Banking Operations Manua l 1 Banking Operations Manual THE A.P. STATE CO.OPERATIVE BANK LTD TROOP BAZAR :: HYDERABAD _________________________________________________ Vol. I Banking Operations Manua l 2 P R E F A C E This Banking Operations Manual is prepared with a view to provide a ready guide to the officers and staff of the Bank – Andhra Pradesh State Cooperative Bank (APCOB) - in day-to-day banking operations. The Manual is prepared based on the extant banking law, practices and is an attempt to provide guidance to the front office functionaries in the Banking operation of the Bank. It is compiled in January - March 2008 and mainly covers the aspects which are currently relevant to the Andhra Pradesh State Co-operative Bank (APCOB). The Manual is to be used keeping in view any changes in rules and practices over time. This is also not a document to provide any full fledged legal framework of banking operations and is in the nature of a guide to operatives and not a rigorous substitute for extant circular instructions, directives etc. The language used is also one to facilitate understanding rather than being legalistic. Throughout this Manual, based on the context, the reference to Masculine gender is to be read as reference to Feminine gender also and similarly the usage of singular be read contextually to include the plural. In compiling this document, use has extensively been made of the Operational Manual for Co- operative Banks [2004 edition] brought out by the National Federation of State Co-operative Banks, Mumbai, which is gratefully acknowledged. This Manual has been gone through in detail and vetted by various senior officers of Head Office and the Co-operative Training Institute of the Bank. The final version is brought out after detailed consultations with well- experienced officers at the Head Office and Branches. Over a period of time it is expected that this manual will be vastly improved based on inputs from the functionaries at different levels based on their active feedback. Further volumes of this Manual are expected to be brought out covering various other areas in due course. It is hoped that this volume will be useful as a basic guide for the Front Office operations in Banking in the Bank. M.S. Rama Rao Chief General Manager Centralised Monitoring, Inspection & Audit Dept Banking Operations Manua l 3 FOREWORD A Banking Operations Manual for the Head Office main branch and branches of the Bank has been a long felt need. The present ‘Banking Operations Manual’ is a team effort by the senior officers of the Bank in consultation with the front office functionaries. The effort has been co- ordinated by the Centralised Monitoring, Inspection & Audit Department of the Bank. The present volume attempts to bring at one place the important aspects of Banking operations for reference of the functionaries at the delivery point of the customer services in the Bank. It is also an effort to streamline and standardize the procedures to usher in the various systems, procedures and controls and the first of a series of such initiation planned by the Bank. Apart from incorporating up-to-date instructions on Banking operations and the latest guidelines of NABARD on Safe Deposit Lockers and Settlement of Claims of deceased depositors, the volume provides the customer relationship policy of the Bank and also the customer service norms of the Bank. It is also envisaged that this Manual would be updated and revised from time to time based on the experience and feedback of the staff at various levels and to incorporate the changes that take place in the practices in Banking. I wish that the Manual will be put to successful use to improve management of the Bank and provide better services to the customers and would pave the way for greater codification and publication of the functions and services of the Bank. T.S. Appa Rao, I.A.S., Managing Director Banking Operations Manua l 4 CONTENTS CHAPTER No. TITLE PAGE No. 1 Introduction 01 2 Customer Identification & Introduction – Opening of Accounts 04 3 Nomination 25 4 Current Accounts 34 5 Savings Bank Accounts 46 6 Maintenance of Accounts & Operational Procedures 56 7 Cash and it’s custody 72 8 Clearing 78 9 Term Deposits - General 84 10 Fixed Deposits 91 11 Reinvestment Deposit Gruhalakshmi scheme 100 12 Recurring Deposits 104 13 Local Cheques / Demand Drafts & Outstation Cheques – Purchase / Instant Credit 109 14 Demand Drafts & Pay Orders 112 15 Safe Deposit Lockers 119 16 Settlement of Claims of Deceased Depositors 133 Appendix - A Customer Relationship Policy 153 Appendix - B Customer Service Norms 158 Banking Operations Manua l 5 CHAPTER - 1 Introduction General: This Manual mainly deals with the Banking operations and is intended as a guide for staff functioning in Banking department and branches of the Andhra Pradesh State Co-operative Bank (APCOB). The operations of the Bank are fully computerized under a Core Banking System (CBS). As such, this Manual does not attempt to detail the accounting, calculation processes, vouchering etc., as would be relevant to the Manual environment. The procedures involved in handling the various types of accounts of customers are dealt with in this Manual for giving a better understanding and background reference to the front office functionaries in the Branches and Banking wing of the Bank. The current volume deals with the customer relationship aspects of Banking in the Bank and focuses on the handling of deposit accounts. Salient features of deposit schemes: CURRENT ACCOUNT: Accounts under this type can be opened by Individuals, Sole Proprietary Concerns, Partnership Firms, Companies, Clubs, Associations, Trusts, Govt./Local Bodies, Cooperative Societies etc. This Account is meant for Individuals / Institutions having large number / volume of transactions, mainly for meeting their day-to-day business and operational requirements for parking their operational fund balances. No interest is provided on the balances in Current Account as the Bank renders a considerable service in operation and maintenance of the Account. These Accounts are operated only through the cheques provided by the Bank drawn either in individual or representative capacity, either singly or jointly. The Cheques, Bills, DDs etc of parties are collected through the Current Accounts and cash/clearing payments are made in respect of cheques issued by the Account holders. Over Drafts, secured or otherwise, are provided as per the separate loan rules in this regard. For Accounts of individuals facility of withdrawal from ATM is also provided. SAVINGS BANK ACCOUNT: The Savings Bank Accounts are meant for individuals operating singly or jointly with other individuals, Associations, Clubs etc. The Savings Bank accounts can be operated either with cheque book facility or without cheque book facility. Where cheque book facility is not provided or not opted for, remittances in cash and withdrawals through withdrawal slip are allowed. There is Banking Operations Manua l 6 a limit on the number of transactions allowed in Savings Bank account and these accounts are not meant for business or trading activities etc. Interest at the rate as prescribed by RBI (presently 3.5% p.a.) is paid on the monthly minimum balance maintained in the account between 10th and last day of the month. The interest is computed for the full month on the above basis and credited once in 6 months to the account. Where cheque book facility is extended, the party can draw cheques on the account which can be collected by 3rd parties through the clearing office. Deposits in cash and cash withdrawals by way of cheque or through ATM is allowed. Cheques / DDs etc., favouring the account holder are collected into the account. A special No Frills Savings Account called Abhyudaya S.B. A/c is made available by the Bank to facilitate financial inclusion of persons of lower economic standing, getting access to banking facilities. Under this, account can be opened with Rs. 25/ There is no minimum balance stipulated. Ten withdrawals are allowed per quarter. Maximum balance at any point of time is stipulated at Rs. 25,000/ There is no service charge or incidentals for these accounts and interest will be paid at the rate applicable for normal Savings Bank Accounts. No cheque book or ATM cards are issued for these accounts and collection of cheques and DDs are not undertaken through these accounts. FIXED DEPOSITS: These are deposits of specified sum of money permitted to be made in multiples of Rs. 100/- for a specified period. For example, a Fixed Deposit of Rs. 5000/- for 12 months period. Fixed Deposits may be accepted for Days, Months, Years or their combination, as per request of customer. If the deposit is for a minimum period of 12 months, then interest may be paid monthly, quarterly, half-yearly or yearly. Minimum period of deposit is 7 days for Rs. 1.00 lakh or more and 15 days for deposits of below Rs. 1.00 lakh. Maximum period of deposit is 120 months or 10 years. These deposits are repayable to the customer on expiry of the period for which the deposit is made. However, the account holders are permitted to make premature encashment of such deposits in case of exigency / need – in such an event the principal amount is paid along with interest as applicable for the period for which the deposit was actually with the Bank, less penalty of 1 percentage points on the applicable rate of interest. The interest is normally paid at quarterly rests for credit of the customer’s Savings / Current account as per standing instructions or allowed to be withdrawn in cash by the customer or paid to him by way of Bankers Cheque / Pay Order and by way of D.D. for out-location customers. The Bank will pay interest at monthly rests also if the customer so desires by duly discounting the interest for such monthly payment. Banking Operations Manua l 7 Loans against the Fixed Deposit may be issued to the customers on surrender of duly discharged Fixed Deposit receipt with a letter of lien through a separate Depositor Loan A/c for which interest is charged at 2% over the rate provided on the deposit. In the event of foreclosure of deposit, the depositor loan is also foreclosed with the rates of interest charged at 2% over the rate allowed on the foreclosure of the deposit. [For foreclosure of deposit, the rate of interest extended is applicable rate on date of deposit for the period for which the deposit remained with the Bank minus 1% ]. GRUHALAKSHMI DEPOSIT: This deposit is essentially a term deposit which is accepted for a minimum period of 6 months and for a maximum period of 120 months in multiples of Rs. 100/-, wherein the quarterly interest payable on the deposit is cumulated and the total cumulative interest earned during the currency of the deposit is paid in full along with the principal on the expiry of the period of deposit. Deposits, as also Depositor loans, under this Head are also subject to the norms of foreclosure as mentioned under Fixed Deposit. RECURRING DEPOSIT: Deposits under this category are in the nature of fixed amounts being paid in by the depositor every month subject to a minimum of Rs. 50/- and in multiples of Rs. 10/- thereafter for a specified period of years involving monthly payments ranging from 12 to 120 months. Under this deposit scheme, interest is cumulated at quarterly rests based on month-end balances in the account and pre-determined amount is fixed as payable at the end of the period of deposit. The rules relating to foreclosure and grant of loan against this deposit are similar to that under Fixed Deposit except that in the event of foreclosure of a Recurring Deposit, interest is paid based on monthly balances without cumulation for the incomplete quarter. In computerized environment, the basic procedures of interest calculation etc., are inbuilt in the Core Banking Solution (CBS) and as such the users are fully guided by the system. However, the necessary verification and checking as required in respect of various operations are essential and need to be performed by the concerned functionaries. ~~~ Banking Operations Manua l 8 CHAPTER - 2 Customer Identification and Introduction: Opening of Accounts Know Your Customer (KYC) Norms: It is imperative that while opening accounts, the authorized officer must be satisfied about the proper identity, standing and residential proof of the prospective customer. It is only after furnishing of proper proof of identity through photo identity card and acceptable address proof that accounts are to be opened. The following is the customer verification and identification procedure: Customer Identification Procedure Features to be verified and documents that may be obtained from customers Features Documents ( latest / valid ) Accounts of individuals - Legal name and any other names used - Correct permanent address (i) Passport (ii) PAN card (iii) Voter’s Identity Card (iv) Driving Licence (v) Identity Card (subject to the bank’s satisfaction) (vi) Letter from a recognized public authority or public servant verifying the identity and residence of the customer to the satisfaction of bank. (i) Telephone bill (ii) Bank account statement (iii) Letter from any recognized public authority (iv) Electricity Bill (v) Ration Card (vi) Letter from employer (subject to satisfaction of the bank) (any one document which provides customer information to the satisfaction of the bank will suffice). Accounts of companies - Name of the company - Principal place of business - Mailing address of the company - Telephone / Fax number (i) Certificate of incorporation and Memorandum & Articles of Association (ii) Resolution of the Board of Directors to open an account and identification of those who have authority to operate the account (iii) Power of Attorney granted to its Managers, officers or employees to transact business on its behalf (iv) Copy of PAN allotment letter (v) Copy of the telephone bill. Banking Operations Manua l 9 Accounts of partnership firms - Legal name - Address - Names of all partners and their addresses - Telephone numbers of the firm and partners (i) Registration certificate, if registered (ii) Partnership Deed (iii) Registered Power of Attorney granted to a partner or an employee of the firm to transact business on its behalf (iv) Any officially valid document identifying the partners and the persons holding the Registered Power of Attorney and their addresses (v) Telephone bill in the name of firm/partners. Accounts of Trusts & Foundations - Names of Trustees, Settlers, Beneficiaries and Signatories - Names and addresses of the Founder, the Managers/ Directors and the Beneficiaries - Telephone / Fax numbers (i) Certificate of Registration, if registered (ii) Registered Power of Attorney granted to transact business on its behalf (iii) Any officially valid document to identify the Trustees, Settlers, Beneficiaries and those holding Power of Attorney, Founders/Managers/Directors and their addresses (iv) Resolution of the managing body of the foundation/association (v) Telephone bill. The original documents are to be verified, copies taken and duly authenticated by the officer of the Bank stating ‘verified with the original’. Introduction of Customer Accounts: Salient features: a. It is important that every prospective customer who wants to open any type of deposit account in the branch must be properly introduced to the Bank by a respectable person known to the Bank (who may not necessarily be a constituent of the bank) or by an existing customer of the Bank with satisfactory conduct of transactions in deposit account (SB/C/a). The introducer must normally call on the Bank and sign in the column specifically provided for the purpose in the account opening application form. Introduction is obtained primarily to get protection under Section 131 of the ‘Negotiable Instruments Act’ and all the members of the staff in the branch must be made aware of the importance of a proper introduction. Banking Operations Manua l 10 b. The legal protection given to bankers in respect of cheques collected “in good faith and without negligence” is available only if the account is opened with proper introduction. c. Once a party has been properly introduced to the Bank for opening an account that party need not bring fresh introduction at the time of opening another type of account (e.g. Current Account Holder opening a SB/FD/RD/CC or a Savings Bank Account Holder opening a CA/FD/RD/CC etc.) d. However, if a party has Term Deposit with the Bank and such investment has been made without any introduction and he wants to open a Savings Bank or Current Account proper introduction is necessary to open such Savings Bank / Current Account. e. The need for introduction in the case of limited companies (unless they are old and well known) is greater as they may form a convenient medium for questionable transactions. 2. Who can introduce a customer? Introduction of a new customer by an existing Current / Savings Bank Account Holder is considered to be the best form of introduction. However, a respectable person well known to the bank or a staff of the bank can also introduce a new customer (except in case of opening Current Account). 3. Who cannot introduce a customer? a. A Term Deposit holder who has no Current / Savings Bank Account cannot introduce another person to open a Current / Savings Bank Account. b. A minor Account Holder cannot introduce. c. It is desirable that there should be a reasonable time gap of at least six months for a new Account Holder of the bank to introduce another new customer to the bank. This will enable the bank to assess whether the operations by the existing Account Holder are in order or not. [...]... will; – Father’s father; – The Executor appointed by the will of the father’s father iii iv v vi If none of the above persons is alive only the person appointed by the competent court can act as the guardian of a minor Under no circumstance mother can act as guardian of the minor under Mohammedan Law In respect of Christians, either the Father or Mother is the natural guardian to the Minor The RBI has... - the husband If both the father and mother are not alive, no one other than the person appointed by a competent court can act as a guardian of a minor ii Under Mohammedan Law, the father is the guardian for the property of the minor but after the father’s death, the following persons are entitled, in the order mentioned hereunder, to be the guardians of a minor: – the Executor appointed by the father’s...Banking Operations Manual 4 Method of obtaining introduction a b 5 The bank must insist that the Introducer must come to the Bank in person and sign the document before the Officer In case the Introducer does not come in person, then the introduction may be got confirmed by an official of the Bank by contacting the Introducer and recording the same in the opening form or by issue of letter In the. .. account in the status of guardian b Guardians: i The natural guardian of a Hindu Minor in respect of Minor’s property according to the Hindu Majority and Guardianship Act 1956 is: – in the case of a boy or unmarried girl the father and if the father is not alive, the mother; – in the case of illegitimate boy or illegitimate unmarried girl the mother and if she is not alive the father; – in the case of... name of the individual with the addition of the words “Executor” or “Administrator.” 22 Banking Operations Manual g Hindu Undivided Family (HUF) Account: i The Bank may open accounts in the names of joint Hindu families The account should be opened in the name of ‘Karta’ (senior male member of the family) or in the name of the family business The bank has to obtain two copies of the photographs of the. .. application form The officer authorizing the opening of Current and Savings Bank Accounts has to authenticate the same by affixing the round stamp of the branch and his signature with date at the bottom corner on the face of the second copy of photograph before affixing the same to the Pass Book In the case of Savings Bank accounts opened by minors of age 12 years and above, photographs of the Account Holder... standing in the name of the deceased depositor d But the claim should be settled first in favour of the nominee by following the procedures laid down for settlement of claims e By making payment of the deposit amount to the nominee, the bank gets a good and valid discharge It is entirely the responsibility of the nominee to account the money with any legal heir(s) of the deceased and the bank is in... guardian appointed by the Court Shri Krishna (or) Ram (Minor) by himself 18 Banking Operations Manual ix x Date of Birth of the minor must be noted and authenticated by an authorised officer of the Bank On the date of minor attaining majority, the bank has to issue a notice in the prescribed format with regard to the eligibility of the minor to operate the account personally On the date of minor attaining... obtained In the case of institutional customers, a set of photographs of all the officials authorized to open and operate the account must be obtained Name of the account holder and the account number have to be written on the back of the photographs and the officer authorizing the opening of the account has to affix his signature on the reverse of the photographs with date before stapling the same to the. .. unless the nomination is changed, in which case, a fresh nomination is required 8 Some clarifications: a Upon the death of the sole depositor in the case of deposit in the name of an individual or upon the death of one or all of the depositors in a deposit in the names of two or more individuals, the names of the deceased depositors in the deposit cannot be substituted by the name of the nominee The name . Operations Manual is prepared with a view to provide a ready guide to the officers and staff of the Bank – Andhra Pradesh State Cooperative Bank (APCOB). under the Income Tax Act, 1961. n) Zilla Parishads / Gram Panchayats only in respect of Jawahar Rojgar Yojana Funds. o) Nagar panchayats, Nagar Palikas and