Sub-staff to Clerk Promotion Booklet PDF

Promotion Booklet Subordinate Staff to Clerical Cadre पदोन्नति परीक्षा के लिए सहायक सामग्री "सपनों को पाने की चाहत, मेहनत को अपना साथी बना लेती है ।” 2024 HO CLI | Head Office | Delhi FOREWORD Dear Promotion Aspirants, Many Congratulations on taking this important step in your career by preparing for the upcoming promotion exam. This journey is not just about moving up the ladder but about taking on bigger roles, new challenges, and contributing more to the success of Punjab National Bank. As the saying goes, "The only way to achieve great work is to love what you do." Let this encourage you to give your best in preparing for this examination. Every bit of effort you put in today will bring you closer to your goals and help you make a meaningful impact on your professional journey. To assist you in your preparation, Team CLI has created a Promotion booklet “Subordinate Staff to Clerical Cadre” which aligns with the training schedule and exam syllabus. I want to commend the team for putting together this helpful resource which will come in handy during the preparations. Preparation is key to success. Take some time to explore the Promotion Corner under the Knowledge Repository, where you’ll find all the necessary materials to guide you. Remember, as they say, "A little progress each day adds up to big results." Stay focused, trust your abilities, and work consistently toward your goal. I wish you the very best for the exam. Your hard work and determination will surely take you to greater heights and help you to contribute to our bank’s success. Pawan Singh GM (L&D) Table of Contents Sr. No. Topic Page No. 1. History of Bank/Structure/Verticals 2 2. Indian Banking system, Banking Regulation Act, RBI, NI Act 7 with emphasis on Endorsement, collection, payment of cheque etc. 3. KYC-AML Guidelines, 25 4. Guidelines on Customer Service (Various committee, RBI/Bank 30 Guidelines, Redressal/ Grievances system) Ombudsman, BCSBI etc. 5. Various types of customers and Banker Customer Relationship 32 6. Deposit Schemes 37 7. General Credit Awareness – Demand Loan, Term Loan, CC, 51 OD etc. 8. IT Products and alternate delivery channel- PNB One, PABL, 53 PAPL, PQCC, DIY Credit Card and other apps 9. Handling of Cash and remittance guidelines & basic Forex 63 10. General Banking- Locker, Clearing, Security Forms, 66 Nominations 11. Basics of English Language 69 12. Deposit Accounts of NRI 71 13. Retail Lending guidelines and Schemes 74 14. Priority Sector Guidelines, Govt Sponsored Schemes, 77 Agriculture Advance, MSME, Jan Samarth Portal 15. Basics of CBS 80 16. Concept of NPA 84 DISCLAIMER We have designed this booklet with the sole objective of guiding Employee for “Promotion Exam”. It contains information which is to be used as a reference and for guidance only. While utmost care has been taken in the preparation of this collateral, in accordance with internal circulars and other prevalent guidelines, the contents are subject to change from time to time. In the rare case of any dispute/mismatch/difference between this workbook and bank circular, bank’s Circular prevails. 1 BOARD OF DIRECTORS 2 ORGANISATIONAL STRUCTURE 3 History of Bank Development Story of Punjab National Bank: ❖ PNB was born on May 19, 1894. ❖ Punjab National Bank (PNB), India’s first Swadeshi Bank, commenced its operations on April 12, 1895. ❖ Bank’s first branch was opened at Anarkali Bazaar in Lahore. ❖ At this time Bank’s authorized capital was ₹ 2 lac and working capital was ₹ 20,000. ❖ The first Board of 7 Directors comprised of Sardar Dayal Singh Majithia, Lala Lalchand, Kali Prosanna Roy, Lala Harkishan Lal, EC Jessawala, Lala Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass, Sh. Dayal Singh Majithia was the first Chairman, Lala Harkishan Lal, the first secretary to the Board and Shri Bulaki Ram Shastri Barrister at Lahore, was appointed Manager. ❖ During the long history of the Bank, 9 banks have been merged/ amalgamated with PNB. ❖ Post amalgamation of eOBC & eUNI w.e.f 01.04.2020, PNB has expanded its presence across India. ❖ As at the end of June 2024, Bank has total 54860 delivery channels with a network of 10,150 domestic branches, 2 International branches, 12820 ATMs & 32630 Business Correspondents. ❖ PNB is the second largest Public Sector Bank (PSB) in the country. Bank’s Subsidiaries, Joint Venture and Associate 4 BANKS’S BUSINESS PERFORMANCE Business (Position) Mar’2023 March’2024 June’2024 Global Deposit 12,81,163 13,69,713 14,08,247 Gross Advances 8,84,681 9,83,325 10,28,682 Gross Global 21,65,844 23,53,038 23,54,323 Business CASA Ratio% 42.98% 41,44% 40.08% Q4FY23 Q4FY24 Q1FY25 Income (In Crore) Interest Income 23849 28113 28557 Other Income 3420 4248 3610 Total Income 27269 32361 32167 Expanses (In Crore) Total Interest Paid 14350 17750 18080 Operating Expenses 7053 8195 7505 Total Expenses 21402 25945 25585 Profit & Provisions (In Crore) Operating Profit 5866 6416 6581 Provisions (-TAX) 3831 4828 5269 Profit 1159 3010 3252 Productivity (in Lakhs) Business per 2164 2384 2480 Employee Business per Branch 20953 22525 23326 Net Profit /Employee 4.82 12.64 13.66 Net profit/ Branch 46.64 119.44 128.47 Asset Quality (Position) (In Crore) Standard Advances 807353 91.26% 926982 94.27% 977419 95.02 Gross NPA 77328 8.74% 56343 5.73% 51263 4.98% Sub-Standard 12227 1.38% 4876 0.50% 5132 0.50% Doubtful 43414 4.91% 39551 4.02% 36072 3.51% Loss 21687 2.45% 11916 1.21& 10059 0.98% Net NPA 22585 2.72% 6799 0.73% 5930 0.60% Provision Coverage 86.90% 95.40% 95.90% incl. TWO Provision Coverage 70.8% 87.9% 88.4% Excluding TWO 5 New Digital Offerings: Debit card for blind and visually inpaired customers PNB Digi Car Loan PNB Digi Home Loan PNB Digital Education Loan Became the first bank to launch PM Vishwakarma Scheme in digital mode Awards & Accolades: Bank’s Social Media Presence: 6 Indian Banking System The Indian banking system is a robust framework comprising public sector banks, private sector banks, regional rural banks, and cooperative banks, regulated by the Reserve Bank of India (RBI). It plays a crucial role in the economic development of the country by mobilizing savings and providing credit to various sectors. The system is categorized into commercial banking, cooperative banking, and specialized financial institutions. Technological advancements have led to the growth of digital banking, enhancing accessibility and convenience for customers. Financial inclusion initiatives have further strengthened the system by catering to underbanked and unbanked sections of the population. Role of Banks Whereas banks play an important role in financial stability and the economy of a country, most jurisdictions exercise a high degree of regulation over banks. Most countries have institutionalized a system known as fractional-reserve banking, under which banks hold liquid assets equal to only a portion of their current liabilities. In addition to other regulations intended to ensure liquidity, banks are generally subject to minimum capital requirements based on an international set of capital standards, the Basel Accords. Banks' activities can be divided into: ▪ Retail banking, dealing directly with individuals and small businesses; (Ex. Home loan to individual) ▪ Business banking, providing services to mid-market business; (Ex. Loan for trading activity to Firm) ▪ Banking needs of agriculture sector. (Ex. KCC Loan) ▪ Corporate banking directed at large business entities. ▪ Investment banking, relating to activities on the financial markets. Most banks are profit-making, private enterprises. However, some are owned by the government, or are non-profit organisations. Evolution of Banking in India Modern banking as evolved in England was introduced by the British during their rule in India. However, it does not mean that banking was unknown to India. In fact, India was a major partner in international trading and was a big producer of cloth, spices and luxurious articles. There are references to rate of interest, security of the loans in the Manusmriti. Kautilya in the ‘Artha Shastra’ mentions regulation of interest rates, deposits and even discounting of bills. They were called ‘Hundies’. The big merchants, traders and moneylenders called ‘Sresthis’ or “Nagarseths” occupied important positions in the Mughal and Maratha courts. They had efficient courier system, extensive branches all over India and they gave loans to the kings also. However, modern banking with its double-entry accounting system and insistence on deposit mobilization was introduced by the British. As the British rule extended all over the country, the stages in evolution in Banking in India. Modern banking also spread driving out the indigenous banking. 7 Structure of Indian banking system Banks in India are generally classified into various categories: Scheduled Commercial Banks Scheduled Commercial banks include public sector, private sector, foreign banks, Regional Rural Banks (RRB), Small Finance Banks and Payment Banks. Public Sector Banks are constituted under the State Bank of India Act, 1955 and Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970/Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980. Presently, there are 12 public sector banks. Foreign Banks is a bank that has its headquarters outside India but runs its offices as a private entity at any other locations in India. Such banks are under an obligation to operate under the regulations provided by the Reserve Bank of India as well as the rule prescribed by the parent organization located outside India. Private Sector Banks are banking companies licensed to operate under Banking Regulation Act, 1949. 8 Regional Rural Banks (RRB) are the banks established under the Regional Rural Banks Act, 1976 with the aim of ensuring sufficient institutional credit for agriculture and other rural sectors. The area of operation of RRBs is limited to the area notified by the Central Government. RRBs are owned jointly by the Government of India, the State Government and Sponsor Banks. Small Finance Banks (SFB) licensed under Banking Regulation Act, 1949 and created with an objective of furthering financial inclusion by primarily undertaking basic banking activities to un-served and underserved sections including small business units, small and marginal farmers, micro and small enterprises and other underserved sections. Payment Banks are public limited companies licensed under Banking Regulation Act, 1949, with specific licensing conditions restricting its activities mainly to acceptance of demand deposits and provision of payments and remittance services. Co-operative Banks Co-operative Banks means State Co-operative Banks, Central Co-operative Banks and Primary Co-operative Banks. Primary Co-operative Banks are also known as Urban Cooperative Banks and over the years, they have registered significant growth in number, size and volume of business handled. State Cooperative Banks are the highest-level cooperative banks in each of the states. They raise funds and assist in their proper allocation among various sectors. Individual borrowers receive funds from state cooperative banks via central cooperative banks and primary credit societies. NI Act ,1881 (Important Sections) The main objective of the Act is to legalise the system by which instruments contemplated by it could pass from hand to hand by negotiation like any other goods. Amendments in the act has come three times: Negotiable Instruments (Amendments and Miscellaneous Provisions) Act, 2002, Negotiable Instruments (Amendment) Act, 2015, Negotiable Instruments (Amendment) Act, 2018. Negotiable instruments The act does not define the term ‘Negotiable Instruments’. Section 13 of the act provides for three kind of Negotiable instruments namely, Bills of Exchange, Promissory Notes & Cheques payable either to bearer or order. NI is payable to Order when: expressed to be so payable when it is expressed to be payable to a specified person and does not contain the words prohibiting its transfer. NI is payable to the Bearer when : express to be so payable When the only indorsement or last indorsement is a blank indorsement. Characteristics of Negotiable instrument It is in writing It is signed 9 Freely transferrable from one person to another Title should be defect free NI must contain unconditional order or promise to pay money only Sum payable, time payable and person to whom payment is made should be certain Instrument should be delivered. Only drawing of instrument does not create liability. PRESUMPTIONS AS TO NI Unless contrary proved correct the following presumptions hold true: Consideration : NI is drawn for something in return Date : NI should bear a date on which it is drawn Acceptance : NI should be accepted within a reasonable period after it is drawn and before maturity Transfer : NI should be transferred before maturity Stamp : NI should be duly stamped Holder : Holder of NI is holder in due course Some of the important provisions of the Act are as follows Section 4: A promissory note is an instrument in writing containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument. Parties to Promissory Notes 1. Drawer/Maker/Debtor/Payer: The person who makes the promise 2. Drawee/Bearer/Creditor/Payee: The person to whom the amount is payable Section 5 : A Bill of Exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument. Parties to Bill of Exchange 1.Drawer:The maker of the bill of exchange 2.Drawee: Person directed by the drawer to pay 3.Payee: person named in the instrument to whom or to whose order the money/instrument is directed to pay. Section 6: CHEQUE: A cheque is like a bill of exchange drawn on a specified banker and expressed to be payable otherwise than on demand and it includes electronic image of a truncated cheque and cheques in electronic form. A Cheque is payable on demand. Features and Parties to Cheque a. Drawn on specified banker b. Payable on demand c. Other features same as bills of exchange Parties to Bills of Exchange a.Drawer -person who makes the cheque b.Drawee –specific banker on whom the cheque is drawn c.Payee –person named in the instrument on whom the cheque is drawn d.Drawee in case of need –name of a person in addition to name of a drawee. Types of Cheques : Order Cheque: One person or more is specified on the cheque as payee or endorsee. Negotiated by endorsement and delivery. Bearer cheque: 10 No person is specified in the cheque as payee or endorsee, or the words 'to bearer' appear on the cheque. Negotiated by delivery only. Crossed cheques Specific direction to the drawee financial institution not to pay the cheque over the counter. Bearer Cheque: Cheque is bearer written and can be negotiated only by delivery. Cheques drawn in different inks, scripts and handwritings: Such Cheques would be paid, if otherwise in order and the paying bank is in a position to read and understand the instructions of the drawer. Cheques without date: Such cheques are to be returned by the Bank. A holder can complete an inchoate cheque by filling in the date and take the payment of the cheque. A cheque bearing a date being a holiday can be paid on the next working day. Cheque bearing impossible date: A cheque bearing an impossible date means the cheques drawn with a date, which never happens to exist. For example: November 31 or February 30, which may be paid on November 30 and February 29/28 respectively, as the case may be. Ante-dated Cheques: An ante-dated cheque is one, which bears a date prior to the actual date of signing the cheque or opening of an account. It can be paid till it becomes a stale cheque. Stale Cheques: A stale cheque is the one, validity period of which, on the date of presentation, has already expired and due to that it cannot be paid. Validity Period of a Cheque: As per RBI directions dated 04/11/2011 (U/s 35 A BR Act) w.e.f 01.04.2012, cheques, demand draft & banker’s cheques presented after 3 months from their date, cannot be paid by the Banks. Revalidation of cheques : After a cheque becomes stale, it can be revalidated, any no of times. The fresh validity runs from the date of revalidation. Post-dated cheque: The cheque, which bears a date after the date on which it is drawn, and the date has not fallen due till presentation is called a post-dated cheque.Such cheques become effective on the date mentioned on the body of the cheque. The drawer of such a cheque can be sued by the holder after the mentioned date only. Different types of dates on cheques: Cheque Issued on Cheque dated as Type of Cheque October 25, 2024 October 1, 2024 Ante dated October 25, 2024 October 27, 2024 Post dated October 25, 2024 July 1, 2024 Stale CTS – 2010 STANDARD: Purpose: Achieving standardization of cheques. Features of CTS Cheques: Branch address with IFSC code printed on top Date in dd/mm/yyyy format with boxes. A pantograph that shows “VOID/COPY” New rupee symbol instead of bilingual format. "Please sign above" is mentioned at the bottom Watermark “CTS INDIA” 11 Ultraviolet logo of the Bank to be visible in UV lamps. Sec. 7 – Drawer and Drawee: The maker of a bill of exchange or cheque is called a “drawer” The person thereby directed to pay is called a “drawee” The name of any person may be given in a bill as ‘drawee in case of need’. His liability arises only when the bill is not accepted by the drawee named in the bill. Sec. 9 – Holder in due course: Any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer, or the payee or endorsee thereof, if payable to order before the amount mentioned in it became payable and without having sufficient cause to believe that any defect existed in the title of the person from whom he derived his title. Sec. 10 Payment in due course: Payment in accordance with the apparent tenor of the instrument in good faith and without negligence to any person in possession thereof under circumstances, which do not afford a reasonable ground for believing that he is not entitled to receive payment of the amount therein mentioned. Sec. 14 Negotiation: When a promissory note, bill of exchange or cheque is transferred to any person so as to constitute that person the holder thereof. The instrument is said to be negotiated. Sec. 15 Endorsement: Signing on the face or back of a negotiable instrument or on a slip of paper annexed to the negotiable instrument called allonge by the holder of a negotiable instrument for the purpose of negotiating such a negotiable instrument. Types of Endorsements: Section 16 (1) – Endorsement in blank: Mere signature of the endorser on the back of an instrument. For example, if A gives B a cheque of 1,000 payable to order, and B merely puts his signature on the back of the cheque and delivers it to C, such an endorsement is a blank endorsement. Endorsement in full – When the endorser makes a direction to pay the amount specified in the cheque to a certain person or his order then the endorsement is in full. For example Pay Ram or Pay Ram or to his order. Sec. 22 Maturity – The maturity of a promissory note or bill of exchange is the date at which it falls due. Days of grace: Every promissory note or bill of exchange which is not expressed to be payable on demand, at sight or on presentment, is at maturity on the third day after the day on which it is expressed to be payable. Section 23 to 25 – Calculating Maturity: Case Date of maturity Corresponding day of the relevant month (i.e., date NI payable on stated number on which negotiable instrument is drawn + stated of months after date number of months) + 3rd day Corresponding day of the relevant month* (i.e., NI payable on stated number Date on which negotiable instrument is presented of months after sight for sight + stated number of months) + 3rd day 12 NI payable on a stated number Date on which negotiable instrument is drawn + of days after date stated number of days + 3rd day NI payable on stated number Date on which negotiable instrument is presented of days after sight for sight + stated number of days + 3rd day Section 50 – Restrictive Endorsement – when the right of negotiation is restricted or excluded by the endorsement. (An example of a restrictive endorsement is the "For Deposit Only" stamp used by most companies on the back of a received check. This stamp effectively limits further action on the cheque by the stated payee to only being able to deposit it). Section 52 – Sans Recourse Endorsement – The endorser can endorse the instrument in such a manner as to escape his liability. This is known as ‘Sans Recourse’ endorsement, or ‘without recourse’ endorsement. Thereafter if he again becomes the holder the instrument, all the intermediate endorsers shall be liable to him. An endorser, who endorses without recourse, cannot be held liable, if the instrument is dishonoured. Section 56 – Partial Endorsement: The endorser transfers only a part of the amount of the instrument to the endorsee. Example: A is the holder of an instrument for Rupees 1,000. He endorses the instrument as Pay to B or his order the sum of Rupees 500. Then such an endorsement is a partial endorsement and hence is not a valid endorsement. Conditional Endorsement: The endorser may make his own liability on the instrument subject to a condition. The condition can be the happening of a contingent event or make the right of the endorsee to receive the payment upon the happening of such an event. e.g. pay to X if he returns from abroad. Facultative Endorsement – The endorsee must give notice of dishonour to the endorser, but the endorser may waive this right in writing to the endorsement as ‘Notice of dishonour waived’. The endorser, however, remains liable to the endorsee for non-payment of the instrument. Forged endorsement – Where the endorsement is forged (signed by somebody other than the person) all endorsees subsequent to the forged endorsement do not deliver any title if he derives title through a forged endorsement. Liability of endorser – In case of dishonour of an instrument, each endorser is liable to the holder. Discharge of endorser’s liability – An endorser is not liable for the instrument when any subsequent endorser destroys his remedy against prior parties. Sec. 17 – Ambiguous Instrument – When an instrument due to its faulty drafting, can be construed as a promissory note or bill of exchange it is called an ambiguous instrument. Sec. 18 – Amount stated differently in figures and words – if the amount undertaken or ordered to be paid is stated differently in figures and in words, the amount stated in words shall be the amount undertaken or ordered to be paid. Sec. 36 – Liability of Prior Parties – Until the instrument is duly satisfied, every prior party to a negotiable instrument has a liability towards the holder in due course. Sec. 40 – Discharge of endorser's liability – Where the holder of a negotiable instrument, without the consent of the endorser, destroys or impairs the endorser's remedy against a prior party, the endorser is discharged from 13 liability to the holder to the same extent as if the instrument had been paid at maturity. Sec. 87 – Effect of Material Alteration – Material alteration of the Instrument renders the same void as against anyone who is a party thereto at the time of making such alteration. Crossing of Cheques: Section 123 – General Crossing is when a cheque bears across its face an addition of the words “and company” or any abbreviation thereof, between two parallel transverse lines, or two transverse lines simply, either with or without the words ‘not negotiable’ that addition shall be deemed a crossing and cheque shall be deemed to be crossed generally. Section 124 – Special Crossing is when a cheque bears across its face an addition of the name of a banker, either with or without the words ‘not negotiable’ that addition shall be deemed a crossing and the cheque shall be deemed to be crossed specially. Section 125 – who can cross a cheque - When a cheque is uncrossed, the holder may cross it generally or specially. Sec. 138 – Dishonour of cheque – When any cheque drawn by a person is returned by the bank unpaid, such person shall be deemed to have committed an offence and shall be punished with imprisonment for a term which may extend to two years, or with fine which may extend to twice the amount of the cheque, or with both. Sec. 146 – Bank’s Returning Memo – Bank’s Returning Memo shall be prima-facie evidence for the dishonour of the cheque. Banking Regulation Act-1949 (Important Sections) Section 5-A: Approved securities means such securities which are authorized by the Central Government under section 20 of the Indian Trust Act , 1882. Section 5-B: The definition of banking includes: "Banking means the acceptance of money , in the form of deposits , from the public for the purpose of lending or investment. " and repayable on demand or otherwise by cheques , drafts , and orders or otherwise. , Section 5-F: Demand Liabilities – which is paid on demand , Time Liabilities – which are repaid after a certain period of time. Section 5-N: Secured loan or advance means a loan against which a security ( asset ) has been mortgaged and the market/ releasable value of that asset should not be less than the loan amount. Section 6-1: Banking Describes the forms of business that can be carried out by a banking company - such as accepting deposits , lending , borrowing , accepting bills , buying/selling foreign currency , lockers , LC Issuance , mortgage , insurance business on comission , acting as a trustee and any other business function given as per the official gazette of the Government of India etc. Section 6-2: Restriction on Business The above section Prohibits a banking company from doing any work other than those given in 6-1. Section 7: Use of the word Banking – In India, one of the words “Bank” , “Banking” or “Banking Company” is used in the name of a banking company (company doing banking business). 14 Section 8: Restriction – no banking company shall directly or indirectly deal in the buying or selling or bartering of goods, except in connection with the realisation of security given to or held by it, or engage in any trade, or buy, sell or barter goods for others. Section 9: Immovable property cannot be held for more than 7 years except for own use , which can be further extended by 5 years by RBI. Section 10: Tenure of Management – (Chairman , Director) – 5 years , which can be extended for another 5 years. As per a government notification dated November 17, 2022, the term for the appointment has been extended to 10 years, from the earlier 5 years, subject to superannuation age of 60 years. Section 11 & 12 - Paid up capital: Foreign Bank - 15 lakh minimum (20 lakh for business in Mumbai or/and Calcutta), Domestic Bank - 5 lakh minimum. Ratio of Authorized Capital, Subscribed Capital & Paid up capital - 4:2:1 A shareholder cannot have a maximum of 10% voting rights irrespective of the size of the shareholder's holding. Section 13- Commission & Brokerage: The bank cannot pay commission , brokerage or discount more than 2.5% of the paid up value of one of its shares. Section 15- Bank cannot pay dividend before capitalized expanses are written off. Section 17-1: The Bank shall, before the declaration of any dividend, transfer an amount equal to 20% of the profits of each year to a reserve fund. (RBI has increased it from 20% to 25% with effect from 31-03-2001.) Section 18: Cash Reserve- Non-Schedule bank will have to keep at least 3% of its demand and time liabilities in cash reserve or current account with RBI. Section 19 : Allows the bank to form a subsidiary company. Section 19(2): No bank shall hold shares in any company in excess of 30% of its paid up share capital + reserves or 30% of the paid up share capital + reserves of that company. Section 20: Bank Loan cannot be given by pledging one's own shares. Section 21: RBI may issue directions to banks for laying down policy for advances. Section 21-A: Interest charged by a bank after February 15 , 1984, can not be made the subject of inquiry by the court on the ground that the interest charged is excessive. Section 22 : License from RBI is necessary for banking business in India. Section 23 : Permission from RBI is required for opening new branch and transfer of branch at the present place of business. Section 24 : Every bank has to keep some percent of its net demand and time liability in the form of cash , gold and unencumbered (on which no charge is recorded) security , which is a maximum of 40 percent, on the last Friday of the second fortnight of every month. Section 26 : Unclaimed deposits of 10 years and above have to be sent to RBI within 30 days from the end of every calendar year. section 31 : Banks have to submit balance sheet and audit report within 3 months from the end of the reporting period, RBI can extend this time by another 3 months. Section 35 : RBI has the right to inspect banks and give them necessary instructions , RBI has given instructions under section 21 and section 35 to round off rupee transactions to the nearest rupee. section 35a : RBI can give instructions to banks in public interest. Section 35 AA : On the orders of the Government of India, the RBI can direct a banking company to proceed with the bankruptcy resolution process under the Insolvency and Bankruptcy Code-2016. Section 35 AB : RBI can give directions to the bank for disposal of bad accounts. Section 36 : If necessary , RBI can dismiss the chairman or employee of a bank. 15 Section 45 : Can apply to the Central Government for suspension of business of any banking companies and preparing a scheme for its reconstitution or amalgamation. Section 45(Y): Preservation of Bank Records - The Central Government in consultation with the RBI is empowered to make rules with respect to the preservation of records , a/cs and other documents. Payments made under section 45Z : instrument can be returned to the customer by keeping the true copy of the instrument. Section 45(ZA) : Nomination in deposit accounts. Section 45(ZC) : Nomination in Safe Custody Accounts. Section 45(ZE): Nomination in Locker Accounts. Section 47A : Violation of RBI instructions can be fined by RBI. Section 49A : No person other than a banking company / RBI / SBI can accept money in the form of deposit, which can be paid through cheque. RBI ACT -1934 (Important Sections) Local Boards, their constitution and functions As per section 9 of RBI Act A Local Board shall be constituted for each of the four areas specified in the First Schedule and shall consist of five members to be appointed by the Central Government to represent, as far as possible, territorial and economic interests and the interests of co-operative and indigenous banks. The members of the Local Board shall elect from amongst themselves one person to be the chairman of the Board. Every member of a Local Board shall hold office for a term of four years and thereafter until his successor shall have been appointed and shall be eligible for re-appointment. A Local Board shall advise the Central Board on such matters as may be generally or specifically referred to it and shall perform such duties as the Central Board may delegate to it. Short title and extent As per section 1 of RBI Act, This Act may be called the Reserve Bank of India Act, 1934. It extends to the whole of India. Establishment and incorporation of Reserve Bank As per section 3 of RBI Act, A bank to be called the Reserve Bank of India shall be constituted for the purposes of taking over the management of the currency from the Central Government and of carrying on the business of banking in accordance with the provisions of this Act. Capital of RBI As per section 4 of RBI Act, The capital of the Bank shall be five crores of rupees. Offices, branches and agencies As per section 6 of RBI Act, The Bank shall, as soon as may be, establish offices in Bombay, Calcutta, Delhi and Madras and may establish branches or agencies in any other place in India or, with the previous sanction of the Central Government, elsewhere. Composition of the Central Board As per section 8 of RBI Act, the Central Board shall consist of the following Directors, namely:- 16 (a) A Governor and not more than four Deputy Governors to be appointed by the Central Government; (b) Four Directors to be nominated by the Central Government, one from each of the four Local Boards as constituted by section 9; (c) Ten Directors to be nominated by the Central Government; and (d) One Government official to be nominated by the Central Government. Local Boards, their constitution and functions As per section 9 of RBI Act A Local Board shall be constituted for each of the four areas specified in the First Schedule and shall consist of five members to be appointed by the Central Government to represent, as far as possible, territorial and economic interests and the interests of co-operative and indigenous banks. The members of the Local Board shall elect from amongst themselves one person to be the chairman of the Board. Every member of a Local Board shall hold office for a term of four years and thereafter until his successor shall have been appointed and shall be eligible for re-appointment. A Local Board shall advise the Central Board on such matters as may be generally or specifically referred to it and shall perform such duties as the Central Board may delegate to it. Business which the Bank may transact As per section 17 of RBI Act, The Bank shall be authorized to carry on and transact the several kinds of business hereinafter specified, namely:- The accepting of money on deposit without interest from and the collection of money for, the Central Government the State Governments local authorities, banks and any other persons. The purchase, sale and rediscount of bills of exchange and promissory notes, drawn on and payable in India. The purchase from and sale to scheduled banks of foreign exchange. The making to local authorities, scheduled banks State co-operative banks and State Financial Corporations loans and advances, repayable on demand or on the expiry of fixed periods not exceeding ninety days. Business which the Bank may transact As per section 17 of RBI Act, The Bank shall be authorized to carry on and transact the several kinds of business hereinafter specified, namely:- The accepting of money on deposit without interest from and the collection of money for, the Central Government the State Governments local authorities, banks and any other persons. The purchase, sale and rediscount of bills of exchange and promissory notes, drawn on and payable in India. The purchase from and sale to scheduled banks of foreign exchange. 17 The making to local authorities, scheduled banks State co-operative banks and State Financial Corporations loans and advances, repayable on demand or on the expiry of fixed periods not exceeding ninety days. Business which the Bank may transact The making to the Central Government and State Governments of advances repayable in each case not later than three months from the date of the making of the advance. The issue of demand drafts, telegraphic transfers and other kinds of remittances made payable at its own offices or agencies, the purchase of telegraphic transfers, and the making, issue and circulation of bank post bills. The Purchase and sale of securities of the Central Government or a State Government of any maturity or of such securities of a local Authority as may be specified in this behalf by the Central Government on the recommendation of the Central Board. The custody of monies, securities and other articles of value, and the collection of the proceeds, whether principal, interest or dividends, of any such securities. Power of direct discount As per section 18 of RBI Act when, in the opinion of the Bank, a special occasion has arisen making it necessary or expedient that action should be taken under this section for the purpose of regulating credit in the interests of Indian trade, commerce, industry and agriculture, the Bank may, notwithstanding any limitation contained in section 17: Purchase, sell or discount any bill of exchange or promissory note though such bill or promissory note is not eligible for purchase or discount by the Bank under that section; Make loans or advances to a State co-operative bank, to a cooperative society, any other person. Business which the Bank may not transact. As per section 19 of RBI Act, save as otherwise provided in sections 17, 18, 42 and 45, the Bank may not – Engage in trade or otherwise have a direct interest in any commercial, industrial, or other undertaking. Purchase the shares of any banking company or of any other company, or grant loans upon the security of any such shares; Advance money on mortgage of, or otherwise on the security of, immovable property or documents of title relating thereto. Make loans or advances; Draw or accept bills payable otherwise than on demand; Allow interest on deposits or current accounts. Obligation of the Bank to transact Government business As per section 20 of RBI Act, the Bank shall undertake to accept monies for account of the Central Government and to make payments up to the amount standing to the credit of its account, and to carry out its exchange, remittance and other banking operations, including the management of the public debt of the Union. Bank to have the right to transact Government business in India 18 As per section 21 of RBI Act, the Central Government shall entrust the Bank, on such conditions as may be agreed upon, with all its money, remittance, exchange and banking transactions in India, and, in particular, shall deposit free of interest all its cash balances with the Bank. Bank to transact Government business of States on agreement As per section 21A of RBI Act The Bank may by agreement with the Government of any State undertake– (a) all its money, remittance, exchange and banking transactions in India, including in particular, the deposit, free of interest, of all its cash balances with the Bank; and (b) the management of the public debt of, and the issue of any new loans by, that State. Right to issue bank notes As per section 22 of RBI Act, The Bank shall have the sole right to issue bank notes in India, and may, for a period which shall be fixed by the Central Government on the recommendation of the Central Board, issue currency notes of the Government of India supplied to it by the Central Government, and the provisions of this Act applicable to bank notes shall, unless a contrary intention appears, apply to all currency notes of the Government of India issued either by the Central Government or by the Bank in like manner as if such currency notes were bank notes, and references in this Act to bank notes shall be construed accordingly. Issue Department As per section 23 of RBI Act, (1) The issue of bank notes shall be conducted by the Bank in an Issue Department which shall be separated and kept wholly distinct from the Banking Department, and the assets of the Issue Department shall not be subject to any liability other than the liabilities of the Issue Department as hereinafter defined in section 34. (2) The Issue Department shall not issue bank notes to the Banking Department or to any other person except in exchange for other bank notes or for such coin, bullion or securities as are permitted by this Act to form part of the Reserve. Denominations of notes As per section 24 of RBI Act, (1) Subject to the provisions of sub-section (2), bank notes shall be of the denominational values of two rupees, five rupees, ten rupees, twenty rupees, fifty rupees, one hundred rupees, five hundred rupees, one thousand rupees, five thousand rupees and ten thousand rupees or of such other denominational values, not exceeding ten thousand rupees, as the Central Government may, on the recommendation of the Central Board, specify in this behalf. (2) The Central Government may, on the recommendation of the Central Board, direct the non-issue or the discontinuance of issue of bank notes of such denominational values as it may specify in this behalf. Form of bank notes As per section 25 of RBI Act, The design, form and material of bank notes shall be such as may be approved by the Central Government after consideration of the recommendations made by Central Board. Legal tender character of notes As per section 26 of RBI Act, 19 (1) Subject to the provisions of sub-section (2), every bank note shall be legal tender at any place in India in payment or on account for the amount expressed therein, and shall be guaranteed by the Central Government. Recovery of notes lost, stolen, mutilated or imperfect As per section 28 of RBI Act, Notwithstanding anything contained in any enactment or rule of law to the contrary, no person shall of right be entitled to recover from the Central Government or the Bank, the value of any lost, stolen, mutilated or imperfect currency note of the Government of India or bank note: Provided that the Bank 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 bank notes may be refunded as of grace and the rules made under this proviso shall be laid on the table of Parliament. Bank exempt from stamp duty on bank notes As per section 29 of RBI Act, The Bank shall not be liable to the payment of any stamp duty under the Indian Stamp Act, 1899, in respect of bank notes issued by it. Issue of demand bills and notes As per section 31 of RBI Act, No person in India other than the Bank or, as expressly authorized by this Act, the Central Government shall draw, accept, make or issue any bill of exchange, hundi, promissory note or engagement for the payment of money payable to bearer on demand, or borrow, owe or take up any sum or sums of money on the bills, hundis or notes payable to bearer on demand of any such person. Liabilities of the Issue Department As per section 34 of RBI Act, The liabilities of the Issue Department shall be an amount equal to the total of the amount of the currency notes of the Government of India and bank notes for the time being in circulation. Obligations of Government and the Bank in respect of rupee coin. As per section 38 of RBI Act, The Central Government shall undertake not to put into circulation any rupees, except through the Bank ; and the Bank shall undertake not to dispose of rupee coin otherwise than for the purposes of circulation. Transactions in foreign exchange As per section 40 of RBI Act, The Bank shall sell to or buy from any authorised person who makes a demand in that behalf at its office in Bombay, Calcutta, Delhi or Madras or at such of its branches as the Central Government may, by order, determine, foreign exchange at such rates of exchange and on such conditions as the Central Government may from time to time by general or special order determine. 20 Cash reserves of scheduled banks to be kept with the Bank As per section 42 of RBI Act, Every bank included in the Second Schedule shall maintain with the Bank an average daily balance the amount of which shall not be less than such per cent. of the total of the demand and time liabilities in India of such bank as shown in the return referred to in sub-section as the Bank may from time to time, having regard to the needs of securing the monetary stability in the country, notify in the Gazette of India: Provided that the Bank may, by notification in the Gazette of India, increase the said rate to such higher rate as may be specified in the notification so however that the rate shall not be more than twenty per cent of the total of the demand and time liabilities Cash reserves of scheduled banks to be kept with the Bank Explanation– For the purposes of this section– a) ‘‘average daily balance’’ shall mean the average of the balances held at the close of business on each day of a fortnight; b) ‘‘fortnight’’ shall mean the period from Saturday to the second following Friday, both days inclusive; c) ‘‘liabilities’’ shall not include – (i) the paid-up capital or the reserves or any credit balance in the profit and loss account of the bank; (ii) the amount of any loan taken from the Bank or from the Exim Bank or from the Reconstruction Bank or from the National Housing Bank or from the National Bank or from the Small Industries Bank. Cash reserves of scheduled banks to be kept with the Bank In the case of a State co-operative bank, also any loan taken by such bank from a State Government or from the National Cooperative Development Corporation established under the National Cooperative Development Corporation Act, 1962 and any deposit of money with such bank representing the reserve fund or any part thereof maintained with it by any co-operative society within its area of operation; In the case of a State co-operative bank, which has granted an advance against any balance maintained with it, such balance to the extent of the amount outstanding in respect of such advance; In the case of a Regional Rural Bank, also any loan taken by such bank from its Sponsor Bank; Appointment of Agents As per section 45 of RBI Act, Unless otherwise directed by the Central Government with reference to any place, the Bank may, having regard to public interest, convenience of banking, banking development and such other factors which in its opinion are relevant in this regard, appoint the National Bank, or the State Bank or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980, or any subsidiary 21 bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959, as its agent at all places, or at any place in India for such purposes as the Bank may specify. Definitions As per section 45A of RBI Act, A ‘‘banking company’’ means a banking company as defined in section 5 of the Banking Regulation Act, 1949, and includes the State Bank of India, any subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959, any corresponding new bank constituted by section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970, and any other financial institution notified by the Central Government in this behalf; Power of Bank to collect credit information As per section 45B of RBI Act, The Bank may– (a) collect, in such manner as it may think fit, credit information from banking companies; and (b) furnish such information to any banking company in accordance with the provisions of section 45D. Power to call for returns containing credit information As per section 45C of RBI Act, For the purpose of enabling the Bank to discharge its functions under this Chapter, it may at any time direct any banking company to submit to it such statements relating to such credit information and in such form and within such time as may be specified by the Bank from time to time. Procedure for furnishing credit information to banking companies As per section 45D of RBI Act, A banking company may, in connection with any financial arrangement entered into or proposed to be entered into by it, with any person, make an application to the Bank in such form as the Bank may specify requesting it to furnish the applicant with such credit information as may be specified in the application. Disclosure of information prohibited As per section 45E of RBI Act, Any credit information contained in any statement submitted by a banking company under section 45C or furnished by the Bank to any banking company under section 45D, shall be treated as confidential and shall not, except for the purposes of this Chapter, be published or otherwise disclosed. PROVISIONS RELATING TO NON-BANKING INSTITUTIONS RECEIVING DEPOSITS AND FINANCIAL INSTITUTIONS As per section 45-I of RBI Act, ‘‘business of a non-banking financial institution’’ means carrying on of the business of a financial institution referred to in clause and includes business of a non-banking financial company referred to in clause ; 22 Maintenance of percentage of assets As per section 45-IB of RBI Act, Every non-banking financial company shall invest and continue to invest in India in unencumbered approved securities, valued at a price not exceeding the current market price of such securities, an amount which, at the close of business on any day, shall not be less than five per cent, or such higher percentage not exceeding twenty-five per cent, as the Bank may, from time to time and by notification in the Official Gazette, specify, of the deposits outstanding at the close of business on the last working day of the second preceding quarter: Provided that the Bank may specify different percentages of investment in respect of different classes of non-banking financial companies. Power of Bank to determine policy and issue directions As per section 45-JA of RBI Act, Every non-banking financial company shall create a reserve fund and transfer therein a sum not less than twenty per cent of its net profit every year as disclosed in the profit and loss account and before any dividend is declared. Deposits not to be accepted in certain cases As per section 45-S of RBI Act, (1) No person, being an individual or a firm or an unincorporated association of individuals shall, accept any deposit– (i) If his or its business wholly or partly includes any of the activities specified in clause (c) of section 45-I; or (ii) if his or its principal business is that of receiving of deposits under any scheme or arrangement or in any other manner, or lending in any manner; Contribution by Central Government to the Reserve Fund As per section 46 of RBI Act, The Central Government shall transfer to the Bank rupee securities of the value of five crores of rupees to be allocated by the Bank to the Reserve Fund. Publication of bank rate As per section 49 of RBI Act, The Bank shall make public from time to time the standard rate at which it is prepared to buy or re-discount bills of exchange or other commercial paper eligible for purchase under this Act. Auditors As per section 50 of RBI Act, (1) Not less than two auditors shall be appointed, and their remuneration fixed, by the Central Government. (2) The auditors shall hold office for such term not exceeding one year as the Central Government may fix while appointing them, and shall be eligible for re- appointment. Rural Credit and Development As per section 54 of RBI Act, 23 The Bank may maintain expert staff to study various aspects of rural credit and development and in particular it may:- tender expert guidance and assistance to the National Bank; (b) conduct special studies in such areas as it may consider necessary to do so for promoting integrated rural development. Delegation of powers As per section 54 A of RBI Act, The Governor may, by general or special order, delegate to a Deputy Governor, subject to such conditions and limitations, if any, as may be specified in the order, such of the powers and functions exercisable by him under this Act or under any other law for the time being in force as he may deem necessary for the efficient administration of the functions of the Bank. Power of Bank to depute its employees to other institutions As per section 54 AA of RBI Act, The Bank may, notwithstanding anything contained in any law, or in any agreement, for the time being in force, depute any member of its staff for such period as it may think fit. Liquidation of the Bank As per section 57 of RBI Act, Nothing in the Companies Act, 1956, shall apply to the Bank, and the Bank shall not be placed in liquidation save by order of the Central Government and in such manner as it may direct. Power of the Central Board to make regulations As per section 58 of RBI Act, The Central Board may, with the previous sanction of the Central Government by notification in the official Gazette make regulations consistent with this Act to provide for all matters for which provision is necessary or convenient for the purpose of giving effect to the provisions of this Act. 24 KYC AML GUIDELINES The KYC Policy has been framed to develop a strong mechanism for achieving the following objectives: i) To prevent Bank from being used intentionally or unintentionally, by criminal elements for Money Laundering or Terrorist Financing activities. KYC procedures also enable the Bank to know/understand their customers and their financial dealings better, which in turn helps it to manage the associated risks prudently. ii) To enable the Bank to comply with all the legal and regulatory obligations in respect of KYC norms / AML standards / CFT measures / Bank’s Obligation under PMLA, 2002 and to cooperate with various government bodies dealing with related issues. iii) The purpose of KYC policy is to put in place customer identification procedures for opening of accounts and monitoring transactions in the accounts for detection of transactions of suspicious nature for the purpose of reporting to Financial Intelligence Unit-India [FIU-IND] in terms of the recommendations made by Financial Action Task Force (FATF) and the paper issued on Customer Due Diligence (CDD) for banks by the Basel Committee on Banking Supervision (BCBS) on AML standards and on CFT measures. iv) For this Policy, the term ‘Money Laundering’ would also cover financial transactions where the end-use of funds is for financing terrorism, irrespective of the source of funds. The KYC Policy includes the following four Key Elements 1. Customer Acceptance Policy (CAP) 2. Risk Management 3. Customer Identification Process (CIP) and 4. Monitoring of Transactions. 25 Bank’s Customer Acceptance Policy (CAP) lays down the guidelines for acceptance of customers. It is to be ensured as under: - No account is opened in anonymous or fictitious / benami name. No account is opened where the Bank is unable to apply appropriate Customer Due Diligence (CDD) measures, either due to non-cooperation of the customer or non-reliability of the documents / information furnished by the customer. No transaction or account-based relationship is undertaken without following the CDD procedure. The mandatory information sought for KYC purpose while opening an account and during the periodic updation, is specified. Additional information, where such information requirement has not been specified in KYC Policy of the Bank, is obtained with the explicit consent of the customer. The CDD procedure is to be applied at the UCIC level. Thus, if an existing KYC compliant customer of Bank desires to open another account with the same Bank, there shall be no need for a fresh CDD exercise. CDD Procedure is followed for all the joint account holders, while opening a joint account. viii)Circumstances in which, a customer is permitted to act on behalf of another person / entity, are clearly spelt out. No account is opened where identity of the customer matches with any person or entity, whose name appears in the sanctions lists indicated in Chapter IX of the Master Direction of RBI last updated upto 04.05.2023. Where Permanent Account Number (PAN) is obtained, the same shall be verified from the verification facility of the issuing authority. Where an equivalent e-document is obtained from the customer, the digital signature has to be verified as per the provisions of the Information Technology Act, 2000 (21 of 2000). Where Goods & Services Tax (GST) details are available, the GST number shall be verified from the search/ verification facility of the issuing authority. It is to be ensured that the 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. Where a suspicion of money laundering or terrorist financing, is formed and reasonably believed that performing the CDD process will tip- off the customer, CDD process shall not be pursued, instead it shall be reported to Centralised AML Cell for onward submission of STR to FIU –IND. RISK MANAGEMENT For Risk Management, Bank has adopted risk-based approach which includes the following: i) Customers shall be categorized as low, medium and high risk category, based on the assessment and risk perception of the Bank. ii) Broad principles may be laid down by the Bank for risk-categorization of customers. iii) Risk categorization shall be undertaken based on parameters such as customer's identity, social / financial status, nature of business activity, and information about the clients' business and their location, geographical risk covering customers as well as transactions, type of products/services offered, delivery channel used for delivery of products/services, types of transaction undertaken—cash, cheque/ monetary instruments, wire transfers, forex transactions, etc. While considering customer's identity, the ability to confirm identity documents through online or other services offered by issuing authorities may also be factored in. iv) The risk categorization of a customer and the specific reasons for such categorization shall be kept confidential and shall not be revealed to the customer to avoid tipping off the customer. 26 CUSTOMER IDENTIFICATION PROCEDURE (CIP) Customer Identification Procedure means undertaking client due diligence measures including identifying and verifying the customer and the beneficial owner. Bank to undertake identification of customers in the following cases: i) Commencement of an account-based relationship with the customer. ii) Carrying out any international money transfer operations for a person who is not an account holder of the Bank. iii) When there is a doubt about the authenticity or adequacy of the customer identification data (CID) it has obtained. iv) Selling third party products as agent, selling its 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. v) 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. vi) When 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. vii) It is to be ensured that introduction is not to be sought while opening accounts. MONITORING OF TRANSACTIONS Bank 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. MONEY LAUNDERING AND TERRORIST FINANCING RISK ASSESSMENT BY BANK Bank shall carry out ‘Money Laundering (ML) and Terrorist Financing (TF) Risk Assessment’ exercise periodically to identify, assess and take effective measures to mitigate its money laundering and terrorist financing risk for clients, countries or geographic areas, products, services, transactions or delivery channels, etc. ✓ The assessment process should consider all the relevant risk factors before determining the level of overall risk and the appropriate level and type of mitigation to be applied. ✓ While preparing the internal risk assessment, Bank shall take cognizance of the overall sectorspecific vulnerabilities, if any, that the regulator/supervisor may share with Bank from time to time. ✓ The risk assessment by the Bank shall be properly documented and be proportionate to the nature, size, geographical presence, complexity of activities/structure, etc. of the Bank. Further, the periodicity of risk assessment exercise shall be annually. ✓ Integrated Risk Management Division shall carry out the above said Risk Assessment exercise on annual basis. ✓ The outcome of the exercise shall be put up to the Risk Management Committee of the Board and should be available to competent authorities and self-regulating bodies. Bank shall apply a Risk Based Approach (RBA) for mitigation and management of the identified risk and should have Board approved policies, controls and procedures in this regard. Further, Bank shall monitor the implementation of the controls and enhance them if necessary. ✓ The respective Process Owner Divisions will review the Controls related to KYC and AML existing / introduced in the area of their operations and its effectiveness in controlling the risk and minimizing data inconsistencies, if any and take corrective action. ✓ This process will be undertaken at least once a year. Special emphasis will be given on Risk Based approach to KYC-AML – Key areas of concern- Outliers. 27 REPORTING REQUIREMENTS TO FINANCIAL INTELLIGENCE UNIT – INDIA (FIU-IND) In terms of Rule 3 of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 and in terms of Rule 7 thereof, the following reports shall be furnished to Financial Intelligence Unit-India as per guidelines prescribed by RBI / FIU as applicable and within the timelines specified. 1. Cash Transaction Report [CTR] 2. Suspicious Transactions Report [STR] 3. Counterfeit Currency Report [CCR] 4. Non Profit Organisations Transaction report [NTR] 5. Cross-border Wire Transfer Report [CWTR Officially valid document" (OVD)means the passport, the driving license, proof of possession of Aadhaar number, the Voter's Identity Card issued by the Election Commission of India, job card issued by NREGA duly signed by an officer of the State Government and letter issued by the National Population Register containing details of name and address. "Politically Exposed Persons" (PEPs)are individuals who are or have been entrusted with prominent public functions by a foreign country, including the Heads of States/Governments, senior politicians, senior government or judicial or military officers, senior executives of state-owned corporations and important political party officials. "Suspicious transaction" means a "transaction" as defined below, including an attempted transaction, whether or not made in cash, which, to a person acting in good faith: gives rise to a reasonable ground of suspicion that it may involve proceeds of an offence specified in the Schedule to the Act, regardless of the value involved; or appears to be made in circumstances of unusual or unjustified complexity; or appears to not have economic rationale or bona-fide purpose; or gives rise to a reasonable ground of suspicion that it may involve financing of the activities relating to terrorism Transaction involving financing of the activities relating to terrorism includes transaction involving funds suspected to be linked or related to, or to be used for terrorism, terrorist acts or by a terrorist, terrorist organization or those who finance or are attempting to finance terrorism. UCIC” means Unique Customer Identification Code, i.e., unique customer-ID allotted to individual customers while entering into new relationships as well as to the existing customers. All the accounts of an individual customer will be opened under his / her UCIC. "FATCA" means Foreign Account Tax Compliance Act of the United States of America (USA) which, inter alia, requires foreign financial institutions to 28 report about financial accounts held by U.S. taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest. "IGA" means Inter Governmental Agreement between the Governments of India and the USA to improve international tax compliance and to implement FATCA of the USA. "Non-face-to-face customers" means customers who open accounts without visiting the branch / offices of the Bank or meeting the officials of Bank. 29 Customer Service Efficient customer service is vital for fostering trust and satisfaction in the banking sector. Various guidelines and mechanisms have been established by regulatory bodies like RBI, BCSBI, and banks themselves to ensure customer-centric operations and effective grievance redressal. Committees on Customer Service Several committees have provided recommendations to enhance customer service standards in banks: Talwar Committee (1975): Recommended simplifying procedures, reducing customer wait time, and enhancing operational transparency. Goiporia Committee (1990): Focused on improving customer satisfaction through clear service standards, punctuality, and complaint handling. Damodaran Committee (2011): Recommended establishing a robust grievance redressal mechanism, ensuring service quality for senior citizens, and adopting technology for better customer experience. RBI Guidelines on Customer Service The Reserve Bank of India (RBI) mandates all banks to implement customer service policies that align with the following: Comprehensive Customer Charter: Banks must adopt a customer service policy approved by their boards, covering customer rights and obligations. Fair Practices Code: Ensures transparency in loan processes, clear communication, and fair treatment for all customers. Customer Compensation Policy: Banks must compensate customers for service lapses, such as delays in resolving complaints or unauthorized transactions. Timely Complaint Redressal: Banks should resolve complaints within 30 days, failing which customers can escalate the matter to higher authorities like the Ombudsman. Grievance Redressal Mechanism Banks must maintain an effective three-tier grievance redressal system: Branch Level: First point of contact for complaints. Zonal/Regional Level: Escalation for unresolved complaints. Head Office Level: Final internal escalation. Banks must display the contact details of their grievance officers prominently in branches and on their websites. 30 The RBI Banking Ombudsman Scheme provides an external forum for resolving customer grievances that remain unresolved by banks. Coverage: Complaints like non-payment of deposits, service deficiencies, and non-adherence to guidelines. Process: Customers can lodge complaints online or offline, free of charge. Decisions are typically binding on banks but non-binding on customers. Integrated Ombudsman Scheme (2021): Streamlined grievances related to banking, NBFCs, and digital payments into a single portal. Banking Codes and Standards Board of India (BCSBI) BCSBI was set up to ensure fair treatment and customer rights in banking. Its Code of Commitment emphasizes: Transparent communication about products and services. Protection of customer data and privacy. Timely updates about transactions and account status. 31 Types of Customers & Banker Customer Relationship BLIND PERSONS Blind persons are fully competent to enter into contract and There is no legal bar in opening accounts in their name or getting loan documents executed by them. Blind persons are fully competent to enter into contract and There is no legal bar in opening accounts in their name or getting loan documents executed by them. All other banking facilities to be offered to the visually challenged without any discrimination such as: ATM facility, Net banking facility, Locker facility, Retail loans, Credit cards etc. JOINT HINDU FAMILY OR HINDU UNDIVIDED FAMILY (HUF) MEMBERSHIP It requires minimum two member KARTA : The eldest member of the HUF who control and manage the business is called Karta. CO-PARCENERS : Other family members who by birth acquires an interest in the joint property of the family. Daughters are also made coparceners by virtue of section 6(1) of the Hindu Succession Act 2005. There is no limit for membership. The inclusion of an individual in to the business occurs due to birth in a Hindu undivided family. POWER OF KARTA He alone is empowered to handle the affairs of HUF business or property. He has powers to raise loan for family business and legal necessity of the family He can execute document, create charge including pledge on behalf of the family for family business. He can also appoint agent and can delegate authority to operate the account to one or some of the coparceners or even to outsiders. He can give valid discharge of debt and can make part payment 32 LIABILITY The liability of a KARTA is unlimited because he is the only deciding authority, whereas the liabilty of Co- Parceners is limited upto their share in the capital of the family. ILLITERATE PERSONS Illiterate person is a person who cannot read and write in any language and who is not capable of writing his signature in any language Banks do not distinguish between literate and illiterate customers. Illiterate persons are fully competent to enter into contracts. ISSUANCE OF ATM/DEBIT CARD If, customer opts to have an ATM debit card, banks should provide the same. However, if customer chooses not to have ATM debit card, banks need not force. MINOR A minor (of Indian domicile)as defined in sec. 3 of Indian Majority Act,1875, is a person who has not completed 18 years of age. A person will become Major at the age of 18 whether guardian is natural or appointed by a court of law. In case of every minor the superintendence of whose property has been assumed by the Court of Ward, age of majority will be 21 years. As per section 11 of the Indian Contract Act, 1872 a minor is not competent to enter into a contract. A minor can not appoint a nominee, but a minor can be appointed as a nominee. A minor can not be declared as insolvent 33 A minor cannot be full fledged partner in a partnership concern. PURDANASHIN LADIES A Purdanashin lady is a woman who remains in complete seclusion and does not transact with people other than her family members. In other words, a woman, who by her custom, is barred from showing her face in public. For example, there are some communities in India where a married woman is not allowed to show her face to non family members even within her house. Pardanashin lady is legally competent to enter into a contract. A contract with a Pardanshin woman is presumed to have been induced by undue influence She can avoid a contract if there is undue influence on her for signing the contract. Person entering into a contract with pardanashin woman has to prove: No undue influence is used She had free and independent advice She fully understand the contents of the contract She exercised her free will Thus, the onus of proving of influence is on the bank Therefore, bank should take extra care in this regards. TRUST ACCOUNTS Trusts are governed by the Indian Trust Act, 1882 A trust may be created for any lawful purpose. Every trust of which the purpose is unlawful is void. Trust may be public charitable trust or private trust ( for benefit of private individuals) 34 A trust may be created by every person competent to contract. In a trust account, a trustee controls funds for the benefit of another party which may be an individual or a group. CLUBS, COMMITTEES, ASSOCIATIONS Clubs, Association and Societies are non-profit making organizations and represent a group of persons. The purpose of these organisations may be promotion of Art, Literature or such other purpose. These institutions are normally incorporated under Co-operative Society Act Clubs are bodies where like minded people join together for some specific purpose. Example – Chess club, Ladies club, Children’s club etc., Clubs are managed by authorized persons namely; the president, secretary and treasurer. Such persons are elected by the members of the club through a resolution. Like clubs, associations are bodies formed by persons pertaining to a specific group example: Teachers’ association, students’ association etc., The associations are also managed by authorized persons and the authorized persons are elected by the members through a resolution A co-operative society is an association registered under the provisions of the Co- operative Societies Act of the State concerned. Partnership Firm According to sec. 4 of the Indian Partnership Act, 1932- “Partnership” is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons who have entered into partnership with one another are called individually “partners” and collectively “a firm”, and the name under which their business is carried on is called the “firm name”. Indian Partnership Act, 1932:- 35 Partnership is governed by the Indian Partnership Act, 1932. Extends to the whole of India except the State of Jammu and Kashmir. It came into force on 1st October 1932. Banker-Customer Relationship The relationship between a banker and a customer is founded on trust, mutual benefit, and legal obligations. This relationship varies based on the nature of the interaction or services provided: 1. Debtor-Creditor Relationship When Bank is Debtor: When a customer deposits money, the bank becomes the debtor and owes the amount to the customer. When Bank is Creditor: When the bank grants a loan, the customer becomes the debtor, and the bank assumes the role of a creditor. 2. Agent-Principal Relationship The bank acts as an agent for the customer when providing services like bill payments, fund transfers, or managing investments. 3. Trustee-Beneficiary Relationship The bank acts as a trustee when it holds valuables or securities in a locker or safe custody for the customer. 4. Lessor-Lessee Relationship This arises when the bank provides a safe deposit locker to the customer. The bank is the lessor (owner of the locker), and the customer is the lessee (user). 5. Advisor-Client Relationship Banks often act as advisors to customers, offering guidance on investments, financial planning, or wealth management. 6. Custodian-Customer Relationship When a bank holds securities, documents, or other valuables for the customer, it acts as a custodian. 7. Bailor-Bailee Relationship This relationship arises when a customer deposits valuables or documents with the bank for safe custody. The bank becomes the bailee, and the customer is the bailor. 8. Guarantor-Borrower Relationship If a bank provides a guarantee on behalf of a customer (e.g., for loans or trade finance), it assumes the role of a guarantor. 36 Deposit Schemes SAVINGS FUND SCHEMES OF THE BANK Sl. No. NAME OF THE SCHEME 1 PNB UNNATI SAVING FUND ACCOUNT (Saving Fund General) 2 PNB SF PRUDENT SWEEP DEPOSIT SCHEME FOR INDIVIDUALS 3 PNB SF PRUDENT SWEEP DEPOSIT SCHEME FOR INSTITUTIONS 4 PNB JUNIOR SF ACCOUNT FOR MINORS 5 PNB SALARY SAVING ACCOUNT SCHEME 6 PNB ELITE SAVING FUND SCHEME 7 PNB WOMEN POWER SAVING SCHEME 8 PNB SAMMAN ACCOUNT (Pension Saving Account) 9 PNB BASIC SAVING BANK DEPOSIT ACCOUNT 10 PNB SELECT SAVING ACCOUNT 11 PNB RAKSHAK PLUS SCHEME 12 PNB AGNI RAKSHAK SCHEME 13 PNB POLICE RAKSHAK SCHEME 14 PNB AROGYA SAVING SCHEME 15 PNB SECURED SAVING ACCOUNT SCHEME 16 PNB “TWIN” (CA+SF) ACCOUNT 37 CURRENT ACCOUNT SCHEMES (BA&RM) – CURRENT DEPOSITS & MAB Consolidated Circular No. 09/2023 dated 09.08.2023, 20/2023 dated 08.11.2023, 02/2024 dated 01.01.2024 & 06/2024 dated 15.03.2024 Sl. NAME OF THE SCHEME No. 1 GENERAL CURRENT ACCOUNT SCHEME 2 SMART BANKING CURRENT ACCOUNT SCHEME 3 Current Account – POS (PNB “Vikas” Current Account & PNB “Samridhi” Current Account) 4 PNB ESCROW/RERA ACCOUNT SCHEME 5 CURRENT ACCOUNT THROUGH MCA 6 PNB EXPERT CURRENT ACCOUNT SCHEME 7 PNB PRAGATI CURRENT ACCOUNT SCHEME Banks may also open current accounts for borrowers who have availed credit facilities in the form of cash credit (CC)/ overdraft (OD) from the banking system as per MSME & Mid Corporate Division Cir. No. 88/2023 dated 01.12.2023, BUSINESS ACQUISITION & RELATIONSHIP MANAGEMENT DIVISION (BA&RM) – CURRENT DEPOSITS & MAB Circular no. 03/2024 dated 04.01.2024. 38 One of the important functions of the Bank is to accept deposits from the public for the purpose of lending. 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. Term & Notice Deposits "Term deposit" means a deposit received by the Bank for a fixed period which is withdrawable only after the expiry of the said fixed period. It includes all variants of Recurring Deposit and Fixed Deposits. “Notice deposit” means term deposit for specific period but withdrawable on giving at least one complete banking days’ notice. CLASSIFICATION OF DEPOSITS ACCEPTED UNDER TERM DEPOSIT SCHEMES Retail (Core) Deposits: All single term deposits up to Rs. 10 crore contracted at the Retail Credit rates, published by HO: IRMD, ALM Cell, will be treated as Core Deposits (Retail Core). Wholesale Term Deposit: All single term deposits above Rs.10 Crore are classified as wholesale term deposit, which is further categorized as Wholesale (Core) and Wholesale (DRI). WHOLESALE (Core) DEPOSIT: Deposits over Rs.10 Crore contracted at the card rates. However, the interest applied on such deposits is the rate issued for retail card rate of Rs 2 crore to Rs. 10 crore, published by HO: IRMD, ALM Cell from time to time. WHOLESALE (DRI) DEPOSIT: Deposit of above Rs.10 Crore where contracted at Differential (DRI) Card Rate, published by Treasury Division are treated as Wholesale (DRI) deposit. Eligibility Fixed Deposit accounts may be opened, on compliance of KYC norms, in the names of: Individuals (singly or jointly) Firms Corporate Bodies Trusts and Associations HUF and Public Undertakings In addition to the due diligence requirements, under KYC norms, the bank is required by law to obtain Permanent Account Number (PAN) or alternatively declaration in Form No. 60 or 61. e-FD also customized in Internet Banking Services. Multi Benefit Term Deposit Scheme (below Rs.1 Crore), 39 Special Term Deposit Scheme (below Rs.1 Crore), Ordinary Term Deposit Scheme (below Rs.1 Crore) & PNB Sugam Term Deposit Scheme (upto Rs.10 Lac per Cust ID). No deposit of above ₹10 Crore whether fresh or renewal (Wholesale Core/DRI) will be contracted without seeking permission from Treasury Division. Single / Joint Accounts Deposit accounts can be opened by an individual in his own name or by more than one individual in their own names. The joint account holders can give any of the following mandates for the disposal of balance in the above accounts: Joint operation Either or Survivor Anyone or Survivor Former or Survivor Later or Survivor This mandate can be modified by the consent of all the account holders. Power of Attorney At the request of the depositor, the bank will register mandate/power of attorney given by him authorizing another person to operate the account on his behalf. Minor Term Deposit Accounts including Recurring Deposits can be opened in the name of minor by natural guardian or guardian appointed by court (legal guardian). Term Deposit Account can also be opened in the name of a minor jointly with natural guardian or with mother as the guardian (known as Minor’s Account) or jointly with a major, where minor is represented by natural guardian. On attaining majority, on the same day account should be inoperative till the time customer converts the minor account to major with required KYC documents. Illiterate The account of such person may be opened provided he/she calls on the Bank personally along with a witness who is known to both the depositor and the Bank. VISUALLY CHALLENGED PERSONS Such accounts will be operated by the account holder personally. Such account holders will have to be present before the branch official and affix thumb impression and they will be identified through their photograph to facilitate operations. ACCOUNT OF PERSONS WITH AUTISM, CEREBRAL PALSY, MENTAL RETARDATION & MULTIPLE DISABILITIES Term deposits can also be opened by the legal guardian appointed by the District Court under Mental Health Act, 1987 or by the Local Level Committees set up under the National Trust for welfare of persons with autism, cerebral palsy, mental retardation and multiple disabilities under Disabilities Act, 1999. 40 Legal guardian, so appointed, will furnish an indemnity-cum undertaking bond duly stamped as per the local law in force along with Guardianship Certificate. TRANSGENDER PERSONS Such person will be recognized as “Third Gender” and the details shall be accepted in the AOFs/ or other applicable forms as such. The salutation of such person shall be “Mx”. All transgender customers shall be treated equally to other male/ female customers without any discrimination. Tenor The tenor of domestic / NRO Term Deposits is minimum 7 days and maximum 10 years. NRI(s) can also open RD (NRO) accounts Nomination Nomination facility is available on all deposit accounts opened by individuals. Nomination is also available to an account opened by a sole proprietor. Nomination can be made in favour of one individual only. Nomination so made can be cancelled or changed by the account holder/s any time. Nomination can be made in favour of a minor also. In such cases, depositor has to give a name of person (called appointee) who is a major and will receive the amount of deposit on behalf of the nominee in the event of death of the account holder during the minority of the nominee. The nominee, in the event of death of the depositor/s, would receive the balance outstanding in the account as a trustee of the legal heirs. Interest Payment In terms of RBI directives Interest is calculated at quarterly intervals on term deposits. For deposits repayable for less than 3 months or where the terminal quarter is incomplete, interest shall be paid proportionately for the actual number of days reckoning the year at 365 days. In case of monthly deposit scheme, the interest shall be calculated for the quarter and paid monthly at discounted value. Interest Payment on Overdue TD If a Term Deposit (TD) matures and proceeds are unpaid, the amount left unclaimed with the bank shall attract rate of interest as applicable to savings account or the contracted rate of interest on the matured TD, whichever is lower. 41 Powers for Interest Payment on cases of Less payment of interest Amount of Less interest paid Competent Authority Upto ₹2 lakh Incumbent-Incharge (small / medium / large branches) Upto ₹5 lakh Incumbent In-charge (VLB / ELB) Upto ₹10 lakh Circle Head / LCB (AGM headed) Upto ₹15 lakh Circle Head / LCB (DGM headed) Full Powers Zonal Manager TDS TDS shall be deducted if total interest payable to a customer during the financial year (i.e. from April to March) on all his term deposits, comes to ₹50,000 and above in case of Senior citizen and ₹40,000 and above for any other person, specified under the Income Tax Act. The depositor, if entitled to exemption from TDS can submit declaration in the prescribed format at the beginning of every financial year. Transfer of Account The deposit accounts may be transferred to any other branch of the Bank at the request of the depositor. For Intersol Transfer of Fixed Deposit account balance amounting more than ₹2 crore, the concerned Zonal Head is the competent authority for allowing the same. RENEWAL OF TERM DEPOSITS The term deposit account holders at the time of opening the account can give instructions with regard to closure of deposit account or renewal of deposit for further period of his choice, on the date of maturity. In the absence of any instructions from customer, the bank will auto renew the deposit on due date for the same period for which the matured deposit was placed. If request for renewal is received after the date of maturity, such deposits will be renewed with effect from the date of maturity at interest rate applicable as on due date, provided such request is received within 14 days from the date of maturity. In respect of request received after 14 days from the date of maturity, interest for the overdue period will be paid at the rates decided by Bank from time to time. Auto renewal of the FD having maturity value of above ₹10 Cr is to be accepted for principal amount only i.e. upto ₹10 crores. 42 EXTENSION OF THE PERIOD OF TD Interest accrued up to the date of extension, may be paid and a note to this effect- should be given, in red ink, on the fresh receipt, as well as on the relative ledger folio. The existing deposit receipt should be cancelled and filed with the relative voucher and a new one issued in lieu thereof. PREMATURE WITHDRAWAL OF DEPOSIT 1% penal interest to be charged at the time of premature cancellation/part withdrawal of domestic term deposits for all tenors and interest rate payable shall be Interest rate applicable to the amount & period for which the deposit remained with the bank minus 1.00% and not at the contracted rate. No penalty is to be levied if the deposit is prematurely closed for the purpose of reinvestment in any other term deposit scheme of the bank provided that the deposit remains for a period longer than the remaining period of the original contract. No Penalty for staff members, Sr. Citizen and deposit in name of demise person. ADVANCE AGAINST DEPOSITS Advance is granted at the request of the depositor/s after execution of necessary security documents. The Bank will also consider a loan against a deposit standing in the name of minor, however a suitable declaration stating that the loan is for the benefit of the minor is to be furnished by the depositor-applicant. Settlement of dues in Deceased Depositor’s A/c The claims in respect of deceased depositors and release of payments to survivor(s)/nominees will be made within a period not exceeding 15 days from the date of receipt of the claim. In a joint deposit account when one of the joint account holders dies, the Bank is required to make payment jointly, to the legal heirs of the deceased person and the surviving depositor(s). In case of death of the depositor, before the date of maturity of deposit and amount of the deposit being 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 interest Savings Bank rate of interest. In case of death of a depositor after the maturity date where the depositor had failed to renew the deposit for a further period, the bank shall pay interest Savings Bank rate of interest as applicable from time to time. 43 INSURANCE COVER FOR DEPOSITS All bank deposits are covered under the insurance scheme offered by the Deposit Insurance and Credit Guarantee Corporation of India (DICGC) upto a maximum limit of ₹ 5 lakh per customer. Closure of TD All routine closure of FDRs should be routed only through the Account/CIF from which the FDR was created, except in case of deceased claim or in case of account(s) of minor. System will not allow the FD to be closed in case any lien is marked on FD. Payment can be made by any CBS branch on maturity only. Where the aggregate amount of deposit repayable together with interest is ₹20,000 or more, the payment to be made to linked account or by account payee DD / PO Former or Survivor- The proceeds of closure of FDR (pre-mature withdrawal/part withdrawal) will be credited in the account of the Former only, if both are alive. Relation Type Joint, E/S: The proceeds of closure of FDR /pre-mature withdrawal/part withdrawal will be credited in the accounts as under:- Fixed Deposit Proceeds to be credited to operative A/c of Account Type Mode of Operation Joint A+B A+B B+A E or S A+B A+B B+A A B A (Single) A A+B B+A A B (Single) B A+B B+A B Issuance of Duplicate Receipt Stamped Indemnity Bond on

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