Mujjtafah Project.docx

PROJECT REPORT on

Topic A STUDY ON BANKING FUNCTIONS IN BANKING AND BEYOND WITH RESPECT TO INDIA BANKING SYSTEM”

at

Sharda University In Partial Fulfilment of the Requirements for the Research Report By: Abdullahi Shafiu Sys Id : 2016015975 Under the guidance of Prof Nauma Rafique

Designation: professor SBS, Sharda University

School of Business Studies Sharda University Plot no: 32,34 , Knowledge Park 3 Greater Noida - 201306

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DECLARATION I the undersigned solemnly declare that the report of the research work entitled “A STUDY ON BANKING FUNCTIONS OF BANKING AND BEYOND WITH RESPECT TO INDIA BANKING SYSTEM” .is based on my own work carried out during the course of my study under the supervision of Prof Nauma Rafique , Sharda University. I assert that the statements made and conclusions drawn are an outcome of my research work. I further declare that to the best of my knowledge and belief the report does not contain any part of any work which has been submitted for the award of BBA degree or any other degree/diploma/certificate in this University or any other University of India or abroad.

Abdullahi Shafiu

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ACKNOWLEDGEMENT I, hereby, express my gratitude towards Sharda University, Greater Noida for granting me the opportunity to do my report. I also take this moment to express my gratitude to Prof Nauma Rafique, under whose guidance i could conduct my report on entitled “A STUDY ON BANKING FUNCTIONS IN BANKING AND BEYOND WITH RESPECT TO INDIA BANKING SYSTEM” I am pleased to record my gratitude and sincere thanks to my guide, for sincere guidance and valuable assistance for completing this report. I am also indebted to my parents and friends for their support for completing this project successfully. Once more, I am grateful to all the above mentioned people for the help, advices and suggestions they contributed in the making of my Report during the period of March 2019.

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CONTENT CHAPTER-1 1

4-5

Introduction

CHAPTER-2 2

6-10

Objective

CHAPTER-3 3

Data Analysis & Research Methodology

11-18

CHAPTER-4 4

19-49

Literature Review

CHAPTER-5 5

Bank Conciliation of Collection & Withdrawal Account

50-55

CHAPTER-6 6

56-58

Conclusion & Suggestion

CHAPTER-7 7

59

Bibliography

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Chapter-1

The banking system of India consists of the central bank (Reserve Bank of India - RBI), commercial banks, cooperative banks and development banks (development finance institutions). These institutions, which provide a meeting ground for the savers and the investors, form the core of India's financial sector

In India the banks and banking have been divided in different groups. Each group has their own benefits and limitations in their operations. They have their own dedicated target market. Some are concentrated their work in rural sector while others in both rural as well as urban. Most of them are only catering in cities and major towns. Banking development in India has been, by and large, a state-induced activity. The Reserve Bank of India was nationalized in 1949 followed by the nationalization of Imperial Bank of India (now the State Bank of India - SBI) in 1955. In 1969, 14 major commercial banks were nationalized and the exercise was repeated when 6 more commercial banks were nationalized in 1980. Thus, prior to economic reforms initiated in early 1990s, banking business in India was a near-monopoly of the Government of India

THE FUNDING MANAGEMENT SIDE OF FINANCE AND ACCOUNTING There are some financial function which the department follows based on that laid down procedures that lead the progress of the department. Which Banking connection relation with all the bank related either National or international mainly are as follows; 1. Bank Reconciliation report; This shows the accuracy of the bank statement with respect to the department record books 2. Semi reconciliation :This stage show if there is any problem encounter by the (BRR) it will show in this stage and it will be verify and address properly 3. Reconcile: This is final stage it show the correctness and accuracy with the bank statement and the account department to the concern party or the university or the 5

institution and a quorum will be made for that bank through the journal voucher so that to enable to pass the deposit from dummy bank account to the actual concern bank which are related.

Chapter-2 In the following section we describe the financial accounting system followed by Indian banks and corporate bodies, as mandated by the Reserve Bank of India.

Financial Objectives  To Ensure Adequate Return On The Capital Employed And Maintain A Reasonable Annual Dividend On Its Equity Capital.  To Ensure Maximum Economy In Expenditure. 

To Manage And Operate The Facilities In An Efficient Manner So As To Generate Adequate Internal Resources To Meet Revenue Cost And Requirements For Project Investment, Without Budgetary Support.

 To Develop Long Term Corporate Plans To Provide For Adequate Growth Of The Activities Of The Corporation.  To Endeavor To Reduce The Cost Of Production Of Petroleum Products By Means Of Systematic Cost Control Measures.

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 To Endeavor To Complete All Plan Projects Within The Stipulated Time And Cost Estimates.

Financial Goals  To Inculcate Cost Consciousness In User Department.  Development Of Standard Refining Cost At Each Unit Level.  Proper Implementation Of Budgetary Control And Submission Of Mis In Time.  To Keep The Level Of Inventories Below The Level Fixed By The Board And Outstanding Debts, Loan And Advances And Claims At Bare Minimum.  Ensure Payments On Due Date To Various Agencies.  Monitor Capital Expenditure To Ensure Completion Within Stipulated Time And Cost.  Optimize Utilization Of Working Capital.  Efficient Management Of Funds,

Functions Of Finance Department  Management Of Financial Resources For Meeting The Corporations Programs Of Operation And Capital Expenditure Including The Investment Of Surplus Fund, If Any.  Ensuring Uniform Financial

And

Accounting Policies And Procedures, To The

Extent Possible, In The Division.  Establish And Maintain A System Of Financial Scrutiny And Internal Checks And Render Advise

On Financial Matters Including Examination Of Feasibility Studies

And Detailed Project Reports.  Establish And Maintain An Appropriate System Of Budgetary Control And Management Information System For Different Levels Of Management.  Carry Out Periodical-Special Studies With A View To Control Cost, Reduce Expenditure, Economy In Administrative Expenditure And Improve Efficiency To Maximize Profitability Of The Corporation.

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 Maintain The Financial Accounts, Cost Accounts And Other Relevant Books And Records In Accordance With The Various Statutory And Other Requirements.  Advice On Corporate Cash Planning, Credit Policy And Pricing Policies Of The Corporation. 

Ensuring That The Corporations Acts In All Financial And Accounting Matters As Per Approved Policies Of The Corporation Within The Framework Of Government Policies For Public Enterprises.

Major Accounting Activities - Corporate Finance  Consolidation Of Divisional Accounts.  Finalization Of Corporate Accounts.  Finalization Of Quarterly & Half Yearly Accounts.  Preparation Of Capital & Revenue Budgets.  Preparation Of Financing Pattern Of Plan And Non-Plan Expenditure.  Profit Projections On Annual & 5 Year Basis.  Targets For Mou With Govt.  Coordination With Oil Coordination Committee.  Coordination With Comptroller & Auditor General And Company Affaires – Relating To Appointment Of Statutory Auditors & Fixation Of Audit Fees.  Statutory / Internal / Govt. Audit.  Monthly & Quarterly Mis Reports To Management, Occ, Mop&Ng Etc.

Various Monthly & Quarterly MIS Reports to Management, OCC, MOP&NG etc.        

Core Information On Monthly Basis. Quarterly Performance Review - Quarterly Basis. Statement Of Internal & External Resources – Monthly Basis. Report Monthly Review Of Annual Plan - Monthly Basis. Report On Monitoring Of Plan Expenditure. Report On Foreign Currency. Report On Details Of Govt. Guaranteed Loans Outstanding Guarantee Fees. Report On Saving In Revenue Expenditure.

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Major Accounting Activities – Treasury Group     

Arranging Foreign Exchange Loans, Finalization Of Loan Agreement. Arranging Rupee Loan. Constant Review Of Cash Resources. Management Of Cash By Reviewing Cash Flows On Daily Basis. Purchasing Foreign Exchange As Requirement On Daily Basis.

In Addition To Above, Treasury Group Also Handles:

 Coordination With Research Analysts.  Handling All Matters Relating To Equity Shares/Disinvestments Etc.

Major Accounting Activities – Refinery Division               

Import Of Crude Oil. Purchases Of Crude Oil. Stores – Transactions. Production Of Petroleum Products. Transfer Of Petroleum Products. Capital Expenditure. Asset Control. Profit Reconciliation. Revenue Expenditure. Finance Concurrence. Statutory / Internal / Govt. Audit. Excise & Customs Duty Accounting. Freight Payment. Tax Deduction 7 Deposit. Pool Adjustments ( Up to 31.03.98)

Major Accounting Activities – Marketing Division  Product Quantities.  Sales – DGS&D / Non DGS&D / OMCs / Others. 9

                  

Capital Expenditure. Asset Control. Investments. Banking Operations. Import / Export – Financial Operations. Stores Management. Maintenance Of Customer Transaction. Excise & Customs Duty. Finance Concurrence Profit Reconciliation. Public Deposit Scheme. Corporate taxation – tax planning & management. Freight Payment. Tax Deduction & Deposit. Pool Adjustments Pool Account Management. Statutory / Internal / Govt. Audit. Corporate Account Consolidation. Sales - Purchases From Other Marketing Co.’s.

Major Accounting Activities –Pipelines Division           

Revenue Expenditure. Capital Expenditure. Tax Deduction Deposit. Pool Adjustments Transportation Charges – Income. Excise & Customs Duty Accounting. Product quantity Reconciliation. Profit Reconciliation. Asset Control. Statutory / Internal / Govt. Audit. Tax Deduction & Deposit.

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CHAPTER -3 DATA Analysis

APPLICATION OF FUNDS (RS. IN CRORES) AS ON 31.03.2009

WORKING CAPITAL

INVESTMENT

11

WIP

G.F. ASSETS

APPLICATION OF FUNDS ( RS. IN CRORES ) AS ON 31.3.2015

W.CAP.

INVESMENT

W.I.P.

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G.F.ASSETS

STRUCTURE OF FINANCE DEPARTMENT

DIRECTOR ( FINANCE )

ED ( IT & CF )

ED (IA)

DGM ( IT&T )

GM ( IA )

DGM ( CF )

DGM ( PAG ) DGM ( TREASURY )

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STRUCTURE OF FINANCE DEPARTMENT CORPORATE OFFICE

CORPORATE FINANCE

INTERNATIONAL TRADE

INTERNAL AUDIT

PROJECT APPRAISAL GROUP

TREASURY FUNCTIONS

POLICY MATTERS

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15

16

17

SOURCES OF FUNDS(Rs. Crores) ISSUED & SUBSCRIBED CAPITAL (Rs.Crores)

AUTHORISED CAPITAL PAIDUP CAPITAL PAIDUP CAPITAL AT THE BEGINNING OF THE YEAR BONUS EMPLOYEE ISSUE

FACE VALUE

2009

2010

2011

2012

2013

2014

150

150

150

2500

2500

150

82

82 41

123 246

369

389

123 246

82

123

369

20 389

389

369

1000

1000

1000

1000

1000

1000

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CHAPTER – 4 Literature review

INTRODUCTION: This study of Banking Functions is basically a compilation of existing instructions, systems and procedures for handling the banking transactions and for operations of various types of Bank Accounts maintained by Indian Oil Corporation Limited. The functions, activities, roles and responsibilities of the concerned work Groups at State/Head Office and Locations, in this regard have also been covered in this study.

This study does not cover the systems and procedures of cash transactions and as such is restricted to dealing with banking transactions only.

TYPES OF CREDIT FACILITIES: State Bank of India continues to be the Main and Sole banker for our various banking needs of the Corporation. Corporate Accounts Group (CAG) – Central office of the Bank at Mumbai is the controlling office of State Bank of India having sanctioning Authority for our various credit facilities and other banking needs of the Corporation. Corporate Accounts

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Group (CAG) of SBI operates with network of branches called “CAG branches” in all Metro cities.

Head office Marketing Division Co-ordinates with SBI for arranging the various banking facilities required by the Corporation and also for its renewal at periodical intervals.

The credit facilities of the corporation can be divided broadly into two parts viz.:

I. Fund Based facility, and II. Non Fund Based facility.

Fund based facility is primarily the amount of overdraft obtained by us from the Bank. At present the total overdraft limit of the Corporation is controlled through Corporation’s Main Cash Credit Account at Mumbai. All other Bank Accounts operated by locations and other offices of the Corporation are only extension of this Main Cash Credit Account. This limit is subject to review periodically.

Non-fund based facilities : are pure banking convenience provided by the bank to Corporation to carry out the business transactions. It does not have any direct financial implication on the Bank. Various Non-fund based facilities available to Corporation are as under: -

I. Performance/ Financial Bank Guarantee facility II. Letter of credit facility – Inland III. Letter of credit facility – Import.

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TYPES OF BANK ACCOUNTS: Any banking transaction takes place by operating a Bank Account. Various types of Bank Accounts operated by Corporation are given below: -

I. Collection Account II. Special Current (Withdrawal) Account III. Current (Imprest) Account IV. Letter of Authority facility V. Railway Credit Note facility VI. Cash Credit Account VII. Regional Cash Credit Account VIII. Other specific purpose accounts like Dividend Account, Public Deposit Account, Export Packing Credit Account, and Bond Issue Account Etc.

Salient features of different types of bank accounts maintained with State Bank of India are detailed in the following pages. Copies of memorandum of terms and conditions of each of the bank account are enclosed for your ready reference.

COLLECTION ACCOUNT: Collection Accounts are opened for various locations and other Offices For depositing various instruments collected from customers/parties.

Opening of Collection Account

Request for opening of a Collection Account should be forwarded to Head Office after ensuring the following main aspects.

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1) It is ensured that the branch is able to handle the workload of our Collection account by inquiring about the branch’s infrastructure, staff strength, facility of sending daily telegraphic transfer of funds to controlling RCC branch Etc.

2) Wherever the CMP facility is functional in the town, the location must open the account in CMP branch.

3) The branch should be a participating member of the local Clearing House. This is very essential for getting timely credit for the local instruments deposited in the Account.

The locations cannot select a branch, merely because it is nearer to Corporation office by ignoring the aspects mentioned above.

Assess the quantum of outstation instruments (cheques/Demand Draft) that the location is likely to deposit every month and accordingly get the DDP Limit allocated to the branch. This will enable to get immediate credit (same day) for all outstation instruments deposited in the Account.

DDP limit is a facility under which SBI purchases all outstation cheques and gives us immediate credit against them, ending actual realisation of cheques from the dealers/customers. In other orders it can be construed as a temporary advance granted by SBI against such cheques till the time the cheques are actually realised. It is therefore the DDP limit is required to be fixed for each location to enable the SBI branch manager for purchasing the outstation cheques. It may be noted that once the DDP limit is granted to a location, Corporation’s overall sanctioned cash credit limit to that extent is reduced by SBI. Therefore it is necessary for the location to ensure that DDP limit is not fixed too high to remain unutilized at the same time it should be sufficient to take care of the outstation cheques requirement for 15 days.

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Quantum of DDP Limit is calculated by estimating the value of outstation Instruments that the location will be depositing in a period of 15 days.

The note for opening of collection account is duly approved by Finance In-charge of the Region. DDP limit required, branch name and code are invariably mentioned in the note.

Checklist of various aspects to be observed at locations: -

Acceptance of Cheques from the customer/party at the location have been done only on approval given by the competent authority to accept the same.

Insist on deposit of instruments by the customer/party at the collection counter by duly filling in the form prescribed by the company in this regard.

Location must verify all the instruments before accepting it as to any errors/technical mistakes to avoid unnecessary dishonours. Location also to ensure that only the instruments of a scheduled bank that is also a member of clearing house, are only accepted.

Ensure that the instrument is correctly drawn in the Name of the Corporation, contain valid date, duly signed, the amount in words and figures are correct Etc.

At the time of generation of DCR through TDM and issue of receipt to the party, due care has be taken for capturing all the information required for segregation of instruments into various categories like “On Branch instrument”, “Out station instrument”, “Local SBI instrument”, “ Local Non SBI instruments” Etc.

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Location should clearly understand from the Local SBI Branch the Clearing House arrangement of that centre (mainly the cut–off time) for acceptance of Local instruments by the branch for including it in the days clearing. There is No fixed or standard timing for this and it varies from City to City. This helps the location in planning the time of deposit of instruments at the branch to get maximum benefit of earliest credit to Corporation’s Account.

Depending upon the Clearing House arrangement for Local banking Instrument, at present all the cities in the country can be divided into three different categories Namely,

A. Day zero centre B. Day One centre C. Day Two centre.

In all Day Zero centres credit and transfer of funds for Local instrument is given to us on the same day of deposit provided the instruments are deposited before the Cut-off time for acceptances of instruments by the branch for presenting it in the days Clearing House.

Similarly in all Day One centers credit and transfer of funds for Local instrument is done on the next day provided the instruments are deposited well before the Cut-off time for acceptances of instruments by the branch.

However as per our understanding with SBI credit and transfer of funds for local instruments in all day two centers should be given to Corporation on day one itself. This also is ensured by all the locations of day two centers.

Locations should know the category of Clearing House arrangement of the city under which are covered i.e. whether it is Day Zero or Day One or Day Two and ensure credit of local instruments is given to Corporation by the bank accordingly and correctly. In other words 24

credit and transfer of funds to be done on the same day for Day Zero center and next day for day one and day two centers.

Generally in most of the centers Clearing House does not function on Saturdays. In such centers, credit for Local instruments deposited on Saturdays are given on Monday only, even though the center is a Day Zero center.

Deposit of banking instruments is made via the Triplicate copies of DCR generated through TDM. It is Insisted that due stamping/acknowledging (signature/initial of the Authorised person) in all the copies of DCR for having received the instruments at the branch have been made.

The Bank’s stamp in the DCR should clearly indicate the Date of deposit of the instrument. It should also have the indication that the instruments are accepted for To-Day’s clearing or not. All efforts should be made by the location to deposit the instruments before cut-off time, however in case instruments are deposited after the cut-off time, the stamp of “Late for day’s clearing” on the face of the DCR by the branch should be insisted upon.

One copy of the acknowledged DCR is retained at the location and one copy is forwarded to concerned State Office/Regional Office at intervals as required/specified along with TDM floppy.

Location verify at weekly intervals that they posses the acknowledged copy of all DCR generated by them during the week. It is ensured that location get themselves satisfied daily from the bank that there was no error in the DCR deposited on the previous day both in relation to the total number of cheques/Demand Draft deposited and the total amount of the DCR.

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Any error reported by the bank is immediately corrected in the PAD and informed to concerned State Office for easy reconciliation and also for passing necessary entries in the customer ledger wherever the reconciliation is carried out at State Office. In No case the acknowledged copies of the DCR’s is to be corrected/altered and rather circling the wrong amount and the Total and indicating the correct value give a rectification remark.

Necessary rectification should also be done in the PAD to avoid any undue gain to the customer/party.

Locations collect two copies of the Bank statement from the branch on daily or weekly basis depending upon the volume of transaction. One copy to be retained at the location and one copy to be forwarded to the concerned State Office/Region.

Detailed analysis of the bank statement is done by the locations immediately for all the entries appearing in the statement. Various aspects to be checked are given below: -

1) The opening balance is in line with the closing balance of previous month. 2) DCR No’s are mentioned against each credit entry in the bank statement. 3) Whether the branch has offered credit for the each DCR to us in line with our MOT with SBI. 4) Closing balance is not more than Rs. 1,000/- at the end of each day. 5) The debit entries appearing in the bank statement should be clearly divided into dishonor debit, bank charges and entry for transfer of funds for correct accounting. 6) Check the amount of bank charges debited to ascertain that they are recovered in line with our MOT with SBI. 7) Check for any casting errors in the bank statement. 8) Collect the weekly statement from the bank containing details of Non realization of instruments beyond 15 days and take follow-up action with our customer/party to liquidate the outstanding.

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9) It is ensured that without prior intimation to Corporation, the bank does not raise debit dishonor or Loss in transit after 60 days from the date of deposit of the instrument. 10) It is ensured that the period of overdue interest for delayed realization of outstation instruments recovered from us is not more than 47 days (60 days–13 days). Such overdue interest should be at Sib’s Prime Lending rate at that period. Overdue interest is applicable only in respect of outstation instruments deposited by us drawn on a Bank other than SBI and the branch on which it is drawn is situated at a place where SBI does not have a branch.

Ensure that same day credit is given to our account in respect of following: -

A. All outstation instruments. B. All SBI instruments drawn on the same branch. C. All local instruments deposited at day zero centers where “Return” OR “Fate” of the instrument is known on the same day.

It is ensure that no bank charges other than 0.75 paisa per Rs.100 are recovered from Corporation for affording immediate credit for outstation instruments.

Extra charges (overdue interest) other than 0.75 paisa per Rs.100 can be debited to Corporation’s Account only if both the following conditions are satisfied

The out station instrument deposited by Corporation is drawn at a place where SBI does not have any Branch and The amount charged by the other Bank is more than 0.1250 Ps per Rs.100. Such overdue interest is debited to the customer’s account and recovered on regular basis. Bank reconciliation is carried out every month and is completed by 12th of the month for the previous month and all open items cleared within 7 days. 27

It is ensure that all items of unlinked credits/excess credit given by bank lying in reconciliation for more than six months are transferred to separate liability code – 077-2000000 in line with the instructions contained in circular No.AC: BKG: BR dated 14.11.2001. In respect of CMP centers the daily realization report given by the branch is checked to ensure that all the amount deposited on the previous day have been accounted and omissions if any noticed is to informed to the branch immediately for their rectification. Utilization of DDP limit is monitored at periodical intervals to ensure that the branch for affording immediate credit accepts all outstation instruments. Request is given for enhancement in DDP limit or reduction if required/as the case may be. It is ensured that due to shortage of DDP limit the branch is not forwarding outstation instruments on “Collection” basis simultaneously ensuring that higher DDP limit than what is required, is not sought as it reduces our overall cash credit limits as explained earlier.

The instrument forwarded by State Office for Imprest Recoupment is not to be deposited in Collection Account and also ensure that the bank does not credit Corporation’s Collection Account by mistake in case both of its Collection and Current Account are maintained at the same branch. Similarly it is to be ensured that the instrument given by the customers are not deposited in Current Account or the bank had not credited Corporation’s Current Account by mistake. The accounting entries that are to be passed are given below: At the time of deposit of instrument in the bank. Dr Bank a/c – 077-010-Location Code Cr Customer a/c Cr Misc Income code (bank charges collected from the party) Entry for transfer of funds to RCC a/c based on location bank statement. Dr 077-014-000 28

Cr Bank a/c – 077-010- Location Code Check list of various important obligations of the Bank: -

1) Submit a weekly statement containing details of Non realization of outstation instruments beyond 15 days. 2) Statement containing details of DCR number, Cheque No, Amount, No of days delay beyond 13 days, and rate of interest is given to locations every month for the overdue interest recovered. 3) Non-CMP branches are providing a daily/weekly/monthly bank statement depending upon volume of transaction per day. 4) DCR Number is incorporated against each credit entry in the bank statement. 5) The branch transfers the balance in the account daily to Regional Cash Credit account and closing balance in excess of Rs. 1,000.00 has not been retained in the branch. 6) In case of dishonour, the original instruments along with reason for dishonour have been handed over to location. 7) Bank charges are recovered as per MOT between IOC and SBI. 8) It is ensured that returned instruments in clearing are not to be presented again in the clearing and are handed over to location. 9) The DCR has been duly stamped and signed with date by the branch’s authorized officer for having received the instruments deposited. 10) Prior intimation to be given to Corporation by the branch before raising debit for Dishonor or Loss in transit after 60 days from the date of deposit of the instrument.

CASH MANAGEMENT PROGRAMME: -

Cash Management Programme (CMP) is a new facility provided by SBI whereby the Collections and Withdrawals from upcountry branches are transferred via electronic mode to 29

Corporation’s cash credit account at Mumbai. The facility has been tailor made to suit it’s specific requirements like providing DCR Number in the daily reports in place of Instrument Number and to suit MOU terms and conditions.

Features

The Cash Management Programme facility can be divided into Two Main categories namely: A. Credit Module of CMP and B. Debit Module of CMP.

Credit Module of CMP deals with Collection Proceeds and Debit Module of CMP deals with Withdrawals. At present the facility is made available by SBI at more than 150 Centres (Cities). The facility is being availed by Corporation in all the centres provided by the Bank. Entire transaction data is provided in soft copy to all Regional offices and State Offices on monthly basis from Mumbai. All the Memorandum Terms and Conditions of Collection Account are equally applicable to the facility under CMP except that instead of TT transfer to RCC A/c, now daily fund transfer takes place through electronic media direct to CC A/c at HO.

Under Cash Management Programme (CMP) virtually no new account is opened rather on receipt of the request for collection account for a location, HO Finance gets a separate client code allotted to the location through CMP Cell Mumbai. Such client code is unique for each location. Since no separate collection account is opened at the center, the amount against instruments

tendered

in

the

revenue/government authority.

branch

for

credit,

cannot

be

attached

by local

The client code given for each of Corporation’s various

locations is to be prominently entered in the DCR copies for easy identification and 30

segregation of data among the various participating units by the branch. Client code is more important at centres where more than one unit is participating in CMP facility in that city.

Procedure to Avail CMP

Proposal for availing CMP facility either due to shifting of Collection Account to CMP branch or due to commissioning of New Depot/ Plant/ Terminal is to be forwarded to HO on the same lines like opening of Collection Account. The proposal must be duly approved by Finance in-charge of the Region and contains necessary details like Branch code, Branch Address, DDP limit Etc.

Reports/Statements given by SBI: -

Unlike Collection Account, under CMP the local Branch does not provide any monthly bank statement to locations. However following daily report is given:

Realization Report containing details of DCR with date of presentation and date of realization. (Date of credit in H.O bank Account).

All locations ensure to collect the Realization report daily and check and verify that credits are correctly given as per understanding and there are no missing Credits for DCR deposited. In addition to above report, all other reports and statements given to locations by the branch maintaining Collection Account is also be provided by CMP branch to Locations namely: -

Statement of overdue interest recovered with all relevant particulars like Cheque Number, rate of interest, date of realization, number of days delay Etc. Such overdue interest is to be immediately debited to the concerned customer and recovered. 31

Weekly statement of unrealised outstation instruments beyond 15 days. Location to take up with the Divisional Manager and the customer for immediate clearance of such unrealised cheques. In case a cheque of a particular customer are noticed to be regularly figuring in the statement, divisional manager may be apprised of the delay with a request for taking appropriate action to stop recurrence of such cases.

Monthly Statement of DDP Charges recovered with all relevant particulars. Location to verify that charges are recovered at the agreed rate as per MOU.

Monthly statement containing details of all Dishonour debits during the month. Bank will however continue to hand over dishonour instruments to location along with dishonour advice on day-to-day basis. Such statement should be verified with the actual receipt of dishonoured instrument during the month. Any case of missing dishonoured instruments should be immediately taken up with the bank.

Under Debit Module of CMP for Special Current (Withdrawal) Account the location will continue to get Daily/Monthly Bank statement containing details of cheques honoured by the Bank as hither to given in withdrawal account. The only change is that day end balance shall be transferred through electronic mode direct to Mumbai. No cheques wise detail shall be provided.

In case of Debit Module of CMP for other than Special Current (Withdrawal) Account also the daily withdrawal of funds will be transferred to H.O, with full details viz. LA number and date, RCN number and date. Accounting Entries

Following entries shall be passed: 32

Entry for transfer of funds (Collections) from CMP branches to H.O. Dr Bank transfers suspense code – 355-009. Cr 077-010-Location Code.

Entry for transfer of funds (Withdrawals- LA) from branches to H.O. Dr 077-005-Location Code Cr Bank transfers suspense code – 355-016.

Entry for transfer of funds (Withdrawals- RCN) from CMP branches to H.O. Dr 077-004-Location Code Cr Bank transfers suspense code – 355-026.

Entry for transfer of funds (Withdrawals- Special Current Account) from CMP branches to H.O. Dr 077-009-Location Code Cr Bank transfers suspense code – 355-021.

CMP Data to Regions: -

Following CMP transaction (collections) data in electronic form is provided by HO to Regions: 33

1) DCR details in text format in Dbase. 2) Details of system returns for amount debited by the bank in Dbase. 3) Details of manual entries posted by the Bank – both debit/credit entries in Dbase format. 4) Bank statement of CMP account maintained at HO in text format. 5) Regions to check that the value dates given in this statement are inline with MOU. Regions to segregate the above data state wise, in the format amenable to their bank reconciliation module and send the same to states for reconciliation.

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SPECIAL CURRENT (WITHDRAWAL) ACCOUNT: All Regions and State Offices operate the Special Current (Withdrawal) Account. Even some major locations having monthly payments of more than Rs.1.00 Crores are given the facility of Special Current (Withdrawal) Account. However, individual locations are to access their fund requirement and put up the proposal for opening the withdrawal account as this will result in avoidance of blockage of fund. In case of Special Current (Withdrawal) Account No Pre-funding of the Account is done. The daily balances are therefore transferred Via Regional Cash Credit Account to Main Cash Credit Account at Mumbai. All payments made from the Account are centrally funded from the Corporation’s Main Cash Credit Account at Mumbai.

Opening of a Special Current (Withdrawal) Account

1) Request for opening of a Special Current (Withdrawal) Account is to be forwarded to Head Office after ensuring the following aspects. 2) Ensure that the branch is able to handle the workload of Corporation’s account by inquiring about the branch’s infrastructure, staff strength, Etc. 3) The monthly payments of various expense incurred by the location are not less than Rs.1.00 crore. 4) At Least one Accounts Officer is posted in that Location. 5) The note for opening of the account has been duly approved by ED of the Region. 6) The proposal contains all necessary details like A. IOC Location Name B. IOC Location Code C. SBI branch Name D. SBI Branch Address E. SBI Branch Code F. Monthly withdrawal Limit.

35

Check List of Various Aspects to Be Verified By Region/S.O/Location: -

1) Due care is to be taken to ensure that monthly limits, as fixed for the Special Current (Withdrawal) Account do not exceed. Any request for increase in limit is to be forwarded to H.O duly approved by Regional Head and with full justifications. 2) Bank reconciliation is done on monthly basis by the respective location/Office operating the Account and all open items cleared within one week. 3) Cheques that are more than 6 months old are not be revalidated and the same have been transferred to time –barred cheque code. 4) No deposit of any instruments is permitted in this account. 5) Care is taken for safe keeping of the Computerised Cheques books printed by us. As a precaution it is recommended not to keep stock of more than six Months requirement of Computerised Cheques. 6) Computerized Cheques books are pre-printed with “Account-payee only” crossing. 7) A register is kept to record the daily movement of the blanks cheques taken out for printing. 8) All blank cheque books given to locations by the Region/State Office for making payments to any specific Authority (e.g. Railway Authority) are pre-printed with the name of the Payee. No blank cheque books without the name pre-printed must be given to any location. 9) Debit entries in the Bank Statement for Bank charges recovered by SBI for issue of Demand Draft Etc have been verified in line with the MOT. 10) Changes in the list of authorised signatories are submitted to the Bank duly approved and Specimen Signatures verified by Dy. General Manager Finance (Grade G) of Finance department and his/her signature is also to be duly verified by the Bank. 11) Periodical and surprise visits are made by controlling Office to ensure that the Account is operated in the correct manner and all records are properly kept. 12) It is to be ensured that the instrument given by the customers are not deposited in Special Current Account or the bank had not credited our Special Current Account by mistake in case both our Collection and Special Current Account are maintained at the same branch. 13) It should be verified that the bank charges debited by the bank are in line with the charges agreed by the Corporation. A copy of various charges agreed by IOC and SBI have been obtained from Head Office at yearly intervals for the purpose. 14) Monthly Bank reconciliation is carried out by 5th of the month and all open items are cleared within 7 days. A report on reconciliation and utilization of the account is submitted to Region.

36

CURRENT (IMPREST) ACCOUNT: Current (Interest) Bank Account is opened for all Locations to meet their day-to-day expenses.

Unlike Special Current (Withdrawal) Account, Current (Imprest) Account is to be pre-funded. Accordingly location cannot make payment in excess of the credit balance available in the Account.

Current (Imprest) Account is an independent Account and hence its transactions are not transferred to State Office /Region.

Opening of a Current (interest) Account Request for opening of a Current (Imprest) Account should be forwarded to Head Office after ensuring the following aspects: 1) Ensure that the branch is able to handle the workload of our account by enquiring about the branch’s infrastructure, staff strength, Etc. 2) The branch is participating member of the local Clearing House for getting timely credit for the value of recoupment instrument received from State Office and deposited in the Account. 3) The locations specify the value of DDP limit required in case there is any possibility of the location getting Outstation cheques from State Office towards Imprest re-coupment or salary payments Etc. 4) More than one Officer is posted in that Location. 5) The note for opening of the account is duly approved by ED of the Region. 6) The proposal contains all necessary details like A. IOC Location Name B. IOC Location Code C. SBI branch Name D. SBI Branch Address E. SBI Branch Code F. DDP Limit

37

In case of locations having only one Officer, Current (Imprest) Account in the Name of the Corporation cannot be opened since as per Company’s Policy Bank Account are to be operated by joint signatories. Such locations can be permitted to have a Savings Account Opened in the Name of the Location in-charge till another Officer is posted to that Location. However No Cheques will be issued from the Account. Any income earned on the account, as interest is to be surrendered to the Corporation. Such account should be closed as soon as more than one officer is posted at the location.

Check List of Various Aspects to be Verified By Region/S.O/Location: -

1) Monthly Bank reconciliation should be completed by 5th of the month and forwarded to State Office at regular intervals. Open items if any to be cleared within 7 days. 2) All open items observed based on Monthly bank reconciliation statement should be immediately taken up with the branch and all items cleared within one week. 3) Cheques that are more than 6 months old should not be revalidated and the same should be transferred to time –barred cheque code. 4) No deposit of any instruments is permitted in this account except instruments received from State Office/Regional Office towards Imprest re-coupment or Salary and other payments. 5) Care is to be taken for safe keeping of the Computerised Cheques books printed by us. As a precaution it is recommended not to keep stock of more than six Months requirement of Computerised Cheques. 6) Computerized Cheques books are pre-printed with “Account-payee only” crossing. 7) A register is to be kept to record the daily movement of the blanks cheques taken out for printing. 8) Debit entries in the Bank Statement for Bank charges recovered by SBI for issue of Demand Draft Etc are to be verified in line with the MOT. 9) State Office to ensure that to the extent of value of time barred cheques, Imprest ReCoupment is not be given to the location until the value of such time barred is accounted as time barred cheques and transferred to State Office. 10) Periodical and surprise visits should be made by controlling Office to ensure that the Account is operated in the correct manner and all records are properly kept. 11) At locations where the Bank provides cheque books, care should be taken to affix the stamp “Account-payee only” crossing immediately. It is advisable not to keep stock of blank cheque books more than two months requirement. 12) Checking of unused leafs in all the cheque books should be done at regularly to ensure that there are no in between cheque leafs missing. 38

13) Locations should verify the bank charges debited by the bank to ensure that they are in line with the charges agreed by the Corporation. A copy of various charges agreed by IOC and SBI is obtained from Regional/ State office at yearly intervals for the purpose.

LETTER OF AUTHORITY FACILITY: This facility is given to Corporation’s locations for making payments of particular nature i.e. payment to Customs and Excise Authorities or payment to Port Trust Authorities or payment to other refineries for cost of product.

This facility can be utilized for making various payments provided the facility is used by the location to make payment to any one single Authority.

Opening of a LA Facility:

1) Request for opening of a LA Facility or Enhancement in Limits should be forwarded to Head Office after ensuring the following: 2) The note for opening of the account or Enhancement in Limits should be duly approved by Finance In-charge of the Region. 3) The proposal contains all necessary details like A. IOC Location Name B. IOC Location Code C. SBI branch Name D. SBI Branch Address E. SBI Branch Code F.Fortnightly/Daily LA Limit G. Nature of Payment i.e. Excise duty/Customs duty/Port-Trust charges Etc.

39

LA facility is opened in such SBI branches, which have been authorized to collect Central Excise/Customs revenue.

In case if in that centre the authorized revenue collecting Bank is other than SBI, then the SBI branch were the facility is to be opened should be one from where the transfer of funds to the other Bank is possible in the quickest time. Normally the SBI branch conducting the clearing House in that centre is able to transfer the funds to other Bank on the same day. This aspect is to be checked and verified with the SBI branch and accordingly the branch is to be identified for opening the LA facility.

Check List of Various Aspects to Be Verified By Region/S.O/ Location: -

1) Region/Locations to verify the bank charges debited by the bank to ensure that they are in line with the charges agreed by the Corporation. A copy of various charges agreed by IOC and SBI is to be obtained from Regional/ State office at yearly intervals for the purpose. 2) Bank reconciliation is done on monthly basis based on LA statement forward by the locations with debits in RCC a/c and open items cleared with in one week. 3) Checking of originating date is also done by the region for debit entries posted in RCC a/c under Code “04” towards transfer of funds for LA payments. For this purpose every month a list containing the date of issue of LA, LA Number and Amount of LA issued during the month obtained from the location. 4) In respect of excise duty payments made by the locations care has been taken not to issue more than three LA’s in a month. However in case of custom duty and other payments made through LA facility no such restriction is imposed. 5) Monthly bank reconciliation to be completed by Regional office by 12th of the month and open items is cleared within 7 days time.

40

IMPORTANT TIPS FOR ACHIEVING THE REDUCTION IN FINANCING COST In view of the fact that cost of financing is an important and major component of the overall expenditure, there is a need to exercise due control and take suitable measures to reduce this burden of financing cost which comprises of interest on borrowings and bank charges.

Following are the important points to be ensured for reducing the financing cost: -

1) Ensure to deposit the DCR before the cut off time so as to enable the bank to present the instrument in the clearinghouse the same day. 2) Wherever “High Value Clearing” facility is available in the city, endeavour should be made to deposit all high value local instruments into high value clearing so that the credit is given the same day to us. For the purpose separate DCR may be generated for such high value instruments with assistance of systems Dept. 3) Check that credit for all outstation instruments, is given the same day and for local instruments on the day of funding as per MOU. 4) Meticulously check the bank charges to ensure that nothing more than the agreed rate is charged. 5) Arrange to recover overdue interest from customer wherever the same is debited by bank. 6) Study the existing RCN arrangement vis-à-vis payment of railway freight through cheque and recommend for the alternative beneficial to us in terms of saving in interest cost. 7) Ensure that there is no withholding of credit balance beyond Rs.1000 in collection account under any circumstances. 8) In case of holiday for IOC but working day for bank, ensure to deposit the DCR in the bank even on such days. This is also to be ensured for Saturday’s in case of administrative offices. 9) Quarterly review of bank charges debited vs. recovery from the customer to be made. Identify areas/customers leading to under recovery and take corrective action. 10) Identify the major locations incurring huge payments (normally more than Rs.1 crores per month) and explore the possibility of opening withdrawal account instead of current (imprest) account to avoid the blockage of fund. 11) Ensure that special advances given for transport and other major payments are cleared within 5 days. Ensure that special advance is not given more than 1-2 days before the date of actual

41

payment of bills to avoid blockage of fund. In case the payment is spread over a period of 510 days, possibility should be explored to give special advances in instalments. 12) Meticulous checking should be done by RO/SO of the originating dates for TTs as per RCC statement with the actual date of TT as appearing in bank statement of the location. This is an area where lot of saving in interest can be achieved. Any error/omission on this account may lead to incurrence of huge avoidable interest cost. 13) Ensure to clear all open items in bank reconciliation immediately. 14) As far as possible all major payments i.e. statutory payments/tax/excise duties should be planned in such a way so that the payment is made on the due dates only and not before.

DISHONOUR OF INSTRUMENTS Dishonour of instruments is one of the areas of major concern in banking activity. Timely realisation of all the instruments/cheques has to be constantly and closely monitored by all concerned and immediate corrective steps to be taken wherever the cases of dishonors or delay in realization are noticed so that no financial loss occurs to the corporation.

Check List of Various Aspects to Be Verified By Region/SO/ Location: -

1) To institute a system of collection of dishonored instrument on day today basis, under acknowledgement by our authorized person. 2) To verify bank statement and classify all debit entries into debit towards dishonor of instruments and debit for bank charges. 3) In respect of CMP centers ensure to collect from the branch a monthly statement of all instruments dishonored during the month and verify that against all the entries mentioned in the statement, the original instrument were returned by the branch to our location. The details of dishonored instruments is to be provided by state office every month to locations to enable them to cross verify the same with the amount debited in our bank account. Any discrepancy in amount debited by the bank for which no instrument was returned by the branch or not reported in the monthly bank statement should be taken up to obtain the original instruments. 4) Ensure that for all debit entries for dishonor of instruments, the original instrument (cheques/DDs) are collected/obtained from the bank. This aspect is equally applicable to centers having CMP facility.

42

5) As soon as the dishonor instrument is received, ensure to pass the necessary entry immediately debiting the customer in PAD for the value of instrument along with interest and incidental charges. 6) Procedure for issuing Notice to the drawer of cheque and further legal action should be initiated within the prescribed time as per the guidelines contained in our letter no AC/CR/44 dated 26-6-2001 (copy enclosed). 7) Action to be taken for obtaining replacement cheques/DD from the concerned party. Divisional Manager to be immediately informed of the dishonor. 8) Cheque facility to the party should be immediately suspended. 9) To review and monitor the weekly statement of unrealized instruments pending for more than 15 days, as provided by the bank to ascertain any delay in realization of instrument deposited by us. In case any cases of delay are noticed in the statement following action should be taken by location: 10) The matter should be immediately taken up with the customer for immediate payment of cheques. If the payment is not forthcoming, the matter to be informed Divisional Manager for taking further action. 11) Cases of accumulation of cheques of any single party are to be viewed seriously and has to be immediately informed to Divisional Manager for taking up with the customer. This will help avoiding occurrence of bunching of cheques at the time of dishonor. 12) In case of the cheque any customer are found to be appearing off and on in such statement, Divisional Manager should take up the matter with the party for changing the bank branch etc., in order to have a permanent solution to such cases.

MOU clauses relevant to dishonour: -

Ensure that the various terms and conditions on dishonour of instruments as contained in the memorandum of terms and conditions of collection accounts are strictly followed by the branch. The relevant clause of MOU dealing with dishonour cases are reproduced below: Clause 6.i - Amount of dishonour of instrument(s) along with the overdue interest (at the cash credit rate applicable to the Prime Interest pricing plus interest tax) for the period (beyond 13 days) for which the Bank remained out of funds to be recovered at the branch by debiting NOC account itself. However, the interest can be charged for a maximum period of 60 days only from the date of purchase.

43

Clause 6.ii The dishonor of instrument(s) along with the relative memo(s)) giving the reasons for dishonor and debit advises should be given to IOC’s local terminal/depot, who had initially deposited the instrument(s) in NOC account, against their proper acknowledgement.

Clause 6.iii - Instruments returned unpaid on first presentation should in no case be presented again even if so requested by the drawer bank. Such instruments should immediately be returned to the corporation as dishonored instruments.

Clause 6.iv The amount of dishonor of instrument along with interest should be debited only when the dishonour of instrument are received by the branch and delivered to the IOC’s officials against their acknowledgement.

Clause 6.v - The instruments on presentation must be dispatched by the branch promptly without delay latest by the next working day.

Clause 6.vi - Weekly statement of unrealized outstanding instruments as stated in 4 (e) below is to be provided to the corporation and such dishonor of instruments should find a mention in it if it is a case of non-realization for more than 15 days.

4.e The details of instruments remaining unpaid for over 15 days should be advised to the Corporation on a weekly basis against their acknowledgement to enable the Corporation to take appropriate steps at their end.

4.g In case the instruments purchased are lost in transit, after ascertaining the same, debits should be raised with prior intimation to IOC giving proof of lost in transit. Overdue interest, wherever applicable in such cases should be recovered up to a maximum period of 60 days.

44

Reporting system: – Cases of dishonor are to be reported to controlling offices as extant instructions, which are, enumerated below:1) Fortnightly Report on Dishonor for want of funds- Location to send fortnightly report to State/Regional Office within 2 days from end of fortnight. Regional Office to submit a consolidated report of such dishonor to HO on fortnightly basis within 5 days from end of fortnight. 2) Monthly Report on all cases of dishonor- Locations to continue to submit monthly report on all dishonors to State/Regional Offices. Regional Office to submit the monthly report as per existing format to HO by 10th of following month.

VALUEDATION As Corporation maintains number of bank accounts through out the country for different purposes like separate account for withdrawal of funds and separate account for sales realization Etc, it is pertinent to pool all this debits and credits together to avoid idling of funds at one account and paying interest to Bank on withdrawals from another account.

In order to pool all the debits and credits at one account, Regional Cash Credit Accounts were opened. Such Regional Cash Credit Account were opened Region wise / Division wise for easy control and proper accounting.

To overcome the drawback of time gap between transfer and receipt of funds from various collection accounts and other withdrawal accounts at Regional Cash Credit Account, the concept of “Valuedation” was introduced. Valuedation is one the unique facility exclusively given to the Corporation by SBI. Under this facility the amount received at Regional Cash Credit Account are recorded with the Date of original transfer of amount from the collection Account or other withdrawal accounts. For example: -

45

Amount transferred from Collection account to Regional Cash Credit Account at Chennai of Neyveli Depot in Tamilnadu – Rs. 5.00 lakhs. The date of transfer - 01-10-2007. The date of posting at Chennai – 05-10-2007.

Amount transferred from Collection account to Regional Cash Credit Account at Chennai of Palakkad Depot in Kerala – Rs. 3.00 lakhs. The date of transfer - 02-10-2007. The date of receipt of posting at Chennai – 05-10-2007.

The above details will be recorded in bank statement of Regional Cash Credit Account as under: -

RCC BANK STATEMENT DATE: 05-10-2000 TRANSCATION TYPE: “01” BRANCH NAME

CODES

ORIGINATING

AMOUNT

DATE SBI Neyveli

Say 980

01-10-2007

5,00,000.00

SBI Palakkad

Say 800

02-10-2007

3,00,000.00

Similar separate statements will be made for each type of transaction (LA/RCN/WITHDRAWAL) recorded in the RCC a/c on daily basis. As all the amounts from various accounts are transferred to Main Cash Credit Account daily, No Interest is to be charged by any of the SBI branches on the amount withdrawn/utilized by our Locations. Interest to be paid to SBI on amount borrowed is calculated for the Corporation as a whole on the basis of daily “Validated” balance of the Main Cash Credit Account by applying the effective Rate of Interest. 46

Such interest calculation is done on quarterly basis validated balances are derived by recasting the bank statement at Mumbai by replacing the date and amount posted in the bank statement with the originating date and amount. In the above example the total credit amount of Rs. 8.00 lakhs in the bank statement of 05-10-2007 will be replaced by Rs. 5.00 lakhs in the bank statement of 01-10-2007 and Rs. 3.00 lakhs in the bank statement of 02-10-2007. Various aspects to be checked by Location/Region: Location to ensure: A. Location must ensure that amount is credited as per MOU and the credit amount is transferred the same day to RCC.

B. Regions to ensure: 1) Ensure that the date given in the RCC bank statement as originating date is same as the date of transfer of collections and payments from upcountry branches. 2) In case the date mentioned in the RCC statement is incorrect or blank the same to be taken up with RCC branch for rectification under Type “07”. 3) Ensure that in the floppy given to H.O and in the RCC bank statement the originating date and date of posting in RCC account are same for RCN payments under Type “05” wherever Exchange amount is recovered by the bank. It means in all such cases the date of posting in RCC is reflected as the originating date also. 4) In case of Railway Freight payment through MICR cheques, no exchange/charges to be debited at all, rather such transaction shall be value dated with reference to originating date. In other wards in such cases originating and posting date shall be different. 5) In case of Special Current (Withdrawal) Account and LA also the transaction are value dated with reference to originating date and in such cases also originating and posting date shall obviously be different. 6) In case of CMP transaction also validation is done wherever the transfer is not posted on same date in CC A/c at Mumbai. Bank statements provided by HO to regions/state for CMP transaction also contain a column for value date. In such cases Validation is done with reference to value date mentioned by SBI in this column. Regions must ensure to that date mentioned in value date column is correct. 7) In No case the originating Date should be later than posting date of RCC Account. For example if the posting date is 10-12-2006-07, then the originating date should be either 1012-2006-07 or earlier.

47

SETTLEMENT OF GRIEVANCES In view of the large number of accounts being operated by IOC spread at over 500 places across the country, a grievances settlement procedure has been worked out by SBI in consultation with us, for early redressed of any problems/unresolved issues with IOC locations against SBI branches. The copy of SBI letter No. CAG/AMT-1/1724 dated 04.11.2007 detailing the settlement procedure is enclosed for ready reference. As per the agreed procedure location should act in the following manner, for settlement of any pending issues/grievance against SBI branch: 1) The matter must be followed up in writing with the branch manager in-charge of the branch quoting the particular clause of MOU. In case of delay in settlement or non-response, personal meeting should be held with the branch manager for working out the solution in a time bound programed. 2) In the event if despite follow-ups both written and in person, the problem is not sorted out within reasonable time, the matter should be taken up in writing with the DGM of SBI, Zonal office. In this regard, SBI has already made extensive arrangement by way of designating one officer in each Zonal Office as the nodal officer, who would be responsible for resolving all the IOC complaints for the branches coming under that Zonal Office. The copy of the correspondence should be marked to State Office who in turn can further follow-up with the DGM or the Nodal Officer in the Zonal Office. State Office finance in-charges should be in touch with DGM of SBI Zonal offices. 3) In case the issue is still not resolved, State Office to write the letter to Chief General Manager of the Circle Office of SBI with a copy to IOC, HO Finance giving details of the matter. In that case, the matter shall be further followed up by HO, Finance with SBI through SBI, CAG – Central, Mumbai. 4) The address of SBI Zonal and Central offices, in this regard are enclosed with our letter No.AC: BKG: MOU dated 22.11.99 for ready reference. While the above is the normal procedure to be followed for settlement of issues, any matter having high financial implications and requiring immediate redressal, can also be referred by State Office/ Regional Office directly to us for immediate action apart from taking up with Zonal office.

48

IMPREST (BANK) ACCOUNT IN PERSONAL NAME: There may be certain locations where only one officer is posted and as such regular impress account in the corporation name cannot be opened in bank because corporation bank account is required to be operated jointly by two persons. Under these circumstances opening of imprest account in bank in the personal name of officer can be allowed by Regions. However such opening and operation of account in personal name shall be subject to following conditions: 1) Imprest is sanctioned in the personal name of the officer where only one officer is posted at a location. 2) The officer should forward proper and periodical accounts along with bank reconciliation statement to the Region concerned to be checked and analysed by them any interest earned on this account will be the income of the corporation and not of the employee. No cheque payment should be resorted to from this account. 3) The imprest account opened in the personal name should be immediately discontinued whenever more than one office is posted in that location and fresh current (imprest) account be opened in the name of the corporation. 4) In view of above Regions should keep a constant watch on such accounts with regard to reconciliation and interest earned and periodically review should be conducted so as to ensure the discontinuance of the account as soon as more than one officer is posted.

49

CHEPTER-5 BANK RECONCILIATION OF COLLECTION AND WITHDRAWAL ACCOUNT OBJECTIVES:

1) To overall manage the Receivables from various Retailers (customers) of

IndianOil

Corporation Ltd. (IOCL), located in different districts of Uttar Pradesh. 2) To co-ordinate with various L.P.G Bottling Plants and Terminals of IOCL for Receivables. 3) To perform Reconciliation separately for various Party’s or customers (Retailers) in different locations so as to remove any discrepancies or mismatch of accounting figures. GLOSSARY OF TERMS USED HEREWITH: 1) DCR: Or commonly known as Daily Cash Receipts. It is the collection of Cash Receipts from individual Party at each location (i.e. Plants or Terminals). 2) SOFTWARES: These are used at various Plants and Terminals of IOCL for processing Cash Receipts or either Chalans. They are as follows: i)

TDM: This is Terminal Documentation Module.

ii)

PDM: This is Plant Documentation Module.

3) DAT: It’s a magnetic tape inside a cassette, which records the monthly DCR’s of each location. These locations send these cassettes to Uttar Pradesh State Office (UPSO), at Lucknow on monthly basis.

4) ACCOUNTS MAINTAINED BY IOCL: Indian Oil Corporation has a contractual agreement with State Bank of India (SBI) to maintain two types of accounts in various branches of SBI spread across the different locations of IOCL. Both these accounts are Current in nature. They are: i)

CMP A/C: It provides speedy and effective cash management to IOCL as a whole, because the SBI branch provides Credit to particular location of IOCL on the same day itself in exchange of instruments like Cheques or Demand Drafts deposited by that location at the same SBI branch. Credit 50

given at any particular location is equivalent to the proportion of the instruments deposited at that location. At the same time in IOCL’s Head Office in Mumbai, its account at Mumbai Branch of SBI is also automatically credited through Telegraphic Transfer (T.T.). This facility helps IOCL in getting its accurate daily cash position. ii)

NON-CMP A/C : this is also similar to CMP A/c with the only difference that Telegraphic Transfer (T.T.) of Credit is done by respective SBI branches to its Delhi Branch where Co.’s Regional Offices maintains its account. And then Delhi branch of SBI Transfers this Credit to its Mumbai branch where Co.’s Head Office holds its account. In this type of account SBI branches retain a few no. of the instruments deposited with them and so does not Credit the Co. for these transactions.

OPERATIONAL METHODOLOGY ADOPTED FOR BANK RECONCILIATION OF COLLECTION ACCOUNT AT UPSO, LUCKNOW: S1: Receiving DAT cassettes on monthly basis from various locations of IOC in U.P S2: Separation of DCR’s and Chelan’s recorded in DAT cassettes; through using a UNIX based server. S3: Preparation of Cash Book for each and every Party (customer) in terms of its DCR’s at a particular location. S4: Preparation of main Cash Book for each location of IOC in terms of the total DCR’s issued at that location. S5: Matching the Credit provided by SBI at a particular location with the ‘cash’ or instrument deposited at the bank at that particular location, through the use of software called ‘Bank Reconciliation of Collection Account’.

Details of a practically done Bank Reconciliation of Collection A/C of Bareilly (Area Office) are as follows: 1. Tallying of list of unmatched Bank and Cash transactions, with bank statement received from bank showing amount credited in Co.’s A/C and amounts Telegraphically transferred to State Bank Of India, Head Office at Mumbai; amounts 51

debited for Bank Charges and TT charges, amounts debited for Chaques Dishonored and excess credit given by Bank on daily basis. 2. Tallied transactions are deleted from programme. 3. Statement of unmatched Bank and Cash transactions is prepared and we arrive at following two amounts: I.

Total for Unmatched Cash Book.

II.

Total for Unmatched Bank Statement.

In following manner Balance As Per Cash Book is arrived at: Opening Balance (Closing Balance of previous month)

210,589.00*

Add Receipts (During month)

1,000,000.00* 1,210,589.00* (1,200,000.00*)

Less T.T.

10,589.00* Add CMP Debits (If any)

5,890.00* 16,479.00*

Less JV Passed

(479.00)* 16,000.00*

Add JV Passed

400.00* 16,400.00*

Balance As Per Cash Book

NORTHERN U.P.STATE OFFICE

NAME OF BANK State Bank

BANK RECONCILIATION

Of India

52

REGIONAL OFFICE

STATEMENT

LOCATION

CODE

MONTH

BAREILLY–A.O. 682/82

& YEAR

JUNE’ 2002

(Collection Account) PARTICULARS

AMOUNT (Rs.)

AMOUNT (Rs.)

BALANCE AS PER CASH BOOK

16400*

ADD: U/L CREDITS

00

NIL

ADD: EXCESS TRANSFER ADD: MISCE. TOTAL:

LESS: U/L DEBITS

16400*

00

LESS: SHORT TRANSFER

LESS: DISHONOUR INST. OR CMP DEBITS

TOTAL:

BALANCE AS PER BANK BOOK 16400*

Nil

*All the amounts have been taken on assumption. 53

00

BANK RECONCILIATION OF WITHDRAWAL ACCOUNT OPERATIONAL METHODOLOGY APPLIED FOR BANK RECONCILIATION OF WITHDRAWAL ACCOUNT AT UPSO, LUCKNOW:

Steps involved in preparation of Bank Reconciliation Of Withdrawal A/C are as follows: 1. List of chaques issued but not presented for payment in previous month. 2. List of chaques issued during the month. 3. Bank statement (received from bank, showing chaques presented (debited) and bank charges being debited & TT transfer being credited) 4. Manually tallying of (1) and (2) with (3), i.e. chaques issued but not presented for payment in previous month and chaques issued during the month are tallied with Bank statement. 5. Result: - non-tallied chaques lying in the bank (actual pending chaques). 6. Preparation of statement of amounts of TT (Telegraphic Transfer) being made by SBI (HO) to particular location / branch / Dolg / Colg / Terminal /A.O. for meeting regular payments which already have been made. 7. Statement of DD / chaques cancelled. 8. Finally a statement containing list of pending chaques is prepared. Details of a practically done Bank Reconciliation of Withdrawal of Bareilly (Area Office) are as follows: -

UP STATE OFFICE BANK RECONCILIATION STATEMENT- WITHDRAWAL ACCOUNT BANKERS: CURRENT A/C NO. 47885952/25 PERIOD: - march’2015 AMOUNT (RS.) OPENING BALANCE AS ON 01.04.2015 AS PER BANK STATEMENT (-)

NIL

54

AS PER CASH BOOK (ANNEX. V)

1458236.00

A CHEQUE ISSUED DURING THE MONTH D D:

58769845.00 60228081.00 SUB TOTAL

A BANK CHARGES OF THE MONTH (ANNEX. IV) D D:

4560.00 60232641.00 SUB TOTAL

LE CHEQUE ISSUED BUT NOT PRENSENTED (ANNEX. I SS +ANNEX. II) :

SUB TOTAL

LE DD CANCELLATION (ANNEX.VI) SS :

14721045.00 45511596.00

47896.00 45463700.00 SUB TOTAL

LE CHEQUES OVER SIX MONTHS (ANNEX- VII) SS :

5000.00 45458700.00 SUB TOTAL

LE TT TRANSFER BY BANK DURING ' (ANNEX III) SS : CLOSING BALANCE AS PER BANK STATEMENT AS ON 31.07.2015

55

45458700.00

0.00

CHEPTER-6 Conclusion and Suggestions: After studying all the facts and other information, this conclusion is arrived at that all the experience on banking and finance department of Sharda University Knowledge park 3 greater Noida. The function and objectives is based on Indian Banking department and finance with respect of the structure of finance in Indian banking system on its function the type of bank account they operate ,the cash management programme and the clause attach to the policy related to the clause which was implemented by RBI. applied/followed in Indian banking system for efficient management of cash is one of the best systems for banking activities to reduce the financing cost and increase the liquidity of various financial instruments (D.D./Cheques etc.) In view of the fact that cost of financing is an important and major component of the overall expenditure, there is a need to exercise due control and take suitable measures to reduce this burden of financing cost which comprises of interest on borrowings and bank charges.

Following are the important points to be ensured for reducing the financing cost and bringing efficiency in banking activities: -

1. Ensure to deposit the DCR before the cut off time so as to enable the bank to present the instrument in the clearinghouse the same day. 2. Wherever “High Value Clearing” facility is available in the city, endeavor should be made to deposit all high value local instruments into high value clearing so that the credit is given the same day to us. For the purpose separate DCR may be generated for such high value instruments with assistance of systems Dept. 3. Check that credit for all outstation instruments, is given the same day and for local instruments on the day of funding as per MOU. 4. Meticulously check the bank charges to ensure that nothing more than the agreed rate is charged. 56

5. Arrange to recover overdue interest from customer wherever the same is debited by bank. 6. Study the existing RCN arrangement vis-à-vis payment of railway freight through cheque and recommend for the alternative beneficial to us in terms of saving in interest cost. 7. Ensure that there is no withholding of credit balance beyond Rs.1000 in collection account under any circumstances. 8. In case of holiday for IOC but working day for bank, ensure to deposit the DCR in the bank even on such days. This is also to be ensured for Saturday’s in case of administrative offices. 9. Quarterly review of bank charges debited vs. recovery from the customer to be made. Identify areas/customers leading to under recovery and take corrective action. 10. Identify the major locations incurring huge payments (normally more than Rs.1 crores per month) and explore the possibility of opening withdrawal account instead of current (Imprest) account to avoid the blockage of fund. 11. Ensure that special advances given for transport and other major payments are cleared within 5 days. Ensure that special advance is not given more than 1-2 days before the date of actual payment of bills to avoid blockage of fund. In case the payment is spread over a period of 5-10 days, possibility should be explored to give special advances in installments. 12. Meticulous checking should be done by RO/SO of the originating dates for TTs as per RCC statement with the actual date of TT as appearing in bank statement of the location. This is an area where lot of saving in interest can be achieved. Any error/omission on this account may lead to incurrence of huge avoidable interest cost. 13. Ensure to clear all open items in bank reconciliation immediately.

As far as possible all major payments i.e. statutory payments/tax/excise duties should be planned in such a way so that the payment is made on the due dates only and not before.

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Regarding Bank Reconciliation of Accounts: Quick clearance of almost all open items while preparation of Bank Reconciliation of Accounts

it

is

necessary, so

due care

is

needed

while

preparing following

statements/transactions:  Daily Cash report  Copy of Bank Statement  Copy of Bank Reconciliation Statement being prepared by different Area Offices/Dolgs/Colgs/Terminals.  Data entered in software and being sent to concerned State Offices in DAT diskettes is accurate and entries are neither missing nor duplicating in nature. Sometimes it has been seen that customers in one region are dealing with locations in different region. Therefore it is advised to take due care while dealing with such customers and a different note/statement showing particulars of such customers be sent to the State Office concerned with other details and Bank and cash data.

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CHAPTER-7

Bibliography: 1. 2. 3. 4.

http//: www.iocl.com Annual-report 20010-20012, 2012-2015 Data from other sources Self analysis

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