amounts of deposits and respective periods requested by the
depositors; the figures of paisa should not be rounded up or rounded down in any case.

Proportionate monthly installment of interest will be credited to the specified account of the
depositor during the last week of the first month and thereafter full monthly installment of
interest, as indicated in the table, will be credited during the last week of every month.
Proportionate interest on the basis of 30 days to a month would be calculated in the following
manner. If a deposit is accepted on the 7th of a month, first installment of interest will be
calculated from 7th to the end of the month, that is, for 24 days (including 7th), irrespective of
number of days in a month, and paid during the last week of the 1st month and so also for the
correspondingly proportionate period in the last month i.e., 6 days in which Monthly Income
Certificate is due for payment.

II. Depositor may receive interest every quarter at actuals in which case the deposits will, for all
practical purposes, be treated as deposits under the Bank's Fixed Deposit Scheme with an
endorsement to the effect that the interest will be paid every quarter.

The periodicity of interest payment on Monthly Income Certificates may be changed from
monthly to quarterly/half yearly or vice versa provided that the name of the deposit is changed to
Quarterly/Half yearly/Annual Income Certificate to coincide with the mode of interest payment
without altering the terms of the original deposit. However, the change from one periodicity to
another (e.g. monthly to annual) would not involve compounding and periodical interest after
change of periodicity would continue to be on simple basis as per the periodicity decided afresh.

In terms of the Reserve Bank of India directive, Branches should not accept deposits for a period
longer than ten years subject to a maximum period of ten years. Branches may accept deposits
for any period in multiples of complete months.

No advice of credit of interest need be sent to the account holders, since the credit of interest will
be reflected in the Savings/Recurring deposit pass book or Current account pass book/statement.
However, the account holder who makes a specific request may be advised.

6.43.5 Interest on Monthly Income Certificate ceases on maturity.

It should be noted that the balance in an account in Monthly Income Certificate Ledger
represents the total principal amount of all Certificates issued in the account. The balance does
not include the interest amount paid/payable on the Certificates (unlike in the case of ledger
balances of Recurring Deposit or Double Benefit Deposit accounts), because the interest on
Monthly Income Certificates is credited every month to the savings/current or recurring deposit
account of the depositor.

6.43.6 Payment and Renewal of Monthly Income Certificate

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A Monthly Income Certificate may be paid or renewed on or after due date on being surrendered,
duly signed by the depositor(s) over a revenue stamp (in case of cash payment) on the reverse.
Instructions with regard to discharge and affixing of revenue stamp, cancellation and payment
scroll book for payment of Term Deposit Receipts also apply to Monthly Income Certificates.

6.43.7 Repayment before Maturity

Sometimes depositors may request repayment of Monthly Income Certificates before maturity.
The Manager may sanction such repayments upto the limits authorised by Head Office from time
to time. The request should be made by all depositors and all of them should discharge the
Monthly Income Certificate irrespective of the instructions regarding repayment. Payment of
interest on a Monthly Income Certificate to be repaid before maturity is governed by the Reserve
Bank of India directive issued from time to time. Where at the specific request of the depositors,
the Bank repays the principal amount of the deposit before maturity, interest repayable shall be
proportionately less (in accordance with the prevailing rules and Reserve Bank of India
directive) and the amount of excess interest, if any, already paid should be recovered from the
principal amount before payment and posted in Profit and Loss Account-Interest on Monthly
Income Certificate and adjusted.

6.43.8 Death of Monthly Income Certificate Account Holder

In the event of death of Monthly Income Certificate account holders, payment of the amount of
Monthly Income Certificate to the nominee, if appointed or to the legal representative(s) will be
made in accordance with the nomination rules and instructions for payment of the balance of
deceased account holders respectively.

6.43.9 Advances against Monthly Income Certificate

For detailed instructions regarding advances against Monthly Income Certificate, refer to the
circulars issued on the subject from time to time by the Bank.

6.43.10 Combination of Monthly Income Certificate and Recurring Deposit

Amount of interest on Monthly Income Certificate which is credited to current or savings
accounts every month can also be credited to recurring deposit account in the name of the
depositors. Since, installment in a recurring deposit account has to be Rs. 100/- or multiples
thereof, the part of monthly interest amount in excess of recurring deposit account installment
can be credited to the depositor's current or savings account. Where, however, monthly interest
amount is less than the amount of installment in recurring deposit account, the depositor may pay
an appropriate extra sum to make the amount equal to the exact recurring deposit account
installment which may then be credited to recurring deposit account. Suitable standing
instructions should be obtained from the depositors).

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 CHAPTER 7

ACCOUNTS OF FOREIGNERS
AND
INDIAN NATIONALS RESIDING
OUTSIDE
(NRI/PIO)

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 CHAPTER 7

ACCOUNTS OF FOREIGNERS AND INDIAN NATIONALS RESIDING

OUTSIDE INDIA20

Opening, holding and maintaining foreign currency accounts by a person resident in India is
regulated in terms of section 9 of the Foreign Exchange Management Act, 1999 (FEMA) read
with Foreign Exchange Management (Foreign Currency Accounts by a person resident in India)
Regulations, 2015 issued vide RBI Notification No. FEMA 10(R)/2015-RB dated January 21,
2016. Maintenance of deposits/ accounts between a person resident in India and a person
resident outside India is regulated in terms of sub-section (3) of section 6 of the Foreign
Exchange Management Act, 1999 (FEMA) read with Foreign Exchange Management (Deposit)
Regulations, 2016 issued vide RBI Notification No. FEMA 5(R)/2016-RB dated April 1, 2016.
.
Within the contours of the Regulations, Reserve Bank of India also issues directions to
Authorised Persons under Section 11 of the Foreign Exchange Management Act (FEMA), 1999.
These directions lay down the modalities as to how the foreign exchange business has to be
conducted by the Authorised Persons with their customers/constituents with a view to
implementing the regulations framed.

7.1 Part I - Opening, holding and maintaining accounts in India

by a person resident outside India
The Foreign Exchange Management Act, 1999 (FEMA) empowers the Reserve Bank to frame
regulations to restrict, regulate and prohibit the maintenance of deposits between a person
resident in India and a person resident outside India. These regulations are notified under
Notification No. FEMA 5(R)/2016-RB of April 1, 2016, (FEMA 5(R)) as amended from time
to time.

7.2 Definitions
 A ‘Non-resident Indian’ (NRI) is a person resident outside India who is a citizen of
India.
 A ‘Person of Indian Origin (PIO)’ is a person resident outside India who is a citizen
of any country other than Bangladesh or Pakistan or such other country as may be
specified by the Central Government, satisfying the following conditions:
a) Who was a citizen of India by virtue of the Constitution of India or the
Citizenship Act, 1955 (57 of 1955); or
b) Who belonged to a territory that became part of India after the 15th day of
August, 1947; or
c) Who is a child or a grandchild or a great grandchild of a citizen of India or of a

20
RBI/FED/2015-16/9 dated January 1, 2016 FED Master Direction No. 14/2015-16 (latest updated as on
September 03, 2019)
207 | P a g e
 person referred to in clause (a) or (b); or
d) Who is a spouse of foreign origin of a citizen of India or spouse of foreign
origin of a person referred to in clause (a) or (b) or (c)
 Explanation: PIO will include an ‘Overseas Citizen of India’ cardholder within the
meaning of Section 7(A) of the Citizenship Act, 1955.
 ‘Permissible currency’ is a foreign currency which is freely convertible
 As FEM (Deposit) Regulations, 2000 have been repealed and replaced by FEM
(Deposit) Regulations, 2016 with effect from April 1, 2016 (FEMA 5(R)), the
term NRI, wherever it appeared, has been replaced by NRI and/or PIO. Prior to
this, PIOs were covered within the definition of NRI.

Exemptions:

These restrictions are not applicable for the following:

 Deposits in rupee accounts and special rupee accounts maintained by foreign diplomatic
missions and diplomatic personnel.
 Foreign currency accounts maintained by diplomatic missions, diplomatic personnel and
non-diplomatic staff who are the nationals of the concerned foreign countries and hold
official passport of foreign embassies in India, subject to the following conditions:
i. The permissible credits to the account will be inward remittances received from
outside India through banking channels; and transfer of funds, from the rupee
account of the diplomatic mission in India, which are collected in India as visa
fees and credited to such account;
ii. Funds held in such account if converted in rupees cannot be converted back into
foreign currency;
iii. The account may be held in the form of current or term deposit account, and in
the case of diplomatic personnel and non-diplomatic staff, may also be held in the
form of savings account;
iv. The rate of interest on savings or term deposits shall be such as may be
determined by the authorised dealer maintaining the account;
v. The funds in the account may be repatriated outside India without the approval of
Reserve Bank.
 Deposits with Authorized Dealer maintained in rupees by persons resident in
Nepal and Bhutan.
 Deposits with authorized dealer maintained by any multilateral organization and its
subsidiary/ affiliate bodies and officials in India, of which India is a member
nation.

7.3 Non-Resident (External) Rupee Account Scheme – (NRE Account):

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 The detailed instructions for opening and maintaining this account are laid down in
Schedule 1 to Foreign Exchange Management (Deposit) Regulations, 2016, as
amended from time to time. The salient features of the scheme are given below:

 Non-resident Indians (NRIs) and Person of Indian Origin (PIOs) are permitted
to open and maintain these accounts with authorised dealers and with banks
(including cooperative banks) authorised by the Reserve Bank to maintain such
accounts.
 The accounts may be maintained in any form, e.g. savings, current, recurring or
fixed deposit account etc
 Joint accounts can be opened by two or more NRIs and/or PIOs or by an
NRI/PIO with a resident relative(s) on ‘former or survivor’ basis. However,
during the life time of the NRI/PIO account holder, the resident relative can
operate the account only as a Power of Attorney holder.
 Inward remittances to the account and remittances outside India from NRE
account are permitted.
 Credits permitted to this account as inward remittance are interest accruing on
the account, interest on investment, transfer from other NRE/ FCNR(B)
accounts, maturity proceeds if such investments were made from this account or
through inward remittance.
 The debits allowed from this account are local disbursements, transfer to other
NRE/ FCNR(B) and investments in India.
 Current income like rent, dividend, pension, interest etc. will be construed as a
permissible credit to the NRE account provided the Authorised Dealer is
satisfied that the credit represents current income of the NRI/PIO account
holder and income tax thereon has been deducted/ paid/ provided for, as the
case may be.
 The regulations for sanction of loans are detailed below:

Authorised Dealers/ banks in India can grant loans against the security of the funds held
in NRE accounts to the account holder/ third party in India, without any limits, subject to
the usual margin requirements. The loan cannot be repatriated outside India and shall be
used for the following purposes:

(a) personal purposes or for carrying on business activities except for the
purpose of relending or carrying on agricultural/ plantation activities or for
investment in real estate business;
(b) making direct investment in India on non-repatriation basis by way of
contribution to the capital of Indian firms/ companies subject to the provisions
of the relevant Regulations made under the Act;
(c) acquiring flat/ house in India for his own residential use subject to the
provisions of the relevant Regulations made under the Act.

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 In case of loans sanctioned to a third party, there should be no direct or indirect foreign
exchange consideration for the non-resident depositor agreeing to pledge his deposits
to enable the resident individual/ firm/ company to obtain such facilities.

In case of the loan sanctioned to the account holder, it can be repaid either by adjusting
the deposits or through inward remittances from outside India through banking
channels or out of balances held in the NRO account of the account holder.

Authorised Dealers may allow their branches/ correspondents outside India to grant
loans to or in favour of non-resident depositor or to third parties at the request of
depositor for bona fide purpose against the security of funds held in the NRE accounts in
India and also agree for remittance of the funds from India, if necessary, for liquidation
of the outstanding.

The facility for premature withdrawal of deposits will not be available where loans
against such deposits are availed of.
The term “loan” shall include all types of fund based/ non-fund based facilities.

NRE accounts should be designated as resident accounts or the funds held in these
accounts may be transferred to the RFC accounts, at the option of the account holder,
immediately upon the return of the account holder to India for taking up employment or
on change in the residential status.

In the event of the demise of an account holder, balances in the account can be
transferred to the non-resident nominee of the deceased account holder. However,
request from a resident nominee for remittance of funds outside India for meeting the
liabilities, if any, of the deceased account holder or for similar other purposes, should be
forwarded to the Reserve Bank for consideration.

Operations on an NRE account may be allowed in terms of Power of Attorney or other

authority granted in favour of a resident by the non-resident account holder, provided
such operations are restricted to withdrawals for local payments or remittance to the
account holder himself through banking channels. In cases where the account holder or a
bank designated by him is eligible to make investments in India, the Power of Attorney
holder may be permitted to operate the account to facilitate such investment.

The resident Power of Attorney holder is not allowed to

(a) open a NRE account;
(b) repatriate outside India funds held in the account other than to the account holder
himself;
(c) make payment by way of gift to a resident on behalf of the account holder;
(d) transfer funds from the account to another NRE account.

Income from interest on balances standing to the credit of NRE Accounts is exempt from
Income Tax. Likewise balances held in such accounts are exempt from wealth tax.

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The rate of interest and tenor applicable to these accounts will be in accordance with the
directions/ instructions issued by the Department of Banking Regulations, Reserve Bank
of India.

7.4 Foreign Currency (Non-resident) Account (Banks) Scheme – FCNR (B)

Account

The detailed instructions for opening and maintaining this account are laid down in
Schedule 2 to Foreign Exchange Management (Deposit) Regulations, 2016, as
amended from time to time. The salient features of the scheme are given below:
a. Non-resident Indians (NRIs) and Persons of Indian Origin (PIOs) are
permitted to open and maintain these accounts with authorised dealers
and banks authorised by the Reserve Bank to maintain such accounts.
Deposits may be accepted in any permissible currency.
b. The accounts can be maintained only in the form of fixed deposit.
c. Other conditions such as credits/debits, joint accounts, loans / overdrafts,
operation by power of attorney etc., as applicable to an NRE account will
be applicable to FCNR (B) account as well.
d. The rate of interest and tenor applicable to these accounts will be in
accordance with the directions/ instructions issued by the Department of
Banking Regulation, Reserve Bank of India.

7.5 Non-Resident (Ordinary) Account Scheme – NRO account

The detailed instructions for opening and maintaining this account are laid down in
Schedule 3 to Foreign Exchange Management (Deposit) Regulations, 2016, as
amended from time to time. The salient features of the scheme are given below:
e. Any person resident outside India (as per Section 2 (w) of FEMA), may
open and maintain NRO account with an Authorised Dealer or an
Authorised Bank for the purpose of putting through bona fide transactions
denominated in Indian Rupees.
f. Post Offices in India may maintain savings bank accounts in the names of
persons resident outside India and allow operations on these accounts subject to
the same terms and conditions as are applicable to NRO accounts maintained with
an authorised dealer/ authorised bank.
NRO (current/ savings) account can be opened by a foreign national of non- Indian
origin visiting India, with funds remitted from outside India through banking channel or
by sale of foreign exchange brought by him to India. The balance in the NRO account
may be paid to the account holder at the time of his departure from India provided the
account has been maintained for a period not exceeding six months and the account has
not been credited with any local funds, other than interest accrued thereon.

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7.6 Opening of accounts by individuals/ entities of certain countries:

(a) Opening of accounts by individuals/ entities of Pakistan nationality/ ownership and

entities of Bangladesh ownership requires prior approval of the Reserve Bank.
However, individuals of Bangladesh nationality may be allowed to open these accounts
subject to the individual/s holding a valid visa and valid residential permit issued by
Foreigner Registration Office (FRO)/ Foreigner Regional Registration Office (FRRO)
concerned.
(b) Authorized Dealers may open only one Non-Resident Ordinary (NRO) Account for
a citizen of Bangladesh or Pakistan, belonging to minority communities in those
countries, namely Hindus, Sikhs, Buddhists, Jains, Parsis and Christians, residing in
India and who has been granted a Long Term Visa (LTV) by the Central Government.
The account will be converted to a resident account once such a person becomes a
citizen of India. This account can also be opened if such person has applied for LTV
which is under consideration of the Central Government, in which case the account will
be opened for a period of six months and may be renewed at six monthly intervals
subject to the condition that the individual holds a valid visa and valid residential
permit issued by Foreigner Registration Office (FRO)/ Foreigner Regional Registration
Office (FRRO) concerned. The opening of such NRO accounts will be subject to
reporting of the details of accounts opened by the concerned Authorised bank to the
Ministry of Home Affairs (MHA) on a quarterly basis. The report shall contain details
of (i) name/s of the individual/s; (ii) date of arrival in India; (iii) Passport No. and
place/country of issue; (iv) Residential Permit/Long Term Visa reference and date &
place of issue; (v) name of the FRO/FRRO concerned; (vi) complete address and
contact number of the branch where the bank account is being maintained. The Head
Office of the AD bank shall furnish the above details on a quarterly basis to the Under
Secretary (Foreigners), Ministry of Home Affairs, NDCC-II Building, Jai Singh Road,
New Delhi – 110 001. AD banks are advised to ensure strict compliance to these
instructions.
g. The accounts may be maintained in any form, e.g. savings, current, recurring or
fixed deposit account.
h. The accounts may be held jointly with residents on ‘former of survivor’ basis.
NRIs and PIOs may hold an NRO account jointly with other NRIs and PIOs.
i. Inward remittances from outside India, legitimate dues in India and transfers from
other NRO accounts are permissible credits to NRO account. Rupee gift/ loan made
by a resident to a NRI/PIO relative within the limits prescribed under the
Liberalised Remittance Scheme may be credited to the latter’s NRO account.
j. The account can be debited for the purpose of local payments, transfers to other
NRO accounts or remittance of current income abroad. Apart from these, balances in
the NRO account cannot be repatriated abroad except by NRIs and PIOs up to USD 1
million, subject to conditions specified in Foreign Exchange Management (Remittance
of Assets) Regulations, 282016. Funds can be transferred to NRE account within this
USD 1 Million facility.
k. Loans against the deposits can be granted in India to the account holder or third
party subject to usual norms and margin requirement. The loan amount shall not be
used for relending, carrying on agricultural/plantation activities or investment in real
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 estate.
l. NRO accounts may be designated as resident accounts on the return of the
account holder to India for any purpose indicating his intention to stay in India for an
uncertain period. Likewise, when a resident Indian becomes a person resident outside
India, his existing resident account should be designated as NRO account.

m. Powers have been delegated to the Authorized Dealers/ Authorised banks to

allow operations on an NRO account in terms of a Power of Attorney granted in favour
of a resident by the non-resident individual account holder provided such operations are
restricted to local payments and remittances to non-residents.
n. To facilitate the foreign nationals to collect their pending dues in India, AD
Category-I banks may permit such foreign nationals to re-designate their resident
account maintained in India as NRO account on leaving the country after their
employment to enable them to receive their pending bona fide dues, subject to the bank
satisfying itself that the credit of amounts are bona fide dues of the account holder when
she/ he was a resident in India. The funds credited to the NRO account should be
repatriated abroad immediately, subject to payment of the applicable income tax and
other taxes in India. The amount repatriated abroad should not exceed USD one million
per financial year. The debit to the account should be only for the purpose of repatriation
to the account holder’s account maintained abroad. The account should be closed
immediately after all the dues have been received and repatriated as per the declaration
made by the account holder when the account was designated as an NRO account.
o. International Credit Cards - Authorised Dealer banks have been permitted to
issue International Credit Cards to NRIs/PIOs, without prior approval of Reserve Bank.
Such transactions may be settled by inward remittance or out of balances held in the
cardholder’s FCNR (B) / NRE / NRO Accounts.
p. Income-Tax - The remittances (net of applicable taxes) will be allowed to be
made by the Authorised Dealer banks on production of requisite information in the
formats prescribed by the Central Board of Direct Taxes, Ministry of Finance,
Government of India from time to time. Reserve Bank of India will not issue any
instructions under FEMA, clarifying tax issues. It shall be mandatory on the part of
Authorised Dealers to comply with the requirement of tax laws, as applicable.

7.7 Special Non-Resident Rupee Account - SNRR account

q. Any person resident outside India, having a business interest in India,
may open a Special Non-Resident Rupee Account (SNRR account) with
an authorised dealer for the purpose of putting through bona fide
transactions in rupees, not involving any violation of the provisions of the
Act, rules and regulations made thereunder.
r. The SNRR account shall carry the nomenclature of the specific business
for which it is opened and shall not earn any interest.
s. The debits/ credits and the balances in the account shall be incidental and
commensurate with the business operations of the account holder.
t. Authorised Dealers should ensure that all the operations in the SNRR
account are in accordance with the provisions of the Act, rules and
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 regulations made thereunder.
u. The tenure of the SNRR account should be concurrent to the tenure of the
contract/ period of operation/ the business of the account holder and in no
case should exceed seven years. Approval of the Reserve Bank shall be
obtained in cases requiring renewal. However, the restriction of seven
years will not be applicable to SNRR accounts opened by persons
resident outside India for the purpose of making investment in India in
accordance with Foreign Exchange Management (Transfer or Issue of
Security By a Person Resident Outside India) Regulations, 2017, as
amended from time to time.
v. The operations in the SNRR account should not result in the account
holder making available foreign exchange to any person resident in India
against reimbursement in rupees or in any other manner.
w. The balances in the SNRR account shall be eligible for repatriation and
transfers from any NRO account to the SNRR account are prohibited.
x. All transactions in the SNRR account will be subject to payment of
applicable taxes in India.
 SNRR account may be designated as resident rupee account on the account holder
becoming a resident.

 The amount due/ payable to non-resident nominee from the account of a

deceased account holder, will be credited to NRO account of the nominee with
an authorised dealer/ authorised bank in India.

 Opening of SNRR accounts by Pakistan and Bangladesh nationals and entities

incorporated in Pakistan and Bangladesh requires prior approval of Reserve
Bank.

7.8 Escrow Account

 Resident or non-resident corporate/ acquirers may open Escrow account in INR

with an authorized dealer in India as an Escrow agent subject to the terms and
conditions specified in Schedule 5 of the Foreign Exchange Management
(Deposit) Regulations, 2016, as amended from time to time.

 Transactions shall be in accordance with the Foreign Exchange Management

(Transfer or Issue of Security by a person resident Outside India) Regulations,
2017 as amended from time to time and relevant regulations issued by the
Securities and Exchange Board of India.

 The accounts shall be non-interest bearing.

 No fund/ non-fund based facility would be permitted against the balances in the
account.

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7.9 Acceptance of deposit by a company in India from NRIs/PIOs on repatriation
basis

A company incorporated in India including NBFC registered with the Reserve Bank
cannot accept deposits on repatriation basis. It can, however, renew the deposits it had
accepted in accordance with Schedule 6 of 33Foreign Exchange Management
(Deposit) Regulations), 2016, as amended from time to time.

7.10 Acceptance of deposits by Indian proprietorship concern/ firm or a company

from NRIs or PIOs on non-repatriation basis

An Indian proprietorship concern/ firm or a company (including Non-Banking Finance

Company) registered with Reserve Bank can accept deposits from NRIs or PIOs on non-
repatriation basis subject to the terms and conditions specified in Schedule 7 to
34Foreign Exchange Management (Deposit) Regulations, 2016, as amended from time
to time.

7.11 Acceptance of deposits by Indian companies from a person resident outside

India for nomination as Director
Keeping deposits with an Indian company by persons resident outside India, in
accordance with section 160 of the Companies Act, 2013, is a current account
(payment) transaction and, as such, does not require any approval from Reserve Bank.
All refunds of such deposits, arising in the event of selection of the person as director
or getting more than twenty five percent votes, shall be treated similarly.

7.12 Other Accounts/ Deposits

A deposit made by an Authorised Dealer with its branch, head office or correspondent
outside India, and a deposit made by a branch or correspondent outside India of an
Authorised Dealer, and held in its books in India, will be governed by the directions
issued by the Reserve Bank in this regard.

 A shipping or airline company incorporated outside India, can open, hold and
maintain a Foreign Currency Account with an authorized dealer for meeting the
local expenses in India of such airline or shipping company. The credits
permitted to such accounts are only freight or passage fare collections in India
or by inward remittances through banking channels from its office outside
India.
 An Authorised Dealer may allow unincorporated joint ventures (UJV) of
foreign companies/ entities, with Indian entities, executing a contract in India,
to open and maintain non-interest bearing foreign currency account and an
SNRR account as specified in Schedule 4 of the Deposit Regulations for the
purpose of undertaking transactions in the ordinary course of its business. The
debits and credits in these accounts should be incidental to the business
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 requirement of the UJV. The tenure of the account should be concurrent to the
tenure of the contract/ period of operation of the UJV and all operations in the
account shall be in accordance with the provisions of the Act or the rules or
regulations made or the directions issued thereunder. Opening of such accounts
by companies/ entities of Pakistan/ Bangladesh ownership/ nationality would
require the prior approval of the Reserve Bank.

 An Authorised Dealer in India may allow a Foreign Portfolio Investor and a

Foreign Venture Capital Investor, both registered with the Securities and
Exchange Board of India (SEBI) under the relevant SEBI Regulations, to open
and maintain a non-interest bearing foreign currency account for the purpose of
making investment in accordance with Foreign Exchange Management
(Transfer or issue of security by a person resident outside India) Regulations,
2017, as amended from time to time.

7.13 Nomination

Authorised dealers may provide nomination facility in respect of the deposits/ accounts
in these regulations maintained by individual account holders.

7.14 Responsibility of authorised dealers maintaining foreign

currency accounts:-

An authorised dealer maintaining accounts under this Master Direction is required to:
 Comply with the RBI directions from time to time
 Submit periodic return or statement, if any, as may be stipulated by the Reserve
Bank.

7.15 Part II - Opening, holding and maintaining foreign currency

accounts by a person resident in India
Introduction
The Foreign Exchange Management Act, 1999 (FEMA) empowers the Reserve Bank to frame
regulations to prohibit, restrict and regulate the opening, holding and maintaining of foreign
currency accounts and the limits up to which amounts can be held in such accounts by a person
resident in India. These regulations are notified under Notification No. FEMA 10 (R)/2015-RB
of January 21, 2016, (FEMA 10 (R)) as amended from time to time.

A person resident in India who held or maintained a Foreign Currency Account before the
commencement of FEMA 10(R) with special or general permission of the Reserve Bank, can
continue to maintain the account.

A person resident in India may maintain a foreign currency account outside India if he had
maintained it when he was resident outside India or inherited it from a person resident outside
India.
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Definitions:
 ‘Foreign Currency Account’ means an account held or maintained in currency
other than the currency of India or Nepal or Bhutan.
 ‘Relative’ is a person as defined in section 2(77) of the Companies Act, 2013.

Foreign Currency Accounts that can be held in India

7.16 Exchange Earner's Foreign Currency (EEFC) Account – EEFC Account

A person resident in India may open an EEFC account with an AD in India as per the
conditions stipulated in Schedule I to FEMA 10(R). The salient features of the scheme
are:
A. Credits: The credits permitted to this account are:
a) 100 percent of the foreign exchange earnings by way of inward
remittance through normal banking channel, (other than loans or
investments);
b) payments received for the purpose of counter trade;
c) advance remittance received by an exporter towards export of goods or
services;
d) professional earnings including director’s fees, consultancy fees, lecture
fees, honorarium and similar other earnings received by a professional
by rendering services in his individual capacity;
e) interest earned on the funds held in the account;
f) Re-credit of unutilised foreign currency earlier withdrawn from the
account;
g) repayment of trade related loans/ advances (which were granted to the
account holder's importer customer out of balances held in the EEFC
accounts);
h) disinvestment proceeds received by the resident account holder on
conversion of shares held by him to ADRs/ GDRs under the DR
Scheme, 2014; and
i) Payments received in foreign exchange by an Indian start-up arising out
of sales/ export made by the start-up or its overseas subsidiaries.

B. Debits: The debits allowed in these accounts are:

a) Payment outside India towards capital or current account transactions in

accordance with the provisions of Foreign Exchange Management
(Permissible Capital Account Transactions) Regulations, 2000 or
Foreign Exchange Management (Current Account Transactions) Rules,
2000, respectively;
b) payment in foreign exchange towards cost of goods purchased from a
100 percent Export Oriented Unit or a Unit in an Export Processing
Zone/ Software Technology Park/ Electronic Hardware Technology
Park;
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 c) payment of customs duty in accordance with the provisions of Export
Import Policy;
d) trade related loans/ advances, by an exporter account holder to his
importer customer outside India, subject to complying the provisions of
FEMA and the rules/ regulations made thereunder;
e) payment in foreign exchange to a person resident in India for supply of
goods/ services including payments for air fare and hotel expenditure.

C. Withdrawal in rupees are permitted from this account, provided the amount so
withdrawn cannot be re-credited to the account.
D. The account will be in the form of a non-interest bearing account.
E. Fund-based/ non-fund based credit facilities should not be granted against the
balances held in EEFC Accounts.
F. Exporters can repay packing credit advances, whether availed of in Rupee or in
foreign currency, from balances in their EEFC account to the extent exports have
actually taken place.
G. Balances held in the account may be credited to NRE/ FCNR (B) Accounts, at
the option/ request of the account holders consequent upon change of their
residential status from resident to non-resident.

7.17 Resident Foreign Currency (RFC) Account – RFC Account

A person resident in India is permitted to open a RFC account with an AD bank in India
out of foreign exchange received or acquired by him:
a) as pension or superannuation benefits or other monetary benefits from his
overseas employer;
b) by converting assets which were acquired by him when he was a non-
resident or inherited from or gifted by a person resident outside India and
repatriated to India;
c) before July 8, 1947 or any income arising or accruing thereon which is held
outside India in pursuance of a general or special permission granted by the
Reserve Bank;
d) received as proceeds of LIC claims/ maturity/ surrendered value settled in
forex from an Indian insurance company permitted to undertake life
insurance business by the Insurance Regulatory and Development
Authority.

The balances in the RFC account are free from all restrictions regarding utilisation of
foreign currency balances outside India.

Such accounts can be held jointly with resident relative as joint holder on ‘former or
survivor’ basis. However, such resident Indian relative joint account holder cannot
operate the account during the life time of the resident account holder.

The balances in the Non-Resident External (NRE) Account and Foreign Currency Bank
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[FCNR (B)] Account can be credited to the RFC account when the residential status of
the non-resident Indian (NRI) or person of Indian origin (PIO) changes to that of a
Resident.

7.18 Resident Foreign Currency (Domestic) Account – RFC (D) Account

A resident individual may open an RFC(D) account to retain in a bank account in India
the foreign exchange acquired in the form of currency notes, bank notes and travellers
cheques from overseas sources such as:
a) payment while on a visit abroad for services not arising from any business
or anything done in India;
b) honorarium or gift or for services rendered or in settlement of any lawful
obligation from any person not resident in India and who is on a visit to
India;
c) honorarium or gift while on a visit to any place outside India;
d) gift from a relative;
e) unspent foreign exchange acquired from an authorised person for travel
abroad;
f) representing the disinvestment proceeds received by the resident account
holder on conversion of shares held by him to ADRs/ GDRs under the DR
Scheme, 2014;
g) by way of earnings received as the proceeds of life insurance policy claims/
maturity/ surrender values settled in foreign currency from an insurance
company in India permitted to undertake life insurance business by the
Insurance Regulatory and Development Authority
1) This facility is in addition to that provided under RBI Notification
No.FEMA.11(R)/ 2015-RB dated December 29, 2015, as amended from time to
time.
2) The sum total of the accruals in the account during a calendar month should be
converted into Rupees on or before the last day of the succeeding calendar month
after adjusting for utilization of the balances for approved purposes or forward
commitments.
3) Balances in the account can be used for any current or capital account transactions
in accordance with the provisions of the Foreign Exchange Management (Current
Account Transactions) Rules, 2000 or the Foreign Exchange Management
(Permissible Capital Account Transactions) Regulations, 2000, respectively.
4) Balances may be credited to NRE/ FCNR (B) Accounts, at the option/ request of
the account holders consequent upon change of their residential status from
resident to non-resident.

7.19 Diamond Dollar Account (DDA) Scheme – DDA Account

Firms and companies which comply with the eligibility criteria stipulated in the
Foreign Trade Policy of the Government of India may open DDA accounts, details of
which are laid down in Schedule II of FEMA 10(R), as amended from time to time,
with an AD in India.
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 2. Indian agent of shipping or airline companies incorporated outside India can maintain
foreign currency account in India for meeting the local expenses of the overseas company.
The credits permitted to such accounts are freight or passage fare collections in India or from
his principal outside India.
3. Project Offices of foreign companies can open non-interest bearing one or more foreign
currency accounts in India for the project to be executed in India.
4. Organisers of international Seminars, Conferences, Conventions, etc. – can open temporary
foreign currency accounts in India subject to conditions.
5. An exporter who has undertaken a construction contract or a turnkey project outside India or
who is exporting services or engineering goods from India on deferred payment terms may
open, hold and maintain a Foreign Currency Account with a bank in India, provided that
approval as required under the Foreign Exchange Management (Export of goods and
services) Regulations, 2015, as amended from time to time has been obtained for
undertaking the contract/ project/ export of goods or services, and the terms and conditions
stipulated in the letter of approval have been duly complied with.
6. A unit located in a Special Economic Zone (SEZ) - may open hold and maintain a foreign
currency account with an authorized dealer in India to credit all foreign exchange funds
received by the unit.
7. An Indian company receiving foreign investment under FDI route in terms of Foreign
Exchange Management (Transfer or Issue of security by a Person Resident outside India)
Regulations, 2000 dated May 3, 2000, as amended from time to time, may open and maintain
a foreign currency account with an Authorized Dealer in India provided the Indian investee
company has impending foreign currency expenditure and the account is closed immediately
after the requirements are completed or within six months from the date of opening of such
account, whichever is earlier.
8. Re-insurance and Composite Insurance brokers registered with Insurance Regulatory and
Development Authority of India (IRDA) may open and maintain non- interest bearing
foreign currency accounts with an AD bank in India for the purpose of undertaking
transactions in the ordinary course of their business.

7.20 Foreign Currency Accounts that can be held outside India

The following persons can open a foreign currency account with a bank outside India for
carrying on normal business and incidental transactions.
a) An authorized dealer in India with its branch/ head office/ correspondent outside India.
b) A branch outside India of a bank incorporated in India.
c) An Indian shipping or airline company.
d) Insurance/ reinsurance companies registered with Insurance Regulatory and
Development Authority of India (IRDA) to carry out insurance/ reinsurance business.
e) An India firm/ company/ body corporate in the name of its foreign office/branch
or its representative posted outside India.
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 f) An exporter who is exporting services and engineering goods on deferred
payment terms or executing a turnkey project or a construction contract abroad.
g) A person resident in India who has gone abroad for studies may open a foreign
currency account with a bank outside India during his stay abroad. All credits to
the account from India should be made in accordance with FEMA and the rules
and regulations made thereunder. On the student’s return to India after
completion of studies, the account will be deemed to have been opened under
the Liberalised Remittance Scheme.
h) A person resident in India who is on a visit to a foreign country may open a
foreign currency account with a bank outside India during his stay abroad. The
balance in the account should be repatriated to India on return of the account
holder to India.
i) A person going abroad to participate in an exhibition/ trade fair may open a
foreign currency account with a bank outside India for crediting the sale
proceeds of goods. The balance should be repatriated to India within one month
from the date of closure of the exhibition/ trade fair.

The following persons can open a foreign currency account outside India for remitting/
receiving their entire salary payable to him in India.
a) A foreign citizen resident in India, being an employee of a foreign company,
on deputation to the office/ branch/ subsidiary/ joint venture/ group company in
India;
b) An Indian citizen, being an employee of a foreign company, on deputation to
the office/ branch/ subsidiary/ joint venture/ group company in India
c) A foreign citizen resident in India employed with an Indian company;
d) Indian startup, having an overseas subsidiary, may open a foreign currency account
with a bank outside India for the purpose of crediting to the account the foreign
exchange earnings out of exports/ sales made by the said startup or its overseas
subsidiary. The balances held in such accounts, to the extent they represent exports
from India, shall be repatriated to India within the period prescribed for realization of
exports, in Foreign Exchange Management (Export of Goods and Services)
Regulations, 2015 dated January 12, 2016, as amended from time to time.

7.21 Miscellaneous

Unless otherwise specifically stated, a foreign currency account maintained by a person

resident in India with an authorized dealer in India under the Foreign Exchange
Management (Foreign Currency Accounts by a person resident in India) Regulations,
2015, dated January 21, 2016 as amended from time to time, may be opened, held and
maintained in the form of current or savings or term deposit account in cases where the
account holder is an individual, and in the form of current account or term deposit
account in all other cases.

The account can be held singly or jointly in the name of person eligible to open, hold
and maintain such account.

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On the death of a foreign currency account holder -

(a) the authorised dealer with whom the account is held or maintained may remit to
a nominee being a person resident outside India, funds to the extent of his share
or entitlement from the account of the deceased account holder;
(b) a nominee being a person resident in India, who is desirous of remitting funds
outside India out of his share for meeting the liabilities abroad of the deceased,
may apply to the Reserve Bank for such remittance.
(c) A resident nominee of an account held outside India in accordance with
Regulation 5 of Foreign Exchange Management (Foreign Currency Accounts
by a person resident in India) Regulations, 2015, dated January 21, 2016, (viz.,
paragraph 4 of Part I of this Master Direction) has to close the account and
bring back the proceeds to India through banking channels.
(d) submit periodic return or statement, if any, as may be stipulated by the Reserve
Bank .

 FEM (Foreign Currency Accounts by a person Resident in India) Regulations,

2000 was repealed and replaced by FEM (Foreign Currency Accounts by a
person Resident in India) Regulations, 2015 with effect from January 21, 2016.
 FEM (Deposit) Regulations, 2000 was repealed and replaced by FEM (Deposit)
Regulations, 2016 with effect from April 1, 2016.

7.22 EXCHANGE CONTROL REGULATIONS APPLICABLE

TO NEPAL AND BHUTAN
General

Exchange Control regulations specifically applicable to Nepal and Bhutan have been given for
facility of easy reference, these regulations have been brought together and amplified, wherever
necessary, in this Supplement.

7.22.1 Transactions with Persons Resident in Nepal and Bhutan

In terms of Reserve Bank Notification No FERA.7/74-RB dated 1st January 1974, for purpose
of transactions in Indian rupees, undernoted categories of persons, firms, companies (including
banks), eg. resident in Nepal and Bhutan are treated as resident in India---
a) Indians, Nepalese or Bhutanese resident in Nepal or Bhutan.
b) Offices and branches situated in Nepal or Bhutan of any business carried on by acompany or a
corporation incorporated or established under any law in force in India, Nepal or Bhutan.
c) Offices and branches situated in Nepal or Bhutan of any business carried on as a partnership
firm or otherwise by Indians, Nepalese or Bhutanese.
For purpose of transactions in foreign exchange, however, persons, firms, companies or other
organisations resident in Nepal and Bhutan are treated like any other non-resident. No sales
of foreign exchange can be made to them except as specifically mentioned.
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7.22.2 Bank Accounts in India of Persons Resident in Nepal and Bhutan

By virtue of Reserve Bank Notification no. FERA 7/74-RB dated 1st January 1974, rupee
accounts with authorised dealers in India, of Persons, firms, companies (including banks), etc.
indicated in paragraph 2 above are regarded as resident accounts. Such accounts will be opened
by authorised dealers freely, provided, however, a declaration in form QA 22 has been
completed and nature and sources of credits declared by the account holder do not indicate any
intention to undertake transactions which may be contrary to the IndianExchange Control
regulations. Once the declaration has been furnished, operations on the accounts may be made
freely.

7.22.3 FAQ: RESERVE BANK OF INDIA21

Can a Bangladeshi/ Pakistani national or an entity owned/ controlled from Bangladesh/

Pakistan have an account in India?
Answer: Opening of accounts by individuals/ entities of Pakistan nationality/ ownership and
entities of Bangladesh ownership requires prior approval of the Reserve Bank.
However, individuals of Bangladesh nationality can open an NRO account subject to the
individual(s) holding a valid visa and valid residential permit issued by Foreigner Registration
Office (FRO)/ Foreigner Regional Registration Office (FRRO) concerned.
Further, citizens of Bangladesh/Pakistan belonging to minority communities in those countries,
namely, Hindus, Sikhs, Buddhists, Jains, Parsis and Christians residing in India and who have
been granted Long Term Visa (LTV) or whose application for LTV is under consideration, are
permitted to open only one NRO account with an AD bank in India subject to the conditions
mentioned in Notification No. FEMA 5(R)/2016-RB dated April 01, 2016, as updated from time
to time. The opening of such NRO accounts will be subject to reporting of the details of the
accounts opened by the concerned Authorised bank, to the Ministry of Home Affairs (MHA) on
a quarterly basis as instructed vide AP (DIR Series) Circular No. 28 dated March 28, 2019.

Can persons resident in Nepal and Bhutan have accounts in India?

Answer: Persons resident in Nepal and Bhutan can open Indian rupee accounts with an
authorised dealer in India.

7.23 PERMISSIBLE ACCOUNTS FOR NRIs/PIOs TO BE OPENED BY

OUR BANK & DOCUMENTAL REQUIREMENTS

Non-Residential External (NRE) Savings Account – This account helps in transferring foreign
currency earned by NRIs to their family and friends residing in India. These accounts are exempt
from any kind of wealth tax and interest earned through these accounts is also exempted from
tax. You can only put in foreign currency in these accounts while putting in Indian rupees is not

21
RBI Frequently Asked Questions on Accounts of Citizens of Bangladesh, Bhutan, Nepal and
Pakistanhttps://m.rbi.org.in/scripts/FS_FAQs.aspx?Id=52&fn=5
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 permissible. These accounts help you in transferring money to India to your near and dear ones
easily and conveniently.

Non-Resident Ordinary (NRO) Account – If you have any regular flow of income in form of
rents, pensions, dividends etc and have other local payments to be made on regular basis then
NRO accounts prove to be beneficial for you while you stay abroad. The source of funds that get
credited in this account need to be from within India. This account is maintained only in Indian
currency. Repatriation of USD 1 million per financial year is permissible through this account.
All incomes received in this account are subject to TDS.

Foreign Currency Non-Resident (FCNR) Fixed Deposit Account – This account comes
handy when you wish to keep the foreign currency earned by you in the same denomination in
order to save yourself from being hit by exchange rate fluctuations. As this account is maintained
in foreign currency, the source of funds in this account needs to be from abroad. There is no
income tax charged in India on the earnings made through this account.

7.23.1 Documents Required to Open NRE/NRO account in India

Following documents are broadly required if you wish to open an NRE/NRO account in India.
However the documents required may vary from one bank to the other.
 Photocopy of passport.
 Photocopy of Visa.
 Proof of Address of Foreign Residence - Utility bills, photocopy of passport with foreign
residence address, photocopy of driving license or any relevant document as a proof of address to
foreign residence.
 All the copies will have to be attested by Embassy of India or any other overseas banker.
 Passport size photograph - Self attested by signing across the photograph.

Documents Required For Opening NRE/NRO Account

You can submit the application by visiting any of our branches along with the following
documents:
 Two recent passport size photographs of each of the applicant(s) (duly signed by the Applicant(s)
on the face of each of the photographs)
 Passport, VISA and address page of each of the applicant
 Proof of address in UK of the applicant(s) – Bank Statement, Utility Bill and council tax bill
 The cheque for the amount (including our charges) made payable to ‘SBI A/c (first applicants
name)’
 PAN Card (Permanent Account Number) for opening NRO Accounts
 Proof of Indian origin in case of other than Indian passport holders. Any one of following
 OCI / PIO Card (if any)
 Birth Certificate (if born in India)

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 Marriage Certificate (if spouse of a PIO)
 Old cancelled Indian passport / Surrender certificate / other record of Indian passport held (if any)
or
 Parents Indian Passport/PIO card/OCI card and your birth certificate
 Indian Address proof (only if you correspondence address of choice is India)
* If you cannot visit the branches you may send the completed application to any of our branches
in India after your signature is duly verified in the application form1 and the copy of the
documents is duly attested by your Banker or by Indian High Commission.

ALL ACCOUNT OPENING DOCUMENTS

(INCLUDING ORIGINAL) NEEDS TO BE SELF-ATTESTED)

You would need to forward below mentioned documents along with Account Opening
forms:
• Passport size Photograph signed across the face.
• The Initial payment cheque/Draft should be favouring “ARYAVART BANK A/c (Customer's
Name)”. The Cheque for the initial payment should be amounting Rs. 15,000/- from your “self
NRE/NRO account or a draft of Rs 15000/-“ made out of your “Self NRE/NRO account” (has to
be submitted along with the Letter from the bank confirming the Draft is issued from your “self
account”).
• Foreign currency cheque amounting to equivalent INR 15000/- issued from your “self overseas
bank or Indian Rupees draft purchased abroad” & the Initial pay should be favouring
“ARYAVART BANK A/c; (Customer's Name)” (has to be submitted along with
acknowledgment slip copy /advice clearly showing that the DD was purchased by the customer
himself should be attached or the Letter from the bank confirming the Draft is issued from
customer's self account).
• In case there is no remitter name proof (like acknowledgement copy) for Initial Payin
draft/cheque then an original bank statement (not more than three months old, attested by the
customer) from the customer’s account either overseas or in India has to be submitted (self-
attested). In such cases a customer declaration needs to be collected stating the remitter’s name.

7.23.2 Average Monthly Balance requirement is Rs. 10,000/- in NRE and NROSB Account:
• Photocopy of passport -self attested
• Photocopy of valid visa / work permit -self attested
• Pan Card copy (Mandatory for NRE PIS/NRO PIS accounts-self attested)
• Address proof -self attested.
• At least one document provided has to be in English apart from passport

In case if the customer does not visit the branch (Non Face to Face Case) to open these
accounts then all photocopies of documents to be attested by customer himself and to be
attested by Indian Embassy or by Notary or by Banker overseas.

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Optionally Customers residing in FATF (Financial Acitve Task Force) countries (List
attached at the end of this documents) who are unable to attest the documents as above
have the option of submitting an additional document (as per list provided in option “C” in
this document to be obtained ) along with the prescribed documents self-attested

In case of non face-to-face account opening for customers from Non FATF countries, all the
documents should be attested by Indian Embassy or by Notary

Documents accepted as Address Proof:-

One document will be obtained from the first applicant confirming either the mailing or overseas
address. The address on the document has to match the address mentioned in the application
form.
The list of documents that will be acceptable as address proofs are:

7.23.3 A. Overseas Address (Any one) : self attested

1. Photocopy of valid passport mentioning the overseas address
2. Photocopy of utility bill not more than 3 months old
3. Photocopy of overseas bank statement not more than 3 months old
4. Photocopy of valid driving license
5. Photocopy of Government issued ID Card
6. Photocopy of credit card bill not more than 3 months old
7. Photocopy of lease agreement / rent receipt (not more than 3 months old)
8. Photocopy of appointment letter
9. Photocopy of company ID card with address
10. Original letter issued by the company for the purpose of account opening on its letterhead
11. Photocopy of bank statement or passbook of a NRI account with another bank
12. Proof of address of the sponsor along with proof of relationship of the primary applicant with
the sponsor
13. Copy of PIO/OCI Card

7.23.4 B. Indian Address as mailing address (Any one): self attested

1. Photocopy of valid passport mentioning the Indian address
2. Permanent Driving license that is not expired
3. Photocopy of telephone bill of private & public operators (e.g. MTNL, BSNL, Reliance, Airtel
& Tata Indicom) – not exceeding 2 months prior to date of account opening
4. Photocopy of electricity bill – not exceeding 2 months prior to date of account opening
5. Photocopy of Bank pass book or Bank account statement – not exceeding 3 months prior to
date of account opening
6. Photocopy of Ration card
7. Photocopy of Election card / Voters ID (if it has address)
8. Letter from the society (only registered societies) - on the letterhead, which carries the
society's Registration No. The letter should carry the applicant's name & full address as well as
the signatories’ full name, designation (Secretary, President) and address.
9. Photocopy of monthly outgoings bill from Registered Housing society - on the letterhead
which carries the society's Registration No. (Maintenance charges receipt issued by the society
NOT acceptable)
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10. Photocopy of title deeds of the property duly registered and stamped
11. Photocopy of Lease deed/Rent agreement copy duly stamped
12. Photocopy of Senior citizens card from Indian Railways/Indian Airlines (if it has address)
13. Photocopy of mobile post paid bill – Airtel, Hutch, BSNL, Idea Cellular, etc.
14. Letter from any recognized public authority (In original)

In case of Non Face to Face NRI Account opening, one additional document will be obtained
for all applicants.

C. List of Additional documents (Any one): self attested

The following documents will be accepted as additional document in case of Non Face to Face
accounts:
1. A cheque drawn on a bank account abroad including IP cheque
2. Any cancelled paid cheque in original drawn on a bank abroad showing the signature, bank
name, account number etc.
3. Photocopy of overseas / Indian bank statement not more than 3 months old
4. Photocopy of utility bill not more than 3 months old
5. Photocopy of ID card like drivers license, employee ID card, labour card
6. Photocopy of local government ID card
7. Original Letter from the employer issued for the purpose of opening of this account
8. Copy of appointment letter issued by the overseas employer for the employment overseas
9. Photocopy of credit card statement not more than 3 months old
10. Copy of lease / rental agreement / rent receipt (not more than 3 months old)
11. Letter from university abroad (in case of NRI Students)

7.23.5 FATF Country List

The FATF currently comprises 33 member jurisdictions and 2 regional organizations,
representing most major financial centres in all parts of the globe. Please take reference from
FATF website for the updated list. Current List of FATF Countries:

Argentina, Australia, Austria, Greece, Belgium, Brazil, Canada, China, Denmark, European
Commission, Finland, France, Germany, Gulf Co-operation Council (UAE, Kuwait, Bahrain,
Qatar, Oman, Saudi Arabia), Hong Kong China, Iceland, India, Ireland, Italy, Japan, Kingdom of
the Netherlands, Luxembourg, Mexico, New Zealand, Norway, Portugal, Republic of Korea,
Russian Federation, Singapore, South Africa, Spain, Sweden, Switzerland, Turkey, United
Kingdom, United States.

7.23.6 Important Points to be noted while submitting the Account opening form
♦ In case if the NRE/NRO A/C is getting opened with zero pay in then original bank statement
self attested has to be submitted (Mandatory)
♦ In case of sole account, nomination form (DA1) compulsory for each account.
♦ Name and the Signature on Account opening form should be same as passport. (In case if
signature differs then change of signature declaration should be attached)
♦ In case of foreign passport having place of birth not India then PIO/OCI card needs to be
submitted. PIO Declaration can be given In lieu of PIO/OCI card
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♦ In case if any of the document is Non English language then Non English declaration to be
submitted (Filled in by the customer himself) Not more than one document can be accepted in
Non English Language)
♦ Email address of all the customers is mandatory
♦ Indian address is mandatory to be filled in the Account opening form (address proof of the
same is not mandatory)
♦ In case of face to face and if the second holder does not have any address proof then both
holders can sign Joint applicant declaration and close relative declaration along with the
documents of the declarant.

# At present none of our bank branches have been designated by RBI as an Authorized
Dealer to deal in Forex. Accordingly we are unable to open accounts where foreign
currencies are involved. In exigencies, we may open the account but foreign exchange has
to be routed or exchanged through an authorized foreign exchange branch of our Sponspor
Bank, Bank of India.

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 CHAPTER 8

CUSTOMER SERVICES
IN BANK
AND
OTHER OPERATIONAL
GUIDELINES

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 CHAPTER 8

CUSTOMER SERVICES IN BANK AND OTHER OPERATIONAL

GUIDELINES

(Ref. RBI’s Master Circular on Customer Services in Banks (RBI/2015-16/59; DBR No. Leg. BC.
21/09.07.006/2015-16) dated July 01, 2015 & relevant circulars of Aryavart Bank)

Broadly, a customer can be defined as a user or a potential user of bank services. So defined, a
‘Customer’ may include:
 A person or entity that maintains an account and/or has a business relationship with the
bank;
 One on whose behalf the account is maintained (i.e. the beneficial owner);
 Beneficiaries of transactions conducted by professional intermediaries, such as Stock
Brokers, Chartered Accountants, Solicitors, etc., as permitted under the law, and
 Any person or entity connected with a financial transaction which can pose significant
reputational or other risks to the bank, say, a wire transfer or issue of a high value demand
draft as a single transaction.

8.1 Policy for general management of the Branches

Banks' systems should be oriented towards providing better customer service and they should
periodically study their systems and their impact on customer service. Banks should have a
Board approved policy for general management of the branches which may include the following
aspects:-
(a) Providing infrastructure facilities by branches by bestowing particular attention to providing
adequate space, proper furniture, drinking water facilities, with specific emphasis on pensioners,
senior citizens, disabled persons, etc.
(b) Providing entirely separate enquiry counters at their large / bigger branches.
(c) Displaying indicator boards at all the counters in English and Hindi. Business posters at semi-
urban and rural branches of banks should also be in the Hindi.
(d) Posting roving officials to ensure employees' response to customers and for helping out
customers in putting in their transactions.
(e) Providing customers with booklets/BCSBI booklet consisting of all details of service and
facilities available at the bank in Hindi, English and the concerned regional languages.
(f) Use of Hindi in transacting business by banks with customers, including communications to
customers.
(g) Reviewing and improving upon the existing security system in branches so as to instil
confidence amongst the employees and the public.

8.2 Branch Level Customer Service Committees

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Banks were advised to establish Customer Service Committees at branch level. In order to
encourage a formal channel of communication between the customers and the bank at the branch
level, banks should take necessary steps for strengthening the branch level committees with
greater involvement of customers. It is desirable that branch level committees include their
customers too. Further, as senior citizens usually form an important constituent in banks, a senior
citizen may preferably be included therein. The Branch Level Customer Service Committee may
meet at least once a month to study complaints/ suggestions, cases of delay; difficulties faced /
reported by customers / members of the Committee and evolve ways and means of improving
customer service.

The branch level committees may also submit quarterly reports giving inputs / suggestions to the
Standing Committee on Customer Service thus enabling the Standing Committee to examine
them and provide relevant feedback to the Customer Service Committee of the Board for
necessary policy / procedural action.

8.3 Savings Bank Rules

As many banks are now issuing statement of accounts in lieu of pass books, the Savings Bank
Rules must be annexed as a tear-off portion to the account opening form so that the account
holder can retain the rules.

8.4 Photographs of depositors

Banks should obtain and keep on record photographs of all depositors/account holders in respect
of accounts opened by them subject to the following clarifications:

i. The instructions cover all types of deposits including fixed, recurring, cumulative, etc.
ii. They apply to all categories of depositors, whether resident or non-resident. Only banks,
Local Authorities and Government Departments (excluding public sector undertakings
or quasi-Government bodies) will be exempt from the requirement of photographs.
iii. The banks may not insist on photographs in case of accounts of staff members only
(Single/Joint).
iv. The banks should obtain photographs of all persons authorised to operate the accounts
viz., Savings Bank and Current Accounts without exception.
v. The banks should also obtain photographs of the 'Pardanishin' women.
vi. The banks may obtain two copies of photographs and obtaining photocopies of driving
licence/passport containing photographs in place of photographs would not suffice.
vii. The banks should not ordinarily insist on the presence of account holder for making cash
withdrawals in case of 'self' or 'bearer' cheques unless the circumstances so warrant. The
banks should pay 'self' or 'bearer' cheques taking usual precautions.
viii. Photographs cannot be a substitute for specimen signatures.
ix. Only one set of photographs need be obtained and separate photographs should not be
obtained for each category of deposit. The applications for different types of deposit
accounts should be properly referenced.
x. Fresh photographs need not be obtained when an additional account is desired to be
opened by the account holder.
xi. In the case of operative accounts, viz. Savings Bank and Current accounts, photographs
of persons authorised to operate them should be obtained. In case of other deposits, viz.,
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 Fixed, Recurring, Cumulative, etc., photographs of all depositors in whose names the
deposit receipt stands may be obtained except in the case of deposits in the name of
minors where guardians' photographs should be obtained.

8.5 Levy of Penal Charges on Non-Maintenance of Minimum balance in savings bank

accounts
With effect from April 1, 2015, while levying charges for non-maintenance of minimum balance
in savings bank accounts, banks shall adhere to the following additional guidelines:
(i)In the event of a default in maintenance of minimum balance / average minimum balance as
agreed to between the bank and customer, the bank should notify the customer clearly by SMS /
email / letter etc. that in the event of the minimum balance not being restored in the account
within a month from the date of notice, penal charges will be applicable.
(ii)In case the minimum balance is not restored within a reasonable period, which shall not be
less than one month from the date of notice of shortfall, penal charges may be recovered under
intimation to the account holder.
(iii)The policy on penal charges to be so levied may be decided with the approval of Board of the
bank.
(iv)The penal charges should be directly proportionate to the extent of shortfall observed. In
other words, the charges should be a fixed percentage levied on the amount of difference
between the actual balance maintained and the minimum balance as agreed upon at the time of
opening of account. A suitable slab structure for recovery of charges may be finalized.
(v)It should be ensured that such penal charges are reasonable and not out of line with the
average cost of providing the services.
(vi) It should be ensured that the balance in the savings account does not turn into negative
balance solely on account of levy of charges for non-maintenance of minimum balance.

These guidelines should be brought to the notice of all customers apart from being disclosed on
the bank's website.

8.6 Purchase of Local Cheques, Drafts, etc., during suspension of Clearing

There may be occasions when Clearing House operations may have to be temporarily suspended
for reasons beyond the control of the authorities concerned. Such suspension entails hardship to
the constituents of the banks because of their inability to realize promptly the proceeds of
cheques, drafts, etc., drawn on the local banks other than those with whom they maintain
accounts. Some remedial action has to be taken during such contingencies to minimise, as far as
possible, the inconvenience and hardship to banks' constituents as also to maintain good
customer service. Thus, whenever clearing is suspended and it is apprehended that the
suspension may be prolonged, banks may temporarily accommodate their constituents, both
borrowers and depositors, to the extent possible by purchasing the local cheques, drafts, etc.,
deposited in their accounts for collection, special consideration being shown in respect of
cheques drawn by Government departments/companies of good standing and repute, as also
demand drafts drawn on local banks. While extending this facility, banks would no doubt take
into consideration such factors as creditworthiness, integrity, past dealings and occupation of the
constituents, so as to guard themselves against any possibility of such instruments being
dishonoured subsequently.

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8.7 Statement of accounts / Pass Books

Issuance of Passbooks to Savings Bank Account holders (Individuals)

(i)A passbook is a ready reckoner of transactions and is handy and compact and as such, is far
more convenient to the small customer than a statement of account. Use of statements has some
inherent difficulties viz., (a) these need to be filed regularly (b) the opening balance needs to be
tallied with closing balance of last statement (c) loss of statements in postal transit is not
uncommon and obtaining duplicates thereof involves expense and inconvenience (d) ATM slips
during the interregnum between two statements does not provide a satisfactory solution as full
record of transactions is not available and (e) there are a large number of small customers who
do not have access to computers / internet, etc. As such, non-issuance of pass-books to such
small customers would indirectly lead to their financial exclusion.

Branches are therefore advised to 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 statement of 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.

8.8 Updating passbooks

(i)Customers may be made conscious of the need on their part to get the pass- books updated
regularly and employees may be exhorted to attach importance to this area.
(ii)Wherever pass-books are held back for updating, because of large number of entries, paper
tokens indicating the date of its receipt and also the date when it is to be collected should be
issued.
(iii)It is sometimes observed that customers submit their passbooks for updation after a very long
time. In addition to the instructions printed in the passbook, whenever a passbook is tendered for
posting after a long interval of time or after very large number of transactions, a printed slip
requesting the depositor to tender it periodically should be given.

8.9 Entries in passbooks / statement of accounts

(i)Banks should give constant attention to ensure entry of correct and legible particulars in the
pass books and statement of accounts.
(ii)The banks often show the entries in depositors' passbooks / statements of accounts, as "by
clearing" or "by cheque". Further, it is observed that in the case of Electronic Clearing System
(ECS) and RBI Electronic Fund Transfer (RBIEFT), banks generally do not provide any details
even though brief particulars of the remittance are provided by the receiving bank. In some
cases, computerized entries use codes which just cannot be deciphered. With a view to avoiding
inconvenience to depositors, banks should avoid such inscrutable entries in passbooks /
statement of accounts and ensure that brief, intelligible particulars are invariably entered in
passbooks / statement of account.

8.10 Maintenance of savings bank pass books: precautions

Negligence in taking adequate care in the custody of savings bank pass books facilitates
fraudulent withdrawals from the relative accounts. A few precautions in this regard are given
below:
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 (i)Branches should accept the pass books and return them against tokens.
(ii)Pass books remaining with the branches should be held in the custody of named responsible
officials.
(iii)While remaining with the branch, pass books should be held under lock and key overnight.

8.11 Providing monthly statement of accounts

(i)Banks may ensure that they adhere to the monthly periodicity while sending statement of
accounts.
(ii) The statements of accounts for current account holders may be sent to the depositors in a
staggered manner instead of sending by a target date every month. The customers may be
informed about staggering of the preparation of these statements.
(iii)Further, banks should advise their Inspecting Officers to carry out sample check at the time of
internal inspection of branches to verify whether the statements are being despatched in time.

8.12 Address / Telephone Number of the Branch in Pass Books / Statement of Accounts
In order to improve the quality of service available to customers in branches, it would be useful
if the address / telephone number of the branch is mentioned on the passbooks / statement of
accounts.
Banks are therefore advised to ensure that full address / telephone number of the branch is
invariably mentioned in the passbooks / statement of accounts issued to account holders.

8.13 Printing of MICR code and IFSC code on passbook / statement of account
The Magnetic Ink Character Recognition (MICR) code is necessary for all Electronic Clearing
Service (ECS – Credit and Debit) transactions and the Indian Financial System Code (IFSC) is
a pre-requisite for National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement
(RTGS) transactions. At present, this information is made available on the cheque leaf along
with the IFSC code of the branch. However, on a review, banks are advised to take necessary
steps to provide this information in all passbook / statement of account of their account holders.

8.14 Issue of Cheque Books

8.14.1 Issuing large number of cheque books (issued to Public Sector Banks)
Banks may issue cheque books with larger number of (20/25) leaves if a customer demands the
same and also ensure that adequate stocks of such cheque books (20/25 leaves) are maintained
with all the branches to meet the requirements of the customers.

Banks should take appropriate care while issuing large number of cheque books. It should be
done in consultation with the Controlling Office of the bank.

8.14.2 Writing the cheques in any language

All cheque forms should be printed in Hindi and English. The customer may, however, write
cheques in Hindi, English or in the concerned regional language.

8.14.3 Dispatching the cheque book by courier

The procedure of disallowing depositors to collect the cheque book at the branch and insisting on
dispatching the cheque book by courier after forcibly obtaining a declaration from the depositor
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 that a dispatch by the courier is at depositor's risk is an unfair practice. Banks should refrain from
obtaining such undertakings from depositors and ensure that cheque books are delivered over the
counters on request to the depositors or his authorized representative.

8.14.4 Acceptance of cheques bearing a date as per National Calendar (Saka Samvat) for
payment
Government of India has accepted Saka Samvat as National Calendar with effect from 22 March
1957 and all Government statutory orders, notifications, Acts of Parliament, etc. bear both the
dates i.e., Saka Samvat as well as Gregorian Calendar. An instrument written in Hindi having
date as per Saka Samvat calendar is a valid instrument. Cheques bearing date in Hindi as per the
National Calendar (Saka Samvat) should, therefore, be accepted by banks for payment, if
otherwise in order. Banks can ascertain the Gregorian calendar date corresponding to the
National Saka calendar in order to avoid payment of stale cheques.

8.14.5 Issue of Multicity / Payable at All Branches Cheques by CBS enabled Banks:
In order to bring efficiency in the cheque clearing, all CBS enabled banks have been advised to
issue only “payable at par” / “multi-city” CTS 2010 Standard cheques to all eligible customers
without extra charges with appropriate Board approved risk management procedures based on
risk categorization of accounts. Banks have been advised not to charge their savings bank
account customers for issuance of CTS-2010standard cheques when they are issued for the first
time.

8.15 Term Deposit Account

8.15.1 Issue of term deposit receipt
Bank should issue term deposit receipt indicating therein full details, such as, date of issue,
period of deposit, due date, applicable rate of interest, etc.

8.15.2 Transferability of deposit receipts

Term deposits should be freely transferable from one office of bank to another.

8.15.3 Disposal of deposits

Advance instructions from depositors for disposal of deposits on maturity may be obtained in the
application form itself. Wherever such instructions are not obtained, banks should ensure sending
of intimation of impending due date of maturity well in advance to their depositors as a rule in
order to extend better customer service.

8.15.4 Notifying the change in interest rates

Change in interest rate on deposits should be made known to customers as well as bank branches
expeditiously.

8.15.5 Payment of interest on fixed deposit – Method of calculation of interest

Indian Banks’ Association (IBA) Code for Banking Practice has been issued by IBA for uniform
adoption by the member banks. The Code is intended to promote good banking practices by
setting out minimum standards, which member banks should follow in their dealings with
customers. IBA, for the purpose of calculation of interest on domestic term deposit, has
prescribed that on deposits repayable in less than three months or where the terminal quarter is
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incomplete, interest should be paid proportionately for the actual number of days reckoning the
year at 365 days. Some banks are adopting the method of reckoning the year at 366 days in a
Leap year and 365 days in other years. While banks are free to adopt their methodology, they
should provide information to their depositors about the manner of calculation of interest
appropriately while accepting the deposits and display the same at their branches.

8.15.6 Premature withdrawal of term deposit

A bank, on request from the depositor, should allow withdrawal of a term deposit before
completion of the period of the deposit agreed upon at the time of making the deposit. The bank
will have the freedom to determine its own penal interest rate of premature withdrawal of term
deposits. The bank should ensure that the depositors are made aware of the applicable penal rate
along with the deposit rate. While prematurely closing a deposit, interest on the deposit for the
period that it has remained with the bank will be paid at the rate applicable to the period for
which the deposit remained with the bank and not at the contracted rate. No interest is payable,
where premature withdrawal of deposits takes place before completion of the minimum period
prescribed. With effect from April 1, 2013 banks will have the discretion to disallow premature
withdrawal of a term deposit in respect of bulk deposits of `1 crore and above of all depositors,
including deposits of individuals and HUFs. Bank should, however, notify such depositors of its
policy of disallowing premature withdrawal in advance, i.e., at the time of accepting such
deposits. A bank on request from a depositor shall allow withdrawal of a Rupee term deposits of
less than 1 crore, before completion of the period of the deposit agreed upon at the time of
making the deposit. Bank will have the freedom to determine its own penal interest rates for
premature withdrawal of term deposits. Bank should ensure that the depositors are made aware
of the applicable penal rates along with the deposit rates. The revised guidelines are made
applicable with effect from April 1, 2013.

8.15.7 Repayment of Term/Fixed Deposits in banks:

Some banks insist on the signatures of both the depositors to allow repayment of money in
fixed/term deposits, though the deposit account is opened with operating instructions (sometimes
called ‘repayment instructions’), ‘Either or Survivor’ or ‘Former or Survivor’. Such insistence on
the signatures of both the depositors has the effect of making the mandate given by the
depositors redundant. This, in turn, results in unjustified delays and allegations of poor customer
service.
1. It is clarified that if fixed/term deposit accounts are opened with operating instructions ‘Either
or Survivor’, the signatures of both the depositors need not be obtained for payment of the
amount of the deposits on maturity. However, the signatures of both the depositors may have to
be obtained, in case the deposit is to be paid before maturity. If the operating instruction is
‘Either or Survivor’ and one of the depositors expires before the maturity, no pre-payment of the
fixed/term deposit may be allowed without the concurrence of the legal heirs of the deceased
joint holder. This, however, would not stand in the way of making payment to the survivor on
maturity.
2. In case the mandate is ‘Former or Survivor’, the ‘Former’ alone can operate/withdraw the
matured amount of the fixed/term deposit, when both the depositors are alive. However, the
signature of both the depositors may have to be obtained, in case the deposit is to be paid before
maturity. If the former expires before the maturity of the fixed/term deposit, the ‘Survivor’ can
withdraw the deposit on maturity. Premature withdrawal would however require the consent of
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both the parties, when both of them are alive, and that of the surviving depositor and the legal
heirs of the deceased in case of death of one of the depositors.
3.If the joint depositors prefer to allow premature withdrawals of fixed/term deposits also in
accordance with the mandate of ‘Either or Survivor’ or ‘Former or Survivor’, as the case may be,
it would be open to banks to do so, provided they have taken a specific joint mandate from the
depositors for the said purpose. In other words, in case of term deposits with "Either or Survivor"
or "Former or Survivor" mandate, banks are permitted to allow premature withdrawal of the
deposit by the surviving joint depositor on the death of the other, only if, there is a joint mandate
from the joint depositors to this effect.
4. It has come to our notice that many of the banks have neither incorporated such a clause in the
account opening form nor have they taken adequate measures to make the customers aware of
the facility of such mandate, thereby putting the "surviving" deposit account holder(s) to
unnecessary inconvenience. Banks are, therefore, advised to invariably incorporate the aforesaid
clause in the account opening form and also inform their existing as well as future term deposit
holders about the availability of such an option.
5. The joint deposit holders may be permitted to give the mandate either at the time of placing
fixed deposit or anytime subsequently during the term / tenure of the deposit. If such a mandate
is obtained, banks can allow premature withdrawal of term / fixed deposits by the surviving
depositor without seeking the concurrence of the legal heirs of the deceased joint deposit holder.
It is also reiterated that such premature withdrawal would not attract any penal charge.
6. When a fixed deposit account is opened in the joint names of two depositors on ‘Either or
Survivor’ basis and the said joint depositors already have a savings bank account in their names
jointly on ‘Either or Survivor’ instructions, on maturity of the fixed deposit, proceeds of the
matured fixed deposit can be credited to the joint savings bank account already opened in the
bank. There is no need for opening a separate savings bank account in the name of the first
depositor for crediting the proceeds of the fixed deposit.

8.15.8 Renewal of Overdue deposits

All aspects concerning renewal of overdue deposits may be decided by individual banks subject
to their Board laying down a transparent policy in this regard and the customers being notified of
the terms and conditions of renewal including interest rates, at the time of acceptance of deposit.
The policy should be non-discretionary and non- discriminatory.

8.15.9 Addition or deletion of the name/s of joint account holders

A bank may, at the request of all the joint account holders, allow the addition or deletion of
name/s of joint account holder/s if the circumstances so warrant or allow an individual depositor
to add the name of another person as a joint account holder. However, in no case should the
amount or duration of the original deposit undergo a change in any manner in case the deposit is
a term deposit.

A bank may, at its discretion, and at the request of all the joint account holders of a deposit
receipt, allow the splitting up of the joint deposit, in the name of each of the joint account holders
only, provided that the period and the aggregate amount of the deposit do not undergo any
change.
Note: NRE deposits should be held jointly with non-residents only. NRO accounts may be held
by non-residents jointly with residents.
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Please refer supplementary reading materials on subject later in the chapter

8.16 Payment of interest on accounts frozen by banks

Banks are at times required to freeze the accounts of customers based on the orders of the
enforcement authorities. The issue of payment of interest on such frozen accounts was examined
in consultation with Indian Banks’ Association and banks are advised to follow the procedure
detailed below in the case of Term Deposit Accounts frozen by the enforcement authorities:
(i)A request letter may be obtained from the customer on maturity. While obtaining the request
letter from the depositor for renewal, banks should also advise him to indicate the term for which
the deposit is to be renewed. In case the depositor does not exercise his option of choosing the
term for renewal, banks may renew the same for a term equal
to the original term.
(ii)No new receipt is required to be issued. However, suitable note may be made regarding
renewal in the deposit ledger.
(iii)Renewal of deposit may be advised by registered letter / speed post / courier service to the
concerned Government department under advice to the depositor. In the advice to the depositor,
the rate of interest at which the deposit is renewed should also be mentioned.
(iv)If overdue period does not exceed 14 days on the date of receipt of the request letter, renewal
may be done from the date of maturity. If it exceeds 14 days, banks may pay interest for the
overdue period as per the policy adopted by them, and keep it in a separate interest free sub-
account which should be released when the original fixed deposit is released.
Further, with regard to the savings bank accounts frozen by the Enforcement authorities, banks
may continue to credit the interest to the account on a regular basis.

8.17 Acknowledgement by banks at the time of submission of Form 15-G / 15-H

Banks are not required to deduct TDS from depositors who submit declaration in Form 15-G/15-
H under Income Tax Rules, 1962. However, it has been brought to our notice that despite
submission of Form 15-G/15-H by customers, banks are deducting tax at source, at times,
causing inconvenience to customers resulting in a number of complaints. Such instances arise
because either the forms are misplaced or a track is not kept of forms received in the branches.
The matter has been examined by us in consultation with Indian Banks’ Association (IBA).
With a view to protect interest of the depositors and for rendering better customer service, banks
are advised to give an acknowledgment at the time of receipt of Form 15-G/15-H. This will help
in building a system of accountability and customers will not be put to inconvenience due to any
omission on part of the banks.

8.18 Timely Issue of TDS Certificate to Customers

Some banks are not providing TDS Certificate in Form 16A to their customers in time, causing
inconvenience to customers in filing income-tax returns.
With a view to protect the interests of the depositor and for rendering better customer service,
banks are advised to provide TDS Certificate in Form 16A, to their customers in respect of
whom they (banks) have deducted tax at source. Banks are advised to put in place systems that
will enable them to provide Form 16A to the customers well within the time-frame prescribed
under the Income Tax Rules.

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 8.19 Opening accounts in the name of minors with Mothers as guardians
Considerable difficulty was experienced by women customers in opening bank accounts in the
names of minors, with mothers as their guardians. Presumably, the banks were reluctant to
accept the mother as a guardian of a minor, while father is alive in view of section 6 of the Hindu
Minority and Guardianship Act, 1956, which stipulates that the father alone should be deemed to
be the guardian in such case. To overcome this legal difficulty and to enable the banks to open
freely such accounts in the name of minors under the guardianship of their mothers, it was
suggested in some quarters that the above provisions should be suitably amended. While it is true
that an amendment of the above Act may overcome the difficulty in the case of Hindus, it would
not solve the problem for other communities as minors belonging to Muslim, Christian, Parsi
communities would still be left out unless the laws governing these communities are also
likewise amended.

The legal and practical aspects of the above problem were, therefore, examined in consultation
with the Government of India and it was advised that if the idea underlining the demand for
allowing mothers to be treated as guardians relates only to the opening of fixed and savings bank
accounts, there would seem to be no difficulty in meeting the requirements as, notwithstanding
the legal provisions, such accounts could be opened by banks provided they take adequate
safeguards in allowing operations in the accounts by ensuring that the minors' accounts opened
with mothers as guardians are not allowed to be overdrawn and that they always remain in credit.
In this way, the minors' capacity to enter into contract would not be a subject matter of dispute. If
this precaution is taken, the banks' interests would be adequately protected.
Banks are advised to instruct their branches to allow minors' accounts (fixed and savings only)
with mothers as guardians to be opened, whenever such requests are received by them, subject to
the safeguards mentioned above.
The facility of allowing opening of minor’s accounts with mothers as guardians may be extended
to Recurring Deposit Accounts also subject to precautions mentioned above.

8.20 Opening of Bank Accounts in the Names of Minors

With a view to promote the objective of financial inclusion and also to bring uniformity among
banks in opening and operating minors’ accounts, banks are advised as under:
a. A savings /fixed / recurring bank deposit account can be opened by a minor of any age through
his/her natural or legally appointed guardian.
b. Minors above the age of 10 years may be allowed to open and operate savings bank accounts
independently, if they so desire. Banks may, however, keeping in view their risk management
systems, fix limits in terms of age and amount up to which minors may be allowed to operate the
deposit accounts independently. They can also decide, in their own discretion, as to what
minimum documents are required for opening of accounts by minors.
c. On attaining majority, the erstwhile minor should confirm the balance in his/her account and if the
account is operated by the natural guardian / legal guardian, fresh operating instructions and
specimen signature of erstwhile minor should be obtained and kept on record for all operational
purposes.
2.Banks are free to offer additional banking facilities like internet banking, ATM/ debit card,
cheque book facility etc., subject to the safeguards that minor accounts are not allowed to be
overdrawn and that these always remain in credit.

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 8.21 Opening of Current Accounts – Need for discipline
(i)Keeping in view the importance of credit discipline for reduction in NPA level of banks, banks
should, at the time of opening current accounts, insist on a declaration to the effect that the
account holder is not enjoying any credit facility with any other bank. Banks should scrupulously
ensure that their branches do not open current accounts of entities which enjoy credit facilities
(fund based or non-fund based) from the banking system without specifically obtaining a No-
Objection Certificate from the lending bank(s). Banks should note that non-adherence to the
above discipline could be perceived to be abetting the siphoning of funds and such violations
which are either reported to RBI or noticed during our inspection would make the concerned
banks liable for penalty under Banking Regulation Act, 1949.
(ii)Banks may open current accounts of prospective customers in case no response is received
from the existing bankers after a minimum waiting period of a fortnight. If a response is received
within a fortnight, banks should assess the situation with reference to information provided on
the prospective customer by the bank concerned and are not required to solicit a formal no
objection, consistent with true freedom to the customer of banks as well as needed due diligence
on the customer by the bank.
(iii)In case of a prospective customer who is a corporate or large borrower enjoying credit
facilities from more than one bank, the banks should exercise due diligence and inform the
consortium leader, if under consortium, and the concerned banks, if under multiple banking
arrangement.

8.22 Reconciliation of transactions at ATMs failure - Time limit

Reserve Bank has been receiving a number of complaints from bank customers, regarding debit
of accounts even though the ATMs have not disbursed cash for various reasons. More
importantly, banks take considerable time in reimbursing the amounts involved in such failed
transactions to card holders. In many cases, the time taken is as much as 50 days. The delay of
the magnitude indicated above is not justified, as it results in customers being out of funds for a
long time for no fault of theirs. Moreover, this delay can discourage customers from using
ATMs.
Based on a review of the developments and with a view to further improve the efficiency of
operations, it has been decided as under:-
a. The time limit for resolution of customer complaints by the issuing banks shall stand reduced
from 12 working days to 7 working days from the date of receipt of customer complaint.
Accordingly, failure to recredit the customer’s account within 7 working days of receipt of the
complaint shall entail payment of compensation to the customer @ ` 100/- per day by the issuing
bank. This compensation shall be credited to the customer’s account automatically without any
claim from the customer, on the same day when the bank affords the credit for the failed ATM
transaction.
b.Any customer is entitled to receive such compensation for delay, only if a claim is lodged with the
issuing bank within 30 days of the date of the transaction.
c.The number of free transactions permitted per month at other bank ATMs to Savings Bank
account holders shall be inclusive of all types of transactions, financial or non-financial.
d.All disputes regarding ATM failed transactions shall be settled by the issuing bank and the
acquiring bank through the ATM System Provider only. No bilateral settlement arrangement
outside the dispute resolution mechanism available with the system provider is permissible. This

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 measure is intended to bring down the instances of disputes in payment of compensation between
the issuing and acquiring banks.

Non-adherence to the provisions contained in para 5.12 (a) to (d) shall attract penalty as
prescribed under the Payment and Settlement Systems Act 2007 (Act 51 of 2007).

8.23 Security Issues and Risk mitigation measures- Online alerts to the cardholder for usage
of credit/debit cards
Banks were mandated to send online alerts to the cardholders for all Card Not Present (CNP)
transactions for the value of ` 5000/- and above. In view of the incidents of unauthorized /
fraudulent withdrawals at ATMs that came to the notice of RBI, banks were advised to put in
place, latest by June 30, 2011, a system of online alerts for all types of transactions irrespective
of the amount, involving usage of cards at various channels. This measure is expected to
encourage further usage of cards at various delivery channels. Banks should provide easier
methods (like SMS) for the customer to block his card and get a confirmation to that effect after
blocking the card.

8.24 Securing Electronic Payment Transactions

The electronic modes of payment like RTGS, NEFT and IMPS have emerged as channel
agnostic modes of funds transfer. These have picked up to a large extent through the internet
banking channel and hence it is imperative that such delivery channels are also safe and secure.

8.25 Levy of Service Charges

Fixing service charges by banks

The practice of IBA fixing the benchmark service charges on behalf of member banks has been
done away with and the decision to prescribe service charges has been left to individual banks.
While fixing service charges for various types of services like charges for cheque collection, etc.,
banks should ensure that the charges are reasonable and are not out of line with the average cost
of providing these services. Banks should also take care to ensure that customers with low
volume of activities are not penalised.

Banks should make arrangements for working out charges with prior approval of their Boards of
Directors as recommended above and operationalise them in their branches as early as possible.

Ensuring Reasonableness of Bank Charges

In order to ensure fair practices in banking services, Reserve Bank of India had constituted a
Working Group to formulate a scheme for ensuring reasonableness of bank charges and to
incorporate the same in the Fair Practices Code, the compliance of which would be monitored by
the Banking Codes and Standards Board of India (BCSBI). Based on the recommendations of the
Group, action required to be taken by banks is indicated under the column 'action points for
banks' in the Annex I .

RTGS charges for customers

As per latest RBI guidelines, Banks are not to charge for NEFT/RTGS Charges.

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8.26 Uniformity in Intersol Charges

Maximum customer charges

With the introduction of Core Banking Solution (CBS), it is expected that customers of banks
would be treated uniformly at any sales or service delivery point. It is, however, observed that
some banks are discriminating against their own customers on the basis of one branch being
designated as the 'home' or 'base' branch where charges are not levied for products / services and
other branches of the same bank being referred to as 'non-home' branches where charges are
levied for the same products / services. The charges generally referred to as 'Intersol' charges, are
also not uniform across home / non-home branches. This practice followed by some banks is
contrary to the spirit of the Reserve Bank's guidelines on reasonableness of bank charges. As
'Intersol' charges are charges levied by the bank to cover the cost of extending services to
customers by using the CBS / Internet / Intranet platform, the cost should be branch / customer
agnostic in-principle. It is clarified that cash handling charges may not be included under intersol
charges.

Banks are advised to follow a uniform, fair and transparent pricing policy and not discriminate
between their customers at home branch and non-home branches. Accordingly, if a particular
service is provided free at home branch, the same should be available free at non home branches
also. There should be no discrimination as regards intersol charges between similar transactions
done by customers at home branch and those done at non-home branches.

Please refer Bank’s Circular on charges for updated charges and free amount/no. of intersol
transactions in an account

8.27 Charges for Sending SMS Alerts

Banks are required to put in place a system of online alerts for all types of transactions
irrespective of the amounts involving usage of cards at various channels.

Accordingly, with a view to ensuring reasonableness and equity in the charges levied by banks
for sending SMS alerts to customers, banks are advised to leverage the technology available with
them and the telecom service providers to ensure that such charges are levied on all customers on
actual usage basis.

8.28 Service at the counters

8.28.1 Banking hours / working days of bank branches

Banks should normally function for public transactions from 10 A.M. to 04:00 P.M. on normal
working days from Monday to Friday and 1st, 3rd and 5th Saturdasy. Branches shall observe lunch
hours from 14:00 – 14:30 hours. Bank shall observe holidays on all Sundays and 2nd and 4th
Saturdays as per latest Bank Circulars.

8.28.2 Commencement / Extension of working hours

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Commencement of employees’ working hours 15 minutes before commencement of business
hours could be made operative by banks at branches in metropolitan and urban centres. The
banks should implement the recommendation taking into account the provisions of the local
Shops and Establishments Act.

The branch managers and other supervising officials should, however, ensure that the members
of the staff are available at their respective counters right from the commencement of banking
hours and throughout the prescribed business hours so that there may not be any grounds for
customers to make complaints.

Banks should ensure that no counter remains unattended during the business hours and
uninterrupted service is rendered to the customers. Further, the banks should allocate the work in
such a way that no Teller counter is closed during the banking hours at their branches.

All the customers entering the banking hall before the close of business hours should be attended
to.

8.28.3 Extended business hours for non-cash banking transactions

Banks should extend business hours for banking transactions other than cash, up till one hour
before close of the working hours.
The following non-cash transactions should be undertaken by banks during the extended hours,
i.e., up to one hour before the close of working hours:

(a)Non-voucher generating transactions:

(i)Issue of pass books/statement of accounts;
(ii)Issue of cheque books ;
(iii)Delivery of term deposit receipts/drafts;
(iv)Acceptance of share application forms;
(v)Acceptance of clearing cheques;
(vi)Acceptance of bills for collection.

(b)Voucher generating transactions:

(i)Issue of term deposit receipts;
(ii)Acceptance of cheques for locker rent due;
(iii)Issue of travellers cheques;
(iv)Issue of gift cheques;
(v) Acceptance of individual cheques for transfer credit.

Such non-cash transactions to be done during the extended business hours should be notified
adequately for information of the customers.

Banks can have evening counters at the premises of existing branches in urban/metropolitan
centres for providing facilities to the public beyond the normal hours of business so as to bring
about improvement in customer service. It is necessary that in such cases the transactions
conducted during such extended hours of business are merged with the main accounts of the
branch where it is decided to provide the aforesaid facilities.
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The concerned banks should give to their constituents due notice about the functions to be
undertaken during the extended banking hours through local newspapers, as also by displaying a
notice on the notice board at the branch(es) concerned. Further, as and when the hours of
business of any of the branches are extended, the concerned clearing house should be informed.

8.29 Guidance to customers and Disclosure of Information

8.29.1 Assistance/guidance to customers

All branches, except very small branches should have “Enquiry” or “May I Help You” counters
either exclusively or combined with other duties, located near the entry point of the banking hall.

8.29.2 Display of time norms

Time norms for specialised business transactions should be displayed predominantly in the
banking hall.

8.29.3 Display of information by banks – Comprehensive Notice Board

The display of information by banks in their branches is one of the modes of imparting financial
education. This display enables customers to take informed decision regarding products and
services of the bank and be aware of their rights as also the obligations of the banks to provide
certain essential services. It also disseminates information on public grievance redressal
mechanism and enhances the quality of customer service in banks and improves the level of
customer satisfaction.

Further, in order to promote transparency instructions have been given by RBI to banks in the
operations of banks, various towards display of various key aspects such as service charges,
interest rates, services offered, product information, time norms for various banking transactions
and grievance redressal mechanism. However, during the course of inspection/visits to bank
branches by RBI, it was observed that many banks were not displaying the required information
due to space constraints, lack of standardization of the instructions, etc.

Keeping in view the need for maintaining a good ambience at the branches as also space
constraints, an Internal Working Group in RBI revisited all the existing instructions relating to
display boards by commercial banks so as to rationalize them. Based on the recommendations of
the Working Group, the following instructions were issued to banks:

8.29.4 Notice Boards

The Group felt that rationalization of the existing instructions could be best achieved if the
instructions were clubbed on certain categories such as ‘customer service information', 'service
charges', 'grievance redressal' and 'others'. At the same time, the Group felt that there may not be
any need to place detailed information in the Notice Board and only the important aspects
or 'indicators' to the information be placed.

The notice board may be updated on a periodical basis and the board should indicate the date up
to which the board was updated (incorporated in the display board)

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 Further, in addition to the above Board, the banks should also display details such as ‘Name of
the bank / branch, Working Days, Working Hours and Weekly Off-days'outside the branch
premises.

8.29.5 Booklets/Brochures:
The detailed information as indicated in Para (E) of Annex II may be made available in various
booklets / brochures as decided by the bank. These booklets / brochures may be kept in a
separate file / folder in the form of ‘replaceable pages’ so as to facilitate copying and updation.
In this connection, banks may also adhere to the following broad guidelines:
The file / folder may be kept at the customer lobby in the branch or at the ‘May I Help You’
counter or at a place that is frequented by most of the customers.
 While printing the booklets it may be ensured that the font size is minimum Arial 10 so
that the customers are able to easily read the same.
Copies of booklets may be made available to the customers on request.

8.29.6 Website
The detailed information as indicated in Para (E) of Annex II may also be made available on the
bank’s web-site. Banks should adhere to the broad guidelines relating to dating of material,
legibility, etc., while placing the same on their websites. In this context, banks are also advised to
ensure that the customers are able to easily access the relevant information from the Home Page
of the bank’s web-sites. Further, there are certain information relating to service charges and fee
and grievance redressal that are to be posted compulsorily on the websites of the bank. Reserve
Bank is providing a link to the websites of banks so that customers can also have access to the
information through RBI’s website.

8.29.7 Other issues

Banks are free to decide on their promotional and product information displays. However, the
mandatory displays may not be obstructed in anyway. As customer interest and financial
education are sought to be achieved by the mandatory display requirements, they should also be
given priority over the other display boards. Information relating to Government sponsored
schemes as applicable location-wise may be displayed according to their applicability.

8.29.8 Display of information relating to Interest Rates and Service Charges – Rates at a
quick glance

8.29.9 Key Statement/ Fact Sheet:

Banks should provide a clear, concise, one page key fact statement/fact sheet, as per prescribed
format to all individual borrowers at every stage of the loan processing as well as in case of any
change in any terms and conditions. The same may also be included as a summary box to be
displayed in the credit agreement.

8.29.10 Disclosure of Information by banks in the public domain

Disclosure of information on products and services on websites is found to be an effective
channel for reaching out to customers and the public at large. Such disclosures increase
transparency in operations and also help to create awareness among customers about the

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products and services offered by banks. Some of the details, which could be at the minimum, be
made available for public viewing through websites of banks are listed below:-

I. Policy / Guidelines
(i)Citizen's Charter
(ii)Deposit Policy
(iii) BCSBI Guidelines

II.Complaints
(i)Grievance Redressal Mechanism
(ii)Information relating to Banking Ombudsmen

III.Branches
(i)Details of branches along with addresses and telephone numbers (with search engine for
queries relating to branch location)
(ii)Details of ATMs along with addresses

8.29.11 Display of Timelines for Credit Decisions

Banks should clearly delineate the procedure for disposal of loan proposals, with appropriate
timelines, and institute a suitable monitoring mechanism for reviewing applications pending
beyond the specified period. There should not, however, be any compromise on due diligence
requirements. Banks may also make suitable disclosures on the timelines for conveying credit
decisions through their websites, notice-boards, product literature, etc.

8.30 Operation of Accounts by Old & Incapacitated Persons

Facility to sick/old/incapacitated non-pension account holders

The facilities offered to pension account holders should be extended to the non-pension account
holders also who are sick / old / incapacitated and are not willing to open and operate joint
accounts.

Types of sick / old / incapacitated account holders

The cases of sick / old / incapacitated account holders fall into following categories:
(a)An account holder who is too ill to sign a cheque / cannot be physically present in the bank to
withdraw money from his bank account but can put his/her thumb impression on the
cheque/withdrawal form;
(b) An account holder who is not only unable to be physically present in the bank but is also not
even able to put his/her thumb impression on the cheque/withdrawal form due to certain physical
incapacity.

Operational Procedure
With a view to enabling the old / sick account holders operate their bank accounts, banks may
follow the procedure as under:-
(a)Wherever thumb or toe impression of the sick/old/incapacitated account holder is obtained, it
should be identified by two independent witnesses known to the bank, one of whom should be a
responsible bank official.
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(b)Where the customer cannot even put his / her thumb impression and also would not be able to
be physically present in the bank, a mark can be obtained on the cheque / withdrawal form which
should be identified by two independent witnesses, one of whom should be a responsible bank
official.
(c)The customer may also be asked to indicate to the bank as to who would withdraw the amount
from the bank on the basis of cheque / withdrawal form as obtained above and that person should
be identified by two independent witnesses. The person who would be actually drawing the
money from the bank should be asked to furnish his signature to the bank.

Opinion of IBA in case of a person who can not sign due to loss of both hands
Opinion obtained by the Indian Banks’ Association from their consultant on the question of
opening of a bank account of a person who has lost both his hands and could not sign the cheque
/ withdrawal form is as under :
“In terms of the General Clauses Act, the term “Sign” with its grammatical variations and
cognate expressions, shall with reference to a person who is unable to write his name, include
“mark” with its grammatical variations and cognate expressions. The Supreme Court has held in
AIR 1950 – Supreme Court, 265 that there must be physical contact between the person who is
to sign and the signature can be by means of a mark. This mark can be placed by the person in
any manner. It could be the toe impression, as suggested. It can be by means of mark which
anybody can put on behalf of the person who has to sign, the mark being put by an instrument
which has had a physical contact with the person who has to sign”.

8.31 Providing bank facilities to persons with disabilities

Guidelines framed by IBA based on the judgment of Chief Commissioner for Persons with
Disabilities
Indian Banks' Association has framed operational guidelines for implementation of its member
banks on providing banking facilities to persons with disabilities. Banks should adopt / follow
the operational guidelines meticulously.

Need for Bank Branches / ATMs to be made accessible to persons with disabilities
Banks are advised to take necessary steps to provide all existing ATMs / future ATMs with
ramps so that wheel chair users / persons with disabilities can easily access them. Care may
also be taken to make arrangements in such a way that the height of the ATMs does not
create an impediment in their use by wheelchair users. However, in cases where it is
impracticable to provide such ramp facilities, whether permanently fixed to earth or
otherwise, this requirement may be dispensed with, for reasons recorded and displayed in
branches or ATMs concerned.

Banks are also to take appropriate steps, including providing of ramps at the entrance of the bank
branches, wherever feasible, so that the persons with disabilities/wheel chair users can enter bank
branches and conduct business without difficulty. Banks are advised to report the progress made
in this regard periodically to their respective Customer Service Committee of the Board and
ensure compliance.

8.32 Providing banking facilities to Visually Impaired Persons

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 In order to facilitate access to banking facilities by visually challenged persons, banks are
advised to offer banking facilities including cheque book facility / operation of ATM / locker,
etc., to the visually challenged as they are legally competent to contract.

In the Case No. 2791/2003, the Honourable Court of Chief Commissioner for Persons with
Disabilities had passed Orders dated September 5, 2005 which was forwarded by IBA to all the
member banks vide their circular letter dated October 20, 2005. In the above Order, the
Honorable Court has instructed that banks should offer all the banking facilities including cheque
book facility, ATM facility and locker facility to the visually challenged and also assist them in
withdrawal of cash.

Further, in Paragraph 14 of the above Order, the Honorable Court has observed that visually
impaired persons cannot be denied the facility of cheque book, locker and ATM on the
possibility of risk in operating / using the said facility, as the element of risk is involved in case
of other customers as well.

Banks should therefore 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.

Banks may also advise their branches to render all possible assistance to the visually challenged
for availing the various banking facilities.

Talking ATMs with Braille keypads to facilitate use by persons with visual impairment
Banks should make all new ATMs installed from July 1, 2014 as talking ATMs with Braille
keypads. Banks should lay down a road map for converting all existing ATMs as talking ATMs
with Braille keypads and the same may be reviewed from time to time by the Customer Service
Committee of the Board.
In addition to the above, magnifying glasses should also be provided in all bank branches for the
use of persons with low vision, wherever they require for carrying out banking transactions with
ease. The branches should display at a prominent place notice about the availability of
magnifying glasses and other facilities available for persons with disabilities.

8.33 Guidelines for the purpose of opening/ operating bank accounts of Persons with
Autism, Cerebral Palsy, Mental Retardation, Mental Illness and Mental Disabilities
The following guidelines would be applicable for the purpose of opening / operating bank
accounts of the above persons:
i.The Mental Health Act, 1987 provides a law relating to the treatment and care of mentally ill
persons and to make better provision with respect to their property and affairs. According to the
said Act, “mentally ill person” means a person who is in need of treatment by reason of any
mental disorder other than mental retardation. Sections 53 and 54 of this Act provide for the
appointment of guardians for mentally ill persons and in certain cases, managers in respect of
their property. The prescribed appointing authorities are the district courts and collectors of
districts under the Mental Health Act, 1987.

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ii.The National Trust for Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and
Multiple Disabilities Act, 1999 provides a law relating to certain specified disabilities. Clause (j)
of Section 2 of that Act defines a “person with disability” to mean a person suffering from any of
the conditions relating to autism, cerebral palsy, mental retardation or a combination of any two
or more of such conditions and includes a person suffering from severe multiple disabilities. This
Act empowers a Local Level Committee to appoint a guardian, to a person with disabilities, who
shall have the care of the person and property of the disabled person.
iii.Banks are advised to take note of the legal position stated above and may rely on and be
guided by the orders/certificates issued by the competent authority, under the respective Acts,
appointing guardians/managers for the purposes of opening/operating bank accounts. In case of
doubt, care may be taken to obtain proper legal advice.
Banks may also ensure that their branches give proper guidance to their customers so that the
guardians/managers of the disabled persons do not face any difficulties in this regard.

Display of information regarding Local Level Committees set up under the National Trust
for the Welfare of Persons with Autism, Cerebral Palsy, Mental Retardation and Multiple
Disabilities Act, 1999
In a case which came up before the High Court of Delhi, the Honorable Court had directed that
all banks should ensure that their branches display in a conspicuous place
(i) essential details about the facilities under the enactment (Mental Disabilities Act); (ii)
the fact that the parties can approach the Local Level Committees, for the purpose of issuance of
the certificate and that the certificate issued under the Mental Disabilities Act is acceptable; and
(iii) the details of the Local Level Committees in that area. The Court had further directed that
the information shall be displayed in the local language and English / Hindi (or both). Banks are
advised to strictly comply with the above orders of the Court.

8.34 Remittance

8.34.1 Remittance of Funds for Value ` 50,000/- and above

Banks should ensure that any remittance of funds by way of demand drafts/mail transfers /
telegraphic transfers or any other mode and issue of travellers cheques for value of ₹ 50,000/-
and above is effected only by debit to the customer’s account or against cheques or other
instruments tendered by the purchaser and not against cash payment . These instructions are
extended to retail sale of gold/silver/platinum. In the current scenario, where the integrity of the
financial system in general and the banking channels in particular is of paramount importance,
breach of these guidelines is a matter of serious regulatory concern in view of the wide ranging
ramifications. Any violation of these instructions will be viewed seriously.

8.34.2 Demand Drafts

Issue of Demand Drafts
Measures seeking to bring down the incidence of frauds perpetrated through bank drafts should
be built into the draft form itself. Necessary changes in system and procedures to speed up issue
and payment of drafts should be taken.

Banks should ensure that demand drafts of ` 20,000/- and above are issued invariably with
account payee crossing.
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All superscriptions about validity of the demand draft should be provided at the top of the draft
form. A draft should be uniformly valid for a period of three months and procedure for
revalidation after three months should be simplified.

Banks should ensure that drafts of small amounts are issued by their branches against cash to all
customers irrespective of the fact whether they are having accounts with the banks or not. Bank's
counter staff should not refuse to accept small denomination notes from the customers (or non
customers for issuance of the drafts).

Encashment of drafts
The banks should ensure that drafts drawn on their branches are paid immediately. Payment of
draft should not be refused for the only reason that relative advice has not been received.

Issue of Duplicate Demand Draft

Duplicate draft, in lieu of lost draft, up to and including ` 5,000/- may be issued to the purchaser
on the basis of adequate indemnity and without insistence on seeking non payment advice from
drawee office irrespective of the legal position obtaining in this regard.
Banks should issue duplicate Demand Draft to the customer within a fortnight from the receipt of
such request. Further, for the delay beyond this stipulated period, banks were advised to pay
interest at the rate applicable for fixed deposit of corresponding maturity in order to compensate
the customer for such delay. The period of fortnight prescribed would be applicable only in cases
where the request for duplicate demand draft is made by the purchaser or the beneficiary and
would not be applicable in the case of third party endorsements.

Some doubts were raised regarding the term "customer" used above and whether it would
include only purchaser / beneficiary or also include any holder of the instrument other than the
purchaser or the beneficiary. It is clarified that the above instructions would be applicable only in
cases where the request for duplicate demand draft is made by the purchaser or the beneficiary
and would not be applicable in the case of draft endorsed to third parties.

8.34.3 Remittance through electronic mode

In case of remittance through electronic funds transfer, originating banks should provide the
option to the customer to choose between RTGS system and NEFT system at the time of
initiation of the funds transfer. The option should be made available to all the customers who
may originate remittance either at the branch or through internet or any other means. The funds
are to be transferred necessarily through the option chosen by the customer. Further, banks
should allow the customers to choose NEFT also as one of the electronic modes of making
payment towards loan EMIs / repayments, etc.

8.34.4 Providing Positive Confirmation to the Originator

All banks should put in place appropriate mechanism to ensure positive confirmation is sent to
the remittance originator confirming the successful credit of funds to the beneficiary’s account
when funds are transferred through NEFT. While it is expected that such confirmation messages
are sent as soon as the beneficiary account is credited, it should not exceed beyond end-of –the-
day under any circumstance.
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8.34.5 Payment of penal interest for delayed credit /refunds of NEFT transactions
In case of delay in crediting the beneficiary customer’s account or in returning the uncredited
amount to the remitter in case of NEFT, banks should pay penal interest. Under the extant
guidelines, banks are required to pay penal interest at the current RBI LAF Repo Rate plus two
percent for the period of delay / till the date of refund as the case may be to the affected
customers suo moto, without waiting for claim from customers.

Under the NEFT Procedural Guidelines, banks are required to establish dedicated Customer
Facilitation Centres (CFCs) to handle customer queries/complaints regarding NEFT transactions.
The contact details of CFCs are available on websites of banks as well as the website of RBI for
easy availability to the customers. Further, banks have to keep the contact details of their CFCs,
set up to handle customer queries / complaints regarding NEFT transactions, updated at all times.
Changes, if any, should be advised by banks immediately to the National Clearing Cell, Nariman
Point, RBI for updating the central directory placed on RBI website. Banks should also ensure
that calls made / e- mails sent to CFCs are promptly attended to and sufficient resources are
dedicated for the same.

8.34.6 National / Regional Electronic Clearing Service (NECS / RECS) – Extension of

service to remaining branches
With a view to extend both NECS and RECS facility to the customers of all bank branches, the
participating banks are advised to make efforts in bringing all their branches under NECS/RECS.

8.34.7 National Electronic Funds Transfer (NEFT) – Requirement of Indian Financial

System Code (IFSC) in transactions
To facilitate electronic modes of remittance and enhancing customer service at branches for
NEFT transactions, the participating banks are advised that staff should provide customers with
necessary assistance in filling out the details as required in the NEFT application form, including
ensuring that beneficiary account details etc. are duly filled in.

8.34.8 NEFT - Customer Service and Charges - Adherence to Procedural Guidelines and
Circulars
With a view to minimizing instances of customer complaints, all participant banks (both direct as
well as sub-members), are advised to ensure adherence to extant instructions as under:
 NEFT application forms with proper instructions are made available at all branches.
 Positive confirmation of credit to beneficiary account is invariably sent for all inward
transactions received by the bank.
 Banks originating the NEFT transactions should ensure that the positive confirmation is
relayed to all remitting customers, including walk-in customers who provide their mobile
number / e-mail id.
 Intimation of failed / returned transactions should also be brought to the notice of the
remitting customer and funds credited to the account immediately / returned to the
remitter at the earliest.
 In case of delayed credits or delayed returns, the penal interest as applicable is paid-suo-
moto to the customer. Even in the case of back-dating or value-dating such delayed
transactions, banks should pay the penal interest for the delayed period.
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8.35 Cheque Drop Box Facility
Both the drop box facility and the facility for acknowledgement of the cheques at regular
collection counters should be available to the customers and no branch should refuse to give an
acknowledgement if the customer tenders the cheques at the counters.

Banks should ensure that customers are not compelled to drop the cheques in the drop- box.
Further, in the context of customer awareness in this regard, banks should invariably display on
the cheque drop-box itself that "Customers can also tender the cheques at the counter and
obtain acknowledgment on the pay-in-slips". The above message is required to be displayed
in English, Hindi and the concerned regional language of the State.

Banks are also advised to make absolutely fool proof arrangements accounting for the number of
instruments each time the box is opened so that there are no disputes and the customer’s interests
are not compromised.

Collection of instruments

8.36 Formulating Cheque Collection Policies

In most countries banks are obliged to develop their own individual policy / procedures relating
to collection of cheques and also provide due disclosures to the customers on the bank's
obligations and the customers' rights. Due to the technological progress in payment and
settlement systems and the qualitative changes in operational systems and processes that have
been undertaken by a number of banks, it is observed that prescription of a single set of rules
may not be appropriate. Hence, efficiencies in collection of proceeds and providing funds to
customers in time are best achieved through a spirit of competition among the banks rather than
through issuance of guidelines by RBI.
Keeping in view the above, earlier instructions issued regarding immediate credit of local
/outstation cheques, time frame for collection of local/outstation instruments and interest
payment for delayed collection have been withdrawn by Reserve Bank leaving it to the
individual banks to formulate policies in this regard.
Broadly, the policy should include instructions on the following:

8.36.1 Time frame for Collection of Local / Outstation Instruments & Interest payment for
delayed collection

Banks have been advised to reframe their Cheque Collection Policies to include compensation
payable for the delay in the collection of local cheques as well. In case, no rate is specified in the
CCP for delay in realisation of local cheques, compensation at savings bank interest rate should
be paid for the corresponding period of delay.

With a view to encouraging faster migration to CTS-2010 standard cheques, banks are advised
that non CTS-2010 standard instruments will be cleared at less frequent intervals in the CTS
clearing centres. Banks may educate and notify their customers of the likely delay in realisation
of non-CTS-2010 standard instruments in view of the arrangement for clearing of such
instruments at less frequent intervals. Banks’ Cheque Collection Policies (CCPs) may also be
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modified suitably to reflect this change. They may also put in place appropriate arrangement for
handling customer complaints, if any, arising out of this new arrangement.

8.36.2 Delays in Cheque Clearing - Case No. 82 of 2006 before National Consumer
Disputes Redressal Commission
Banks are advised to comply with the final order on 'timeframe for collection of outstation
cheques' passed by the National Consumer Disputes Redressal Commission in case no. 82 of
2006. Further, banks are advised as under:
(i)Banks shall reframe their Cheque Collection Policies (CCPs) covering local and outstation
cheque collection as per the timeframe prescribed by the Commission.
(ii)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. Ideally, in respect of local clearing, banks shall permit usage of
the shadow credit afforded to the customer accounts immediately after closure of relative return
clearing and in any case withdrawal shall be allowed on the same day or maximum within an
hour of commencement of business on the next working day, subject to usual safeguards.
(iii) Timeframe for collection of cheques drawn on State Capitals / major cities / other locations
to be 7/10/14 days respectively. If there is any delay in collection beyond this period, interest at
the rate specified in the CCP of the bank, shall be paid. In case the rate is not specified in the
CCP, the applicable rate shall be the interest rate on Fixed Deposits for the corresponding
maturity. The timeframe for collection specified by the Commission shall be treated as outer
limit and credit shall be afforded if the process gets completed earlier.
(iv)Banks shall not decline to accept outstation cheques deposited by its customers for collection.
(v)Banks shall give wide publicity to the CCP by prominently displaying salient features thereof
in bold and visible letters on the notice board at their branches.
(vi) A copy of the complete CCP shall be made available by the branch manager, if the
customers require so.

8.36.3 Collection of Account Payee Cheque - Prohibition on Crediting Proceeds to Third

Party Account
a)In consonance with the legal requirements and in particular, the intent of the Negotiable
Instruments Act, 1881 and with a view to protect the banks being burdened with liabilities
arising out of unauthorized collections, and in the interest of the integrity and soundness of the
payment and banking systems, and in order to prevent recurrence of deviations observed in the
recent past, the Reserve Bank has considered it necessary to prohibit the banks from crediting
'account payee' cheque to the account of any person other than the payee named therein.
Accordingly, banks were directed that they should not collect account payee cheques for any
person other than the payee constituent.
Where the drawer / payee instructs the bank to credit the proceeds of collection to any account
other than that of the payee, the instruction being contrary to the intended inherent character of
the 'account payee' cheque, bank should ask the drawer / payee to have the cheque or the account
payee mandate thereon withdrawn by the drawer. This instruction would also apply with respect
to the cheque drawn by a bank payable to another bank.
b)In order to facilitate collection of cheques from a payment system angle, account payee
cheques deposited with the sub-member for credit to their customers' account can be collected by
the member bank (referred to as the sponsor member) of the Clearing House. Under such
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arrangements, there should be clear undertaking to the effect that the proceeds of the account
payee cheque will be credited to the payee's account only, upon realization.
c)With a view to mitigate the difficulties faced by the members of co-operative credit societies in
collection of account payee cheques, it is further clarified that collecting banks may consider
collecting account payee cheques drawn for an amount not exceeding ` 50,000/- to the account of
their customers who are co-operative credit societies, if the payees of such cheques are the
constituents of such co-operative credit societies. While collecting the cheques as aforesaid,
banks should have a clear representation in writing given by the co-operative credit societies
concerned that, upon realization, the proceeds of the cheques will be credited only to the account
of the member of the co-operative credit society who is the payee named in the cheque. This
shall, however, be subject to the fulfillment of the requirements of the provisions of Negotiable
Instruments Act, 1881, including Section 131 thereof.
d)Banks may note that the above instructions shall also extend to drafts, pay orders and bankers’
cheque.

8.36.4 Payment of Cheques/Drafts/Pay Orders/Banker’s Cheques

With effect from April 1, 2012, banks should not make payment of cheques/drafts/pay
orders/banker’s cheques bearing that date or any subsequent date, if they are presented beyond
the period of three months from the date of such instrument. Banks should ensure strict
compliance of these directions and notify the holders of such instruments of the change in
practice by printing or stamping on the cheque leaves, drafts, pay orders and banker’s cheques
issued on or after April 1, 2012, by issuing suitable instruction for presentment within the period
of three months from the date of the instrument.

8.36.5 Cheques / Instruments lost in transit / in clearing process / at paying bank's branch
Banks are advised to follow the following guidelines regarding cheques lost in transit: -
(i)In respect of cheques lost in transit or in the clearing process or at the paying bank's branch,
the bank should immediately bring the same to the notice of the accountholder so that
accountholder can inform the drawer to record stop payment and can also take care that other
cheques issued by him are not dishonoured due to non- credit of the amount of the lost cheques /
instruments.
(ii)The onus of such loss lies with the collecting banker and not the accountholder.
(iii)The banks should reimburse the accountholder related expenses for obtaining duplicate
instruments and also interest for reasonable delays occurred in obtaining the same.
(iv)If the cheque / instrument has been lost at the paying bank's branch, the collecting banker
should have a right to recover the amount reimbursed to the customer for the loss of the cheque /
instrument from the paying banker.
Banks are advised to incorporate the above guidelines in their Cheque Collection Policies.

8.36.6 Delay in Re-presentation of Technical Return Cheques and Levy of Charges for such
Returns:
Banks have been advised to levy cheque return charges only in cases where the customer is at
fault and is responsible for such returns. The illustrative, but not exhaustive, list of returns, where
the customers are not at fault are indicated in the Annex VI. In cases where the cheques need to
be re-presented without any recourse to the payee, such re-presentation should be made in the

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immediate next presentation clearing not later than 24 hours(excluding holidays) with due
notification to the customers of such representation through SMS alert, email etc.

8.36.7 Dishonour of Cheques – Procedure thereof 15.1 Returning dishonoured cheques

(Banks are required to implement the recommendation of the Goiporia Committee that
dishonoured instruments are returned / despatched to the customer promptly without delay, in
any case within 24 hours.

8.36.8 Procedure for return/ despatch of dishonoured cheques

(i)The paying bank should return dishonoured cheques presented through clearing houses
strictly as per the return discipline prescribed for respective clearing house in terms of Uniform
Regulations and Rules for Bankers' Clearing Houses. The collecting bank on receipt of such
dishonoured cheques should despatch it immediately to the payees / holders.
(ii)In relation to cheques presented direct to the paying bank for settlement of transaction by way
of transfer between two accounts with that bank, it should return such dishonoured cheques to
payees/ holders immediately.
(iii)In case of dishonor / return of cheques, the paying banks should clearly indicate the return
reason code on the return memo / objection slip which should also bear the signature / initial of
the bank officials as prescribed in Rule 6 of the Uniform Regulations and Rules for Bankers’
Clearing Houses (URRBCH).

8.36.9 Information on dishonoured cheques

Data in respect of each dishonoured cheque for amount of ` 1 crore and above should be made
part of bank's MIS on constituents and concerned branches should report such data to their
respective controlling office / Head Office.
Data in respect of cheques drawn in favour of stock exchanges and dishonoured should be
consolidated separately by banks irrespective of the value of such cheques as a part of their MIS
relating to broker entities, and be reported to their respective Head Offices / Central Offices.

8.36.10 Dealing with incidents of frequent dishonour of cheques of value ` 1 crore and
above
(i)With a view to enforce financial discipline among the customers, banks should introduce a
condition for operation of accounts with cheque facility that in the event of dishonour of a
cheque valuing rupees one crore and above drawn on a particular account of the drawer on four
occasions during the financial year for want of sufficient funds in the account, no fresh cheque
book would be issued. Also, the bank may consider closing current account at its discretion.
However, in respect of advances accounts such as cash credit account, overdraft account, the
need for continuance or otherwise of these credit facilities and the cheque facility relating to
these accounts should be reviewed by appropriate authority higher than the sanctioning authority.
(ii) For the purposes of introduction of the condition mentioned at (i) above in relation to
operation of the existing accounts, banks may, at the time of issuing new cheque book, issue a
letter advising the constituents of the new condition.
(iii)If a cheque is dishonoured for a third time on a particular account of the drawer during the
financial year, banks should issue a cautionary advice to the concerned constituent drawing his
attention to aforesaid condition and consequential stoppage of cheque facility in the event of

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cheque being dishonoured on fourth occasion on the same account during the financial year.
Similar cautionary advice may be issued if a bank intends to close the account.

8.36.11 Dealing with frequent dishonour of cheques of value of less than ` 1 crore
Since frequent dishonour of cheques of value of less than ` 1 crore is also a matter of concern, it
is felt that banks need to take appropriate action in those accounts where such dishonour of
cheques occur. Further, it is also felt that though it may not be necessary to extend all the steps
laid down in our earlier circular to smaller cheques, banks should have their own approach to
deal with recalcitrant customers.
Banks are therefore advised to have a Board approved policy for dealing with frequent dishonour
of cheques of value of less than ` 1 crore. The policy should also deal with matters relating to
frequent dishonour of ECS mandates.

General
(i)For the purpose of adducing evidence to prove the fact of dishonour of cheque on behalf of a
complainant (i.e., payee / holder of a dishonoured cheque) in any proceeding relating to
dishonoured cheque before a court, consumer forum or any other competent authority, banks
should extend full co-operation, and should furnish him/her documentary proof of fact of
dishonour of cheques.
(ii)Banks should place before their Audit/ Management Committee, every quarter, consolidated
data in respect of the matters referred to above.

Framing appropriate procedure for dealing with dishonoured cheques

Banks are also advised to adopt, with the approval of their respective Boards, appropriate
procedure for dealing with dishonoured cheques with inherent preventive measures and checks to
prevent any scope for collusion of the staff of the bank or any other person, with the drawer of
the cheque for causing delay in or withholding the communication of the fact of dishonour of the
cheque to the payee/ holder or the return of such dishonoured cheque to him.
Banks should also lay down requisite internal guidelines for their officers and staff and advise
them to adhere to such guidelines and ensure strict compliance thereof to achieve aforesaid
object of effective communication and delivery of dishonoured cheque to the payee.

8.37 Dealing with Complaints and Improving Customer Relations

8.37.1 Complaints/suggestions box

Complaints/suggestions box should be provided at each office of the bank. Further, at every
office of the bank a notice requesting the customers to meet the branch manager may be
displayed regarding grievances, if the grievances remain un-redressed.

8.37.2 Complaint Book /Register

Complaint book with perforated copies in each set may be introduced, so designed as to instantly
provide an acknowledgement to the customers and intimation to the Controlling Office. IBA has,
for the sake of uniformity, prepared a format of the complaint book with adequate number of
perforated copies, which are so designed that the complainant could be given an acknowledged
copy instantly. A copy of the complaint is required to be forwarded to the concerned Controlling

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Office of the bank along with the remark of the Branch Manager within a time frame. Bank
should introduce the complaint book as per the above format for uniformity.

All bank's branches should maintain a separate complaints register in the prescribed format given
for entering all the complaints/grievances received by them directly or through their Head
Office/Govt. These registers should be maintained irrespective of the fact whether a complaint is
received or not in the past.

The complaints registers maintained by branches should be scrutinised by the concerned

Regional Manager during his periodical visit to the branches and his observations/comments
recorded in the relative visit reports.

Banks having computerized operations may adopt the afore-said format and generate copies
electronically.

8.37.3 Complaint Form

Further, a complaint form, along with the name of the Nodal Officer for complaint redressal,
may be provided in the homepage itself to facilitate complaint submission by customers. The
complaint form should also indicate that the first point for redressal of complaints is the bank
itself and that complainants may approach the Banking Ombudsman only if the complaint is not
resolved at the bank level within a month. Similar information may be displayed in the boards
put up in all the bank branches to indicate the name and address of the Banking Ombudsman. In
addition, the name, address and telephone numbers of the Controlling Authority of the bank to
whom complaints can be addressed may also be given prominently.

8.37.4 Analysis and Disclosure of complaints -

Disclosure of complaints / unimplemented awards of Banking Ombudsmen along with
Financial Results
The Committee on Procedures and Performance Audit on Public Services (CPPAPS) had
recommended that banks should place a statement before their Boards analyzing the complaints
received. CPPAPS had further recommended that the Statement of complaints and its analysis
should also be disclosed by banks along with their financial results. Further, a suggestion has
been received that unimplemented awards of the Banking Ombudsman should also be disclosed
along with financial results.

Banks should place a statement of complaints before their Boards / Customer Service
Committees along with an analysis of the complaints received. The complaints should be
analyzed (i) to identify customer service areas in which the complaints are frequently received;
(ii) to identify frequent sources of complaint; (iii) to identify systemic deficiencies; and (iv) for
initiating appropriate action to make the grievance redressal mechanism more effective.

Further, banks are also advised to disclose the following brief details along with their financial
results:
A.Customer Complaints
(a)No. of complaints pending at the beginning of the year
(b)No. of complaints received during the year
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 (c)No. of complaints redressed during the year
(d)No. of complaints pending at the end of the year

B.Awards passed by the Banking Ombudsman

(a)No. of unimplemented Awards at the beginning of the year
(b)No. of Awards passed by the Banking Ombudsmen during the year
(c)No. of Awards implemented during the year
(d)No. of unimplemented Awards at the end of the year

Further, banks are also advised to place the detailed statement of complaints and its analysis on
their web-site for information of the general public at the end of each financial year. Banks
should include all complaints pertaining to ATM cards issued by them in their disclosures.

8.37.5 Grievance Redressal Mechanism

Banks should ensure that a suitable mechanism exists for receiving and addressing complaints
from its customers / constituents with specific emphasis on resolving such complaints fairly and
expeditiously regardless of source of the complaints.
Banks are also advised to:
(i)Ensure that the complaint registers are kept at prominent place in their branches which would
make it possible for the customers to enter their complaints.
(ii)Have a system of acknowledging the complaints, where the complaints are received through
letters / forms.
(iii)Fix a time frame for resolving the complaints received at different levels.
(iv) Ensure that redressal of complaints emanating from rural areas and those relating to financial
assistance to Priority Sector and Government’s Poverty Alleviation Programmes also form part
of the above process.
(v) Prominently display at the branches, the names of the officials who can be contacted for
redressal of complaints, together with their direct telephonenumber, fax number, complete
address (not Post Box No.) ande-mail address, etc., for proper and timely contact by the
customers and for enhancing the effectiveness of the redressal machinery.
(vi)The names of the officials displayed at the branches who can be contacted for redressal of
complaints should also include the name and other details of the concerned Nodal Officer
appointed under the Banking Ombudsman Scheme, 2006.
(vii)Banks should display on their web-sites, the names and other details of the officials at their
Head Office / Regional Offices / Zonal Offices who can be contacted for redressal of complaints
including the names of the Nodal Officers / Principal Nodal Officers.
(viii)Further, banks should also display on their web-sites, the names and other details of their
CMD / CEO and also Line Functioning Heads for various operations to enable their customers to
approach them in case of need, if necessary.

Further, as stated above in Paragraph banks are required to disclose the brief details regarding the
number of complaints along with their financial results. This statement should include all the
complaints received at the Head Office / Controlling Office level as also the complaints received
at the branch level. However, where the complaints are redressed within the next working day,
banks need not include the same in the statement of complaints. This is expected to serve as an
incentive to the banks and their branches to redress the complaints within the next working day.
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Where the complaints are not redressed within one month, the concerned branch / Controlling
Office should forward a copy of the same to the concerned Nodal Officer under the Banking
Ombudsman Scheme and keep him updated regarding the status of the complaint. This would
enable the Nodal Officer to deal with any reference received from the Banking Ombudsman
regarding the complaint more effectively. Further, it is also necessary that the customer is made
aware of his rights to approach the concerned Banking Ombudsman in case he is not satisfied
with the bank’s response. As such, in the final letter sent to the customer regarding redressal of
the complaint, banks should indicate that the complainant can also approach the concerned
Banking Ombudsman. The details of the concerned Banking Ombudsman should also be
included in the letter.

Banks should give wide publicity to the grievance redressal machinery through advertisements
and also by placing them on their web sites.

8.37.6 Display of Names of Nodal Officers

With a view to making the Grievance Redressal Mechanism more effective, in addition to the
instructions mentioned above, banks are further advised as under:
i) Ensure that the Principal Nodal Officer appointed under the Banking Ombudsman
Scheme is of a sufficiently senior level, not below the rank of a General Manager.
ii) Contact details including name, complete address, telephone / fax number, email address,
etc., of the Principal Nodal Officer needs to be prominently displayed in the portal of the
bank preferably on the first page of the web-site so that the aggrieved customer can
approach the bank with a sense of satisfaction that she / he has been attended at a senior
level.
iii) Grievance Redressal Mechanism (GRM) should be made simpler even if it is linked to
call centre of customer care unit without customers facing hassles of proving identity,
account details, etc.
iv) Adequate and wider publicity are also required to be given by the respective financial
services provider.
The name and address of the Principal Nodal Officer may also be forwarded to the Chief
General Manager, Customer Education and Protection Department, Reserve Bank of India,
Central Office, 1st Floor, Amar Building, Sir P.M.Road, Mumbai-400 001 (email).

8.38 Erroneous Debits arising on fraudulent or other transactions

8.38.1 Vigilance by banks

Banks have been advised to adhere to the guidelines and procedures for opening and operating
deposit accounts to safeguard against unscrupulous persons opening accounts mainly to use them
as conduit for fraudulently encashing payment instruments. However, in view of receipt of
continuous complaints of fraudulent encashment by unscrupulous persons opening deposit
accounts in the name/s similar to already established concern/s resulting in erroneous and
unwanted debit of drawers’ accounts, banks should remain vigilant to avoid such lapses and
issue necessary instructions to the branches / staff.

8.38.2 Compensating the customer

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Besides in cases of the above kind, banks also do not restore funds promptly to customers even
in bona-fide cases but defer action till completion of either departmental action or police
interrogation. Therefore, (i) In case of any fraud, if the branch is convinced that an irregularity /
fraud has been committed by its staff towards any constituent, the branch should at
once acknowledge its liability and pay the just claim,
(ii)in cases where banks are at fault, the banks should compensate customers without demur, and
(iii) in cases where neither the bank is at fault nor the customer is at fault but the fault lies
elsewhere in the system, then also the banks should compensate the customers (up to a limit) as
part of a Board approved customer relations policy.

8.39 Extension of Safe Deposit Locker / Safe Custody Article Facility

The Committee on Procedures and Performance Audit on Public Services (CPPAPS) had made
some recommendations for easy operation of lockers. Reserve Bank has reviewed all the
guidelines issued by the Bank on various issues relating to safe deposit lockers / safe custody
articles. The following guidelines supersede all the guidelines issued earlier in this regard.

Allotment of Lockers
Linking of Allotment of Lockers to placement of Fixed Deposits
The Committee on Procedures and Performance Audit of Public Services (CPPAPS) observed
that linking the lockers facility with placement of fixed or any other deposit beyond what is
specifically permitted is a restrictive practice and should be prohibited forthwith. RBI concurs
with the Committee's observations and banks are advised to refrain from such restrictive
practices.

Fixed Deposit as Security for Lockers

Banks may face situations where the locker-hirer neither operates the locker nor pays rent. To
ensure prompt payment of locker rent, banks may at the time of allotment, obtain a Fixed
Deposit which would cover 3 years rent and the charges for breaking open the locker in case of
an eventuality. However, banks should not insist on such Fixed Deposit from the existing locker-
hirers.

Wait List of Lockers

Branches should maintain a wait list for the purpose of allotment of lockers and ensure
transparency in allotment of lockers. All applications received for allotment of locker should be
acknowledged and given a wait list number.

Providing a copy of the agreement

Banks should give a copy of the agreement regarding operation of the locker to the locker-
hirer at the time of allotment of the locker.

Security aspects relating to Safe Deposit Lockers

Operations of Safe Deposit Vaults/Lockers

Banks should exercise due care and necessary precaution for the protection of the lockers
provided to the customer. Banks should review the systems in force for operation of safe deposit
vaults / locker at their branches on an on-going basis and take necessary steps. The security
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procedures should be well-documented and the concerned staff should be properly trained in the
procedure. The internal auditors should ensure that the procedures are strictly adhered to.

Customer due diligence for allotment of lockers /

Measures relating to lockers which have remained unoperated
In a recent incident, explosives and weapons were found in a locker in a bank branch. This
emphasizes that banks should be aware of the risks involved in renting safe deposit lockers. In
this connection, banks should take following measures:
(i)Banks should carry out customer due diligence for both new and existing customers at least to
the levels prescribed for customers classified as medium risk. If the customer is classified in a
higher risk category, customer due diligence as per KYC norms applicable to such higher risk
category should be carried out.
(ii)Where the lockers have remained unoperated for more than three years for medium risk
category or one year for a higher risk category, banks should immediately contact the locker-
hirer and advise him to either operate the locker or surrender it. This exercise should be carried
out even if the locker hirer is paying the rent regularly. Further, banks should ask the locker hirer
to give in writing, the reasons why he / she did not operate the locker. In case the locker-hirer has
some genuine reasons as in the case of NRIs or persons who are out of town due to a transferable
job etc., banks may allow the locker hirer to continue with the locker. In case the locker-
hirer does not respond nor operate the locker, banks should consider opening the lockers after
giving due notice to him. In this context, banks should incorporate a clause in the locker
agreement that in case the locker remains unoperated for more than one year, the bank would
have the right to cancel the allotment of the locker and open the locker, even if the rent is paid
regularly.
(iii)Banks should have clear procedure drawn up in consultation with their legal advisers for
breaking open the lockers and taking stock of inventory.

Embossing identification code

Banks should ensure that identification Code of the bank / branch is embossed on all the locker
keys with a view to facilitate Authorities in identifying the ownership of the locker keys.

8.40 Nomination Facility

8.40.1 Legal Provisions: Nomination Facility

Provisions in the Banking Regulation Act, 1949
The Banking Regulation Act, 1949 was amended by Banking Laws (Amendment) Act, 1983 by
introducing new Sections 45ZA to 45ZF, which provide, inter alia, for the following matters:
a.To enable a banking company to make payment to the nominee of a deceased depositor, the
amount standing to the credit of the depositor.
b.To enable a banking company to return the articles left by a deceased person in its safe custody
to his nominee, after making an inventory of the articles in the manner directed by the Reserve
Bank.
c.To enable a banking company to release the contents of a safety locker to the nominee of the
hirer of such locker, in the event of the death of the hirer, after making an inventory of the
contents of the safety locker in the manner directed by the Reserve Bank.

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 8.40.2 The Banking Companies (Nomination) Rules, 1985
Since such nomination has to be made in the prescribed manner, the Central Government framed,
in consultation with the Reserve Bank of India, the Banking Companies (Nomination) Rules,
1985. These Rules, together with the provision of new Sections 45ZA to 45ZF of the Banking
Regulation Act, 1949 regarding nomination facilities were brought into force with effect from
1985.
The Banking Companies (Nomination) Rules, 1985 which are self-explanatory, provide for:-
(i)Nomination Forms for deposit accounts, articles kept in safe custody and contents of safety
lockers.
(ii)Forms for cancellation and variation of the nominations.
(iii)Registration of Nominations and cancellation and variation of nominations, and
(iv) Matters related to the above.

8.40.3 Nomination facilities in respect of safe deposit locker / safe custody articles
Sections 45ZC to 45ZF of the Banking Regulation Act, 1949 provide for nomination and release
of contents of safety lockers / safe custody article to the nominee and protection against notice of
claims of other persons. Banks should be guided by the provisions of Sections 45 ZC to 45 ZF of
the Banking Regulation Act, 1949 and the Banking Companies (Nomination) Rules, 1985 and
the relevant provisions of Indian Contract Act and Indian Succession Act.

In the matter of returning articles left in safe custody by the deceased depositor to the nominee or
allowing the nominee/s to have access to the locker and permitting him/them to remove the
contents of the locker, the Reserve Bank of India, in pursuanceof Sections 45ZC (3) and 45ZE
(4) of the Banking Regulation Act, 1949 has specified the formats for the purpose.

In order to ensure that the amount of deposits, articles left in safe custody and contents of lockers
are returned to the genuine nominee, as also to verify the proof of death, banks may devise their
own claim formats or follow the procedure, if any, suggested by the Indian Banks' Association
for the purpose.

8.40.4 Nomination Facility – Sole Proprietary Concern

Banks may extend the nomination facility also in respect of deposits held in the name of a sole
proprietary concern.

8.40.5 Nomination Facility in Single Deposit Accounts

Banks should give wide publicity and provide guidance to deposit account holders on the
benefits of nomination facility and the survivorship clause. Despite the best efforts in this regard,
banks might still be opening single deposit accounts without nomination.

In a case which came up before the Allahabad High Court, the Honourable Court has observed
that "it will be most appropriate that the Reserve Bank of India issues guidelines to the effect that
no Savings Account or Fixed Deposit in single name be accepted unless name of the nominee is
given by the depositors. It will go a long way to serve the purpose of the innocent widows and
children, who are dragged on long drawn proceedings in the Court for claiming the amount,
which lawfully belongs to them".

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Keeping in view the above, banks should generally insist that the person opening a deposit
account makes a nomination. In case the person opening an account declines to fill in
nomination, the bank should explain the advantages of nomination facility. If the person opening
the account still does not want to nominate, the bank should ask him to give a specific letter to
the effect that he does not want to make a nomination. In case the person opening the account
declines to give such a letter, the bank should record the fact on the account opening form and
proceed with opening of the account if otherwise found eligible. Under no circumstances, a bank
should refuse to open an account solely on the ground that the person opening the account
refused to nominate.

8.40.6 Acknowledgement of Nomination

It was observed that some banks do not have the system of acknowledging the receipt of the duly
completed form of nomination, cancellation and / or variation of the nomination. Further, in
some banks, although there is a system of acknowledgement of nomination as provided in the
Savings Bank account opening form, such acknowledgements are actually not given to the
customers. In this connection, banks are aware that in terms of Rules 2 (9), 3 (8) and 4 (9) of the
Banking Companies Nomination (Rules), 1985, they are required to acknowledge in writing to
the depositor(s) / locker hirers (s) the filing of the relevant duly completed Form of nomination,
cancellation and / or variation of the nomination.
Banks should therefore strictly comply with the provisions of Banking Regulation Act, 1949 and
Banking Companies (Nomination) Rules, 1985 and devise a proper system of acknowledging 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.

8.40.7 Registering the nomination

In terms of Rules 2 (10), 3 (9) and 4 (10) of the Banking Companies (Nomination) Rules, 1985
banks are required to register in its books the nomination, cancellation and
/or variation of the nomination. The banks should accordingly take action to register nominations
or changes therein, if any, made by their depositor(s) / hirers.

Incorporation of the legend “Nomination Registered” in pass book, deposit receipt etc. and
indicating the Name of the Nominee in Pass Books / Fixed Deposit Receipts
When a bank account holder has availed himself of nomination facility, the same may be
indicated on the passbook so that, in case of death of the account holder, his relatives can know
from the pass book that the nomination facility has been availed of by the deceased depositor and
take suitable action. Banks may, therefore, introduce the practice of recording on the face of the
passbook the position regarding availment of nomination facility with the legend "Nomination
Registered". This may be done in the case of term deposit receipts also.
Further, banks are advised that in addition to the legend “Nomination Registered”, they 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.

8.40.8 Separate nomination for savings bank account and pension account
Nomination facility is available for Savings Bank Account opened for credit of pension. Banking
Companies (Nomination) Rules, 1985 are distinct from the Arrears of Pension (Nomination)
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Rules, 1983 and nomination exercised by the pensioner under the latter rules for receipt of
arrears of pension will not be valid for the purpose of deposit accounts held by the pensioners
with banks for which a separate nomination is necessary in terms of the Banking Companies
(Nomination) Rules, 1985 in case a pensioner desires to avail of nomination facility.

8.40.9 Nomination Facility – Certain Clarifications

Nomination facility in respect of deposits

(i)Nomination facility is intended for individuals including a sole proprietaryconcern.
(ii)Rules stipulate that nomination shall be made only in favour of individuals. As such, a
nominee cannot be an Association, Trust, Society or any other Organisation or any office-
bearer thereof in his official capacity. In view thereof any nomination other than in favour of an
individual will not be valid.
(iii)There cannot be more than one nominee in respect of a joint depositaccount.
(iv)Banks may allow variation/cancellation of a subsisting nomination by all the surviving
depositor(s) acting together. This is also applicable to deposits having operating instructions
"either or survivor".
(v)In the case of a joint deposit account the nominee's right arises only after the death of all the
depositors.
8.40.10 Witness in Nomination Forms: The Banking Companies (Nomination)
Rules, 1985 have been framed in exercise of powers conferred by Section 52 read
with Sections 45ZA, 45ZC and 45ZE of the Banking Regulation Act, 1949. In this connection,
we clarify that for the various Forms (DA1, DA2 and DA3 for Bank Deposits, Forms SC1, SC2
and SC3 for Articles left in Safe Custody, Forms SL1, SL1A, SL2, SL3 and SL3A for Safety
Lockers) prescribed under Banking Companies (Nomination) Rules, 1985 only Thumb-
impression(s) shall be attested by two witnesses. Signatures of the account holders need not be
attested by witnesses.

(vii)Nomination in case of Joint Deposit Accounts: It is understood that sometimes the

customers opening joint accounts with or without "Either or Survivor" mandate, are
dissuaded from exercising the nomination facility. It is clarified that nomination facility is
available for joint deposit accounts also. Banks are, therefore, advised to ensure that their
branches offer nomination facility to all deposit accounts including joint accounts opened
by the customers.

8.40.11 Nomination in Safe Deposit Lockers / Safe Custody Articles

(i)Nomination facilities are available only in the case of individual depositors and not in respect
of persons jointly depositing articles for safe custody.
(ii)Section 45ZE of the Banking Regulation Act, 1949 does not preclude a minor from being a
nominee for obtaining delivery of the contents of a locker. However, the responsibility of the
banks in such cases is to ensure that when the contents of a locker were sought to be removed on
behalf of the minor nominee, the articles were handed over to a person who, in law, was
competent to receive the articles on behalf of the minor.

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(iii)As regards lockers hired jointly, on the death of any one of the joint hirers, the contents of the
locker are only allowed to be removed jointly by the nominees and the survivor(s) after an
inventory was taken in the prescribed manner. In such a case, after such removal preceded by an
inventory, the nominee and surviving hirer(s) may still keep the entire contents with the same
bank, if they so desire, by entering into a fresh contract of hiring a locker.

8.40.12 Customer Guidance and Publicity Educating Customers on the Benefits of

nomination / survivorship clause
(i)The nomination facility is intended to facilitate expeditious settlement of claims in the
accounts of deceased depositors and to minimise hardship caused to the family members on the
death of the depositors. The banks should endeavour to drive home to their constituents the
benefit of nomination facilities and ensure that the message reaches all the constituents by taking
all necessary measures for popularising the nomination facility among their constituents.
(ii)Banks should give wide publicity and provide guidance to deposit account holders on the
benefits of the nomination facility and the survivorship clause. Illustratively, it should be
highlighted in the publicity material that in the event of the death of one of the joint account
holders, the right to the deposit proceeds does not automatically devolve on the surviving joint
deposit account holder, unless there is a survivorship clause.
(iii)In addition to obtaining nomination forms, banks should ensure that account opening form
should contain space for nomination also so that the customers could be educated about
availability of such facilities.
(iv)Unless the customers prefer not to nominate (this may be recorded without giving scope for
conjecture of non-compliance), nomination should be a rule, to cover all other existing and new
accounts.
(v)To popularise the nomination facility, publicity may be launched, including printing
compatible message on cheque books, pass-book and any other literature reaching the customers
as well as launching periodical drives. The methodology which the banks may like to adopt for
this purpose may vary. However, one of the banks has devised a small slip indicating the
availability of nomination facility and the slip is inserted in the cheque books and pass books and
in current account statements. A specimen format of the slip is given below :-
"Nomination facility available for -
-Deposits
-Safe Custody
-Safe Deposit Vault
Please make use of it.
For details, please enquire at the Branch"
The availability of the above facility may also be indicated on the cheque/pass books.

8.41 Settlement of claims in respect of deceased depositors – Simplification of procedure

Provisions of the Banking Regulation Act, 1949
Banks should adhere to the provisions of Sections 45 ZA to 45 ZF of the Banking Regulation
Act, 1949 and the Banking Companies (Nomination) Rules, 1985.

8.41.1 Accounts with survivor/nominee clause

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In the case of deposit accounts where the depositor had utilized the nomination facility and made
a valid nomination or where the account was opened with the survivorship clause ("either or
survivor", or "anyone or survivor", or "former or survivor" or "latter or survivor"), the payment
of the balance in the deposit account to the survivor(s)/nominee of a deceased deposit account
holder represents a valid discharge of the bank's liability provided :
(a)the bank has exercised due care and caution in establishing the identity of the survivor(s) /
nominee and the fact of death of the account holder, through appropriate documentary evidence;
(b)there is no order from the competent court restraining the bank from making the payment
from the account of the deceased; and
(c)it has been made clear to the survivor(s) / nominee that he would be receiving the payment
from the bank as a trustee of the legal heirs of the deceased depositor, i.e., such payment to him
shall not affect the right or claim which any person may have against the survivor(s) / nominee to
whom the payment is made.

It may be noted that since payment made to the survivor(s) / nominee, subject to the foregoing
conditions, would constitute a full discharge of the bank's liability, insistence on production of
legal representation is superfluous and unwarranted and only serves to cause entirely avoidable
inconvenience to the survivor(s) / nominee and would, therefore, invite serious supervisory
disapproval. In such case, therefore, while making payment to the survivor(s) / nominee of the
deceased depositor, the banks should desist from insisting on production of succession
certificate, letter of administration or probate, etc., or obtain any bond of indemnity or surety
from the survivor(s)/nominee, irrespective of the amount standing to the credit of the deceased
account holder.

8.41.2 Accounts without the survivor / nominee clause

In case where the deceased depositor had not made any nomination or for the accounts other than
those styled as "either or survivor" (such as single or jointly operated accounts), banks are
required to adopt a simplified procedure for repayment to legal heir(s) of the depositor keeping
in view the imperative need to avoid inconvenience and undue hardship to the common person.
In this context, banks may, keeping in view their risk management systems, fix a minimum
threshold limit, for the balance in the account of the deceased depositors, up to which claims in
respect of the deceased depositors could be settled without insisting on production of any
documentation other than a letter of indemnity.

Premature Termination of term deposit accounts

In the case of term deposits, banks are required to incorporate a clause in the account opening
form itself to the effect that in the event of the death of the depositor, premature termination of
term deposits would be allowed. The conditions subject to which such premature withdrawal
would be permitted may also be specified in the account opening form. Such premature
withdrawal would not attract any penal charge.

Treatment of flows in the name of the deceased depositor

In order to avoid hardship to the survivor(s) / nominee of a deposit account, banks should obtain
appropriate agreement / authorization from the survivor(s) / nominee with regard to the treatment
of pipeline flows in the name of the deceased account holder. In this regard, banks could
consider adopting either of the following two approaches:
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The bank could be authorized by the survivor(s) / nominee of a deceased account holder to open
an account styled as 'Estate of Shri ________________, the Deceased' where all the pipeline
flows in the name of the deceased account holder could be allowed to be credited, provided no
withdrawals are made.
OR
The bank could be authorized by the survivor(s) / nominee to return the pipeline flows to the
remitter with the remark "Account holder deceased" and to intimate the survivor(s) / nominee
accordingly. The survivor(s) / nominee / legal heir(s) could then approach the remitter to effect
payment through a negotiable instrument or through ECS transfer in the name of the appropriate
beneficiary.

8.41.3 Interest payable on the deposit account of deceased depositor

In the case of a term deposit standing in the name/s of
(i) a deceased individual depositor, or
(ii) two or more joint depositors, where one of the depositors has died,
the criterion for payment of interest on matured deposits in the event of death of the depositor in
the above cases has been left to the discretion of individual banks subject to their Board laying
down a transparent policy in this regard.

In the case of balances lying in current account standing in the name of a deceased individual
depositor/sole proprietorship concern, interest should be paid only from 1stMay, 1983, or from
the date of death of the depositor, whichever is later, till the date of repayment to the claimant/s
at the rate of interest applicable to savings deposit as on the date of payment.

8.41.4 Time limit for settlement of claims

Banks should settle the claims in respect of deceased depositors and release payments
to survivor(s) / nominee(s) within a period not exceeding 15 days from the date of receipt of the
claim subject to the production of proof of death of the depositor and suitable identification of
the claim(s), to the bank's satisfaction.
Banks should report to the Customer Service Committee of the Board, at appropriate intervals,
on an ongoing basis, the details of the number of claims received pertaining to deceased
depositors / locker-hirers / depositors of safe custody article accounts and those pending beyond
the stipulated period, giving reasons therefore.

8.41.5 Claim Forms to be made available

With a view to facilitate timely settlement of claims on the death of a depositor, banks are
advised to provide claim forms for settlement of claims of the deceased accounts, to any person/s
who is/are approaching the bank / branches for forms. Claim forms may also be put on the
bank’s website prominently so that claimants of the deceased depositor can access and download
the forms without having to visit the concerned bank/branch for obtaining such forms for filing
claim with the bank.

8.41.6 Access to the safe deposit lockers / Return of safe custody articles to Survivor(s) /
Nominee(s) / Legal heir(s)
For dealing with the requests from the nominee(s) of the deceased locker-hirer /depositors of
the safe-custody articles (where such a nomination had been made) or by the survivor(s) of the
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deceased (where the locker / safe custody article was accessible under the survivorship clause),
for access to the contents of the locker / safe custody article on the death of a locker hirer /
depositor of the article, the banks are advised to adopt generally the foregoing approach, mutatis
mutandis, as indicated for the deposit accounts. Detailed guidelines in this regard are, however,
as follows:

8.41.7 Access to the safe deposit lockers / return of safe custody articles (with
survivor/nominee clause)

If the sole locker hirer nominates a person, banks should give to such nominee access of the
locker and liberty to remove the contents of the locker in the event of the death of the sole locker
hirer. In case the locker was hired jointly with the instructions to operate it under joint signatures,
and the locker hirer(s) nominates person(s), in the event of death of any of the locker hirers, the
bank should give access of the locker and the liberty to remove the contents jointly to the
survivor(s) and the nominee(s). In case the locker was hired jointly with survivorship clause and
the hirers instructed that the access of the locker should be given over to "either or survivor",
"anyone or survivor" or "former or survivor" or according to any other survivorship clause,
banks should follow the mandate in the event of the death of one or more of the locker-hirers.

However, banks should take the following precautions before handing over the contents:
(a)Banks should exercise due care and caution in establishing the identity of the survivor(s) /
nominee(s) and the fact of death of the locker hirer by obtaining appropriate documentary
evidence;
(b)Banks should make diligent effort to find out if there is any order from a competent court
restraining the bank from giving access to the locker of the deceased; and
(c)Banks should make it clear to the survivor(s) / nominee(s) that access to locker / safe custody
articles is given to them only as a trustee of the legal heirs of the deceased locker hirer i.e., such
access given to him shall not affect the right or claim which any person may have against the
survivor(s) / nominee(s) to whom the access is given. Similar procedure should be followed for
return of articles placed in the safe custody of the bank. Banks should note that the facility of
nomination is not available in case of deposit of safe custody articles by more than one person.
21.1.3Banks should note that since the access given to the survivor(s) / nominee(s), subject to the
foregoing conditions, would constitute a full discharge of the bank's liability, insistence on
production of legal representation is superfluous and unwarranted and only serves to cause
entirely avoidable inconvenience to the survivor(s) / nominee(s) and would, therefore, invite
serious supervisory disapproval. In such case, therefore, while giving access to the survivor(s) /
nominee(s) of the deceased locker hirer / depositor of the safe custody articles, the banks should
desist from insisting on production of succession certificate, letter of administration or probate,
etc., or obtain any bond of indemnity or surety from the survivor(s)/nominee(s).

8.41.8 Access to the safe deposit lockers / return of safe custody articles (without
survivor/nominee clause)
There is an imperative need to avoid inconvenience and undue hardship to legal heir(s) of the
locker hirer(s). In case where the deceased locker hirer had not made any nomination or where
the joint hirers had not given any mandate that the access may be given to one or more of the
survivors by a clear survivorship clause, banks are advised to adopt a customer-
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friendly procedure drawn up in consultation with their legal advisers for giving access to legal
heir(s) / legal representative of the deceased locker hirer. Similar procedure should be followed
for the articles under safe custody of the bank.

Preparing Inventory

Banks should prepare an inventory before returning articles left in safe custody / before
permitting removal of the contents of a safe deposit locker as advised in terms of Notification
DBOD.NO.Leg.BC.38/ C.233A-85 dated March 29, 1985. The inventory shall be in the
appropriate Forms set out as enclosed to the above Notification or as near thereto as
circumstances require. A copy of the above Notification is shown as Annex IV of this Circular.

Banks are not required to open sealed/closed packets left with them for safe custody or found in
locker while releasing them to the nominee(s) and surviving locker hirers / depositor of safe
custody article.

Further, in case the nominee(s) / survivor(s) / legal heir(s) wishes to continue with the locker,
banks may enter into a fresh contract with nominee(s) / survivor(s) / legal heir(s) and also adhere
to KYC norms in respect of the nominee(s) / legal heir(s).

Simplified operational systems / procedures

As per the direction of Reserve Bank, the Indian Banks' Association (IBA) has formulated
a Model Operational Procedure (MOP) for settlement of claims of the deceased
constituents, under various circumstances, consistent with the instructions contained in this
circular, for adoption by the banks. The banks should, therefore, undertake a comprehensive
review of their extant systems and procedures relating to settlement of claims of their deceased
constituents (i.e., depositors / locker-hirers /depositors of safe-custody articles) with a view to
evolving a simplified policy / procedures for the purpose, with the approval of their Board,
taking into account the applicable statutory provisions, foregoing instructions as also the MOP
formulated by the IBA.

Customer guidance and publicity

Banks should place on their websites the instructions along with the policies / procedures put in
place for giving access of the locker / safe custody articles to the nominee(s) / survivor(s) / Legal
Heir(s) of the deceased locker hirer / depositor of the safe custody articles. Further, a printed
copy of the same should also be given to the nominee(s) / survivor(s) / Legal Heir(s) whenever a
claim is received from them.
Banks should view these instructions as very critical element for bringing about significant
improvement in the quality of customer service provided to survivor(s) / nominee(s) of deceased
depositors / locker hirer / depositor of safe custody articles.

8.42 Settlement of claims in respect of missing persons

Settlement of claims in respect of missing persons

Banks are advised to follow the following system in case a claim is received from a nominee /
legal heirs for settlement of claim in respect of missing persons :-
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The settlement of claims in respect of missing persons would be governed by the provisions of
Section 107 / 108 of the Indian Evidence Act, 1872. Section 107 deals with presumption of
continuance and Section 108 deals with presumption of death. 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.

Banks are advised to formulate a policy which would enable them to settle the claims of a
missing person after considering the legal opinion and taking into account the facts and
circumstances of each case. Further, keeping in view the imperative need to avoid inconvenience
and undue hardship to the common person, banks are advised that keeping in view their risk
management systems, they may fix a threshold limit, up to which claims in respect of missing
persons could be settled without insisting on production of any documentation other than (i) FIR
and the non-traceable report issued by police authorities and (ii) letter of indemnity.

8.42.1 Settlement of Claims in respect of Missing Persons in Uttarakhand Disaster

In the aftermath of Uttarakhand Natural Disaster during June 14-20, 2013 the Office of the
Registrar General of India, Ministry of Home Affairs, Government of India has devised a
procedure for Registration of Death of Missing persons in Natural Calamities affected areas in
Uttarakhand vide its circular F.No.1/2/(Uttarakhand)/2011-VS-CRSdated August 16, 2013
(MHA Circular). A copy of MHA Circular is furnished at Annex VIII for reference. The MHA
Circular has devised detailed procedure for registration and issue of ‘Death Certificate’ of a
person reportedly missing since his/her visit to the site of disaster in Uttarakhand in June 2013.

In view of the above, banks are advised to settle the claims in respect of missing persons,
covered by MHA Circular, without insisting on production of any documentation other than (i)
the ‘Death Certificate’ issued by the Designated Officer under MHA Circular and (ii) letter of
indemnity.
Banks are further advised that the provisions detailed in Para 22.1 above on ‘Settlement of
claims in respect of missing persons’ would be applicable in other cases which are not covered
by MHA Circular.

8.42.2 Release of other assets of the deceased borrowers to their legal heirs
Banks had represented that the principle of not obtaining succession certificates etc., could be
extended for settlement of claims in respect of other assets of deceased customers
including securities held against advances after adjustment thereof. Banks are advised not to
insist upon legal representation for release of other assets of deceased customers irrespective of
the amount involved.

Banks may, however, call for succession certificates from legal heirs of deceased borrowers in
cases where there are disputes and all legal heirs do not join in indemnifying the bank or in
certain other exceptional cases where the bank has a reasonable doubt about the genuineness of
the claimant/s being the only legal heir/s of the borrower.

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8.43 Unclaimed Deposits / Inoperative Accounts in banks
Section 26 of the Banking Regulation Act, 1949 provides, inter alia, that every banking company
shall, within 30 days after close of each calendar year submit a return in the prescribed form and
manner to the Reserve Bank of India as at the end of each calendar year (i.e., 31st December) of
all accounts in India which have not been operated upon for 10 years.

In view of the increase in the amount of the unclaimed deposits with banks year after year and
the inherent risk associated with such deposits, banks should play a more pro-active role in
finding the whereabouts of the account holders whose accounts have remained inoperative.
Further several complaints were received in respect of difficulties faced by the customers on
account of their accounts having been classified as inoperative. Moreover, there is a feeling that
banks are undeservedly enjoying the unclaimed deposits, while paying no interest on it. Keeping
these factors in view, the instructions issued by RBI have been reviewed and banks are advised
to follow the instructions detailed below while dealing with inoperative accounts:
(i)Banks should make an annual review of accounts in which there are no operations (i.e., no
credit or debit other than crediting of periodic interest or debiting of service charges) for more
than one year. The banks may approach the customers and inform them in writing that there has
been no operation in their accounts and ascertain the reasons for the same. In case the non-
operation in the account is due to shifting of the customers from the locality, they may be asked
to provide the details of the new bank accounts to which the balance in the existing account
could be transferred.
(ii)If the letters are returned undelivered, they may immediately be put on enquiry to find out the
whereabouts of customers or their legal heirs in case they are deceased.
(iii)In case the whereabouts of the customers are not traceable, banks should consider contacting
the persons who had introduced the account holder. They could also consider contacting the
employer / or any other person whose details are available with them. They could also consider
contacting the account holder telephonically in case his Telephone number / Cell number has
been furnished to the bank. In case of Non Resident accounts, the bank may also contact the
account holders through e-mail and obtain their confirmation of the details of the account.
(iv)A savings as well as current account should be treated as inoperative / dormant if there are no
transactions in the account for over a period of two years.
(v)In case any reply is given by the account holder giving the reasons for not operating the
account, banks should continue classifying the same as an operative account for one more year
within which period the account holder may be requested to operate the account. However, in
case the account holder still does not operate the same during the extended period, banks should
classify the same as inoperative account after the expiry of the extended period.
(vi)For the purpose of classifying an account as ‘inoperative’ both the type of transactions i.e.,
debit as well as credit transactions induced at the instance of customers as well as third party
should be considered. However, the service charges levied by the bank or interest credited by the
bank should not be considered.
(vii)There may be instances where the customer has given a mandate for crediting the interest on
Fixed Deposit account and/or crediting dividend on shares to the Savings Bank account and there
are no other operations in the Savings Bank account. Since the interest on Fixed Deposit account
and/or dividend on shares is credited to the Savings Bank accounts as per the mandate of the
customer, the same should be treated as a customer induced transaction. As such, the account
should be treated as operative account as long as the interest on Fixed Deposit account and/or
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dividend on shares is credited to the Savings Bank account. The Savings Bank account can be
treated as inoperative account only after two years from the date of the last credit entry of the
interest on Fixed Deposit account and/or dividend on shares, whichever is later, provided there is
no other customer induced transaction.
(viii)Further, the segregation of the inoperative accounts is from the point of view of reducing
risk of frauds etc. However, the customer should not be inconvenienced in any way, just because
his account has been rendered inoperative. The classification is there
only to bring to the attention of dealing staff, the increased risk in the account. The transaction
may be monitored at a higher level both from the point of view of preventing fraud and making a
Suspicious Transactions Report. However, the entire process should remain un-noticeable by the
customer.
(ix)Operation in such accounts may be allowed after due diligence as per risk category of the
customer. Due diligence would mean ensuring genuineness of the transaction, verification of the
signature and identity etc. However, it has to be ensured that the customer is not inconvenienced
as a result of extra care taken by the bank.
(x)There should not be any charge for activation of inoperative account.
(xi)Banks are also advised to ensure that the amounts lying in inoperative accounts ledger are
properly audited by the internal auditors / statutory auditors of the bank.
(xii)Interest on savings bank accounts should be credited on regular basis whether the account is
operative or not. If a Fixed Deposit Receipt matures and proceeds are unpaid, the amount left
unclaimed with the bank will attract savings bank rate of interest.

Banks may also consider launching a special drive for finding the whereabouts of the customers /
legal heirs in respect of existing accounts which have already been transferred to the separate
ledger of ‘inoperative accounts’.

Display list of Inoperative Accounts: Banks should, in addition to the instructions

contained above, play a more pro-active role in finding the whereabouts of the
accountholders of unclaimed deposits/ inoperative accounts. Banks are, therefore, advised
that they should display the list of unclaimed deposits/inoperative accounts which are
inactive / inoperative for ten years or more on their respective websites. The list so
displayed on the websites must contain only the names of the account holder(s) and his/her
address in respect of unclaimed deposits/inoperative accounts. In case such accounts are
not in the name of individuals, the names of individuals authorized to operate the accounts
should also be indicated. However, the account number, its type and the name of the
branch shall not be disclosed on the bank’s website. The list so published by the banks
should also provide a “Find” option to enable the public to search the list of accounts by
name of the account holder.

Banks should also give on the same website, the information on the process of claiming the
unclaimed deposit/activating the inoperative account and the necessary forms and documents for
claiming the same. Banks are required to have adequate operational safeguards to ensure that the
claimants are genuine.

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Strengthening the Regulatory Framework for Unclaimed Deposits
With a view to further strengthen the regulatory framework for inoperative accounts and
unclaimed deposits, banks are advised to put in place a Board approved policy on classification
of unclaimed deposits; grievance redressal mechanism for quick resolution of complaints; record
keeping; and periodic review of such accounts. The first periodic review of unclaimed
deposits/inoperative accounts should be put up to their respective bank Boards by September 30,
2012.

Treatment of certain savings bank accounts opened for credit of Scholarship amounts and
credit of Direct Benefit Transfer under Government Schemes
State and Central Governments have expressed difficulties in crediting cheques/Direct Benefit
Transfer/Electronic Benefit Transfer/Scholarships for students, etc. into accounts/Accounts with
zero balance opened for the beneficiaries under various Central/State Government schemes but
had been classified as dormant/inoperative due to non-operation of the account for over two
years.

Keeping the above in view, banks are advised that they may allot a different “product code” in
their CBS to all such accounts opened by banks so that the stipulation of inoperative/dormant
account due to non-operation does not apply while crediting proceeds as mentioned above.

In order to reduce the risk of fraud etc., in such accounts, while allowing operations in these
accounts, due diligence should be exercised by ensuring the genuineness of transactions,
verification of signature and identity, etc. However, it has to be ensured that the customer is not
inconvenienced in any manner.

8.44 Treatment of accounts opened for credit of Scholarship Amounts under Government
Schemes
Bombay High Court has brought to RBI notice that banks fix a limit on total credits in zero
balance accounts opened for students studying in primary, secondary / higher secondary schools
and technical institutions. Resultantly, in cases where scholarship amounts exceed the credit
limit, banks do not allow the credit and return the amount to the disbursement account of the
Government. Further, in some cases banks are reported to have closed zero balance accounts
unilaterally without intimating student beneficiaries concerned. Instances of banks refusing to
open zero balance account for students have also been brought to our notice.

As directed by the Bombay High Court, banks are advised to ensure that accounts of all student
beneficiaries under the various Central/State Government Scholarship Schemes are free from
restrictions of ‘minimum balance’ and ‘total credit limit’.

8.45 Customer Confidentiality Obligations

The scope of the secrecy law in India has generally followed the common law principles based
on implied contract. The bankers' obligation to maintain secrecy arises out of the contractual
relationship between the banker and customer, and as such no information should be divulged to
third parties except under circumstances which are well defined. The following exceptions to the
said rule are normally accepted:
(i)Where disclosure is under compulsion of law
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 (ii)Where there is duty to the public to disclose
(iii)Where interest of bank requires disclosure and
(iv) Where the disclosure is made with the express or implied consent of the customer.

8.46 Collecting Information from customers for cross-selling purposes

At the time of opening of accounts of the customers, banks collect certain information. While
complying with the above requirements, banks also collect a lot of additional personal
information.

In this connection, the Committee on Procedures and Performances Audit on Public Services
(CPPAPS) observed that the information collected from the customer was being used for cross
selling of services of various products by banks, their subsidiaries and affiliates. Sometimes,
such information was also provided to other agencies. As banks are aware, the information
provided by the customer for KYC compliance while opening an account is confidential and
divulging any details thereof for cross selling or any other purpose would be in breach of
customer confidentiality obligations. Banks should treat the information collected from the
customer for the purpose of opening of account as confidential and not divulge any details
thereof for cross selling or any other purposes. Banks may, therefore, ensure that information
sought from the customer is relevant to the perceived risk, is not intrusive, and is in conformity
with the guidelines issued in this regard.

Wherever banks desire to collect any information about the customer for a purpose other than
KYC requirements, it should not form part of the account opening form. Such information may
be collected separately, purely on a voluntary basis, after explaining the objectives to the
customer and taking his express approval for the specific uses to which such information could
be put. Banks should therefore, instruct all the branches to strictly ensure compliance with their
obligations to the customer in this regard.

8.47 Transfer of account from one branch to another

Instructions of a customer for transfer of his account to another office should be carried out
immediately on receipt of, and in accordance with, his instructions. It should be ensured that
along with the balance of the account, the relative account opening form, specimen signatures,
standing instructions, etc., or the master sheets wherever obtained, are also simultaneously
transferred, under advice to the customer.

The account transfer form with the enclosures may be handed over to the customer in a sealed
cover if he so desires for delivery at the transferee office / branch. However, the transferee office
should also be separately supplied with a copy of the account transfer letter.

When an office receives an enquiry from a customer regarding the receipt of his account on
transfer from another office it should take up the matter with the transferor office by electronic
means, in case it has not received the balance of the account and/or other related papers even
after a reasonable transit time.

8.48 Co-ordination with officers of Central Board of Direct Taxes

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There is a need for greater co-ordination between the income-tax department and the banking
system. As such banks should extend necessary help/co-ordination to tax officials whenever
required. Further, banks will have to view with serious concern cases where their staff
connive/assist in any manner with offences punishable under the Income Tax Act. In such cases
in addition to the normal criminal action, such staff member should also be proceeded against
departmentally.

8.49 Miscellaneous

8.49.1 Sunday banking

In predominantly residential areas banks may keep their branches open for business on Sundays
by suitably adjusting the holidays.
Banks should keep rural branches open on weekly market day.

8.49.2 Accepting standing instructions of customers

Standing instructions should be freely accepted on all current and savings bank accounts. The
scope of standing instructions service should be enlarged to include payments on account of
taxes, rents, bills, school / college fees, licences, etc.

8.49.3 Clean Overdrafts for small amounts

Clean overdrafts for small amounts may be permitted at the discretion of branch manager to
customers whose dealings have been satisfactory. Banks may work out schemes in this regard.

8.49.4 Rounding off of transactions

All transactions, including payment of interest on deposits/charging of interest on advances,
should be rounded off to the nearest rupee i.e., fractions of 50 paise and above shall be rounded
off to the next higher rupee and fraction of less than 50 paise shall be ignored. Issue prices of
cash certificates should also be rounded off in the same manner. However, banks should ensure
that cheques/drafts issued by clients containing fractions of a rupee are not rejected or
dishonoured by them.

8.49.5 Various Working Groups / Committees on Customer Service in Banks -

Implementation of the Recommendations
In order to keep a watch on the progress achieved by the bank in the implementation of the
recommendations of various working groups/Committees on customer service, banks may
examine the recommendations which have relevance in the present day banking and continue to
implement them. Banks may consider submitting periodically to their Customer Service
Committee of the Board a progress report on the steps/ measures taken in that regard.

8.50 Code of Bank’s Commitment to Customers

Banks should follow various provisions of the Code of Bank’s Commitment to Customers,
implementation of which is monitored by the Banking Codes and Standards Board of India
(BCSBI).

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 CHAPTER-9

CASH, CLEARING & CTS

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 CHAPTER-9

CASH & CLEARING

9.1 CASH MANAGEMENT

9.1.1 Custody of Cash: Dual Control

Cash held in Branch safe or strong room should always be under the dual control of Manager /
authorized Supervising official and the Cashier of the Branch, even during working hours. The
cash safe/strong room must be opened or locked by the two officials, so that under no
circumstances, some official can open the cash safe/strong room singly.
The bulk of the Cash Balance should always be in the Strong Room / Cash Safe under joint
custody. When cash safe / strong room are opened in the morning, the cashier should take out
limited cash that should sufficient for the requirements during the day. The balance of cash
should remain in the safe / strong room under dual control, as stated above.
The cashier should maintain a ‘Dual Cash Control Book’ to keep a record of cash taken out in
the morning and kept back in the evening. (A specimen of the Dual Cash Control Book with the
required columns is given in Appendix I). If further cash is required to be taken out during the
day, appropriate entries must be made in the book. This book should remain in the cash safe /
strong room. The Manager / authorized official should check, from the entries in the book, the
cash taken out and kept back. (The amount of cash kept back in the safe at the end of the day
together with the cash already in the safe must agree with the balance of cash on hand at the
close of business of the day). The Manager / authorized official must also sign the book at the
end of the day after the cashier has signed it. This is necessary to evidence the dual control over
cash in the Cash Safe / Till/Vault.

9.1.2 Daily Lodgement of Cash in the Cash Safe/Till/Vault

The Joint Custodian of cash (i.e. Manager / authorized supervising official as the case may be)
should check the cash every time before depositing the same in the Cash Safe / Till / Vault. The
procedure for such checking, at the minimum, should cover:
(a) Detailed piece by piece count of all notes of higher denominations, viz. Rs. 100/- and
above (if in circulation), however, in the case of Rs. 100/- denomination notes, if there are more
than 2 bundles, first the number of bundles and then packets in each bundle should be counted (a
bundle contains 10 packets each of 100 currency notes); thereafter, a detailed piece by piece
count of a sample lot of at least 25% of the total number of packets of Rs. 100/- denominations
notes should be made.
(b) After checking the total number of bundles and the number of packets in each bundle, a
sample count of notes of lower denominations by the "clip" system. The Joint Custodian should
use his discretion as to the number of sample packets to be checked on clip system basis. (The
clip system is explained in the Note below).
(c) Piece by piece count of all loose currency notes.
(d) Sample check of Rupee coins and small coins. The Joint Custodian may use his
discretion as to the extent of such sample check.
Note: Under the "clip" system, the checking officer (i.e. the Joint Custodian) clips a certain
portion of the notes from the selected packet and asks an officer/cashier other than the cashier-in-

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charge to count in his presence the pieces "unclipped". Thereafter, the checking officer counts
the pieces in the clipped portion and verifies that the total number of pieces counted by himself
and the other cashier/officer amounts to 100 pieces.

9.1.3 Change of Cashier

The incoming cashier should take complete charge of the branch cash and satisfy himself that the
balance of cash in hand tallies with the balance in the Daily Cash Balance Book. While Handing
over / taking the Charge of Cash, the outgoing / Incoming Cashier will incorporate the handing /
taking over noting in the Daily Cash Balance Book at the closing / opening of the business of the
day, as the case may be. The incoming Cashier should at least undertake the minimum checks
and satisfy himself regarding correctness of the cash on hand.

9.1.4 Safety of Cash within the Bank

Grill cages should be provided for Cash Counters with an arrangement to lock their doors to
prevent entry of unauthorised persons. The railings around cages should be sufficiently high; it
should not be possible for any one standing outside Cash Counters to reach cash on the counter
or in the drawer. The glass partition in front of the cashier should be so placed that the cashier
and the persons standing outside the counter can converse with each other without difficulty. The
cages should remain locked while cash is being handled.
As and when there is a change in layout of a branch, either due to the layout being defective or
not meeting the security norms, the Regional Office / Chief Manager, A & S Department, Head
Office must be consulted.
The Branch Manager should have a clear view of Cash Counters; it should not be obscured by
cabinets or safes.
The work of removing cash from the strong room / Cash Safe should be undertaken 15 minutes
before the actual start of business hours. This has three-fold advantages:
(a) The cash could be withdrawn from the strong room / Cash Safe when the customers are
not expected and when the gates are closed.
(b) The absenteeism will be known so that alternative arrangements can be made.
(c) Prompt service will be available to the customers at the start of business hours.
During business hours, cash must be taken out of the strong room on a minimum number of
occasions, if necessary.
The doors of the Branch should be closed and locked from inside when the cash is taken out of the
strong room to the counters in the cash Counters and similarly when the cash is brought back from
the counters to the strong room. In case of posting of an armed guard/watchman, he should escort
such cash in transit. The cashier must accompany the cash box duly locked from cash safe to his
cabin and vice versa.
Cash taken out from the cash safe should be just sufficient to meet the daily requirements and it
should not exceed the amount prescribed by Regional Offices. The minimum quantum of cash
should be taken out of the safe every day depending upon the average payments/receipts.
Cashiers' cabins should be properly covered and provided with an automatic lock. Doors of the
cash cabins should remain locked at all times. Cashiers should keep the cash in the drawers of
their counters or in steel boxes fixed to the counters. If cash is kept in the drawers, they should
be provided with locks which close automatically when they are pushed in. If cash is kept in steel
boxes near the counter, they should be chained securely (with an iron chain) either to the railing

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or to the leg of the counter. The steel boxes should be provided with a locking device so that
when the box is closed, it is automatically locked.
As a strict precautionary measure, an unknown person should not be allowed to loiter around,
particularly behind the counter or the cashier's cage, without proper enquiries/interrogation and
that no access to important instruments and documents is given to any unauthorised person. The
receiving/paying cashier should invariably keep the door(s) of the cash cage(s) locked, when
cash transactions are being handled. It is also necessary that the cashiers should not indulge in
conversation with unknown person(s), as someone else or companion of unknown person may
have an opportunity to whisk away currency notes without the notice of the cashier. Utmost
vigilance, therefore, should be kept by all the staff members concerned. Further, entry of
customers in cash area should not be allowed.
Branches should close shutters/grille gates immediately at the close of banking hours every day.
Visitors to the Bank after business hours should be closely screened and let in selectively after they
are properly identified. There should only be one exit-cum-entry door in the Branch and it should
be provided with collapsible gate/rolling shutters. The collapsible grill gate at the main entrance to
the branch must be so chained so that entry and exit is restricted to one person at a time.
Alarm system in branches must always be kept in working order and it must be ensured that they
are being properly serviced by the authorised vendor as per contract terms. Alarm switches must
be installed at a few important places viz., Manager's cabin, cash cabins, strong room, stationery
room, toilet and near the armed guard where posted and speakers of the alarm system in a branch
should be located in a manner, so that it is hidden from public view and not easily accessible.
CCTV camera should be focused towards cashier cabin having clear images of person(s),
receiving or depositing cash or accompanying the customer, in front of cashier cabin.
Branch officials should not allow entry of any person in the branch premises with face covered
or wearing mask or helmet or disguising the face in normal circumstances.

9.1.5 Bait Money

The use of bait money is a measure of passive resistance and is highly effective as a counter
offensive against robbers. Bait money is also known as trap money, decoy money, or the robbers
pack. It is prepared in advance of an attempt of robbery at the branch premises or while cash is in
transit. It does not require physical action, that might be suspicious or objectionable to
desperadoes and it is not self-revealing as bandits cannot recognise bait money. Hence, as a
measure of passive resistance bait money by itself does not incite robbers to violence towards the
staff and customers.
The bait money is currency notes whose serial numbers and series of issue have been noted
either by micro-filming or simply by noting down their numbers in ‘Bait money Register’ and
keeping those in a safe place separately. These currency notes which are "Recorded" should be
placed among the currency in bank safe, cashier's cash box and containers of the cash in transit.
In the case of a holdup, these recorded notes are purposely included in the "Loot" or are
unknowingly carried by the bandits who steal the cash.
The number and denomination of currency notes to be used for the purpose would depend
entirely on the discretion of the Branch Manager. However, as a guideline only one or two
bundles of different denominations be kept at each place. It is, however, preferable that the notes
selected should be fairly new, preferably of same series and be in sequence.
Bank robbers are highly afraid of bait money as there is no knowledge which of the stolen notes
might have been recorded. It is, therefore, necessary that these details are circulated after a theft,
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only to the police, bank etc., but must be withheld from the rest and the public. The desperadoes
would be only too happy to have these numbers.

Bait money has the following advantages:

(a) When recognised, it leads to the location and identification of suspects.
(b) The robbers in possession of decoy money, when arrested, confess their offence.
(c) In the absence of confession, bait money serves the prosecution as evidence in convicting
criminals arrested with it in their possession.
(d) It is easy to use, inexpensive and highly effective in the apprehension and prosecution of the
offender.
(e) The use of bait money or decoy money has been recommended by the Government and Indian
Bank's Association. The use of bait money serves as a great deterrent to the persons attempting
robbery.
The General Managers, Regional Managers and other designated officers of the Regions while
visiting Branches should ensure that these instructions are followed meticulously.

9.1.6 Daily Cash Position

The optimum level of cash holding in a Branch would mainly depend on:
i) Size of business consisting of deposits and advances;
ii) Pattern of cash receipts and cash withdrawals by various types of customers;
iii) Facilities available for lodgement and replenishment of cash.
It is the duty of the Manager to maintain adequate cash reserve position. In determining the daily
cash reserve position, overdue deposits and the deposits maturing in the next few days,
outstanding commitments under sanctioned limits of advances, maturing loans and the bills and
the position of drawings of demand drafts etc., should be taken into account. A careful but
conservative estimate of Branch receipts and payments should be made.

9.1.7 Cash Retention Limit:

Branches should operate within a cash retention limit equal to 0.75% to 1.00% of their total
deposits, which will be advised by the respective Regional Offices. If a higher cash retention
limit is desired, the branch concerned should obtain approval from the Regional Offices by
giving justification for the enhancement. Region should ensure that the overall cash holding of
the Region is maintained at 0.75 to 1.00% of the total deposits of the Region, by reducing the
cash holding limits of branches having easy access to the currency chest of other banks.

Sanction / Approval for cash retention limit of a Branch should be kept in record in the Cash File
of the Branch at the appropriate place.

Regional Offices should generate a statement through CBS and verify the cash position at branches
at fortnightly intervals and percentage to be checked, corresponding with the reporting Fridays for
Form A submission. This system generated fortnightly return would give the controlling offices a
ready picture of the fluctuations in cash balances during the fortnight and initiate corrective steps
where necessary.
It should be ensured that the Branch cash balance consists of currency notes of different
denominations in adequate proportions so that the Branch is able to pay currency notes in the
denominations required by customers.
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 It is advisable that the Branch Manager/designated official scrutinizes the outward clearing to see
if there are cheques of large amounts, so that if necessary, the sufficient cash arrangement could
be made. Remittance of surplus cash by branches to Nodal Branch must be made without delay.

9.1.8 Survey of Cash Position

Survey of the cash position of Branches must be done as a continuous process to ensure that
funds are not lying idle and the cash in excess of the minimum required for day-to-day working
is promptly remitted to Nodal Branch.
Branches having account with other Banks may manage their cash position with respective Banks
of their accounts.
The Regional Offices will submit every Friday, the branch wise cash position, indicating separately
the balances held with other Banks. This information is vital for Head Office for maintenance of
the cash liquidity ratio.
(i) All remittances/lodgements of cash between our branches should be routed through the
CASHTR module in Finacle.
(ii) A suitable CBS generated data on weekly basis should be checked by Regional
Offices and keep checks on Cash holding.

9.1.9 MODULE ‘CASHTR’ in Finacle to route Transactions relating to Cash lodgements

and Withdrawals between Branches
The Module ‘CASHTR’ is applied to route the above-mentioned transactions without the
necessity of using SCS/CN/DNs and CO/Dos. The transactions are to be conducted through a
account Sol-id+Cashtr001, opened by Data Centre in all the Branches. The Transaction Flow in
the new Module is as under:-
a) At the Branch lodging Cash
DR. Sol-id (Cash lodging Branch) + Cashtr001
CR. CASH
For example if the Branch Code of Cash Lodging Branch is 8888 then the entry is
88880Cashtr001.
The above transaction is to be done through ‘TM’ Menu like Cash Payment.
b) At the Branch receiving Cash
DR. CASH
CR. Sol-id (Cash receiving Branch) + Cashtr001
The above transaction is to be done through ‘TM’ menu like Cash Receipt.
At this stage, the Cash Lodging Branch Cashtr001 account will be in debit balance and Cash
Receiving Branch Cashtr001 will be in credit balance as seen above. Now the Cash Receiving
Branch has to credit the Branch which lodged cash with them by invoking the new Menu
‘CASHTR’ and capture the Branch Code of Cash lodging Branch and the amount of Cash
received. After verification of the particulars, the system will generate the following entries.
DR. Sol-id (Cash Receiving Branch)
CR. Sol-id (Cash Lodging Branch)
Thus, the Cashtr001 account becomes ‘NIL’ at the end of the day in both the branches.

Please note that ‘CASHTR’ Menu is to be RUN by Cash Receiving Branch only and not by
Cash Lodging Branch.

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It is the responsibility of the Cash Receiving Branch to credit the amount received by them to
Cash Lodging Branch through ‘CASHTR’. Menu on the same day of cash receipt without fail,
otherwise the Branch will not be able to do CSOLOP on that day. Cash Lodging Branch has to
monitor their Cashtr001 has been credited by Cash Receiving Branch.

9.1.10 Remittance of Surplus Cash / Sealing of Currency Notes

(i) With a view to streamlining the procedure for cash remittances between branches as also
expediting transfers of surplus cash from one branch to another, a procedure for sealing of note
packets has been devised in accordance with the guidelines from Reserve Bank of India which is
expected to bring about uniformity and ease the problem of counting the note packets.
(ii) A pre-requisite of this procedure is that, before the tenders are brought by other branches,
they should be properly sorted into re-issuable and non-issuable notes and affixed with
appropriate labels. Cut, defective, torn, mutilated notes should be deposited with the Nodal /
Main Branches separately and not put in packets of non-issuable notes. Once the packets are
sealed as per the procedure, the re-issuable note packets can be retained by the branch and issued
in transactions with the public without counting being done at any stage. Whenever surplus cash
at the branch is required to be remitted to the Nodal Branch, re-issuable and non-issuable packets
shall be accepted at the receiving Branch without counting.
(iii) In the case of non-issuable notes, the packets may be deposited straightway in the Nodal /
Main Branch without counting and Nodal / Main Branch in turn shall remit the same to Reserve
Bank of India in due course. Reserve Bank of India will not insist on Nodal / Main Branch
affixing its own fresh labels on these non-issuable note packets as under the system, the
responsibility for the discrepancies can be traced to the Branches that made packets. (For details,
please refer to Appendix III)

9.1.11 Safety of Cash in Transit

The time for sending out cash should not be fixed. Cash should be sent out at different times on
each occasion. It is not desirable also to follow a fixed route on every occasion of transporting
cash. (This does not mean that a long circuitous road should be followed).
Under no circumstances should the whole cash exceeding Rs. 300 Lakh (insurance cover
obtained for cash in transit) be transported at any one time from one Branch to another or from a
Branch to another bank or vice versa. Where there are two or more Branches in the same place,
care must be taken to see that the total amount of cash in transit does not exceed Rs. 300 Lakh at
any one time.
Cash in case be carried from one Branch to other branches or Banks etc., by Bank's
officers/authorised clerk accompanied by an Office Attendant, It should be carried on the body
of the person or in a leather bag; the belt of the bag should be put round the shoulder of the
person.

Transportation of cash:
Transportation of cash should as far as possible be done in the Bank's own vans/cars or closed
vehicles e.g. a taxi / Cash Van. The number of the taxi / Cash Van in which cash is carried should be
noted on every occasion. Where such conveyance is not easily available, other modes of transport
which can afford security and safety may be considered. The cash should preferably be carried in
steel box with a strong padlock. The box should also, if possible, be chained securely (with iron

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chain) to some fixed part of the vehicle so that the box cannot be removed with ease. If the cash is
carried on person, it should be carried in a briefcase which should be kept close to the body.
The Bank is providing cash vans to Nodal / Main Branch having cluster of branches with high cash
transactions. At centres where the bank has provided a cash van for carrying cash from one Branch to
another Branch/bank, cash van should be used instead of hired taxi or any other vehicle. Where hired
cash vans are used, the vendor must get the antecedents of the driver verified from the police and also
send the names of the drivers to the bank. The policy of hiring vans must be reviewed periodically in
the light of experience gained in this regard and keeping in view the local conditions and the law and
order situation. The cash vans when carrying cash should not be delayed at branches beyond
reasonable time.
The cash van should be provided with all required security fittings for securing the cash
container to the cash van, etc. and should be fitted with an alarm system which should be capable
of giving a loud alarm when activated. The activation points of the alarm system installed should
be capable of sounding the alarm, both while in motion or when stationary with an independent
source of power, whether the ignition key of the vehicle is switched on or off. Cash vans on
Matadors and standard vehicles may require minor variations, which may be decided by the
Regional Managers.

Escorting of Cash:
The cash, whilst in transit, depending upon the risk run, should wherever possible, be
accompanied by adequate armed escort. Wherever there are two guards, it is desirable to have
one of them armed with a revolver. If armed guards are available, at least two armed guards
should accompany the officer/authorised cash clerk/staff. In such cases, one armed guard should
be at the vehicle to keep vigil while the other should accompany the authorised cash clerk giving
delivery of cash inside the Branch.

A procedure to ensure maximum safety of Bank cash in premises and in transit is detailed
in Appendix II for the guidance and compliance by the Branches. Branch Managers should
ensure strict compliance of these measures.

9.2 CASH RECEIPTS

9.2.1 Receipt Scroll Book

All cash receipts, whether for credit of accounts or for issue of demand drafts, retirement of bills
etc. must be entered in Receipt Scroll Book before cash is accepted by the Cashier. The book
should be maintained as one of the books of the accounts which serves as an independent check
on cash business. The Scroll writer / counter Clerk (where no clerk other than cashier is posted at
branches, the officer will be scroll writer) should enter the name and amount mentioned in the
paying-in-slip, affix the cash scroll stamp on the paying-in-slip (not on the counterfoil, enter the
serial number of the entry (from the Receipt Scroll Book) within the impression of the stamp and
initial there against. The paying-in-slip (duly stamped with scroll stamp) with the counterfoil
kept intact, should be returned to the depositor. The cashier, after verifying that entry is made in
the Receipt Scroll Book should receive the cash in the usual way and return the counterfoil duly
stamped and signed to the depositor and retain the paying-in-slip.
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In the course of the day, the paying-in slips (the particulars of which are already entered in the
cash receipt book should be sent to the scroll writer who should mark off the relative entries in
the Receipt Scroll Book and should then pass them on to counter clerk for posting in computer.
After the business hours, the scroll writer should take the total of the items entered in the Receipt
Scroll Book during the day and tally it with the total receipts in the Cash Receipt Book which, in
turn, must agree with the actual cash receipt on that day.
After cash, Cash Receipt Book and Receipt Scroll Book are balanced, the Receipt Scroll Book
should be signed by the scroll writer, the Cashier-in-charge and Cancelling Officer.
If, by mistake, an entry is made in Receipt Scroll Book for a cheque instead of cash, the
cancellation of such entry should always be authenticated by the officer concerned giving, in
brief, the reasons for such cancellation.
If a depositor fails to pay in cash after an entry is made in the Receipt Scroll Book, the depositor
must be advised of the non payment of the cash and requested to confirm that he did not pay in
cash on that day. The entry in the Receipt Scroll Book should be struck off and initialled by the
Cancelling Officer only after satisfying and enquiring from the customer.
A notice should be prominently displayed near the cash window of the receiving cashier ‘ No
cash should be deposited at the cash window unless the relative paying-in-slip or voucher has
been delivered to the scroll writer to affix the scroll stamp.’ A sign board should be kept at the
scroll counter reading ‘Please present paying-in-slip slip here first before depositing money at
the cash window.’ The scroll writer should be warned against handling any cash from people
tendering money.

9.2.2 Cashier-in Charge

When the pay-in-slip / voucher is presented to the cashier, the cashier should ensure that it has
been properly scrolled and after counting cash and satisfying himself that it is in accordance with
the denominations stated on the paying-in-slip/voucher, should affix the "cash received" stamp
on the paying-in-slip/voucher and on the counterfoil and sign the paying-in-slip/voucher and the
counterfoil in full with ink/ball-point pen and return the counterfoil to the depositor. The
receiving cashier should take particular care to guard against accepting forged or defective
currency notes by processing the notes on the Note Authentication cum Sorting machine where
provided. Where the particulars of denominations are not recorded or are recorded incorrectly,
the receiving cashier may request the depositor to enter or correct the particulars, or he may do
so himself.
The cashier should enter the particulars of the denominations (of currency noted received) in the
Cash Receipt Book in ink / ball point pen.
The Cashier should take care that all the relevant columns are properly and correctly filled viz.
amount in words and digits, name of the account, correct date of deposit, correct branch and sol
ID if account pertaining to some other branch, correct denomination of each currency or coin to
be deposited, mobile number of the depositor and signature of the depositors.
If amount is being deposited by the third party, branch should ensure authorisation from the
account holder permitting the third party to deposit the amount in his/her account. Branch should
also try to obtain the KYC particulars of third party depositors.
At the end of the day, the receiving cashier should balance cash in his access as per the
denominations in the Cash Balance Book.
The counter Clerk should take care not to post credit vouchers or paying-in-slips for cash unless
they bear the cash scroll stamp and cash receipt stamp with the full signature of the receiving
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cashier. In case it is found correct, he should enter the receipt in the system, and mark the
transaction number on the voucher under his initials.
The officer, verifying the entries in CBS should carefully scrutinize all the vouchers to ascertain,
among other things, that they have been signed by the receiving cashier.
Branches should check CTR/STR reports from Day End Reports on daily basis to ensure that any
unusual transactions are not routed through the accounts and no money laundering activities are
enabled.
The Cashier should not accept cash of Rs. 50,000/- or above without PAN or Form 60 of
depositor in a single day in a single account even if depositor deposits it in multiple deposit
vouchers of smaller values.

9.2.3 Receipt of Cash after the Daily Cash Balance Book is closed
Any receipt of cash by a Branch after the Daily Cash Balance Book is closed for the day should
be recorded in the Receipt Scroll Book and Cash Receipt Book under the date of following day.
The amount (cash) and the relative paying-in-slip / voucher should be kept in an envelope with
the name of the depositor and the amount deposited super scribed thereon under the initials of the
Manager and the Cashier. The envelope containing the cash received should be kept in the cash
safe overnight.

9.3 Facility for exchange of notes and coins at bank branches22

(a) All branches of banks in all parts of the country are mandated to provide the following
customer services, more actively and vigorously to the members of public so that there is no
need for them to approach the RBI Regional Offices for this purpose:

(i) Issuing fresh / good quality notes and coins of all denominations on demand,
(ii) Exchanging soiled / mutilated / defective notes, and
(iii) Accepting coins and notes either for transactions or exchange.

It will be preferable to accept coins, particularly, in the denominations of ₹ 1 and 2, by

weighment. However, accepting coins packed in sachets of 100 each would perhaps be more
convenient for the cashiers as well as the customers. Such sachets may be kept at the counters
and made available to the customers.

(b) All branches should provide the above facilities to members of public without any
discrimination on all working days. The scheme of providing exchange facility by a few select
currency chest branches on one of the Sundays in a month will remain unchanged. The names
and addresses of such bank branches should be available with the respective banks.

(c) The availability of the above-mentioned facilities at the bank branches should be given wide
publicity for information of the public at large.

22RBI’s Master Circular – Facility for Exchange of Notes and Coins dated July 01, 2019; RBI/2019-20/02
DCM (NE) No.G-2/08.07.18/2019-20 dated July 01, 2019
285 | P a g e
(d) None of the bank branches should refuse to accept small denomination notes and / or coins
tendered at their counters.

9.3.1 Reserve Bank of India (Note Refund) Rules, 2009 - Delegation of Powers
(a) In terms of Section 28 read with Section 58 (2) of Reserve Bank of India Act, 1934, no
person is entitled as a right to recover from the Government of India or RBI the value of any lost,
stolen, mutilated or imperfect currency note of the GOI or banknote. However, with a view to
mitigating the hardship to the public in genuine cases, it has been provided that the RBI may,
with the previous sanction of the Central Government, prescribe the circumstances in, and the
conditions and limitations subject to which, the value of such currency notes or banknotes may
be refunded as a matter of grace.

(b) With a view to extending the facility for the benefit and convenience of public, all branches
of banks have been delegated powers under Rule 2(j) of Reserve Bank of India (Note Refund)
Rules, 2009 for exchange of mutilated / defective notes free of cost.

(c) The Reserve Bank of India (Note Refund) Rules, 2009 were amended to enable the public to
exchange mutilated notes in Mahatma Gandhi (New) series, which are smaller in size compared
to the earlier series. The minimum area of the single largest undivided piece of the note required
for payment of full value for notes of rupees fifty and above denominations were also revised.
The Reserve Bank of India (Note Refund) Amendment Rules, 2018 have since been notified in
the Gazette of India on September 6, 2018.

9.3.2 Liberalized definition of a Soiled Note

In order to facilitate quicker exchange facilities, the definition of soiled note has been expanded.
A ‘soiled note’ means a note which has become dirty due to normal wear and tear and also
includes a two piece note pasted together wherein both the pieces presented belong to the same
note and form the entire note with no essential feature missing. These notes should be accepted
over bank counters in payment of Government dues and for credit to accounts of the public
maintained with banks. However, in no case, these notes should be issued to the public as re-
issuable notes and shall be deposited in currency chests for onward transmission to RBI offices
as soiled note remittances for further processing.

9.3.3 Mutilated Notes – Presentation and Passing

A mutilated note is a note of which a portion is missing or which is composed of more than two
pieces. Mutilated notes may be presented at any of the bank branches. The notes so presented
shall be accepted, exchanged and adjudicated in accordance with Reserve Bank of India (Note
Refund) Rules, 2009.

9.3.4 Extremely brittle, burnt, charred, stuck up Notes

Notes which have turned extremely brittle or are badly burnt, charred or inseparably stuck up
together and, therefore, cannot withstand normal handling, shall not be accepted by the bank
branches for exchange. Instead, the holders may be advised to tender these notes to the Issue
Office concerned where they will be adjudicated under a Special Procedure.

9.4 Procedure for exchange of soiled/ mutilated/ imperfect notes

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9.4.1 Exchange of soiled notes

Notes presented in small number: Where the number of notes presented by a person is up to 20
pieces with a maximum value of Rs.5000 per day, banks should exchange them over the counter,
free of charge.

Notes presented in bulk: Where the number of notes presented by a person exceeds 20 pieces or
Rs.5000 in value per day, banks may accept them, against receipt, for value to be credited later.
Banks may levy service charges as permitted in RBI’s Master Circular on Customer Service in
Banks (DBR.No.Leg.BC.21/09.07.006/2015-16 dated July 1, 2015). In case tendered value is
above Rs.50000, banks are expected to take the usual precautions.

9.4.2 Exchange of mutilated and imperfect notes

While designated branches may continue to follow the procedure as laid down in Part III of
Reserve Bank of India (Note Refund) Rules, 2009 (www.rbi.org.in
→Publications→Occassional) for exchanging mutilated and imperfect notes and issue receipt for
the notes presented for adjudication, non-chest branches are required to follow the following
procedure for notes presented in small numbers and in bulk.

Notes presented in small number: Where the number of notes presented by a person is up to 5
pieces, non-chest branches should normally adjudicate the notes as per the procedure laid down
in Part III of Reserve Bank of India (Note Refund) Rules, 2009 and pay the exchange value over
the counter. If the non-chest branches are not able to adjudicate the mutilated notes, the notes
may be received against a receipt and sent to the linked currency chest branch for adjudication.
The probable date of payment should be informed to the tenderers on the receipt itself and the
same should not exceed 30 days. Bank account details should be obtained from the tenderers for
crediting the exchange value by electronic means.

Notes presented in bulk: Where the number of notes presented by a person is more than 5 pieces
not exceeding Rs.5000 in value, the tenderer should be advised to send such notes to nearby
currency chest branch by insured post giving his / her bank account details (a/c no, branch name,
IFSC, etc.) or get them exchanged thereat in person. All other persons tendering mutilated notes
whose value exceeds Rs.5000 should be advised to approach nearby currency chest branch.
Currency chest branches receiving mutilated notes through insured post should credit the
exchange value to the account of sender by electronic means within 30 days of receipt of notes.

9.4.3 Notes bearing "PAY" / "PAID" / "REJECT" stamps

(a) Every Officer-in-charge of the branch i.e. the Branch Manager and every Officer-in-charge of
the Accounts or Cash Wing of the Branch shall act as 'Prescribed Officer' in each branch to
adjudicate the notes received at the branch for exchange in accordance with Reserve Bank of
India (Note Refund) Rules, 2009. After adjudicating mutilated notes, the Prescribed Officer is
required to record his order by subscribing his initials to the dated 'PAY'/ 'PAID'/ 'REJECT'
stamp. The 'PAY' /'PAID' & 'REJECT' stamps should also carry the name of the bank and branch
concerned and held under the custody of the 'Prescribed Officer' to avoid misuse.
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(b) Mutilated / defective notes bearing 'PAY'/'PAID' (or 'REJECT') stamp of any RBI Issue
Office or any bank branch, if presented for payment again at any of the bank branches should be
rejected under Rule 6(2) of Reserve Bank of India (Note Refund) Rules, 2009 and the tenderer
should be advised that the value of such note/s cannot be paid since the same has already been
paid as is evident from the PAY/PAID stamps affixed on it/them. All bank branches have
instructions not to issue notes bearing PAY/PAID stamps to the public even through oversight.
The branches should caution their customers not to accept such notes from any bank or anybody
else.

9.4.4 Notes bearing slogans / political messages, etc.

Any note with slogans and message of a political nature written across it ceases to be a legal
tender and the claim on such a note will be rejected under Rule 6(3) (iii) of Reserve Bank of
India (Note Refund) Rules, 2009. Similarly, notes which are disfigured may also be rejected
under Rule 6(3) (ii) of Reserve Bank of India (Note Refund) Rules, 2009.

9.4.5 Deliberately cut notes

The notes, which are found to be deliberately cut, torn, altered or tampered with, if presented for
payment of exchange value should be rejected under Rule 6(3)(ii) of the Reserve Bank of India
(Note Refund) Rules, 2009. Although it is not possible to precisely define deliberately cut notes,
a close look at such notes will clearly reveal any deliberate fraudulent intention, as the manner in
which such notes are mutilated will follow a broad uniformity in the shape/location of missing
portions of the notes, especially when the notes are tendered in large numbers. The details of the
case such as the name of the tenderer, the number of notes tendered and their denominations
should be reported thereafter to the Deputy/General Manager, Issue Department, under whose
jurisdiction the branch falls. The matter should also be reported to local police in case a large
number of such notes are tendered.

9.4.6 Training
RBI’s Issue Offices conduct training programmes for 'Prescribed Officers' of bank branches on a
priority basis. As the training programmes are intended to provide knowledge and instill
confidence in the Prescribed Officers in the process of adjudication of defective notes, it is
imperative that the Prescribed Officers of the branches are deputed for such programmes.

9.4.7 Display of Notice Board

All bank branches are required to display at their branch premises, at a prominent place, a board
indicating the availability of note and coin exchange facility with the legend,
"SOILED/MUTILATED NOTES AND COINS ARE ACCEPTED AND EXCHANGED
HERE" for information of general public. Banks should ensure that all their branches provide
facility for exchange of notes and coins not only to their customers but also others. However,
they should ensure that the note exchange facility is not cornered by money changers / dealers in
defective notes.

9.4.8 Disposal of notes adjudicated at bank branches

Regarding audit of the notes adjudicated by bank branches, the full value paid notes have to be
remitted by all branches to the chest branches with which they have been linked and there from
to the Issue Offices concerned together with the next soiled note remittance in the manner
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already laid down. The half value paid notes and rejected notes, which are held by the chest
branches in their cash balance, may either be remitted separately packed together with the full
value paid notes or sent by registered and insured post as and when required. The full value paid
notes will be treated as chest remittance by the Issue Office while the half value paid notes and
rejected notes will be treated as notes tendered for adjudication and processed accordingly. All
chest branches are required to submit to RBI’s Issue Offices a monthly statement showing the
number of notes adjudicated during the month.

9.5 Uncurrent Coins

The coins of 25 paise and below, issued from time to time, ceased to be legal tender for
payments as well as account with effect from June 30, 2011 in terms of Gazette Notification No.
2529 dated December 20, 2010 issued by the Government of India.

9.6 Monitoring and Control

(a) The Regional Managers may pay surprise visits to the branches and report the position of
compliance in this regard to the Head Office which will review such reports and take prompt
remedial action, wherever necessary.
(b) Any non-compliance in this regard shall be viewed as violation of instructions issued by the
Reserve Bank of India.

9.7 Impounding of Forged Currency:23 (Please refer RBI Circular on Counterfeit

Currency attached as a separate chapter in this Manual for proper identification of
counterfeit currencies and needful action).

The cashier and the cash clerks as well as the staff members handling cash operations should
familiarize themselves with the security features of genuine currency notes of different
denominations. For this, they may visit RBI website and click on “paisa bolta hai” and get the
details in an inter-active manner. Details of security features of each of Rs. 2000/-, 500/-, 100/-,
50/-, 20/- and Rs.10/- notes are enclosed for ready reference. Branches may also obtain posters
showing features of genuine notes from RBI regional issue office through their Regional office
and display in the branch premises for the benefit of staff and customers.
14.1 In case, a currency suspected to be forged is received by a Branch, the Manager should
impound it and stamp it with the word "forged" on it in red ink in large block letters. The
Manager / Officer should put his initials on the note and mention his/her designation and the
name of the Branch below his/her initials. Under no circumstances, the forged currency/
counterfeit currency received over the counter should be returned to the depositors but a receipt
for the same shall be issued.

In case the bonafide of the presenter of the forged currencies is suspected, the Manager should
hand over the impounded currency and the presenter to the police. However, if the Manager is
convinced that the forged currency has been presented by the presenter in good faith believing
that it was genuine, he/she should impound the note as indicated above and record the name, the

23
RBI’s Master Circular – Detection and Impounding of Counterfeit Notes; RBI/2019-20/01 DCM (FNVD) G –1/16.01.05/2019-
20 dated July 1, 2019
289 | P a g e
address of the presenter and his statement regarding the person from whom the note was received
and the circumstances under which it was received from him.
The Manager should send the forged note and the presenter's statement to the police for further
enquiry in the prescribed format. While forwarding the forged note, Branches should advise the
police authorities to send the note to the currency officer, Reserve Bank of India; under whose
jurisdiction the concerned Branch falls, when the enquiry is over. A copy of this advice should
be endorsed to the currency officer of the Reserve Bank of India.

If the forged note is inadvertently returned to the Branch by police authorities/court after
completion of their enquiry / after the final disposal of the case by the court, the Branch should
ensure that the forged note is sent to the concerned currency officer of Reserve Bank of India for
disposal.

9.8 Detection of Counterfeit Banknotes Revised procedure for Reporting

RBI has now advised that all cases of detection of counterfeit notes at the bank
branches/treasuries are promptly reported to the police authorities, it has been decided to revise
the procedure to be followed on detection of counterfeit banknotes at bank branches, treasuries
and sub treasuries. Accordingly, the following procedure should be adopted with immediate
effect:--
 For cases of detection of counterfeit notes up to 4 pieces, in a single transaction, a
consolidated report should be sent to the police authorities at the end of the month.
 For cases of detection of counterfeit notes of 5 or more pieces, in a single transaction,
FIRs should be lodged with the Nodal Police Station / Police Authorities as per
jurisdiction.

9.9 Record of Cash Received & Counted

The cashier should make packets of currency notes (each packet to be of 100 pieces of currency
notes of the same denomination). For detailed guidelines please refer to Appendix III.

If a cashier wishes to have his packets of Currency Notes tied into bundles:
(a) he should get each bundle of ten packets (or less) duly tied under his personal
supervision; he should not give to the Office Attendants more than ten packets at one time;
(b) he should invariably check carefully and satisfy himself that the bundle, when it comes
back to him, contains the ten (or less, as the case may be) packets.

9.10 Defacing Currency Notes by Writing on them or Inscribing Messages, Stamp etc.
Thereon

The practice of writing in ink, various remarks such as names of the depositors number of pieces
etc., as also inscribing rubber stamps of the Bank indicating the name of the Branch etc.,
particularly in the water-mark window of the currency notes not only make them soiled and
shabby - thereby shortening their life - but also result in wastage of expensive security paper on
which they are printed. Besides, under the Legal Tender (Inscribed Notes) Act, 1964, any note
with slogans and messages of a political nature written across it ceases to be a legal tender, the
value of which cannot be claimed by the holder as a matter of right.

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 Branches should ensure that the staff members handling cash desist from defacing currency notes
as aforesaid and handle cash with due care and a suitable notice is put up on the branch premises
for the information of the customers and general public.

9.11 CASH PAYMENTS

9.11.1 Payment Scroll Book

All cash payment cheques or cash payment vouchers / withdrawals must be entered in Payment
Scroll Book and initialled therein by counter clerk. Cancelling Officer (or Officers who pass the
cash voucher) should also initial against the relative entry in the book.

Cashier should verify that all cheques and vouchers / withdrawals entered in the book are duly
cancelled or initialled and that the corresponding entries are initialled by counter clerk and
officer. Thereafter he should initial against the entries in the book, return it to counter and retain
the cheques / vouchers / withdrawals for payment. Cancelling Officer should ensure that the
entries in the book relating to cheques / vouchers / withdrawals retained by the Cashier bear the
cashier’s signature. The payment scroll book should move quickly between counter and cash
counter. There should be no delay in payment and no inconvenience to customers. In case of
need, depending upon the regular rush of customers at the branch, more than one Payment Scroll
Book can also be used.

At the close of business every day, the totals of the amounts entered in the Payment Scroll Book
must be balanced with the totals of amount entered in Cash Payment Book. It is understood that
the totals of all entries in the Cash Payment Book must also be balanced with the actual cash
payments for the day.

I. Procedure:

a. (i) The Cashier-in-charge will take out the reasonable amount of cash from cash
safe, in convenient denominations, on the basis of his estimate of the day's requirements.
An entry to the effect would be made in Dual Cash Control Book maintained by the
Cashier- in-charge.
(ii) During the day, if at any time his cash falls short of the requirements, the cashier
would replenish the cash from the cash safe in the same manner mentioned above.
b. For making the cash payments, the procedure to be adopted by the cashier will be as
under:
(i) The cashier will scrutinise the cheques/withdrawal slips with Pass Books tendered to
him for payment and see if they are prima facie in order; such a scrutiny would, inter-alia,
include -
a) that the cheque/withdrawal slip bears authorised signature;
b) that it is not post dated or out dated;
c) that it bears no alterations;
d) that the amount in words and figures agree;
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 e) that there is no stop payment instructions against the cheque presented for
encashment;
f) that the cheque/withdrawal slip is properly endorsed;
(ii) In order to protect against fraudulent alterations, he will see each instrument under
the Ultra Violet Ray Lamp, wherever available.
(iii)He will check that the instrument bear the Token number and Transaction Number
with initials of the posting official and initial of the cancellation officer in token of having passed
the cheque/withdrawal slip/debit voucher.
(iv) He will refer to the denominations indicated on the reverse of the cheque/withdrawal
slip and take out cash from his counters of the cash cabin accordingly and tick the
denominations and the number of pieces. Where the denominations are not given by the
customer on the reverse of the instrument, he will enter the denominations and number of pieces.
(v) He will count the currency notes and check the number of pieces in each
denomination and then make the payment.
(vi) At the end of business hours, he will balance the cash and render an amount to the
Cashier-in-charge.
(vii) Signatures of those who receive payments would be obtained even for "bearer"
cheques. This should apply to payments by vouchers / withdrawals also. In case of
large payments, say above Rs.50,000/- name, address and mobile number of the person
receiving payment should be recorded on the reverse of the payment instrument as a
measure of adequate inquiry and precaution. As per latest CBDT guidelines, any
transaction equal or above Rs. 50,000/- should be done only after seeing the original OVDs, and
making record of it, of the person doing transaction for self or on behalf of some other person or
account holder.
(viii)The denominations of currency notes paid must be entered on the reverse of
cheques or vouchers by cashiers.

9.11.2 For Branches, where Cash is live in the system:

Cash Transfers between System Cash to Cashier (Teller)

With the migration of all branches to CBS, it has been decided to gradually live the Cash in the
system. For those branches, where Cash live module has been started, the cash transfers between
System Cash to teller account should be routed through the system invoking the prescribed menu
– TM.

If Cashier is allotted the TELLER account say TELLER01, then transfer of Cash between
System Cash (Sol-Id CASH001) and TELLER01 can be ‘POST’ed by the Cashier.

For better control over the ‘POST’ing of cash transfers between System Cash and teller account
can be ‘POST’ed by the respective users / Cashier. Thus the Part-Tran of the voucher set
crediting or debiting the Teller account would have to be ‘POST’ed by the respective Teller only.
This procedure enables the flows of transactions to be controlled with the physical movement of
the cash between System Cash to teller account and vice versa.

We give below few examples to clarify the change.

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a. System Cash transfers cash of Rs.1,00,000/- in the morning to TELLER01. The System Cash
would have the following entry
Debit Sol-Id TELLER01 Rs.1,00,000/-
Credit Sol-Id CASH001 Rs.1,00,000/-

This entry would go in ‘ENTERED’ status, since Finacle first POSTS the Debit and then Credit,
and the Cashier has no right to debit the TELLER01 account. Thus on receiving cash, the
TELLOR01 only would ‘POST’ the debit leg of the transaction and then System Cash would
POST the credit leg.
b. System Cash receives cash from Teller01. The System Cash will have the transaction as below
Debit Sol-id CASH001 Rs.1,00,000.00
Credit Sol-id TELLER01 Rs.1,00,000.00
System Cash can ‘POST’ the Cash001 leg (since first debit is to be posted), the Credit Leg will
have to be ‘POST’ed by TELLER01 only.

9.11.3 Payment of Cheques to Other Banks over the Counters

This facility may not be extended except in case of issuing cash for their requirements. If the
beneficiary is an account holder of the other bank, payment may be made either through NEFT
or RTGS and payments over the counter should be discouraged.

9.11.4 Receipt Book & Payment Book

Every cashier should maintain and write the Cash Payment Book and Receipt Book. The cashier,
while receiving the cash should enter the amount in the Receipt (denomination-wise) during the
day. In the same way, the Payment Book will also be maintained by the cashier. At the end of the
day, the cashier-in-charge should put his signatures in full in these Books along with cancellation
officer. The total of these books with respective Receipt Scroll Book and Payment Scroll Book
should tally with each other.

9.11.5 Shortage and Excess of Cash: Procedure

When any shortage in cash occurs, the Branch Manager / Cancelling officer and the cashier
concerned should check the particulars of currency notes received/paid for all transactions
handled by the cashier. If the mistake is not located, the shortage in cash should be recovered
from the cashier concerned and the matter reported to Regional Office / Head Office on the same
day.

If there is any excess in cash, the cashier should immediately report the matter to the Branch
Manager and the cashier should check all particulars of currency notes for receipts/payments and
endeavour to locate the mistake. If the excess cash is located as belonging to any customer, the
amount may be refunded to him after the Manager is fully satisfied about the bonafide of the
customer's claim. The amount should be refunded by crediting it to the account of the customer
or by a payslip; it should not be paid in cash. If the mistake is not located, the excess cash should
be credited to Sundry Deposit Account - "Excess Cash Received" and the matter should be
reported to Regional Office on the same day. The amount of the excess cash held in Sundry
Deposit account should be transferred to Comptroller’s Department, Head Office after one year
from the date of receipt of such excess cash at the Branch giving full details such as the date of
entry etc. Head Office Comptroller’s Department will account for such amounts suitably in its
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books. For this purpose, as soon as the entry in respect of deposits for excess cash received found
is made in Sundry Deposit account, Branches should take an appropriate diary note, in the next
year's diary.

Branches should not lose sight of the possibility of receiving such requests from other
comparable customers.

CTR (Cash Transaction reports) are required to be sent to RBI at monthly intervals, in addition
to Compliance Department, Head Office.

9.12 Cash Module in CBS

Queries
How to generate Cash
Transaction Report where the
transaction is above Rs. 10
lakh.
What is the option for various
cash related reports
What is menu option to get a
back dated report of cash.
Branch user wanted to know,
the procedure to transfer
funds in menu CASHTR.
Please guide.
Branch user mentioned that
we are unable to do the
verification of Cashtr Ticket
number.
Solution
Use
MISRPT > OTHERS > IT01
1. Menu option SCWRPTA for same day transaction.
2. Under PTW menu option select Cash waste report for given
date range.
3. FTR for given date for transaction type as cash only
1. Use menu PTW 2. Option 13 - C (Cash waste report ) 3.
Enter the sol id and date range
To transfer the funds follow the below mentioned steps :-
1. 1. First Lodging branch do the following transaction
through TM menu for cash lodgment in Cashtr a/c SOL ID +
CASHTR001 – Debit SOL ID + Teller - Credit
2. Use menu option CASHTR and lodge funds for sending
branch which will pass transaction during verification of
CASHTR i.e. SOL ID + CASHTR001 - Debit (Lodging
Branch) SOL ID + CASHTR001 - Credit (Receiving Branch)
1. 1. Use CASHTR menu option 2. Function V to Verify, then
put ticket no 3. Then by pressing F4 do the CTRL D. 4. Again
F4 the message as 'do you want to verify y/n put the Y press F4

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 9.13 CLEARING AND TRANSFER

9.13.1 Outward Clearing

Branches should put up a notice (in English and in the regional language) on the counter
requesting customers to cross cheques before tendering for collection in their accounts.
Receiving Clerk / cashier(s) must ensure that all cheques received for collection from customers
are crossed before they are accepted.

In respect of cheques received too late for the day's clearing, the relative paying-in-slips and
counterfoil should be clearly stamped "Received too late for today's clearing". These cheques
must be kept apart.

The receiving Clerk / cashier may accept for credit in savings bank account cheques, dividend
warrants, etc., payable to the account holder only. If the Clerk / cashier is satisfied that the
account is an introduced account or if he has any doubt in any particular case, he should refer to
the Manager or the officer concerned.

In terms of RBI instructions vide Circular No. DBOD.BP.BC. No.56/21.01.001/2005-06 dated

23.01.2006, banks are prohibited from crediting ‘account payee’ cheque to the account of any
person other than the person named therein.

Cheque receiving/ processing official must see that cheques are regular in all respects and that
endorsements are correctly made.

With the introduction of cheque drop box facility, customers can deposit cheques along with
paying-in slips in the box meant for this purpose. Timings for clearing cheques on the same day
should be clearly mentioned on the cheque drop box. The contents of the cheque drop box should
be taken out inside the banking hall in the presence of two officials and the number of credit and
debit instruments should be recorded in a register/pass book meant for the purpose. A special
crossing stamp should be placed near the cheque drop box to enable the depositors affix the
crossing stamps on payment instruments in the drop box.

Branches should note that they should continue to accept cheques over the counter when
tendered by the customers and the counterfoil of the deposit slip duly stamped and signed must
be issued as an acknowledgement. Customers desirous of handing over the cheques across the
counter should not be directed to the cheque drop box as this violates the guidelines issued by
RBI.

9.13.2 Immediate Credit of Local Cheques

Reserve Bank of India has set up a definite time frame and guidelines for speedier collection of
local cheques as below :-
i) Cheques up to and inclusive Rs. 2,000/-: (Not in practice, must be taken necessary
precautions before extending immediate credit)
Immediate credit and withdrawals against cheques upto and inclusive of Rs. 2,000/- for
local cheques deposited in deposit account of an individual customer for collection is to be given
subject to maintaining satisfactorily operated account, without waiting for customer's specific
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 request but as a matter of normal course. Exception: Deposit Accounts of Minors, N.R.I.s and
staff members.

ii) Cheques exceeding Rs. 2,000/-

1. To be credited to the customer's accounts and they should be allowed use of funds latest on
the third working day from the date of acceptance of the cheques at counters.
2. The authority to decide on the satisfactory conduct of an account and affording facility of
giving credit/allowing withdrawals as per time schedule as above vests with the Manager.
3. To recover service charges as prescribed immediately upon allowing the facility, to the
credit of Branch Profit & Loss Account - Miscellaneous Receipts.
4. In case the cheque is returned unpaid, interest at the rate as is applicable to a similar sized
credit limit (as advised by Reserve Bank of India from time to time) plus interest tax element for
the period the Branch is out of funds i.e. till the customer repays the amount withdrawn to be
recovered.
Branches are required to compensate the customers for any delay in crediting the local cheques.
Hence branches should promptly dispose the instruments received for collection.

9.13.3 Clearing of Cheques where we have more Branches than one

At centres where the Bank has more than one Branch, normally the Main Branch at that Centre
participates in the "Local Clearing." At larger centres this work is handled by the Service Branch.
The other Branches of the Bank at that Centre send their local clearing cheques for the day to the
Main Branch / Service Branch along with clearing schedules. At centres where Net Clear
Scheme has been introduced the clearing instruments are sent to the Main/Service Branch under
an outward memo.

9.14 Magnetic Ink Character Recognition (MICR) Technology

With a view to reducing the delay in clearance of cheques the Reserve Bank of India has
introduced the MICR Technology w.e.f. end of November 1985 for mechanised cheque
processing.

The MICR Technology of cheque processing requires very rigid specifications and a smooth transit
to the system requires co-operations of all concerned viz. the Reserve Bank of India, Banks and
their customers. The specifications of the MICR cheque paper, cheque sizes etc. approved by
Reserve Bank of India. Certain precautions should be observed in writing/ handling MICR
instruments by the banks and the customers.

To avoid rejections in high volumes MICR inward clearing all the branches concerned are
instructed to comply with the following instructions meticulously.
i) Arrange for immediate withdrawal of the instruments which do not conform to the MICR
norms from customers as well as stock with the branch. All the staff concerned should make
themselves aware of the same.
ii) Branches should not get the MICR instruments / sort codes printed locally. They should
strictly issue the MICR instruments provided by the Stationery Department / Centralised
Operations Department Head Office.

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 9.15 Inward Clearing
The inward clearing should be handled promptly so as to be completed within the settlement
hours of the Clearing House.

After the inward clearing is received, the clearing clerk(s) should call over from the schedules
the amounts of cheques listed therein with the cheques and total tallied; thereafter the cheques
should be distributed amongst the respective person for posting.

Cheques which cannot be paid for various reasons such as irregular endorsements etc., should be
returned within the settlement hours of the Clearing House.

A physical count of the cheques should be taken

(a) when received from the Clearing House;
(b) those distributed amongst for posting; and
(c) those which are to be returned unpaid.

At the end of each day, the total number of cheques posted by counter clerk / ledger keepers plus
those returned to Clearing House unpaid (b + c) must be agreed with the number of cheques
received from the Clearing House (a).

Inward clearing should be balanced every day. Failure to balance inward clearing every day may
lead to abuses including frauds.

9.16 Clearing Module in CBS

Queries Solution
In outward clearing zone, Branch
If zone is released then it cannot be modified or deleted or
has wrongly entered certain transferred. If zone is not released and regularized then do
instruments, which are in verified
as follows:- 1. Use the menu option MCLZOH & open a
status. How to rectify? new zone with same zone code but next date. 2. Then use
the menu option TROFSETS function "T" and enter the
set number details which need to be deleted, then enter
the details for new zone in which you have to transfer the
set and press F4 and then F10, this will give new Set
Number which will be in "Unverified" status. 3. Use the
menu option OCTM, enter the new zone details and
delete the new Set Number.
One cheque was wrongly entered If Clearing Zone is Posted and transaction is in Entered
twice in ICTM menu. How to do status due to an exception then, Proxy post transaction
the deletion of the cheque? and reverse proxy to Netclear a/c or if shortfall is there
then reverse to shortfall a/c If Clearing Zone is not posted
then, 1.Use the menu option ICTM function will be D
enter the Zone number press F4 2.Enter the cheque
number which you want to delete. Press F4 3.Select one
record for deletion by Shift+F4 and press F10.

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While marking outward rejection
from inward clearing zone, getting
error as "all part transactions are
not verified". What to do?
While posting the inward clearing
transaction getting error as
"sufficient debit not posted
scheme update failed" What is the
solution?
In one of the accounts, some
amount is showing in funds in
clearing. How to know the detail
and how to regularize?
While releasing outward clearing
zone system gives message as
"Zone is Locked try after some
time".
While releasing the outward
clearing zone get an error "Can't
release to shadow balance unless
all part transactions are posted".
Due to technical problem for
some bank returns are late but
want to release zone excluding
those bank or branches.
What is the menu option for
revoke pending instrument in
outward clearing?
Clearing is not balanced which
reports should be taken to cross-
check the entries.
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1. Use menu option MICZ enter the outward clearing
zone details and note down the transaction Number. 2.
Use the menu option TM and enter the transaction
number by using function M and verify the pending part
transactions and press F10. 3. Use the menu option
ICTM and mark the outward clearing rejections entry.
This is due to account not having sufficient balance so the
system gives the error. If branch want to pass this cheque
then TOD is required. To give TOD do as follows; 1.
Under menu option TM use function code M, enter the
transaction number and press F4. 2. Enter N in specify
option and press F4 you will get TOD screen. 3. Press F4
& enter the user id in "permitted by" field then press F4
and F10.
Menu option ACSBIO can be used Also use the menu
option ACM function "I" enter the account number and
press F4, give option M and press F4 again. Press Ctrl+E
on "funds in clearing" field, will display the outward
clearing zone details. Use the menu option MCLZOH
and regularize the zone
To unlock the Zone, please use menu option UNLKZ,
function U for unlock, enter the zone number and date
press F4 and F10, Check the status and release the zone.
It needs to check whether all instruments entered in Zone
are verified 1.Use menu option IOCLS, enter the zone
date, zone number & verified status flag as N Press F4 2.
Check the unverified set number and verify the same
from OCTM menu option. 3. Release the zone from
MCLZOH menu option.
For marking pending release for given bank or branch. 1.
Use menu option MARKPEND 2. Enter the zone Date,
zone number, zone bank code, zone Branch code (If for
specific branch) 3. Press F4
4. Select record by Shift + F4 and press F10.
To revoke pending release for given bank or branch,
follow the below steps:-
1. Use menu option REVPEND 2. Enter the Zone No,
Zone Date, Zone SOL ID, Zone bank code, zone Branch
code(If for specific branch) 3. Press F4. Select record by
shift + F4 and press F10.
Use PTW and generate the clearing report and cross-
check the transactions or use FTI / FTR to check for
particular amount by giving transaction-type as L-
Clearing and transaction amount low and transaction
amount high. Check for un-posted transaction.
In OCTM verification an error This error comes due to wrong MICR code added in
comes "BCT record not found". OCTM which is not available in system. Log a call in
helpdesk for necessary update. After updating record,
modify sort code for given number.

9.17 Clearing Difference Receivable/ Payable Account

There could be occasions of short receipt / excess receipt of instruments in a day's inward
clearing received by the clearing branches from their Main / Service Branch. For accounting /
cash-book balancing purpose, the clearing branches are required to pass one or more 'adjustment
vouchers' that take care of the differences.

The above type of vouchers are generally passed to the debit / credit of Clearing Difference
Adjustment Account, depending on the nature of short receipt/ excess receipt. Subsequently,
when the short/excess receipts are recovered / paid the branches reconcile the initial entries in the
Clearing Difference Adjustment Account by passing corresponding 'adjustment vouchers'.

Inward Clearing Instruments are received by the Main / Service Branch from the Reserve Bank
of India or the Bank conducting clearing and these are now posted centrally at the main branch
or the service branch. In case any over-limit/ overdraft is required to be allowed in accounts
where payment of cheques received in inward clearing results in excess drawing over the
available balance, turn are sent to the concerned branches duly listed and accounted for under a
Debit Note or through the Net Clear Document (at centres where Net Clear system is introduced)
by the Main / Service Branch. Inward Clearing Instruments received from the Main / Service
Branch should be physically counted and called over with the schedules / sheets listing the
amounts. Branches should balance its day's inward clearing on a daily basis. For excess receipt
or short receipt necessary adjustment vouchers should be passed.

Clearing Differences could arise due to the following items

i. Items listed but not delivered (LBND)
ii. Items delivered but not listed (DBNL)
iii. Encoding errors:-
a) Encoded less
b) Encoded more
iv. Casting errors
(the list is illustrative and not exhaustive)

(B) Whenever such differences arise the Branches should take the following action
(i) Items listed but not delivered (LBND):
Advise the Main / Service Branch of the item listed but not delivered along with a Xerox copy of
the schedule / sheet marking off therein the item not received. At MICR Centres where the sheet
is exhaustive the details of the cheque number are available -necessary earmarking of the cheque
amount should be made in the account and in case the balance is short necessary telephonic
intimation should be given to the presenting Bank - Branch about non-receipt and return of the
cheque.
(ii) Items delivered but not listed (DBNL):
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Advise the Main / Service Branch of the cheque that has been delivered but not listed and
forward a xerox copy of the cheque (both sides) to enable the Main / Service Branch to ascertain
the presenting Bank - Branch. In case the cheque pertains to some other branch and is also not
listed, the drawee branch should be contacted and the cheque forwarded to them through the
Main / Service Branch with a small covering letter but not under a return memo as the cheque is
not listed.
(iii) Encoding Errors:
Encoding errors can arise only at MICR Centres. Any encoding error in inward clearing received
at a branch can be a valid technical reason for return of cheques/ instruments. However, when
returning, it should be ensured that the return memo is prepared for the amount encoded, (and not
the amount of the cheque) since it is this amount that is listed. The correct amount of the cheque
may be noted in pencil within brackets for the sake of clarity.
(iv) Casting Errors:
Errors in casting detected in the sheets / schedules received should be immediately
informed to the Main / Service Branch together with the xerox copy of the sheet/schedule.
(C) The adjustment vouchers on account of the above differences should be passed to two
different accounts in the General Ledger Balance Book viz. GL Clearing Difference Receivable
Account for debit entries (receivable differences to appear on the Asset side) and GL Clearing
Difference Payable Account for credit entries (payable differences to appear on the liability
side). These vouchers, whether debit or credit, should be signed by two officials-the Cashier /
Official-in-charge of clearing and the Branch Manager as the case may be. The Branch Manager
should ensure that the steps enumerated in (B) above are taken and check the posting of this
voucher in the G/L Clearing Difference Receivable/Payable Accounts (at TBM branches
authorisation of these vouchers shall be made by the above named delegatees).
(D) All the particulars of the difference vouchers should be entered in the Clearing Difference
Register with full particulars like date, cheque no., presenting bank etc.. The first half of the
register may be used for receivable differences i.e. debit entries passed in Clearing Difference
Receivable Account and the balance half may be used for payable difference i.e. credit entries
passed in the GL Clearing Difference Payable Account. The debit entries in this Register
represent amount receivable from other banks and credit entries represent amount payable to
other banks. The individual entries in the Clearing Difference Receivable / Payable Account
should be followed up for speedy settlement within a reasonable time - maximum one month.
The settlement vouchers to the Clearing Difference Receivable / Payable Account should also be
signed as above i.e. Cashier / Official-in-charge of clearing and the Branch Manager as the case
may be and entered in the Clearing Difference Register. The relevant entries in the Register
should be marked off upon settlement. Every month, on the last day, the total amount of
outstanding (un 'p' marked) entries in the 'Receivable' Section (first half) of the Clearing Control
Register should be jotted and balanced with the outstanding in the GL Clearing Difference
Receivable Account and those outstanding (un 'p' marked) entries in the 'Payable' Section
(second part) of the Clearing Difference Register should be jotted and balanced with the
outstanding in the GL Clearing Difference Payable Account. Maintenance of the Clearing
Difference Register will also enable correct reporting of receivable / payable figures in the Long
Form Audit Report and quarterly reporting to Regional Offices.

Hitherto, all clearing differences were maintained by Branches in the G/L Clearing
Difference Adjustment Account. These differences have been mounting over the years and
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 hence require to be monitored carefully, as it is a fraud prone area. As per directives from
Reserve Bank of India, old clearing differences prior to 1.4.94 only should be kept in the
G/L Clearing Difference Adjustment Account (a blocked account). Clearing Differences
should be segregated as receivable / payable differences and maintained in separate
accounts in the GLB viz. G/L Clearing Difference Receivable Account (debit entries) and
G/L Clearing Difference Payable Account (credit entries) with individual entry wise details
in the Clearing Difference Register.

The balancing of the Clearing Difference Register should be reported to the Controlling
Authority in the Branch Performance Report. The details of all clearing differences receivable /
payable should also to be reported by Branches to their Regional Offices, every quarter, who in
turn should report a consolidated position to General Operations Department, Head Office.
Inspecting officials of Regional Offices during their visit to branches should verify maintenance
of the Register / Accounts as mentioned above.

It should be carefully noted that passing of such 'adjustment vouchers' to the Clearing Difference
Receivable / Payable Account involves a great amount of risk and hence it is the responsibility of
the Branch Manager at branches to take utmost care in passing such vouchers. It should hence be
strictly ensured that all such vouchers for the Clearing Difference Receivable / Payable Account
are prepared after thoroughly checking the inward clearing sheets / instruments and should be
signed by two officials - the Cashier / Official in charge of clearing jointly with the Branch
Manager.

9.18 Endorsements on Cheques by Clearing Banks:

The Clearing Houses operating in the country are required to adopt Uniform Rules and
Regulations governing the conduct of the Clearing House operations on the lines of the draft
given by the Reserve Bank of India. The respective Service Branches / Main Branches of the
Bank attending the clearing house would advise Branches participating in the Local Clearing
House about adoption of the set of Rules and Regulations by the Clearing House.

Under the Uniform Rules and Regulations, a Clearing House stamp (known as 'Clearing Stamp')
of a member bank (or sub-member) affixed on the face of the document shall denote and mean
discharge by endorsement by such member (or sub-member):
(i) when the document is made payable to a member bank (or sub-member) A/c. A.B.C. or,
(ii) document is made payable to a member (or sub-member) or
(iii) in case of a document requiring a certificate or other endorsement in one or other of the
forms mentioned below:
(a) Received Payment
(b) Received Payment
Payee's Account Credited
(c) Received Payment
First Payee's endorsement guaranteed
Second Payee's Account Credited
(d) Received Payment
Second Payee's Account Credited
(e) Received Payment
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 Collection Bank's confirmation guaranteed
(f) Received Payment
Endorsements confirmed..

All endorsements other than those mentioned above will be required to be discharged manually
as hitherto
Note : For the purpose of these rules, 'documents' include, besides cheques, banker's demand
drafts, dividend warrants, pay orders, Indian Postal Orders and Bills accepted payable at a
member bank and due on date of Clearing, but does not include coupons and banker's fixed
deposit receipts.

Once the revised set of uniform rules and regulations is passed by the Local Clearing House,
participating Branches will not be required to put rubber stamp endorsements on the instruments
received for clearing. Consequently, the Clearing House stamp at a Branch would become very
important. Branches should meticulously follow the procedure given below in regard to safe
custody and affixing of the clearing house stamp:
(i) Clearing House stamp/s to be used for Clearing Instruments should, as usual, be kept at
all times in safe custody of the concerned official of the Clearing Department;
(ii) Proper record should be maintained by Branches about custody of the Clearing House
Stamp. A pass book should be maintained by the Clearing Department indicating the name of the
official and also his signature with PF no. in token of his receipt of the Clearing House Stamp for
the day's use;
(iii) Clearing House Stamp should be affixed on the documents after verifying that
documents/ endorsements are regular in all respects and are correctly made. The relative credit
vouchers for such clearing documents should be initialed / signed by the official who has verified
the documents.

Branches should note the important changes made under the revised Rules and Regulations and
follow them when adopted by the Local Clearing House and informed by the Service Branch/
Main Branch.

At centres where MICR technology is in operation, Service Branch are required to send local
cheques, duly encoded with amount and other numerical fields on the code line to the Local
Clearing House/Reserve Bank of India for clearance. The encoding of the cheques is done on the
encoder machine. This endorsement called the variable line endorsement, will be affixed by the
encoder machine on the back of the instrument, printed in MICR format and shall denote and
mean discharge by endorsement.

9.19 Affixing Crossing and Clearing Rubber stamps on the Clearing Instruments

'Crossing' and 'Clearing' rubber stamps on the face of the clearing instruments should be affixed
in such a manner so as not to obliterate/deface the important particulars such as name of the
beneficiary, date and amount etc.

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9.20 Membership of Clearing Houses

Branches opened at centres already having Clearing House should take all relevant factors into
consideration and promptly put up a proposal to become member/sub-member of the Clearing
House. Membership/sub-membership of the Clearing House confers many advantages and leads
to better customer service.

In terms of the Clearing House Rules, the member banks are required to maintain minimum
balance in their current account with RBI/Clearing House Bank. In case any member bank fails
to maintain the minimum balance (without considering the clearing receivables) or in case of an
overdraft on account of adverse clearing position, such defaulting member Bank shall be liable to
pay penal interest till the minimum balance position or debit position is regularised. Defaulting
member banks shall also be liable to have their membership terminated.

Member banks should ensure adherence to the regulations and rules adopted by the Clearing
House and in case of certain problems faced by them, they may seek relief from the application
of the relevant rules from the President of the Clearing House or consider withdrawing from
participation in Clearing House operations, pending restoration of normalcy in the Bank as
provided for in the Clearing House Regulations and Rules.

Member banks should ensure that they send to the Clearing House such representatives as will
deal (exchange instruments) with the representatives of all members of the Clearing House. If
necessary, feasibility of sending a Staff to the Clearing House may be considered, if warranted.
There should also be periodical rotating of representatives and regular check of their work.
Whenever such instances like
(i) suspension of work by any representative boycotting or refusing to deal with all members
present at the Clearing House (in such an event the President of the Clearing House has power to
suspend the Clearing House).
(ii) ragging and extortion of money from new representatives occur, Branches should
promptly intimate higher Controlling Authority so as to ensure that prompt action is taken to
avoid recurrence of such incidents.

9.21 Note on Inward Clearing in CBS

Presently the branches under Finacle are using ICTM menu option for posting the Inward
Clearing Cheques. The following changes are being introduced in the Inward Clearing.

Instrument Date will be mandatory input.

Changing of Carve Flag will not be allowed.
All zones have been changed to allow for negative carving.
For HOC/OAP/OAB/DDA accounts Branch Code will be mandatory
Post-dated and stale instruments have to be marked returned in the Inward Clg. Zone.

The current process that was being followed in branches is explained below using an example.
The account used in the example has the following balance:

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 Available Balance: 2,522/-

Funds Available in Clearing 1,50,000/-

Case: Customer is presenting a cheque for 153,000/-
Since available balance is less than the cheque amount, debit against uncleared funds is given.
The operator used to change the carve_flg to N from Y and lodge the cheque.
In this case the branch will have to return the cheque, the reject flag has to be changed to “I” and
<F4> pressed. The system will change the Carve_flg to ‘N’ automatically.
There would be no other change in the functionality of Inward Clearing. Kindly feel free to
contact IT Department at Regional Offices / Head Office in any case of difficulty / problem or in
case you require any further clarification in the matter.

9.22 Outward and Inward Reject in Clearing - handling

Inward Reject– is cheque presented by us in outward clearing and returned by drawee bank
Outward Reject - is cheque presented to us in inward clearing and to be returned by us
Any cheque return, whether Outward or Inward, should be returned through the Inward Clearing
only by giving ‘O’ for outward reject or “I” for inward reject. This has to be done meticulously
because of the following reasons
1. Debiting of charges by the system
2. In case of Govt. Business, if the cheque is not marked returned as above, then the GBM module
treats the cheque as passed and funds would be transferred to Govt. The Inward Reject cheques
are to be physically returned to the respective bank and the entries of credit and debit would be
reflected in the statement of account of the customer. The Outward Reject, the customer account
would be debited and funds blocked. This blocking would be released once the Inward Clearing
Zone is Posted. The Outward Reject needs to be entered before generalization of the outward
clearing Zone.
3. While returning the Outward Rejects, ‘O’ would be entered in the Reject field and <F6> key is
pressed. This would open one more screen, wherein the details of ‘Presenting Sort Code’ which
is available on the MICR band of the cheque (eg. For SBI Andheri West sort code would be
400002003 – where 400 is the city code, 002 is the Bank Code and 003 is the branch Code).
Then the user is also expected to enter ‘Pres Bank/Branch Code’ would be entered. Here Bank
Code would be 002 and branch code would be 400003 (city+branch code). If it is Home
Clearing, then Bank code would be 013 & branch code would be Reconciliation Code only. Note
in ‘Presenting Sort Code’ in case of Home Clearing would be same as per MICR Band Code.
Then press <F6>. Here the reason Code for cheque return would be entered. Then press <F4> to
view or modify the cheque return charges. Press <F4> and then <F10> to complete the activity.
4. While returning the Inward Reject, ‘I’ would be entered in the Reject field and <F6> pressed.
This would open one more screen, wherein the details of ‘Presenting Sort Code’ which is
available on the backside of the cheque or arrive it from the Crossing stamp of the presenting
bank. Same is the case with ‘Pres Bank/Branch Code’. Same is the case with Home clearing
cheques as above. Press <F6> and enter the reason code and press <F4> to view/modify charges.
Press <F4> and press <F10> to complete the activity.
5. Handling of ‘Payable at Par’ Instruments in ‘Outward Clearing’

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6. The City Code mentioned on the ‘Payable at Par Instruments’ will be the city-code of Issuing
Branch. When the same is to be presented in outward clearing (from a different city other than
issuing branch city), the Branch Sort code (which is entered in OCTM Menu), the city code
portion should be of the local presenting branch city code. E.g. If a ‘Payable at Par’ instrument
issued by a branch of SBI in New Delhi and it is to be presented in Mumbai from one of our
Branch in outward clearing, the following code need to be given
400 002 001
Here 400 is the local city code of Mumbai
002 is the Bank code of SBI
001 is the Service branch of SBI –
7. All payable at par instruments issued at different city (i.e. other than presenting city) of other
banks should be presented to the service branch of the bank. If the instrument is to be presented
in local clearing (i.e. the issuing branch and presenting branch is in same city the actual Branch
Sort Code should be given).

9.23 Uploading of Inward Clearing from a centralized location for local clearing branches.
The Inward Clearing at MICR centre generates a file for the respective Banks and gives to the
Bank for further processing. Therefore this file is available at local service branch at MICR
centre early in the morning. Presently this file is not being used. We, therefore, propose to post
the Inward Clearing at such centres from the Service Branch, if in Finacle or local Finacle
branch. The exact date would be conveyed separately,

However the following assumptions are made.

a. New cheque Books issued have been properly entered in the customer account.
b. Cheque Books of proper transaction type are issued to customers. Savings account cheque
books are not issued to Current Accounts and vice-versa.
c. The cheque leaf presented in clearing is in unpaid status in the account database.

Following are the Limitations

The Uploading will take place in Inward Clearing Zone Number ‘06’ only. Hence the
branches should not use this zone for any other purpose.
a. Upload facility is currently available for transaction types
i. ‘10’ – Savings
ii. ‘11’ – Current and Overdraft
iii. ‘12’ – Pay Order or Bankers Cheques
iv. ‘13’ – Cash Credit
v. ‘16’ – Demand Draft

b. If the same cheque number is issued to more than one account under the same transaction type
(as above) or the same cheque number is available in the same account under two different
series, the branches to manually enter the correct account number.
c. The beneficiary name has to be manually entered for each instrument other than Pay Order.
d. If the Pay Order is marked as paid, mark it return through CLGREC a/c.
e. The Date of Instrument would be moved as the ‘BOD’ date.

Procedure at Local branches

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1. Enter the Bar amount received from clearing house / service branches by modifying bar
number and date and number of instruments for the zone number ‘06’ and total amount
through ‘MICZ’ using modify option ‘M’.
2. Run the validation report through ‘MICZ’ option ‘V’. The report will be generated at
Background. The report can be viewed or printed using Background menu. The report gives
all the exceptions, if any in the account where the posting has taken place.
3. By using ‘M’ option in ICTM, the user has to modify the details like ‘Beneficiary Name’,
‘Date of Instrument’ for all the instruments. The User can also grant TOD by pressing <F7>.
If the user has to return the instrument, he can choose reject option ‘I’ and press <F6>.

9.24 Bank's account with Reserve Bank of India, Bank of India or Other Banks

Branches should not open an account with another bank without the prior approval of
Controlling Office. Head Office does not ordinarily wish that Branches should maintain an
account with any bank other than the Reserve Bank of India or the Bank of India. If Branches
desire to maintain accounts with other banks, they should write to Regional Office giving
reasons there for.

Arrangement should be made to obtain a statement of account at regular intervals from banks
with which the Branch maintains operative accounts. It should be arranged that the statement of
account must be delivered direct to the Manager who should personally scrutinise each entry of
the statement. He should particularly see that the dates of entries for cash transactions in the
statement always agree with the dates in the ledger account of the bank maintained by the
Branch.

Reconciliation of the Branch account with the Reserve Bank of India/Bank of India or other
Bank must be made on regular intervals. The Manager should take out reconciliations on surprise
dates. In addition, Branches must reconcile their accounts with the Reserve Bank of India/State
Bank of India or other bank(s) as on the last day of each month. The reconciliation should be
made in the ledger account or in a special Reconciliation Book, but not on loose sheets of paper.
The reconciliation should be checked and signed by the Manager and the cashier. If the entries in
the statement of accounts are wrong or subject to query in any way, they must be followed up
immediately and satisfactory explanations obtained.

The Manager must satisfy himself about the correctness of the Branch accounts with other banks
by periodically obtaining certificates of balance of such accounts.

9.25 Deposit of Cash and Cheques in Accounts with Other Banks

A remittance in cash for credit of the Branch account with another bank should be made after the
relative debit voucher is passed by the cashier and the Manager. The Official who carries the
cash remittance should sign on the back of the debit voucher in token of his having verified and
received cash. He should be accompanied by an Office Attendant or an armed guard or as the
case may be.

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The paying-in-slip for cash/cheques remitted for deposit with another bank should be signed on
both the portions by the cashier and initialled by the Manager. The debit voucher evidencing the
remittance of cash/cheques for credit of the Branch account with another bank must be kept by
the Manager with himself and released for posting in the Cash Book only after he has verified it
with the receipted counterfoil of the relative paying-in-slip. The Manager should check and
initial the debit entry in the ledger account.

The Branch Manager should ensure about lodgement of cash with the Reserve Bank of India,
Bank of India or other Bank by verifying the counterfoil of the relative paying-in-slip
immediately on return of the cashier to the Branch or latest by evening at the time of checking
cash.

9.26 Withdrawal of Cash from Accounts with Other Banks

The cheque book of the Reserve Bank of India/Bank of India or other Bank must remain in the
joint custody of the Branch Manager or the Manager and the cashier of the Branch. Before
drawing a cheque on the Branch account with the Reserve Bank of India/Bank of India or other
Bank, a credit voucher for the amount must be prepared by the Cashier and signed in full by both
the cashier and the Manager. This credit voucher should be retained by the Manager till cash is
brought from the Reserve Bank of India/Bank of India or other Bank. The cheque should be
signed jointly by the Manager and the cashier, as authorised.

The correct practice for drawing a cheque for withdrawal of cash from the Branch account with
the Reserve Bank of India/Bank of India or other Bank is to draw it payable to "Ourselves or
order" and to discharge it on the reverse by two authorised officials jointly. The cheque(s) duly
discharged should be accompanied by a covering memorandum addressed to the drawee bank
requesting to pay the amount of the cheque(s) to the deputed staff named therein. The
Memorandum should be signed by the Branch Manager and the signature of the member of the
staff to be deputed should be appended to the memorandum.

Cash should be brought by authorized official who should be accompanied by an Office

Attendant or an armed guard or as the case may be.

9.27 Account with other Banks

Banks are not allowed to issue cheques on their account with other Banks in favour of "third
parties." Such accounts are maintained for the use of the Bank's own requirements. If, in a
particular case it becomes necessary to issue such cheques, Branches should advise the
concerned Bank by a separate letter as in the case of issue of a demand draft on a correspondent
bank.

9.28 Monthly Surprise Check of Branch Cash

The joint Custodian of cash should make a surprise check of the entire cash held in the Till/Vault
periodically, but at least once a month. A remark to this effect should be made in the Daily Cash
Balance Book under the signature of the Joint Custodian.

Checking ought to be a surprise and should not be known or anticipated by the cashier or his
assistants.
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Currency notes of large denominations should be counted first. If there are more than 12 packets
of currency notes of Rs. 100/- denomination (a packet contains 100 pieces of currency notes), the
number of packets should be counted; thereafter all the pieces of currency notes of about six
packets should be counted; a similar procedure should be adopted for the packets of currency
notes containing denominations of less than Rs. 100/-. All odd lots of currency notes should also
be counted.

All bags of coins should be opened and where there are more than six bags of rupees (each bag
purporting to contain Rs. 2,000/- the entire contents of at least three bags out of six should be
counted. All bags containing less than Rs. 2,000/- should be opened, emptied and the contents
counted. Small coins should be taken out from the bags and examined; the contents of some bags
should be counted. It is important to ensure that the currency notes are correctly listed in the
Daily Cash Balance Book. The number of pieces of each denomination should be entered in the
space provided. If this is not done properly, an explanation should be called for from the cashier
and if the explanation is not found satisfactory, the matter be reported to Regional Office / Head
Office.

When counting currency notes and coins, the checking officer should be able to detect
counterfeit notes and coins. If any chit, I.O.U., or other memorandum is found in cash, a report
should be made to Regional Office / Head Office.

The above suggestions are in the nature of minimum requirements; they are not to be regarded
either as curtailment of the responsibilities or liability of the checking officer counting cash or
preventing him (the checking officer) from exercising his general discretion.

It is of importance that the surprise checking of cash should not interfere with the course of
Bank's business and the customers should not be put to inconvenience. Cash may be checked in
the morning before the commencement of business or in the evening after the close of business
(after the daily Cash Balance Book has been written and signed by the cashier).

Cash on hand must be checked by the Manager at the close of business of the last working day of
each half-year and in case of any irregularity, a report of the checking should be sent to Regional
Office /Head Office.

9.29 Verification by Officers Unconnected with Custody of Cash

Apart from the daily check of cash and surprise check of cash at least once a month, the entire
cash in a Branch Till/Vault should be verified once in six months by an official unconnected
with custody of cash. The Controlling Authority should draw up a programme of verification of
cash under this system and ensure that it is executed properly.

9.30 Safe Custody of Keys of Safes/Strong Room etc.

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All employees of the Bank entrusted with the Bank's keys should take proper care of the keys at
all times, ensure that the principle of "Dual Control" is always maintained and that the keys are
not handed over or made accessible to any unauthorised person.

The purpose of maintaining dual control of the cash safe keys is that no official singly can open
the cash safe during the working hours. When the official entrusted with the Bank's keys desires
to proceed on leave, he needs to hand over the charge of keys held by him to another authorised
official by making appropriate entries in the daily cash balance book and in the pass book
maintained for recording the number of keys handed over/taken over with date and the signatures
of the concerned officials. However, under the emergent circumstances, when the concerned
official/authorised clerk holding charge of the keys of the cash safe is unable to attend the office
for the reasons beyond his control, the keys of the cash safe should be handed over in the
following manner:
(a) The employee should contact the Manager/supervising official on telephone at the latter's
residence or office and requests him to depute an authorised staff member to his place for
collecting keys in person. The employee should hand over the keys to this authorised staff
member in a sealed cover, with signature put across the sealed portion as a precautionary
measure. or
(b) The employee should send the keys of the cash safe in a sealed cover with signatures put
across the sealed portion as a precautionary measure through the spouse or the nearest blood
relative.
The Branch Manager/ Manager while accepting the keys of the Cash safe received from the
employee concerned in absentia should open the sealed cover in the presence of cashier and
make a separate note in the Daily Cash Balance Book and the pass book as stated above.

The employees should have Bank's keys attached to their person by means of a key chain and the
keys should be preferably carried in a closed wallet which may be purchased at the Bank's cost at
a reasonable price to the debit of Profit & Loss Account - Miscellaneous Charges. Due care
should be taken to supply key pouches / chains to the concerned staff members and also to
replace regularly old key pouches/chains, etc.

Serious notice will be taken of lapses in this regard. These are elementary precautions and must
be taken without exception. Any incident of loss of keys should be reported immediately to the
concerned department at Regional Office / Head Office as well as to Personnel Department,
Head Office giving the full facts to enable Head Office to assess the degree of negligence of the
concerned staff member(s) and deal with it appropriately.

It is desirable to put into use periodically the duplicate keys; it is possible that while the keys in
use would definitely operate the locks, the unused keys may not. Due to constant use, the keys as
well as levers of locks wear out and it may happen that while the keys in use would definitely
operate the locks the duplicate set of keys when taken out in emergent circumstances may not
operate. It is, therefore, necessary to interchange the two sets of keys once every year in turn, so
that, both sets of keys undergo similar wearing out process.

9.31 Duplicate Keys of Safes

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Duplicate keys of safes - of cash and securities, safe deposit vault and strong room - must under
no circumstances be left in the Branch safes themselves. They should be lodged in safe custody
with another bank/Branch in the following manner even before the Cash Safe, Safe Deposit
Vault and/or Strong Room are put into use.
(a) At centres where Bank has more than one Branch
(i) Instructions for the Main Branch

The duplicate keys should be lodged in safe custody with the local office of the Bank of India or
of a nationalised bank whichever is nearest to the Main Branch. If the local office of any other
non-nationalised bank happens to be nearest and the Main Branch finds it more convenient to
lodge the duplicate keys with such non-nationalised bank, the Main Branch could do so after
obtaining prior approval of the higher Controlling Authority.

(ii) Instructions for Branches other than the Main Branch

The duplicate keys should ordinarily be lodged with the Main Branch of the Bank at the District /
Centre. However, if the Main Branch is situated at a distance and if it is extremely inconvenient
to lodge the keys at the Main Branch, the duplicate keys may be lodged, with the prior approval
of the Controlling Authority, with any nearest Branch of the Bank. Controlling Authorities will
grant such permission sparingly, so as to restrict this facility to the minimum.
Note: In the cases covered under sub-paragraph (a) (i) and (ii) above, it is understood that
the local office of the other bank with which the duplicate keys are lodged affords the necessary
facilities for safe - keeping of the keys, such as fire proof safe, dual control over custody, etc.

The purpose of lodging duplicate keys with another bank/institution or Branch is to ensure not
only safety of the keys but also to afford their easy access/availability if the originals are lost or
are not on hand. It is, therefore, necessary to select with care and caution the depository for the
duplicate keys, keeping our requirements in mind.

9.32 Preparation of Packets of Duplicate Keys

The duplicate keys should be kept in two separate cloth-lined, sealed packets: one packet
containing the duplicate cash safe keys and the other packet containing the duplicate keys of the
"other safes". Two lists of keys (with key numbers) should be prepared (in duplicate) and should
be signed:
(a) in the case of duplicate cash safe keys: by the Branch Manager and the cashier
and
(b) in the case of duplicate keys of the other safes : by two officials, one of whom should be
the Branch Manager.

The original lists and relevant duplicate keys should be placed in the appropriate packets which
should be sealed by sealing wax with the Branch seal in the presence of the persons who signed
the list. The words "Cash Safe Keys" or "Other Keys", as appropriate, should be written in bold
handwriting on the relevant packets. The copies of the lists of keys kept in the packets should be
retained in a file in the custody of the Manager. (At smaller Branches having a common safe for

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cash and securities, there is no need to have two separate packets for duplicate keys of" cash
safe" and "other safes" - all the duplicates should be kept in one sealed packet).
The two sealed packets of duplicate keys should be lodged in the safe custody of the nominated
Branch, as applicable, with the mode of operation of safe custody account as under:
(a) deliverable on the joint signatures of two officials, one of whom should be the Manager
and the other to be the cashier only or in his absence the acting cashier only (in case of sealed
packets containing duplicate cash safe keys);
(b) deliverable on the joint signatures of two officials; one of whom should be the Manager
(in case of sealed packet containing duplicate keys of other safes).

The Main Branch, which receives the sealed packets containing duplicate keys sent with a
representative along with a letter of authority, should issue a Safe Custody Receipt for the
packets. An entry stating "two sealed packets said to contain duplicate keys of "cash safe" and
"other safes" of …………… Branch" should be made in the Safe Custody Register of the Main
Branch and the usual printed Safe Custody Receipt signed by two authorised officers of the Main
Branch should be issued. No entries of the particulars of key numbers should be made in the Safe
Custody Register of the Branch lodging the duplicate keys.

The Safe Custody Receipt issued to the Branch must not be stored in the safes. The intention of
keeping the Safe Custody Receipt outside the safes is to ensure that in the event of the keys of
safes not being available, the Safe Custody Receipt of duplicate keys (kept outside the safes) will
be available to the Branch to collect the duplicate keys.

Noting of the Safe Custody Receipt for duplicate keys lodged with another Branch/Bank should
be made in the Branch records.

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 APPENDIX I

Specimen Ruling for Record of Cash Taken Out from the Till in the Morning and
Returned in the Evening

Date Cash taken Initials of Cash lodged Initials of Cash Initials of

out the Cashier in the Cashier Balance the
Manager /
authorized
Official
Rs. Rs. Rs.

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 APPENDIX II

Procedure to Ensure Maximum Safety of Cash

With a view to strengthening the security arrangement in the Bank particularly in view of
the security risks to the Bank Cash in premises and in transit, the following procedure is evolved
to enable Branches to ensure maximum safety of this asset:
Part I... Cash remittances
Part Il... Cash at counter and movement of
cash from strong room to counter and vice versa.

PART - I
CASH REMITTANCES
i. Cash may be transported in Banks own cash van or in a hired vehicle as may be
considered appropriate by the Management keeping in view the local condition and the law and
order situation.
ii. All remittances exceeding Rs. 50 Lakh should be accompanied by at least two armed
guards.
Explanation
As per the existing instructions, cash can be remitted from one branch to another branch as
follows:
(a) All remittances above Rs. 20 Lakh and upto Rs. 50 Lakh should be accompanied by
at least one armed guard.
(b) For remittances upto Rs. 20 Lakh it may not be necessary to provide an armed guard
escort.
(c) At vulnerable areas, if the need to provide additional security is felt, it may be done at
Management's discretion over and above what has been stipulated above.
(d) At no stage security of cash should be compromised.
Note :
1 . Branch Manager must endeavour to take minimum cash from/to branches, so as to
avoid vulnerability/risks. As a rule, heavy remittances be split and cash carried in piecemeal,
subject to availability of armed guards/escorts and general law and order situation prevailing in
the area.
2. Branch Manager must lodge cash more frequently to avoid accumulation of cash at
branches.
3. If due to unavoidable circumstances cash exceeding Rs. 3 crore is to be transported,
prior permission of the Regional Manager will be necessary. Branch Managers must take all
possible precautions to ensure security of cash and as far as possible local police be contacted to
provide armed escorts for cash remittance.
iii The cash van should be provided with all required security fittings for securing
the cash container to the cash van, etc.
iv. All the doors of the cash van should be locked from within, when the cash van is on the
move.
v. The cash van should be fitted with an alarm system.
vi. When the cash remittances are escorted by 2 armed guards; one of them shall sit by the
side of the driver and the other at the rear, near the cash container along with the carrier of the cash.

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vii. The cash containers to be used for the remittance should be kept ready as soon as it is
decided to transport cash. The locks of the containers should be secured.
viii. Before the strong-room door is opened for taking out cash, it should be ensured that:
A. The main door of the branch is closed and access to all outsiders is barred and it
remains so till the transaction is completed and the strong-room is locked once again;
B. Both the joint custodians are present.
ix. As soon as the custodians enter the strong room, the grille door should be closed.
x. Cash should be taken out of the strong room only after satisfying that there is no
apparent danger.
xi. The driver of the cash van must be ready and seated in the driver's seat inside the van.
xii. The cash should then be carried to the cash van escorted by the second guard, if one is
available and the cash container should be chained down to the body of the vehicle.
xiii. No unauthorised person should be allowed to travel in the cash van. The rear door
must be properly bolted and locked from inside before the van starts moving.
xiv. No outsider should be given a lift in the cash van.
xv. The driver must be instructed to be on his guard against fake accidents, bogus police
officials, unexpected traffic diversions, road blocks and suspicious vehicles following the cash van.
xvi. If the vehicle has to stop for some reason, the inmates of the vehicle should not
entertain or enter into a conversation with any outsider.
xvii. The cash van should be parked as near to the strong room at the receiving branch as
possible.
xviii. When a cash van is not available, a private vehicle may be used, with prior approval of
the Regional Office / Head Office.
xix. Where private vehicles are used, closed vehicles as opposed to open ones, are
preferable.
xx. The precautions applicable to the transportation of cash from strong room to the cash
van (where the Bank's own vehicle is used) will be followed.
xxi. The cash container should be chained to the seat of the vehicle. The vehicle should be
inspected to ascertain that the arrangements for chaining the cash container to the body of the
vehicle are available and that the doors can be locked from inside.
xxii. Wherever possible, an audible alarm should be fitted to the cash container. A whistle
is a recommended alternative.
xxiii. It is preferable to have two persons escorting the cash in all cases where a cash remittance
is sent by a hired vehicle.
xxiv. Stationary vehicles near to the exit of the branch should not be used. Also such vehicles
should not be hired from any particular vendor stand but from different vendors, so that the
robber cannot plan his strategy.
xxv. All other security precautions mentioned above be observed.
xxvi. The cash bag should be strong.
xxvii. Before the cash leaves the branch, the escort should come out of the branch and ensure
that there is nothing unusual and if he is satisfied in this regard, he may signal the person
carrying cash to come out.
xxviii. The escort should not walk along with the person carrying the cash bag. He should walk
behind, at some distance. Preferably, he should be armed or should carry a staff/ lathi.
xxix. Both the carrier and the escort should walk on that side of the road which faces oncoming
traffic. Wherever possible, busy roads and frequented streets should be used.
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xxx. The streets which are noted for very heavy traffic/traffic bottlenecks should be
avoided.

Where hired services are used:

i. If hired services of private agencies are used, the bonafides of the agency should be
checked.
ii. The identity of the driver, in all cases should be established. The license of the driver
should be checked and its number and address noted in the Branch.
iii. It may be ascertained that all the vehicles used by such an agency have appropriate
fittings for chaining the cash container.
xiv. Precise instructions regarding the destination should be conveyed.

General precautions for cash-in-transit:

i. The amount of cash sent from one point to another, should not exceed the limit for
which transit insurance cover has been arranged.
ii. It is preferable to divide large amounts and carry them in separate batches, if
necessary at different times during the day.
iii. Where the transportation of cash between two offices is a regular feature, care should
be taken to ensure that a specific pattern with regard to days, dates, timings, routes, frequency
etc., does not emerge. In other words, the days, dates, timings, routes and the staff should be
changed at regular intervals - as frequently as possible.
iv. Dual keys for the container may be used. Wherever possible, the two keys should be
kept and carried separately by the carrier and the escort respectively.
v. Routes where traffic bottle-necks are a common feature should be avoided.
vi. An advance intimation, either telephonically or by any other means should be sent by
the remitting branch to the receiving branch. In the event of failure to report in time, on the part
of the employees accompanying the cash, immediate follow-up should initiated by the receiving
branch.
vii. Great secrecy should be maintained regarding the despatch of cash remittances.
viii. In sending such information it must be remembered that the culprits may collect
information about remittances by listening to telephone conversations or by clandestinely
reading messages/letters about the remittances. Information regarding remittances must,
therefore, be sent very carefully and if possible through coded message.
ix. Discussions about such remittances should be restricted to those people directly
concerned with the remittances. Also information regarding a remittance may be made known to
the concerned employees immediately before the transport of the remittance. Discussions, if any,
should be held in secure places.
x. Remittances should be sent only during the day time.
xi. The cash and valuables which are to be sent should be ready well before the actual
time of loading. Similarly, the vehicle, the armed escort, the accompanying cashier and the
messenger should be ready well before time.
xii. The driver and the escort must both, be on their guard against fake accidents, bogus
police officials, unexpected traffic diversions, road blocks and suspicious vehicles following the
cash vans.
xiii. In case of doubt/suspicion the remittance should be taken back or the driver should
drive his vehicle into the nearest police station.
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xiv. During civil unrest/riots, turbulence, disturbed conditions, etc., if the remittances have
to pass through affected areas, the remittance may be avoided and if it cannot be avoided
additional security arrangements should be made.
xv. The receiving branch should verify that the persons accompanying the cash are in fact
the representatives deputed by the remitting branch. This can be achieved by a matching of
signatures or, by the use of identity cards.
xvi. The receiving branch should open the parcel in the presence of the joint custodians of
cash at the branch and the employee from the remitting branch accompanying the remittance.
xvii. Any discrepancy found in the remittance should be pointed out at once to the latter and
the signature obtained there for.
xviii. The remittance should be opened in the room in which the safe is located and the
precautions laid down for the opening of the safe, should be strictly followed.
xix. Receipt of the remittance should be acknowledged to the remitting branch with special
urgency.
xx. Guards should not be used as carriers.

PART - II
CASH AT COUNTERS AND MOVEMENT OF CASH FROM STRONG ROOM
TO COUNTER AND VICE VERSA
i. It must be ensured that the amount of cash at the counter, does not exceed the amount
required and prescribed, as per the counter limit.
ii. Dual control must be exercised at all times. If on occasion, one of the joint holders
has for some reason to be away from the branch during banking hours, appropriate arrangements
should be made for the continuance of the dual control.
iii. All withdrawals and lodgements of cash from/into, the cash safe / strong-room must
be undertaken under dual control. Every entry in the Dual Cash Control Book (cash-safe-in and
the cash-safe-out Book) must be authenticated by both the joint holders. Cash must be taken out
of the strong-room on a minimum number of occasions.
iv. The cash safe should be secured each time it is opened.
v. The main door of the branch should be closed and bolted from inside when the cash is
taken out of the strong-room to the counters in the Cash counter and similarly when the cash is
brought back from the counters to the strong-room.
vi. The cashier must invariably bolt and lock the door from inside when he is in the
cabin. Similarly, the cash cabin door must also be locked from outside whenever the cashier goes
out of the cabin even for short periods, so that no unauthorised person can enter the cabin.
vii. The cashier may leave the cash cabin, only after ensuring that both the cash and the
cash cabin are safely locked.
viii. When cash is being handled on the cash counter, it must be ensured that the cash is
not left laying on the table in such a way that it can be reached by a person, by putting a hand in
the window from outside.
ix. No person, whether a member of the staff, or the public should be allowed access to
the cash counter without adequate reason.
x. Enquiries from the public must not be entertained at the cash counter. All such
persons making enquiries should be directed to the enquiry counter/ other officer(s).
xi. Unusually heavy receipts of cash should be transferred to the strong-room at the
earliest opportunity.
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xii. Cash cabins must be enclosed by see-through partition walls. Thick plate glass or
wire-netting of 2.5 cms square, may be used for the purpose. It must be ensured that registers and
other books/records, are not piled against the partition, thereby obstructing the view.
xiii. The doors to the cash counters must be fitted with night latches so that once closed
from within, they cannot be opened from outside operating the keys.
xiv. The cashier's cabin should have a small window at the rear, so that cheques, registers,
etc., can be passed through it without opening the door.
xv. The windows of all cash counters should be provided with sliding flaps which cannot
be opened from outside.
xvi. The height of the cash cage should be adequate to prevent a person standing outside
from reaching the counter level.
xvii. The breadth of the work-table on the cashier's side of the counter should likewise be
such that a person standing outside cannot reach the drawer level.
xviii. The cash counter should have work tables at two levels - one of the same level as the
counter on the customer's side and the second at a lower level where drawers for keeping cash
will be fitted.
xix. The cash drawers should have appropriate locking arrangements.
xx. The cash window should provide space just enough for a hand to pass through.

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 APPENDIX III

Sealing of Currency Notes - Procedure

1. PREPARATION OF PACKETS
(i) All cash received across the counter should be sorted, shroffed and precounted into
packets of 100 pieces by the cashiers. Each of these packets should be wrapped by an appropriate
note Denomination Slip. Cut, defective, torn, mutilated notes should be deposited with the Nodal
/ Main Branches separately and not put in packets of non-issuable notes. The stocks of printed
labels should be handled carefully by the staff concerned so as to prevent its misuse. The
wrapping should be made around the left hand edge of the note packet in such a way that the
note denomination slip covers approximately two-thirds to three-fourths of the length of the note
bunch on the front side and about half of the length of the back side.
(ii) In view of the considerable difficulties faced by the public in opening packets which bear
multiple stapling and the notes getting damaged by repeated multiple stapling and consequently
not being readily accepted in transactions, with the result that the people are put to avoidable
hardship.
(iii) Banks should do away with stapling of currency note packet and instead secure note
packets with paper bands/ polymer bands;
(iv) Banks should sort notes in re-issuable and non-issuable and issue only clean notes to
public. Soiled notes in unstapled condition may be tendered at RBI in inward remittances
through currency chests, through Nodal / Main Branch;
(v) Banks should forthwith stop writing of any kind on water mark window of currency
notes.
(vi) The protective seal should be colourless and transparent. An emblem of the Bank will be
printed on the seal. Seals should be affixed on both the sides (one on each side) of the note
packet
(vii) The cashier preparing the packet should also ensure that the note slip is affixed with
stamps indicating the name of the Branch and the date of preparing the packet.
2. RESPONSIBILITY:
(i) So long as the seals are intact and there is prima facie no evidence to suspect that a packet
has been tampered with, the cashier preparing the packet and the cashier recounting the packet
are responsible for the quality, quantity and the value of the contents in the packet until disposed
of in the course of business, regardless of whether they are held in the same branch or any other
branch.
(ii) If, however, while turning out packets from the Till/Vault to paying cashier, the paying cashier
detects any discernible prima facie evidence of tampering on a packet and if shortages are
discovered in such a packet, the Cashier-in-Charge will be held responsible for the shortages.
The responsibility for shortages in the packets exhibiting signs of their having been tampered
with which if not pointed out by the paying cashier at the time of their being issued to him, will
devolve on him and he will have to make good the loss.

3. REMITTANCE:
(i) While effecting remittance of sealed note packets from one Branch to another, the
Cashier-in Charge of the remitting Branch will ensure that all the packets making up the
remittance are prima facie untampered and all other procedural details pertaining to preparation

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of sealed note packets have been strictly adhered to in respect of each and every packet making
up the remittance.
(ii) Similarly, the Cashier-in-Charge at the receiving Branch should verify that all the sealed
packets making up the remittance are prima facie in order and they bear no evidence of having
been tampered with. He should also verify that the note packets bear the signatures of the
Cashiers, preparing the packet and recounting the same. He should then take them over without
getting them recounted. However, whenever the Cashier-in-Charge of the receiving Branch has
any cause for suspicion, he should get such packets recounted and in the event of any shortages
being detected, he should arrange to send back such packets to the remitting Branch with the
seals and note slips in the conditions they were found in. The note slips of such packets should
also be countersigned on the reverse by the remitting Branch representative who accompanies
the remittance, in token of the packet having been found in a tampered condition by the receiving
Branch. In case, in such a packet no shortage is detected, the Cashier-in-charge or Cashier
Officer at the receiving Branch should arrange to have a fresh packet prepared and recounted as
indicated above in the procedure for preparation of packet.

4. GENERAL INSTRUCTIONS:
(i) In terms of the clean note policy of RBI announced in 2001, currency note should neither
be stitched nor stapled for making into a packet. The notes duly sorted into issuable and non-
issuable ones, should be made into packets of 100 pieces with a polymer or paper band. Rubber
bands should not be used for the purpose of holding the currency notes in packets.
(ii) The paper / polymer bands/seals sufficient for a period of 3-4 months should be indented
at a time as the seals loose effectiveness if they are stored unused for a long time, the shelf-life
being less than a year.
(iii) the note packets should be made into bundles of 10 packets each. Thus each bundle of notes
will have 1000 pieces of currency notes.
(v) non-issuable note bundles should be sealed in a shrink wrapping machine, with the paper
seal of the branch duly filled in, kept inside the bundle, in a such a manner that the details are
visible without opening the bundle. Such bundles may be lodged with RBI through Nodal /
Main Branch.
(vi) Whereas the responsibility of the employees who have prepared and recounted the packet
ceases as soon as the packet is broken by the Cashier, it may happen that a defective note is
detected with a defect which could not have been detected while the packet was intact (if this
defect was on the left hand side of the ring thread). In such an event, the cashier should recover
the amount of the defective note from the Cashier who has prepared the packet. When the packet
pertains to remittance received from some other branch, the Cashier-in-Charge should record this
fact and report to the Branch Manager. Then the defective note shall be returned to remitting
branch along with the relevant note slip, duly countersigned on the reverse by the cashier
detecting the defective note. The remitting branch shall be advised to recover the amount of the
defective note from the concerned cashier preparing the note packet and to remit the same to the
said branch. Such events should also be promptly reported to the controlling authority.
(vii) A record should be kept at each Branch of such instances and Cashiers who detected
defective notes as well as shortages as also that of the cashiers who had prepared and recounted
the packets. In the event of frequent occurrences the name of the Cashier should be probed into.
(viii) Every Cashier-in-Charge should also maintain for reference a systematic record of the
specimen signatures of all the members of the staff who are working in the Cash counter. He
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should also ensure, while taking over newly prepared packets, that the signatures appearing on
the note slips conform to the recorded specimen signature.
(ix) It should be noted very carefully that, so long as the seals are intact and there is no prima
facie evidence on the note packet of any tampering, the Cashier preparing the packet, will be
responsible for the quality, quantity and value of the note packet prepared/examined/recounted
by them. If, however, at a particular branch there are frequent detections of shortages in sealed
note packets bearing no apparent remarks of tampering and there are reasons to suspect foul play,
the matter should be brought to the notice of the controlling authority.
(x) All the Branch Managers should ensure that the revised system and procedure for sealing
of note packets is implemented at their Branches irrespective of whether or not they are required
to send remittance(s) to other Branches.

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 APPENDIX IV

Procedure for Remitting / Lodging Cash

1. The Branch Manager calling for cash should send intimation in writing. Similarly, the Branch
lodging cash should also give suitable intimation to the receiving Branch. Branches should take
precautions to maintain full confidentiality of remittances from security point of view. However,
in emergent circumstances, telephonic requests may also be made, which should be confirmed in
writing immediately thereafter.
2. While lodging cash in branch account with other Banks, the remitting Branch should debit
initially G/L Suspense Account Cash Lodged with - (other Banks as applicable) by using plain
'debit' voucher. The voucher should be signed jointly by the cashier-in-charge of the branch and
the Joint Custodian of Cash as the case may be. The cashier carrying the lodgement will have to
sign on the reverse of the voucher in full for having received the cash for the purpose of
lodgement.The debit in the G/L Suspense Account Cash Lodged with (other Banks as applicable)
should be wiped out on the same day after verification of the counterfoil of paying-in-slip for
cash lodged, duly receipted by other Banks as the case may be by debiting G/L Account (other
Banks as applicable) and crediting G/L Suspense Account Cash Lodged with other Banks (as
applicable).
4. While lodgement / remittance of cash takes place between two branches not served, the
Cash Remitting / Lodging Branch should debit the amount initially to G/L Suspense
Account Cash Lodged with / Remitted to ……………….branch by using debit voucher
giving full particulars of the branch to which the cash is remitted/lodged, date and
reference number of written / telephonic request from the ……………….Receiving
Branch (as applicable), denomination of cash etc. The voucher should be signed jointly
by the Cashier-in-charge of the Branch and the Joint Custodian of Cash as the case may
be. The cashier who carries the lodgement or the cashier of the Receiving Branch if he
has been deputed to receive cash from the Remitting Branch will sign in full on the
reverse of the Suspense debit voucher for having received the cash for the purpose. The
transactions of cash remittance between branches or between branches and currency or
vice-versa should be routed through the CASHTR Menu and no credit or debit notes
should be drawn for the purpose.
(10) (A) Precautions to be taken at the Remitting Branch
(i) The Cash Remitting Branch should intimate in writing the Cash Receiving Branch about
the cash remittance. Branches should incorporate in the written communication to the Cash
Receiving Branch, the following particulars:
a. Date of cash remittance
b. Amount of cash remittance,
c. Denomination-wise break-up of cash remitted
Denomination No. Amount No. of No. of loose Total No. of
(Rs.) of packets Of (Rs.) Bundles packets of packets
Notes each 100 notes containing 100
containing each notes.
10 Packets
1.
2.

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 3.
4.
Total

The letter containing the above particulars should be sent in duplicate along with the cash
remittance to the Cash Receiving Branch with a request to return the duplicate with the written
confirmation of the Cash Receiving Branch for having received the cash remitted under the
signature of the cashier.
The cash to be lodged should be neatly tied denomination-wise in bundles of ten packets each.
As far as possible, loose packets (i.e. where the number of packets are less than ten and hence
cannot be made into a bundle of ten packets) should not be sent for lodgement. Exceptions may
be made by branches with small cash retention limits and in case of high denomination notes as
well as packets of soiled notes/non-issuable notes, etc.
(B) At the Receiving Branch:
(i) The cashier of Cash Remitting Branch, on reaching the Cash Receiving Branch,
should hand over the letter in duplicate advising the cash remittance, to the Cashier of the Cash
Receiving Branch.
(ii) It is the primary responsibility of the cashier of the Cash Remitting Branch to hand
over the cash as per denominations indicated in the letter, to the Cashier of the Cash Receiving
Branch. To ensure this, the Cashier of the Cash Remitting Branch should first hand over the
loose packets of higher denominations, if any, followed by the tied bundles to the Cashier of the
Cash Receiving Branch.
(iii)The Cashier of the Cash Receiving Branch should then acknowledge in writing under
his signature, receipt of the cash as per the denominations on the duplicate of the letter received
from the Cash Remitting Branch.
The procedure in para (10) is to be followed when the cashier of the Cash Remitting Branch goes
to the Cash Receiving Branch for lodging the cash. There may be occasions when the cashier of
the Cash Receiving Branch is required to go to the Cash Remitting Branch for taking delivery of
the Cash. A similar procedure to that enumerated above should be followed in such cases also.
Needless to add that in such cases the CASHTR Menu will be used.

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 9.33 PROCEDURAL GUIDELINES FOR CHEQUE TRUNCATION SYSTEM (CTS)

9.33.1 Procedural Guidelines for Grid Based Cheque Truncation System (CTS)

RBI implemented cheque truncation project on a pilot basis in the National Capital Region, New
Delhi on February 01, 2008. CTS was fully operationalized in the National Capital Region
(NCR), New Delhi on July 01, 2009. Subsequently, RBI entrusted the CTS operations at New
Delhi to National Payments Corporation of India (NPCI), w.e.f., December 10, 2013 and
mandated them to implement the Grid-based Cheque Truncation System in the Northern Region
at New Delhi. Grid means the sum total of geographical jurisdiction of 21 MICR centres in the
states/UT of Bihar, Chandigarh, Delhi, Haryana, Himachal Pradesh, Jammu & Kashmir,
Jharkhand, Punjab, Rajasthan, Uttarakhand and Uttar Pradesh. Grid may be expanded as decided
by RBI from time to time.

In the grid scenario, NPCI will be submitting session wise settlement files to RBI in a specified
format provided by RBI.

9.33.2 PRESERVATION OF RECORDS-PAID CHEQUES AND IMAGES OF PAID

CHEQUES
In traditional/legacy system, paid cheques were to be preserved for TEN years by paying bank
as per legal/statutory requirement as mandated by RBI. However, in CTS scenario, physical
paid cheques/instruments as also the images sent to the paying bank would have to be
preserved for TEN years by the presenting bank instead of the paying bank. The presenting
Bank shall be required to provide copy of the cheques or image of the Cheque to the
Drawee Bank in case the same is required by them for any reason.

9.33.3 PROCEDURES FOR THE PRESENTING BANK

The presenting bank should observe all precautions which a prudent banker does under normal
circumstances, e.g.:
i Check the apparent tenure of the instrument
ii Physical feel of the instrument
iii Any tampering visible to the naked eye with reasonable care, etc.
iv Examine the instrument under UV lamp and look for bank’s logo in ultra violet ink to
establish the genuineness of cheque. In case the bank’s logo is not visible under UV
lamp, the cheque should be returned to the presenting branch. UV lamps should be
provided to branches so that branches may do an initial screening of cheques before
sending these for clearing
v Branches should make sure that the payees name written on the cheque should match
exactly with the name written on the cheque else the cheque will be returned.
vi Branches are not allowed for collection of cheques in MBB account or in any other
account other than payee’s account except for loan accounts. In case, the branch wants
the collection of cheque in MBB account or in any other account, they should specifically
provide a valid reason to the respective service branch in their letter head.

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The Presenting bank takes full responsibility for collecting on behalf of the intended payee
(KYC compliant account) and exercises due diligence as per the amended Negotiable
Instruments Act.

The instruments drawn on self (i.e. on our bank) should be segregated from other
instruments. The instrument drawn on our bank should be settled internally as a transfer
instrument. Similarly, the presenting bank should also segregate instruments which are being
re-presented and also those instruments which are required to be sent physically to the drawee
banks (i.e Paper to Follow instruments e.g. Govt. Cheques etc.), as these require separate
process of handling. The paper to follow instruments would be settled only in the local
clearing house on which they are drawn and would not form a part of the CTS clearing.

Special crossing stamp should be prepared which will have Bank’s Name + MICR code of
the branch only. This stamp should be affixed on the instrument in such a way that it does
not obliterate / cover any material portion of the cheque. Therefore, special care should be
taken while affixing the stamp. This is required to enable the drawee bank to process their
inwards without any undue problem on this account.

Each image shall have an Image Quality Analysis (IQA) indicator tag indicating the outcome of
the IQA test carried out by the capture system.

PROCESS FLOW

9.33.4 CTS TIMING24

The CTS is capable of supporting different types of clearing. Each type of clearing will have a
separate clearing window known as clearing session. The separate clearing sessions for CTS-
2010 standard instruments and non-CTS-2010 standard instruments were introduced w.e.f.
January 1, 2014 as per RBI circular DPSS.CO.CHD.No./133/04.07.05/ 2013-14 dated July 16,
2013. The clearing timings for these sessions are given below:

Northern Grid (New Delhi)

Session Type Monday-Saturday
Presentation
CTS 2010 Instruments 15:30 hrs to 19:30 hrs
Returns (on the next working day/value date)
CTS 2010 Instruments Till 14:30 hrs
Note:
• P2F session timings: 20:30hrs to 21:00hrs (across all erstwhile MICR locations).
• P2F session timings at non-MICR centers will be decided by NPCI depending on local convenience.
In terms of circular ND.DPSS.No.202/01.05.013/2015-16 dated September 01, 2015, the second and
fourth Saturdays of every month are holiday for all banks in India, with effect from September 1,
2015. Accordingly, the clearing operations under Bankers’ Clearing House at New Delhi (BCHND)
will not be operated on the second and fourth Saturdays and full working day schedule shall be adhered
to on the remaining Saturdays of every month.

24
Bankers’ Clearing House at New Delhi (BCHND) Procedural Guidelines for Grid-based Cheque Truncation System (CTS) –
Version 2.0
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The details of the clearing sessions shall be worked out by the Standing Committee and
communicated to member banks by the Clearing House from time to time.

After closure of the prescribed clearing window, the Clearing House shall arrive at the net
settlement position for each bank. This is based on all the instruments that have been
accepted by the Clearing House for arriving at the net settlement position.

9.33.5 OUTWARD CLEARING:

AT BRANCH:

1. The cheques drawn on Aryavart Bank should be segregated from the cheques received
for clearing and settled internally and not presented in CTS clearing. Clearing Host
Interface (CHI) - the system installed at the Clearing Settlement Centre (in this case,
Service Branch) is configured to reject On-Us items.
2. Paper to follow instruments like Government Cheques etc. will be segregated at this
point and have to be sent physically to Hub/Service branch for presentation in P2F
session.
3. Branch will enter details of the clearing instruments in Outward Clearing Menu and
will verify the same.
4. Physical instruments will then be sent to the Service Branch for further
processing.
5. Branch should keep a record of number of instruments sent to Service Branch.
6. The above stated activities are also being performed by Service Branch as per
current practices and convenience.

AT SERVICE BRANCH:

1. Once the verification of the instruments has been completed by the branch / service
branch, the concerned officer at service branch has to generate the RC file from
FINACLE for uploading in CTS s. In case the verified lots are small, a continuous flow
of instruments for scanning can be ensured. The scanning activity should be
continuous so that all the instruments which are entered and verified in FINACLE are
scanned and submitted to NPCI for clearing on the same day. This will ensure that
no clearing lots which are entered in FINACLE are pending for scanning activity.
2. After scanning is completed, the concerned operator has to verify that the number of
Instruments scanned with the total amount tallies with the number of instruments and
amount entered in finacle. After creating a batch, operator has to perform reject repairs
and batch balancing to ready the files for creation, uploading and processing.
3. The files will then be created, uploaded and processed which will result in
transmitting the data to clearing houses.
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 4. If the cheque that has been scanned and that bank do not participate in CTS then that
cheque has to be deleted in CTS and in FINACLE also by using TROFSET menu.
In this you have to open next day’s zone, transfer that cheque and then delete cheque
for that bank and send for normal clearing process.
5. The batch instruments and amount should tally with FINACLE instruments and
amount.
6. Reconciliation will be the responsibility of corresponding service branch.
7. The Service Branch that has captured the image of the cheque/instrument should
ensure that the scanner is printing a single line endorsement on the back of the
cheque/ instrument, which shall be the unique identifier for the instrument. The
printing of endorsement implies that the collecting bank’s cheque/instrument
(presenting bank) undertakes –

i. to credit the payee’s account on realization of the proceeds of the

instrument,
ii. that the instrument deposited is a genuine one, and,
iii. That it is being collected for a bona fide customer.

8. Paper to follow instruments like Government Cheques etc. will be segregated (in case
Branches have overlooked any such instruments during doing segregation) at this
point for presentation in clearing. The instruments received from branches for
representation or asked by drawee bank to be represented and retained for the same
purpose and being re-presented will have to be sent physically to P2F session.
9. The physical instruments of outward clearing will be retained at the presenting
branch i.e. local Service Branch concerned for TEN years period as per statutory
requirements.

9.33.6 INWARD CLEARING:

1. Inward images and data file will be received by Service Branch from RBI/NPCI.
2. All cheques have to be uploaded into Finacle including both DD and NON DD.
3. The total count of instruments and amount received in CTS for Inward Clearing should
be tallied with total count of instruments and amount fed into Finacle.
4. Officers will start verification of collected instruments and will decide either to pass the
instrument or mark the same for return.
5. All high value cheques i.e. cheques of more than Rs 100000/- (One Lakh) need to be
confirmed by making a phone call/SMS to the customer. In case customer’s mobile
number is not present in Finacle, the cheque should not be passed. In those cases
where the mobile number is present but customer is not receiving the call or
customer’s mobile number is not reachable and customer could not be contacted for
any such reason (atleast two attempts must be made to contact the customer with a
reasonable time gap before deciding that the customer cannot be contacted), the
cheque should not be passed. Branches should ensure that all accounts in which a
cheque book is issued have mobile numbers updated in them.
6. Branches should ensure that only latest signature card is referred while verifying
signature. In case of joint account if an updated signature card is uploaded, it should
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 contain signatures of all the account holders to avoid confusion created by referring to
multiple signature cards.

OUTWARD RETURNS (INWARD REJECTS)

1. Once all instruments are verified including returns, we need to generate a return file
in Finacle with menu CTSRTN.
2. We need to upload the return file generated above in CTS system to mark the instruments
which are returned in Finacle.
3. Return Reason Codes have been provided ranging from 1 to 99 by the Clearing House.
4. The Outward Returns (Returns of the Inward Clearing) are actually a part of the
Inward Clearing and are included in the figures of Inward Clearing.
5. Total instruments marked as return in CHI have to be tallied with the
instruments marked return in finacle.

INWARD RETURNS (OUTWARD REJECTS)

1. On receipt of the Inward Returns (Returns of the Outward Clearing), the same
will be entered in Finacle.
2. The Return Memo will be printed at the service branch where physical instruments are
preserved and it will be attached to the returned instrument before returning the same to the
customer preferably within 48 to 72 hours by the fastest and safest mode.
3. A record of cheques returned to the customers must be maintained at the Service
Branch from where the physical returned cheques with Return Memo is sent back to the
customers.

9.33.7 RECONCILIATION

INWARD CLEARING
After closing Inward zones and tallying the amount with presented instrument we need to
settle the credited amount in Inward Clearing Account
(00980CTSIW001) with Mirror Account (00010CABOI003) as follows:

DR. 00980CTSIW001
CR. 00010CABOI003

This will be routed through MBB ACCOUNT (009800200000034).

OUTWARD RETURNS (INWARD REJECTS)

Once return file will get uploaded in CHI Interface, and all get positive acknowledgement.
Total number of instruments and amount should be tallied with instruments marked in
FINACLE.

After total count and amount is tallied we need to settle Clearing Difference Account
(XXXXXCLGREC001) with Mirror Account (XXXXXCABOI003) as follows –

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 DR. XXXXXCABOI003
CR. XXXXXCLGREC001
This will be routed through MBB ACCOUNT (XXXXX200000034).

OUTWARD CLEARING
1. After presenting all Outward Instruments through CHI interface, we need to make
sure that total number of instruments and amount should be tallied with
instruments fed into FINACLE.
2. We need to Suspend and Release Outward Zones in order to reflect fund in “Funds in
CLG” of a particular account to which it relates.
3. Collective amount of all the instruments presented will be debited from Outward
Clearing Account (XXXXXCTSOW001) and Customer’s Account will be credited
respectively.
4. Once the amount started reflecting in ledger we will settle Outward Clearing Account
(XXXXXCTSOW001) with Mirror Account(XXXXXCABOI003) as follows:

DR. XXXXXCABOI003
CR. XXXXXCTSOW001
This will be routed through MBB ACCOUNT (XXXXX0200000034).

INWARD RETURNS (OUTWARD REJECTS)

After total number of instruments and amount is tallied with the Inward return report
received from RBI, We need to settle Inward Clearing Account (XXXXXCTSIW001) with
Mirror Account (XXXXXCABOI003) as follows –

DR. XXXXXCTSIW001
CR. XXXXXCABOI003
This will be routed through MBB ACCOUNT (XXXXX0200000034).

Regularization of Outward Clearing Zone has to be done only after the Inward Returns
(outward rejects) are marked in FINACLE and amount is debited from respective customer’s
account.
(XXXXX–
Sol_id)

CHARGES
1. A cheque return charge will be charged from the customers for cheques that are
returned in inward and outward clearing which will be as follows25:
 For cheques upto Rs 100000/- (One Lac) – Rs 250 + taxes as applicable from
time to time
 For cheques greater than Rs 100000/-(One lac) and upto Rs 10000000 (One
crore)– Rs 500 + taxes as applicable from time to time
 For cheques above Rs 10000000/- (One crore) - Rs 750 + taxes as applicable

25
The applicable charges pertain to current charges and this is subject to revision. Please take reference of current
applicable rate of return charges as per Bank’s Circular.
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 from time to time
 In case of reason code 88 – “Other reasons (Please specify)” it will be at the
discretion of service branch to decide whether to deduct the charges or not
as it may vary from case to case.

 Cheque return charges will not be waived for staff in inward c l earin g
and an explanation can be called from the concerned staff to discourage
such practices. The family members of staff will be required to pay cheque
return charges. In case of outward clearing charges will not be applicable for
staff.

9.33.8 DISPUTE MANAGEMENT

1. Due to the receipt / transmission of the images along with the data file, the
instances of the Cheques Listed but not Delivered and Delivered but not Listed are
automatically eliminated.
2. The physical instruments to be presented in Outward Clearing are to be
preserved at the respective Service branch i.e. truncation point.
3. For Outward Rejects, the Return Memo will be printed by respective service
branch, the truncation point.
4. In Inward Clearing, if there is a difference between the amount of the
instrument and the amount in the data file:
i If the cheque is returned based on the amount in the data file, there will be no
issue.
ii In case the cheque is passed with the amount of the instrument, clearing will not be
balanced. In this case, Service Branch and respective service branch representative
sitting at CTS Centre, will take up the matter for claiming or paying the difference
amount as the case may be, from or to RBI/ NPCI.
iii In case the image of inward clearing instrument is required by the branch in the
grid, the respective service branch representative of the city concerned, sitting
at CTS centre will download the image concerned and mail it to the branch
requiring the image for confirmation.

5. It will be the primary responsibility of Service Branch to ensure that total clearing
pertaining to CTS are balanced and reconciled on a day to day basis.

6. Internal Control reports should be generated at the end of the day to effectively
reconcile the presentation made / received and the credit / debit received from the
CHI.

9.33.9 MISCELLANEOUS IMPORTANT POINTS

1. Each bank is required to conduct annual internal audit of itself (or of outsourced
agents) in order to comply with the CTS Procedural Guidelines and submit a report to
NPCI which would be shared with RBI.
2. Settlement related activity will be undertaken by RBI only. NPCI will be only
submitting session-wise settlement files to RBI in a specified format provided by RBI.
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 3. The present legal requirement for preservation of physical paid cheques is TEN
years as mandated by RBI by the presenting bank.
4. In case of regional holidays, the grid system has been designed to handle different
state holidays.
5. Handling of counter presentation – to be handled manually.
6. Paper to follow instruments will be handled locally i.e. the presenting bank and the
paying bank should be in the same city for exchange of Paper to Follow (P2F)
instrument. A record of instruments exchanged under P2F shall be maintained by both
the banks, in order to have appropriate control over the movement of paper instruments.
The paying bank shall retain and preserve the physical instrument after making the
payment thereof.

9.33.10 PROCESS FLOW IN FINACLE

OUTWARD CLEARING:
1. There will be separate Outward clearing zones centre-wise for CTS.
2. The hubs / branches/ service branch will open outward clearing zone. They will enter
the outward clearing in the same zone.
3. The respective hub / branch/ service branch will enter / upload outward clearing
and verify the instruments in outward clearing and suspend the zone. The respective
centre should tally the total of the outward clearing sent with the report from
FINACLE.
4. Service Branch will upload the data through CHI.
5. Service Branch will also upload the data pertaining to clearing branches through CHI.
6. Uploaded batch figure should tally with the clearing figures of individual center and the
total should tally with the clearing figures of all the centers put together. This has to be
ensured by Service Branch.
7. Release of the i nst rum ent s (i.e. credit t o account) will be done by the
controlling branch i.e. service branch.
8. Service Branch will release and regularize the zone as follows –

i. Menu Option – MCLZOH

ii. S – Suspension of Outward Clearing Zone
iii. R – Release of Outward Clearing Zone
iv. G – Regularize of Outward Clearing Zone

9. Regularization of the outward clearing zones will be done by Service branch.

10. Service branch will reconcile debit account (00980CTSOW001) wi t h the outward
clearing presented by them through CHI for respective centers.

INWARD CLEARING
1. Service Branch will pass the voucher for the total amount of Inward Clearing received
from RBI, by debiting Service Branch Inward Clearing Account (00980CTSIW001)
and crediting settlement account i.e.(00010CABOI003)
2. Service Branch will open the Inward Clearing zones, through menu option MICZ.
3. File will be transferred through FILETR menu option.
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 4. Speed clearing, Dividend Warrants, DD and national clearing files etc. are to be
uploaded through RMI menu.
5. Inward clearing cheques will be uploaded through service Branch in the respective
inward clearing zone.
6. TOD to be granted, if any, is to be granted and verified at the respective branch by 12:30
p.m. and the service branch should be informed beforehand if any branch is giving
TOD to any such account.
7. All the instruments present in inward clearing (DD+NON DD) should be entered in
Finacle and get verified.
8. Service Branch will post the inward clearing zone.
9. We need to Suspend, Post and close an Inward Clearing Zone with Menu Option
MICZ and Function S, P, Z respectively.
10. After closing zone, amount pertaining to that particular zone will be credited to Inward
Clearing Account (00980CTSIW001)
11. Clearing Account (00980CTSIW001) will be settled through Mirror Account
(00010CABOI003).

INWARD RETURNS (OUTWARD REJECTS)

1. We will receive Inward Return Report through CHI.
2. We need to open a new zone in order to reverse the amount reflecting in “Funds
in CLG.” Of respective customer as below -
MICZ -> Function “O” (Open) -> Zone Name CT7 ->F4 -> F10
We need to feed all the instruments in Zone with Reject Flag as “O” (Outward Reject)
3. Inward returns (outward rejects) will be uploaded / entered in the inward clearing
zones of Service branch, in a separate inward clearing zone.
4. On receipt of Inward Returns (Outward Rejects), Service Branch will pass voucher
for total inward returns by debiting Service Branch Inward Clearing Account
(00980CTSIW001) and crediting Mirror Account (00010CABOI003).
5. After posting of the zone for inward clearing and inward clearing returns, the inward
clearing account will be zero.

OUTWARD RETURNS (INWARD REJECTS)

1. Outward returns (Inward rejects) will be done by the service branch.
2. If the branch wants to pass the instrument by granting TOD, then branch can do it as
the instruments are uploaded in the respective branch. Return time decided by service
branch should be strictly adhered to.
3. After concluding all instruments in Finacle, one shall generate return report from
Finacle to be uploaded into CHI as following –

CTSRTN -> ZONE CODE ->F4

PR -> CTRL+E ->CTRL+E
The file will be saved in the folder finacle files.

The same file needs to be uploaded into CHI through Menu Option File upload.

4. Returns marked into CHI and in Finacle should tally in amount and count.
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 CHAPTER 10

ECS-RTGS-IMPS-AEPS-NPCI

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 CHAPTER 10

ECS-RTGS-IMPS-AEPS-NPCI

10.1 Electronic Clearing System (ECS)

Electronic Clearing System (ECS) is an electronic method of fund transfer from one bank
account to another. It is generally used for bulk transfers performed by institutions for making
payments like dividend, interest, salary, pension, etc. ECS can also be used to pay bills and other
charges such as payments to utility companies such as telephone, electricity, water, or for
making equated monthly instalments payments on loans as well as SIP investments. In this
article, we look at the working process of ECS in detail.

Types of ECS:
ECS can be used for both ECS credit and ECS debit.

ECS Credit
ECS credit is used for allowing credit to a large number of beneficiaries by raising a single debit
to the customer’s account, such as dividend, interest or salary payment.

Advantages
The benefits of ECS credit given to the clients are as follows:
 The end beneficiary need not make frequent visit to his bank for depositing the physical
paper instruments.
 Delay in the realisation of proceeds, which used to happen in the receipt of the paper
instrument, is eliminated.
 The ECS user helps to save on administrative machinery for printing, dispatch and
reconciliation.
 Provides the ability to make payment and ensure that the beneficiaries account gets
credited on a designated date.

Working of ECS Credit System

ECS payments can be performed by any institution (ECS user) that has to make bulk or repetitive
payments to a number of recipients or beneficiaries. They initiate the transactions after
registering themselves with an approved clearinghouse. ECS users also have to obtain consent
such as the account particulars of the beneficiaries for engaging in the ECS clearings.

Under the scheme, the beneficiaries of the repetitive or regular payments can also require the
paying institution to make ECS (credit) for payment. The ECS users expect to effect payments
and to present the data in a prescribed format to any one of the recognised clearinghouses. The
clearinghouse will debit the account of the ECS user through the user’s bank on a particular day
and credit the accounts of the recipient banks, for providing onward credit to the accounts of the
ultimate beneficiaries.

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ECS Debit
ECS debit is used for raising debits to a number of accounts of consumers or account holders for
affording a single credit to a particular institution, in cases such as utility payments like
electricity bills and telephone bills.

Advantages to Clients
The benefits of ECS debit given to the clients are as follows:
 Trouble-free: Eliminates the need to go to the collection centres or banks and the need to
stand in long queues for payment.
 Easy to track: Customers are not required to track down payments by last dates. The ECS
users would monitor the debts. The ECS user saves on administrative machinery for
collecting the cheques by monitoring their realisation and reconciliation.
 Better cash management: Chances of frauds due to fraudulent access to paper instruments
and encashment are avoided.
 The realisation of payments on a single date is enabled instead of fractured receipt of
payments.

Working of ECS Debit System

ECS debit is a scheme in which an account holder can authorise an ECS user to recover a
prescribed amount by raising a debit on his account. The ECS user has to receive an
authorisation which is called ECS mandate for raising such debts. These mandates have to be
approved by the bank branch maintaining the account.

Any ECS user participating in the scheme has to register with an approved clearinghouse, an
ECS user should receive the mandate forms from the participating destination account holders
with the bank’s acknowledgement. A certified copy of the mandate should be available with the
drawee bank.

The ECS user has to submit the data in a specified form through the sponsor bank to the
clearinghouse. The clearinghouse would pass on the debit to the destination account holder
through the clearing system and credit the sponsor bank’s account for onward crediting the ECS
user. All the unprocessed debits have to be returned to the sponsor bank’s account for onward
crediting the ECS user. All the unprocessed debits have to be returned to the sponsor bank,
within the time frame specified. Banks treat the electronic instructions received through the
clearing system at par with the physical cheques.

10.2 Payment and Settlement Systems Act, 2007

The Payment and Settlement Systems Act 2007, set up by the RBI, provides for the regulation
and supervision of payment systems in India and designates the apex institution (RBI) as the
authority for that purpose and all related matters. To exercise its powers and perform its
functions and discharge its duties, the RBI is authorized under the Act to constitute a committee
of its central board, which is known as the Board for Regulation and Supervision of Payment and
Settlement Systems (BPSS). The Act also provides the legal basis for ‘netting’ and ‘settlement
finality’.
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The PSS Act, 2007 received the assent of the President on 20th December 2007 and came into
force with effect from 12th August 2008.

What is a Payment System under the PSS Act 2007?

The Section 2(1) (i) of the PSS Act 2007 defines that a payment system enables payment to be
effected between a payer and a beneficiary, involving clearing, payment or settlement service or
all of them, but does not include a stock exchange. It is further stated a ‘payment system’
includes the systems enabling credit card operations, debit card operations, smart card
operations, money transfer operations or similar operations.

Except stock exchanges and clearing corporations set up under stock exchanges, all other
systems carrying out either clearing or settlement or payment operations or all of them are
regarded as payment systems. All entities operating such systems will be known as system
providers. Also, all entities operating money transfer systems or card payment systems or similar
systems fall within the purview of a system provider.

10.3 NEFT (National Electronic Funds Transfer)

NEFT (National Electronic Funds Transfer)
With NEFT, you can transfer any amount to the recipient’s account in a one-on-one transfer
basis. NEFT transactions don’t have a maximum limit for funds that can be transferred in a
single day.

Timings for NEFT

One important feature of this method is that the funds are transferred in batches that are settled
in hourly time slots. So, depending on the batch in which the funds were transferred, you can
expect the recipient to receive the funds within 2 hours of transfer. The fund transfers are
processed in 12 batches between 8 a.m. to 7 p.m. on weekdays and 6 batches between 8 a.m. to 1
p.m. on Saturdays. NEFT is not available on Sundays and bank holidays. If a transfer is initiated
any time after the specified hours for that day, it will be processed on the next working day.
(RBI has announced in August, 2019 that NEFT & RTGS timings will be round the clock
24*7 basis from December onwards and free of cost).

Transaction limits
Even individuals without bank accounts can deposit cash through NEFT, but it’s limited to Rs.
50,000 per transaction. With NEFT, you can initiate transactions to transfer funds from one bank
account to another throughout India. However, you must make sure that the banks are a part of
the NEFT transfer network (another way to say this is that the banks should be NEFT-enabled).

Procedure
To transfer funds via NEFT, all you have to do is log in to your net banking portal and add the
recipient as a beneficiary. You’ll need to enter details like their name, account number, account
type and IFSC code under the Add New Payee section. Once you choose NEFT as the preferred
mode of transfer and enter the amount to be transferred, the fund transfer will be completed.

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 10.4 RTGS (Real Time Gross Settlement)
Business owners can use RTGS when they need to transfer large amounts instantly. One
advantage that RTGS has over the other methods is the transaction speed, since the entire amount
is transferred in real time.

Timings for RTGS

Though the available hours for RTGS transactions vary based on the individual banks and their
branches, this is the standard timing:
 7:00 a.m. to 6:00 p.m. for customer transactions (Timing changed to 07:00 AM from
08:00 AM from beginning of RTGS Transactions w.e.f. 26.08.2019)
 7:00 a.m. to 7:45 p.m. for inter-bank transactions

Transaction limits
There’s a minimum limit over Rs. 2 lakhs for RTGS transactions, and there’s no maximum limit
as such. To get an RTGS-enabled account, you can either contact your bank or check
your eligibility status in your online banking portal. If you’re using RTGS for a fund transfer,
make sure that both you and the recipient have RTGS enabled accounts.

Procedure
To transfer funds via RTGS, log in to your banking portal and add the recipient as a beneficiary
by entering details like their name, account number, account type and IFSC code. Then choose
RTGS as the mode of transfer and enter the amount to be transferred, and the fund transfer will
be completed.

10.5 IMPS (Immediate Payment Service)

IMPS is another real-time payment service, but the distinguishing factor is that IMPS is
available 24⁄7 and you can avail the service even on bank holidays. Using IMPS, you can transfer
comparatively lower amounts, up to Rs. 2 lakhs, instantly. The service fee for IMPS transactions
is pretty low, ranging from Rs. 2.5 to Rs. 15.

A good example of an IMPS transfer is digital wallets — when you use wallets, they implement
IMPS to credit the recipient’s account. So, you can think of IMPS as the fund transfer mode
that has the best features of both RTGS and NEFT. You can transfer amounts as low as you
want, any time you want, with instant results.

Though IMPS services are mostly used online, a few banks offer SMS services. The IMPS
service is offered by the National Payments Corporation of India (NPCI). Their services allow
customers to transfer funds through both banks and Prepaid Payment Instrument (PPI)
issuers. PPIs are instruments that allow you to purchase goods and services or initiate fund
transfers using value that is stored in the PPI. Some examples of PPIs include smart cards,
magnetic stripe cards, digital wallets, and vouchers. Individuals without bank accounts can
transfer funds by IMPS using PPI.

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Procedure
To transfer funds via IMPS, you should first register for the mobile banking service of the
concerned bank and generate a Mobile Money Identifier (MMID) and MPIN from the bank. You
should make sure that your beneficiary or recipient has the MMID and MPIN too.
Once you’ve registered, log in to your net banking portal and select IMPS as the preferred mode
of transfer. Then you should fill in details like the recipient’s mobile number, the
recipient’s MMID, the amount to be transferred, and your MPIN. Once this is done, you will
receive a confirmation message via SMS.

Factors that differentiate the 3 modes

 Timing: The available hours for each type of fund transfer depend on the individual bank
and their customer service schedule. NEFT and RTGS services will be unavailable on
weekends and bank holidays, while IMPS services can be availed round the clock.
Also, NEFT transfers funds in timed batches, while RTGS and IMPS are real-time transfer
modes.
 Transaction limit: This is one of the most important differences. NEFT and IMPS have no
minimum value, while RTGS has a minimum fund value over Rs. 2 lakhs.
 Service fee: The fee charged for the fund transfer transaction varies between the three
modes. RTGS is comparatively expensive, while NEFT and IMPS are less so.
 Transaction speed: NEFT has fixed batch time slots and can take around 2 hours for the
recipient to receive the funds, whereas RTGS and IMPS transfers take place in real time and
are usually complete within 30 minutes.

10.6 AEPS - Aadhaar Enabled Payment System

Developed National Payment Corporation of India, AEPS or Aadhaar Enabled Payment System
is a system that enables to carry out transactions through Aadhaar based authentication. It helps
all individuals carry out financial transactions on a Micro-ATM and helps in empowering all
sections of the society by making financial and banking services available through Aadhaar.

Uses of AEPS
The basic transactions that can be done through AEPS registration are:
 Cash deposit
 Cash withdrawal
 Intra-bank or Interbank fund transfer
 Balance enquiry
 Obtain a mini statement
 Purchasing at fair shops

Benefits of AEPS
The Aadhaar Enabled Payment System enables the under-banked sections of the society to
enable financial and basic services at ease. The benefits associated with AEPS are:
1. The account holder can do both, financial and non-financial transactions with the help of
a banking correspondent.
2. There is no requirement of a signature on your debit card.
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 3. It is a completely safe and secure process as AEPS transactions require the account
holder’s fingerprint.
4. It increases the reach to rural areas as banking executives can now reach distant rural
places with micro POS machines.
5. The process is easy-to-use for individuals who are not tech-savvy.
6. It brings different sections of the society under a financial umbrella.
7. AEPS helps in facilitating disbursements of different government schemes such as
NREGA, Social Security pension, Handicapped Old Age Pension etc using Aadhaar
authentication.

Requirements for AEPS transactions

Although Aadhaar Enabled Payment System does not require any paper or card, it does require
the individual to link the Aadhaar to a bank account. If the individual fails to link his/her
Aadhaar, the AEPS facility is not useful for you.
The major requirements to carry out an AEPS transactions are:
 Aadhaar Number
 Fingerprint
 Name or Bank IIN(Issuer Identification Number)
This means all you need to carry out an AEPS transaction is to remember your Aadhaar number
just like your own mobile number.

Why Aadhaar for Authentication?

When Aadhaar was launched in India, all individuals were asked to provide their biometric data
which includes your fingerprints and iris image. The biometric data collected is unique to every
individual and thus cannot be duplicated.

This is why Aadhaar is used for authentication as your Aadhaar number is unique and therefore
acts as a proof for the banking transactions. In fact, nowadays, Aadhaar has now replaced
signatures and physical document submission process.

How to use AEPS?

The steps to AEPS registration are as follows:
 Step 1: Visit a banking correspondent in your nearest area. It is not necessary that he/she
is a correspondent from your bank.
 Step 2: Enter your 12-digit Unique Identity Number mentioned in your Aadhaar in the
POS machine.
 Step 3: Select the type of transaction- Cash deposit, Cash withdrawal, Intrabank or
Interbank fund transfer, Balance enquiry, Obtain a mini statement
 Step 4: Choose the bank name.
 Step 5: Enter the transaction amount.
 Step 6: Validate the transaction using your biometric (fingerprint or iris scan).
 Step 7: As the transaction is completed in seconds, collect the receipt given.

Charges for AEPS transactions

The transactions with AEPS are comparatively costly over UPI. In fact, an AEPS transaction can
go upto ₹15 per transaction. The r transaction cost is split amongst the following:
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UIDAI may charge a nominal fee, which may is not charging anything till now.
NPCI may charge 15 paise to 25 paise for settlement.
THe bank may charge upto 1% of the transaction. The minimum charges are ₹5 and the
maximum could go upto₹15.
Although, as of now, the Union government is bearing the cost of AEPS payment till December
2019. It is subsidising debit card, UPI and AEPS MDR charges. So, the transactions through
AEPS are currently free of cost.

Transfer Limit for AEPS

There is no set limit for transactions made through AEPS. However, certain banks have capped
the transaction limit to avoid misuse of this system. Various banks have set a daily limit of
₹50,000 on total transactions.

The Reason behind AEPS

The government has decided to bring all the unbanked sections of the society in the banking
framework. However, this is not geographically possible for people who live in distant and
remote places. In order to provide them access to banking facilities, the government has come up
with AEPS where people can easily send/receive money and avail banking and non-banking
facilities with the help of micro-ATMS and banking executives.

Moreover, transactions done via fingerprint or iris detection make the process completely safe
and secure. This has also eliminated the hassle of carrying bank passbooks and debit card as the
transaction can be done with only the Aadhaar number and your fingerprints.

10.7 National Payment Corporation of India (NPCI)

National Payments Corporation of India (NPCI), an umbrella organisation for operating
retail payments and settlement systems in India, is an initiative of Reserve Bank of India (RBI)
and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement
Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India.

Considering the utility nature of the objects of NPCI, it has been incorporated as a “Not
for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section
8 of Companies Act 2013), with an intention to provide infrastructure to the entire
Banking system in India for physical as well as electronic payment and settlement systems.
The Company is focused on bringing innovations in the retail payment systems through the
use of technology for achieving greater efficiency in operations and widening the reach
of payment systems.

The ten core promoter banks are State Bank of India, Punjab National Bank, Canara
Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank
N. A. and HSBC. In 2016 the shareholding was broad-based to 56 member banks to include
more banks representing all sectors.

NPCI, during its journey, has made a significant impact on the retail payment systems in the
country. Dedicated to the nation by our former President, Shri Pranab Mukherjee, endorsed by
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the Hon’ble Prime Minister, Shri Narendra Modi and later made the card of choice for the
ambitious Pradhan Mantri Jan Dhan Yojana, RuPay is now a known name.
RuPay is an Indigenously developed Payment System – designed to meet the expectation and
needs of the Indian consumer, banks and merchant eco-system.
RuPay supports the issuance of debit, credit and prepaid cards by banks in India and thereby
supporting the growth of retail electronic payments in India.
RuPay is well poised to explore innovative payment opportunities such as Contactless – offline
and online to drive adoption of low value payments. All RuPay Cards will now have the
functionality of NCMC which can enable low value contactless payments (like transit, toll,
parking, retail) using Offline technology.

The alliances with international network partners (Discover Financial Services, Japan Credit
Bureau and China Union Pay) provide valuable access to global acceptance footprint and offer
world class payment solutions to RuPay cardholders.

With Immediate Payment Service (IMPS), India has become the leading country in the world in
real time payments in retail sector. National Automated Clearing House (NACH), an offline web
based system for bulk push and pull transactions. NACH provides electronic mandate platform to
register mandates facilitating paper less collection process for the corporates and banks. It
provides for both account based and Aadhaar based transactions. Aadhaar Payment Bridge
(APB) System is helping the Government and Government agencies in making the Direct
Benefit Transfers for various Central as well as State sponsored schemes. To access these funds
at door step & drive the financial inclusion in India, Aadhaar enabled Payment System (AePS)
has been introduced. Since inception it has become instrumental to increase accessibility of basic
banking services in underserved areas. To extend the convenience of biometric to merchant
payments, BHIM Aadhaar has been launched by Hon'ble Prime Minister Narendra Modi.
National Financial Switch (NFS) is the largest network of shared Automated Teller Machines
(ATMs) in India facilitating interoperable cash withdrawal, card to card funds transfer and
interoperable cash deposit transactions among other value added services in the country.
Unified Payments Interface (UPI) has been termed as the revolutionary product in the payment
system and Bharat Bill Payment System is currently offering one-stop bill payment solution with
150+ Billers in the five approved categories Viz. Electricity, Gas, Water, Telecom and DTH
across India. National Payments Corporation of India (NPCI) has developed the National
Electronic Toll Collection (NETC) program to meet the electronic tolling requirements of the
Indian market. It provides an electronic payment facility to customer to make the payments at
national, state and city toll plazas by identifying the vehicle uniquely through a FASTag.
FASTag are Radio-Frequency Identification (RFID) stickers which are affixed on the vehicle
windshield and enable the driver to make toll payments electronically while the vehicle is in
motion without stopping at the Toll plazas by saving Fuel and Time.

With these products the aim is to transform India into a ‘less-cash’ society by touching every
Indian with one or other payment services. With each passing year we are moving towards our
vision to be the best payments network globally.

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Background
DPSS at its meeting held on September 24, 2009 had given an in-principle approval to issue
authorization to NPCI for operating various retail payment systems in the country and granted
Certificate of Authorization for operation of National Financial Switch (NFS) ATM Network
with effect from October 15, 2009. NPCI had deputed its officials to IDRBT Hyderabad and had
taken over NFS operations on December 14, 2009. Membership regulations and rules had been
framed for enrolling all banks in the country as members. This was done so that when the nation-
wide payment systems are launched, all would get included on a standardized platform.
A Technical Advisory Committee was constituted with two eminent professors of IIT, Mumbai.
Prof. N.L. Sarda is the Chairman and Prof. G. Sivakumar is the Co-Chairman of the Technical
Advisory Committee. Members in these committees are from banks at the level of Deputy
General Manager and Asst. General Manager.

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 CHAPTER 11

TDS & GST

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 CHAPTER 11

TDS & GST

11.1 Tax Deduction at Source (TDS) Provisions

We, as a Bank, pay interest on public deposits and other payment against services received. As
per statutory guidelines, we need to deduct TDS as per eligible rates from eligible beneficiaries
whom we pay within stipulated timeline as per given below chart:

Commonly used TDS Provision for payments made to persons resident in India
(Individuals, Firms, Companies, etc.):-
Section Nature of Payment for Threshold Individual Others 15G-15H
Domestic Transactions Limit / HUF

Rs. TDS Rate (%) Allowed

192 Salaries (Annexure-I) – Basis on – No

Slab

192A Premature withdrawal 50,000 10 – YES

from EPF

193 Interest on Securities/ 10,000 10 10 No

Debentures

Interest (Banks, co- 40,000/ 10 10 YES

194A operative society and post 50000
office)/ For Senior
Citizen Rs. 50000

Interest (Others) 5,000 10 10 YES

Contractor – Single 30,000 1 2 No

Transaction
194C
Contractor – During the 1,00,000 1 2 No
F.Y.

Transporter (44AE) – – – –
declaration with PAN

194H Commission / 15,000 5 5 No

Brokerage

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 Rent of Land and 2,40,000 10 10 YES
Building – F&F
194I
Rent of Plant / 2,40,000 2 2 YES
Machinery / Equipment

194IB Rent by Individual / 50000/PM 5 – No

HUF (wef 01.06.2017)

194IA Transfer of certain 50,00,000 1 1 No

immovable property
other than agriculture
land

Professional Fees / 30,000 10 10 No

Technical Fees
/Director fees/ royalty
194J
Payment to Call Centre 30,000 2 2 No
Operator
(w.e.f. 01.06.2017)

11.2 Form 26Q

At the time of paying to the payee, the payer has to deduct TDS on certain occasions. This
payment is other than payment of salary, and the payer has to file TDS return in Form 26Q. 26Q
is to be submitted on a quarterly basis. Total amount paid during the quarter and TDS amount
deducted on such payments have to be reported in 26Q.

Sections covered in 26Q:

 193 – Interest on securities
 194 – Dividend
 194A – Interest other than Interest on Securities
 194B – Winnings from lotteries and crossword puzzles
 194BB – Winnings from horse race
 194C – Payment of contractor and subcontractor
 194D – Insurance commission
 194EE – Payment in respect of deposit under national savings scheme
 194F – Payments on account of repurchase of Units by Mutual Funds or UTI 94F
 194G – Commission, prize etc., on sale of lottery tickets
 194H – Commission or Brokerage
 194I(a) – Rent
 194I(b) – Rent
 194J – Fees for Professional or Technical Services
 194LA – Payment of Compensation on acquisition of certain immovable property

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  194LBA – Certain income from units of a business trust
 194DA – Payment in respect of life insurance policy
 194LBB – Income in respect of units of investment fund
 194IA – Payment on transfer of certain immovable property other than agricultural land
9IA
 194LBC – Income in respect of investment in securitization trust

Details to be mentioned in 26Q

As against 24Q which contains 2 annexure, Form 26Q contains only one annexure. Challan
details (BSR code, date of payment, total amount etc.), details of deductor and deductees are to
be mentioned. Along with this, if the deductor hasn’t either deducted TDS or deducted it at a
lower rate, reasons are also to be mentioned in the form.

Due date of filing 26Q

Quarter Due Date

April to June 31st July

July to September 31st Oct

October to December 31st Jan

January to March 31st May

Rate of Interest as penalty against late deduction or deposit of TDS Amount

 If TDS is not deducted – 1% per month, from due date of deduction to actual date of
deduction,
 If TDS is not deposited – 1.5% per month, from actual date of deduction to actual date of
payment

Penalties for late filing of 26Q

Late Filing Fees – under section 234E, a fine of Rs. 200 per day is to be paid until the return is
filed. This amount has to be paid for each day until total fine becomes equal to the TDS amount.

11.3 Form 16A

Form 16A is also a TDS Certificate like Form 16. While Form 16 is for only salary income,
Form 16A is applicable for TDS on Income Other than Salary. For example, a Form 16A shall be
issued to a customer – when a bank deducts TDS on his/her interest income from fixed deposits,
for TDS deducted on insurance commission, for TDS deducted on your rent receipts.

In fact, when TDS is deducted on any other income you receive that is liable for such deduction.
This certificate also has details of the name and address of deductor/deductee, PAN/TAN details,
345 | P a g e
challan details of TDS deposited. It also has details of income you have earned and the TDS
deducted and deposited on such income.

All details that are there in Form 16A are available on Form 26AS. This can be used to file one’s
income tax return. It is mandatory on part of TDS Deductor (here Bank) to provide Form 16A to
all the customers and service providers on whose accounts TDS are deducted and deposited and
subsequently Form 26Q filed.

11.4 Form 15G and Form 15H

Form 15G and Form 15H are forms one can submit to prevent TDS deduction on his/her income,
if one meets the conditions mentioned below. For this, PAN is compulsory. Some banks allow
its’ customers to submit these forms online through the bank’s website. Form 15H is for senior
citizens, those who are 60 years or older; while Form 15G is for everybody else.

Form 15G and Form 15H are valid for one financial year. So, it is proactive service approach
from a banker to ensure collecting these forms from every eligible customers every year at the
beginning of the financial year. This will ensure the bank does not deduct any TDS on their
interest income.

Conditions you must fulfil to submit Form 15G:

1. You are an individual or HUF or trust or any other assessee but not a company or a firm
2. Only Resident Indians can apply
3. You should be less than 60 years old
4. Tax calculated on your Total Income is nil
5. The total interest income for the year is less than the basic exemption limit of that year,
which is Rs.2.5 lakh for financial year 2019-20 (AY 2020-21)

3. Conditions you must fulfill to submit Form 15H

1. You are an individual and resident Indian
2. You’re a senior citizen or will be 60 during the year for which you are submitting the
form
3. Tax calculated on your Total Income is nil

11.5 Goods & Services Tax (GST)

GST is an Indirect Tax which has replaced many Indirect Taxes in India. The Goods and Service
Tax Act was passed in the Parliament on 29th March 2017. The Act came into effect on 1st July
2017; Goods & Services Tax Law in India is a comprehensive, multi-stage, destination-based
tax that is levied on every value addition.

In simple words, Goods and Service Tax (GST) is an indirect tax levied on the supply of goods
and services. This law has replaced many indirect tax laws that previously existed in India. GST
is one indirect tax for the entire country.

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Under the GST regime, the tax is levied at every point of sale. In the case of intra-state sales,
Central GST and State GST are charged. Inter-state sales are chargeable to Integrated GST.
GST is thus a comprehensive, multi-stage, destination-based tax that is levied on every value
addition.”

Multi-stage
There are multiple change-of-hands an item goes through along its supply chain: from
manufacture to final sale to the consumer.
Let us consider the following case:
 Purchase of raw materials
 Production or manufacture
 Warehousing of finished goods
 Sale to wholesaler
 Sale of the product to the retailer
 Sale to the end consumer
Goods and Services Tax is levied on each of these stages which make it a multi-stage tax.

Value Addition
The manufacturer who makes biscuits buys flour, sugar and other material. The value of the
inputs increases when the sugar and flour are mixed and baked into biscuits.
The manufacturer then sells the biscuits to the warehousing agent who packs large quantities of
biscuits and labels it. That is another addition of value after which the warehouse sells it to the
retailer. The retailer packages the biscuits in smaller quantities and invests in the marketing of
the biscuits thus increasing its value. GST is levied on these value additions i.e. the monetary
value added at each stage to achieve the final sale to the end customer.

Destination-Based
Consider goods manufactured in Maharashtra and are sold to the final consumer in Karnataka.
Since Goods & Service Tax is levied at the point of consumption. So, the entire tax revenue will
go to Karnataka and not Maharashtra.

Journey of GST in India

The GST journey began in the year 2000 when a committee was set up to draft law. It took 17
years from then for the Law to evolve. In 2017 the GST Bill was passed in the Lok Sabha and
Rajya Sabha. On 1st July 2017 the GST Law came into force.

Advantages of GST
GST has mainly removed the Cascading effect on the sale of goods and services. Removal of
cascading effect has impacted the cost of goods. Since the GST regime eliminates the tax on tax,
the cost of goods decreases. GST is also mainly technologically driven. All activities like
registration return filing, application for refund and response to notice needs to be done online on
the GST Portal; this accelerates the processes.

Components of GST:
There are 3 taxes applicable under this system: CGST, SGST & IGST.

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  CGST: Collected by the Central Government on an intra-state sale (Eg: transaction
happening within Maharashtra)
 SGST: Collected by the State Government on an intra-state sale (Eg: transaction
happening within Maharashtra)
 IGST: Collected by the Central Government for inter-state sale (Eg: Maharashtra to
Tamil Nadu)
In most cases, the tax structure under the new regime will be as follows:
Transaction New Old Regime
Regime

Sale within CGST + VAT + Central Revenue will be shared equally between
the State SGST Excise/Service tax the Centre and the State

Sale to IGST Central Sales Tax + There will only be one type of tax (central)
another State Excise/Service Tax in case of inter-state sales. The Centre will
then share the IGST revenue based on the
destination of goods.

Tax Laws before GST

In the earlier indirect tax regime, there were many indirect taxes levied by both state and centre.
States mainly collected taxes in the form of Value Added Tax (VAT). Every state had a different
set of rules and regulations. Interstate sale of goods was taxed by the Centre. CST (Central State
Tax) was applicable in case of interstate sale of goods. Other than above there were many
indirect taxes like entertainment tax, octroi and local tax that was levied by state and centre. This
led to a lot of overlapping of taxes levied by both state and centre. For example, when goods
were manufactured and sold, excise duty was charged by the centre. Over and above Excise
Duty, VAT was also charged by the State. This leads to a tax on tax also known as the cascading
effect of taxes. The following is the list of indirect taxes in the pre-GST regime:
 Central Excise Duty
 Duties of Excise
 Additional Duties of Excise
 Additional Duties of Customs
 Special Additional Duty of Customs
 Cess
 State VAT
 Central Sales Tax
 Purchase Tax
 Luxury Tax
 Entertainment Tax
 Entry Tax
 Taxes on advertisements
 Taxes on lotteries, betting, and gambling

CGST, SGST, and IGST have replaced all the above taxes. However, the chargeability of CST
for Inter-state purchase at a concessional rate of 2%, by issue and utilisation of c-Form is still

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prevalent for certain Non-GST goods such as: (i) Petroleum crude; (ii) High-speed diesel; (iii)
Motor spirit (commonly known as petrol); (iv) Natural gas; (v) Aviation turbine fuel; and (vi)
Alcoholic liquor for human consumption.

GST & ARYAVART BANK

When we purchase certain services or goods and at the same time, the seller of services, goods
charges GST on that purchase, we should insist for B2B invoice (invoice mentioning the GST
no. of the seller as well as the GST no. of our Bank). In such bills or invoices, we should deduct
the cost of goods or services from PL account whereas the GST amount should be deducted from
GENSUS687 account. All such transaction details should be sent on the relevant factor to HO
through RO for the purposes of GST Refund claims.

Similarly, Bank charges different fees and charges from its’ customers or buyers of certain
products. We should deduct GST at 18% on all such eligible charges over and above our
prescribed charge and the collected charges should be credited to the PL account of the Bank and
the GST amount collected should be collected to the SUNCR687.

GST NO. OF ARYAVART BANK: GSTIN09AAIAA9148E1ZL

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 CHAPTER 12

MODEL OPERATIONAL
PROCEDURE FOR SETTLEMENT OF
CLAIMS IN DECEASED
DEPOSITORS’ ACCOUNTS

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 CHAPTER 12

MODEL OPERATIONAL PROCEDURE FOR SETTLEMENT OF

CLAIMS IN DECEASED DEPOSITORS’ ACCOUNTS26

12.1 Introduction

Delays in settlement of claims by legal heirs of deceased constituents of banks cause

considerable hardship to dependent legal heirs. Claims by legal heirs could be in respect of
deposits, safe custody articles or contents of lockers. With a view to eliminating the hardships
faced by Common Person, RBI Committee on Procedures and Performance Audit on Public
Services (CPPAPS) had suggested that Reserve Bank of India may issue comprehensive
guidelines in the matter and IBA may be asked to draft and circulate a comprehensive model
operational procedure, which could be adopted by banks for settlement of claims of deceased
depositors and SDV lockers/ Safe custody articles.

The legal position is quite clear in the matter of deceased claims. In the absence of nomination or
clear mandate in respect of a joint account or a will left behind by the deceased depositor, banks
are expected to pay the stock (balances) at the time of death of the person to all the legal heirs of
the deceased. Considering the risk involved, banks traditionally used to insist for legal
representation (in the form of a succession certificate, letter of administration or probate, etc.) for
settlement of claims. The system of obtaining operational mandates in joint accounts emerged as
a banking practice to overcome difficulties in settlement of claims in deceased accounts.
Subsequently, the statutes were amended in 1985 to provide for nomination facility in bank
deposits, safe deposit lockers and safe custody articles. However, since nomination facility is
optional at the discretion of the depositor/ lessee, problems and difficulties in settlement of
deceased claims persisted.

Reserve Bank of India vide Circular No. DBOD.No.Leg.BC.95 /09.07.005/2004-05 dated 9th
June, 2005 had issued detailed guidelines for evolving simplified procedure for settlement of
claims in respect of deceased depositors. The CPPAPS had also made recommendations for
easy operation of SDV lockers. Taking into consideration these recommendations RBI had
issued detailed guidelines in respect of Safe Deposit Lockers and Safe Custody Articles
emphasizing need for a simplified procedure for settlement of claims in respect of Safe Deposit
Locker/ Safe Custody Articles Facility in the event of death of the depositors(s) vide Circular
DBOD.No.Leg.BC.78/09.07.005/2006-07 dated April 17, 2007.

RBI vide Circular DBOD.No.Leg.BC.80/09.07.005/2007-08 dated May 2, 2008 has issued

guidelines for claims in respect of missing persons (deemed deceased). The circular brings out
the position of Law for presumption of death. Banks were advised to settle the claims of legal

26
Bank of India “Policy on Model Operational Procedure for Settlement of Claims in Deceased Depositors
Account’s”; March, 2018; https://www.bankofindia.co.in/PageMenuDocs/KMBT-195-01696.pdf
351 | P a g e
heirs of a missing person after considering the legal opinion and take into account the facts and
circumstances of each case.

IBA circulated Model Operational Procedure covering settlement of claims in deceased deposit
accounts in February, 2006. This revised Model Operational Procedure incorporates the
subsequent RBI guidelines on settlement of claims in safe deposit locker/safe custody articles
facility extended by Banks also. This model operational procedure will be applicable to the
deceased claims in deposit accounts within the threshold limit (member banks to determine the
threshold limit keeping in view their Risk Management Policy). Deceased claims within the
threshold limit will be settled against indemnity by legal heirs of the deceased without any legal
representation in the absence of nomination or mandate given by deceased depositor(s). The
drafting committee could not arrive at a similar threshold risk limit for settlement of claims in a
deceased safe deposit locker/safe custody article account for settlement without legal
representation considering the fact that value of contents/ articles remains unknown. The
member banks were given discretion to evolve a customer friendly approach in such cases as
envisaged by Reserve Bank of India.

12.2 Guidance to the customers on advantages of nomination facility / survivorship

mandate

12.2.1 Nomination:

Nomination Facility – an ideal tool to mitigate hardship of common persons in settlement of

claims in the event of death of the account holder.

Nomination facility simplifies the procedure for settlement of claims of deceased depositor(s) as
banks get valid discharge by making payment of the balances in a depositor(s) account at the
time of depositor’s death or delivery of contents of locker or articles kept in safe custody to the
nominee.

Nomination is optional for bank customers. It is therefore necessary that nomination facility is
popularized and customers are made aware of advantages of nomination at the time of opening a
deposit account or opting for the SDV lockers/ safe custody.

Branches should inform account holder about the availability of nomination as a voluntary
facility and recommend to availing the option. Nomination facility, if availed, would ensure
smooth settlement of claim to the nominee.

It should also be made clear to the depositor(s) that nomination is introduced solely for the
purpose of simplifying the procedure for settlement of claims in the event of demise of
depositors and nomination facility does not take away the rights of legal heirs on the estate
of the deceased. The nominee would be receiving the stock from the bank as a trustee of the
legal heirs.

12.2.2 Survivorship:

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A joint account opened as "Either or Survivor" or "Anyone or Survivors" or "Former or
Survivor" or "Latter or Survivor" will permit the surviving account holder(s) to have
unimpeded access to the credit balance in the account for withdrawal if one of the co-
account holders dies.

If the mandate of survivorship is given / provided, the survivor(s) can give a valid discharge to
the bank in the case of "Either or Survivor" / "Anyone or Survivors" and "Former or
Survivor" / "Latter or Survivor" joint accounts.

In short, payment to survivor(s) can be made in the normal course subject to the rider that
there is no order from a competent court restraining the bank from making such payment.

12.2.3 Customer Guidance and Publicity:

This Model Operational Procedure (MOP) for settlement of claims of deceased depositors has
been suggested with a view to mitigating hardships faced by common persons in settlement of
claims in deceased accounts. This document also aims at creating better awareness amongst
depositors about the advantages of availing "nomination" facility offered by banks or giving
operational mandates like "Either or Survivor", etc. when accounts are opened in joint names.

Our Branches to give wide publicity and provide guidance to deposit account holders on the
advantages of the nomination facility and the survivorship clause. These should be highlighted in
the publicity material that in the event of the death of one of the joint account holders, the right
to the deposit proceeds does not automatically devolve on the surviving joint deposit account
holder/s, unless there is a survivorship clause.

12.3 Settlement of claims in various types of accounts / facilities

12.3.1 Single Account with or without nomination -

12.3.1.1 Savings Account/Current Account:

With Nomination:

The balance amount will be paid to the nominee on verification of nominee’s identity (such as
PAN Card, Election ID Card, Aadhaar Card, MGNREGA Card, Passport, Driving License, etc.)
and proof of death of depositor.

Without Nomination:

The balance amount will be paid to the legal heir(s) (or any one of them as mandated by all of
the legal heirs) on verification of the authority of the legal heir(s) and proof of death of depositor.

12.3.1.2. Term Deposit Account:

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With Nomination:

The balance amount will be paid to the nominee on verification of nominee’s identity (such as
PAN Card, Election ID Card, Aadhaar Card, MGNREGA Card, Passport, Driving License, etc.)
and proof of death of depositor on maturity date of deposit.
Without Nomination:

The balance amount will be paid to the legal heir(s) (or any one of them as mandated by all the
legal heirs) on verification of the authority of the legal heir(s) and proof of death of depositor on
maturity of deposit.

12.3.1.3. Premature termination of Term Deposit Account:

With Nomination:

Premature termination of term deposit account as per terms of contract will be permitted at the
request of the nominee on verification of nominee’s identity (such as PAN Card, Election ID
Card, Aadhaar Card, MGNREGA Card, Passport, Driving License, etc.) and proof of death of
depositor.

Without Nomination:

Premature termination will be permitted on joint request by all legal heirs (or any of them as
mandated by all the legal heirs) as per the terms of the contract on verification of the authority of
the legal heirs and proof of death of depositor.

12.3.2. Joint Account with or without nomination and without survivorship mandate
(operated jointly) -

12.3.2.1. Savings Account/Current Account:

With Nomination:

a) In the event of death of one (or more but not all) of the joint account holders, the balance
amount will be paid jointly to survivor(s) and the legal heirs of the deceased joint account
holder (or any of them as mandated by all the legal heirs) against their joint claim on
verification of the authority of the legal heirs and proof of the death of the depositors.

b) In the event of death of both / all joint account holders, the balance amount at the time of
death of the depositors will be paid to the nominee on verification of nominee’s identity
(such as PAN Card, Election ID Card, Aadhaar Card, MGNREGA Card, Passport,
Driving License, etc.) and proof of death of all depositors

Without Nomination:

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a) In the event of death of one (or more but not all) of the joint account holders, the balance
amount will be paid jointly to survivor(s) and the legal heirs of the deceased account holder (or
any one of them as mandated by all the legal heirs) against their joint claim on verification of the
authority of legal heirs and proof of death of depositor.

b) In the event of death of both/ all joint account holders, the balance amount will be paid jointly
to the legal heir(s) of all the deceased depositors (or any of them as mandated by all the legal
heirs) on verification of authority of the legal heirs and proof of death of all the depositors.

12.3.2.2. Term Deposit Account:

With Nomination:

a) In the event of death of one (or more but not all) of the joint account holders, the balance
amount will be paid jointly to survivor(s) and the legal heirs of the deceased joint account holder
(or any one of them as mandated by all the legal heirs) on verification of identity of the legal
heirs and proof of death of the depositor on maturity of the deposit.

b) In the event of death of both / all the joint account holders, the balance amount at the time of
death of the depositors will be paid to the nominee on verification of nominee’s identity (such as
PAN Card, Election ID Card, Aadhaar Card, MGNREGA Card, Passport, Driving License, etc.)
and the proof of death of all depositors on maturity of the deposit.

Without Nomination:

In the event of death of one (or more but not all) of the joint account holders, the balance amount
will be paid jointly to the survivor(s) and the legal heir(s) of the deceased joint account holders
(or any of them as mandated by all the legal heirs) against their joint claim on verification of
authority of the legal heirs and proof of death of the depositor on maturity of the deposit.

b) In the event of death of both / all the joint account holders, the balance amount will be
paid jointly to the legal heirs of all the deceased depositors (or any one of them as
mandated by all legal heirs) on verification of authority of the legal heirs and proof of
death of all depositors on the maturity of the deposit.

12.3.2.3. Premature termination of Term Deposit Account:

With Nomination:

a) In the event of death of one (or more but not all) of the joint account holders,
premature termination of term deposit will be permitted against joint request of the
survivor(s) and the legal heir(s) (or any one of them as mandated by all legal heirs) as
per the terms of contract on verification of identity of the legal heirs and proof of
death of depositor.

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 b) Premature termination of term deposit account as per the terms of contract will be
permitted at the request of the nominee on verification of nominee’s identity (such as
PAN Card, Election ID Card, Aadhaar Card, MGNREGA Card, Passport, Driving
License, etc.) and proof of death of all the depositors.

Without Nomination:

a) In the event of death of one (or more but not all) of the joint account holders,
premature termination of term deposit will be permitted against joint request by the
survivor(s) and the legal heir(s) of all the deceased depositors (or any one of them as
mandated by all legal heirs) as per the terms of contract on verification of authority of
legal heirs and proof of death of depositor.

b) In the event of death of both / all the joint account holders, premature termination of
term deposit will be permitted against joint request by all legal heirs of the deceased
depositors (or any one of them as mandated by all legal heirs) as per the terms of
contract on verification of authority of legal heirs and proof of death of depositors.

12.3.3. Joint account with mandate “Either or Survivor”/“Former or survivor”/ “Anyone

or Survivors”/ “Latter or Survivor” - with or without nomination: -

12.3.3.1 Savings Account / Current Account:

With Nomination:

a) In the event of death of one (or more but not all) of the depositors, the balance amount
will be paid to survivor (s) on verification of proof of death of the depositor.

In the event of death of both/all the joint depositors, the balance amount will be paid to the
nominee on verification of nominee’s identity (such as PAN Card, Election ID Card, Aadhaar
Card, MGNREGA Card, Passport, Driving License, etc.) and proof of death of all depositors.

Without Nomination:

a) In the event of death of one (or more but not all) of the depositors, the balance
amount will be paid to survivor on verification of proof of death of the depositor.

b) In the event of death of both/all the joint depositors, the balance amount will be
paid jointly to the legal heirs (or any one of them as mandated by all the legal
heirs) on verification of authority of legal heirs and proof of death of all
depositors.

12.3.3.2 Term Deposit Account:

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With Nomination:

a) In the event of death of one (or more but not all) of the depositors, the balance amount
will be paid to survivor(s) on verification of proof of death of the depositors on maturity
of deposit or as agreed at the time of opening of deposit.

b) In the event of death of all joint depositors, the balance amount will be paid to the
nominee on verification of nominee’s identity (such as PAN Card, Election ID Card,
Aadhaar Card, MGNREGA Card, Passport, Driving License, etc.) and proof of death of
all depositors on maturity of deposit or as agreed at the time of opening of deposit.

Without Nomination:

a) In the event of death of one of the depositors (or more, but not all), the balance
amount will be paid to the survivors on verification of proof of death of the depositor
on maturity of deposit or as agreed at the time of opening of deposit.

b) In the event of death of all joint depositors, the balance outstanding will be paid to the
legal heir(s) of all the deceased depositors (or any one of them as mandated by all the
legal heirs of joint holders) on verification of authority of legal heirs and proof of
death of all depositors on maturity of deposit.

12.3.3.3 Premature termination of Term Deposit Account by the survivors:

a) In the event of the death of one (or more but not all) of the depositor(s), the balance amount
will be paid to the survivor(s) after premature termination of term deposit account on
verification of proof of death of the depositor/s, only if, there is a joint mandate from all
the depositors to this effect given either at the time of placing the fixed deposit or
subsequently during the tenure of deposit or there is suitable clause in this regard in
deposit account opening form which is accepted and signed by all the depositors at the
time of opening of fixed deposit account.

In the event of the death of one (or more but not all) of the depositor(s), the balance amount will
be paid jointly to survivor(s) and the legal heir(s) of the deceased joint account holders (or any of
them as mandated by all the legal heirs) against their joint claim on verification of authority of
the legal heir(s) and proof of death of depositor(s), if there is no joint mandate from all the
depositors/ suitable clause in account opening form to this effect as stated in clause (a)
above.

With Nomination:

c) In the event of death of all the joint depositors, the nominee will have right to seek
premature termination of term deposit account as per the terms of the contract on
verification of claimant’s identity (such as PAN Card, Election ID Card, Aadhaar Card,
MGNREGA Card, Passport, Driving License, etc.) and proof of death of all depositors.

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12.4 – Settlement of claims in respect of Missing Persons:

12.4.1. Legal Position:

The settlement of claims in respect of missing persons would be governed by the provisions of
Section 107/108 of the Indian Evidence Act, 1872.

“Section 107 deals with presumption of continuance and section 108 deals with presumption of
death”.

As per the provisions of Section 108 of the said Act, presumption of death can be raised only
after a lapse of seven years from the date of a person being reported missing. As such,
nominee/legal heirs have to raise an express presumption of death of the depositor under Section
107/108 of the Indian Evidence Act before a competent court.

If the court presumes that a person is dead, then the claim in respect of a missing person can be
settled as is done for any other deceased accounts.

12.5 Simplification of the process for settlement of claims in deceased depositors' accounts:

12.5.1 Documentation:
Documents required to be submitted along with the claim form:
i. Proof of death;

ii. Proof of identification of nominee(s) wherever applicable (such as PAN Card, Election
ID Card, Aadhaar Card, MGNREGA Card, Passport, Driving License, etc.) or any other
satisfactory proof of identification acceptable to the bank or proof of authority of legal
heir(s) as applicable;

iii. Indemnity/ legal representation, wherever applicable;

iv. Asset Liability Statement/ Net worth statement with documentary evidence, wherever
applicable.
Branches must exercise due care and caution in ascertaining the identity of legal heir(s)
/nominee’s and proof of death of the account holder, through appropriate documentary
evidence. If necessary, any official of the Branch shall visit the place of the depositors to
enquire about the genuineness of such claims.

In cases where settlement will be made to the Survivor(s)/ Nominee as per the terms of the
contract, it should be made clear to the survivor(s)/nominee that he/she/they would be receiving
the payment from the Bank as trustee of the legal heirs of the deceased depositor, i.e., such

358 | P a g e
payment to him/her/them shall not affect the right or claim which any person may have against
the survivor(s)/nominee(s) to whom the payment is made.

It may be noted that payment made to the survivor(s) in cases where there is a mandate to the
effect like “Either or Survivor” or “Former or Survivor”/nominee(s), subject to the foregoing
conditions, would constitute full discharge of the bank's liability, insistence on production of
legal representation is superfluous and unwarranted and it would only serve to cause avoidable
inconvenience to the survivor(s)/nominee(s). In such cases, making payment to the
survivor(s)/nominee(s) of the deceased depositor, Branches should not insist on production of
succession certificate, letter of administration or probate, etc., or obtain any bond of indemnity or
surety from the survivor(s)/nominee(s), irrespective of the amount standing to the credit of the
deceased account holder.

In cases where the deceased depositor had not made any nomination or for the joint accounts
without survivorship clause (such as single or jointly operated accounts), Banks have been
advised to adopt a simplified procedure for repayment to legal heir(s) of the depositor
keeping in view the imperative need to avoid inconvenience and undue hardship to the
common person. Banks have also been given discretion keeping in view their risk
management systems, to fix a minimum threshold limit, for the balance in the account of
the deceased depositors, up to which claims in respect of the deceased depositors would be
settled without insisting on production of legal representation.

Branches or Controlling Offices may settle the claim in favour of the legal heirs without insisting
for legal representation by way of succession certificate or letter of administration, probate, etc.
by obtaining Indemnity letter and other documents as stated hereunder, after obtaining sanction
of the competent authority as per the delegation of powers according to the amount involved in
sanction. Where there is dispute between the legal heirs / claimants even if the claim is
within the delegation of competent authorities, Branches should insist for necessary Court
Order by way of Succession Certificate or Letter of Administration etc.

With a view to avoid inconvenience and undue hardship to common public in obtaining court
order, Board of Directors has allowed to settle the claims based on Affidavit cum Indemnity by
the competent authorities as per delegation of powers for settlement of deceased account(s). The
details on requirement of Indemnity and Sureties are as under:

Claim Amount in Deceased Depositors’ Details of Requirement of Indemnity and

Account
Balance up to Rs. 5,000/-
Balance above Rs. 5,000/- to Rs. 25,000/-
Balance above Rs. 25,000/- to Rs. 2 Lakh
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Sureties and their Net Worth
Unstamped Indemnity Letter signed by all the
heirs without any surety.
Stamped Indemnity Letter signed by all the heirs
and one or more sureties of good standing for
twice the amount involved.
Stamped Indemnity Letter signed by all the heirs
and two or more sureties of good standing for
twice the amount involved.
Balance above Rs. 2 Lakh to Rs. 5 Lakh
Above Rs. 5 Lakh
Stamped Indemnity Letter signed by all the heirs
and three or more sureties of good standing for
twice the amount involved.
Stamped Indemnity Letter signed by all the heirs
and three or more sureties of good standing for
thrice the amount involved.

In the absence of nomination and when there are no disputes among the claimants, the Bank will
pay the account balance amount of the deceased account holder(s) against joint application and
indemnity by all the legal heirs or the authorised representative mandated by all the legal heirs to
receive the payment on their behalf, without insisting on legal documents as per the sanctioning
power of delegation for the competent authority. This is to ensure that the depositors are not put
to undue hardship on account of delays in completing legal formalities.

12.5.2 Time Norms for Settlement of Claims:

Branches should settle the claims in respect of deceased depositors and release payments to
survivor (s)/ nominee in accounts with survivor/ nominee within a period not exceeding 15
days from the date of receipt of the claim subject to production of documentary proof of death
of the depositor(s) and suitable identification of the claimant(s) to the Bank’s satisfaction. In
case of accounts without survivor/ nominee clause the claim should be settled within ONE
month from the date on which the requisite documents have been submitted. The claim should
be settled following the procedure in vogue and on approval of the Competent Authority as per
the Delegation of Powers.

12.5.3 Payment of interest in case of term deposit accounts of deceased depositor(s):

12.5.3.1 In case of a Term Deposit standing in the name/s of:

i. A deceased individual depositor, or

ii. two or more joint depositors, where one or all the depositors have expired, interest shall
be paid in the manner indicated below,

 On the maturity of the deposit: Bank will pay interest at the contracted rate till the date
of maturity of deposit.

 In case of premature withdrawal by legal heir(s)/nominee/legal heir , i.e., in the

event of the payment of deposit being claimed before the maturity date/ contract
period :

The bank will pay “applicable rate of interest on the date of acceptance of deposit for the
actual period for which deposit has remained with the bank or contracted rate of interest,
whichever is lower shall be applicable” without charging penalty.

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  In case of deposit being claimed after the date of maturity:

In the case of death of depositor(s) after the date of maturity of the overdue deposit, the
Bank shall pay interest at Saving Bank Rate applicable as on the date of maturity, up to
the date of payment.

In the event of death of the depositor, before the date of maturity of deposit and where the
amount of the deposit is claimed after the death of maturity, the Bank shall pay interest at
the contracted rate, till the date of maturity and thereafter at simple term deposit interest
applicable as on the date of maturity, for the period for which the deposit remained with
the Bank, beyond the date of maturity.

In the event of auto renewal system of term deposits for the same tenor (as of the
maturing deposit) at the then prevailing rate of interest applicable as on date of maturity,
Bank shall pay interest at the contracted rate/ prevailing rate up to the date of maturity
span of such auto- renewal period, during which depositor has expired and thereafter
simple term deposit interest at the applicable rate for the period (as on the date of
renewal/ maturity), up to the date of payment.

12.5.4 Splitting of Term Deposit

On specific request from the claimant/s, branches may split the amount of term deposit and
issues two or more separate receipts in the names of the claimant/s, these shall not be construed
as premature withdrawal of the term deposit, provided the period and the aggregate amount of
the deposit do not undergo any change.

12.5.5 Treatment of Flow in the name of the Deceased Depositor

In order to avoid hardship and inconvenience to the survivor(s) / nominee of a deceased deposit
account holder, branches will obtain appropriate agreement / authorization from the survivor(s) /
nominee with regard to the treatment of pipeline flow in the name of the deceased account
holder. In this regard, branches should consider adopting either of the following approaches:

• The survivor(s) / nominee of a deceased account holder should authorise the Branch to
open account styled as 'Estate of Shri/Ms ________________, the Deceased' where all
the pipeline flow in the name of the deceased account holder could be allowed to be
credited, provided no withdrawals are made.

OR

• The survivor(s) / nominee should authorise the Branch to return the pipeline flow to the
remitter with the remark "Account holder deceased" under intimation to survivor(s) /
nominee. The survivor(s) / nominee / legal heir(s) can then approach the remitter to effect
payment through a negotiable instrument or through electronic transfer of amount in the
name of the appropriate beneficiary.

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12.6. Provisions of Law regarding Legal Heirs:

12.6.1 HINDU

If the deceased is a MALE, dying intestate, it must be ascertained whether there

are one or more Class-I legal heirs.

- The following are Class-I legal heirs:

- Mother,

- Widow,

- Son(s),

- Daughter(s),

- widow of a predeceased son,

- Son(s) and Daughter (s) of a predeceased son,

- Son(s) and daughter (s) of a predeceased daughter,

- Son(s) and daughter(s) and widow of a predeceased son of a

predeceased son,

- Son(s) and daughter(s) of predeceased daughter of predeceased

daughter,

- Daughter(s) of predeceased son of a predeceased daughter,

- Daughter (s) of predeceased daughter of predeceased son.

All Class-I legal heirs take simultaneously to the exclusion of any other legal
heir and no one takes precedence over the other.

The Class-II legal heirs are classified in different Entries and legal heirs belonging to Entry-I
will be preferred to the second entry and so on in succession. But there is no preference among
these falling in the same entry and they take their share simultaneously

Entry-I - Father

Entry-II -

(a) Son's Daughter's Son,

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 (b) Son's Daughter's Daughter

(c) Daughter's Daughter’s Son,

(d) Daughter's Daughter's Daughter

(e) Brother and Sister.

Entry-III –

(a) Son / Daughter of Daughter's Son and

(b) Son / Daughter of Daughter's Daughter.

Entry -IV –

Gives Son / Daughter of Brother or Sister as the Heirs and many more.

- In case, the Deceased is a married Female Hindu, who died intestate,

the following are her legal heirs: (a) Sons & Daughters (including the
children of any predeceased Son) & the Husband; (b) Heirs of Husband; (c)
Mother & Father, (d) Heirs of Father; (e) Heirs of Mother.

- If a Female Hindu who dies intestate does not have Son/Daughter, the
property inherited from her parents goes to the heirs of Father whereas if
the same is inherited from Husband or Parents-in-Law, Heirs of Husband
will be the claimants to inherit property.

12.6.2 CHRISTIAN:

- Where the deceased is a Christian, Indian Succession Act governs

the intestate succession.

- As per the provision of Succession Act, the widow of the male intestate is
entitled to one-third of the property while the remaining two-third goes to
lineal descendants (i.e. sons & daughters) in equal shares. If the deceased
has none, whole property passes to his widow.

- If the male intestate has left no lineal descendant, one half goes to the
widow and other half to the kindred (i.e., father, mother, brother, sister).

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 - In case a Christian female dies intestate, husband has the same right.

12.6.3 MOHAMMEDAN:

- Inheritance in the case of Muslims is governed by the Sunni or Shia

law depending upon the sect to which they belong.

- According to Sunni law the class of heirs are:

Sharers - Heirs by consanguinity

1. Ascendants : Father, True grandfather, Mother, True

grandmother

2. Descendents: Daughter, Son's daughter,

3. Collateral: Full/consanguine sister, uterine

brother/sister Heirs by Affinity - Husband, Wife

These 12 sharers will inherit fixed shares subject to conditions.

A sharer may be excluded by many reasons such as nearer in
blood will exclude remote one in one class. Sometimes sharer
may be converted as residuary or otherwise one sharer may be
partly sharer and partly residuary.

126.4 Residuary category:

After fixed share is allotted to the sharers the residue left is devolving upon the residuary:

Children male or female of deceased, of son of deceased, of father of deceased, male descendents
of true grandfather.

Son is always a residuary. Daughter with son becomes residuary. Among these,
descendents exclude all others. Ascendants exclude all others except descendents
and descendents of nearer ascendants exclude those in remote. In each class of
residuary nearer blood excludes remote one. Division among these is according to
the rule of double share to the male and if only one sex is there then equally
divided.

In the absence of sharers and residuary estate devolves upon his other
blood relations i.e., distant kindred.

According to Shia law the class of heirs are:

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Heirs by consanguinity:

I (i) Parents

(ii) Children & descendents

II (i) Grand-parents (true/false)

(ii) Brother or sister and descendents

III Paternal or maternal uncle of him or his parents and grandparents.

Heirs by Marriage - Husband, Wife:

Heirs by consanguinity and heirs by affinity succeed simultaneously. Among heirs by
consanguinity those in class I exclude those in class II. The heirs in two sections of class
I succeeds together. In each section nearer in degree exclude the remote. The son always
takes as a residuary.

Signed certificate from Muslim Jama-I-eth on the letterhead by the head of the
institution to which the deceased was affiliated should be obtained giving details
of legal heirs with their age. In case of deceased male, a categorical certificate to
the effect that the deceased had not married any woman other than the one named
in the list should be insisted upon.

12.6.5 Minor's Interest and Guardianship:

- Where the legal heir is a minor, lawful guardian will represent minor’s
interest.
- For Hindus and Christians- minor’s father is the natural guardian and
after him the mother. Supreme Court has decided on guardianship of
minor (Hindu) that, even mother can be a natural guardian even during
the life time of father since the welfare of child is of utmost importance.

For a Muslim minor- father, then person appointed by father's will, then father's father and then
person appointed by father's father will be guardian in order.

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12.7 Legal Heirs under Various Personal Laws

Legal Heirs under various Personal Laws

i) Hindus
a) Primary heirs of a Hindu Male:
i. Son(s)
ii. Daughter(s)
iii. Wife
iv. Mother
v. Children of Predeceased children
vi. Widow of predeceased son
vii. Children of predeceased grand children
b) Primary heir(s) of a Hindu Female:
i. Son(s)
ii. Daughter(s)
iii. Husband
iv. Children of predeceased children
ii) Muslims
a) Primary heirs of a Sunni Muslim:
i. Son(s)
ii. Daughter(s)
iii. Father
iv. Mother
v. Spouse (Husband/Wife)

b) Primary heirs of a Shia Muslim:

i. Spouse (Husband/Wife)
ii. Mother
iii. Father
iv. Son(s)
v. Daughter(s)
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iii) Christians

a) Primary heirs of a Christian:

i. Spouse (Husband/Wife)
ii. Son(s)
iii. Daughter(s)

iv) Parsis

a) Primary heirs of a Parsi Male:

i. Wife (Widow)
ii. Son(s)
iii. Daughter(s)
iv. Mother
v. Father
vi. Children of predeceased children

b) Primary heirs of a Parsi Female:

i. Husband
ii. Son(s)
iii. Daughter(s)

Children of pre-deceased children.

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 Annexure - 1

Clarification on Provisions in Nomination Rules

The Banking Companies (Nomination) Rules 1985 have been framed in terms of
Sections 45 ZA to 45 ZF of the Banking Regulation Act, 1949.

1. Deposit Accounts

(i) Nomination facility is intended only for individuals including a sole

proprietary concern.

(ii) There cannot be more than one nominee in respect of single/joint deposit
account.

(iii) Banks may allow variation/cancellation of a subsisting nomination by all the

surviving depositor(s) acting together. This is also applicable to deposits
having operating instructions “Either of Survivor”.

In case of a joint deposit account the nominee’s right arises only after the death of all the
depositors.

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 Annexure – 1(a)

Settlement of Claims in Deposit Account(s) with Various Types of Operational Instructions

 With Nomination

Account in Operational Nominee Situation What is to be done/ options available

the Name of Instructions
A Self X X dies “A” can change the nomination
A Self X A dies “X” will receive the balance amount
A, B Either or Survivor X A dies Balance amount will be payable to “B”
A, B Either or Survivor X B dies Balance amount will be payable to “A”
A, B Either or Survivor X A & B die “X” will receive the balance amount
A, B Jointly X A dies Payable to “B” and legal heirs of “A”
jointly
A, B Jointly X B dies Payable to “A” and legal heirs of “B”
jointly
A, B Jointly X A & B die “X” will receive the balance amount

 Without Nomination

Account in Operational Situation What is to be done/ options available

the Name of Instructions
A Self A dies Balance amount will be payable to the legal heirs or
any one of them if mandated by all of the legal heirs
A, B Either or Survivor A dies Balance amount will be payable to “B”
A, B Either or Survivor B dies Balance amount will be payable to “A”
A, B Either or Survivor A & B die Jointly payable to legal heirs of A & B (or any one of
them if mandated by all the legal heirs)
A, B Jointly A dies Jointly payable to “B” and legal heirs of the “A” (or
any one of them if mandated by all the legal heirs)
A, B Jointly B dies Jointly payable to “A” and legal heirs of the “B” (or
any one of them if mandated by all the legal heirs)
A, B Jointly A & B die Jointly payable to legal heirs of A & B (or any one of
them if mandated by all the legal heirs)

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 Annexure – 2

Settlement of Claims in respect of Deceased Depositors

Checklist of Documents

Claims Document Obtained:

Yes/No
1. Accounts with Nomination Clause:
(i) Application for Deceased Claim from Nominee/Guardian of
Nominee (Annexure-3)
(ii) Copy of Death Certificate (Verified with Original)
(iii) Proof of Identification of Nominee
(iv) Stamped receipt for amount received signed by nominee/person
on behalf of minor nominee (Annexure - 6)
2. Joint Accounts with Either or Survivor/Former or Survivor/Any One of Survivor/ Letter
of Survivor clause (As per mandate/clause in account opening form for payment of
balances to survivor(s)):
(i) Application for Deceased Claim from Nominee/Guardian of
Nominee (Annexure-3)
(ii) Copy of Death Certificate (Verified with Original)
(iii) Stamped receipt for amount received signed by Survivor/s-
(Annexure - 6)
3. For all other cases including accounts without Nomination/Joint Accounts with survivor clause
(for amounts up-to threshold limit of Rs. 40 lakh):
(i) Application for Deceased Claim (Annexure-4)
(ii) Copy of Death Certificate (Verified from Originals)
(iii) Letter of affidavit cum Indemnity signed by all claimant(s) and
sureties (stamp duty payable for affidavit & Indemnity Bond as applicable
from time to time) (Annexure - 5)
(iv) Proof of Authority of Legal Heir(s)
(v) Proof of Identification of Legal Heir(s)
(vi) Proof of Identification, Asset Liability Statement (CBD 23) of
sureties along with documentary evidence
(vii) Stamped receipt for amount received signed by all the legal heir (s) –
(Annexure - 6)
4. Settlement of claims based on the legal representation by way of Succession Certificate, Letter of
Administration, Probate, etc.
(i) Application for Deceased Claim (Annexure-4)
(ii) Copy of Death Certificate (Verified from Originals)
(iii) Legal Representation – Succession Certificate/ Letter of
Administration/ Probate etc.
(iv) Proof of Identification of Legal Heir(s)
(v) Stamped receipt for amount received by all the legal heir (s) eligible
for claim as per legal representation – (Annexure - 6)

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 Annexure – 3
Application for Deceased Claim
(To be used when account has nomination or is a joint account with survivor clause)
To From:
The Branch Manager, _____________________
Aryavart Bank _____________________
Branch____________ _____________________
R.O.______________

Dear Sir,

Re: Deceased Account of

Late Shri/Smt __________________________
Account No (s)__________________________

I/We advise, the demise of Shri/Smt. ________________________________________ on

_________________. He/ She holds the above account(s) at your branch. The account is in the
name (s) of _______________________________________________________________.

A. In case of Nomination
I, ________________________________________________________ son/daughter/wife of
Shri __________________________________ residing at ______________________________
_________________________________________________________________________ am

(i). the registered nominee in the above account (s)

(ii). the person authorized to receive MONIES on behalf of Master/Miss____________________
________________ who is the nominee in the above account(s).

Please arrange to settle the balance in the account in the name of the nominee. I/We have/shall
received/ receive the payment as trustee of the legal heirs of the deceased.
B. In the case of Joint Account
I/We am/are the Survivor(s) in the account No(s)______________________________________
opened jointly with deceased ______________________________ with mode of instructions as
____________________________. Please arrange to settle the claim in the name of Survivor (s).

I/We submit photocopy of the following document(s) together with originals and Original
Passbook, Fixed Deposit Receipt, Unused Cheques in the account(s), etc. Please return the
original Death Certificate and Identity Proof to us after verification.

Death Certificate issued by _____________________________________

Identity proof (required in nomination cases) _____________________________________

Place: Yours’ faithfully

Date:
[Claimant(s)]
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 (Two Bank acceptable witnesses are required in case if claimant(s) are illiterate).
Annexure – 4

Application for Deceased Claim

(To be used for cases other than nomination/joint account with survivor clause)

From,
_______________________
_______________________
_______________________
To,
The Branch Manager
Aryavart Bank
_______________ Branch
_______________ R.O.

Dear Sir,

Re: Deceased Account of

Late Shri/Smt __________________________
Account No (s)__________________________

I/We advise, the demise of Shri/Smt. ________________________________________ on

_________________. He/ She holds the above account(s) at your branch. The account is in the
name (s) of _______________________________________________________________.

I/We lodge my/our claim for the balances with accrued interest lying to the credit of the above
named deceased who died in testate. I/We am/are the legal heirs of the above named deceased
and lodge my/our claim for payment as per the bank’s rules and discretion. The relevant
information about the deceased and the legal heirs are as under:

1. Names in Full of the Parents of the Deceased:

Father _________________________________________________
Mother_________________________________________________
2. Religion of the Deceased: _________________________________

3. Details of living (i) Husband (ii) Wife (iii) Children (iv) Father (v) Mother (vi) Brothers
(vii) Sisters (viii) Grand Children. If Hindu Joint Family, the name and address of the
Karta and Co-Parceners with their respective ages as on the date of the claim.

Full Name/Address Occupation Relationship with Deceased Age

I. _______________________ __________ _______________________ _____

II. _______________________ ___________ _______________________ _____

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III. _________________________ __________ _______________________ ______

IV. __________________________ __________ _______________________ ______

V. __________________________ __________ _______________________ ______

VI. __________________________ __________ _______________________ ______

VII. __________________________ __________ _______________________ ______

4. Name or names of the Guardian/s of the minor, Children of the depositors: _______________
___________________________________________________________________________

(a) Whether Natural Guardian ___________

(b) Whether Guardian appointed by Court of Law in India. If so, attach a certified copy or
duly attested copy of such order
____________________________________
(c) Custody of the Minor/Minors is/are with? ________________________

5. Claimant/s name/s and address in full

(i) _______________________________________________________________________

(ii) _______________________________________________________________________

(iii)_______________________________________________________________________

I/We submit the following documents. Please return the original death certificate to us after
verification.

1 Death Certificate (Original + 1 Photocopy) issued by the Competent Authority

2 Letter of Indemnity
3 Original Passbook (s), Term Deposit Receipt(s), Unused Cheque (s)
4
5
6
7
8
9

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I/We request you to pay the balance amount lying to the credit of the above named deceased to
______________________________________________________ on my/our behalf.

I/We hereby solemnly affirm that the above statements are true and correct to the best of my/our
knowledge and belief.

Place: Yours’ faithfully,

Date:

Signature of Claimant (s)

Name of Claimant Address Signature/Thumb Impression

1 .

2 .

3 .

4 .

5 .

6 .

7 .

8 .

9 .

10 .

11 .

12 .

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 Annexure – 5
Affidavit cum Indemnity Letter

In respect of payment of balance in deposit accounts of deceased person

(To be stamped with the duty payable for Affidavit & Indemnity Bond)

I/We Mr./Ms ______________

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

_____________________________________________________________________________

(Please mention above as – (name/names of the claimants), (s/o, w/o, d/o), age and address)

do hereby solemnly affirm and state as follows.

1. I/We am/are the legal heirs of Mr./Ms____________________________________

(name of the deceased account holder) and the deceased is my/our _________________
(father/ mother/ wife/ husband/ son/ daughter, etc.).

2. I/We further state that I/We the following, are the only legal heirs entitled to claim the
outstanding deposit balance in the account(s) of the deceased with you.

S. No. Name Age Relationship with

the deceased
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.

3. I/We further state that the deceased was holding following account/s (hereinafter
referred to as “the account’s”) at __________________ Branch of _________________
Bank (hereinafter referred to as “The Bank”).

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 S. No. Type of Account Account No. Balance Interest up to

At the time of the death of the deceased the account’s were having a credit of Rs.
____________ (balance amount in the account’s) which includes interest up to
____________ (date of payment) amount to Rs. __________ (amount being now paid).

4. I/We affirm that I/We am/are the sole legal heirs of the deceases who is are entitled to
receive the amount standing in the credit of the account belonging to the deceased.

5. I/We have requested the bank to make the payment of the amount standing in the
credit of the account belonging to the deceased together with interest thereon as
applicable to shri/smt __________________________ being mandated one of the
legal heirs for and on behalf of all the legal heirs.

6. I/We are aware that the Bank has agreed to settle our claims relying on this affidavit
and I/We agree to indemnify the bank in respect of such payment against any claim
made by any person for the amount standing to the credit of the account of the
deceased in future.

7. I/We for ourselves and my/our respective heirs, executors and administrators jointly
and severally agree, affirm and undertake that the bank, its successors and assignees
and its managers, agents, officers and servants and their respective estates and effects
are and shall from time to time and at all times hereafter be kept safe and saved
harmless and indemnified for and in respect of such payment and against all actions,
losses, cost, charges, expenses and demands whatsoever in respect of the said payment
and bind to pay to the Bank (herein after referred to as “the Bank”) on demand the
amount of any such losses, damages, costs, charges and expenses together with
interest from the date of payment made by you until reimbursement by me/ us.

As the averments made herein before are true and correct and I/We put my/our signature/mark
on this ________ Day of ____________ 20__ at ______________________.

Signature (s) of Deponent/s (Claimant/s)

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In consideration of the premises, we the undersigned___________________________________
______________________________________________________________________________
______________________________________________________________________________
______ [Names of Surety (ies)] jointly and severally guarantee to you, Aryavart Bank, the
payment of all moneys due under the aforesaid indemnity by the executants thereof.

1. Signature ___________________________
Name ________________________________
S/o, D/o, W/o ___________________________
Address _______________________________
_______________________________________

2. Signature ___________________________
Name ________________________________
S/o, D/o, W/o ___________________________
Address _______________________________
_______________________________________

3. Signature ___________________________
Name ________________________________
S/o, D/o, W/o ___________________________
Address _______________________________
_______________________________________

Affidavit to be attested by Notary Public

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 Annexure – 6
RECEIPT

Received with thanks from Aryavart Bank, _______________________________ Branch,

a sum of Rs. _______________ (Rupees ______________________________________
only) by Banker’s Cheque No. ________________________ dated ________________ /
transfer the amount in account no. _____________________ maintained with __________
Branch ________________ Bank in favour of ___________________________________
____________________________ in full and final settlement of my/our claim as
successor on the balance in ________________________ Account No(s) ______________
_____________________ standing in the name of the deceased Shri/ Smt./ Kum.
____________________________________. I/We do not have any other claim from the
Bank henceforth.
Place:
Date:

(Signature of all the legal heirs over a Revenue Stamp)

Declaration, in case, funds are settled in favour of a Minor

I, _____________________________________ father/mother and natural guardian of

_______________________________________ hereby certify that the proceeds of your
Banker’s Cheque No. _____________________/ transfer in account no.
_________________ dated ____________ favouring ______________________ issued by
your in settlement of the balance in account numbers ________________________ of Late
____________________________ will be utilized for the benefit of the minor only.

(Signature of Father/ Mother and Natural Guardian of Minor)

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 CHAPTER 13

DETECTION AND
IMPOUNDING
OF
COUNTERFEIT NOTES

379 | P a g e
 CHAPTER 13

DETECTION AND IMPOUNDING OF COUNTERFEIT NOTES27

13.1 Authority to Impound Counterfeit Notes The Counterfeit Notes can be

impounded by:
(i) All Banks
(ii) All Treasuries and Sub-Treasuries.
(iii) Issue Offices of Reserve Bank of India.

13.2 Detection of Counterfeit Notes

Banknotes tendered over the counter should be examined for authenticity through
machines.

Similarly, banknotes received directly at the back office / currency chest through bulk
tenders should also be examined through machines.

No credit to customer’s account is to be given for Counterfeit Notes, if any, detected in the
tender received over the counter or at the back-office / currency chest.

In no case, the Counterfeit Notes should be returned to the tenderer or destroyed by the
bank branches / treasuries. Failure of the banks to impound Counterfeit Notes detected at
their end will be construed as willful involvement of the bank concerned in circulating
Counterfeit Notes and penalty will be imposed.

13.3 Impounding of Counterfeit Notes

Notes determined as counterfeit shall be stamped as "COUNTERFEIT NOTE" and
impounded in the prescribed format (Annex I). Each such impounded note shall be
recorded under authentication, in a separate register.

13.4 Issue of Receipt to Tenderer

When a banknote tendered at the counter of a bank branch/back office and currency chest
or treasury is found to be counterfeit, an acknowledgement receipt in the prescribed format
(Annex II) must be issued to the tenderer, after stamping the note as in Paragraph 3 ibid.
The receipt, in running serial numbers, should be authenticated by the cashier and
tenderer. Notice to this effect should be displayed prominently at the offices / branches for
information of the public. The receipt is to be issued even in cases where the tenderer is
unwilling to countersign it.
13.5 Detection of Counterfeit Notes - Reporting to Police and other bodies

The following procedure should be followed while reporting incidence of detection of

Counterfeit Note to the Police:

27
RBI Master Circular – Detection and Impounding of Counterfeit Notes, Circular No. RBI/2019-20/01, DCM (FNVD) G
– 1/16.01.05/2019-20 dated July 01, 2019.
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For cases of detection of Counterfeit Notes up to 4 pieces, in a single transaction, a
consolidated report in the prescribed format (Annex III) should be sent by the Nodal Bank
Officer to the police authorities or the Nodal Police Station, along with the suspect
Counterfeit Notes, at the end of the month.

For cases of detection of Counterfeit Notes of 5 or more pieces, in a single transaction, the
Counterfeit Notes should be forwarded immediately by the Nodal Bank Officer to the
local police authorities or the Nodal Police Station for investigation by filing FIR in the
prescribed format (Annex IV).

A copy of the monthly consolidated report / FIR shall be sent to the Forged Note Vigilance
Cell constituted at the Head Office of the bank (only in the case of banks), and in the case
of the treasury, it should be sent to the Issue Office of the Reserve Bank concerned.

Acknowledgement of the police authorities concerned has to be obtained for note/s

forwarded to them both as consolidated monthly statement and for filing of FIR. If the
Counterfeit Notes are sent to the police by insured post, acknowledgement of receipt
thereof by the police should be invariably obtained and kept on record. A proper follow-up
of receipt of acknowledgement from the police authorities is necessary. In case any
difficulty is faced by the Offices / Branches due to reluctance of the police to receive
monthly consolidated statement / file FIRs, the matter may be sorted out in consultation
with the Nodal Officer of the police authority designated to coordinate matters relating to
investigation of Counterfeit Banknotes cases. The list of Nodal Police Stations may be
obtained from the Regional Office concerned of the Reserve Bank of India.

In order to facilitate identification of people abetting circulation of Counterfeit Notes,

banks have been advised to cover the banking hall / area and counters under CCTV
surveillance and recording and preserve the recording.

Banks should also monitor the patterns / trends of such detection and suspicious trends /
patterns should be brought to the notice of RBI / Police authorities immediately.

The progress made by banks in detection and reporting of Counterfeit Notes to Police,
RBI, etc. and problems thereof, should be discussed regularly in the meetings of various
State Level Committees viz. State Level Bankers’ Committee (SLBC), Standing
Committee on Currency Management (SCCM), State Level Security Committee (SLSC)
etc.

The data on detection of counterfeit Indian notes at bank branches and treasuries should be
included in the monthly returns forwarded to the Reserve Bank Issue Offices as indicated
in para 10 below.

The definition of 'counterfeiting' in the Indian Penal Code covers currency notes issued by
a foreign government authority as well. In case of suspected foreign currency note
received for opinion from the police and government agencies, etc., they should be advised
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to forward the case to the Interpol Wing of the CBI, New Delhi after prior consultation
with them.

The Government of India has framed Investigation of High Quality Counterfeit Indian
Currency Offences Rules, 2013 under Unlawful Activities (Prevention) Act (UAPA),
1967. The Third Schedule of the Act defines High Quality Counterfeit Indian Currency
Note. Activity of production, smuggling or circulation of High Quality Counterfeit Indian
Notes has been brought under the ambit of UAPA, 1967.

13.6 Examination of the Banknotes before Issuing over Counters, Feeding ATMs and
Remitting to Issue Offices of the Reserve Bank

The banks should re-align their cash management in such a manner so as to ensure that
cash receipts in the denominations of ₹100 and above are not put into re- circulation
without the notes being machine processed for authenticity. The said instructions shall be
applicable to all bank branches, irrespective of the volume of daily cash receipt. Any non-
compliance will be construed as violation of the Directive No.3158/09.39.00
(Policy)/2009-10 dated November 19, 2009 issued by the Reserve Bank.

In order to obviate complaints regarding receipt of Counterfeit Notes through ATMs, and
to curb circulation of counterfeits, it is imperative to put in place adequate safeguards /
checks before loading ATMs with notes. Dispensation of Counterfeit Notes through the
ATMs would be construed as an attempt to circulate the Counterfeit Notes by the bank
concerned.

Detection of counterfeits in chest remittances is also liable to be construed as willful

involvement of the chest branches concerned in circulating Counterfeit Notes and may
attract special investigation by police authorities, and other action like suspending the
operation of the chest concerned.

Penalty at 100% of the notional value of Counterfeit Notes, in addition to the recovery of
loss to the extent of the notional value of such notes, will be imposed under the following
circumstances:

a) When Counterfeit Notes are detected in the soiled note remittance of the bank.
b) If Counterfeit Notes are detected in the currency chest balance of a bank
during Inspection / Audit by RBI.
In terms of DPSS.CO.OD.No.1916/06.07.011/2018-19 dated March 7, 2019, all
guidelines, safeguards, standards and control measures applicable to banks relating to (a)
currency handling, and (b) cyber-security framework for ATMs, shall also be applicable to
the WLA Operators.

13.7 Designating Nodal Bank Officer

Each bank should designate a Nodal Bank Officer, district-wise and notify the same to the
Regional Office of RBI concerned and Police Authorities. All cases of reporting of
Counterfeit Note detection as indicated in Para 5 should be done through the Nodal Bank
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Officer. The Nodal Bank Officer will also serve as the contact point for all Counterfeit
Note detection related activities.

13.8 Establishment of Forged Notes Vigilance Cell at Head Office of Bank

Each bank shall establish at its Head Office, a Forged Note Vigilance (FNV) Cell to
undertake the following functions:

i. Dissemination of instructions issued by the Reserve Bank on Counterfeit

Notes to bank’s branches. Monitoring the implementation of these instructions.
Compilation of data on detection of Counterfeit Notes, and its submission to Reserve
Bank, FIU-IND and National Crime Records Bureau (NCRB) as per extant instructions.
Follow-up of cases of Counterfeit Notes, with police authorities / designated nodal officer.
ii. Sharing of the information thus compiled with bank’s CVO and report to
him / her all cases of acceptance / issue of Counterfeit Notes over the counters.
iii. Conducting periodic surprise checks at currency chests where shortages /
defective / Counterfeit Notes etc. are detected.
iv. Ensuring operation of Note Sorting Machines of appropriate capacity at
all the currency chests / back offices and closely monitoring the detection of Counterfeit
Notes and maintaining the record of the same. Ensuring that only properly sorted and
machine examined banknotes are fed into the ATMs / issued over the counters and to put
in place adequate safeguards, including surprise checks, both during the processing and in
transit of notes.

FNV Cell shall submit status report on a quarterly basis covering the aforesaid aspects to
the Chief General Manager, Department of Currency Management, Reserve Bank of India,
Central Office, Amar Building, Fourth Floor, Sir P. M. Road, Fort, Mumbai 400 001 / to
(email) and to the Issue office of the Regional office of Reserve Bank under whose
jurisdiction the FNV Cell is functioning, within a fortnight from the conclusion of the
quarter under report. The said report should be sent by e- mail. No hard copy need be sent.

In order to update the record of the addresses of the FNV Cells, the bank shall furnish by
e-mail, in the prescribed format (Annex V), the particulars to the Reserve Bank every year,
as on 1st July. No hard copy need be sent.

13.9 Provision of Ultra-Violet Lamp and Other Infrastructure

With a view to facilitating the detection of Counterfeit Notes, all bank branches /
identified back offices should be equipped with ultra-violet lamps / other appropriate
banknote sorting / detection machines. In addition, all currency chest branches should be
equipped with verification, processing and sorting machines and should be used to their
optimum capacity. Such machines should conform to the guidelines on 'Note
Authentication and Fitness Sorting Parameters' prescribed by the Reserve Bank.

The banks shall maintain a daily record of the notes processed through the Note Sorting
machines, including the number of counterfeits detected.

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The banks should also consider providing at least one counting machine (with dual display
facility) for public use at the counter.

13.10 Reporting of Data to RBI / NCRB / FIU-IND

By All Bank branches

Data on Counterfeit Notes detected by all the branches of the bank shall be reported in the
prescribed format, on a monthly basis. A statement (Annex VI) showing the details of
Counterfeit Notes detected in the bank branches during the month shall be compiled and
forwarded to the Issue Office of Reserve Bank concerned so as to reach them by 7th of the
next month. A “nil “report may be sent in case no counterfeit note has been detected
during the month.

Under Rule 8 (1) of Prevention of Money Laundering (Maintenance of Records)

Amendment Rules, 2013, Principal Officers of banks are also required to report
information on cash transactions where forged notes have been detected to The Director,
FIU-IND, Financial Intelligence Unit- India, 6th Floor, Hotel Samrat, Chanakyapuri, New
Delhi-110021, by the 15th day of the succeeding month, by uploading the information on
the FINnet Portal. Similarly, data on Counterfeit Note detection is also to be uploaded on
the web-enabled software of National Crime Records Bureau, New Delhi at their website.

13.11 Preservation of Counterfeit Notes Received from Police Authorities

All Counterfeit Notes received back from the police authorities / courts may be carefully
preserved in the safe custody of the bank and a record thereof be maintained by the branch
concerned. FNV Cell of the bank shall also maintain a branch-wise consolidated record of
such Counterfeit Notes.
These Counterfeit Notes at branches should be subjected to verification on a half- yearly
basis (on 31st March and 30th September) by the Officer-in-Charge of the bank office
concerned. They should be preserved for a period of three years from the date of receipt
from the police authorities.
They may thereafter be sent to the Issue Office of Reserve Bank of India concerned with
full details.

Counterfeit Notes, which are the subject matter of litigation in the court of law should be
preserved with the branch concerned for three years after conclusion of the court case.

13.12 Detection of Counterfeit Notes - Training of Staff

It is necessary to ensure that the cash handling staff in banks and treasuries / sub-
treasuries are fully conversant with the security features of a banknote.

With a view to educating the branch staff on detection of Counterfeit Notes, the design and
security features of all the banknotes shown in Annex VII have been supplied to all the
banks / treasuries with instructions to display them prominently at the branches for
information of the public. Posters of the 2005-06 series of banknotes have also been
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supplied to bank branches for display at the branches. Details of security features of the
New Design banknotes of `2000, `500, `200, `100, `50, `20 and `10 are available at the
link https://www.paisaboltahai.rbi.org.in

Details of other banknotes are also available under ‘Know your Banknotes’ at the above
link.

The Controlling Offices / Training Centers should also organise / conduct training
programmes on the security features of banknotes for members of staff to enable detection
of Counterfeit Notes at the point of receipt itself. The banks should ensure that all bank
personnel handling cash are trained on features of genuine Indian bank notes. These
trainings should cover detection, impounding and reporting of Counterfeit Notes. The
Reserve Bank will also provide faculty support and training materials.

* For the purpose of knowing the exact figures and designs of “Bank Notes issued by
the Reserve Bank of India since 1967”, please refer RBI Master Circular – Detection
and Impounding of Counterfeit Notes, Circular No. RBI/2019-20/01, DCM (FNVD)
G – 1/16.01.05/2019-20 dated July 01, 2019, Annexure VII, Page No. 14 to 22.

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